Wednesday, January 29, 2020

2020 Tax Tips for the Gig Economy

What has the IRS cooked up for us this year? I was reviewing some of the tax changes for 2020, and it seems like the big changes came last year as part of the Trump administration’s Tax Cuts and Jobs Act. What did get my attention were some cautionary items directly related to the growing number of people who are employed as contractors—the gig workers.
Back in the days when we all had regular jobs, it was easy. We got one W-2 form in January and used it to file our taxes. Now contractors can easily have ten or more W-2s to include in their April filings.

Outsourcing has become a standard part of the way we do business

Despite the pending new gig law legislation, companies of all sizes are routinely filling in skill gaps and boosting efficiency by hiring contractors or companies with specialized services. As the gig economy grows, we’re seeing a flood of contractors in the workforce. Still more people are not so much contractors as working multiple low-paying jobs to make ends meet.
All of this translates to more taxpayers with multiple streams of taxable income that their employers may or may not be reporting. The burden is on the IRS to track all of these incoming and outgoing payments–which could go undetected. Then again, by not reporting these payments, taxpayers could receive a penalty and set themselves up to be audited.

If you’re audited, you’re more likely to be audited again

According to the IRS, each tax return is individually evaluated for an audit. If a prior audit was resolved in your favor, every effort is made not to select your return the next year for the same issues. However, let’s say you’re audited because you didn’t include all of your earnings and the audit was not resolved in your favor. If you file another return and fail to report all of your earnings again, you are setting yourself up for another audit. No one wants to become a consistent audit target by the IRS.

Paying estimated quarterly taxes on time

New gig workers may not know that taxpayers are required to pay quarterly estimated taxes for the current tax year. They may not know how and when to make their payments. A failure to pay quarterly estimated taxes does a couple of things. It can:
  • Result in a massive tax bill in April.
  • Trigger late fees and interest on top of the base tax figure. For high earners, such as those in the tech sector, this could amount to thousands of dollars in additional taxes.

Quarterly tax payments: Estimates of what you’ll earn over the course of a year

  • In order to accurately estimate your tax burden, contractors need to keep meticulous records and run calculations to generate a ballpark estimate.
  • You may slightly underpay, but it’s better to overpay to avoid a big surprise in April.
  • A rule of thumb: Set aside 22-24% of every client payment you receive into a savings account that’s reserved for making payments throughout the year.
These quarterly tax payments need to be paid on time, yet an estimated 20% of people file their taxes late. The result is penalties, fees and other inconveniences.

Errors on Tax Forms

Errors lead to delays in processing, but there’s a bigger issue–they can also flag audits. Typical errors include incorrect Social Security numbers, inaccurate bank account information, a lack of proper signatures and missing information. One of the biggest errors that taxpayers make is underestimating the amount of taxes they owe.

These cautionary reminders may seem like common sense

We all know enough to sign our taxes before filing and to use our correct Social Security number. But I know several people who have just begun working as contractors, and they do not know that they must file quarterly taxes. I’m guilty of being a little late on my own quarterly filing. The bottom line is that you really don’t want to do anything that will raise a red flag with the IRS. An audit is time consuming and expensive. If dealing with your taxes is something that is difficult for you, outsource it. It’s worth it.

Taxes, financials and Living Trusts are all important parts of estate planning

Our Living Trust package includes a Power of Attorney and Advance Healthcare Directive. Our dedicated team has assisted hundreds of families in creating their Living Trusts. We’re responsive and available throughout the process. We’re helpful, compassionate and affordable. Schedule an appointment today at one of our three Bay Area offices.

Wednesday, January 15, 2020

Divorce and Your Money: A Thoughtful Action Plan

Those in the Divorce business will tell you that they experience an uptick in January. No couple wants to disrupt their family’s holiday, so they push the Divorce off until January. They know that it will be emotional and disruptive, even as they try to minimize the effect on their families.

Here are some thoughts on money matters while preparing for your Divorce

The economic realities

The process of itemizing your property and getting an idea of what will be left after you split it up is routine practice in all 50 states. Some people actually decide to reconcile once they see their financial landscape divided in half. Others use this as a reality check and move forward.

Know that your financial circumstances may change

Certified financial planner Lauren Klein has seen clients make poor decisions such as using retirement funds to help them keep the family home, only to see the house lose value and become an enormous financial burden. Many others overcommit in order to keep the home. They end up with a mortgage that could choke a horse, in a neighborhood that’s beyond their means, with a lavish landscape and gardener. They’d be much better off selling that home, taking the money and buying a smaller home in a modest neighborhood that they can afford.

Waiting too long to separate finances

Do not wait to split joint bank and any other accounts that you share. Change your login information and whatever else you need to do to separate your financial lives. Check your credit report periodically to make sure there aren’t any surprises. Remember that your ex has your social security number and knows your mother’s maiden name. One of my colleagues’ divorced husband died and she inherited nearly $750K of his debt—all of it from accounts that he had not canceled or transferred into his name.

Avoid big ticket, emotional buying

Don’t make any major financial decisions until the divorce is final. Most families deal with varying degrees of financial adjustment as they figure out how to support two households rather than just one. Avoid impulsive purchases until the dust settles.

Do not try to hide money or assets

If you try hiding money or assets to keep them out of the “marital estate,” the risks are serious penalties and possible jail time. Bad idea. This is not worth the risk.

Think about your career and making more money. You’re going to need it

If you’re currently not working, try to get a job, especially one with health insurance. If you are working, look for ways to advance in your career or increase your income because a divorcing individual will likely need a 30% increase in income to maintain his/her standard of living.

California Document Preparers has helped hundreds of families get divorced

Our dedicated team has assisted hundreds of couples with uncontested DivorcesIf you and your spouse can agree on division of property and a parenting plan, we can save you a considerable amount of money. 

Guided Divorce: A specially trained, neutral third-party

If, however, your situation is more complex and you and your spouse cannot agree on how to divide your assets and raise your children, CDP’s Guided Divorce may be the right solution for you. We’re a specially trained, neutral third-party who work with divorcing couples to guide them through the issues that have stalled their Divorces. Together we reach a mutually acceptable resolution. There’s no judge, no winning or losing. Instead, our Guided Divorce is based on the principles of negotiation, an open mind and compromise.
We’re responsive and available throughout the process. It starts with an office visit to review the Guided Divorce processSchedule an appointment today to talk to one of our team. We’re helpful, compassionate and affordable.

Tuesday, January 7, 2020

Prescription Drugs to Fight Aging—Entirely Experimental

Meet Dr. Alan Green. He has a tiny but lucrative practice in Queens. His patients travel from around the country to get prescriptions to drugs they believe will fight aging. Who are his patients? An estimated 5% are fellow doctors. Others have backgrounds in science or are in the upper-income bracket. He charges $350 for an initial visit and doesn’t accept insurance. Many fly to their appointments in their own airplanes. One 85-year old drove through a Midwest snowstorm to keep her appointment. Dr. Green is 76 and has been taking the drugs for three years himself.

Taking off-label drugs to fight aging

Green is among a small but growing number of doctors who prescribe drugs “off-label” for their possible anti-aging effects. In this case, the drugs are metformin, commonly prescribed for diabetes; the other drug is rapamycin, prescribed to prevent organ rejection. Now these drugs are being prescribed for their anti-aging powers, though there’s little evidence to support their premise.

Taking these drugs is entirely experimental

Patients get the drugs legally off-label or illegally from a foreign supplier. This methodology is much easier than it is for researchers to launch clinical trials. To date, no rigorous, large-scale clinical trials have been conducted for aging. Pharmaceutical companies have little incentive to fund costly, large-scale trials because aging is systemic—there is an infinite number of ways that aging takes place—and metformin and rapamycin are generic, cheap and accessible for seniors.
The National Instititue for Health (NIH) rejected a $77 million grant proposal by a prominent group of researchers to determine whether metformin could target multiple age-related diseases at once. It was the second rejection of the ambitious but unorthodox bid.

Advocate for rapamycin and Alzheimer’s study

Studies show that rapamycin extends animal life spans. It also has been shown in such studies to stave off age-related diseases, from cancer to cardiovascular diseases to cognitive diseases. “There should have been a clinical trial for rapamycin and Alzheimer’s disease years ago,” said Matt Kaeberlein a professor of pathology at the University of Washington medical school, who has publicly urged the NIH to use a historic boost in Alzheimer’s funding to study the drug’s effects. But clinical trials are expensive and difficult to fund.

Changing the model: Tackling aging as a whole rather than as one disease at a time

Alexander Fleming, a former FDA official and advocate for the metformin proposal, said he believed it was difficult for regulators and funders to grasp that aging can be tackled as a whole — not just one disease at a time.
In fact, NIH reviewers who rejected the metformin proposal cited problems with the project’s aim of testing multiple age-related diseases at once. The researchers considered appealing the decision, asserting those reviewers were biased against studying aging as a whole. The NIH, which declined to comment, discouraged the attempt.

Researchers have moved ahead with clinical trials focused on specific age-related conditions

  • Researchers have shown that a “cousin” of rapamycin boosts the effectiveness of flu shots and lowers the incidence of upper respiratory infections in seniors by up to 30%.
  • This group has licensed it from Novartis and is now working on getting approval to target Parkinson’s disease.
  • At a recent forum on aging, a NIH researcher asked the 300 people in attendance to raise their hands if they were already taking metformin for aging. “Half the audience raised their hands,” recalled Nir Barzilai,director of the Institute for Aging Research at the Albert Einstein College of Medicine. “And a pharmaceutical rep estimated that metformin sales are up 20%.”

To be successful, clinical trials are necessary

Barzilai contends that researchers in the longevity field first need to set up a framework for testing in clinical trials. Even if metformin doesn’t pan out as the most effective drug, he asserts a model like the metformin proposal is needed for any major clinical trial to proceed. His group is now trying to secure about half the amount of funding it requested from NIH from a mix of nonprofit and private investment.

Proceeding with caution

While Dr. Green plans to continue prescribing his drugs, other doctors who may be open to prescribing metformin are holding off on rapamycin due to side effects in higher doses. Meanwhile, we’re a society obsessed with youth, and supplements with purported anti-aging effects routinely enter the market with little scrutiny and less evidence. There will be more on this one.

Many of our clients are seniors who come in to our offices to create their Living Trusts

The result is numerous conversations on a wide range of topics related to health, healthcare and end-of-life planning–and a Trust is an important part of this planning process. Our dedicated team has assisted hundreds of families in creating their Living Trusts. Our comprehensive Living Trust package includes a Power of Attorney and an Advance Healthcare Directive. We’re responsive and available throughout the process. We’re helpful, compassionate and affordable.