Financial Planning Questionnaire
The financial planning questionnaire is used to gather information in the initial phase of the financial planning process with Greenbush Financial Group.
Year End Tax Strategies
The end of the year is always a hectic time but taking the time to sit with a tax professional and determine what tax strategies will work best for you may save thousands on your tax bill due April 15th. As the deadline for your taxes starts to get closer, you may be in such a rush to file them on time that you make some mistakes in the process, but
year end tax strategies
The end of the year is always a hectic time but taking the time to sit with a tax professional and determine what tax strategies will work best for you may save thousands on your tax bill due April 15th. As the deadline for your taxes starts to get closer, you may be in such a rush to file them on time that you make some mistakes in the process, but don't worry, you won't be the only one. If you don't have the relevant tax strategy in place, you are more prone to mistakes. So, the purpose of this article is to discuss some of the most common tax strategies that may apply to you. It may be worth contacting a company that specializes in tax services if you're unsure of how to go about these strategies though. Some of the deadlines for these strategies aren't until tax filing but the majority include an action item that must be done by December 31st to qualify and therefore taking the time before year end is crucial.
Taxable Investment Accounts
Offset some of the realized gains incurred during the year by selling investments in loss positions. Often times dividends received and sales made in a taxable investment account are reinvested. Although the owner of the account never received cash in the transaction, the gain is still realized and therefore taxable. This may cause an issue when the cash is not available to pay the tax bill. By selling investments in a loss position prior to 12/31, you will offset some, if not all, of the gain realized during the year. If possible, sell enough investments in a loss position to take advantage of the maximum $3,000 loss that can be claimed on your tax return.
Note: The IRS recognized this strategy was being abused and implemented the "wash sale" rule. If you sell an investment in a loss position to diminish gains and then repurchase the same investment within 30 days, the IRS does not allow you to claim the loss therefore negating the strategy.
Convert a Traditional IRA to a Roth IRA
If you are in a low income year and will be taxed at a lower tax bracket than projected in the future, it may make sense to convert part of a traditional IRA to a Roth IRA. The current maximum contribution to a Roth IRA in a single year is $5,500 if under 50 and $6,500 if 50 plus. You will pay taxes on the distributions from the traditional but the benefit of a Roth is that all the contributions and earnings accumulated is tax free when distributed as long as the account has been opened for at least 5 years. Roth accounts are typically the last touched during retirement because you want the tax free accumulation as long as possible. Also, Roth accounts can be passed to a beneficiary who can continue accumulating tax free. Roth money is after tax money and therefore the IRS allows you to withdraw contributions tax and penalty free and let the earnings continue to accumulate tax free. If you don't have the cash come tax time to cover the conversion, you can convert the Roth money back to a traditional IRA by tax filing plus extension and the account will be treated as the Roth conversion never took place.
Donate to Charity if you Itemize
If you itemize deductions on your tax return, go through your closet and donate any clothing or household goods that you no longer use. There are helpful tools online that will allow you to value the items donated but be sure you keep record of what was donated and have the charity give you a receipt.
Max Out Your Employer Sponsored Retirement Plan
If you know you will be hit with a big tax bill and want to defer some of the taxes, max out your retirement plan if you haven't already. Employer sponsored plans, such as 401(k)'s, must be funded through payroll by 12/31 and therefore it is important to make this determination early and request your payroll department start upping your contribution for the remaining payroll periods in the year. The maximum for 401(k)'s in 2015 and 2016 is $18,000 if under 50 and $24,000 if 50 plus.
Business Owners – Cut Checks by 12/31
If your company had a great year and the cash is available, use it to pay for expenses you would normally hold off on. This could mean paying state taxes early, paying invoices you usually wait until the end of the payment term, paying monthly expenses like health or general insurance, or buying new office equipment. This might also mean investing in new office furniture such as chairs and desks, or more storage space for all of your paperwork and electronics. Above all, by getting the checks cut by 12/31, you realize the expense in the current year and will decrease your tax bill.
Business Owners – Set Up a Retirement Plan
For owners with no full time employees, a Single(k) plan being put in place by 12/31 will allow you to fund a retirement account up to the 401(k) limits mentioned early. As long as the plan is established by 12/31, the owner will be able to fund the plan any time before tax filing plus extension. If the plan is not established by 12/31, other options like the SEP IRA are available to take money off the table come tax time.With tax laws continuously changing, it is important to consult with your tax professional as there may be strategies available to you that could save you money. Don't procrastinate as some planning before the end of the year may be necessary to take full advantage.
About Rob.........
Hi, I'm Rob Mangold. I'm the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
Understanding Investment Tax Forms
Making a wide variety of investments is a wise move as it means if one market drops, not all of your investments will be affected. If you've only invested in stocks or real estate then it would be a good idea to diversify. Take a look at this review and see if Bitcoin is something you want to invest in. The whole point of investing is to make a profit from your
investment tax forms
Types of Investment Income
Making a wide variety of investments is a wise move as it means if one market drops, not all of your investments will be affected. If you've only invested in stocks or real estate then it would be a good idea to diversify. Take a look at this review and see if Bitcoin is something you want to invest in. The whole point of investing is to make a profit from your investments so you want to give yourself as much of a chance of success as possible. Income from investments can be divided into four main categories;
Interest – Interest income is paid on bonds and other types of fixed-income securities such as fixed annuities. Interest is always taxable as ordinary income unless it is paid inside an IRA or qualified plan or annuity contract. Municipal bond interest is also tax free and interest from treasury securities is exempt from taxation at the state and local levels.
Dividends – These represent a portion of a company's current profits that it passes on to shareholders. Dividends can be taxed as ordinary income, or they may qualify for lower capital gains treatment in some cases if they are coded as "qualified" dividends.
Capital Gains – This represents the amount of profit realized when an investment is sold at a higher price than that for which it was bought. Long-term gains are realized for investments held for at least a year and a day before they were sold, and are taxed at a lower rate than ordinary income. Short-term gains are taxed as ordinary income.
Retirement and Annuity Distributions – Although distributions from retirement plans are not technically a form of investment income, they are listed here because IRA and retirement plan owners can only access the gains from their investments in these accounts by taking distributions. Normal distributions are always taxed as ordinary income.
Tax Forms
Each income type listed above is broken out on a corresponding 1099 form issued by the broker or issuer of the income generated. Every form includes the name, address and tax ID number of the issuing entity. These forms are listed as follows:1099-INT – Breaks out the interest paid to the investor. This form is issued for anyone who owns bonds, CDs or mutual funds that invested in fixed income securities or cash or has an interest-bearing bank or brokerage account.
Box 1 shows total taxable interest paid
Box 2 shows the amount of early withdrawal penalty, if any
Box 3 shows the amount of U.S. Treasury security interest paid
Box 4 shows the amount of tax withheld
Box 5 shows investment expenses
Box 6 shows foreign tax paid
Box 7 shows the foreign payor
Box 8 shows tax-exempt interest
Box 9 shows interest from special private activity bonds
Box 10 shows the CUSIP number for tax-free bond interest
Boxes 11-13 show state ID information and withholding
1099-DIV – This breaks down the total amount of dividends paid to an investor. It is issued to holders of any common stock, preferred stock, or mutual fund that invests in them. However, it is not issued to owners of cash value life insurance policies, as those dividends are merely a return of premium.
Box 1a shows total ordinary dividends
Box 1b shows total qualified dividends
Boxes 2a-d break down capital gains from mutual funds, REITs and collectibles
Box 3 shows nondividend distributions
Box 4 shows federal tax withheld
Box 5 shows investment expenses
Boxes 6 and 7 show foreign tax paid and the foreign payor
Boxes 8 and 9 show cash and noncash liquidation distributions
Box 10 shows private interest dividends
Box 11 shows specified private activity bond interest dividends
Boxes 12-14 show state ID information and withholding
1099-B – This form breaks down the amount of capital gain or loss that the investor realized for that tax year. It is issued to everyone who bought or sold publicly traded securities at a gain or loss. Many brokerage firms issue additional statements that break down the loss or gain for each trade and then quantify them into net long- and/or short-term gains and losses for the year.
Box 1a shows the date of sale or exchange
Box 1b shows the date of acquisition
Box 1c shows whether it is a long- or short-term gain or loss
Box 1d shows the ticker symbol of the security
Box 1e shows the quantity sold
Box 2a shows the gross proceeds reported to the IRS both before and after commission and expenses
Box 2b shows a checkbox if loss not allowed due to amount shown in box 2a
Box 3 shows cost or other basis
Box 4 shows federal tax withheld
Box 5 shows any amount of wash sale loss that was disallowed
Box 6 has checkboxes for noncovered securities and for sales where the basis in box 3 was reported to the IRS
Box 7 shows income from bartering
Box 8 is for a description of the security if needed
Boxes 9-12 break down realized and unrealized gains and losses from derivatives contracts
Boxes 13-15 show state ID information and withholding
1099-R – This form is issued to everyone who receives distributions from IRAs, qualified retirement plans or annuity contracts that are not housed inside a tax-deferred account or plan.
Box 1 shows the gross distribution amount
Box 2a shows the amount of taxable distribution
Box 2b has checkboxes for taxable amount not determined and total distribution
Box 3 shows amount of capital gain included in box 2a
Box 4 shows federal tax withheld
Box 5 shows employee/Roth contributions
Box 6 shows net unrealized appreciation in employer securities
Box 7 shows the distribution code that determines how the distribution is taxed
Box 8 shows the value of any annuity contract included in the distribution
Box 9a shows the value of distribution percentage that belongs to the recipient
Box 9b shows the amount of the employee's investment for annuity distributions where the exclusion ratio must be computed
If Box 10 is filled, refer to instructions on Form 5329
Box 11 shows the year the recipient first made a Roth contribution of any kind
Boxes 12-17 show state and local ID information and withholding
1099 MISC – Although most of this form pertains to earned income, it is also used to report royalty income (box 1) and working interest income (box 7) in oil and gas leases.Form 5498 – The receiving custodian of a qualified plan rollover or IRA transfer issues this to the account holder as proof that the transfer was not a taxable event and should not be counted as a distribution.
Michael Ruger
About Michael.........
Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Should I Establish an Employer Sponsored Retirement Plan?
Employer sponsored retirement plans are typically the single most valuable tool for business owners when attempting to:
Reduce their current tax liability
Attract and retain employees
Accumulate wealth for retirement
establishing an employer sponsored retirement plan
Employer-sponsored retirement plans are typically the single most valuable tool for business owners when attempting to:
Reduce their current tax liability
Attract and retain employees
Accumulate wealth for retirement
But with all of the different types of plans to choose from, which one is the right one for your business? Most business owners are familiar with how 401(k) plans work, but that might not be the right fit given variables such as:
# of Employees
Cash flows of the business
Goals of the business owner
There are four main stream employer-sponsored retirement plans that business owners have to choose from:
SEP IRA
Single(k) Plan
Simple IRA
401(k) Plan
Since there are a lot of differences between these four types of plans, we have included a comparison chart at the conclusion of this newsletter, but we will touch on the highlights of each type of plan.
SEP IRA PLAN
This is the only employer-sponsored retirement plan that can be set up after 12/31 for the previous tax year. So, when you are sitting with your accountant in the spring and they deliver the bad news that you are going to have a big tax liability for the previous tax year, you can establish a SEP IRA up until your tax filing deadline plus extension, fund it, and take a deduction for that year.
However, if the company has employees who meet the plan's eligibility requirement, these plans become very expensive very quickly if the owner(s) want to make contributions to their own accounts. The reason is that these plans are 100% employer-funded, which means there are no employee contributions allowed, and the employer contribution is uniform for all plan participants. For example, if the owner contributes 15% of their income to the SEP IRA, they have to make an employer contribution equal to 15% of compensation for each employee who has met the plan's eligibility requirement. If the 5305-SEP Form, which serves as the plan document, is set up correctly, a company can keep new employees out of the plan for up to 3 years, but often it is either not set up correctly or the employer cannot find the document.
Single(k) Plan or "Solo(k)"
These plans are for owner-only entities. As soon as you have an employee who works more than 1000 hours in a 12-month period, you cannot sponsor a Single(k) plan.
The plans are often the most advantageous for self-employed individuals who have no employees and want to have access to higher pre-tax contribution levels. For all intents and purposes, it is a 401(k) plan, with the same contribution limits, ERISA protected, they allow loans and Roth contributions, etc. However, they can be sponsored at a much lower cost than traditional 401(k) plans because there are no non-owner employees. So there is no year-end testing, it's typically a boilerplate plan document, and the administration costs to establish and maintain these plans are typically under $400 per year compared to traditional 401(k) plans, which may cost $1,500+ per year to administer.
The beauty of these plans is the "employee contribution" of the plan, which gives it an advantage over SEP IRA plans. With SEP IRA plans, you are limited to contributions up to 25% of your income. So if you make $24,000 in self-employment income, you are limited to a $6,000 pre-tax contribution.
With a Single(k) plan, for 2025, I can contribute $23,500 per year (another $7,500 if I'm age 50-59 or 64 or over or $11,250 if I’m age 60-63) up to 100% of my self-employment income and in addition to that amount I can make an employer contribution up to 25% of my income. In the previous example, if you make $24,000 in self-employment income, you would be able to make a salary deferral contribution of $23,500 and an employer contribution of $500, effectively wiping out all of your taxable income for that tax year.
Simple IRA
Simple IRA's are the JV version of 401(k) plans. Smaller companies that have 1 – 50 employees that are looking to start are retirement plan will often times start with implementing a Simple IRA plan and eventually graduate to a 401(k) plan as the company grows. The primary advantage of Simple IRA Plans over 401(k) Plans is the cost. Simple IRA's do not require a TPA firm since they are self-administered by the employer and they do not require annual 5500 filings so the cost to setup and maintain the plan is usually much less than a 401(k) plan.
What causes companies to choose a 401(k) plan over a Simple IRA plan?
Owners want access to higher pre-tax contribution limits
They want to limit to the plan to just full time employees
The company wants flexibility with regard to the employer contribution
The company wants a vesting schedule tied to the employer contributions
The company wants to expand investment menu beyond just a single fund family
401(k) Plans
These are probably the most well-recognized employer-sponsored plans since, at one time or another, each of us has worked for a company that has sponsored this type of plan. So we will not spend a lot of time going over the ins and outs of these types of plan. These plans offer a lot of flexibility with regard to the plan features and the plan design.
We will issue a special note about the 401(k) market. For small business with 1 -50 employees, you have a lot of options regarding which type of plan you should sponsor but it's our personal experience that most investment advisors only have a strong understanding of 401(k) plans so they push 401(k) plans as the answer for everyone because it's what they know and it's what they are comfortable talking about. When establishing a retirement plan for your company, make sure you consult with an advisor who has a working knowledge of all these different types of retirement plans and can clearly articulate the pros and cons of each type of plan. This will assist you in establishing the right type of plan for your company.
Michael Ruger
About Michael.........
Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
How is my Social Security Benefit Calculated?
The top two questions that we receive from individuals approaching retirement are:
What amount will I received from social security?
When should I turn on my social security benefits?
how is social security calculated
The top two questions that we receive from individuals approaching retirement are:
What amount will I received from social security?
When should I turn on my social security benefits?
Are you eligible to receive benefits?
As you work and pay taxes, you earn Social Security “credits.” In 2015, you earn one credit for each $1,220 in earnings—up to a maximum of four credits a year. The amount of money needed to earn one credit usually goes up every year. Most people need 40 credits (10 years of work) to qualify for benefits.
When will I begin receiving my social security benefit?
You are entitled to your full social security benefit at your “Normal Retirement Age” (NRA). Your NRA varies based on your date of birth. Below is the chart that social security uses to determine your “normal retirement age” or “full retirement age”:
social security retirement age
For example, if you were born in 1965, your NRA would be 67. At 67, you would be eligible for your full retirement benefit.
Delayed Retirement or Early Retirement
You can claim benefits as early as age 62, but your monthly check will be cut by 25% for the rest of your life. The way the math works out, for each year you take your social security benefit prior to your normal retirement age, you benefit is permanently reduce by 6% for each year you take it prior to your NRA.
On the opposite end of that scenario, if you delay claiming past your NRA, you will get a delayed credit of approximately 8% per year plus cost of living adjustments.
There are a number of variables that factor into this decision as to when to turn on your benefit. Some of the main factors are:
Your health
Do you plan to keep working?
What is your current tax bracket?
The amount of retirement savings that you have
Income difference between spouses
social security age chart
What amount will I receive from social security?
Social security uses a fairly complex formula for calculating social security retirement benefits but the short version is the formula uses your highest 35 years of income. If you have less than 35 years are income, zeros are entered into the average for the number of years you are short of 35 years of income. They also apply an inflation adjustment to your annual earnings in the calculation.
You can obtain your Social Security statement by creating an account at www.ssa.gov. Your statement contains lots of valuable information, such as:
Your estimated benefit amount at full retirement age
Eligibility for benefits
A detailed history of how much you've earned each year
Keep in mind that the figures in your statement are just estimates, and your eventual benefit amount could be quite different, especially if you're relatively young now.
Michael Ruger
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Do I Have to Pay Taxes on my Social Security Benefit?
If your “combined income” exceeds specific annual limits, you may owe federal income taxes on up to 50% or 85% of your Social Security benefits. The limits for federal income tax purposes are listed in the chart below.
paying taxes on social security
If your “combined income” exceeds specific annual limits, you may owe federal income taxes on up to 50% or 85% of your Social Security benefits. The limits for federal income tax purposes are listed in the chart below.
percent of social security taxed
The federal income thresholds are not indexed for inflation, so they are the same every year. “Combined income” is defined as adjusted gross income plus any tax-exempt interest plus 50% of your Social Security Benefit. Some states tax Social Security Benefits, whereas others do not tax them. See the chart below:
what states do not tax social security benefits
Michael Ruger
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Can I Receive Social Security Benefits While I'm Still Working?
The short answer is "Yes". But you may not want to depending on when you plan to turn on your social security benefits and how much you plan to earn each year from working.
can i receive social security while I'm still working
The short answer is "Yes". But you may not want to depending on when you plan to turn on your social security benefits and how much you plan to earn each year from working.
Electing social security benefits AFTER your Normal Retirement Age
For social security, your Normal Retirement Age (NRA), is the age you are eligible to receive full retirement benefits. Your NRA is based on your date of birth and the table is listed below:
delaying social security
Once you reach your NRA, you are allowed to begin receiving social security benefits without having to worry about the social security "earnings test". Meaning that you can earn as much as you want working and they will not reduce your social security benefit. You are free and clear.
Electing social security benefits BEFORE your Normal Retirement Age
If you turn on your social security benefits prior to reaching your Normal Retirement Age, you will be subject to the "earnings test" each year. For social security recipients who will not reach full retirement age in the 2016 calendar year, the first $15,720 in earnings is exempt. Beyond that amount, every $2 in earnings will reduce your social security benefits by $1. It's a fairly steep penalty. The general rule is if you plan to earn over the $15,720 threshold and you will not hit your normal retirement age for social security in 2016, do not elect to begin taking social security early because you will lose most of it from the "earned income penalty".
Electing social security benefits in the year your reach "Normal Retirement Age"
For social security recipients who will attain full retirement age during 2016, the first $41,880 is exempt, and the reduction is just $1 for every $3 in earnings beyond that point. Plus, only the months before your birthday count toward the total.
We advise our clients in this situation to keep their pay stub from the payroll period prior to reaching Normal Retirement Age because the IRS may contact them the following year to prove the amount of income that they earned prior to receiving their first social security payment.
Michael Ruger
About Michael.........
Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
Inherited IRA's: How Do They Work?
An Inherited IRA is a retirement account that is left to a beneficiary after the owner’s death. It is important to have a general knowledge of how Inherited IRA’s work because a minor error in how the account is set up could lead to major tax consequences.
how do inherited ira's work
An Inherited IRA is a retirement account that is left to a beneficiary after the owner’s death. It is important to have a general knowledge of how Inherited IRA’s work because a minor error in how the account is set up could lead to major tax consequences.
Before going into the different kinds of Inherited IRA’s, if you are the sole beneficiary of your spouse’s IRA, you are able to transfer the assets to your own existing IRA or to a new IRA through what is called a “Spousal Transfer”. This account is not treated as an Inherited IRA and therefore is subject to all the rules a Traditional IRA would be subject to as if it was always held in your name. If the spouse needs to have access to the money before age 59 ½, it would probably make sense to set up an Inherited IRA because this would give the spouse options to access the money without incurring a 10% early withdrawal penalty.
Withdrawal Rules for Spouse & Non-Spouse Beneficiaries
The SECURE Act that passed in December 2019 dramatically changed the distribution options that are available to non-spouse beneficiaries. If you are spousal beneficiary please reference the following article:
10 Year Method
All the assets must be distributed by the 10th year after the year in which the account holder died. This option may make sense compared to the Lump Sum option explained next to spread out the tax liability over a longer period.
Lump Sum Distribution
You may take a lump sum distribution when the account is inherited. It is recommended that you consult your tax preparer to discuss the tax consequences of this method since you may move up into a different tax bracket.
Additional Takeaways
If the decedent was required to take a distribution in the year of death, it is important to determine whether or not the decedent took the distribution. If the decedent was required to take a RMD but did not do so in the year they passed, the inheritor must take the distribution based on the life expectancy of the decedent or the distribution will be subject to a 50% penalty. Distributions going forward will be based on the life expectancy of the inheritor.
It is important to be sure a beneficiary form is completed for the Inherited IRA. If there is no beneficiary and the account goes to an estate then the inheritor will have limited choices on which distribution method to choose among other tax consequences.
You are only able to combine Inherited IRA’s if they were inherited from the same individual. If you have multiple Inherited IRA’s from different individuals, you cannot commingle the assets because of the distributions that must be taken.
There is no 60 day rule with Inherited IRA’s like there is with other Traditional IRA’s. The 60 day rule allows someone to withdraw money from an IRA and as long as it’s replenished within 60 days there is no tax consequence. This is not available with Inherited IRA’s, all non-Roth distributions are taxable.
The charts below are from insurancenewsnet.com publication titled “Extended IRA Quick Reference Guide” give another look at the details of Inherited IRA’s.
inherited ira options
inherited ira distribution options
About Rob……...
Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.
