Tag Archives: dustin rinaldi finances

05.21.18
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Dustin Rinaldi on tax changes: 529 plans

Thanks to the Tax Cuts and Jobs Act of 2017, Section 529 plan savings may now be used for K-12 tuition as well as for higher education costs.

Over 20 years ago, federal lawmakers authorized states to create tax-exempt “qualified tuition programs” — Section 529 plans — to help taxpayers fund the cost of higher education. The Tax Cuts and Jobs Act of 2017 expands Section 529 by allowing tax-free account withdrawals not only for qualified higher education expenses but also for tuition at public, private, or religious elementary and secondary schools.

Tax-free 529 withdrawals for K-12 are capped at $10,000 a year, per student

If a child is the beneficiary of multiple 529 plan accounts, the $10,000 may be distributed from one or more of the accounts. Withdrawals in excess of $10,000 would be taxed according to the Section 529 rules (generally as part nontaxable return of principal and part distribution of earnings subject to both income taxes and a 10% penalty).

529 plans typically have generous contribution limits

Since most states’ 529 plans have relatively high limits on contributions, using one or more 529 plans to save for both K-12 tuition and higher education expenses may be a practical option for families who expect to incur those costs. Although 529 plan contributions are not deductible for federal income tax purposes, many states provide residents a state tax deduction for contributions to their plans.

Contributions to Coverdell education savings accounts, which also allow tax-free withdrawals for qualified K-12 and college expenses, are restricted to $2,000 a year (per beneficiary) and are phased out for higher-income taxpayers. There are no such limits on 529 plan contributions. Both types of accounts allow any investment earnings to build up deferred of federal income taxes.

Rollovers to ABLE accounts are permitted

Federal tax law allows 529 plan savings for a beneficiary to be rolled over tax-free within 60 days of distribution to another 529 account for the same beneficiary. Tax-free rollovers of 529 plan funds are also permitted from one beneficiary to another beneficiary who is a member of the same family (e.g., a sibling or other relative defined in the law). This flexibility can be useful in the event the original 529 account beneficiary doesn’t need the money for educational expenses or uses only a portion of the account balance.

The Tax Cuts and Jobs Act provides another rollover option by allowing 529 plan savings to be rolled over tax and penalty free (within limits) to an ABLE account owned by the designated beneficiary or a member of the beneficiary’s family. ABLE accounts are tax-advantaged accounts for disabled individuals. Unless it is extended or made permanent, the 529-to-ABLE account rollover provision will expire after 2025.

This is just an overview of the new 529 plan tax provisions. Please consult your tax advisor for more information about the rules and how they apply in your specific situation.

Footnotes/Disclaimers

This communication is not intended to be tax advice and should not be treated as such. You should contact your tax professional to discuss your specific situation.

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber’s or others’ use of the content.

Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

04.18.18
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Dustin Rinaldi Shares Red Flags that Could Alert the IRS

The IRS audited approximately 1.4 million individual tax returns filed in 2012.1 That amounts to approximately 1% of 146 million individual returns filed that year. However, fewer than one-quarter of those audits involved face-to-face meetings with IRS auditors. The rest were conducted through the mail.

Filers earning less than $100,000 had a .58% chance of being audited. Among filers with income exceeding

$200,000, the audit rate was 2.06%; for those earning more than $1 million, it climbed to 9.20%. Audit risk also increased for self-employed taxpayers who filed a Schedule C, Income and Expenses for sole proprietors.

Depending on how much income was reported, the chance of being audited ranged from 1.0% for returns listing gross receipts under $25,000 to 2.7% for those reporting gross receipts of $200,000 or more.1

What Triggers an Audit

The following are some of the red flags that could alert the IRS, aside from earning a lot of money:

1. Running a cash business

2. Claiming the home-office deduction

3. Self-employment

4. Deducting business meals, travel, and entertainment

5. Failing to report all taxable income

6. Claiming 100% business use of a vehicle

7. Making large charitable contributions

8. Claiming a rental loss

9. Taking larger than usual deductions

What the IRS Looks For

Whether the IRS requests a face-to-face meeting or chooses to conduct its audit through correspondence, the following issues may arise:

· Unreported income — The IRS will assess taxes on any “missing” amount plus interest and penalty charges — regardless of whether the omission was accidental or intentional. A finding of significant fraud could even result in criminal prosecution and jail time.

· Personal expenses vs. business expenses — Be prepared to prove that expenses you’ve claimed for business purposes were not actually personal expenses. Auditors pay particular attention to deductions related to entertainment, meals, travel, and transportation. If you own a business, keep all receipts and be ready to answer questions about the connection between each expense and your business.

Even if you don’t expect the worst during your audit, there are several reasons it’s still a good idea to enlist the services of an experienced tax professional to help you navigate the process. For example, a professional is probably more familiar with the complexities of ever-changing tax laws than you, and is also less likely to let emotions cloud his or her judgment. In addition, letting a pro speak on your behalf reduces the chance that you will accidentally volunteer information that could hurt your case.

This communication is not intended to provide tax advice and should not be treated as such. Each individual’s tax situation is different. You should contact your tax professional to discuss your personal situation.

For more information or any questions regarding this topic, contact certified financial planner Dustin Rinaldi or call (239) 444-6111.

1Source: IRS, Internal Revenue Service Data Book, March 2014.

04.18.18
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Dustin Rinaldi Shares 10 Investment Mistakes You Should Avoid

Who needs a pyramid scheme or a crooked money manager when you can lose money in the stock market all by yourself. If you want to help curb your loss potential, avoid these 10 strategies.

1. Go with the herd. If everyone else is buying it, it must be good, right? Wrong. Investors tend to do what everyone else is doing and are overly optimistic when the market goes up and overly pessimistic when the market goes down. For instance, in 2008, the largest monthly outflow of U.S. domestic equity funds occurred after the market had fallen over 25% from its peak. And in 2011, the only time net inflows were recorded was before the market slid over 10%.1

2. Put all of your bets on one high-flying stock. If only you had invested all your money in Apple 10 years ago, you’d be a millionaire today. Perhaps, but what if, instead, you had invested in Enron, Conseco, CIT, WorldCom, Washington Mutual, or Lehman Brothers? All were high flyers at one point, yet all have since filed for bankruptcy, making them perfect candidates for the downwardly mobile investor.

3. Buy when the market is up. If the market is on a tear, how can you lose? Just ask the hordes of investors who flocked to stocks in 1999 and early 2000 — and then lost their shirts in the ensuing bear market.

4. Sell when the market is down. The temptation to sell is always highest when the market drops the furthest. And it’s what many inexperienced investors tend to do, locking in losses and precluding future recoveries.

5. Stay on the sidelines until markets calm down. Since markets almost never “calm down,” this is the perfect rationale to never get in. In today’s world, that means settling for a minuscule return that may not even keep pace with inflation.

6. Buy on tips from friends. Who needs professional advice when your new buddy from the gym can give you some great tips? If his stock suggestions are as good as his abs workout tips, you can’t go wrong.

7. Rely on the pundits for advice. With all the experts out there crowding the airwaves with their recommendations, why not take their advice? But which advice should you follow? Cramer may say buy, while Buffett says sell. And remember that what pundits sell best is themselves.

8. Go with your gut. Fundamental research may be OK for the pros, but it’s much easier to buy or sell based on what your gut tells you. Had problems with your laptop lately? Maybe you should sell that IBM stock. When it comes to hunches, irrationality rules.

9. React frequently to market volatility. Responding to the market’s daily ups and downs is a surefire way to lock in losses. Even professional traders have a poor track record of guessing the market’s bigger shifts, let alone daily fluctuations.

10. Set it and forget it. Ignoring your portfolio until you’re ready to cash it in gives it the perfect opportunity to go completely out of balance, with past winners dominating. It also makes for a major misalignment of original investing goals and shifting life-stage priorities.

For more information or any questions regarding this topic, contact certified financial planner Dustin Rinaldi or call (239) 444-6111.

1Sources: ICI; Standard & Poor’s. The stock market is represented by the S&P 500, an unmanaged index considered representative of large-cap U.S. stocks. These hypothetical examples are for illustrative purposes only, and are not intended as investment advice.