We are now officially into fall, even if many of us already left summer mode behind once Labor Day passed. For most, this means a little more buckling down at work before the holiday season comes and gives us a new excuse to take some extra time off work. It also means we are exiting the high time of the year for weddings.
And sure, these are beautiful occasions when people declare their love for one another in front of the people who mean something in their lives … but it also comes with some financial and tax considerations, and that’s where I come in. Maybe that’s why I am not invited to too many weddings, but this semi-killjoy attitude still comes with information that the recently married should know. Even those who are not yet married may want to pay attention, for when it comes to tax purposes, even if you do not get married until December 31, you are considered married for the year when it comes to tax purposes.
First, marriage often comes with a change in name, and it is important to report this change to the Social Security Administration. The name on your tax return must match what is on record with the SSA. And sure, dealing with a Social Security comes with a level of joy that may only be rivaled by a trip to the DMV, but it is worth it to not run into issues come tax time. Along the same lines, if you have changed your address, send the IRS a change of address form, too.
Next, married couples will face a decision on whether they want to file their tax returns jointly or separately. Filing jointly is usually the better way to go, but everyone’s situation is different, so it is worth looking into to make sure you are selecting the most beneficial status.
Once you figure out how you will file, it is a good idea to run some rough calculations and get an estimate for how much tax you will owe by the end of the year. Once you know that number, it could be worth considering changing your withholding. If your new combined income means will owe a little more, you can start having that withheld from your paycheck and not face a big bill early next year. If your new situation means you can expect a bigger refund, though, changing your withholding can allow you to bring home more money each week in your paycheck, and that is usually a welcome thing with that aforementioned holiday season coming up.
Finally, when you look up issues concerning marriage, the IRS includes their near-constant reminder to watch out for scams. There are legitimate things to think about when it comes to your finances when newly married, and there are legitimate people who can help you with that. If someone contacts you claiming that your new status comes with some new payments you have to make, though, that is less legitimate. Remember to follow your gut instinct if something sounds fishy, and do not hesitate to investigate it.
After all, it’s that gut instinct that led you to the marrying your partner in the first place, no? Those guts can know some things.
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A few weeks ago I wrote about the importance of recordkeeping and how it eases a lot of the burden and frustration come tax time. I addressed it as more of an issue with one’s personal taxes, though. This time, however, although I wish I didn’t have to say it, I have also seen all too many cases when businesses were much too lax with the records they keep. This can present an even bigger problem than with one’s personal records, for if you cannot document business expenses, you are potentially losing legitimate deductions on your taxes and costing yourself money.
So in this vein, I first want to state that keeping bank and credit card statements is not enough. Sure, this proves that you spent some money, but does not prove what you spent it on or why you needed it. Now this doesn’t mean throw away your statements, though, for they are key in a three-pronged approach for the documentation you want to keep to legitimize your expenses.
You see, those statements may not prove what you spent money on, but they do prove that money was spent on something. This is still key to prove that you paid the money and aren’t trying to pass off something a friend or family member paid for (or making something up completely) as an expense you paid for.
Beyond that, though, you need to keep the receipts you receive when you spent that money. That will show what the money actually went to. Don’t just stuff them in your pocket, though, and forget about them for six months, for you will want to be able to remember why the money was spent. This may not be so difficult if you’re, let’s say, a contractor who bought some supplies at Home Depot; those will not be too difficult to track back to the job you were working on at the time. But if you are at a lunch meeting with a business associate, exactly who you were with and what you were discussing is not going to be so evident from the receipt itself. Just jotting down some notes to that effect on that receipt when you get it can help this issue.
The third piece of documentation you will want to hold onto are any invoices you receive. With that, you can further justify some of the money that came out and is shown on those bank statements, and show exactly what it paid for. If you are able to have all three of these pieces of documentation for one expense, it gives you all the necessary backup to prove that you spent what you said you spent and what you spent it on.
Even with that, though, this does not automatically make a business expense. Please remember that just because you have a business does not mean that every expense you ever have is for your business. The groceries for your family still are just groceries for your family. This is the reason that I always recommend having a separate business banking account, as it can automatically help alleviate the confusion between what is or is not a business expense.
Finally, I know that none of this is fun; it is the part of running a business that is a drain and feels like you are not doing the things that you wanted to do when you started the enterprise. You want to make sure that that enterprise is running at peak ability, though, and part of that is keeping control of your records
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I almost cannot believe that I am writing about such things again after just discussing some of the ramifications of Hurricane Harvey last week. Since then, though, Hurricane Irma arrived to carve its own path of destruction.
I do not want to go into the same levels of discussion that I did last week, but just let it be known that my heart continues to hurt for those who have been affected, but still sends out good hopes and well wishes for those whose lives have been affected.
I do want to say, though, that much like with Hurricane Harvey, the IRS is offering similar help to those newly affected, and have set up a website, located here, with all the pertinent information. Please pass that along to anyone you know who could benefit from having that knowledge.
In the midst of all these unfortunate events, though, we continue to see stories about those who do what they can to help others in need. Combine that with our remembrances of 9/11 this week, and we can be a little heartened by what we can endure, and what others will do to help us in that quest.
And since I have to tie this into something financial or tax-related in some way, I will take a little time now to give a reminder that what makes for a charitable tax deduction is not simply monetary donations, but can include expenses incurred while working for a charity.
So first off, remember that all of these deductions to be valid must involve a qualified charity. Granted, most of them are, but it never hurts to check, especially when starting a relationship with a new group, and ensure that the organization is legitimate. It is important to note that for a charitable contribution to be deductible, it must be made to such a group as an entity, and not earmarked to be set aside for a specific person or family.
Second, if you do substantial charity work for such a group and travel for it, many of those expenses can be deducted if you have not already been reimbursed for them. One thing many do not realize is that this can even include working with local organizations. If you use your car at a time for the express purpose of helping that charity, then you can even use a standard mileage rate in claiming a deduction. This will probably be easier than keeping track of exact expenses, but you will still want to keep a reliable record of this type of travel as you go, noting your mileage.
And of course, this can include longer and farther trips, too. A slight warning here, though, that the trip must involve a genuine and substantial duty to the charity and cannot be deducted if a significant portion of it was for recreation or vacation. If a trip does qualify, though, then such as expenses as air, rail and bus transportation, lodging costs, meals and certain transportation costs while at your destination become deductible.
It is a wonderful thing that there are people who give so much of themselves and their time to such noble pursuits, and it is also wonderful that they get these little bonuses for the good work that they do.
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This is a different type of blog than I usually write, and I am thankful for that. Sometimes, though, unavoidable tragedies happen, and they have to be mentioned. Unfortunately, one of those times is happening now, and will be happening for a while, as the areas affected by Hurricane Harvey move through their recovery phase.
These times shock us with trying images as we see levels of devastation that defy imagination. At the same time, though, they also bring us inspiring images. We get to see the levels of human will that can be reached when a community bands together to help each other and return their lives to as close to normal as possible. We also get to see the level of human compassion reached when those from afar do what they can to achieve the same lofty goals.
So before going through many of the implications of this, I first just urge everyone to donate to the cause if you can. I know that many of the times I write about giving to charities, it is in relation to how it affects your tax picture, but moments like this are reminders of the human reality behind it. Good is done by giving to others who find themselves in need. Sometimes we only think of these things as numbers, but it is so much more than that.
At the same time, though, the IRS has put out a notice to be wary of those putting together scams and only pretending to be gathering money for the cause. There are plenty of obviously reputable charities doing good works, though, so please don’t be that wary. Just remember that if something feels fishy, it probably is. But all those other groups out there who don’t feel fishy, the charities that you we see doing great things, they are worthy of our attention.
Let it also be known that the IRS has announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of the storm and their families. I don’t want to get into the minutiae of it here, but know that more information on this, and much of the other information in this blog, can be found at the IRS Hurricane Harvey Information center located online here. There is also a program where employees can forgo vacation, sick, or personal leave time in exchange for their employers making donations to charitable organizations working to help those affected by the disaster.
I think there are a couple of other highlights from the tax realm that are worth noting. First is that those affected get some tax relief in how long they have to file certain individual and business tax returns, as well as in making certain tax payments. This includes an additional filing extension for individual taxpayers with valid extensions that run out on October 16 and businesses who were to have filed on September 15.
Also, the IRS has waived a diesel fuel penalty for the entire state of Texas.
Granted, all this is far down on the list of importance for those who have had their life upended by something totally out of their control. But in those times, hopefully enough pieces of light can come together to start making life bright again.