I’m once again spending my morning scattershooting around news in the tax industry, while simultaneously preparing for a sure-to-be-busier tax season here in the San Diego, CA area (thanks for all the recent referrals — keep ‘em coming!) AND navigating the perils of another holiday season … well, it means one busy Shirley Nakawatase!

Seriously, we’re getting excited about what is our most intense season of the year — TAX time. This year, with all of the ACA confusion, we are already fielding a ton of questions from San Diego, CA tax preparation clients, not to mention queries about the raft of tax credits disappearing on 12-31-13.

So in between cookies and eggnog, we’re boning up on all of the official tax law changes, and we’re meeting with clients for last-minute tax planning.

[Which, based on what we’re seeing in our meetings, could be a VERY good idea for you too. Give us a call: 619-423-7093 ]

But it also reminds me, as we prepare to meet with hundreds of our clients, that “tax time” is the perfect time for you to get other, long-delayed financial tasks accomplished. One of these is the dreaded estate plan. This is something which every San Diego, CA family should have in place, and so I’ve got some further thoughts on that for you in this week’s Note…

San Diego, CA Tax Preparer Explains Why You Need An Estate Plan NOW
“Leadership is practiced not so much in words as in attitude and in actions.” -Harold Geneen

Most of us here in the San Diego, CA region (and beyond, I suppose) spend a considerable amount of time and energy in our lives working for our families and accumulating wealth.

But unless you’re careful, all of it will be going to waste.

That’s why a well-crafted estate plan is so critical. It ensures that your hard-earned wealth (including intangible, non-financial assets) can pass intact to those you intend to be your beneficiaries, instead of being siphoned off to government processes and bureaucrats, or even being lost. We all dislike handing over our resources to those who don’t have our best interests in mind.

A well-made estate plan guarantees that this will NEVER happen to your family.

“But Shirley, what happens if I don’t create an estate plan? Doesn’t the judicial system have easy steps in place for families?”

Yep, and it’s called “probate” (Latin for “prove the will”), and it’s an ugly process.

You see, “probate” guarantees government interference in how you transfer your estate (however large or small). Documents must be filed, and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property. Oh, and even worse – it all takes place in the public’s view.

If you fail to plan your estate, not only do you lose the opportunity to protect your family from an impersonal, complex governmental process (that is a burden at best), but it’s slapped across the public domain for all to see.

Then, of course … there’s taxes. You think the government is incentivized to keep those low on your behalf? There’s a variety of solutions for each San Diego, CA family’s particular situation, but the plain fact is that working without a plan is U-G-L-Y no matter how you slice it.

When it comes right down to it, planning is a gift for your family (the people you love most), because if you don’t take care of things while you are living and able, they’ll have a mess to clean up when you are gone.

Even more, if you have children, you want to establish the proper (legal) procedure for ensuring they’re taken care of properly.

So if these issues are important to you (and I believe they are), make your tax preparation appointment with us count twice, and we can set you up with information about how to get the estate planning process started right.

Right now, a little knowledge is trickling into the wider tax professional community, but it’s something we’ve known around here at Team Nakawatase for quite some time: Properly planning and managing a San Diego, CA tax preparationclient’s reported Adjusted Gross Income (AGI) doesn’t just affect the tax bill — it also affects potential health care subsidies.

And the difference can be quite stark. Take “Covered California”, for example (https://www.coveredca.com/shopandcompare/#incomeGuidelines ). In that example, the difference between a $46K AGI and one of a mere $100 less ($45,900) means the difference between a $0 subsidy, and one of $225 per month.

That’s just in California, but similar subsidy cutoffs exist all over the tax and healthcare code of the states, and federal exchanges. But do not think that massaging this AGI number is “easily” done by any San Diego, CA tax service – it MUST be legal, recognized and be able to withstand an audit. Because you should also know that the Treasury Enforcement Division (i.e. Audit Shock Troops) are also well aware of these cutoffs.

And if you think the ACA (Obamacare) is going away because of political troubles, you may not be operating wisely (or realistically). Regardless of your opinion about the law,it is always best to plan for the status quo. And the new status quo is that the ACA is officially taking effect.

Which is just one more big reason to meet with us here in San Diego, CA in person, or on the phone before the end of the year: it is MUCH easier to plan for such differences beforethe year ends than it is to try to “go back” and “massage” what already occurred, to create the desired outcome.

So call us now: 619-423-7093. Your investment of time and resources now could make a significant bottom-line difference. But you won’t know that unless we meet.

Now, last week, I wrote about some of these “last-minute tax moves” we could look at with you, and (surprise, surprise!) one of the options was increasing your donations. In fact, the other day, I received probably the 20th “Consider including _____ in your holiday giving plans” request of the season. I’m not tired of it (in fact, I welcome it), but it’s also pretty clear that these 501(c)3 organizations all sort of “get” simple tax planning — this year of all years!

So as a San Diego, CA tax professional, it warms my heart to see all of that deductibility flying around through mailboxes and the interwebs, and I’m especially happy when I see clients step to the plate and actually give. Because as nice as it can be for your tax bill or healthcare subsidy, there are even better reasons to give…

Shirley Nakawatase’s Reasons To Give Money Away, With or Without a Tax Deduction
“Happiness is the spiritual experience of living every minute with love, grace, and gratitude.” —Denis Waitley

There’s something that happens to your soul when you cut a big check to someone in need.

You signal to those very fears and desires which so often control your unconscious thoughts: “Money doesn’t rule me. I have more than enough, so much more than enough that I’m giving it away.” Then, of course, something special often happens: more money seems to find itself in your hands.

I’m not advocating a mystical pay-it-forward scheme; I’m simply making the observation over years of being a student of how money “works”. And, “coincidentally” it just seems to find itself in the hands of those who give it away.

Why is it that those who are benevolent seem to be well-taken care of, even rich? I know many families of now-significant means who were NOT wealthy when they started to give in large percentages of their income (15%+). Coincidence?

So I’d say that this first dynamic is one significant reason to give: Your soul is set free from the shackles of fear and greed.

Here are two more big reasons:

2) You build a network of grateful friends and organizations here in the San Diego, CA region. You’ll never know when someone to whom you’ve donated or given (be it time, money, connections, or other resources) comes back to you with something you need, at just the right time.

Personally, I’ve seen this dynamic in play enough times to not dismiss it. When you act or give generously, it’s the most powerful form of networking on the planet. Obviously, there are better, less self-interested reasons to give … but there sure are worse ones.

3) Your perspective can shift in an instant. When you don’t just give money, but also time and heart, you often discover heretofore-unrealized reasons for being grateful about your own present circumstances.

Sometimes giving to institutions that work with the San Diego, CA-area poor can bring home appreciation of your own enormous wealth. And it can also bring home awareness of a poverty which isn’t solved through adding zeroes to a bank balance. But either way, if you do it right, you are changed for the better.

With these reasons, AND the monetary benefits to your tax return, I urge you: stretch yourself this month. Give more than you think you should. See what happens.

I promise it’ll be good.

All this said, above, I firmly advocate for being careful with your planning of said giving. I don’t suggest impulsivity, just some small risk-taking.

But don’t risk losing out on the tax advantages to gifting appreciated stock, or other, less common, forms of gifting. Shoot me an email, or give us a call (619-423-7093) if you want to discuss the tax implications of your year-end giving. It is, after all, what we do.

Well, the Nakawatase family is starting into the holiday season this week, as many of our San Diego, CA tax and accounting clients are as well — and, ahem, no small number of retail establishments.

Am I the only one who is noticing a significant “holiday creep” this year? In times past, stores would pretend to be more circumspect, and at least wait until Black Friday (aphenomenon mostly inspired, of course, by those very stores)!

But no matter your religious persuasion, it’s going to be pretty difficult over these next few weeks here in San Diego, CA to avoid the non-stop merchant clamor to “buy stuff” in order to properly celebrate what started as a spiritual season.

And yes, I’m a business owner — I have nothing against people spending money as a way to communicate their love. It’s just … a tad ironic, isn’t it?

So, to continue to distract all of us from the ongoing mess on the national political scene, I’ve decided to put on my contrarian hat today, and let out that little grumpy San Diego, CA tax accountant that most of my clients know lurks within me.

“Release the Scrooge!” …

Shirley Nakawatase Unleashed: An Accountant Looks At Holiday Gift-Giving
“If you haven’t any charity in your heart, you have the worst kind of heart trouble.” – Bob Hope

Many people, both here in San Diego, CA and beyond, spend more during the holiday season than they can afford. Among other things, sometimes guilt or shame can drive a lot of big-ticket gifts — though not always, of course. But the satisfaction can be both short-lived and shortsighted.

Well, Wharton School professor Joel Waldfogel’s book, “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays” says that people are the most efficient when spending their own money, producing at least a dollar in satisfaction for every dollar they spend. But spending money on those we don’t know well results in what Waldfogel calls a “deadweight loss” of value — about 20%.

You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash. With Christmas & holiday spending in the United States at $100 billion, this loss results in “an orgy of wealth destruction” to the tune of about $20 billion. Ouch.

Waldfogel’s study found that givers with infrequent contact were those most likely to give less appreciated gifts. This group includes aunts, uncles and grandparents who live in another town. According to economists, people are better off when they make their own choices. For this obvious reason, Waldfogel suggests giving money or gift cards instead.

To the criticism that he has taken the joy out of Christmas, he responds that after watching desperate last-minute shoppers, he thinks the joy was taken out of Christmas long before his critique.

Of course railing against the commercialism and waste of the holidays is pretty common these days. So, let’s further breakdown what happens during this gift-giving season …

Some gift-giving is driven by social expectation, and becomes a test of the relationship. For example, for couples who are dating seriously, the message is much more important than the medium. Give a book the other person despises, and you have revealed how little you pay attention to your loved one’s opinions. But a pair of gloves, with a heartfelt note saying, “These will keep your hands warm when I’m not there to hold them” would show your affectionate side. Or maybe the receiver doesn’t like romantic mush, and you are expected to know better.

Parents can help extended family members select gifts for their children by providing specific wish lists to ensure that what they buy will truly be appreciated. If you aren’t confident, include a gift receipt. You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash.

And in families where children don’t have any spending money, cash may be the best possible gift. Handling cash with all the complexity of choice is an experience that offers irreplaceable life lessons.

Try asking people, “What present changed the course of your life the most?” to see just how much influence you can have. A pair of binoculars sparks a love of ornithology. A telescope fuels a fascination with astrophysics. A microscope leads to a biology career. An electronic toy prompts your daughter to join a robotics competition.

Not all presents need to be academic. A graphics tablet can lead to a design career. A guitar can inspire your son to form a new band. Or a video camera can lead to a later career choice in filmmaking.

Finally, some parents who are still unemployed will disappoint their children if they are hoping for expensive gifts this year. I’ve known a few San Diego, CA families who had to tell their children that celebrating a traditional American credit card holiday would jeopardize the family’s financial security. Being financially cautious doesn’t mean you love your children any less. And if you can be positive and reassuring, you needn’t try to shelter your children entirely from household economics.

The greatest joy of the holiday season is not bought in a store and does not increase your credit card debt. There is a better way to celebrate that builds long-lasting family ties.

Make a list of all the things you have gotten right in past holidays, and make them annual family traditions. Add a few new ideas every year.

After all, the best holiday traditions don’t cost a lot of money, and they aren’t wrapped and put under a tree.