Tax Returns: How Long to Hold?

These days we are fortunate to live in a world much less reliant on paperwork. Almost everything can be found online and file cabinets are becoming bare. As much as we live in the digital era, there are still some tax papers imperative to keep on hand.

There are several important reasons to retain tax paperwork. If you are ever audited by the IRS or learn of a deduction or tax break you could have claimed, you will need those documents. The IRS has 3 years to do an audit of your taxes. However, if you understate your adjusted gross income by 25% or more, the IRS is allowed 6 years to conduct the audit. If you file an extension, the 3 years begins from when the extended return was filed. Based on this, most would recommend keeping all documentation for 6 years.

There is however, no time limit to when audits for unfiled returns or fraudulent returns can be done. Additionally, many recommending keeping your W2 forms until your Social Security begin. You can very easily find that you have to prove your earnings to the Social Security office when the time comes. Having your W2 forms as record of your earnings will be critical as proof in that case.

For any real estate and retirement accounts, the 3 year rule applies again. It is advised to keep your real estate records for as long as you own the property plus 3 years after it is sold. Likewise, retirement records should be retained for as long as you’re receiving payouts plus 3 years.

The IRS website shares their recommendations on the topic as well. They recommend that you should keep your records until the period of limitations, or the time in which you can amend your return, runs out. For more information from the IRS directly,
https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

So what really is the safest bet? Keep everything for at least 6 years and in the case of real estate and retirement accounts for 3 years after the gain is realized. After 6 years the choice is yours. If you believe your tax returns to be clean, it should be fine to keep just the return itself and the W2s. But as many experts debate, how much room do those files really take up? Save yourself a future headache and save those files…..forever.


Taxes 101

To quote the great Benjamin Franklin, “…in this world nothing can be said to be certain, except death and taxes.”  Taxes can be confusing and frustrating but, have you ever stopped to wonder when the taxes we pay originated and where the money goes?  Taxes in the form of tariffs on imports have a long history in the USA, dating back to the 1760’s.  Taxes as we know them however are more recent with the 16th amendment to the constitution. This was ratified in 1913 and legally allowed for income taxes.  Not long after, in 1930, sales taxes were introduced. Since then, more taxes have been introduced along with more legislature and complexities surrounding them.  

Taxes generally consist of money paid by individuals or businesses to help the government fund schools, libraries, armed forces, roads, bridges, police, and other public services.

  • Approximately 7.65% of your wages go to the government before you even see your paycheck in the form of a Payroll Tax.  These payroll taxes fund Social Security, healthcare, and unemployment.  
  • Property Taxes are paid annually for the land you own and real estate. This money goes to your local public services such as schools, roads, sanitation, etc.
  • Sales Tax impacts the greatest number of consumers as it is levied on goods and sometimes services purchased.  45 states have a sales tax and each state is responsible for the laws of their own state tax. The rates average between 4 – 7%.  These taxes are found on goods and sometimes services offered and are used to pay for state roads and other public safety measures.
  • Income Taxes are the dollars paid by employees based on earnings at the federal, state, and local level.  There are 7 states who do not charge a state income tax. Businesses pay income taxes as well as individuals on the income they earn.  Deductions are available to both individuals and businesses to lessen the amount of income that they pay on taxes. Additionally, not all income that you may receive (such as child support payments) is taxable.  This money is to be used by the government for activities that serve the public. Present day, income taxes account for nearly half of the government’s revenue.

 

The percentage of income that the government makes from taxes has gone up exponentially over the past 100 years, both in terms of an increased percent of taxable income and increase in the number of taxes levied.  These taxes are a source of controversy for many business owners and tax payers. The better we educate ourselves about what we are paying and why, the more informed we can be at tax time to make good decisions. Knowing what deductions are available to you and what the specific laws of your state require can help.  Our office is always available to help answer questions!!


Nicole Hagen

One of the most challenging parts to a healthier lifestyle is making positive changes and then sticking with them weeks and months down the road.  This is where Nutrition Coaching with Nicole has been found to excel. In an effort to help clients get the best results that last for the rest of their lives, Nicole Hagen encourages sustainable habit-based strategies as opposed to the deprivation-based mindset of dieting. With guidance and accountability from an educated and experienced nutrition coach using sustainable, easy-to-begin habit-based coaching, Nicole believes anyone can create healthy, positive change that lasts a lifetime.

As a certified nutrition coach, Nicole helps people change their bodies and their lives with guided nutrition coaching geared specifically to their individual goals, lifestyle, and preferences.  Through her nutrition coaching process clients will learn the best eating, exercise (optional), and lifestyle strategies — unique and personal — for their body. And because she recognizes that we live in a fast-paced world, Nicole offers both in-person and remote nutrition coaching packages. So even those who live at a distance or who can’t get away for a face-to-face consultation can stay consistent and see results, no matter what life brings.

The majority of her clientele have fat loss goals, whether it’s 10, 50 or 100 pounds. She also does a lot of work with disordered eating and sport-specific clientele. So whether you feel like your body is working against you and just can’t seem to lose weight, or you’re looking for a way to enhance your fitness performance, Nicole is here to help guide the way.

Nicole utilizes an online nutrition coaching portal with her clients. This service allows for daily accountability, so nutrition and fitness goals remain a priority amidst the everyday life distractions! You can learn more at her website or Facebook/Instagram pages, where she posts daily Nutrition Tips of the Day. Nicole is also on instagram at https://www.instagram.com/nutritionwithnicole/.  If you need any additional information, Nicole is happy to help via email at nutritioncoachingwithnicole@gmail.com!


Sandra Kilpatrick Jordan

Our local business spotlight is always proud to share the many talents and expertise of our local area from  Himalayan tours to candle makers. Today we are incredibly excited to introduce Sandra Kilpatrick Jordan. Sandra worked at Sesame Workshop for 12 years as an executive producer of non-broadcast educational programs.  She spent 2 years as a federal grant maker at the National Girl Scouts of the USA which she describes as an amazing experience! Sandra followed this with another 8 years in public affairs and government relations for the international trade association for the music products industry (NAMM) and grant maker for their foundation.

 This employment resume is incredibly impressive in itself, but the work that Sandra does for these organizations is even more exciting.  An independent consultant since 2010, she works with business and nonprofit clients in various parts of the U.S. and overseas. Sandra describes her work as strategic planning and communications, along with program and partner development in education and the arts. She has been labeled a “trim tab” by one of her mentors, a definition she agrees with for herself and her work.  This term is primarily used to describe a small part on boats that gives better control and improved performance with just minor adjustments. Sandra fits this description by recognizing the future implications of small, high-leverage actions that can help to guide an organization in a right, new direction. She helps busy business and nonprofit leaders accelerate their social impact by

  • supporting them to plan, brand and communicate more effectively
  • producing new collateral materials
  • developing partnerships and programs

 

Sandra brings a wealth of bold and innovative services to organizations including writing strategic plans and annual reports, introducing new products or services, crafting new content for any medium, and spearheading or re-evaluating an education, public affairs or community outreach program.  This list does not exhaust her capabilities and Sandra’s customer testimonials and completed projects speak volumes to the work that she does and the quality she brings.

To see a complete list of the programs and projects she has been involved with, her website includes testimonials from many.

http://www.sandrakilpatrickjordan.com/Programs—Products.html

http://www.sandrakilpatrickjordan.com/Testimonials.html

If you are ready to take your organization in a new and innovative direction, Sandra is ready to help!  She is based locally in Lancaster at the Candy Factory and can be reached by email at skjordanconsult@gmail.com.  


Spending Your Refund

Getting a tax refund can feel like winning the April jackpot.  But how do you spend your winnings? It may be tempting to look at this fun money as a new wardrobe, expensive dinner, or other splurge.  Here are some ideas on how we can utilize our tax refunds for the greatest gain, and still have a little fun.

First, take care of your needs – and of course these are different for each person.  Start by paying off some of those big bills with highest interest rates first. If you have credit card debt or student loans, this is the perfect time to put a little extra towards those amounts.  Next, look at those monthly bills with lower interest rates such as your mortgage and car payments. Not only does paying more now help to pay them off quicker, it saves you future money in the form of saved interest payments.  It is always a good idea to get ahead now on these payments. You will be set when there is an emergency and you need to take a month of from making payments.

Second, start an emergency account in a separate savings account.  Even if you don’t add to it for several months, at least it is started and there in case of…..well, an emergency.  If you haven’t set up a retirement fund, now is a great time to do so. Set up an IRA or see if your employer has a matching retirement account.  If you already have an emergency account and retirement account, adding a little money from your tax refund will be a big help towards the future.

Third, look towards those expenses that you may be putting off but know need to be taken care.  Many people avoid making medical and dental appointments because of their fear of the price tag.  Now is the perfect time to schedule those appointments and take care of YOU! Just like us, our cars need TLC that often gets avoided because of cost fear.  Maintaining your automobile will save dividends down the road. This is a great time to get that noise looked at, before it becomes a bigger noise! The same can be said for our homes.  Ignoring a leaky roof or a dryer that doesn’t really dry? Here is the opportunity that you’ve been waiting for!

Finally, we come to the category of fun ways to spend this money….a trip of a lifetime.  If you’ve been living paycheck to paycheck, this might fall more under the need category.  Enjoy it!

The best advice for spending that refund is to spread it around.  Most Americans receive close to a $3,000 return. In this instance, the money can be split with $500 to credit cards, $500 to student loans, $500 to car payment, $500 to emergency or retirement fund, $500 to yourself $500 to vacation.  Putting a little money towards each of your big expenses and still pampering yourself is a great way to enjoy your winnings!


What You Need To Know About Vacation Tax Deductions

Going away for Spring break? Your travel plans might be starting for the year so make sure you know if you’re able to turn that trip into a tax deduction.

Perhaps the easiest way to claim a tax break on a vacation is by attending a seminar or conference related to your current profession.

Work activities you can write off for taxes can include:

  • seminars and conferences
  • meeting a potential client or business partner
  • or doing research in your field.

This is a win-win as you’re improving yourself while enjoying the destination of your dreams. It’s necessary to spend four or more hours a day in professional development and you’ll also need records of attendance.

But that leaves 20 hours for surfing, sailing, and fun! Before leaving on your trip you must have at least one work-related engagement planned and set. This allows you to fulfill the IRS “prior set business purpose” rule.

If the primary purpose of your trip is work, then you can write off your travel costs.  When looking at travel expenses, airfare and driving are both covered. Airfare is covered for you but not family or friends who accompany you.  

However, if the destination is close enough to drive, then $0.50 a mile is allowed. When driving you may bring other passengers with you and the mileage is still deductible.  Days spent traveling are counted as work days as well.

Lodging stays for the work days are also tax deductible.  As an added bonus, bookending the weekend between Friday and Monday work days allows for the lodging and food expenses accrued over the weekend to be covered.

Reimbursement is allowed for you only. If a second room or room with additional beds are required to house your family, you will only be reimbursed at the rate for a single room.  

Your personal meals are deductible at 50%, but if you bring the family on the trip their meals aren’t included. With the exception of lodging, receipts are not required for expenses less than $75.  

However, documentation, such as a travel diary, will be needed to claim the deduction. When in doubt, more is better to make sure you can claim your trip. The key is thorough documentation throughout the trip.  

Trips outside of the United States have some additional considerations, as do conventions. IRS Publication 463 contains additional details on deductible expenses on a work/play vacation.


Jerry Lapp

 If traveling to Nepal or high mountain trekking is on your bucket list, check out Skychasers!  Based right here in Lancaster, PA, but with tons of expertise in the Nepali region, this is the best place to go for your next travel adventure!

Jerry has been in the adventure travel business for four years.  He’s taken outdoor ed courses, but most of his training was experiential in Nepal prior to starting the Skychasers business.  His first visit to Nepal was in 1999 to trek the Himalaya. He and his then girlfriend, now wife, both loved it there and decided to stay.  They got permanent visas, jobs, and eventually got married and their oldest daughter, Anabelle, was born in Nepal. The family lived and worked in Kathmandu managing a Nepalese silver jewelry exporting company, Yak & Yeti Enterprises, that was founded as a fundraising arm of a large Tibetan Buddhist monastery in the Kathmandu Valley.

Jerry had five weeks of vacation time and he used almost all of it on treks in the Himalaya, sometimes heading out alone or with his wife . . . they even took Anabelle trekking to the Everest Region when she was only seven-months-old, setting her up in a Pack ‘n Play for naps and bedtime in lodges along the trail.  Trekking the Himalaya became second nature through this time and more enjoyable every time he got into the mountains.

During this time, Jerry became fluent in the Nepali language, supplementing plentiful practice with off and on tutoring sessions.  In 2003, he completed his college degree with a year of study abroad in Kathmandu. He also learned to read and write Nepali for the first time, although he jokes that these skills never caught up to his conversational abilities and remain at a pre-kindergarten level to this day.  Here’s “Jerry” in the Nepali script, known as Devanagari . . . जेरी

जेरी says he loves the freedom of designing treks that stretch his and his trekkers’ abilities.  In turn, it’s rewarding to watch trekkers gain confidence by the day, sometimes by the hour, when they conquer fears, or summit an 18,000 ft pass, a 20,000 ft mountain, or make it to Everest Base Camp.  Jerry is a firm believer in the power that stretching mind or body has to reshape our lives for the better.

Jerry shares the credit for what makes an expedition with Skychasers great with his Sherpas.  He works with a marvelous group of Sherpas and there’s no doubt that they’re improbably gifted with the ability to instill confidence in trekkers.  Their preposterous physical skills (for example, people-carrying 🙂 provides a great backup should anything go wrong and they’re almost always blissfully optimistic.

In addition to the outstanding team of sherpas, Jerry tries to give trekkers something to write home about every day.  He is able wow guests by going to the hidden treasures, strange places, weird sites, and exotic places that only the locals know about.  Because of the years Jerry has spent in Nepal he has a lot of friends on the trekking routes, especially in the Everest area, so people get to drink tea in a friend’s home, or join in on a local festival.  That’s also a testament to the extremely social nature of Nepal’s people!

In his own words, Jerry describes why a trip with Skychasers is truly a unique experience unlike other:

“Traveling to Nepal and trekking the Himalaya is pretty intimidating for many people, even experienced hikers.  To ease these worries, I arrange group travel on beautiful airlines from major East Coast airports, so no one has to travel alone.  Paraphrasing a quote from Haley on Modern Family, “it’s the Himalaya; if it were easy, everybody would do it”. Yes, this is true, the Himalayas are a nice challenge for anyone, but the rewards are tough to beat.  And, I design 90% of my treks to be accessible to anyone who can commit to a bit of conditioning work beforehand. There’s usually no camping . . . our daily destination is typically a family-run lodge in a small village; evenings go by quickly swapping trekking war stories with other hikers from all over the world while eating around a yak dung fueled potbelly stove.”

Jerry would love to see more younger travelers take advantage of his trip and is negotiable on discounts.  To discuss your next adventure you can contact Jerry by email or phone at jerry@skychasersworld.com or 717.682.5265.  Their website also provides a good overview of what is available.  Skychasers is active on social media as well and can be found on instagram @skychasersworld or facebook Skychasers on Facebook.


Mike Gingerich

As small business owners, we’ve talked about which hats to wear to create the most successful operation.  Some jobs you can take on yourself and others are best left to someone with the expertise in that field. Unless you enjoy unleashing your creative side and have time to keep current with social media marketing, these tend to be some of the best areas to outsource.  This is where Mike Gingerich and Digital Hill can help!  They offer website development, website tools and software, as well as online and social media marketing strategy and management to their clients.  Digital Hill has completed more than 500 projects!

Mike has the experience to create exactly what you need with 10 years in online marketing. He received his MS degree in Organizational Development and Leadership from Shippensburg University.  Mike shared that when he went to college, there was no such thing as social media so he’s learned on the fly. He has a passion for technology, so working with website and social media keeps him on the leading edge where he likes to be.

In addition to the work he does through Digital Hill, he has a podcast, Halftime Mike, which is a monthly resource on web/social media/business/fitness/life mission topics.  Mike does 2 weekly Facebook Live shows about online marketing trends.

His aim through his work in business and life is to add value and help businesses and organizations set themselves apart.  To this end he has written a 30 day guide to becoming a better leader which can be found at www.mikegingerich.com/lead.  

Shop local!  Mike is here in Lancaster working at the Candy Factory when he isn’t out training for triathlons and long distance races.  

Online you can find him at:

MikeGingerich.com

@Mike_Gingerich on Twitter

facebook.com/mikegdigital

@mikegingerich on Instagram


Bankruptcy and Foreclosures

When life doesn’t go as you had planned, and either bankruptcy or home foreclosure is necessary, what are the tax implications?  

Cancelled debt is generally considered taxable income, but fortunately bankruptcy is a big exception to that rule.  However, expenses accrued as the result of bankruptcy cannot be itemized and claimed as deductions either. When filing bankruptcy, there are several important tips to remember regarding taxes.  It is usually best to file your taxes for the year before your file bankruptcy, if you are going to owe money.  If you have already filed taxes and received a refund, do not use your tax refund to pay bills. Do keep receipts of how any refund money is spent because the information will be needed during bankruptcy proceedings.

When your home forecloses there is a possibility for taxable income in any gains that are achieved from the sale of the foreclosure or through the taxable cancellation of debt income.  However, as in the case of bankruptcy, losses from foreclosures are not reportable as tax deductions.

What is the difference between a short sale and a foreclosure?  Both occur when the homeowner cannot continue to make mortgage payments.  In the case of a short sale, you sell the home for less than your owe on it and the mortgage company forgives the remaining balance.  This differs from foreclosures which involve the mortgage lender actually taking possession of the home and canceling the entire balance due.  When this happens you are liable for the taxable income on the capital gain from the foreclosure.

IRS website includes tools to calculate cancellation of debt income and gain from foreclosure.  There are a high number of different scenarios possible when it comes to taxes and bankruptcy or foreclosure.  If you are looking for more specific information related to your own unique situation, the IRS website also contains a publication on bankruptcies as they relate to taxes.  ITP Taxes, LLC is also available to help answer your specific questions as they arise!


Brittney Hippensteel

We are very pleased to introduce you to Hamilton Wax Co….the quintessential “Shop Local, Shop Small Business” company.  Hamilton Wax Co has been in business for a year, based in Lancaster’s west end neighborhood of Hamilton Park.  Named after the neighborhood, this small business is run out of an 850 sq. ft. home that was built in the 30’s for the Hamilton Watch Factory workers and their families. The owner’s love for beautiful home goods, and simple design is where this dream began.

Brittney Hippensteel has a BFA in Graphic Design, but loves all kinds of art.  In addition to creating quality hand crafted candles, Brittney is a full time Graphic Designer.  She enjoys package design, photography, and social media marketing. As a self taught candle maker she has fulfilled her dream to make something tangible – outside the computer generated graphic design world.

Hamilton Wax Co offers 5 classic scents in 9 oz jars or 8 oz tins.  Holiday and seasonal scents are available as well. The candles are richly scented, soy wax candles poured in small batches. All candles are proudly vegan and phthalate free. Orders can be placed by visiting the Hamilton Wax Co website or locally at the following vendors:

Sophie Stargazer – 323 N Queen St, Lancaster, PA 17603

Realm and Reason – 213 W King St, Lancaster, PA 17603

To get in touch with Brittney, please check out Hamilton Wax Co on facebook and instagram.  She can be reached by email at hello@hamiltonwaxco.com with specific questions.  Subscribe to Hamilton Wax’s eNewsletter through their website, and receive 15% off your first order!