Tax Tips for Individuals

6 Millennial Money Mistakes That May be Hurting Your Wallet

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By 2025, Millennials will make up 75% of the workforce. This generation — composed mostly of twenty- and thirty-something children of Baby Boomers — is unique in that it faces the most uncertain economic future of any generation since the Great Depression.

But thanks to factors like massive student debt and a fondness for immediate gratification over long-term savings, Millennials also have a reputation of succumbing to some avoidable mistakes when it comes to finances.

Whether you’re a Millennial or not, be aware of the following six behaviors before they get in the way of your financial goals:

  1. Assuming too much credit card debt on too many cards. Building a credit history is an important step to obtaining a mortgage, car loan or apartment. But letting it get out of control can be risky. Stick to a couple of major cards with reasonable terms.
  2. Not maintaining a rainy-day or emergency fund. A rainy-day fund saves you when there’s an unexpected car repair or plumbing backup — a short-term blip. An emergency fund, however, will get you through a job loss, an injury or a pandemic. Most experts recommend stashing away three to six months of living expenses to create adequate emergency savings.
  3. Making big splurges without considering the consequences. It can be tempting to treat yourself to the best of the best while you have the cash. But buying too much too soon can set you up for future regret. Strike a balance between what you can live with now and your goals for the future.
  4. Failing to put away money for retirement. Yes, it may seem far away, and you’d rather use the money to pay for things in the present. But a retirement plan offered by your employer is free money your future self will be grateful for.
  5. Thinking you can save later. Saving is a habit that’s harder to start as you get older and life gets more expensive. By starting early and living beneath your means, you’ll have more time to build a larger nest egg.
  6. Not making — and sticking to — a budget. There are three main categories: needs, wants and nice-to-haves. You need to pay your rent or mortgage, but a luxury car would be just that — a luxury. Knowing what you should and shouldn’t be spending your money on is key to a financially secure future.

The road to financial security can be a long one for any generation. But it’s not impossible when you’re committed to making smart money decisions. With smart strategies for tax planning, the knowledgeable CPAs at Magone & Company can help keep you focused on financial success. To learn more, give us a call today: (973) 301-2300.

The Procrastinator’s Guide to Surviving This Year’s Tax Season

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If you’re a procrastinator, tax filing season is probably the worst time of year. With deadlines looming, filling out all those complicated forms and making sense of the ever-changing tax code can seem like an overwhelming task.

But no matter how long you put it off, the April 15th tax filing deadline will arrive, and what you do to get ready will make all the difference. Here are three timely tips you can use to get a jump on tax filing season:

  1. Find last year’s return now. Go ahead, we’ll wait. It’s stressful to hunt for vital information at the last minute, so make sure you have it in hand well before you need it. Your previous return is required to verify your identity — an important step the IRS implemented in the face of growing identity theft and tax filing fraud.
  2. Touch base with your tax professional early. Don’t wait until March to call or email your CPA. Keep them in the loop of any changes since last year’s filing. Did you get married, have another child, sell a business interest, receive PPP funds or withdraw early from a retirement account? Make sure they have the most current filing information to stop easily avoidable errors.
  3. Gather tax forms as they arrive. Facing the tax deadline with a stack of papers is daunting — even for the non-procrastinator. Instead of waiting until everything is ready to go, gather documents as you receive them and save them in a dedicated folder on your computer.

Miss the deadline anyway?
Most often, a decision made deliberately and slowly is preferable to one made in haste. But as a procrastinator, you know things don’t always go as planned.

Last-minute snags may happen despite your best efforts, but you don’t want to mess with the IRS. Keep in mind that filing for an extension doesn’t absolve you of paying the amount you think you owe.

If you’ve missed filing in the past, the NJ CPAs at Magone & Company can help. To learn more about our tax resolution services, give us a call today at (973) 846-8265.

Four Secrets of a Tax Preparer: What You Don’t Know Can Cost You

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Tax time will be here before you know it. If your return is a simple one, you may be up to preparing and filing yourself. But if your situation is somewhat complicated, seeking the help of a qualified professional may be a smart move.

When you look to hire a professional, keep in mind that training, certifications and expertise can greatly vary from one tax preparer to another. And what you don’t know about them can leave you on the hook for a hefty tax bill.

#1. Many tax preparers lack tax-specific training or expertise. Just because an employee of a large tax preparation company is allowed to complete tax returns doesn’t make them an expert. In fact, the only pre-requisite for obtaining the required preparer tax identification number (PTIN) to file taxes on your behalf is the completion of a simple form — one that takes about 15 minutes to fill out.

Before you engage any tax professional, ask questions about their specific training, qualifications and expertise. Find out how long they’ve been preparing returns, ask about audits they’ve been involved in, and share your personal tax situation. Above all, ensure that you’re confident with their ability to handle your tax return properly.

#2. They very likely won’t be preparing your return. It’s an open secret in the world of tax preparers that returns are prepared in stages. That means the owner of the firm or the most experienced professional will probably not be the one who initiates your return. Instead, a junior associate will likely enter your income information and other relevant data, identify potential deductions and tax credits and give your return a quick review. Once that’s done, a senior advisor or tax preparer verifies the return and signs off on it.

The sheer number of tax returns that experienced firms handle during a busy season makes this multi-step process necessary, but it’s important to know how things work. At Magone & Company, we’ve honed a rigorous quality assurance process to ensure your return gets the right level of attention. Read what our tax clients have to say.

#3. They may not research unusual deductions and tax breaks. Your tax preparer will typically apply the most common deductions and tax credits to your return — things like deductions for educational expenses and health care costs, as well as earned income or retirement tax credits, etc. But what they may not do is research more unusual tax credits and deductions, even if they could potentially save you money.

Keep in mind your accountant is not a mind reader. Without documentation and/or mention of situations such as property held in trust or part ownership of a business, it’s difficult to identify the best way to proceed to minimize your tax burden.

Discuss situations like these with your tax preparer. You may need to pay an extra research fee or renegotiate the cost of preparing and filing your return, but the tax savings could be well worth the extra cost.

#4. CPA doesn’t mean tax relief pro. When clients get into tax trouble or get behind on paying their tax debt, they often turn to the very same tax pro that prepared the return. Unfortunately, most CPAs and tax preparers are not skilled in tax relief.

Tax relief means they know all the available IRS programs to settle your tax debt or give you favorable payment terms that don’t drown you in penalties and interest. Even if they think they know, they may not be experienced in negotiating with the IRS on your behalf.

Get tax season off to a solid start
Tax season may look a little different this year, but you can count on the tax professionals at Magone & Company to provide you with straightforward, socially distanced tax preparation. To learn more about our virtual services, call our office at (973) 301-2300.

Avoid These 5 Common Tax Filing Mistakes That Can Get You In Tax Trouble

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Whether you file the simple 1040EZ or a complex 1040 with multiple schedules, making a mistake on your tax returns could lead to big tax trouble. Something as simple as a math error or unsigned form could invite extra attention from the IRS.

The tax agency sees those mistakes every year, and IRS representatives warn taxpayers to be careful when filling out their forms. Even if you think you have everything filled out perfectly, it never hurts to double-check and look for these common errors.

#1 — Assuming your tax pro prepared your taxes properly
Blindly trusting your accountant or tax preparer to file your taxes correctly can be costly. Most tax professionals do a thorough job, but letting them file without your careful review is a mistake.

We resolve back tax problems for people, and often what gets people in trouble is a simple mistake, like forgetting to report income, missing deductions or taking too many deductions. These are sometimes honest mistakes that if not caught early can trigger red flags and have the IRS sending you balance due notices.

No one knows your financial situation better than you, do so it’s important you double-check your return so you’re not blindsided with an unwanted surprise.

#2 — Waiting until the last minute
Filing taxes is stressful enough. Don’t make things worse by waiting until midnight on deadline day to get your return in the mail. Give yourself plenty of time to gather all the necessary documents and complete your return.

Keep in mind that unexpected problems could interfere with your last-minute tax filing plans. Getting your taxes completed early is the only way to protect yourself from unforeseen circumstances that can delay your tax filing.

#3 — Failing to file on time
If you cannot file your return on time, you can ask for an extension by filling out a single form. Even if your documents are in disarray, there is no excuse for not filing on time. An extension gives you six more months to get everything in order and complete your return.

Keep in mind that even when filing an extension, you will still need to estimate the tax you owe and make your payment. Filing an extension extends the amount of time you have to get your return to the IRS, but it does not provide a reprieve from your tax debt. If you wait to make your tax payment, you will get hit with penalties and interest.

#4 — Not making a backup or keeping good records
Making backup copies of your tax returns, income documents and schedules is an essential part of tax planning and preparation. Set up a folder or file box and use it to store your tax documents as they come in, and then scan each one before you put it away.

Once you have completed your return, be sure to make copies of every document, including your W-2 form and tax schedules, before sending the return to the IRS. If you file electronically, save a PDF copy of your return before completing the final step. Save all of those electronic tax documents on your computer or cloud storage device. Ordering a lost copy of a past year’s return from the IRS is time-consuming and expensive; you can save time and money by making your own backup copies. If the IRS audits you or requests more information, having your own records organized will be extremely helpful in the process.

#5 — Ignoring letters from the IRS after you file your taxes.
Sometimes the IRS will send follow-up correspondence, especially if you owe them money. It can be easy to ignore the first few letters. Even if you have the intention of paying your taxes soon, you should still take action and either get on an installment agreement or reach out to a reputable tax relief firm if your financial situation requires it.

That’s not all. Here are some suggestions to keep in mind if you’re preparing your own return.

Owe back taxes?
Our firm specializes in tax problem resolution. And you certainly don’t want to talk to them yourself. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to schedule a virtual or in-person no-obligation confidential consultation to explain your options to permanently resolve your tax problem. Need immediate assistance? Call 973-846-8265 today.

What is a Levy? IRS and Other Asset Levies Explained

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Falling behind on your debts is never a fun position to be in. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.

What is an IRS levy?
Simply put, if you owe back taxes and you ignore the IRS, they can seize your property, take money from your bank accounts, or sell your assets in order to satisfy the balance due.

The IRS will give you plenty of notices via mail before they take this step. If you do not satisfy the debt or make payment arrangements by the specified date, the IRS will attempt to take the amount of the levy directly out of your bank account.

Other types of levies
Private creditors may issue a levy against your bank account with a court order. Court orders are not required for levies by government agencies. The creditor must notify you of the upcoming levy at least 21 days before removing any funds from your account. You may not withdraw money or close the account during this waiting period.

Funds earned from child support, social security, unemployment, workers’ compensation settlements and certain other types of government agency payments are exempt from levy. You must request the exemption and offer proof of the source of the funds.

Wage garnishments
Government agencies may also garnish an employee’s wages for back taxes, child support and other delinquent payments required by law.

The IRS has the authority to levy up to 85 percent of your paycheck. The levy notice will be sent to your company’s payroll or human resources department, which will then withhold the appropriate amount of money from each paycheck and send it to the IRS or state tax board. You must provide a wage garnishment release if you’re able to work out a payment arrangement.

If you are behind on your taxes, the IRS may levy most payments from federal agencies. This includes railroad retirement benefits, Medicare supplier and provider payments and federal retirement annuities, among others.

Seizing your assets
The IRS may also seize your real estate and personal property such as a car or boat. You will receive a 30-day notice indicating that seizures will follow if you do not pay your outstanding taxes or contact the IRS to make payment arrangements. This authority also extends to property and money you own that’s being held by another party, such as the cash value accrued from a life insurance policy. The government sells its seized property at auction to recover some of the funds owed by delinquent taxpayers.

What to do if you have an IRS levy
Back taxes don’t just disappear if you ignore them long enough. Putting your head in the sand will cause the problem to get worse. The IRS knows if you’ve paid or not. They might even be willing to compromise.

If you have back tax debt, we highly recommend you reach out to our firm first, particularly if you owe more than $10k in federal or state taxes and can’t pay in full. Our clients never have to talk to the IRS, and tax resolution through our firm can save you money and time in the long run. You might also be eligible for other IRS relief programs or get your penalties reduced or removed. Reach out today for a consultation.

Time to Pay Up! Why it’s in Your Best Interests to File Your Taxes Early

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With the filing deadline moved to July 15th, you may have put off filing your taxes for as long as possible. Maybe you even requested an extension for October 15th. Most taxpayers dread the tedious task of compiling their financial documents and filing their taxes. Unfortunately, the longer you procrastinate, the greater the chances that something will go wrong. No matter the deadline, it’s always smarter to file your taxes sooner rather than later. Here’s why:

Help avoid tax identity theft. Tax return fraud is one of the most common and fastest growing forms of identity theft. In a nutshell, an identity thief steals your employment information and Social Security number, and files a fraudulent tax return on your behalf. They can steal your refund, or put you in the hole owing back taxes you might not actually owe. By filing your taxes as early as possible, a thief won’t have the chance to file a fraudulent return.

Find and correct mistakes sooner. Give yourself more time to fix any mistakes on your tax documents. For example, your employer might record the wrong earnings on your W-2. If you discover the mistake right before the filing deadline, you aren’t going to have enough time to get it resolved. Your tax return will end up getting delayed, which can result in having to request an extension and accrue penalties and interest.

Pay smaller penalty fees. Unfortunately, many taxpayers underestimate their tax liability during the year. That means they underpay and end up owing the government money. The IRS charges taxpayers a penalty for underpaying their taxes, as well as interest on the amount of taxes that they owe. So the sooner you file and pay any remaining taxes, the smaller your financial penalty and interest will be. If you can’t pay up front, you may have tax relief options to help you settle your debt.

Get it over with. There’s no better tax relief than just finally taking care of your taxes. If you are one of the many taxpayers that get stressed over taxes, you will actually feel better if you don’t procrastinate filing your tax return. Even if you owe back taxes, having a firm like ours represent you can be worth it in the long run.

Magone & Company specializes in tax resolution, and we’re experts in navigating the IRS maze. Reach out to our firm at (973) 301-2300 to schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax challenges.