Year-End Planning: Emergency Edition ’17

I’ve been trying to write this missive for months.  This is *definitely* not your typical year-end on either the tax or investment fronts.  Congressional leadership has surprised me and most other observers by passing a tax bill with major changes, and we are only now getting enough detail to understand the radical changes that are only weeks off!

The stock market also looks to be turning in a strong performance for 2017.  Many of us fear that it is now overvalued, with implications for both your investment portfolio performance and your 2017 tax returns.

So, here are my thoughts on year-end planning.

Tax Planning:

As of today, it appears that the Congressional Republicans’ tax bill will pass and be signed into law this week.  The way we calculate taxable income will change for the next 8 years!  Your federal taxes may go up, down or sideways.

There have been some calculators out; so far I’ve found them largely meaningless.  I expect to have one available for tax season.  For now, I ran a few random returns with the major changes.  It appears that *most* middle income clients will have higher taxable incomes, but lower net income tax.  Lower income folks *should* see lower taxes.  Some of your taxes will go up!  Contact me to see if yours was one I ran – or I can do that if you ask nicely.

Highlights that bear on planning right now (as in, before year-end):

RATES:  The same number of tax brackets (7), but all over 10% are down about 2-3% (15% bracket is reduced to 12%); some bracket shifts may mean higher rates on part of your income.

EXEMPTIONS:  They are eliminating the personal exemption in 2018.  This could be bad news for anyone with multiple children or other dependents (older kids, parents, etc.).  The increased standard deduction does not cover this loss for anyone except singles.  A small new credit will not either.

ITEMIZED DEDUCTIONS:  They have substantially reduced allowable deductions.  In a blow to residents of the coasts and somewhat to Ohio & Kentucky, state & local tax deductions are limited to a total of $10,000 in income & property tax combined.  See details below.

The standard deduction will not quite double, so not a replacement for the loss of exemptions.

CHILD TAX CREDITS:  There will be an increased child tax credit, but only for children under 17.  Income phase outs will increase, so that’s good news with anyone with kids & income $110,000 – $400,000.

BUSINESS INCOME:  It appears that some of you who are self-employed or freelancing may pay significantly less income tax but the details are complex; for most of you, 20% of your business profit will be exempt from income – not self-employment – tax.

  • PLANNING TIP: It may be worth pushing invoicing off until January to the extent you still can. You can’t avoid reporting it by just not depositing a check.



  • State & local income & property tax deductions will be limited to a $10,000 aggregate total. (If your income taxes are $6,000 and your property tax is $6,000, the deduction will be $10,000.) This will be a mixed bag in Ohio & Kentucky – and bad on the coasts.  The effect will depend on your income & how much property tax you’re paying.
  • Home equity loan interest will no longer be deductible.
  • Unreimbursed *employee* expense deductions will be repealed. Note that this does not affect business deductions, only those employees like salespeople who don’t get reimbursed for mileage, etc.
  • Other Miscellaneous Itemized deductions will all be repealed, including tax preparation fees, legal fees, investment fees, gambling losses, etc.
  • Undoubtedly, some of you may no longer be itemizing deductions, so you’ll see reduced or no tax effect from your taxes & charity in 2018.
      1. Pay your 4th quarter 2017 state & city estimated taxes in December. Pre-paying 2018 is specifically not allowed.
      2. Consider paying at least the first installment of 2018’s property taxes, or all of it. This is not disallowed.
      3. Accelerating 2018 charitable contributions may pay off.
      4. For longer-term planning, if you want to make all your 2018 contributions – and maybe 2019 & beyond, you should consider a charitable donor-advised fund. DAF’s are a type of low-cost trust arrangement that allows you to take the deduction now and actually send the money out later.
      5. Definitely get your noncash charity (Goodwill) out of the house before year-end!

 ALTERNATIVE MINIMUM TAX:  Changed, but not repealed.  You may no longer pay.  Call for details.

 OTHER ISSUES:  Alimony will not be taxable or deductible beginning with 2019 divorces.  Corporate rates, Estate (“death”) tax reduction are also in the bill, but those don’t affect real people we know, so I’m not covering them here.


  • Dependent Care Credits & Flexible Spending
  • Education credits
  • Student loan interest (for those within the income limits)
  • Teacher expense deduction
  • Adoption Assistance (tax free employer reimbursement & credit)
  • Tuition waivers (for University employees, families & grad students)
  • Exclusion of gain from sale of home (still 2 of 5 years)
  • 401(k)’s: There were rumors they might try to restrict or even eliminate pretax contributions


We don’t know how to start changing W-4’s, but will need to do that soon – especially for those of you whose taxes will increase.  Restructuring withholding should be on IRS’s short list.  Correcting yours is on mine.

Oh, and it’s all temporary – to 2025 – except the corporate tax reductions, which are permanent.

Please call if you want to discuss any of this.  If I get useful updates, I’ll post them here.   I’ll also post good links on my business Facebook page.  So watch the news, but pay attention to your sources.  There’s a *lot* of noise out there that just isn’t true either because of deliberate bias, or lack of understanding by those reporting.

Here are a few links to readable, reliable blogs (even then, not gospel; nobody’s read all 1,097 pages yet):




  1. Many actively managed (not index) mutual funds will be reporting large capital gains – which you will need to report as income even though you haven’t sold the fund(s). (The gain should be more-or-less reflected in your current market value.)  A large number of funds will be reporting income of 10% or more of market value and some even 20%+.
  • Those of you with incomes in the lower brackets may pay no tax on these, as the 0% capital gains rate applies.
  • If your income puts you in or above the 25% bracket, you’ll pay 15% on the gains.


  1. The stock market has soared in the past few years, and many of you may be selling to take gains. The above comments about long-term capital gain tax apply.


  1. Please review the risk level in your portfolio. If the market “corrects,” you don’t want to be taking more loss than you can stand!  Call if you want help with that.  We have limited time before year-end (more in January) but should be able to review your investments and suggest a few adjustments.


Looking forward to seeing you all soon – and perhaps hearing from a few of you sooner.  Happy Holidays!


Market’s High — What to Do?

The stock market has posted really strong gains this year; in recent weeks it’s hit all-time highs.  We don’t believe in timing the market, but we do believe in sticking with an asset allocation that’s consistent with our risk tolerance.  Right now, the gains in our stock position (individual stocks & stock mutual funds) have thrown us out of whack – we’re more exposed to the stock market than we like to be.


The coolest thing in rebalancing to a pre-determined asset allocation is that it forces us to sell high and buy low!  Do we always hit the top & the bottom? Of course not.  But we didn’t get creamed in 2008, we stayed in the market without having to sell as it declined, and were forced (by our allocation) to buy near the bottom & ride it up.  Now we’re selling out some of those gains to pull back our stock position and invest in cash like CD’s and in short- to medium-term bonds.

Many of you have expressed interest over the past year in working with us on aspects of your financial plan and the allocation of your investments – including your 401(k), 403(b), 457 or similar plan.

Do you have a plan with Specific, Measurable, Achievable, Results-focused, and Time- bound goals?

  • If you’re under 50, you should be contributing as much as possible to your retirement account(s), you should know how you’re going to pay for kids’ education (if any), and whatever other medium-term SMART goals you have.
  • If you’re 50+, it’s time to start looking at SMART goals for retirement.  How much do you need, when, what you need to do differently in the interim (or maybe continue doing right)?
  • No matter your age, you need an asset allocation that fits your risk tolerance.  At the top of the market is when big losses happen to those who are taking too much risk.  Get a check-up!

Call, email or go to to schedule an appointment.  We do have time to get started while we’re still in Fort Collins, so get in touch soon.  We can get yours started before we meet!  Just ask for a list of items to begin assembling.

Talk to you soon.

“Mom, what’s a W-9?”  1099-MISC, W-4 Exemptions & More

It’s summer job time, time for new grads to find jobs, and it’s always a good time to take a better job!  But navigating the shoals of new hire paperwork can be hazardous.  I got this question just a couple of weeks ago from one of my own kids!

When you’re hired on at a new job, you normally have to fill out a W-4 and an I-9.  The first (and the state equivalent) require you to designate your number of exemptions for the income tax withholding calculation.  The latter, with your ID, proves your legal authorization to work in the U.S.

But sometimes you’ll be presented with a W-9 requesting your Social Security Number instead of a W-4.  Beware!  This employer is treating you as an “independent contractor” – a self-employed person – and will not be paying employment taxes or withholding income taxes for you.  They won’t be carrying workers’ comp insurance or providing any other benefits.  You will receive a 1099-MISC in January rather than a W-2.  If you’ll be making more than $1,000 or so, you could be in for a rude shock when tax time comes.

What are your options if you’re being treated as self-employed?

  • IRS and the states have rules about who qualifies as an independent contractor. There are 20 “tests” (here) but they add up to who controls the conditions of your work – the employer or you?  When do you work, where do you work, who decides how the work is done, whose tools & equipment are used, do you have a professional license/experience or do they train you, do you provide this service to multiple firms?  Are you paid for the work you accomplish – or hourly like an employee would be?
  • If you’re incorrectly classified, you can file the SS-8 with the IRS, and in the fullness of time you will receive a determination. Your employer will be in trouble, and you can count on being fired.  So for practical purposes, the only alternative if you want to retain the job is to put money aside and either pay quarterly estimated taxes or expect it to eat any other refund to which you’re entitled.  You’ll need to pay approximately 15% in addition to your income tax (on the first $118,500), but you may be able to deduct some business expenses.
  • Best to consult a professional, or use a calculator like the one here to make sure you won’t owe. You can make quarterly payments online at, or mail them to IRS in April, June, September & January.

If you *are* an employee, fill out your W-4 with care.  Basically, one exemption covers the standard deduction and personal exemption for a single person with one job.  If you itemize deductions, or have children (especially under 17), qualify as Head of Household or for Earned Income or other credits, you can increase it to 2 or more and have less tax withheld.  If you’re single with one job, you can safely use the worksheet on the W-4 form.  If you want a higher refund, reduce your exemptions to zero or add an additional dollar amount of withholding per pay period.

Common W-4 traps include:

  • Married couples – claiming Married can often mean owing, since the tables essentially assume you have a non-working spouse at home. If both of you have good incomes, beware. You may need to file as “Married but withhold at higher single rate.”  Consult a professional or use a comprehensive W-4 calculator like this one at to make sure you won’t owe.
  • Multiple jobs – if you work more than one job, each payroll calculation assumes that it’s all your income. But that $5,000 or $10,000 you make at your second job is taxed at your marginal (top) tax rate, which may be 25% or higher.  Again, consult a pro or use a calculator to adjust your exemptions; set them at Single – zero, and add a fixed amount, or see if your employer will withhold a flat percentage that corresponds to your top tax rate.

Remember, you must report all your income, even if you don’t receive a reporting form.  If you do receive one, IRS will be matching to make sure you report.  If you work in someone else’s home – providing childcare or other services – then you may be a household employee.  Your employer is required to withhold and pay employment taxes.  You can refer them to this info.

As always, call 513-794-1829 or email for a FREE consultation if you have questions.

Identity Theft & Taxes

This just in:

IRS Asking Some Taxpayers to Verify Their ID

Beset by ID thieves, IRS has set up filters to try to spot bogus returns before issuing refunds.  Of course, they’re not telling us what the screens are.  But some taxpayers may get an IRS Letter 5071C asking them to verify their identification.  If you get one, go to and answer some ID questions.  Processing will take another 6 weeks, so I hope you don’t need that refund immediately!  You can also call the toll-free ID Verification number in the letter.  Hopefully, they’re answering that one.

Ohio (and probably other states) have been using a similar program since the beginning of this filing season.  If you get a letter, follow the instructions.  If you pass the quiz, your refund will be released the next day.

REMEMBER:  IRS will *never* initiate contact via email or phone.  If you get a phone call claiming you owe IRS & threatening you, assume it’s a scam to get your ID or your money, or both.

Note that neither of these programs will ask you for credit card or bank info, only tax return info & innocuous information from your credit report (“third party authentication”) like which of several cars you’ve owned, or addresses you’ve lived at.

Call if you have questions.  I probably can’t come to the phone, but Brigid can handle your questions at 513-794-1829.

How Can Financial Counseling Help You?

Financial counseling can be the first step toward financial stability and wealth building.  With tax season behind me, now would be a good time to make an appointment.  Contact me via email, phone, or via my web scheduler (  Let’s talk about how you could improve your finances.   It can be simpler than you think to lower your money stress and make your life work!