Accounting/Finance
Are You Financially Prepared For The Death Of Your Spouse?
Death isn’t an easy topic, but it is important to discuss it. When developing financial plans, couples need to consider what will happen when one of them passes away.
The Census Department reports that in 2009, 2.4 percent of all men were widowed and 9.3 percent of all women were. After age 65, 41.3 percent of women were widows. The death of a spouse isn’t a theoretical number: It’s something that could very well affect your family.
As part of your financial plan, you should consider what will happen to your family’s income and expenses when one spouse passes away. If the spouse was working, that income will be lost; if the spouse was retired, the pension could be. Social Security benefits may make up some of the lost income, especially if there are minor children in the household.
Expenses may go down, but don’t depend on it. If there are minor children, then childcare expenses are likely to increase with only one parent in the household. If the family received its health insurance from the deceased spouse’s job, then those costs may rise. On the other hand, some of the deceased’s expenses will be eliminated. With retired couples, research by the Department of Health and Human Services on widows shows that household costs decreased about 20 percent when the husband passed away; in some cases, her income decreased by 50 percent or more when her spouse's income was gone.
Careful planning for savings, pension elections and life insurance may help your family avoid a financial crisis on top of personal sorrow. The proper option will be different for each couple, but the first step should be a discussion about what would happen should tragedy hit tomorrow.
Adi Khorsandian, a State Farm agent providing insurance and financial services, can be reached at (813) 991-4111 or visit www.adikinsurance.com
TAX Talk - Tips for 2014 tax year
It is almost October and a good time to review the tax implications for the year 2014. Tax planning is all about planning in advance, which involves evaluating the overall tax strategy and implementing it before the tax year end. Below are some tips that may be helpful for the tax year 2014.
Interest, Dividend, & Investment Income (Form 1099 INT/DIV)
Maintain good record keeping segregating interests and dividends separately. Schedule B may be required if the total amount is greater than $1,500. Verify year-end and periodical tax statements normally available online from the financial institutions and brokerage accounts. Do not forget to include any foreign interests/dividends collected/earned during the year.
Capital Gains (Form 1099-B)
Capital gains and deductible capital losses are reported on Form 1040, Schedule D (PDF), Capital Gains and Losses, and on Form 8949 (PDF), Sales and Other Dispositions of Capital Assets. Capital gains and losses are classified as long-term or short-term. If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. Generally, for most taxpayers, net capital gain is taxed at rates no higher than 15 percent. Some or all net capital gain may be taxed at 0 percent if you are in the 10 or 15 percent ordinary income tax brackets. However, beginning in 2013, a new 20 percent rate on net capital gain applies to the extent that a taxpayer’s taxable income exceeds the thresholds set for the new 39.6 percent ordinary tax rate.
Pension and annuities (Form 1099R)
If there are payments (Form 1099-R) from retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable. Also, if you are above 70½ of age, then you may have to comply with ‘required minimum distributions’ (RMD) rules.
Rental Income and Expenses
Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E. Special attention is required for treatment of Advance rent, Security Deposits, Depreciation, Repairs (vs. improvements), uncollected rent, etc.
Retirement Plans
Try maximizing the plan contributions for the year. There are many plans, including Individual Retirement accounts, Simple, SEP-IRA, 401k/Profit sharing, etc.
Itemized Deductions
You should itemize deductions if your allowable itemized deductions are greater than your standard deduction. Some taxpayers must itemize deductions because they cannot use the standard deduction. Some of the significant itemized deductions include mortgage interest/Points, state/property taxes, charitable contributions, medical expenses etc. You may benefit from itemizing your deductions on Form 1040: Schedule A. Tax payers with higher income have to pay special attention to Alternative Minimum Taxes (AMT).
Individual Tax Credits
Credits reduce your federal income tax after your tax has already been calculated. Accordingly, tax credits can be powerful strategies for reducing your US federal income tax. Some credits are non-refundable, and can at most reduce your federal income tax to zero. Other credits are refundable, and these can reduce surtaxes and possibly generate a refund than the amount you actually paid in. Below are some of the major tax credits available:
Adoption Tax credit, Education/American Opportunity Tax credit, Child and dependent care credit, Child tax credit, Credit for elderly or disabled, Health coverage tax credit, Earned Income tax credit.
Filing Deadline:
Final deadline to file Individual Tax Return - Form 1040 – Oct. 15 (with extension)
There are various limitations, thresholds, & procedures for many of the deduction and filings. Please consult your CPA/Tax attorney/or tax consultant for proper guidance with the above subject matter.
DISCLAIMER: In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
Suresh Kumar CPA, MBA is the principal of Kumar Consulting PA, a CPA and consulting firm licensed in the states of Florida, Kansas and Missouri. He may be reached at (813) 421-5068, by email at [email protected], or visit www.kumarconsultingcpa.com