Robert J. Kratz & Co.

11/27/2022

Ideas to Improve Your Personal Cash Flow

Lack of proper cash flow is one of the most common reasons businesses fail. The same is often the case in many households. Learn how the concept of cash flow pertains to you and some ideas to improve using Robert J. Kratz’s tips found in our blog at: https://robertjkratz.com/ideas to improve your personl cash flow/
If you still have questions talk with one of Robert J. Kratz’s many CPAs. Call us at 610-296-2500.

11/15/2022

Planning for Future Care: A Financial Dilemma

Your nest egg can be severely compromised by long term care cost that is hard to avoid. Below are some ideas to help manage this hazard.

How much is needed

According to Genworth's 2021 Cost of Care Survey here is how much money you'll need for three different types of senior living arrangements:
• In-home care - $4,957 to $5,148 monthly; $59,484 to $61,776 annually
• Community and assisted living - $1,690 to $4,500 monthly; $20,280 to $54,000 annually
• Nursing home facilities - $7,908 to $9,034 monthly; $94,896 to $108,408 annually
The traditional source of payment problems

Too many people unfortunately think that Social Security, Medicare and health insurance will cover the costs of long-term care. While about half of adults age 50 and over believe that Medicare will cover the cost of long-term care services, according to an AARP survey, the reality is that Medicare provides very limited coverage for long-term care.

What you can do

Here are some suggestions for how you can care for yourself and your loved ones when you need it.
• Review long-term care insurance. While it's hard to find a cost-effective policy, long-term care insurance helps pay for several types of services ranging from in-home care to nursing homes. It can be difficult to qualify for long-term care insurance, however. Policy underwriters require you to answer questions and possibly complete an exam to determine medical eligibility.

Some employers offer long-term care insurance that is purchased at group rates. If your company offers coverage, it may be a better alternative than purchasing a policy on your own.
• Take advantage of tax benefits. Long-term insurance premiums may be tax deductible. Tax-qualified polices are considered a medical expense and the premiums are listed as an itemized deduction.
• Research long-term care costs in your state. The cost of long-term care services varies by state, type of services required, and type of services preferred. Knowing the cost of long-term care available in your area is a good starting point in the planning process.
• Leverage life insurance. Certain life insurance policies with an early withdrawal for terminal illness or care needs can be an alternative to long-term care insurance. And if structured properly, it can also have tax-free status when used.
Before taking steps for your care as you age, talk to qualified experts. While long-term care is costly, so is making the wrong decision on how you are going to fund it. Speak with an insurance agent specializing in long-term care policies. Then call your tax professionals at Robert J Kratz to answer any questions or concerns regarding your tax situation. Please feel free to call us at 610-296-2500.

11/08/2022

FAFSA Tips To Maximize Your College Financial Aid

On October 1st a brand new Free Application for Federal Student Aid (FAFSA) made its debut. The FAFSA features 60% fewer questions and a host of other changes that aim to increase the likelihood that you can qualify for financial aid.

Here are some tips to maximize your FAFSA eligibility for financial aid.
• File the FAFSA early. More than a dozen states award financial aid on a first-come, first-serve basis. Students who file the FAFSA in October tend to get more than twice as much grant aid on average as students who file the FAFSA later. Even better, by completing the FAFSA early you can time your financial requests to colleges with their varied due dates.
• Minimize income in the base year. 2021 is the base tax year when filling out the FAFSA for the 2023-2024 school year. If you’ve already filed your 2021 tax return, consider filing an amended Form 1040 if there were deductions you may have overlooked that could reduce your income. Otherwise, file this knowledge away to best position your income for future years.
• Reduce the amount of reportable assets. While assets aren’t weighted as heavily as income on the FAFSA, they may affect overall financial aid eligibility. To decrease the amount of reportable assets, consider using cash in your bank accounts to pay down unsecured debt such as credit cards and auto loans, or maximizing retirement plan contributions. Keep in mind that certain assets aren’t considered when determining financial aid eligibility. This includes the home you live in, the value of life insurance, and most retirement plans.
• Use 529 plans wisely. 529 plan owners will impact how the funds are reported on the FAFSA. If the account owner is a grandparent or relative, the funds are not counted on the FAFSA until the money is used. So timing the use of these funds is important. And Remember, if the account owner is a parent or the student, the balance of 529 plans is considered an asset of the parent on the FAFSA.
• Spend a student’s money first. If a student does have cash saved or other assets, consider withdrawing money from student assets first before touching parent assets, since student assets are assessed at a higher rate than parent assets.
• Plan for the American Opportunity Tax Credit (AOTC). If your family is eligible for the AOTC, try spending up to $4,000 in tuition and textbook expenses using cash. The AOTC's maximum tax credit of $4,000 will be worth more dollar-for-dollar rather than using a $4,000 tax-free distribution from a 529 plan.
Let your tax experts at Robert J. Kratz answer any questions you may have by calling the office at 610-296-2500.

11/01/2022

Plan Now To Reduce Tax Surprises!

With the end of the year quickly approaching, now is the perfect time to conduct a final tax planning review now to see if you can still take actions to minimize your taxes this year. Here are some ideas to get you started.
• Review your income. Determine how your income this year will compare to last year. Since tax rates are the same, this is a good initial indicator of your potential tax obligation. If your income is rising, more of your income could be subject to a higher tax rate. This higher income could also trigger phase outs that will prevent you from taking advantage of certain deductions or tax credits formerly available to you.
• Examine life changes. Review any key events over the past year that may have potential tax implications. Here are some common examples:
o Purchasing or selling a home
o Refinancing or adding a new mortgage
o Getting married or divorced
o Incurring large medical expenses
o Changing jobs
o Welcoming a baby
• Identify what tax changes may impact you. One of the major changes this year includes the lowering of the child tax credit and the lowering of dependent care credit for working couples. This year also marks the first year in the last two with no pandemic related payments. If you think this could impact your situation it may make sense to conduct a tax planning review.
• Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. Now is a perfect time to review your retirement account funding options. If you are not taking full advantage of the accounts available to you, there is still time to make adjustments.
• Look into credits. There are a variety of tax credits available to most taxpayers. Spend some time reviewing the most common ones to ensure your tax plan takes advantage of them. Here are some worth reviewing:
o Child Tax Credit
o Earned Income Tax Credit
o Premium Tax Credit
o Adoption Credit
o Elderly and Disabled Credit
o Educational Credits (Lifetime Learning Credit and American Opportunity Tax Credit)
• Avoid surprises. Your objective is to try and avoid any unwanted surprises when you file your tax return. Needless to say it is wise to identify the need for a review now rather than at the end of the year when time is running out. Use the tips here to determine if a review of your situation is warranted. Let your tax experts at Robert J. Kratz answer any questions you may have by calling the office at 610-296-2500.

10/25/2022

Tips to Protect Your Social Security Number

What can bring more chaos to your life than losing your identity? When you have your Social Security number stolen, you have your only form of permanent identification taken from you. Here are some things that you can do to minimize the risk of having your number fall into the wrong hands can be found on our blog https://robertjkratz.com/tips-to-protect-…-security-number/

If you have questions or concerns, call the Robert Kratz office at 610-296-2500.

10/18/2022

Tax Incentives for Installing High Efficiency Home Improvements

The recently passed Inflation Reduction Act (IRA) included a tax incentive for installing high efficiency home improvements, amongst other incentives we will review in future posts. Here’s a closer look at some of the bill’s tax provisions regarding the new incentives.
• Qualifying high efficiency home improvements now qualify for an annual $1,200 credit, up from a $500 maximum lifetime credit.
• Energy efficient heat pumps, heat pump water heaters, central air conditioners, wood stoves, and natural gas or oil furnaces or boilers qualify for a $2,000 credit.
What you can do
• Look for the details. Prior to purchasing new high efficient home improvements, double check how the new credit will apply to your purchase.
• Check with manufacturers. Most manufacturers are motivated to understand the new program and could be a good resource to see how they apply to your situation.
There will be more details on how to obtain these credits in the future. So, stay alert and check before making any purchase decisions if you are expecting to take any of these new energy saving credits. Remember that we are always on top of the most current tax information that will most benefit your bottom line. Questions or concerns are just a phone call away at Robert Kratz, 610-296-2500

10/12/2022

Controlling Monthly Bill Creep

Bills may be the bane of our existence but paying too much is not. Here are some tips to help you get a handle on your recurring monthly expenses.
• Look at your recurring services. Review every service you are currently using. Then look at your bank and credit card statements and highlight all the charges that look like a subscription. Some examples to look for are streaming services (video, music and games), magazines, news subscriptions, digital storage services, gym memberships and financial services. Determine if you have redundant subscriptions, such as two music-streaming services. Finally, ask yourself if each service is still providing value to you. If it's not, cancel it.
• Review bills for unnecessary fees. Once you trim your list down to the services you want to keep, locate the most recent bill for each. Read through all the charges and make notes of those that are questionable. You might be paying for services you aren't using, such as a video streaming service on your cell phone bill. Or maybe you are paying replacement insurance coverage for something you don't need. For every charge that doesn't make sense, call and ask the provider to cancel it.
• Bundle expenses when you can. Many suppliers provide multiple services and will offer discounts if you sign up for more than one. Bundling your cable TV, Internet and home phone is a common example. Other places to look for bundling opportunities are cell phone providers and insurance companies.
• Negotiate for lower rates. Call each provider and ask for a lower rate or discount. Most companies want to keep your business, so often times they will work with you. Service providers routinely change the way they package their products, so saving money might be as simple as changing to a different level of service so you need to make the call!
It's easy for your bills to spiral out of control if you don't keep close tabs on them. Go through a review exercise every few months to ensure you aren't paying more than necessary. Robert J. Kratz is always available to answer any questions you may have by calling the office at 610-296-2500.

10/05/2022

Debit Card Smarts

When and how should you use your debit card? Save money and potential headaches by using Robert J. Kratz’s debit card tips found in our blog at: https://robertjkratz.com/how-to-use-debit-cards-safely/

If you still have questions talk with one of Robert J. Kratz’s many CPAs. Call us at 610-296-2500.

09/25/2022

5 Great Things to Know about IRAs

IRAs can be powerful tools to lower taxes all while saving for retirement or other predetermined uses. Here are five fairly unreported things to know about IRAs.
1. A nonworking spouse can have an IRA. If your spouse doesn't work, you may still be able to open and contribute to an IRA for your spouse, assuming that you work and file a joint tax return. This can be a great way to help reduce your taxable income each year.
2. Even children can have IRAs. If your child has earned income, you can open and contribute to an IRA. Just ensure you can document the earnings. While your child can contribute their own earnings, many parents will help keep track of things like babysitting money, then match those earnings in either a traditional or ROTH IRA. Often the ROTH IRA is preferred because the future earnings could be tax free! Your child's IRA is managed by an adult until the child is old enough (18 or 21 depending on the state) for the account to be transferred to their name.
3. You may still contribute to an IRA if you have a 401(k) or similar program at work. As long as you do not exceed the income limits, it is ok to have both an IRA as well as other forms of retirement savings plans. Call us at Robert J. Kratz to learn about your options and plan accordingly.
4. Non-deductible contributions may be made. If you exceed IRA income phaseouts, contributions to your IRA may not reduce your taxable income for the year. But you may still want to make after-tax contributions to a non-deductible IRA. Remember, while you are taxed on the contributions to a non-deductible IRA, the earnings can still grow tax deferred.
5. It's not just for retirement. With traditional IRAs, if you withdraw funds before the age of 59 1/2 you may be subject to income tax AND an early withdrawal penalty. But there are exceptions to this rule. These include withdrawals for a first time home purchase, major medical bills, college costs, birth/adoption and many others. It is important, however, to know the rules BEFORE you withdraw the funds.
Tax rules surrounding IRAs are vast and complex. But within the rules are numerous situations that if you know they exist, can help you plan for a more tax-efficient future. Don’t take chances with your IRA, ROTH IRA, and 401(k). For professional guidance call Robert J. Kratz 610-296-2500.

09/18/2022

Tips to improve your credit score

Credit scores are used to determine interest rates on mortgages, car loans and even the amount you pay for insurance premiums. It is a good idea to review ways to improve score. Read our blog for some ideas: https://robertjkratz.com/tips-to-improve-your-credit-score/.

As always Robert J. Kratz is available to help. You can call us at 610-296-2500.

09/14/2022

The IRS Announces Tax Scams

The IRS annually compiles lists of common scams that taxpayers can encounter. This year's list includes the following four categories:
• Pandemic-related scams. Criminals are still using the COVID-19 pandemic to steal people's money and identity with phishing emails, social media posts, phone calls, and text messages.

All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing fraudulent tax returns. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers' money.
• Offer-in-compromise mills. Offer-in-compromise (OIC) mills make outlandish claims about how they can settle a person's tax debt for pennies on the dollar. Often, the reality is that taxpayers are required to pay a large fee up front to get the same deal they could have gotten on their own by working directly with the IRS. These services tend to be more visible right after the filing season ends while taxpayers are trying to pay their recent bill.
• Suspicious communication. Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.
• Spear phishing attacks. Criminals try to steal client data and tax preparers' identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.
What you can do

If you discover that you’re a victim of identity theft, consider taking one or more of the following actions:
• Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. Generally, you can avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
• Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This covers all three of your credit files.
• Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
• Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call Robert J. Kratz at 610-296-2500 to schedule an appointment to discuss next steps.

09/05/2022