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Taxes : Start Your Money Plan Here. Take Charge: Your Money. Your Life. Brought to you by 360 Degrees of Financial Literacy and America's CPA Financial Planners. Let’s get this out of the way …. - PowerPoint PPT Presentation
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Taxes: Start Your Money Plan Here
Take Charge: Your Money. Your Life.
Brought to you by 360 Degrees of Financial Literacy and America's CPA Financial Planners
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Let’s get this out of the way …
The general information contained in this web seminar is provided by the American Institute of Certified Public Accountants as a service to the public and our members. It is not intended to serve as tax, legal or any other professional advice applicable to any particular person or matter.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Your Host
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Gina Chironis, CPA/PFSCEO, Clarity Wealth Management•PFP Executive Committee Member•AICPA member•PFS credential holder•CalCPA PFP Committee Chair
Personal Financial Planning Section 360 Degrees of Financial Literacy
The Stats
A recent poll conducted for the AICPA and 360 Degrees of Financial Literacy found:
• 94% of Americans have financial concerns.
• 40% are concerned about basic living expenses
• 25% are concerned about the long-term
• Source: Harris Interactive
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Personal Financial Planning Section 360 Degrees of Financial Literacy
The Benefits of Planning Ahead
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.09
.12
46%
35%
34%
68%
50%
48%
Planners Non-Planners
% Living comfortably
% Not feeling behind on any specific goal
% Feeling very confident in managing money,
savings and investments
Statistics for households with incomes of $100,000 or more.2012 Household Financial Planning Survey, Certified Financial Planner Board of Standards, Inc. and the Consumer Federation of America. July 23, 2012.
Source: BAM Advisor Services
Personal Financial Planning Section 360 Degrees of Financial Literacy
Where are you now?
Where do you want to be in the future?
The Plan: Your roadmap to get there!
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The Takeaway: Americans Need a Plan
Personal Financial Planning Section 360 Degrees of Financial Literacy
Your tax return tells a story. In it you will find:• Details of your cash flows.• Information important to your
investment, retirement and estate planning strategies.
• Overlooked opportunities to help you achieve your financial goals.
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Where Are You Now:
Personal Financial Planning Section 360 Degrees of Financial Literacy
Your Tax Return Provides Valuable Info on Where You Are Now:
Estimate of Total Annual Spending 1040
IRA Contributions/Distributions 1040
Marginal Tax Bracket 1040
Big Ticket Expenses: Schedule A
Interest & Dividend Income: Schedule B
Capital Gains (Losses) and Investment Trading Activity Schedule D
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Personal Financial Planning Section 360 Degrees of Financial Literacy
How much are you saving?
• Company retirement plans• IRAs• Personal savings
Estimate your total current spending:
Gross Income:1040 Line 22
– Savings
– Taxes:1040 Line 61
= You Spent the Rest
How Much are you Saving and Spending?
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Tax Bracket
Current Marginal Tax Bracket: the tax rate that applies to the next dollar of income earned.
Find your Total Taxable Income on Line 43 of 2013 Form 1040.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
2014 Federal Tax Brackets
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2014 Federal Taxable Income Brackets and Rates
Rate Single Filers Married Joint Filers Head of Household Filers
10% $0 to $9,075 $0 to $18,150 $0 to $12,950
15% $9,076 to $36,900 $18,151 to$73,800 $12,951 to $49,400
25% $36,901 to $89,350 $73,801 to $148,850 $49,401 to $127,550
28% $89,351 to $186,350 $148,851 to $226,850
$127,551 to $206,600
33% $186,351 to $405,100 $226,851 to $405,100
$206,601 to $405,100
35% $405,101 to 406,750 $405,101 to 457,600 $405,101 to $432,200
39.6% $406,751+ $457,601+ $432,201+
Source: Internal Revenue Service
Personal Financial Planning Section 360 Degrees of Financial Literacy
Schedule A: Expenses
Medical expenses >10% AGI
Mortgage Interest Expense
(no principal payments)
Charitable contributions
State Taxes
Misc. Expenses >2% AGI
Phaseouts
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Personal Financial Planning Section 360 Degrees of Financial Literacy
360-Degree View
Your tax return gives you a 360-degree view of your finances that you can use to improve your future.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Tax Planning: The Bridge to Financial Planning
Think about taxes year round.
Save money tax efficiently for future needs.
Spend money tax efficiently so you keep more to invest in your future.
Hint: Visit www.360taxes.org for year-round tax tips.
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Where do you want to be in Retirement?
Taxes: Start Your Money Plan Here
What lifestyle do you want?How will your expenses change?Are you planning for medical expenses?Do you have an overall game plan?
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Personal Financial Planning Section 360 Degrees of Financial Literacy
360-Degree View
Save money tax efficiently Identify future deductions Spend money tax efficiently
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What's Your Tax Strategy?
Taxes: Start Your Money Plan Here
How are you timing income and deductions?Have you considered ways to bunch deductions?Are you losing deductions due to phaseouts?Do you have a system for tracking expenses?
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Decrease Debt or Invest?
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Pay down debt when you can’t invest at a higher rate401(k)
Match*Credit Card Investment Mortgage
Interest Paid / Received 100.0% 18.0% 8.0% 6.5%
Tax effect @ 25% -- 0.0% -2.0% -1.6%
Net Paid / Received 100.0% 18.0% 6.0% 4.9%
* Assumes 100% matching of first 3% of your pre-tax 401k contributions
Personal Financial Planning Section 360 Degrees of Financial Literacy
Planning Bonus
Estate Planning Tip: While reviewing retirement documents, check beneficiary information to ensure it is accurate and up to date.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
360-Degree View
Maximize deferral opportunities Reduce unnecessary complexity Maximize Social Security benefits Ensure sustainable withdrawals
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Retirement—Planning
Key Document• Form 1040
Key Questions:• Do you have a plan for retirement?
- Divide your total spending by 3- 4%• Are you maximizing deferral opportunities?
- 401(k), 457, 403(b), IRA• Do you have multiple retirement plans?
- Consider consolidating them.• Have you considered a Roth conversion?
- Run the numbers on your plan
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Retirement—Distributions
Key Document:Form 1040
Key Questions:•Are you withdrawing at a sustainable rate?
- Don’t run out of money before you run out of life expectancy.•Are you taking required minimum distributions?
- Over 70 ½ you have to take a required minimum distribution.•Are you drawing from the right place?
- Pull money from the right pool for tax efficiency.•Are you maximizing Social Security benefits?
- Know rules for spouses, divorcees.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
360-Degree View
Review asset allocation Match returns to goals Manage risk Reduce unnecessary complexity
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Personal Financial Planning Section 360 Degrees of Financial Literacy
3.8% Tax on Net Investment Income
Applies to individuals withmodified AGI above certain thresholds: • $250,000 for married couples
filing jointly• $200,000 for single taxpayers
Includes capital gains, interestand dividend income frominvestment assets
May also apply to rental androyalty income
Personal Financial Planning Section 360 Degrees of Financial Literacy
Increased Tax Rates on Dividend Income and Capital Gains
The dividend income and long-term capital gains tax rate jumped in 2013 from 15% to 20% for high earners (23.8% if the new net investment income tax applies).
The dividend and long-term capital gains rates for other taxpayers remained the same,ranging from 0 to 15%.
Investments
Taxes: Start Your Money Plan Here
Is your plan consistent with your goals?Does asset allocation consider risk tolerance?Are your investments tax efficient?Have you considered the safety of your assets?Does your asset allocation consider cash flow?
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Investment Considerations
Key Document:• Schedule B—Interest & Dividends
Key Questions:• Are you properly diversified?
- Risk and return are married.• Do you have enough cash?
- 3 months savings might not be enough.• Do you have too much cash?
- Balance inflation with interest rates.• Do you have too much cash in one bank?
- Watch FDIC limits.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Investments
Key Document:• Schedule D—Capital Gains/Losses
Key Questions:• Are investment decisions coordinated with tax planning?
- Lower capital gains rates; Medicare tax- Asset location: where are you holding taxable vs tax free
investments• Are you harvesting losses?
- Offset capital gains by taking losses.• Are you carrying losses forward?
- Reduce your future tax bill.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
360-Degree View
Assess insurance needs Review estate plan Create an emergency fund
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Future You
Taxes: Start Your Money Plan Here
Have you set clear goals?
Do you have protection for your family and assets?
Are you ready for emergencies?
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Future You
Planning is only as good as your goals.• Know where you’re headed.• Develop a clear picture for retirement.• Evaluate the education needs of your children.
- Will you pay the entire cost of tuition?- What percentage will you commit to?
• It is a continuous process, not a one time event
Protection is as important as planning.• Without proper insurance you could jeopardize all the saving
and planning you have done.• Estate planning is not just for the wealthy. It’s for everybody.• An emergency fund helps bridge difficult times.
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Future You
Planning is only as good as your goals.
• Know where you’re headed
• Establish a budget and savings goals
• Develop a clear picture for retirement
• It is a continuous process, not a one time event
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Personal Financial Planning Section 360 Degrees of Financial Literacy
Questions and Resources
Q&A
www.findacpapfs.org
www.aicpa.org/pfp/consumer
www.360financialliteracy.org
Among them:• Checklists to use with your own return.• Today’s PowerPoint presentation.• Archived recording of today’s webinar.• Tips on choosing the right financial advisor.
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