Vista Tax Relief | Accounting and Tax Blog

admin

Financial Wellness Programs — A Win-Win for Your Business and Your Employees

by Leave a Comment

Money worries distract workers. Employees who are stressed out about their finances generally have trouble focusing on work and don’t give it their best effort, resulting in a loss of productivity. Moreover, employees who are living from paycheck to paycheck are unlikely to direct money to a workplace retirement plan and, if they do contribute, they tend to contribute small sums. Financially stressed employees are also more likely to leave their jobs, taking their skills with them and putting pressure on their former employers to hire replacements.

Inflation, debt, a lack of emergency savings, and minimal or no retirement savings are some of the factors contributing to the high levels of financial stress among American workers that can affect the companies they work for. Very often, personal financial issues are compounded by a lack of knowledge of basic commonsense money management skills. One way employers can help employees gain more control over their financial lives is by providing them with access to educational programs focused on financial wellness.

What Is Financial Wellness?

When it comes to their finances, employees have different priorities and obligations. But in broad terms, employees who are financially well make sound financial decisions, manage their money wisely, and have a clear, workable plan for saving for their short- and long-term goals. Since they are no longer under extreme financial stress, they can also focus more on fully engaging at work and in other parts of their lives.

An effective financial wellness program should focus on imparting the knowledge and skills that help individuals overcome personal financial challenges. Employers should consider the following topics and strategies:

  • Budgeting. Learning how to budget and set spending priorities is an invaluable skill that can help individuals get a handle on their financial lives. Employers could direct employees to online tools that help with budgeting and offer suggestions on how to not overspend.
  • Debt management. Online seminars, videos, and written materials that explain the terms and conditions of consumer debt and how to comparison shop among credit card issuers can help prevent employees from making expensive errors and falling deeper into debt. There are also tools that allow users to develop a strategy for paying off credit cards and other debts that limit their ability to save for the future.
  • Saving for current and future goals. Offering materials that teach employees how to establish and prioritize financial goals, such as building an emergency fund, buying a first home, financing a child’s college education, and saving for retirement, can be hugely helpful in putting employees on the road to financial wellness.
  • Investing education. Covering a variety of investment-related topics — including asset allocation, diversification, risk and reward, volatility, and rebalancing — can help retirement plan participants make sound decisions about managing their plan assets. Online tools, seminars, and handouts that explain these topics in easy-to-understand language give employees the skills they need to make the most of their opportunity to attain retirement security.

Your financial professional can offer helpful insights on smart ways to help your employees take control of their finances and improve their financial health.

For more information on Financial Wellness Programs, call Vista Tax Relief at 480-916-2862 today!

Projects That Add to the Value of Your Home

by Leave a Comment

You only have to look at the number of home remodeling shows on television to understand just how many people enjoy watching others upgrade their living spaces. These popular home remodeling shows have inspired many people to try their own hands at various remodeling projects.

If you are interested in having work done on your living space or doing it yourself, you should understand that some remodeling and construction projects will enhance the value of your home as well as its appearance. Other remodeling projects may be on your wish list and make you happy but won’t materially affect the value of your home.

What projects will add to the value of your home? According to the “2023 Cost vs. Value Report” conducted by Remodeling, a leading trade publication/platform, the top five renovations that increase — or come close to increasing — home value are as follows:

HVAC Conversion

Switching out your fossil-fuel burning furnace to a more environmentally friendly alternative — an electric heat pump — is an expensive undertaking but easily recoups its cost. Typically, the cost of converting a 2,000-square-foot home to an electric heat pump is estimated to be $17,747, but the report notes that it adds about $18,366 to the home’s resale value — a 103.5% return on the investment.

Garage Door Replacement

A new garage door definitely enhances a home’s curb appeal and easily recoups its initial cost. The report found that removing and disposing a 16- by 7-foot garage door and replacing it with four-section doors with heavy galvanized steel tracks would cost $4,302 on average but would boost the home’s resale value by $4,418, a 102.7% return on investment.

Manufactured Stone Veneer

Stone veneer has grown in popularity amongst homeowners looking to craft a warm and welcoming feel to their homes’ exterior. It costs an estimated $10,925 to install 36 linear feet of sills, 40 linear feet of corners, an address block, and other materials, including water-resistant and corrosion-resistant barriers. However, homeowners will recoup 102.3% of the project’s cost if they put their home on the market.

Replacing an Entry Door

New front doors can help improve a home’s energy efficiency as well as enhance its appearance. Replacing an old entry door with a new steel one will cost an average of $2,214 but will increase your home’s resale value by $2,235, recouping 102.9% of its original cost.

Replacing Siding

Replacing a home’s siding is an expensive undertaking, but it is one project that delivers immediate eye appeal. New siding refreshes a house’s appearance and adds to the neighborhood’s overall desirability. The report looked at the costs of installing both fiber-cement siding and vinyl siding. It found that the average cost of installing 1,250 square feet with fiber-cement siding would run a homeowner $19,361. The homeowner would expect to recoup 88.5% of the cost of the project, or $17,129. Installing new vinyl siding would be less costly than fiber-cement siding. Siding for a 1,250-square-foot house would cost an estimated $16,348, and the homeowner could expect to get back around 94.7% of that total cost at resale.

Be aware that labor costs vary from state to state and from community to community. The cost of materials fluctuates, sometimes considerably, depending on inflation, supply chain issues, and other economic and political forces.

For more information on Home Projects, call Vista Tax Relief at 480-916-2862 today!

Separating Business and Personal Expenses

by Leave a Comment

Running a small business is a demanding task that requires careful attention to various aspects, including finances. One of the most critical financial practices is separating business and personal expenses. While it may seem like a minor detail, this separation is essential for the financial health and legal integrity of your business. Here’s why keeping these expenses distinct is important.

Accurate Financial Tracking

When you mix business and personal expenses, it becomes challenging to track the true financial performance of your business. Accurate financial tracking is crucial for understanding how your business is doing, making informed decisions, and planning for the future. Without clear records, you may struggle to see where your money is going, which can lead to poor financial decisions that could harm your business.

Simplified Tax Filing

Tax season can be stressful for any business owner, but it’s even more challenging when business and personal expenses are intertwined. The IRS requires that you report your business income and expenses accurately. If your records are muddled, you might miss out on valuable deductions or, worse, inadvertently claim personal expenses as business ones. This can result in penalties or even an audit. Keeping expenses separate simplifies tax preparation and ensures that you are compliant with tax laws.

Legal Protection

For businesses structured as limited liability companies (LLCs) or corporations, maintaining a clear distinction between personal and business finances is vital for protecting personal assets. This separation helps uphold the “corporate veil,” which is the legal barrier that protects your personal assets from being used to satisfy business liabilities. If you don’t keep your finances separate, a court could rule that your business is not truly separate from you, putting your personal assets at risk.

Professionalism and Credibility

Maintaining separate finances also boosts your business’s credibility. Whether you’re dealing with lenders, investors, or clients, having clear and organized financial records shows that you run your business professionally. This can build trust and open doors to opportunities that might not be available if your finances were disorganized.

Better Financial Management

When you separate business and personal expenses, it’s easier to manage your cash flow, create budgets, and forecast future financial needs. This clarity allows you to make better decisions about when to reinvest in your business, when to cut costs, and how to plan for growth.

How to Keep Business and Personal Finances Separate

  • Open a Business Bank Account: Use a dedicated bank account for all business transactions. This makes it easier to track income and expenses and simplifies record-keeping.
  • Get a Business Credit Card: Charge all business-related expenses to a business credit card. This keeps personal spending separate and helps build business credit.
  • Pay Yourself a Salary: Instead of dipping into business funds for personal use, establish a regular salary or owner’s draw. This ensures that business income and personal income remain distinct.
  • Keep Detailed Records: Maintain thorough records of all business transactions. Save receipts, invoices, and bank statements to ensure you have a clear trail for tax purposes and financial management.
  • Consult a Professional: Consider working with an accountant or financial advisor who can help you establish and maintain good financial practices.

Separating business and personal expenses is more than just a good habit—it’s a necessity for the long-term success of your business. By keeping these expenses distinct, you can ensure accurate financial tracking, simplify tax filing, protect your personal assets, and present a professional image to the world. In the end, this practice will save you time, reduce stress, and help your business thrive.

For more information on Business and Personal Expenses, call Vista Tax Relief at 480-916-2862 today!

Tax Diversification Can Be a Smart Strategy

by Leave a Comment

We are all familiar with some of the more common threats to our retirement savings. Inflation is a significant threat because it can make today’s dollar worth less in the future. An illness or injury that forces one to spend a large percentage of retirement savings on health care is another. Bad investment decisions and periods of sustained underperformance in the investment markets can also erode retirement savings. However, fewer people are familiar with an important but often overlooked threat to retirement savings — taxes.

Having to pay taxes can reduce the size of your retirement nest egg over time. However, there are strategies that can help minimize the impact of taxes on retirement savings. One of the most effective is tax diversification. It essentially involves spreading your retirement assets among accounts that are treated differently for tax purposes to achieve greater control over your taxes.

Taxable Accounts

When you invest in mutual funds,* stocks, bonds, and money market securities in a taxable account, any net realized capital gains, interest earnings, and dividends are taxable each year. The advantage of a taxable account, however, is that you don’t have to take annual required minimum distributions (RMDs) upon reaching age 73 (or other RMD age), so you can choose to withdraw your money when it suits your needs.

Roth Accounts

When you invest using after-tax dollars in a Roth IRA or a Roth 401(k) plan, investment earnings accumulate tax deferred, and withdrawals from the account will be tax free after you’ve had the account for at least five tax years and have reached age 59½. Investing in a Roth account could give you access to your retirement savings without the potential for being shifted into a higher tax bracket. And if you don’t need to withdraw money, you can simply leave it invested in your account — the RMD rules don’t apply to a Roth IRA or, starting in 2024, to a Roth 401(k) account during the owner’s lifetime.

Traditional Retirement Accounts

You won’t owe any taxes on the money you contribute to a traditional 401(k) or similar workplace retirement savings plan — or on tax-deductible contributions to a traditional IRA — until you make withdrawals. Investment earnings in these accounts are also tax deferred until withdrawal. Tax deferral lets your account grow faster than it would if taxes were paid on the income as it was earned. When you are retired and start taking withdrawals from your account, you may be in a lower tax bracket.

The Benefits of Tax Diversification

Diversifying across different types of accounts can give you greater control over when and how much you take from your retirement accounts. By spreading taxable distributions over a longer period, you may end up paying less tax and retain more of your savings.

The challenge is to determine the most strategic way to allocate your retirement assets among the different accounts. A tax professional can provide more insights on how tax diversification may work for you.

*You should consider the fund’s investment objectives, charges, expenses, and risks carefully before you invest. The fund’s prospectus, which can be obtained from your financial representative, contains this and other information about the fund. Read the prospectus carefully before you invest or send money. Shares, when redeemed, may be worth more or less than their original cost.

For more information on Tax Diversification, call Vista Tax Relief at 480-916-2862 today!

Unpaid Payroll Taxes: A Common Small Business Mistake

by Leave a Comment

Managing a small business involves juggling many responsibilities, and payroll taxes often get overlooked. Unfortunately, failing to handle payroll taxes properly is a common mistake that can lead to significant financial and legal issues.

What Are Payroll Taxes?

Payroll taxes include federal income tax withholding, Social Security and Medicare taxes (FICA), unemployment taxes, and state income tax withholding. Employers must withhold these taxes from employees’ wages and remit them to the government.

Why Small Businesses Struggle with Payroll Taxes

  • Lack of Awareness: Many small business owners underestimate the importance of timely payroll tax payments.
  • Cash Flow Issues: Delaying payroll tax payments to manage cash flow is risky due to penalties and interest.
  • Complex Regulations: Federal, state, and local tax laws can be confusing and challenging to navigate.
  • Inadequate Systems: Relying on outdated or manual processes often leads to errors.
  • Poor Record-Keeping: Missing payments or reporting errors are common without proper documentation.

Consequences of Unpaid Payroll Taxes

  • Penalties and Interest: The IRS imposes hefty fines for late or insufficient payments.
  • Legal Action: The IRS can take legal measures, including asset seizure or business closure.
  • Personal Liability: Business owners can be held personally responsible for unpaid taxes.
  • Reputation Damage: Failing to pay taxes can harm your business’s credibility.

How to Avoid Payroll Tax Mistakes

  • Educate Yourself: Understand your payroll tax obligations and deadlines.
  • Use Reliable Systems: Invest in payroll software or a service provider to ensure accuracy.
  • Separate Payroll Funds: Set aside taxes in a separate account to avoid spending them elsewhere.
  • Keep Accurate Records: Maintain detailed records to avoid errors and prepare for audits.
  • Consult a Professional: Seek help from a tax professional or accountant if you’re unsure.

Payroll tax management is crucial for small businesses. By staying informed, using the right tools, and seeking professional guidance, you can avoid the common pitfalls of unpaid payroll taxes and keep your business on track.

For more information on Unpaid Payroll Taxes, call Vista Tax Relief at 480-916-2862 today!

“Big Picture” Retirement Planning

by Leave a Comment

What makes a “successful” retirement? The answer for many people is: Retire with enough money saved to live through all the years of retirement with some degree of financial security. Of course, financial security is a critically important retirement goal. But it’s not the only component of a truly successful retirement. Other factors can also play an important role. To help you envision the big picture, consider the following.

What Makes You Happy?

This is an important consideration. Do you derive the greatest happiness from being around your family and other loved ones? Do you thrive on social interaction or do you prefer solitude? Do you have hobbies or other interests that you enjoy? Do you find that travel and exploring new places are important to your well-being? A deep understanding of what makes you happy can influence where you live, how much spending money you’ll need, and whether your retirement savings will last.

Where Will You Live?

Family ties and their importance can influence whether you’ll want to stay close to where you are living now or spread your wings and retire to a different area. The opportunity to access recreational and cultural events, educational programs, reliable transportation, and excellent health care facilities and providers are additional factors that can contribute to a satisfying retirement.

Your financial health also could be a factor when you are deciding where to live. You may need to downsize if the cost of keeping up your current home eats up too much of your retirement income. However, if you have done well saving for retirement, you will have more options. Thinking about where you may want to live in retirement long before you actually retire will give you time to strategize about how much you need to save to achieve your goals.

What Will You Do With Your Free Time?

Post-working life may leave you feeling aimless and discontented if you can’t find ways to occupy yourself. You’ll find retirement more satisfying if you have activities that are meaningful and pleasurable. You may want to volunteer for organizations in your community or try different hobbies well before retirement to see if these activities will capture your interest. It can be particularly satisfying if you can find some way to share particular skills or knowledge you have with others in your community.

Will Health Be an Issue?

Exercising, eating a healthy diet, and avoiding stress now can pay off big in retirement. Good health in retirement means that you will be able to be active and do more things you may enjoy, such as taking trips to see places you’ve always dreamed of seeing. Moreover, health care is expensive. Even with Medicare or other health insurance, out-of-pocket medical expenses can add up. So it pays to stay as healthy as possible and to have a strategy in place before retirement to deal with anticipated medical expenses that you or a loved one will incur.

What About Taxes?

State income tax rates vary, and some states tax Social Security payments while others do not. There also can be significant differences among localities when it comes to property and sales taxes. If your tax burden is significant, it can be worthwhile to consult with a tax professional to see how beneficial it might be to move to a lower tax area in retirement.

What Will Your Retirement Look Like?

A successful retirement requires clear, unemotional thinking about the type of life you want when you are no longer in the workforce. It requires holistic planning and a commitment to save as much as you can afford so that you will have enough money to lead your retirement life on your terms. Talk with your financial professional for ideas on how you can see the big picture when it comes to retirement planning.

For more information on Retirement Planning, call Vista Tax Relief at 480-916-2862 today!