Category Archives: Blog

QuickBooks Payroll User Alert! EFTPS Password Changes Effective October 24, 2019

November 5, 2019

The Electronic Federal Tax Payment System (EFTPS) implemented new password security requirements effective October 24, 2019. If you are using EFTPS for federal payroll or income tax payments the new security requirements for internet passwords are listed below:

 Passwords need to be 12 – 30 characters long
 Passwords will expire after 13 months
 Passwords must contain at least 1 uppercase alpha character, 1 lowercase alpha character, 1 numeral, and 1 of the following special characters ! @ # $ * + –

You must log in to and change your password if you have not changed your EFTPS password in over 13 months or if your password does not meet these new requirements. You must wait 1 hour after updating your password before submitting any tax payments.

QuickBooks online users should have their new password sync automatically. QuickBooks desktop users will have to enter the new EFTPS password in QuickBooks. If you have any questions or trouble updating your EFTPS password, you can contact one of our staff members to assist you.

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Now’s the Time to Organize Your Tax Records

October 30, 2019

The period between filing last year’s tax return and this year’s return is the perfect time to organize your tax records! Granted, it may not be something you relish doing, but tackling this now can save you a multitude of headaches later.

Tax Law Rules

Generally, you should keep tax-related records as long as the IRS has the ability to audit your return or assess additional taxes — in other words, until the statute of limitations expires. That means three years after you file your return or, if later, three years after the tax return’s original due date.

In some cases, the statute of limitations extends beyond three years. If you understate your adjusted gross income by more than 25%, for example, the period jumps to six years. And there’s no statute of limitations if you fail to file a tax return or file a fraudulent one.

Longer Periods

Although the IRS statute of limitations is a good rule of thumb, there are exceptions to consider. For example, it’s wise to keep your tax returns themselves indefinitely because you never know when you’ll need a copy.

For one thing, the IRS often destroys original returns after four or five years. So if the IRS comes back 10 years later and claims you never filed a return for a particular year, it can assess tax for that year even though the limitations period for properly filed returns has long since expired. As you can see, it would be difficult to defend yourself without a copy of your tax return.

W-2 forms also are important to keep at least until you start receiving Social Security benefits. You may need them if there’s a question about your work record or earnings in a particular year.

Property and Investments

If you have property records, it’s ideal to keep closing documents and records related to initial purchases and capital improvements until at least three years (preferably six years in case you understated your income by more than 25%) after you file your return for the year in which you sell the property.

When it comes to sales of stocks or other securities, retain purchase statements and trade confirmations until at least three years (preferably six years) after you file your return for the year in which you sell these stocks or other securities.

Keep Volume of Records in Check

Many years’ worth of tax and financial records can accumulate before you know it. The better your documentation is organized, with records culled after the appropriate time to keep the volume in check, the easier time you’ll have if you need to access previous years’ records or deal with any IRS surprises.

Contact us if you have additional questions on what you should keep and what you can toss.

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Taxable vs. Tax-Advantaged: Where to Hold Investments

October 15, 2019

When investing for retirement or other long-term goals, people usually prefer tax-advantaged accounts, such as IRAs, 401(k)s or 403(b)s. Certain assets are well suited to these accounts, but it may make more sense to hold other investments in taxable accounts.

Know the Rules

Some investments, such as fast-growing stocks, can generate substantial capital gains. These gains are recognized and generally taxable when you sell a security for more than you paid for it.

If you’ve owned that position for over a year, you qualify for the long-term gains rate, generally 15% or 20%. The long-term gains rate also applies to qualified dividends. In contrast, short-term gains, on investments held a year or less, are taxed at your ordinary-income tax rate — which might be as high as 37%. Nonqualified dividends and interest income are also generally subject to your ordinary-income rate. The 3.8% net investment income tax (NIIT) might also apply to capital gains, dividends and interest, depending on your income.

But if an investment is held in a tax-deferred account, like a traditional IRA, 401(k) or 403(b), there’s no tax liability until you take distributions from the account. At that time, the distribution is taxed at your ordinary-income tax rate. However, the NIIT doesn’t apply to retirement plan distributions.

Choose Tax Efficiency

Generally, the more tax efficient an investment, the more benefit you’ll get from owning it in a taxable account. Conversely, investments that lack tax efficiency normally are best suited to tax-advantaged vehicles.

Consider municipal bonds (“munis”), either held individually or through mutual funds. Munis are attractive to tax-sensitive investors because their income is exempt from federal income taxes and sometimes state and local income taxes. Because you don’t get a double benefit when you own an already tax-advantaged security in a tax-advantaged account, holding munis in your 401(k) or IRA would result in a lost opportunity.

Similarly, tax-efficient investments such as passively managed index mutual funds or exchange-traded funds, or long-term stock holdings, are generally appropriate for taxable accounts. These securities are more likely to generate long-term capital gains, which have more favorable tax treatment. Securities that generate more of their total return via capital appreciation or that pay qualified dividends are also better taxable account options.

Take Advantage of Income

What investments work best for tax-advantaged accounts? Taxable investments that tend to produce much of their return in income. This category includes corporate bonds, especially high-yield bonds, as well as real estate investment trusts (REITs), which are required to pass through most of their earnings as shareholder income. Most REIT dividends are nonqualified and therefore taxed at your ordinary-income rate.

Another tax-advantaged-appropriate investment may be an actively managed mutual fund. Funds with significant turnover — meaning their portfolio managers are actively buying and selling securities — have increased potential to generate short-term gains that ultimately get passed through to you. Because short-term gains are taxed at a higher rate than long-term gains, these funds would be less desirable in a taxable account.

Get Specific Advice

The above concepts are only general suggestions. Please contact us for specific advice on what may be best for you.

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