Blog

5 Tips To Think More Clearly About Financial Decisions For Cape Cod Taxpayers

Despite that title, it has, in fact, been a relatively smooth first week of tax filing here at Peter D. Arnold, CPA. Cape Cod clients have been streaming through our doors, and we’ve been enjoying our little mini-reunion with so many longtime friends.

Now, there’s plenty to say about that Super Bowl, the advertisements (apparently, they’re all Tide ads), the halftime show, etc. But I’ll let others weigh in there. I’m a Cape Cod tax professional after all.

But, given what happened with the stock market on Monday, I feel that I should make these quick financial points (which is closer to my area of expertise):

1) The Dow is not the economy. Good or bad.
2) Saving is almost always better than spending.
3) Fretting about the ups and downs of one market indicator will make you very tired. Don’t play that game.

Moving on, and somewhat relatedly, I posted a recent Note about retirement mistakes, and it stirred up some email responses, as well as conversation with clients in-person.

But it made me realize that in order to think clearly about retirement, taxes, or any kind of financial decision we need to be blunt with … ourselves.

That’s a difficult task, even for the best of us. But I have thoughts for you.

5 Tips To Think More Clearly About Financial Decisions For Cape Cod Taxpayers
“Where you grew up has no bearing on where you decide you are going to be today.” – Dan Kennedy

Working with my Cape Cod clients’ finances over the years has given me a bit of a crash course in human behavior. Often, I’m floored by the generosity I see displayed by many Cape Cod clients — even those without significant means.

Other times … well, I think that we all could use the reminder that our human flaws show up very clearly in our family’s finances. The fact is that we ALL deceive ourselves, from time to time, about what’s really happening within our wallets.

This habit of self-deception threatens our financial stability. Instead of spending $10, we spend $30. Instead of recognizing that we *want* that new shirt, car, or fine dinner at a restaurant, we lie to ourselves until we are convinced that, for one reason or another, we *need* that new shirt, car, or fine dinner. The massive credit crunch a decade ago can partly be blamed on a nation full of people who convinced themselves that a $800,000 home was necessary — even though a $350,000 home was more than sufficient. We must learn to live within our income … and this sometimes means that we must stop lying.

So, I’ve compiled a short list of ideas on how to stop lying to ourselves, and to instead face the truth when making purchase decisions.

1. Have (and stick to) a budget. Is this purchase in my budget? For example, your family budgets a certain amount each month to spend on clothing. You’ve agreed that this amount is sufficient to meet your needs. So you set this amount before facing a purchase decision. If during the month you want to exceed the budget because Kohl’s is having a fantastic sale, then you are now lying to yourselves. You aren’t saving money by exceeding your budget during a sale. In fact, now you have to dip into savings to pay for your overspending.

2. Set a per-purchase spending limit. A wise man said, “The four most caring words for those we love are, ‘We can’t afford it.'” Take some time with your spouse to set what I call a “What I can spend without having to ask my spouse if it’s okay” spending limit. Some spouses have decided that neither one of them is allowed to spend more than $100 at any given time without calling and asking the other one if it’s okay (this does not apply to groceries). Let me tell you right now, these limits have stopped many from making a lot of unnecessary purchases.

3. Replace bad habits with enjoyable, inexpensive activities. Shopping or overspending is a habit that we have likely formed over years. Since our brains are programmed to react in a certain way in specific situations, any change is met by resistance. The existing habit is simply more comfortable and natural. To help change your behavior, replace the bad habit with another activity.

For example, instead of going to a Cape Cod mall to pass time, go to a local park with a soccer ball and spend some time with family or friends. Start or re-start a hobby. Your new hobby might even be a low-cost home business in which you make money!

4. Make sure that the reason you tell yourself you are making the purchase and the *actual* reason you are making the purchase are the same. Ask yourself, “Why am I really making this purchase?” Am I buying this dress for my wife because I love her and want to show my appreciation, or am I trying to prove to her and the world that I am a good provider? We lie to ourselves to cover our true motives. If the real reason you are making a purchase isn’t in line with your principles and budget, then don’t buy it.

5. Take stock of, and enjoy, everything that you already have! Develop gratitude for what you already have in your life. Purchasing new things is often a sign of ingratitude for what life has already afforded us … or a sign that we feel deficient in some area.

Overcoming bad habits and addictions is a process that requires concerted effort. Face each day one at a time, and stop lying to yourself! Don’t believe the story you’ve created in your mind that justifies unnecessary and financially harmful purchases.

To your family’s financial and emotional peace …

Warmly,

Peter Arnold
(508) 771-3775
Peter D. Arnold, CPA


2018 Tax Refunds Have You Confused? Peter Arnold Provides Clarity

We are cranking along with tax return preparation here at Peter D. Arnold, CPA, and there are some interesting things that you should know about from Tax Land (that wild, scintillating world that it is).

Look — it is our J-O-B to handle this junk so you don’t have to, which is why I make it a point to not be too tax-heavy in my notes to you. But this week, well, there’s just a few too many things to ignore.

Firstly, did you know the government “shut down” for a few hours Friday night? It was a function of the Congresspeople finally coming to a budget deal, and, well … it might mean some changes for YOU and many in Cape Cod (and it might not).

Buried in the deal were a variety of tax credits that HAD been expired for 2017 taxes, but which were suddenly reinstated. If you want to get very, very wonky, you can see the full list right here (beginning at Section 40101) — but here are some high points:

above-the-line deduction for qualified tuition and related expenses
mortgage insurance premiums treated as qualified residence interest
exclusion from gross income of discharge of qualified principal residence indebtedness
credit for nonbusiness energy property
credit for residential energy property
credit for new qualified fuel cell motor vehicles
credit for alternative fuel vehicle refueling property
credit for 2-wheeled plug-in electric vehicles
Basically, Cape Cod students, homeowners, and energy-savers got their breaks restored. If this affects you, we can amend your return if you would like to account for these breaks.

However, my suggestion is that we wait a bit to see how the IRS responds, because they don’t actually have full clarity about what they will be doing about them just yet. Shocking, I know.

But I don’t blame them, because this is pretty last-minute, even by Congressional standards.

Finally, I’m going to use my Note this week to clear up some confusion about tax refunds that have been the subject of a bunch of questions from Cape Cod clients this year. Here’s what’s really happening…

2018 Tax Refunds Have You Confused? Peter Arnold Provides Clarity
“The truth can be funny but it’s not funny to cover up the truth.” -Ryan Cooper

Fake news is something we’re used to handling around here at Peter D. Arnold, CPA — you know the drill: “My neighbor’s uncle has a friend who is an accountant and HE said that my support parakeet is 100% deductible — and can even be counted twice!”

Yes, well … isn’t that precious.

Aside from those kinds of silly examples, there is some definite confusion about certain tax refunds this tax filing season, and we’re here to clear it up for you. Enough confusion, that the IRS issued a release about it (which you can read right here). I’ll deal with a few of those points, as well as a few other questions that we’ve received right here:

Confusion #1: Refund Delays
No, not every refund is delayed. Yes, EITC and ACTC related returns (both are child tax credits) WILL have delayed refunds. For every other kind of return in which a refund is expected, the IRS says that refunds should go out within 21 business days of filing. More about that below.

But about those EITC and ACTC refunds — unless you got some sort of advance on your refund, those might even take a little longer than was promised. The IRS said they will begin processing those on February 15th, but those refunds won’t begin to hit bank accounts until 2/27 — and that’s for those who chose direct deposit, and for whom there are no other issues.

So, hang tight.

Confusion #2: Checking On Refund Status
Have you heard that if you order a tax transcript it will tell you when to expect your refund?

Or if you call the IRS help hotline or ask US to call on your behalf that you’ll get a definite refund delivery date?

Whoops, more fake news. These social-media touted refund inquiry workarounds won’t work.

The information on a tax transcript does not necessarily reflect the amount or timing of a refund.

And as for calling us about it, we have no additional ways to check your refund status, unfortunately.

And sure, you can call the IRS directly … but be prepared to wait on hold for a looong time, and to receive no further information.

The BEST place to check, always is “Where’s My Refund” on the IRS website, which is right here: https://www.irs.gov/refunds

Confusion #3: “Is The IRS Calling Me???”
Short answer: No.

Longer answer: Nope.

Full answer: The IRS does NOT initiate contact with taxpayers by phone, email, text messages or social media to request your personal, tax or financial information.

If you are contacted in one of these ways regarding your refund — either a caller saying you owe more or an email promising a bigger refund — the communication isn’t from the IRS, even if the caller or emailer says they are agents. They are crooks looking to assume your tax identity and take your money.

Alright then. Glad we’ve cleared all of that up.

And in all seriousness: remember that we are in your corner. We’re here to help, and love to serve our Cape Cod clients, so whatever advice you need, we’re just an email or phone call away.

To your family’s financial and emotional peace …

Warmly,

Peter Arnold
(508) 771-3775
Peter D. Arnold, CPA


Estate Planning For Dummies: Two Estate Planning Myths Debunked For Cape Cod Families

I’m not sure there is very much I could say that could add anything to the conversation about what happened last week in Parkland, FL. It seems that every time something like this happens, we grieve for shorter and shorter amounts of time and move on ever-more quickly to the shouting at each other over root causes.

But the fact remains that there are 17 families whose entire world has been decimated, and a community who is reeling. With the speed of social media these days, it’s easy to take this opportunity to make various points (many of them quite valid), but should we perhaps notice about ourselves and our culture that we seem to “move on” so very quickly?

I’d like to never become “numb” to such things. And so we pause to mourn with those families, even here in the midst of our Cape Cod office’s busiest season.

In times like this, I’m grateful for the moments I’ve been given with my friends and my family … and I am reminded that everything can change in an instant.

It sure brings everything into its proper perspective, doesn’t it?

Events like this can never be planned for, but nor can many of the other kinds of disasters which tend to hit families at unexpected times. Whether financial, personal, occupational, or otherwise, disaster and tragedy *does* strike every family at some point.

But problems that can intensify the disaster are ones that *can* be planned around, and sometimes we just need a reminder and the right timing to get those plans handled…

Estate Planning For Dummies: Two Estate Planning Myths Debunked For Cape Cod Families
“In every conceivable manner, the family is the link to our past, the bridge to our future.” -Alex HaleyAs we have seen this past week, life can turn on a dime … and we can’t plan for every one of the specific ways it may do so. But we CAN plan broadly.

For me and my family, we’ve put some simple plans in place for a VARIETY of circumstances, not just financial or legal. And it truly helps us sleep better at night, just knowing we have it all covered.

And the unfortunate reality is that the most recent numbers indicate that almost 60% of Americans don’t have a basic will — and that’s a big problem.

One of the big reasons that most Cape Cod families don’t yet have this in place is because of some incorrect thinking about whether it’s right for them, or if it’s even necessary. And sure, some just haven’t gotten around to creating a will or trust. Others think they don’t need an estate plan because they’re not “rich”.

I’ve even heard from Cape Cod people that they don’t want to put it in place because when they do, it’s sending some sort of death wish into the universe (or some such).

But here’s the big problem — if you continue without an estate plan, you could (instead) leave a legacy of bad feelings and attorneys’ fees.

Because it is currently “tax season”, this is something that might make sense to have done once your return is filed — simply because you would have already compiled your financial documents in such a way that creating an effective plan is a bit easier.

Or maybe you are still tripping up on these myths?

Myth 1. “Only rich people prepare estate plans.”
Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your Cape Cod property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state’s “intestate succession” laws. That means your money and property could end up with family members you haven’t spoken to in years, instead of who you’d really like to see control your assets.

I won’t go into all of the different components of a will, trust, health care directive, etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats.

Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a Cape Cod lawyer to guide you through the process.

Myth 2. Everything goes to your spouse, if something happens.
Unfortunately, that’s not always the case. We take care of Cape Cod clients from different states around the country, and I can tell you that state laws vary; whether for taxes, estates, or anything else. And in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies intestate, the spouse gets the first $50,000 of the estate and what’s left is divided 50-50 among the spouse and the children.

You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.

I’ll post a few more in the weeks ahead, but I hope you can already see that things are not always as we “think”.

I hope this helps. To your family’s financial and emotional peace…

Warmly,

Peter Arnold
(508) 771-3775
Peter D. Arnold, CPA