Stephen Merritt, CPA, PC  |  Certified Public Accountants  |  (757) 420-5778
233 Business Park Drive, Suite 104, Virginia Beach, VA 23462

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Oxford says try and find me!

What’s Inside

• Partner With a Tax Expert if the IRS Comes Knocking
• Retiring Early Catches on FIRE
• Avoid the Summertime Tax Blues With These Planning Tips

Partner With a Tax Expert if the IRS Comes Knocking

Sleuthing your way through a tax audit or responding to a letter from the IRS by yourself is not the same as fixing a leaky faucet or changing your oil. Here are reasons to partner with a tax professional as soon as you receive a letter from the IRS.

• IRS auditors do this for a living – you don’t. Seasoned IRS agents see your situation many times and know the rules better than you. Even worse, they are under no obligation to teach you the rules. Just like a defendant needs the help of a lawyer in court, you need someone in your corner that knows your rights and understands the correct tax code to apply in correspondence with the IRS.
• Insufficient records will cost you. When selected for an audit, the IRS will typically make a written request for specific documents they want to see. The list may include receipts, bills, legal documents, loan agreements and other records. If you are missing something from the list, things get dicey. It may be possible to reconstruct some of your records, but you might have to rely on a good explanation to avoid additional taxes plus a possible 20 percent negligence penalty.
• Too much information can increase audit risk. While most audits are limited in scope, IRS agents have the authority to increase that scope based on what they find during their original analysis. That means if they find a document or hear something you say that sounds suspicious, they can extend the audit to additional areas. Being prepared with proper support along with concise answers to their questions is the best approach to limiting further audit risk.
• Missing an audit deadline can lead to trouble. When you receive the original audit request, it will include a response deadline (typically 30 days). If you miss the deadline, the IRS will change your tax return using their interpretation of findings, not yours. This typically means assessing new taxes, interest and penalties. if you wish your point of view to be heard, get help right away to prepare a plan and manage the IRS’s deadlines.
• Relying on an expert gives you peace of mind. Tax audits are never fun, but they don’t have to be pull-your-hair-out stressful. A tax expert can help map out a plan and take it step-by-step to ensure the best possible outcome. You’ll rest easy knowing your audit situation is being handled by someone with the proper expertise that also has your nest interests in mind.

Oxford says its nap time after eating a big lunch.

Retiring Early Catches on Fire!

Is trying to retire in your 30s or 40s the right move for you?

Retiring early is an idea that an entire community of people across the United States is putting into action. It even has an official name – Financial Independence Retire Early, or FIRE. Read on to find out how it works. And who knows – maybe you or someone you know may want to try it out!

How it started:

The origins of FIRE started in the early 1990s when a former Wall Street analyst, Joe Dominguez shared his story in the book Your Money or Your Life about retiring at the age of 31, never to work again, and have total financial independence. The ideas presented in the book became popular during the 2008 financial crisis when younger people started re-evaluating the historical practice of working a 9 to 5 job until age 65 or older. Many people identified with what Dominguez discussed in his book, especially doing things when they’re younger rather than waiting for the golden years of retirement.

How it works:

The FIRE concept is built on extreme saving and frugality in your early years so you can comfortably live with enough money well before the traditional retirement age of 65. Here are some of the basic rules:

• Spend as little as possible. Refrain from activities such as eating out, going on vacation, and purchasing brand name clothing. Focus on activities such as bunking with friends and riding your bike to work. You adopt (almost) anything you can to cut expenses.
• Save as much as possible. Once you identify the minimum amount of money you need to live comfortably in the present, save everything else. The goal is saving 50% to 70% (!) of your income.
• Earn as much as possible. Weather it’s quickly climbing the corporate ladder, adding a side hustle, or making smart investments, maximizing income is the name of the game. Income-producing activities are also prioritized in place of most of your hobbies. The more you make, the faster you can get to your goal or financial independence.
• Set a specific goal, the retire when you achieve it. The idea is to get to you goal as fast as possible so you can retire in your 30s and 40s. Even if you’re in your 30s, 40s, or 50s right now, you can do a modified form of FIRE to retire as quickly as you can.

FIRE can become COASTING:

While retiring early and having total freedom sounds great in theory, some people struggle with boredom and overspending after achieving FIRE. One option to consider if you find yourself in this situation is called coasting. Instead of completely retiring in your 30s or 40s, coasters simply downshift to a less demanding or more enjoyable job to continue earning money while also enjoying the benefits of financial freedom without the stresses of maintaining a certain income level.

While the FIRE movement isn’t for everyone, you can adopt your own variation by saving as much as you can while you’re working so you can enjoy some level of financial independence as soon as you can.

Avoid the Summertime Tax Blues With These Planning Tips

If you picked up a part-time job for some extra summer spending money, you may have to set aside some of your cash for taxes. Here are some tips to help you manage the taxes on your summer earnings:

• Review the need to make estimated payments. As an independent contractor, you are responsible for paying all taxes on your earnings. This is done by making quarterly estimated tax payments to the IRS using Form 1040 – ES. In addition to income taxes, contractors also need to pay self-employment taxes of 15.3% on earnings at the federal level. You may also need to pay estimated taxes at the state level.

Tax Tip: Track your expenses and save receipts. By doing this, you can subtract eligible expenses like mileage and supplies from your gross earnings. Use this lower income number to calculate your self-employment tax and correctly estimate your quarterly income.

• Closely monitor tax withholdings. As an employee, your employer withholds taxes based on what you claim on Form W-4. The tax tables used by this form to calculate your withholdings unfortunately do not account for seasonal jobs. This typically results in paycheck withholdings being too low for supplemental income workers and too high for students working during the summer.

Tax Tip: If you anticipate earnings in excess of the standard deduction, request a revision of your withholdings. Use tools on the IRS web site, review last year’s tax return, or ask for help to estimate the correct amount to withhold. From there, ask your employer to increase or decrease your federal and/or state withholdings.

With a little tax planning, you can ensure that your summer job or side hustle provides the income you’re looking for without the disappointment of unexpected taxes. Please call if you have any questions.

Oxford Part 6

Steve spoke with the repair shop owner, who stated two of his employees had not come in that day. So, he was shorthanded. The shop owner decided he would repair the car. He told Steve he hadn’t turned a wrench in months and was looking forward to working under the hood of a car again!

Around 10 am the auto repair shop called to tell us the car was ready. The issue was fluid leaking on to the alternator, which caused the car to be inoperable. The alternator was replaced. He stated he fixed the car up “just enough” to get us back home. He gave us detailed instructions for our repair person in Virginia. Woo hoo!!

I began trying to get a ride via Uber. Two drivers popped up and I scheduled one. Two minutes later that driver cancelled. We were to remote!! So, I tried again. The next Uber driver could pick us up in 3 minutes. I booked that driver and we headed to the hotel lobby to wait for our ride.

The Uber arrived. He was not familiar with the area or the town that the repair shop was located, but he would take us there. As soon as we get settled in the car the Uber driver informs us that Uber normally does not go to this town! He was willing to make the 25-mile trip out to the repair shop.

We had a very enjoyable conversation with our Uber driver. He was from Ukraine. His wife and 3- year-old son were still in the Ukraine. His wife is an art historian and restores churches. Currently, she was on an extended restoration project. The restoration job did not pay much but it was noble work. He would visit periodically. The goal was for the family to relocate to the US after she completed the project. He was in the US setting up his business. He had attended college in Pennsylvania and had a degree in computers. He had designed a website and an application for booking venues. It was a work in progress, so in the meantime he was Uber driving and worked full- time at an IT company. Of course, he asks why we are in the middle of nowhere Pennsylvania. We begin to tell him about our ordeal.

We arrive at the repair shop just as we finished up telling him the story. He is nothing short of amazed and asked if he could keep in touch with us. We gave him our numbers. He and his wife maintain a home in the Ukraine and one day hopes we can come visit. We wished him and his family well especially with the ongoing war in Ukraine. His last comment to us was “there are still good people in the world.” Steve and I exited the car and headed to the repair shop. The Uber driver did not up charge us for the ride, however, we made sure to show our appreciation.

We head into the repair shop and are greeted by the owner. I asked how he knew who we were. He said it was easy, small town and we had unfamiliar faces! The owner asks why we were in the middle of nowhere Pennsylvania, and we again tell the story. He immediately, tells us he knows the lady. Actually, he knows her well and that she has brought her car to his shop for years. The owner said he was not surprised that she helped us, that she is truly wonderful. He then inquired why we did not spend the night with her versus going to a hotel. She had been known to help strangers in the past and would let them stay overnight if needed. We explained she had mentioned we could have spent the night at her house. However, she was in the process of having the interior painted and that furniture was shuffled around. Her home was going up for sale once the painting was completed. She had recently decided to downsize.

The shop owner just chuckled and mentioned she was truly a special lady and that we were fortunate to have crossed paths with her.

My phone rings, it is the Uber driver he wanted to make sure that all well with our car and wished us safe travels back to Virginia. I told him all was good with the car and that we would be headed out to meet the puppy.

We pay the repair shop owner and are headed out the door and I turned around. I mentioned to him that the nice lady’s “check engine” light was on in her truck. She had refused any money for helping us and we wanted to show our appreciation. We asked that when she brings her car in for repair if he would reach out to us and we would like to help pay with the car repair. He chuckled at me and said he would let us know!

Steve and I got in the car and headed to the breeder in Lebanon, Pennsylvania. However, on our journey, we stopped by the home of the couple who had loaned us the battery. We pulled in her driveway, and she immediately ran outside. She was laughing. When her husband had given us the battery to use the night before we promised to return his battery. Apparently, when we did not return the night before with battery, they presumed we just took it. She said her husband was going to be shocked that we came back. We explained what happened after we left her house and she like everyone else was surprised. We gave her the battery and she like the nice lady refused any money for helping us. When she took the battery around the corner to her garage, we put an envelope in her mailbox with a little something inside.

Driving out of town towards the breeder, we passed the spot where the car shut off for the second time. In the light of day, I narrowly missed hitting a deep rut on the side of the road. We could still see our tire marks from the night before and there is a small sign off to the side, Oxford Pet Spa.

Driving to Lebanon, Pennsylvania, we must have gone over hundred different names for an English bulldog. Steve liked the name Tank. I liked Beauregard. Two hours later we were still going over possible names when we arrived at the breeder’s farm.

It was love at first sight when we saw the puppies. I wanted to take them all. I almost had Steve convinced to get a girl and boy puppy. But, no, just one. So, we chose the boy pup.

So, now you know why the unusual name for our puppy. Oxford was named for the town in Pennsylvania where we had the car trouble. We really wanted to name him after the nice lady. Her name is Esther Diaz. There is no male version of Esther. So, his “official” name is Sir Oxford Diaz the Noble Merritt. Ox for short!

The End or is it just the beginning………

None of this was random, every person was in the right place at the right time on purpose. The universe gives you what you need when you need it, Esther the nice lady, the couple who loaned us the battery, the repair shop owner, and Nikolay the Uber driver. We will forever remember their kindness.

I text or talk with Esther twice a week. She loves the photos I send of Ox. She is an avid freshwater fisherman and shares her fish tales. Hopefully, she will come visit and do some saltwater fishing! I have spoken with the repair shop owner twice, Esther has not brought her car in for repair yet, but he says when she does, he will call me. We have not spoken with Nicolay, but I’m sure we will hear from him.

July Days

Here are some Days to Remember in July!

July 4th – Independence Day

This day allows us to celebrate the freedom and birth of our great nation from England.

July 11th – National Free Slurpee Day

Make sure you head on over to your local 7-11 and enjoy a slurpee!

July 21st – National Ice Cream Day

Make sure you cool off with plenty of delicious ice cream. But remember don’t eat it too fast or you’ll give yourself brain freeze!

July 28th – Parents Day

Make sure you hug your parents and tell them thanks for all they do! Treat them for a nice dinner or just spend sometime with them.

Office Hours

After Tax Season Hours:

Monday – Thursday
8 AM to 5 PM