As lawmakers return to work after their August recess, Hurricane Harvey has increased expectations on Congress to quickly pass disaster-relief tax breaks. September is also expected to bring Congressional hearings on tax reform and possibly the unveiling of tax reform legislation. At the same time, lawmakers must address the federal government’s budget, including the IRS.

As lawmakers return to work after their August recess, Hurricane Harvey has increased expectations on Congress to quickly pass disaster-relief tax breaks. September is also expected to bring Congressional hearings on tax reform and possibly the unveiling of tax reform legislation. At the same time, lawmakers must address the federal government’s budget, including the IRS.

Disaster relief

After Hurricane Katrina, Congress passed an extensive disaster relief package, which included many tax provisions. Lawmakers took similar action after Hurricane Sandy a few years ago. Congress is expected to take up a Hurricane Harvey disaster relief plan in coming weeks.

If a Hurricane Harvey bill resembles past disaster relief acts, affected taxpayers could see relaxed casualty loss rules, expanded expensing and more generous depreciation. Past disaster relief laws have also enhanced some tax credits, such as the rehabilitation credit, the low-income housing credit and the Work Opportunity Tax Credit (WOTC) to encourage rebuilding and hiring. For individuals, Congress could waive the penalty for early distributions from IRAs and certain retirement plans for hurricane-related distributions. These were some of the incentives Congress passed after Hurricane Katrina. A Hurricane Harvey relief bill could include these and/or different incentives. Our office will keep you posted of developments.

Meanwhile, the IRS has announced help for affected taxpayers. The IRS postponed various tax filing and payment deadlines that occurred starting on August 23, 2017. As a result, affected individuals and businesses will have until January 31, 2018, to file returns and pay any taxes that were originally due during this period. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after August 23, 2017 and before September 7, 2017 if the deposits are made by September 7, 2017.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Please contact our office if you have any questions.

Tax reform

Before their August recess, GOP leaders in the House and Senate, along with senior administration officials, outlined their ideas for tax reform. The lawmakers and White House staff said that tax reform legislation would originate in the House and Senate tax writing committees (the House Ways and Means Committee and the Senate Finance Committee). They also predicted that tax reform would lower and consolidate the individual tax rates, reduce the corporate income tax, and repeal the federal estate tax. However, the lawmakers were short on details. More information is expected to be gleaned as the tax writing committees hold hearings.

Several lawmakers have called for a bipartisan approach to tax reform. “It is going to take Democrats and Republicans getting together, putting aside their differences,” Senate Finance Committee (SFC) Chair Orrin Hatch, R-Utah, said. Hatch’s comments were shared by SFC Ranking Member Ron Wyden, D-Oregon. “In 1986, Republicans worked with Democrats from the get-go and knew that a long-term, bipartisan solution was necessary to create jobs and grow the economy,” Wyden said.

IRS funding

The federal government’s current fiscal year (FY) ends September 30. In his FY 2018 budget, President Trump proposed to cut the IRS’s budget for FY 2018. In past years, the Senate has restored some of the proposed funding cuts and the same scenario could play out this year, especially with IRS funding for cybersecurity and customer service.

Further, a bill drafted by the House Appropriations Committee would prevent the IRS from using any appropriations to "implement or enforce" the Affordable Care Act’s individual mandate requiring minimum essential coverage. The ACA generally requires individuals to have minimum essential health coverage or make a shared responsibility payment, unless exempt.

Parents incur a variety of expenses associated with children. As a general rule, personal expenditures are not deductible. However, there are several deductions and credits that help defray some of the costs associated with raising children, including some costs related to education. Some of the most common deductions and credits related to minors are the dependency exemption, the child tax credit, and the dependent care credit. Also not to be overlooked are tax-sheltered savings plans used for education, such as the Coverdell Education Savings Accounts (ESAs).

Parents incur a variety of expenses associated with children. As a general rule, personal expenditures are not deductible. However, there are several deductions and credits that help defray some of the costs associated with raising children, including some costs related to education. Some of the most common deductions and credits related to minors are the dependency exemption, the child tax credit, and the dependent care credit. Also not to be overlooked are tax-sheltered savings plans used for education, such as the Coverdell Education Savings Accounts (ESAs).

Dependency exemption. The dependency exemption is a type of deduction that is available for children and other qualifying dependents, subject to phase out if the taxpayer's adjusted gross income (AGI) exceeds prescribed threshold amounts. The amount of the personal exemption, adjusted for inflation, is $4,050 for tax years beginning in 2016 and 2017. The dependency exemption is available for each qualifying child under the age of 19 (under the age of 24 if a full-time student) and with no age restriction for a qualifying individual who is permanently and totally disabled. For 2017, the personal exemption begins to phase out for joint filers starting at $313,800 AGI and completely phasing out at $436,300 AGI ($261,500 and $384,000, respectively for single filers).

Child credit. The child tax credit is available for parents of qualifying children under the age of 17. The credit amount is $1,000 per qualifying child, but once again is subject to phase out if the taxpayer's AGI exceeds prescribed threshold amounts. The phaseout of the child tax credit starts at $110,000 of modified AGI (for unmarried taxpayers, it starts at $75,000). These thresholds are not adjusted for inflation.

Dependent care credit. The dependent care credit may be available to working parents for qualifying children under the age of 13, or for dependents who are physically or mentally incapable of self care. This credit is available not only for direct employment-related expenses that take place at home, but also child-care expenses for tuition paid for pre-K programs, as well as fees paid for after-school activities that double as child care. The dependent care credit is a percentage of eligible work-related expenses. The percentage goes down as adjusted gross income (AGI) goes up. The maximum amount of eligible expenses is $3,000 for taxpayers with one qualifying individual, and $6,000 for taxpayers with two or more qualifying individuals.

The amount of the credit is further determined by multiplying work-related expenses by the “applicable percentage,” which is 35 percent reduced by one percentage point for each $2,000 by which AGI for the tax year exceeds $15,000. However, the applicable percentage cannot go below 20 percent (for those with AGI over $43,000). Thus, the maximum dependent care credit amount overall is $1,050 for one qualifying dependent and $2,100 for two or more qualifying dependents. For those with income above $43,000, the maximum credit for $3,000 of qualifying expenses is $600. Finally, the amount of the employment-related expenses taken into account in calculating the credit may not exceed the lesser of the taxpayer's earned income or the earned income of his spouse if the taxpayer is married at the end of the tax year.

Coverdell education savings accounts. Two education savings entities let individuals pay for education on a tax-favored basis: a Coverdell Education Savings Account (Coverdell ESA or ESA) and a qualified tuition program (QTP, also referred to as a Code Sec. 529 plan). In contrast to Sec. 529 plans, which can only be used to cover college expenses, ESAs can cover expenses from kindergarten through college.

Individuals may open a Coverdell ESA to help pay for the qualified education expenses of a designated beneficiary. Contributions to a Coverdell ESA must be made in cash and are not deductible. In addition, the maximum annual contribution that can be made is limited to $2,000 a year. The annual contribution is phased out for joint filers with modified adjusted gross income (MAGI) at or above $190,000 and less than $220,000 (at or above $95,000 and less than $110,000 for single filers).

Distributions from Coverdell ESAs are not included in the income of the donor or the beneficiary, as long as payouts do not exceed the beneficiary's adjusted qualified education expenses. For purposes of excludable distributions from an ESA, qualified elementary and secondary school expenses (kindergarten through grade 12), include the following costs:

• expenses for tuition, fees, academic tutoring, services for beneficiaries with special needs, books, supplies, and other equipment that are incurred in connection with the designated beneficiary's enrollment or attendance at a public, private or religious school;
• expenses for room and board, uniforms, transportation, and supplementary items and services (including extended day programs) that are required or provided by the school in connection with enrollment or attendance; and
• expenses for the purchase of computer technology or equipment or internet access and related services that will be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is in school. This category does not include software designed for sports, games or hobbies unless it is predominantly educational in nature.

Medical expense deduction. For parents who itemize deductions, medical and dental costs paid for their children may be deductible.

If you have any questions regarding tax breaks associated with child care or education expenses, please contact our office.

Two recent court cases indicate that, although use of a conservation easement to gain a charitable deduction must continue to be arranged with care, some flexibility in determining ultimate deductibility may be beginning to be easier to come by. The IRS had been winning a string of cases that affirmed its strict interpretation of Internal Revenue Code Section 170 on conservation easement. The two latest judicial opinions, however, help give taxpayers some much-needed leeway in proving that the rules were followed, keeping in mind that Congress wanted to encourage conservation easements rather than have its rules interpreted so strictly that they thwart that purpose.

Two recent court cases indicate that, although use of a conservation easement to gain a charitable deduction must continue to be arranged with care, some flexibility in determining ultimate deductibility may be beginning to be easier to come by. The IRS had been winning a string of cases that affirmed its strict interpretation of Internal Revenue Code Section 170 on conservation easement. The two latest judicial opinions, however, help give taxpayers some much-needed leeway in proving that the rules were followed, keeping in mind that Congress wanted to encourage conservation easements rather than have its rules interpreted so strictly that they thwart that purpose.

In the first case, the Court of Appeals for the Fifth Circuit found that a homesite adjustment provision did not prevent a conservation easement from satisfying the perpetuity requirement of Code Sec. 170 that controls charitable deductions. Modifications (or "tweaks as the court characterized them) would not violate the perpetuity requirement.

In the second case, a taxpayer satisfied the substantiation requirements for a charitable contribution of an easement to a landmark preservation council. Although the taxpayer had not received from the donee organization a timely letter that could have acted as a contemporaneous written acknowledgment, the Tax Court considered the deed of easement a good enough de facto qualified acknowledgment.

Comment. The first decision potentially opens up many more vacation-type properties on large tracts of land to be more susceptible to a "win-win" in terms of a charitable tax deduction for the homeowner and preserved acreage for the community. The second decision gives some flexibility to the rules on “contemporaneous” substantiation.

What Happened?

In the first case (BC Ranch II, L.P., CA-5, August 11, 2017), the taxpayer owned some 1,800 acres of land in Texas. The taxpayer donated a conservation easement to a tax-exempt organization. The easement aimed to protect the habitat for certain birds and to preserve the watershed, scenic vistas, and mature forest. The easement gave the grantee, its successors and assigns, perpetual easements in gross over the conservation areas, subjecting the property to a series of covenants and restrictions that prohibited most residential, commercial, industrial, and agricultural uses. The easement also included a boundary modification provision, affecting certain five-acre homesite parcels. The IRS disallowed the purported charitable deduction for the conservation easement. The Tax Court had found that the conservation easement was not given in perpetuity because the five-acre homesite parcels could be changed to include property within the easement.

In the second case (310 Retail, LLC, TC Memo 2017-164), the taxpayer (an LLC) donated a façade easement (also considered a “conservation easement”) in connection with an historic building in downtown Chicago. On audit, the IRS disallowed a $26 million charitable deduction by the taxpayer on the grounds that a contemporaneous written acknowledgment within the meaning of Code Sec. 170 was not provided. Although the LLC did not receive from the donee organization a timely letter of the sort that normally acts as a “contemporaneous written acknowledgment,” the taxpayer claimed that it nevertheless satisfied the statutory substantiation requirements, pointing to the deed of easement that the donee organization executed contemporaneously with the gift.

Courts’ Analysis

Rearranging parcels. The Fifth Circuit found that the easement in this case was different from the easement in Belk, a prior Tax Court case upon which the IRS was relying. The easement in Belk could be moved to a tract or tracts of land entirely different and remote from the property originally covered by that easement. The easement in this case did not allow any change in the exterior boundaries or acreage. "Neither the exterior boundaries nor the total acreage of the instant easements will ever change: Only the lot lines of one or more of the five-acre homesite parcels are potentially subject to change and then only within the easements and with the grantee’s consent," the court found.

Contemporaneous acknowledgement. The Tax Court in its case found that the deed of easement constituted a contemporaneous written acknowledgment sufficient to substantiate the taxpayer’s gift because it was properly executed and recorded. The Court also found that the deed also sufficiently included what should be considered “an affirmative indication that the donee organization had supplied no goods or services to the taxpayer in exchange for its gift.” The deed explicitly stated that it represented the parties’ "entire agreement" and, thus, negated the provision or receipt of any consideration not stated in that deed.

A partnership is created when persons join together with the intent to conduct unincorporated venture and share profits. Intent is determined from facts and circumstances, including the division of profits and losses, the ownership of capital, the conduct of parties, and whether a written agreement exists. Despite such nuances in the process, however, distinguishing the existence of a partnership from other joint investments or ventures is often critical in determining tax liability and reporting obligations.

A partnership is created when persons join together with the intent to conduct unincorporated venture and share profits. Intent is determined from facts and circumstances, including the division of profits and losses, the ownership of capital, the conduct of parties, and whether a written agreement exists. Despite such nuances in the process, however, distinguishing the existence of a partnership from other joint investments or ventures is often critical in determining tax liability and reporting obligations.

The factors often considered in the determination of whether the participants in an enterprise intended to form a partnership include:

1. the existence of an oral or written agreement between the parties;
2. the contribution by the participants of capital, property or services;
3. the sharing of profits and/or losses;
4. any mutual control over the business;
5. the joint conduct of the business; and
6. the filing of partnership returns or representations to third parties that the participants are partners.

The presence or absence of these factors is weighed in distinguishing partners in a partnership from other business relationships. Thus, co-ownership of property may be a partnership depending on the owners' intent, the manner in which the property is held and the other facts and circumstances of the arrangement including a profit motive. Other arrangements may or may not be treated as partnerships depending upon whether the requisite intent and circumstances are present. These include:

• lessor-lessee relationships (normally, this does not make the lessor and lessee partners for tax purposes, unless the lessor also exercises control over the lessee's business beyond that necessary to protect his investment and assure the lessee's continuing ability to pay rent);
• employment or independent contractor relationships (an employment or independent contractor relationship might be characterized for tax purposes as a partnership when a person both provides services to and shares in the profits of the enterprise);
• debtor-creditor relationships (although a debtor-creditor relationship generally does not establish the existence of a partnership, an advance of funds may be treated as a contribution to the capital of, or an acquisition of an equity interest in, a partnership rather than as a loan);
• purchaser-seller relationships (a purported sale may be treated as a partnership between the seller and buyer if the terms of sale grant the seller a right to receive a share of the future profits generated by the business or asset being sold, and the seller has a continuing proprietary interest in the business or asset).

Gross income is taxed to the individual who earns it or to owner of property that generates the income. Under the so-called “assignment of income doctrine,” a taxpayer may not avoid tax by assigning the right to income to another.

Gross income is taxed to the individual who earns it or to owner of property that generates the income. Under the so-called “assignment of income doctrine,” a taxpayer may not avoid tax by assigning the right to income to another.

Specifically, the assignment of income doctrine holds that a taxpayer who earns income from services that the taxpayer performs or property that the taxpayer owns generally cannot avoid liability for tax on that income by assigning it to another person or entity. The doctrine is frequently applied to assignments to creditors, controlled entities, family trusts and charities.

A taxpayer cannot, for tax purposes, assign income that has already accrued from property the taxpayer owns. This aspect of the assignment of income doctrine is often applied to interest, dividends, rents, royalties, and trust income. And, under the same rationale, an assignment of an interest in a lottery ticket is effective only if it occurs before the ticket is ascertained to be a winning ticket.

However, a taxpayer can shift liability for capital gains on property not yet sold by making a bona fide gift of the underlying property. In that case, the donee of a gift of securities takes the “carryover” basis of the donor.  For example, shares now valued at $50 gifted to a donee in which the donor has a tax basis of $10, would yield a taxable gain to the donee of its eventual sale price less the $10 carryover basis. The donor escapes income tax on any of the appreciation.

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important federal tax reporting and filing data for individuals, businesses and other taxpayers for the month of September 2017.

As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important federal tax reporting and filing data for individuals, businesses and other taxpayers for the month of September 2017.

September 1

Employers. Semi-weekly depositors must deposit employment taxes for Aug 26–Aug 29.

September 7

Employers. Semi-weekly depositors must deposit employment taxes for Aug 30–Sep 1.

September 8

Employers. Semi-weekly depositors must deposit employment taxes for Sep 2–Sep 5.

September 11

Employees who work for tips. Employees who received $20 or more in tips during August must report them to their employer using Form 4070.

September 13

Employers. Semi-weekly depositors must deposit employment taxes for Sep 6–Sep 8.

September 15

Employers. For those to whom the monthly deposit rule applies, deposit employment taxes and nonpayroll withholding for payments in August.

Corporations. Corporations deposit the third installment of estimated tax for 2017.

Individuals. Individuals deposit the third installment of 2017 estimated tax.

Corporations. S Corporations with 6-month extensions file 2016 1120S and pay tax due.

Partnerships. Partnerships with 5-month extensions file 2016 Form 1065.

Employers. Semi-weekly depositors must deposit employment taxes for Sep 9–Sep 12.

September 20

Employers. Semi-weekly depositors must deposit employment taxes for Sep 13–Sep 15.

September 22

Employers. Semi-weekly depositors must deposit employment taxes for Sep 16–Sep 19.

September 27

Employers. Semi-weekly depositors must deposit employment taxes for Sep 20–Sep 22.

September 29

Employers. Semi-weekly depositors must deposit employment taxes for Sep 23–Sep 26.

October 4

Employers. Semi-weekly depositors must deposit employment taxes for Sep 27–Sep 29.

October 6

Employers. Semi-weekly depositors must deposit employment taxes for Sep 30–Oct 3.

The responsibility for remitting federal tax payments to the IRS in a timely manner can be overwhelming for the small business owner -- the deadlines seem never ending and the penalties for late payments can be stiff. However, many small business owners may find that participating in the IRS's EFTPS program is a convenient, timesaving way to pay their federal taxes.

The responsibility for remitting federal tax payments to the IRS in a timely manner can be overwhelming for the small business owner -- the deadlines seem never ending and the penalties for late payments can be stiff. However, many small business owners may find that participating in the IRS's EFTPS program is a convenient, timesaving way to pay their federal taxes.

The Electronic Federal Tax Payment System (EFTPS) is a simple way for businesses to make their federal tax payments. It is easy to use, fast, convenient, secure and accurate. It also saves business owners time and money in making federal tax payments because there are no last minute trips to the bank, no waiting lines, no envelopes, stamps, couriers, etc. And best of all, tax payments are initiated right from your office!

What is the EFTPS?

EFTPS is an electronic tax payment system through which businesses can make all of their federal tax deposits or payments. The system is available 24 hours a day, seven days a week for businesses to make their tax payments either through the use of their own PC, by telephone, or through a program offered by a financial institution.

What federal tax payments are covered by EFTPS?

Some taxpayers mistakenly assume that EFTPS applies only to the deposit of employment taxes. EFTPS has much broader reach. It can be used to make tax payments electronically for a long list of payment obligations:

• Form 720, Quarterly Federal Excise Tax Return;
• Form 940, Employer's Annual Federal Unemployment Tax (FUTA) Return;
• Form 941, Employer's Quarterly Federal Tax Return;
• Form 943, Employer's Annual Tax Return For Agricultural Employees;
• Form 945, Annual Return of Withheld Federal Income Tax;
• Form 990-C, Farmer's Cooperative Association Income Tax Return;
• Form 990-PF, Return of Private Foundation;
• Form 990-T, Exempt Organization Business Income Tax Return Section 4947(a)(1) Charitable Trust Treated as Private Foundation;
• Form 1041, Fiduciary Income Tax Return;
• Form 1042, Annual Withholding Tax Return for U.S. Sources of Income for Foreign Persons;
• Form 1120, U.S. Corporation Income Tax Return; and
• Form CT-1, Employer's Annual Railroad Retirement Tax Return.

How can I get started using EFTPS?

To enroll in EFTPS, the taxpayer must complete IRS Form 9779, Business Enrollment Form, and mailing it to the EFTPS Enrollment Center. To obtain a copy of IRS Form 9779 a taxpayer or practitioner can call EFTPS Customer Service at 1-800-945-8400 or 1-800-555-4477. The enrollment form may also be requested from the IRS Forms Distribution Center at1-800-829-3676.

After you complete and mail the enrollment form, EFTPS processes the enrollment and sends you a Confirmation Packet, which includes a step-by-step Payment Instruction Booklet. You will also receive a PIN under separate cover. Once the Confirmation Packet and the PIN are received, you can begin to make tax payments electronically.

What flexibility is available within the EFTPS for payment options?

There are two primary ways to make payment under EFTPS - directly to EFTPS or through a financial institution. If you wish to make payments directly to EFTPS, the "ACH debit method" should be selected on the enrollment form. Deposits and payments are made using this method by instructing EFTPS to move funds from the business bank account to the Treasury's account on a date you designate. You can instruct EFTPS by either calling a toll-free number, and using the automated telephone system, or by using a PC to initiate the payment.

If you instead elect to make payments through a financial institution, the "ACH credit method" should be chosen on the enrollment form. This method works by using a payment system offered by the financial institution through which you instruct the institution to electronically move funds from your account to a Treasury account.

Although the ACH debit and the ACH credit methods are the primary payment methods for EFTPS, a taxpayer may also choose the Same Day Payment Method. You should contact your financial institution to determine if it can make a same day payment.

If I provide the IRS with access to my bank account, can it access my account for any other purposes?

It is important to note you retain total control of when a payment is made under EFTPS because you initiate the process in all instances. In addition, at no time does the government or any other party have access to your account from which the deposits are made. The only way to authorize deposits or payments from your account is through use of the PIN that is given to you upon enrollment.

Many businesses have recognized the convenience of voluntary participation in the IRS's EFTPS program. If you are interested in discussing whether your business would also benefit from this program, please contact the office for a consultation.

Imagine you had a camera that could take a snapshot of your financial transactions over the course of a year. This snapshot would give you a chance to see the results of financial decisions you made during the course of the year -- good and bad. By using your recently filed Form 1040 as a "snapshot" of your past spending and investment habits, you can use this information to make better financial decisions in the current year.

Imagine you had a camera that could take a snapshot of your financial transactions over the course of a year. This snapshot would give you a chance to see the results of financial decisions you made during the course of the year -- good and bad. By using your recently filed Form 1040 as a "snapshot" of your past spending and investment habits, you can use this information to make better financial decisions in the current year.

Evaluate your investment strategies. Reviewing Schedule D, Capital Gains and Losses, of Form 1040 for the past few years can be an eye-opener for many people. Did you hold stocks long enough to be entitled to the long-term capital gains rate? Did you try to balance short-term gains with short-term losses? Are you bouncing from one investment trend to another without a long-term investment plan that achieves long-term needs? Are your mutual funds "tax smart"? Looking at your tax return will help you decide whether the investments you now have are the right ones for you.

Become familiar with different types of banking institutions and their products. Find out about CDs, money-market funds, government securities, mutual funds, index funds, and sector funds and how they interrelate with the determination of your tax liability each year. If you are in a high tax bracket and need to diversify away from common stocks, for example, looking into tax-exempt bonds might help, especially if you have state income taxes to worry about, too. You may want to put that knowledge to work in your investment strategy.

Identify borrowing patterns. A look at the interest deductions you claimed on Schedule A, Itemized Deductions, of your Form 1040 can also pinpoint ways for you to let Uncle Sam help pay off some of your loans with tax deductions. Should you have more home-equity interest rather than credit card debt? Are you maximizing -- or overusing -- the advantages of borrowing on margin? Consumer debt is a necessary way of life these days for many taxpayers, but smart borrowing on an after-tax basis can help "tame that tiger."

Revisit medical costs. Should you be taking advantage of the medical expense deduction? Many people assume that with the 7.5 percent adjusted gross income floor on medical expenses that it doesn't pay for them to keep track of expenses to test whether they are entitled to itemize. But with the premiums for long-term care insurance now counted as a medical expense, some individuals are discovering that along with other health insurance premiums, deductibles and timing of elective treatments, the medical tax deduction is theirs for the taking.

Maximize retirement planning efforts. A look at your Form W-2 for the year, and at the retirement contribution deductions allowed in determining adjusted gross income, should tell you a lot. Are you maximizing the amount that Uncle Sam allows you to save tax-free for retirement? Should your spouse set up his or her own retirement fund, too? Are you over-invested in tax-deferred retirement plans, facing a large amount of tax each year after you retire?

Remember, too, that a defined amount of retirement income will only be available for a definite amount of time after you retire. If you are spending down your retirement savings with a five percent return at ten percent per year, those savings will be exhausted in a finite number of years. Do the analysis and try to save enough so that, between Social Security and your savings, you can keep your annual withdrawals to under five percent per year and still meet living expenses.

Extrapolate into the future. Review your Form 1040 like you would reconcile your checkbook except, instead of balancing your monthly budget in your check register, balance your annual budget in your life's registry. You may already use your checkbook to extrapolate one, three or five months into the future to ensure that your income will cover the bills. So why not use your tax return to extrapolate one, three or five years into the future to develop a plan that will cover your life?

Consider "The Big Picture". Many people ask "How long should I keep my tax returns?" It depends on how much of your own financial history you want to see documented. The tax code requires retention of tax returns for a minimum of three years but the more history you have of your financial progress - or regress - over the years, the more information you will have for your analysis for the future.

When you are reviewing your tax return and learning how you have spent your money during the last year, it may help to review some of what you've learned with the person who prepared the return. In fact, taking this step is very important to enable you to work together to better plan your financial future. Please contact the office if you need additional assistance or have any questions as you review your recently filed return.