I’ve put together a primer on automating and leveraging tools in order to get out of debt but, before I get there, today, as I write on Monday, it’s the second-to-last day which organizations can mail W-2′s without facing consequences (you might not *receive* all of them by tomorrow, just so you understand).

Unfortunately, these consequences don’t often carry much teeth for employers and sometimes HR departments or very small businesses don’t get their act together (probably because someone competent isn’t helping them! –ahem–), and … the W-2′s take a while.

(Here’s a link to concise information about what happens on the business owner side of things: http://smallbusiness.chron.com/happens-dont-make-w2-deadline-employees-15702.html)

If you haven’t gotten your W-2 by the end of next week, here are some basic steps for you (you might want to print out or save this email, by the way):

1) Contact your payroll department/boss. Be nice about it — after all, they’re just as burdened by the paperwork junk as you are!

2) If, however, the days roll by and the form is indeed lost or your employer is inordinately slow in issuing a replacement, or you worked for a company that went out of business and there’s no one to bug about getting a W-2 … what then?

“Make” your own! Well, actually, you contact the IRS at this number: (800) 829-1040 with the following info from your last paystub handy:

Year’s wages.
Payroll taxes withheld.
Federal and state income taxes withheld.
Contributions to your company retirement/401(k) plan.
Employer’s tax identification number.

Wait on hold, and ask for Form 4852. Basically, this will inform your employer “officially” that they’re delinquent, and you can even use this form in a pinch, if your employer never gets their act together.

*** Want the BEST solution? Let us handle all that junk for you in the first place … which is part of what we do!

Well, I’ve gotten this far in this email and I realize that I’ve run out of space to go into my debt-defeating strategies for you. You’ll have to tune in next week, when I break it down in the “Real World”, as they say.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Think tax evasion is a small problem? The Tax Justice Network released a report at the end of 2011 which showed that tax evasion amounts to $337.3 billion per year in the US. Yes, that’s billion with a “B”.

This was based on numbers from 1999 to 2006, and is probably even higher in recent years, as the weak economy may have led more people to hide money from the government. As an example, the average tax refund decreased by $100 in 2011 — perhaps people are reporting less income in order to keep more of their money.

Now, it’s hard for us wrap our heads around how much money that really is. Here’s a way to do so: Recently, Congress was unable to agree on a plan which would reduce the national deficit by $1 trillion over 10 years. Over that same time period, tax evasion will cost us well over $3.3 trillion.

Given my profession, perhaps it’s obvious that I’m a big proponent of everyone following the tax rules. When we don’t, it means that everyone else has to pick up the slack. And the consequences of all of this reporting about tax fraud is greater scrutiny on honest taxpayers, and higher tax rates.

The IRS is Catching More Tax Evaders
The “good” news is that the IRS is doing a better job of catching people who aren’t paying their fair share of taxes. Fraud investigations increased by 14% in 2010, while prosecution recommendations (cases that the IRS thinks should be brought to court) increased 18% and convictions increased by 4%.

Again, it’s possible that some of these increases are due to the economic situation of the past few years, but the fact that the IRS decreased its investigation time by nearly 40 days is a sign that the IRS is doing a better job.

Don’t Give In To The Pressure; Avoid Taxes — LEGALLY
Here’s what you should understand — the rise in tax evasion means that the IRS is continuing to increase its scrutiny on every return. But that doesn’t mean you have to give up the fight! There are innumerable LEGAL ways to avoid paying too much in taxes. And, unfortunately, software programs and fly-by-night tax shops don’t do a very good job of proactively seeking them out for you.

But perhaps you know someone who does?

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

For various liability issues, I’m loathe to actually mention this company by name, but let’s say (for the purposes of this conversation) that there’s a big, popular company who made its fortune on the backs of lower-income taxpayers called H&P Black (a name picked completely at random). This company is flooding the airwaves with a brand new program offering “free” tax preparation.

Maybe you’ve heard about it? Well, like many such things, there are, shall we say … strings.

First of all, here are the restrictions: it only covers those filing the 1040EZ federal form, which covers only the very simplest tax issues. It can’t be used by anyone who has dependents, makes more than $100,000 per year, is age 65 or older, claims adjustment to income like alimony or tuition deductions, or itemizes deductions. Thus, homeowners who deduct mortgage interest or people with large charitable contributions can’t use the 1040EZ.

Plus, filers have to pay fees for state tax preparation and any other fees incurred — which have a tendency to pile up.

Asked by stock investors why said company was doing this, an executive replied: “Our ability to monetize this program means a minimal impact on our net average charge,” said company Retail Tax President Phil Mazzini told analysts on Dec. 7. (source)

It’s always enlightening to look at executive interactions with stock analysts to see why public companies do what they do, I’ve found.

So — in summary: don’t be seduced by the siren call of getting something for nothing. You usually end up paying for it, in a whole host of ways.

In fact, one of OUR revenue centers over the years has always been in fixing the mistakes made by these “big box” retail tax outfits and off-the-shelf software programs, and discovering loads of missed opportunities and overpayments.

(Because, speaking of software: do you remember when our current Treasury Secretary used the leading tax software to do HIS taxes, unintentionally created a bunch of errors with it, and then blamed it for all of his tax problems in front of the Senate? Not an uncommon issue, I’m afraid.)

The old adage *is* an adage because it’s so often true: you get what you pay for. It’s the foundation for a stable economic system because it’s almost always true.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Yes, this is a long list — but it’s the unfortunate reality of our tax code that it’s not even comprehensive! But these items will cover 95% of our clients. Really, this is for ensuring that we’re able to help you keep everything you deserve to keep under our tax code.

Even if for some strange reason you won’t be using our cost-effective services this year, feel free to use this list as a handy guide…

Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number

Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation

Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses

Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses

Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits

Automobiles
Personal property tax information
Department of Motor Vehicles fees

Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees

Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income

Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions

We hope this helps, and we really look forward to seeing you this year!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

Here’s the thing about most financial resolutions: They don’t usually last even until the end of January. That’s because making a permanent change in our behavior requires both time and a steely resolve. But I’ve found that we can develop financial character one action at a time.

So in that vein, here are some financial practices to take you from pauper to prince or princess if you add one each year. If you’ve already got one down, move to the next on the list.

#1 MOST CRITICAL: Resolve to become (and stay) debt free. Now, I’m not Dave Ramsey, but there’s a reason why he’s become so popular: his approach works. I’d say that you can have a fixed-rate fixed-year traditional mortgage on your house — but nothing else, please. No equity line of credit on your house. No car payments. Certainly no credit card debt. Because you simply have to learn to live within your income — which, unfortunately, sometimes means going without. The millionaires among us really are frugal. So learn to enjoy that process, and it’s a fantastic start.

#2 Automate your savings (AKA Pay Yourself First). You can start by getting the entire match if your company offers a 401(k) plan. Usually this translates to saving 5% of your salary while the company contributes a 4% match, which is the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can learn to think like a millionaire and live well on 95% of what you make. If you don’t have a 401(k) plan, act like you do, and sock away 5% automatically.

#3 Fully fund your 2012 Roth IRA. This is $5,000 in 2012 and $6,000 if you are older than age 50. If you can’t manage the entire amount in January, put in $416 monthly. Automating deposits in an employer-defined contribution plan is easy. Fortunately, automating saving in a Roth IRA or a taxable savings plan is equally painless. Most brokers offer an automatic money link between your checking account and an investment account. Set your savings on autopilot, baby!

Remember — these steps build off one another, so if you already have done the first 3, here’s your next step:

#4 Save another 5% in a taxable investment account. Automating savings is great, automating investment is even greater. Key word here: automate. At this point, you’re hitting a mark of saving 15-20% of your income. That’s a fast-track to long-term prosperity.

But I’m not quite done, grasshopper. However, I’m going to leave you with these for now, and come back to this again in the weeks ahead.

Happy New Year!

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia