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There are many benefits of getting a head start on your taxes, but there are also some downfalls to consider before jumping in too soon. Here’s a brief overview of the pros and cons of filing your taxes early.

Pros of filing taxes early

Like to get ahead? Consider filing your taxes early to enjoy these benefits:

1. You’ll eliminate your tax deadline stress.

If you’re the kind of person who hates looming deadlines, filing early is a good way to go. Planning to file your taxes in late January or February means you can take your time and do a thorough double- and triple-check on your tax return, without worrying about cutting it too close to the April 15 filing deadline. Filing early also means that if you spot an error on your return or need to make an amendment after filing, you’ll have plenty of time to address it.

2. You’ll get your refund sooner (and protect it from would-be identity thieves).

If the IRS owes you money, you’ll probably want it in your bank account as soon as possible. Since the IRS typically issues refunds in less than 21 calendar days after processing a tax return, it makes sense to file as early as you can to get your refund faster.

The other advantage of filing early is that you reduce the likelihood of someone successfully filing a fraudulent return using your name and Social Security number and claiming your refund. Once the IRS receives and processes a taxpayer’s return, they’ll reject any additional returns using the same Social Security number — which means if someone filed a false return in your name while you procrastinated, it could take months to resolve the fraud and get your refund from the IRS. 

3. You’ll have more time to prepare for your tax bill.

If you think (or know) you’ll owe the IRS money, filing early means you’ll have some extra time to save up and make a plan for paying off your tax bill. This can be especially helpful if your tax bill comes as a surprise and you weren’t expecting to owe the IRS.

4.  Tax professionals may be more available to work with you.

During the first quarter of the year, tax professionals and accounting firms get busier and busier the closer it gets to April 15. Working with a professional to file your taxes early means it’s more likely that they’ll be available on your schedule, instead of trying to slot you in between other clients who waited until the last minute.

Cons of filing taxes early

Of course, rushing the tax filing process can be just as detrimental as procrastinating until the last minute. Here are a few reasons to consider waiting a few weeks (or a month or two) before filing your return:

1. You might be filing before receiving all proper forms.

If you’re a corporate employee, your employer is legally required to send you a W-3 tax form summarizing your earned wages and taxes withheld. If you’re self-employed or have interest-bearing accounts, you’ll also likely be receiving a handful of 1099 tax forms from your clients or financial institutions. 

The deadline for issuers to file and send out your copy of these tax forms is January 31, which means you should not file your tax return until you’ve received all of them. Even if you’re certain of the amounts you earned, it’s best to double-check your numbers against the official forms that were filed with the government.

2. There’s an increased likelihood of making mistakes when in a hurry.

Your tax return isn’t something you should rush through just to get your refund, no matter how much you might need the money. If you’re filing early for the sake of an early refund, you’re more likely to miss some of the smaller details when you file, especially if you’re using a DIY tax return software instead of working with a professional.

3. You may increase your audit risk if you have to amend your return.

Mistakes happen, and the IRS understands that you might need to make a correction or two after you’ve officially filed your return. You can amend yours to fix any errors, but keep in mind that amended returns are more likely to be audited.

4. You might owe more interest and penalties.

If you do amend your tax return and end up owing more to the IRS than you originally paid when you filed, you’ll be subject to additional interest on the balance and may even have to pay a penalty.

Need tax help? Call Miller and Company

If you’re not sure how to approach your taxes this year, don’t try to go it alone. The trusted CPAs at Miller and Company LLP can help you figure out the best strategy and timing for filing your 2020 tax return and making the most of your potential deductions. Contact us today for a consultation.

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Individuals in this age range can practice some smart habits and strategies to maximize their savings and plan for their future retirement. Here are some retirement preparation tips to follow in your 40s.

1. Set a clear retirement savings target.

At age 40, you’re about halfway through your overall career, which means you have two to three decades left to maximize your savings. Knowing how much you’ll need upon retirement depends on a multitude of factors, including your desired lifestyle during retirement, when you plan to stop working, and projected growth on investments.

However, if you don’t have a goal in mind, it could keep you from having a solid plan to reach your desired nest egg. Additionally, if you just make a guess about how big your nest egg should be, you may end up falling short of what you actually need.

A financial advisor can help you plot out the actual number and online retirement calculators are there to assist you when choosing the best amount for you and your family.

2. Create a plan for meeting your target.

Saving is key to meeting your desired retirement number. Making a plan to reach your desired goal looks like making wise investment decisions, such as choosing whether to buy something to fit your lifestyle or putting that money away for retirement. Creating a plan to meet your target will involve certain prioritizations and putting contributions toward your nest egg above other expenses that pull your money in another direction.

3. Work on paying off high-interest debt.

If you have high-interest credit cards or loans, the amount you owe in interest each month could keep you from retirement savings. While many believe they can allocate appropriate funds while saving towards retirement, if they have large balances on high interest cards, they’re paying more annually in debt interest than earning on investments.

However, you don’t want to throw all your money at debts. Put enough in your retirement that you can match your employer’s contribution and then some (if applicable), then use what’s left to chip away at high-interest balances.

4. Spread out your investment to minimize tax liability during retirement.

Rather than keeping all your retirement savings in one 401(k), it may be helpful to spread your savings among different tax-deferred accounts. Roth IRAs and taxable investment accounts will allow you to control the amount of taxes you’ll end up paying when you start withdrawing from your retirement savings.

5. Balance your investment risk.

Investing in higher-risk stocks can be a great way to position yourself for huge earnings, but there’s no guarantee on your return at the end of every year. While investing can be intimidating, it’s important to weigh the risks and rewards of your chosen assets. There are natural ups and downs in the investment market, especially in times of economic uncertainty. Therefore, investing is about taking just the right amount of risk while not playing it too safe to maintain a solid enough return to work with future investments.

Work with a CPA

A certified public accountant can help you sort through your current assets, liabilities and future projections. Contact Miller & Company today for a consultation.

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To protect your assets and a legacy you may want to leave for your family when you pass away, it’s important to start ramping up your retirement savings before you reach age 40. With more than 30 years to go before retirement, this is the best time to start building your nest egg and earning interest on your investments.

Here are a few tips to help you get ahead on your retirement plans in your 30s.

1. Increase your retirement account contributions.

It’s important to increase your retirement savings by contributing the maximum amount allowed if you can afford to do so. As noted by the IRS, the contribution limit for employees who participate in a 401(k) has increased to $19,500 this year. If you have an individual retirement account (IRA), the max amount you’re allowed to contribute each year is $6,000.

If you can’t afford to contribute the maximum, at least try to double the amount you’ve been contributing. Employers often match up to 3 or 4% of 401(k) contributions, which is what you may have been contributing in your 20s. If you can bring that contribution up to at least 8%, you will get that much closer, that much faster, to reaching your retirement savings goals.

2. Protect your assets with proper insurance.

Now that you have more assets, you have more to lose. It’s important to continually save for retirement despite whatever life events may happen. For example, in the event you get hurt at work and are not able to perform your job duties, your retirement savings will be set back. Disability insurance can replace a percentage of lost wages for a certain period of time. Life insurance is another type of insurance to look into as it could protect your assets when you pass away.

3. Get out of student loan debt.

There are various programs available that you may qualify for that can help you get out of student loan debt. If you don’t qualify for them, make a plan to start doubling your student loan payments and talk to a private lender about student loan refinancing. A few of those programs include:

• Teacher loan forgiveness. Teachers who work for low-income schools or educational agencies may qualify for this program.
• Public service loan forgiveness. This program is for select people who have worked in a public sector job for a certain period of time.
• Income-driven payment plans. If you’ve recently lost your job or had a reduction in income, find out if your lender will allow you to move to a modified payment plan based on your current salary.

4. Roll over retirement accounts from past employers.

Now that you may have worked for a few different companies, it’s likely you have more than one retirement savings account. It’s easy to forget about old accounts along with the amount of money you have in them and what fees you are being charged to keep them open.

To help keep track of your retirement accounts, speak with each financial institution to see if rolling them over into one account would make financial sense. If so, they will be easier to track all from one location.

5. Get help from a financial professional.

A financial professional can work with you to explore additional ways that you can prepare for retirement while you’re in your 30s. For further assistance, schedule a consultation with the top-rated accountants at Miller & Company.

The short answer is yes — but only if you also use that home office for self-employed business activities. Here’s what you need to know if you’re a remote worker with a home office.

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What is the home office deduction?

The home office deduction is for people who use part of their home as their primary workplace. You can deduct certain business expenses for your home office, regardless of whether you rent or own your home.

The catch? This deduction is only available to those who are self-employed. In other words, if you’re a W2 employee who is working remotely, you are not eligible for this deduction unless you have additional self-employment income.

If you meet the self-employment requirement, there are two basic criteria that would qualify your space for a home office deduction. They are:

1.     Regular and exclusive use

To qualify for the deduction, you must regularly and exclusively use a space in your home for work. If you have a designated room or area in your home that is solely used for business, you are eligible to take the home office deduction. If you work at the kitchen table or on the couch, this does not qualify as “exclusive space,” as these areas are used for everyday living.

2.     Principal place of your business

Your home must be the principal place that you conduct business in. As an example, you can meet with clients at other locations, so long as your home is the principal setting for your business. Freestanding structures that are on your property, such as a studio or garage, that are used as your primary place of business are also eligible.

Employees versus self-employed individuals: Who’s eligible?

Now that the vast majority of people are working from home due to the coronavirus pandemic, you might think you’re entitled to some tax deductions as your home now doubles as your office.  Previously if you were a W2 employee who worked from home all or most of the time, you were able to deduct your home office expenses through line 21 of Schedule A. This changed with the Tax Cuts and Jobs Act of 2017 (TCJA).

Once TCJA was passed, W2 employees could no longer deduct home office expenses. Now these deductions only apply to self-employed individuals and independent contractors. During their annual tax filing, these taxpayers can file their home deduction on IRS Form 8829, which is filed under their Schedule C on their 1040.

Get help with your home office deduction from a trusted CPA.

If you’re a self-employed person who works out of their home this year and needs insight as to how you can deduct expenses, contact the experts at Miller and Company. We can connect you with one of our expert CPAs for a consultation to see what you’re entitled to and how you can qualify for the home office deduction.

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However, it’s important to start saving for retirement as early as possible so you can take advantage of compound interest and grow your “nest egg” decades before you need it.

Here are six ways you can prepare for retirement when you’re in your 20s.

1. Open an IRA or 401(K) and take advantage of employer contribution matching, if available.

If your employer offers any kind of retirement savings account, such as an IRA or 401(k), sign up for it right away. At minimum, start by contributing what your employer will match, if applicable. Your employer’s contribution is essentially free money that you are leaving on the table if you don’t take the offer. Should your employer not offer a retirement savings plan, contact a trusted financial institution to open up your own IRA. In either case, the more you can afford to contribute early on, the better. 

2. Don’t be too conservative with your investments.

The younger you, the more aggressively you’ll want to invest with your retirement portfolios. In your 20s, you’ll have plenty of time to ride out any downturns in the market. As you get older, you can adopt a more conservative investing strategy to protect what you have saved. 

3. Focus on paying down credit card debt.

Paying down debt can seem like an impossible task when you don’t make a lot of money. Ideally, you should try to avoid using credit cards in the first place unless you’re able to pay off the balance in full to avoid accruing interest. If you do, however, find yourself in credit card debt, do the following:

• Speak to your credit card providers about consolidating debt.
• Consider setting a tight budget and getting an additional job on the side until the debt is significantly paid down.
• Don’t just pay the minimum balance due. Instead, pay down the card that has the smallest debt first and work your way up.
• Close each card account as debt is paid off. While this may impact your credit score negatively in the short term, having fewer open debts can increase your score in the long run. 

4. Build an emergency fund.

Having three to six months worth of expenses set aside in an emergency is ideal, but having even more can better secure your financial future in the event an emergency arises. Depending on your salary and monthly expenses, building an emergency fund can take a few months or a couple years.

When building your emergency funds, contribute as much money as you can each month. You may even consider opening a separate emergency funds savings account and having a portion of your paycheck go directly to that account every payday.

5. Increase your retirement savings contributions each year.

A helpful time to increase your contribution is when you get a raise or a bonus. Increasing your monthly contribution based on the percent or dollar amount your salary changed is a sound strategy to regularly increase your contribution. If you are on a tight budget and can only increase the contribution temporarily, doing so for a limited amount of time is better than not increasing it at all. 

6. Get help from a financial professional.

Once you have decided to save for retirement, you may have questions or run into unexpected problems. A trusted CPA firm can help answer any retirement questions you have as well as ensure you are maximizing your retirement savings potential.

For further assistance with retirement planning at any age, schedule a consultation with the top-rated accountants at Miller & Company.

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RMDs have gotten a lot of attention this year, as the Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended required withdrawals from retirement accounts in 2020 to give those accounts more time to recover from post-COVID stock market downturns. However, next year, account holders who are 72 or older (or 70½, if you reached that age in 2019), must resume taking their annual RMDs.

Here’s a brief overview of RMDs and how they can impact your taxes.

How do RMDs work?

As mentioned above, an RMD refers to the minimum amount that’s required to be withdrawn from your retirement account each year. The Internal Revenue Service helps taxpayers calculate this amount using a set of worksheets to divide the account’s year-end fair market value by the account holder’s life expectancy. While you can withdraw more than the minimum required amount if you want or need to, you must pay income tax on the amount you withdraw. 

With the exception of account holders who turned 70 ½ in the year 2019, IRA owners must take their first RMD by or before April 1 following the year they turn 72, and continue to take subsequent withdrawals every year after that. Be sure to stay on top of your deadlines if you’re approaching or above this age. If you miss your withdrawal deadline, you can expect to pay the IRS a 50% penalty of the total amount of money they were supposed to withdraw. 

Keep in mind that Roth IRAs are not subject to RMDs, regardless of the account holder’s age, because taxes are already paid on the funds in these accounts. 

How to calculate your RMD

The IRS breaks down all the information you need to calculate your RMD in Publication 590-B. There are three different tables that the IRA offers for taxpayers, depending on their personal circumstances:

1. Joint and Last Survivor Table. This table is used if your spouse is the sole beneficiary of your IRA and/or if you are 10 years older than your spouse.
2. Uniform Lifetime Table. In order to use this table if you have more than one beneficiary and you are less than 10 years older than your spouse.
   
3. Single Life Expectancy Table. This table is used if you are a beneficiary of an account such as an inherited IRA.

If you have more than one qualifying individual retirement account, you will need to calculate each separately. While you may have similar balances in multiple accounts, your calculation can vary. Calculations factors in your age, account balance, and in some cases, your beneficiaries. 

Be sure to consult a financial professional after you go through the IRS worksheets to help you ensure your calculations are accurate. 

Get help from a trusted CPA.

Not sure how your RMD will impact your tax planning? The trusted team at Miller & Company can help you calculate your withdrawal amount and determine how to plan ahead for owed income taxes. Contact us to schedule your consultation.

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This means there’s a large group of Americans who are now receiving unemployment compensation for the first time. While the weekly benefits a financial relief to those struggling to find work, they may not be so relieved come next tax season when they find they owe income taxes to the IRS.

On August 18, 2020, the Internal Revenue Service issued a press release reminding those on unemployment that their benefits are, in fact, considered taxable income and must be reported on a federal tax return. This includes special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The good news is, you can opt to have taxes withheld from your unemployment compensation so there are no surprises when you file your 2020 taxes.

What types of unemployment payments are subject to withholdings?

The IRS recommends that taxpayers who receive the following unemployment compensation should calculate their estimated tax withholdings:

• State benefits paid from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability benefits paid in lieu of unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
• Unemployment assistance under the Airline Deregulation Act of 1978 Program 

If you’re currently receiving any of these payments, you will receive IRS Form 1099-G from the agency paying your unemployment benefits in January 2021. This form will show the amount of unemployment compensation you received and any federal income tax withheld during 2020. Hold onto it, as you will need it when you file your 2020 federal tax return. 

Do I have to withhold taxes from my unemployment benefits? 

Withholding is completely voluntary. However, if you can afford to do so, it’s a good idea to take this option to avoid owing a large tax bill next April. 

According to federal law, recipients of unemployment compensation can elect to have a flat 10% withheld from their benefits to cover part or all of their tax liability by filling out IRS Form W-4V, (Voluntary Withholding Request).

What if I can’t afford to take the withholding? 

For many Americans, stretching unemployment benefits to cover their family’s needs can be a challenge, and a 10% withholding may create an additional financial strain. In other cases, that withholding may not be enough to meet your full tax obligation. 

If this is the case for you, you can make quarterly estimated tax payments instead, just like businesses and self-employed individuals. The IRS provides additional details on quarterly estimated taxes and calculation worksheets on Form 1040-ES and Publication 505. Once you calculate the total amount you will owe (based on your weekly unemployment compensation), you can divide that number by 4 and pay the quarterly amounts on September 15, 2020 (for Q3) and January 15, 2021 (for Q4). 

If you’ve been receiving unemployment benefits and haven’t had taxes withheld or paid quarterly estimated taxes for Q1 or Q2, consult with a trusted financial professional to determine your best options for meeting your tax obligations. 

What happens if I go back to work and stop receiving unemployment? 

If you begin earning regular wages or self-employment income and are able to go off unemployment benefits before the end of 2020, make sure you’re having enough taxes taken out of your pay by using the IRS’s tax withholding estimator. This online tool can help you avoid or lessen your year-end tax bill or adjust your income to receive more money up front with a smaller refund at tax time. 

Still have questions about unemployment and your tax bill? Contact Miller & Company. 

If you’re unsure of how your current unemployment obligations will impact your 2020 taxes, schedule a consultation with the experienced CPAs at Miller & Company LLP. We’ll help you understand what you might owe and assist you with setting up voluntary withholdings or making estimated tax payments.

That’s why it’s wise to hire a trusted certified public accountant (CPA) to help you with your finances. A CPA is a financial advisor who can assist you in creating a strategic plan for managing and maximizing your wealth.

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How do CPAs help you manage your money?

Here are just a few of the many ways your CPA can streamline your personal and business money management.

1. Bookkeeping and payment tracking

For individuals and businesses alike, keeping detailed records of income and expenses is paramount to financial health. It’s not always the most exciting task, but it must be done – and done well.

An experienced CPA can ensure your books are accurately maintained month after month, freeing you up to focus on the more important tasks of running your business. In addition to basic bookkeeping services, a CPA can help you stay on top of client invoices and outgoing vendor payments. 

2. Long-term strategic financial planning

You have long-term financial goals. A good CPA can help you reach them. When you have a clear picture of where you want to go, a trusted financial professional can look at your assets and circumstances and help you devise the smartest plan to get there. 

By analyzing the current landscape and your personal or business financial situation, you and your CPA will be able to develop a long-term strategic financial plan that works for your budget and lifestyle.

3. Retirement planning

One of the most important ongoing financial responsibilities you have is to plan ahead for retirement. You owe it to yourself to ensure your comfort, and you owe it to your loved ones to establish your legacy.

Thinking about your finances years or even decades from now can be overwhelming, but a CPA can help you forecast your expenses and guide you on the best investment path to maximize your retirement account returns.

4. Cash flow management

You need a positive cash flow to sustain your lifestyle and your business. That’s why good cash flow management is so important to your overall success.

To improve your cash flow, rely on a CPA who can help you strategize your spending, build up your savings, and ultimately generate better profit margins.

5. Tax accounting and audit assistance

Many of us dread tax season, and there’s nothing more nerve-wracking than the thought of an IRS audit. When you entrust your tax preparation and filing to a CPA, you can rest assured that your tax return will be completed accurately and on time, with the maximum allowable deductions and credits for your situation.

If you’re concerned about an audit, a CPA can conduct a “dry run” and review your tax documents with the same scrutiny as the IRS. If there are any issues or red flags, your CPA can help you address them before your return is filed. They can also help you if the IRS does audit your return.

Why work with a CPA?

Just like you want the very best medical professionals to take care of your health, you want the very best and most experienced financial professionals to help you manage your money. 

A licensed CPA has a higher professional standing than a non-CPA accountant. Earning this prestigious certification means the person has met certain educational requirements and passed a rigorous state CPA exam. 

Unlike accountants without a CPA license, CPAs are able to represent their clients in front of the Internal Revenue Service and prepare and file audited financial statements with the Securities and Exchange Commision – a must for owners of public companies. Most importantly, CPAs agree to abide by a code of ethics and put their clients’ best interests first.

If you’re looking for a trusted CPA firm in New York, Florida, or Washington D.C., look no further than the top-rated professionals at Miller & Company LLP. We can help you with all of the above money management tasks and more. Contact us today to schedule a consultation.

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Reasons to consider delaying retirement

1. It gives you more time to plan out and minimize your future expenses.

Due to coronavirus, many people have had to deal with expenses that they had not planned for, such as job loss, the stock market losing money, and health care costs. If you were hit with financial hardship and didn’t already have a well-stocked emergency fund (which many people don’t — just 41% of Americans can cover a $1,000 emergency with their current savings), you may be struggling to make ends meet. 

By delaying your retirement, you may be able to rebuild your savings and prepare for any future emergencies along the road to your golden years. In addition to contributing to your retirement plan, set aside money toward an emergency fund and pay off your credit cards and loans to minimize future expenses. 

2. You can maximize Social Security benefits.

If you’ve reached age 66 and have earned your full retirement age, you can ask the Social Security Administration to suspend your social security payments until you turn age 70. This allows you to earn delayed retirement credits, which means when you do stop working and need to start collecting, you will be able to collect a higher monthly payment — up to 8% for each year you’ve suspended social security. 

3. You can avoid locking in recent investment losses.

It’s no secret that the stock market has taken a hit during COVID-19, and most individuals have seen a dip in the value of their 401(k) or IRA. However, the market is always cyclical, and sooner or later, things will bounce back.

If you’re past retirement age but in good financial standing, you can avoid your retirement account’s required minimum distribution until age 72 (up from age 70.5, per the SECURE Act of 2019. This means you can potentially keep your money invested for longer and wait out the current economic decline.

4. Work can keep you busy. 

The pandemic has upended many facets of “normal” life, with travel restrictions, limits on social gatherings, and business closures. If you’re stuck at home, it’s important to keep your mind active. You may not be able to see friends and family or leave your home state, but there are things that can be done during quarantine to create a sense of well-being, including staying busy with work. Remaining in the workforce during this time can ultimately improve your mental and financial health.

5. You’ll end up with more money to enjoy during your golden years.

By making smart financial decisions and actively saving for retirement, extending your retirement will result in a larger nest egg. Let’s say you planned to retire in 2020 and have been saving $1,000 a month. By continuing with your $1,000 savings and delaying your retirement by five years, you’ll have an additional $60,000 (plus any matching contributions from your employer, if applicable) to support you after you leave the workforce.

Need help with retirement planning? Contact Miller & Company LLP for a consultation today. Our top-rated CPAs will help you plan for a successful retirement by considering all factors in your personal and professional life.