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If the sick season has you getting to know the drugstore pharmacy staff a little too well, it might be time to look at a Health Savings Account. Maggi Tax answers the most frequently asked questions about this versatile fund that serves as a great way to save money for out-of-pocket medical expenses.

What is a Health Savings Account?

This fund gives account holders the flexibility to pay current medical expenses or save for future ones by using a tax-advantaged checking account. While the account is individually owned, other people may be elected as authorized signers. This status gives them permission to withdraw funds and use an assigned debit card.

Am I eligible for a Health Savings Account?

Most likely. If you are covered only by a High Deductible Health Plan (HDHP), are not enrolled in Medicare benefits, and are not claimed as a dependent on another tax return, you qualify for this type of account.

What kind of benefits does an HSA offer?

Many! First off, flexibility. As the owner of this account, you determine how the funds are spent. Save money for future expenses or use them for current medical needs. Unused funds roll over so there is no “use it or lose it” rule. Another HSA perk? Contributions made to this account are tax-free, the earnings are tax-free, and funds withdrawn for eligible medical expenses are tax-free. Nearing retirement? Because you are the account owner, not your employer, you are entitled to take all your acquired HSA funds upon your leave.

How do I contribute to my HSA?

The three most common ways to contribute to an HSA are through payroll withholding, by an employer that is excluded from your income or taxes, and through an after-tax contribution made directly to the account when filing your taxes. The IRS mandates a maximum contribution amount that changes annually. Check with a tax professional to ensure you are within the parameters.

Would you like to learn more about opening a Health Savings Account? We’re here to help! For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.

Anytime the IRS wants to chat, most Americans go immediately into panic mode. Unfortunately, a multitude of factors can create tax filing confusion for individuals and business owners. To avoid the IRS tax audit minefield, Maggi Tax wants to make sure you take note of these three red flags.

1. Rental income

With the rise of remote work, people can now come and go as they please. This newfound freedom has allowed many to enter the new world of rental businesses, generally considered passive income. But if your operating expenses exceed the rental income, it may not be deducted against your W-2 income. This common mistake compounds when filers also try to claim deductions on a mixed-use rental property, or a personal residence that is rented part of the year. The more the space is used personally, the fewer deductions it may qualify for. Avoid this red flag by logging the use of the property, keeping all receipts for deduction verification, and never underreporting rental income.

2. Cryptocurrency

Blockchains, not blockheads. The rapid growth of cryptocurrency inspired a new IRS mandate to collect $30 billion in cryptocurrency over the next decade, declaring that all types of digital currency are now property. Because investors may use several global exchanges that could include almost a dozen digital wallets, tax filers must aggregate all their information on Form 8949. Ensure that you avoid this red flag by listing all taxable trades individually and reporting all crypto income and interest.

3. IRA and 401(k) withdrawals

The last few years have been financially tough for many. If you needed to withdraw early from your IRA or 401(k), here’s what you ought to know. Traditional IRA and 401(k) payouts before 59.5 years old incur a 10% penalty on top of regular income tax. There is a 10% penalty for Roth accounts and some parts of early distributions may be taxable. Avoid this red flag by reporting income from all IRA and 401(k) distributions and include all documentation with your 1040.

Looking for additional tax assistance? For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.

Running your own business is the ultimate adventure. It may not always produce a healthy work-life balance but flying solo brings tax advantages that are not available to those who work for others. Maggi Tax shares a brief tax guide that all solopreneurs can benefit from.

A foundational first step for any and all entrepreneurs is to remember that first and foremost, you are a business. Regardless of the trade or area that you focus on, it’s critical to maintain accurate and current financial records. These should include profit and loss statements, mileage logs, equipment purchase details, and any additional expenses. Keeping this information at your fingertips helps file accurate tax returns.

As a self-employed person, you are required to pay self-employment taxes that include Social Security and Medicare. This is similar to the Social Security and Medicare taxes that are withheld from wage earners’ paychecks. Currently, these need to be paid by anyone who works for themselves and earns $400 or more. Self-employment tax amounts vary and are assessed on a percentage of net earnings. Before filing, you must calculate the net profit or net loss from your business and record it on your 1040 or 1040-SR. As a solopreneur, there is an option to pay quarterly estimated tax payments for both income tax and self-employment taxes. But, if you fail to pay or underreport, you are subject to penalties and interest.

To quote David Rose, “that’s a write-off.” Entrepreneurs have the option to write off far more business expenses than a traditional company employee. The IRS defines deductible expenses as those that are ordinary and necessary to your business. Make sure to take advantage of available expense deductions related to the business use of your home like utilities, internet, portions of rent or mortgage interest, and even depreciation of equipment you purchase.

This brief introduction is by no means exhaustive. Working with a tax professional can help you identify the best financial decisions for your business. Contact Maggi Tax here or call (727) 799-1701 to schedule your appointment today.

The spooky season may be upon us but for investors, earnings season can be tricky. Publicly held companies or those that make shares of their stock available for public purchase, are required to report their financial results quarterly. This time of financial reporting and updating shareholders is commonly called “earnings season.” Maggi Tax shares why this is an important time for investors.

Every publicly held company is required by the Securities and Exchange Commission (SEC) to report financial results after the end of each quarter. The SEC designed this process to promote ethical practices and create transparency for investors. During earnings season, each company reports its most recent financial results, adjusts business expectations for the next quarter, holds conference calls with Wall Street analysts, and may speak with the media to discuss results and projections. Topics like company earnings, profits and losses, balance sheets with assets and liabilities, applicable legal proceedings, and financial analysis of the company’s current condition are included in these financial reports. Company leadership may also weigh in on their goals for the next quarter.

So what does earnings season really mean for you? This critical time can affect investors and stock prices rapidly with three factors: the company’s prediction of the future quarter’s earnings or guidance; the estimates on new customers, earnings, and more made by Wall Street analysts; and how the financial results reported by the company compare to the analysts’ estimates. Meeting or beating estimates can be helpful for stock prices while failure to meet expectations, or missing estimates, can negatively affect stock prices. All of these can lead to more volatility in the stock market because traders will buy and sell more during earnings season.

In the short term, investors with individual stocks are more affected during this period. Because there is more risk in holding only one or a few individual stocks, earnings results have a huge impact on your investments. The best way to combat this is by working with tax professionals to create a financial plan that suits your needs. Contact Maggi Tax here or call (727) 799-1701 to schedule your appointment today.

 

 

“Alternative” is much more than that angsty teen phase you went through in high school. On the contrary, Maggi Tax is highly interested in sharing alternative investments that can provide your portfolio with unparalleled diversification. These out-of-the-box financial ideas may offer exposure in several areas that can guarantee a broadened portfolio is within reach.

Though financial barriers to entry can be higher than other investments, these unique selections can include anything outside the financial asset mainstream. Think collectibles to modern buildings to raw materials. Wading into this pool may seem like a straight-up thrill ride since these investments are largely unregulated by the SEC. We recommend proceeding with caution, so the risk doesn’t outweigh the reward. For example, if you purchase a piece of art but discover it is forged and cannot locate the seller, that loss is yours alone. Here are three ways to get started with alternative investments.

1. Real Estate

This is the most common type of alternative investment. Real estate investments can produce profit in three ways: through rental income, increased property values, or royalties from any discoveries made on your land. Collecting rent and flipping houses tend to be the most reliable ways of increasing capital but be sure not to overextend yourself. There are alternatives to direct ownership like a real estate investment trust (REIT) that is publicly traded.

2. Collectibles

Not exactly an episode of Pawn Stars but the options are endless for this alternative investment. Tangible items like jewelry, art, coins, vintage cards, fine wines, and more can appreciate over time. However, your ability to profit depends entirely on your ability to locate a buyer. Most sales are kept confidential so there is no data-driven way to determine price or predict what will be a la mode. Should you choose to invest in this area, make sure you consult an expert when it comes to collectibles.

3. Private Equity

This alternative investment refers to capital that can be shuttled into privately held companies or partnerships as a future investment or as part of a reorganization tactic. Investors may purchase parts of a company during high-risk stages through angel investing or even assist with expansion or restructuring through venture capital.

Whatever path you choose, we are here for you. For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.

 

We all remember Clark Griswold’s excitement about his bonus check and grand pool plans. But what if he knew how to use his bonus wisely for an even better tax break? Bonuses can be tricky but working with tax professionals can help you maximize those cash windfalls. The team at Maggi Tax shares a few ways that you can efficiently and effectively use bonuses to reach your financial goals.

The IRS considers bonuses as “supplemental income” that can be withheld differently than a regular salary. Because of this, the IRS recommends employers use a flat withholding of 22% from all bonuses. Most follow that suggestion but there is also another way, the aggregate method. This approach adds the entire bonus to your paycheck and then withholds the combined amount at a normal income rate. This new amount suggests, that this is representative of what you typically make every paycheck, and could be higher or lower than 22%. This type of withholding can bump you into a higher tax bracket, creating an illusion that less is kept. However, the aggregate method’s “bump” may cause you to lose certain deductions and tax credits. Consult a tax professional to help you understand how your financial plans will be affected. With either method, there are a few simple recommendations that may help you preserve or even grow your bonus.

Make the most of multiple accounts. Depending on your income and if your spouse participates in a company retirement plan, you may be able to reduce your taxable income by contributing to a traditional or Roth IRA, a health savings account, or a flexible savings account. Most don’t realize that you can participate in a company plan while also funding a traditional or Roth IRA. Using a portion of your bonus towards these accounts allows for guaranteed growth.

Consider adding a portion (or all) of your bonus to a 401(k). For example, if you typically contribute 10% from every paycheck, withhold the same amount from your bonus to use as a contribution. Make sure to check with your employer’s rules because some companies do not allow employees to use bonuses towards 401(k) contributions.

Or if tax-deferred accounts are not your thing, try this. Create a “happiness annuity” by investing in a well-diversified portfolio that will produce a growing source of cash flow.

Whatever you choose, we are here for you. For over 30 years, Maggi Tax has guided Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.

 

For the first time since the 1980s, rising interest rates and inflation are front-page news. For many of us, this impact one’s financial quality of life immediately. Some may have to choose between their usual comforts as they become increasingly expensive. Maggi Tax shares how rising inflation rates and inflation could affect you and how to prepare for it.

Last year, we experienced massive inflation for the first time in decades. Consumer prices spiked 2.6% in March 2021 and just recently, the 10-year Treasury yield hit 1.75%. These numbers in hyperbolic headlines may seem scary but here’s some perspective on the growing inflation. Inflation and interest rates had been so low for so long that any pickup in demand for services and goods rose faster than the supply. Adding to that pressure, the COVID-19 pandemic supply chain issues affected many businesses dependent on manufactured materials. In an attempt to meet the growing demand, businesses had to expend time, money, and resources to find alternative materials solutions.

This is where you might have felt an impact. Rising prices eat into bonds’ fixed interest payments, creating increased yield when sold. Long-term yields are another area to keep an eye on. These are used as a benchmark by mortgage lenders. When the yields rise, this creates market volatility and causes lenders to raise the rate that they charge borrowers. These increased rates can affect both monthly and total loan payments over a loan’s lifetime.

Though many economists cannot agree on when the inflation period will end, it is tied to supply chain issues and a few other assumptions. When manufacturers can meet the higher consumer demand for products and the world can return to normalcy in a post-COVID-19 world, rates can start decreasing to recover.

Working with a trusted financial advisor can help you make the right decisions for your financial situation. By better understanding the impact of buying versus waiting, how a mortgage can fit within your budget, or even how payments can affect your financial goals. Contact us here or call (727) 799-1701 to schedule your appointment today.

 

 

 

 

Your 21st birthday might have been a favorite birthday but when it comes to taxes, three other birthdays can significantly affect your financial picture. Maggi Tax shares more about these important milestones that may have implications for both retirement and tax situations.

The first critical age that can color your retirement plans is 50 years old. At this time, employees can make an annual “catch-up” contribution in addition to their usual contributions. Currently, up to $6,000 can be contributed to an IRA if you are under 50 years old and an additional $1,000 if you are older than 50 years or older. If you are 50 years and older, you can also contribute up to $6,500 to a 401(k), 403(b), 457 plans, and for federal employees, a total of $27,000 to a Thrift Savings Plan. By contributing additional earned income to a tax-deferred account now, you can alleviate future tax burdens.

Before 65 years old, a standard deduction for the 2021 tax year was $12,550 for single filers and $25,100 for married couples filing jointly. However, when age 65 is reached the standard deduction increases by $1,700 for single filers and $2,700 for married couples filing jointly if both are of age. Because retirement can cause dramatic changes to tax situations, you may make changes to your filings. For example, many decide to forego itemizing and instead claim the standard deduction if other popular deductions like mortgage interest are unavailable.

At age 72, Required Minimum Distributions (RMDs) are applied to qualified retirement plans like 401(k)s, 403(b)s, and IRAs. This rule requires a minimum amount withdrawn annually but more can also be withdrawn. Withdrawals from a retirement account can cause a higher tax burden that can terminate tax-free growth quickly. If you forget an RMD, there is a 50% penalty based on the amount on top of any owed taxes. Working with a tax professional can help you project amounts and plan accordingly.

As you approach retirement, consider a company that has spent over 30 years guiding Tampa Bay residents with all aspects of their financial well-being. Contact us here or call (727) 799-1701 to schedule your appointment today.

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