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

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What’s Inside

• Common Missing Tax Return Items

• Building an Emergency Fund When Cash is Scarce

• Important Moves to Consider When Interest Rates Change

• March Days

• Office Hours

Common Missing Tax Return Items

Want your tax return filed quickly and without error? Then double-check this list of items that are often overlooked. These missing items often cause delays in getting your tax return filed:

Forms W-2 and 1099. Using last year’s tax return as a checklist, make sure all your W-2s and 1099s are received and applied to your tax return. Missing items will be caught by the IRS mismatch program. All these forms are required to be in the mail to you on or before Jan. 31. If you are missing a form, contact the company responsible for issuing them.

Dependent information. If you added a new dependent in 2023, provide the name, Social Security number and birth date to have them added to your tax return. If you have a dependent that shares custody with someone else, discuss the plan for who is going to claim them. Your tax return cannot be filed if there is conflict in this area.

Cost basis information. If you sold any assets (typically investments or real estate), you need to know the cost basis amount to calculate your taxable capital gain. Check your investment statements to ensure that your broker includes the required information. Sometimes it’s difficult to find this information on the Form 1099-B summary, but it might be listed later in the statement details.

Schedule K-1s. As an owner of a partnership or S-corporation, you will need to receive a Form K-1 that reports your share of the profit or loss from the business activity. When you receive your K-1, pay special attention to box 17 (code V) for S corporations and box 20 (code Z) for partnerships. This is where information is included for the Qualified Business Income Deduction.

Digital asset transactions. If you are buying or selling cryptocurrency or other digital assets, you will need to provide details to support the cost basis and sales price of each transaction.

Forms or documents with no explanation. If you receive a tax form, but have no explanation for the form, questions will arise. For instance, if you receive a retirement account distribution form, it may be deemed income. If it is part of a qualified rollover, no tax is due. An explanation is required to file your information correctly.

Missing signatures. Both you and your spouse need to review and sign the e-file approval forms before the tax return can be filed. The sooner you review and approve your tax return, the sooner it can be filed.

By knowing these commonly missed pieces of information, hopefully your tax filing experience will be a smooth one.

Building an Emergency Fund When Cash is Scarce

The traditional rule-of-thumb for emergency funds is to have enough cash stashed away to cover 3 to 6 months worth of expenses. For many people, though, this sounds better in theory than in practice.

When you’re starting from scratch and don’t have a lot — or any — extra cash at the end of the month, consider these ideas to help grow your emergency fund.

Cutting Expenses

Review recent statements to find opportunities to save. Look over your bank statements and credit card bills from the last few months to see where all your income is going. Spend some time tallying up expenses in categories you have some control over, such as entertainment, dining out, clothing and online shopping.

Cut down on lifestyle expenses. Identify areas to cut your spending and create new spending goals in categories that were problematic in previous months. Some of the easiest places to cut include online shopping, subscription services, clothing, movies and music. Once you reach your emergency fund goal, you can consider adding some of these spending areas back into your budget.

Spend less on food. One of the biggest budget busters for many families is their spending on food — both at the grocery store and at restaurants. Control food spending by making a meal plan and cooking most of your meals at home, shopping sales at the supermarket, and making meals with ingredients you already have.

Increasing Income

Squirrel away windfalls. Consider adding windfalls such as tax refunds, work bonuses, or annual gifts you may receive from a family member to your emergency savings as soon as you receive it.

Sell stuff you don’t need. Look around your home for items you rarely use and then sell unwanted stuff using an online marketplace. Used items that can fetch a good sales price include workout equipment, brand name clothing and accessories, small furniture and antiques.

Add a part-time job or side hustle. Boost your income by picking up more shifts at work, asking for overtime, or getting a second job or side gig to fill your spare time. This step can help you bring more money home so you can add to your emergency fund.

Once you start looking for ways to spend less and earn more, there’s one final step that can help you grow your emergency fund. Make sure the money you find on both ends of the spectrum makes its way to your savings, either through manual or automatic transfers.

The best way to do this is by having a dedicated emergency fund in an account that’s separate from your regular checking and savings accounts. By moving your extra money into this account, you can grow your emergency fund with less temptation to spend it.

Important Moves to Consider When Interest Rates Change

A domino effect occurs each time the Federal Reserve changes interest rates. An increase leads to higher rates for consumers when they borrow, while paving the way to better returns for savings accounts. A decrease results in paying less interest when borrowing money, but also causes a drop in how much your savings can earn.

While waiting to see what the Fed does in 2024, consider having a plan in place for both these scenarios — a hike in interest rates as well as a cut. Here are some ideas for formulating your own financial plan for each scenario.

When Interest Rates Increase

Shop around for new savings accounts. Rate increases are good for long-term savers and families who are stashing away money for short-term goals like buying a home. When interest rates are on an uptick like they are right now, it’s a great time to shop around for a high-yield savings account or to lock in a great rate for a portion of your savings with a certificate of deposit.

Focus on paying down high interest debt. Rate increases can create disastrous results for people who have debt with variable interest rates. For example, data from the Fed shows the average credit card interest rate increased from 14.22% in 2018 to 21.19% in the second half of 2023. If high-interest debt is dragging you down financially, rate increases give you more incentive to pay it off.

Avoid borrowing when possible. Surging interest rates make borrowing money more expensive, so try and avoid borrowing for personal and business reasons. If you must borrow, attempt to exhaust every other source of cash before taking on new debt.

When Interest Rates Drop

Refinance existing debts. Look into consolidating or refinancing all your existing debts, including your mortgage, personal loans, and credit cards. Lower rates can help you save money on interest, secure a lower monthly payment, and help you pay off a debt’s balance more quickly.

Look for ways to put additional funds to good use. Lower interest rates make it less appealing to stash money away in savings account products, money market accounts, and certificates of deposit. Instead of savings accounts that feature little or no interest, look for ways to invest for the future or put your money to use for things you need.

Apply for funding. Rate drops also make borrowing money more attractive. Consider applying for a personal or small business loan, but only if you have a plan for it.

As always, should you have any questions or concerns regarding your tax situation please feel free to call.

Adventures with Steve and Barbara

Suddenly, a small truck pulls up behind me and starts flashing their headlights. I get a tap on the passenger side window, it’s Steve! I was shocked, I unlocked the door and he opens it and starts explaining how he got a ride from a nice lady. He shuts the door abruptly and begins installing the new battery.

I get a knock on my driver’s side window. It’s the nice lady. She starts telling me to call the two hotels in town. I explained to her that I had already called them and there was no luck. She told me to call again. So, I did. I let her hear what I had already been told. The two “hotels” had been converted to transitional homes for short and month long stays for individuals in need of shelter. I tried telling the customer service persons that we were in transition and would happily pay for a week. They both chuckled at my persistence and creativity, but alas we did not meet the requirements to stay at their facilities. Cellphone service is not the best. My phone battery is draining quickly and switches over to low power mode. Those calls proved to be nonproductive, and we still have no place to spend the night. I start Googling hotels nearby and it’s not looking good as the nearest hotel is 25 miles away. The nice lady is looking over my shoulder and not saying anything.

Meanwhile, the battery had been installed with those two special wrenches! I start up the car. It’s functioning okay however, it struggled to turn over even with the fresh battery. The nice lady tells us to follow her into town, which is just a mile or so past the auto store. She says she knows of a repair shop in town that she trusts and who can fix the car. We begin our journey into town following the truck driven by the nice lady.

The car is operating very wonky. Dashboard is flashing more symbols I never knew existed. Again, the headlights are super dim. Sure enough, the nice lady leads us to the repair shop in town. There is one parking spot by the front door, I pull in the space and the car promptly shuts off. The shop looks nice, however, there are lots of cars on the lot. There is a box by the front door with a note to fill out an envelope outlining the issue, place our keys inside and place the sealed envelope in the box. The nice lady instructs me do this so our car can be looked at first thing in the morning. She goes so far as to getting the envelope for me! Steve and I expressed to her how grateful we were that she had taken the time to help us. She just waves it off as if it was nothing.

The nice lady then hops back into her truck, rolls down her window, shouts out she needs to run home for a moment but that she will come back to drive us to a hotel. The nearest hotel is 25 miles away and it is 10:30 pm.

Steve and I get back into the car. I look at him and say hopefully she comes back but, in the meantime, I am not putting my keys into a box until I know we have a place to stay for the night. At this point we were thankful for all the help from the nice lady but not overly confident that she would be returning. Secretly, I was hoping she was coming back. Again, I suggest sleeping in the car. Steve said no way, we would freeze to death.

to be continued…….

March Days

Here are some Days to Remember in March!

Second Sunday in March – Daylight Saving Time

Daylight Saving Time begins on the second Sunday in March in the USA. The practice gives people an extra hour of sunlight in the evening by setting the clock ahead one hour on a predetermined date each year.

March 12th – National Girl Scout Day

This day honors the history and legacy of Girl Scouting in America each year. You can help support by buying all the yummy cookies Girl Scouts sell each year!

March 15 – “S” Corporate and Partnership Tax Returns are due

March 17th – ST. Patrick’s Day

St. Patrick’s Day kicks off a worldwide celebration also known as the Feast of St. Patrick. Many will wear green in honor of the Irish and decorate with shamrocks.

Vernal Equinox – Spring Begins

The vernal equinox marks the moment the sun crosses the celestial equator. Spring begins when the amount of sunshine is approximately 12 hours long. The amount of sunlight will incrementally increase until the first day of Summer.

March 31st – Easter

Easter is observed on the first Sunday following the full moon after the vernal equinox. Happy Easter!