Asset Planning, Inc Blog

The latest from the team.

Record Retention: Keep it or Toss it

After your taxes are complete it is always a good idea to go through your records and organize what you should keep and what you can get rid of.

How long to keep records is a combination of judgment and state and federal statutes of limitations. Since federal tax returns can generally be audited for up to three years after filing and up to six years if the IRS suspects underreported income, it’s wise to keep tax records at least seven years after a return is filed. Requirements for records kept electronically are the same as for paper records. Many records can easily be kept on-line now and downloaded and to your computer, external drive or cloud account.

Records Retention Guideline # 1: Some items should never be thrown out

This is because these items would be hard to replace and you may be asked to provide them later in life. I suggest storing these “permanent records” in an expanding file or wallet – preferably in a fire safe box:

  • Income tax returns: if the return is uncomplicated then you only need to keep it for 7 years.
  • Important correspondence.
  • Legal documents.
  • Vital records (birth/death/marriage/divorce/adoption etc.).
  • Retirement and pension records.
  • Year-end investment statements.
    • If the investments are transferred to another account make sure the cost basis has transferred over correctly.
    • IRA non-deductible contributions (Form 8606).
  • Will and Trust documents.
  • Records of paid mortgages and other loans.

Records Retention Guideline # 2: Everything Else

You should retain these records according to the following guidelines:

  • Home purchase documents – Ownership period + 7 years.
    • Property records/builder contracts/home improvement receipts (keep until property is sold – needed for taxes)
  • Car purchase and sale records (keep until car is sold + 3 years).
  • Insurance policies (keep for life of policy).
    • If policy is changed to another company make sure that you keep the files together.
  • Sales receipts (keep for life of warranty or life of the item on large purchases).
  • Warranties and instructions (keep for life of product).
  • Medical bills – keep for 3 years or longer if there are any reimbursement questions.
  • No need to keep monthly statements for credit cards, bank statements, utilities, etc. if you receive a year end recap or are able to go online and view up to 3 years of statements.
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CARES Act Stimulus Summary

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. This is a $2 trillion emergency fiscal stimulus package to help reduce the economic damage caused by the virus and “stay at home” policies. The following is a summary of the main provisions for individuals.

Recovery Rebates:

  • The CARES Act provides for recovery rebate checks of up to $1,200 for individuals with adjusted gross income (“AGI”) up to $75,000 ($2,400 for joint filers with AGI up to $150,000) plus an additional $500 for each child under the age of 17 for US taxpayers through an advance refundable tax credit against 2020 income taxes. There is a phase out of the rebate, which causes a $50 reduction in the rebate for every $1,000 of AGI above these thresholds. For example, individuals with no children having an AGI of more than $99,000 and married couples with no children filing jointly having an AGI of more than $198,000 would be phased out completely and receive no recovery rebate check. The advanced payment of the recovery rebates will be based on the AGI reported on tax returns filed for 2019, and if no such tax return has been filed for 2019, the AGI reported on the 2018 filed tax returns will be used.
    • The rebate check will be sent directly to the bank account on file with the IRS for your 2019 or 2018 tax return. If the account is closed or there is no account on-file then a check will be mailed.
    • You can receive the rebate if you are retired and receive social security or a pension as long as your AGI is within the limits listed above.

Retirement Accounts:

  • Required Minimum Distributions are waived in 2020 for all retirement type accounts (401K, 403B, 457, IRA and Beneficiary IRAs). If you already took part or all of the RMD you might have the option of returning them except for beneficiary IRA distributions.
    • We are waiting to hear more details on the charitable contributions that are paid with RMD funds and we will be in contact with those clients that make charitable contributions from their RMDs to let them know their options for 2020.
  • Individuals under age 59 ½, may take coronavirus-related distributions from qualified retirement plans (IRA, 401K) of up to $100,000 without the distributions being subject to the 10% early distribution tax. The distributions are still subject to federal income tax, but the tax owed can be spread over three years.
    • In order to get these favorable terms, you will have to prove that you were adversely affected by the coronavirus.

Unemployment:

  • Regular unemployment payments, which are about 55% of your normal pay are increased by $600 per week for a maximum of 4 months. The benefit period is also extended by 13 weeks. It is normally 26 weeks maximum in California, so it can now go to 39 weeks.

There are also several small business and self-employed benefits provided by the CARES Act. We recommend that you discuss with your accountant or business manager the different options and if you should apply and take advantage of them.

Hope you are staying safe, sane, and healthy!

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New Tax Deadlines

In an effort to help you understand the ever-changing tax deadlines, we went to the source (IRS, CA FTB) to get the details. The following is a summary of the new deadlines that we thought you should know about:

The IRS extended the tax filing deadlines for your 2019 taxes from April 15 to July 15, 2020. The IRS also clarified other details that we thought were important:

  1. You also have until July 15 to contribute to an IRA account and have it posted to the 2019 tax year.
  2. For those of you that pay estimated taxes, the IRS stated that the first-quarter 2020 estimated tax payment that would have been due on April 15 is now delayed to July 15. BUT the second 2020 estimated tax installment is still due June 15, 2020 This makes the second payment due before the first payment! Hopefully America is back up and running so this does not become an issue but, if not, we expect the IRS to issue another statement regarding the due dates.
  3. The IRS also clarified that taxpayers “do not have to be sick, or quarantined, or have any other impact from COVID-19” to qualify for the new deadlines.
  4. California is following the IRS filing guidelines.
  5. Note, if you think you will receive a refund, go ahead and file as soon as possible.

California Property tax is still due on April 10, 2020. This is paid to the county that you live in. The state of California is encouraging the counties to waive penalties for late payments. The county tax collectors have the authority to waive penalties resulting from a late payment due to “reasonable cause and circumstances beyond the taxpayer’s control. Relief under this rule is discretionary and will be evaluated on a case-by-case basis. Taxpayers unable to pay by April 10 will need to request relief and demonstrate to the tax collector that the inability to make a timely payment was due to the COVID-19 pandemic. For example, the Los Angeles County Tax Collector has set up a special team to process penalty relief requests, and has advised impacted taxpayers to submit a request for penalty relief online, beginning on April 11.

In Orange County, Shari Freidenrich, the county treasurer-tax collector released the following statement “For taxpayers that do not make payment of property taxes due to COVID-19 by April 10, we expect them to submit a Penalty Cancellation Request Form and documentation to support the cancellation of penalties as allowed in limited circumstances under current state law.”

As soon as the stimulus bill is finally approved, we will post a summary of the final package. This will include the payroll tax, unemployment, small business loans and stimulus check guidelines.

Stay safe, sane and healthy!

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Special Update: Coronavirus, Markets and What You Need to Know

Volatility has surged in financial markets, as investors react to the potential economic and earnings fallout from the rapid global spread of the coronavirus. Given what has been historic volatility, we wanted to provide you with a market update that helps to separate fact from fiction and put this market turmoil in the appropriate context.

Over the past month, equity markets have dropped sharply as new cases of the coronavirus burgeon around the world. That is the primary, but not the only, reason for the recent declines. As of this writing, there are just over 200,000 cases of coronavirus worldwide, 100,000 of which are still “active cases.” In the United States, there are approximately 7,000 coronavirus cases.

On March 9, U.S. markets and the economy were dealt another surprise blow, when Saudi Arabia effectively abandoned OPEC-mandated production levels and began to dramatically discount oil prices and increase oil production. The move was in direct response to Russia not agreeing to comply with proposed “OPEC+” production cuts, and essentially, an oil price war broke out between the two countries (Saudi Arabia and Russia) that saw oil futures collapse nearly 25% in a single day.

In the past, low oil and gasoline prices would have been a positive for the U.S. economy, but a lot has changed in the past few years. The U.S. is now the largest oil producer in the world, and the U.S. energy industry is valued at more than $340 billion. With oil prices so low, many U.S. energy firms will have to reduce production and payroll, which will hit both earnings and the economy. This oil price war directly contributed to the markets taking another leg lower during the week ended March 13.

Finally, in the days leading up to this writing (March 18), stocks have dropped even further in response to the extreme social distancing measures being implemented across the country. These measures, which include the cancellation of virtually every major sports season, travel bans from Europe and parts of Asia, the closing of bars and restaurants, the mass instituting of work-from-home practices, school closures, and curfews, are intended to stop the spread of the coronavirus. Yet they also will have a significant and negative economic impact on the travel, leisure, beverage and restaurant industries to name just a few of the segments that will be hardest hit. The cumulative impact of these measures materially increases the chances of a recession in 2020, which is something virtually no one thought possible just six weeks ago.

Positively, the U.S. government is acting to support the economy and that support has ramped up dramatically in the last few weeks. There are two economic supports bills that are currently making their way through Congress and a third has already become law. Each is designed to help a portion of our population bridge the economic gap until the spread of the virus peaks and begins to decline.

The Federal Reserve, meanwhile, has cut interest rates to zero percent to help the economy. The Fed also has implemented several important measures to provide short-term cash for corporations and to ensure there’s plenty of capital for the broader banking system. Those measures are working to help keep the banking and financial systems functioning in an orderly manner.

Yet despite this support, which is an important economic positive, the world understandably looks very scary to many people right now.

Across the nation, and the world, roads are mostly empty, office buildings are vacant, schools are closed and normal life as we have known it has largely shut down. Yet it’s important to remember that this historic market volatility, along with these societal disruptions, are temporary. At some point, the spread of the virus will peak and begin to recede.

Similarly, these social distancing measures, while unsettling, are also only temporary. Our children will once again return to school and adults will return to work. Air travel will resume, cruise ships will set sail again, and the U.S. economy, which is by far the most flexible and resilient in the world, will recover.

Over the past several weeks, we’ve witnessed near panic, both in regular society as well as financial markets. But as we all know, the worst thing to do during a panic is to panic. That’s because panic leads to hasty, short-term decisions that jeopardize your long-term best interests.  

Meanwhile, shares of some of the most-profitable, well-run companies in the world are now trading at substantial discounts to levels of just a month ago, and history has shown us that over the longer term, these tumultuous episodes can create fantastic investment opportunities, and some of the most ideal buying conditions the market can offer.

As has been said many times over the past few weeks, we are all in this together. That’s why we remain committed to helping you navigate this difficult environment—and always maintain the primary goal of ensuring you achieve your long-term financial objectives.

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Tis the Season for Scammers

The holiday season brings out a lot of good in most people but there are many that look to take advantage at this time of year as well. Here is an article from the FTC with things to remember when purchasing gift cards for family and friends.

Tips for holiday gift card shopping

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Free Shredding!!!

Sending out a quick reminder that we offer free shredding for our clients! We utilize a company who is certified so you can be sure that your personal information is safe. You can drop it off to our office anytime. If you have a lot and it's too heavy to carry up to our suite, give me a call and I will come down and get it.

Have a wonderful weekend!

Melani

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Cell Phone SIM Swap Scam

Just when we thought we were safe by setting up two-step authentication on our accounts, hackers are getting smarter and scamming us in a different way. The new scam is when a hacker calls your cell phone service provider, pretends to be you and says that you lost your phone and need to activate the new one. They do this by having enough personal information about you to convince the cell phone provider that it is really you. Once they have this information all your texts, phone calls and anything else you receive on your phone will be transferred to their phone and yours will be deactivated. So, all those text messages you receive when logging into your accounts will go directly to the new phone and right into the hacker's hands. This is scary stuff. Please read the following article with the detailed information on the scam and ways to protect yourself from having it happen to you.

How To Prevent and Respond to a SIM Swap Scan

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Insurance Coverage Check Up

Watching the news coverage of Hurricane Dorian this past week as well as the fire in Murrieta, had us sympathizing for the people in their path, what they were going through and how their lives would be affected by these natural disasters. Naturally, this also made us start thinking of our own preparedness for a natural disaster. We recently posted about creating your own emergency kits for your homes. Another thing to think of is what happens to your home and other belongings that were damaged during one of these incidents. It's important to periodically review your insurance policies to make sure that your coverage is sufficient. Our lives are constantly changing, which means you could have recently done a remodel to your home or purchased a brand-new computer. Will your homeowner's insurance cover these new and improved items? One way to make sure is to keep an updated inventory of your personal belongings as well as any documentation for upgrades you have done to your home. Without this documentation your homeowner's insurance may just pay you the basic value of these items and you will not recoup the increased value. One tip I read about, and which seems like the easiest way to inventory your property is to walk around your home with your phone and take a video of each room with its contents. In the video you would show the items of most value and explain what they are. Not only will this prove the items existence, but most phones are hooked up to a cloud-based recovery system. So even if you lose or damage your phone in a disaster the video will be saved to the cloud. Obviously, you would not want to share this video with anyone and should keep it private. No posting to social media sites like FB or Instagram as this could make you a target for break ins. Even if you "know" everyone on your friend lists. We still recommend keeping physical documentation either in a fireproof box, safety deposit box or a flash drive but it never hurts to have more proof. You may also want to look into additional flood and earthquake policies.  Maybe you decided to skip these policies when you first bought your home because they can be pricey, or you went with a higher deductible. Now would be the time to get a check up to see if these supplemental policies are right for you.

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Equifax Breach... Were You Affected?

A settlement has been announced in the 2017 Equifax breach. Equifax has agreed to pay up to $700 million in compensation to the victims of this breach. If you were affected, there are three different settlement options. The 1st option is to sign up for free credit monitoring service. If you already have credit monitoring service, you can choose to be paid $125 for the value of the credit monitoring. Option 2 is to be reimbursed for any of the time you spent trying to clear up any issues that happened to your credit because of the breach. The 3rd option is to be reimbursed for any damages you incurred as a result of the breach. For the latter two options you will need to submit additional documentation to support your claim. It is really easy to check to see if you were affected by the breach and submit your claim. It took each of us in the office about 3 minutes to complete the whole process. Simply click on this link and follow the steps provided.

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Keeping You Updated

As you know, all of us at Asset Planning put our clients personal and financial well-being as our number one priority. One of the ways we do this is by keeping you updated on any potential dangers when it comes to fraud and scams that we hear about. While doing research on a scam we were alerted to, I came across the Federal Trade Commission website. Along with many other self-help topics, there are two sections dedicated to privacy, identity & online security and scams. There you can find useful tips and recent information on scams going around. I found this website to be a useful tool in my research and I was even able to sign up for email notifications to alert me to any new scams they have been notified of. If you are interested in keeping up with the latest news on these sorts of things click on this link and sign up for email updates.

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