This reminder is for everyone—especially joint filers who ended up owing money in recent years—to make sure your withholding choices don’t leave you with another big tax bill in years to come. Strange as it may sound, for working couples filing jointly who make more than $150,000 year, it might make sense to change one (or both!) of your W-4s to Single status with 0 dependents. The basis is simple: The more money that is withheld in taxes throughout the year, the more likely you are to get a refund, rather than owe, when it’s time to file.
If you’re like most people, you filled out a W-4 form when you started working. It was part of the paperwork, like your I-9 and health insurance forms, and you haven’t thought about it since. In fact, it’s not unusual to think that making changes to your W-4 is only possible—or necessary—in two circumstances:
When you are newly hired or are changing jobs; or
When you have a life event, such as the birth or adoption of a child, a divorce, or the death of a spouse.
But the truth is that you can make changes to your W-4 at any time. And there is often good reason to do so. For instance:
You and your spouse’s combined incomes put you over an income threshold that affects your tax burden.
You have a second or part-time job, but your W-4 withholdings don’t take this into account.
You are making more money and your tax bracket has changed.
Changes to tax laws unexpectedly put you in a higher tax category.
This last one is what many of our clients experienced as a result of the Tax Cuts and Jobs Act that was passed in 2017. And that is why we suggest checking that your withholding makes sense for your current situation.
Though it’s too early to speculate on what changes we are likely to see at the beginning of the new year, we’re still encouraging everyone who has owed money the last two years to consider contacting your employer to change your W-4 allowances and/or status before your first paycheck of 2021.
We reported in a previous newsletter about criminals taking advantage of an overwhelmed system to file fraudulent unemployment claims. And the thieves are literally banking on you not paying attention.
The issue was identified as a nationwide problem back in May. Governor Baker addressed the state’s response at that time in light of the thousands of cases that were reported in the Commonwealth. That seemed to stem the tide for a time, but more recent news reports have noted an uptick in these cases that seems to coincide with the rise in legitimate jobless claims. The latest scams are using e-mails that require you to respond or click through to a form to provide personal information. Data breaches can also be a source for criminals to mine for personal information.
How do they do it? Here’s a step by step breakdown:
Once an identity thief gets your personal information—maybe through a data breach or sophisticated phishing e-mail—they simply file an unemployment claim in your name.
You then receive a legitimate notification from the Department of Unemployment Assistance informing you that “your” claim has been approved.
Unless you open that letter and report it as fraud, the money that is approved can be issued via a Massachusetts Unemployment Insurance Debit Card to anyone claiming to be you.
In late January you receive a W-2 showing that you received thousands of dollars in unemployment benefits that you are expected to report as income.
You’ll need to start the process of proving you never received that money and unraveling what other damage may have been done.
As with most scams of this type, the likelihood that you’ll be a victim is small, but as legitimate jobless claims are on the rise again, so too, are the opportunities for thieves to take taxpayer money and ruin your credit.
So how can you avoid being a victim?
Open your mail! If it looks like a duck…you know the rest.
Never reply to or click links in an unsolicited e-mail, or one from an unknown sender.
Report suspicious communication to the state, the IRS, or both.
It’s true that criminals will continue to look for new ways to trick people out of their money, so we all need to continue to be vigilant in our efforts to stop them.
It is with great sadness that we share the news of the recent passing of our long-time colleague and friend, Ed Greenlaw.
Ed has been apart of the Business Bookkeeping Services family fro 37 years. We will miss his sense of humor, his dedication to his work, and the proud stories he shared of his grandchildren.
Our deepest sympathies go out to Ed’s many friends and family as we all grieve the loss of this great man. Boston Globe Obituary — Ed Greenlaw
With the global pandemic causing record-breaking job losses and wreaking havoc on our economy, it can be tempting to withdraw large amounts of cash from your IRA to have on hand. But before you raid your IRA at any time, we encourage you to think carefully about how much you actually need.
Individual Retirement accounts are are designed to provide additional financial security as we get older, but unlike a traditional bank account, access to the money in these accounts—particularly in times of financial crisis—can come at a significant cost.
For this year, the CARES Act has eased some restrictions and penalties for qualifying individuals whose income has suffered as a result of COVID-19, like allowing taxes on IRA withdrawals to be spread over three years, but it is still recommended to exhaust other cash resources before tapping into retirement accounts for emergency funds.
Consider this: Any withdrawal from your IRA is treated as income for that year. So substantially large distribution amounts could potentially bump you into a higher tax bracket, which translates into giving up more of your hard-earned savings than you intended.
And while there are no restrictions or requirements on IRA distributions between age 60 and 70½, the more you take out, the more income tax you will pay—most likely at a higher rate than if you wait until your required minimum distributions kick in.
So before you make any additional withdrawals from your IRA, we recommend taking a moment to determine how much you actually need right now. While the idea of using your retirement account as a rainy day fund might seem attractive in the short term—particularly in uncertain times—the tax ramifications down the road can prove far more costly than riding out the storm.
Criminals are relentless in finding new ways to prey on people’s fears during this pandemic. We urge you to be vigilant in questioning any texts, emails or offers that require you to click on links, fill out surveys, or give any personal information to unknown sources. You can Google the subject line of any email to see if there are reports of it being spam or phishing.The FBI is warning people about a new stimulus check scam where people receive a text message, supposedly from Costco, offering “$110 goodies,” and other hooks, to entice people to fill out bogus surveys. The information from these surveys can be used to steal your identity, commit financial fraud, or install malware into your computer. Here is the press release from the FBI for more information.
At this time, you should be particularly wary of any emails or texts from unknown senders concerning:
The CDC and other organizations offering links to new info about coronavirus
