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Amended Tax Return Tips

If you filed your 2024 tax return already but realized you missed some information, you can amend your return by filing Form 1040-X.

An amended return is necessary for things like, forgetting to claim taxable income, or claiming the wrong tax filing status.

But before filing your amended return, ensure the IRS has already processed your original return. This will help ensure the IRS doesn’t get your original and amended returns mixed up. The “Where’s My Refund?” tool on IRS.gov is the most reliable and convenient way to track your refund. You can access it directly at: https://www.irs.gov/refunds.

Be sure to attach any documents or tax forms that support your changes. And check to see if you have to amend your state return. Contact your tax advisor for assistance.

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Dollar-Cost Averaging

Trying to predict the market isn’t usually a recipe for success. In contrast, a slow and steady investing approach may help you use market fluctuations to your advantage as you invest for long-term financial goals. Dollar-cost averaging* can play a part in this approach.

DISCIPLINED INVESTING

Dollar-cost averaging is as much about discipline as it is an investing technique. When you use dollar-cost averaging, you contribute the same amount of money to the same investment portfolio on a regular schedule.

For example, you might contribute $100 twice a month to your retirement account, putting $50 into equity investments and $50 into fixed income. If each share were, say, $1, then you would buy 50 shares of one asset and 50 of the other.

Buying the same dollar amount of any investment doesn’t, however, mean you are buying the same amount of each investment’s shares each period. When stock prices rise, you get fewer shares for your $50. So, if stock prices double to $2 per share, you would buy 25 shares. And if fixed income shares declined to 75 cents a share, your $50 would buy almost 67 shares. In other words, you buy more securities with declining prices and fewer whose price has increased.

EMOTIONLESS INVESTING

Why does this matter? If you were making investment decisions on a daily basis, it would be easy to be influenced by what is happening in the markets now — not in the future. As a result, some investors tend to make decisions after the fact, buying when prices are high and selling when they’re low.

Dollar-cost averaging takes the emotion out of investing, providing a way to maintain a consistent investing approach regardless of short-term volatility, with an eye on long-term goals.

Talk to your financial and tax professionals to learn how this technique may apply to you.

*Investing regular amounts steadily over time (dollar-cost averaging) may lower your average per-share cost, but this investment method will not guarantee a profit or protect you from a loss in declining markets. Effectiveness requires continuous investment, regardless of fluctuating prices. You should consider your ability to continue buying through periods of low prices.

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May 2025 Client Line Newsletter

Dollar-Cost Averaging – help use market fluctuations to your advantage.

Amended Tax Return Tips – you can amend your return by filing Form 1040-X.

Easing Into Retirement or Semi-Retirement – retirement is a process that begins before you leave work and continues for the rest of your life.

May 2025 Client Profile

Your Financial Legacy and Taxes – take steps today to insulate your estate from taxes.

Best Practices for Employee Reimbursements – using technology to report and track employee business expenses can be easier and more accurate.

May 2025 Question and Answer

Client Line Short Bits

U.S. Inflation Statistic – the inflation rate has been recorded since 1913.

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Is Your Hobby a Business or Is Your Business a Hobby?

Everyone has hobbies and sometimes those hobbies provide some income. But when does your hobby become a business? Getting the right classification determines how this income is taxed.

PROFIT BASED

Generally, if you engage in your hobby with the intent to generate profit, put in a lot of effort and money and rely on the income for your livelihood it’s a business. But if your hobby is strictly for personal entertainment, it’s not a business.

IT’S YOUR HOBBY

You must report all your hobby income on your tax return. However, following the Tax Cuts and Jobs Act, hobby expenses were eliminated and are no longer deductible on Schedule A as a miscellaneous itemized deduction.

IT’S YOUR BUSINESS

However, unlike your hobby, if you’re operating a business, you can deduct all your business expenses even if it creates a taxable loss. And the upside is that if you generate a loss, it can usually be used to offset other income from things like wages or investment income.

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April 2025 Question and Answer

QUESTION:

I will claim an automobile deduction on my tax return and have used the standard mileage rate in previous years. However, in 2024 I incurred significant car expenses that will outweigh the standard mileage deduction. Can I switch to deducting actual costs for 2024?

ANSWER:

Yes, you’ll be able to switch to the actual expenses method if you own your car and you used the standard mileage rate in the first year that you used your vehicle for business. The rules are different though if you lease your car. If you’re leasing your car, you’ll need to take the standard rate for the entire lease term.

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Balance Transfers and Your Credit Score

Here are some tips for consolidating credit card debt that will potentially boost your score.

  • Calculate the monthly payment you’ll need to make to pay off the balance before the introductory rate ends.
  • Don’t cancel your old cards. In addition to eliminating your credit history, closing accounts reduces your available credit. Both can have a negative impact on your credit score.
  • Avoid charging purchases to your old cards unless you can pay off the balance each month. People often fail at debt consolidation because they run up new debt.
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Professional Financial Designations

When choosing your financial team it is important to understand the differences between various professional designations.

CPA (CERTIFIED PUBLIC ACCOUNTANT)

This is one of the more widely recognized certifications. These professionals are tax and accounting specialists.

CFP (CERTIFIED FINANCIAL PLANNER)

These experts can help with your overall financial strategy, including insurance, investments and retirement planning.

IA (INVESTMENT ADVISERS)

IAs are able to give advice about specific investments. An investment adviser may also be a CFP.

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Diversify Your Investments

Mutual funds and exchange-traded funds (ETFs) are both baskets of individual securities that offer a variety of asset classes and niche markets that can help investors diversify their portfolios. There are differences between them, however, that could make one option preferable for a particular investor.

MUTUAL FUNDS

Mutual funds are either actively managed or pinned to an index. Earnings can be taxable and are paid as dividends, capital gains distributions, or increases in the share price. Mutual funds allow automatic investments and withdrawals. Share prices are calculated at the end of each trading day when all trades are executed. Not all funds have a sales fee but may charge other fees and expenses, which vary.

EXCHANGE-TRADED FUNDS

ETFs are traded on an exchange, like stocks, throughout the day, so investors can purchase as few as one individual share. Most ETFs follow an index, but some are actively managed. Passively managed ETFs may have lower expenses and can be tax efficient because trades are only made to match changes in their index. However, some trades can trigger the capital gains tax.

Index funds can be less volatile than those that follow a specific sector. ETFs can be relatively inexpensive, however, investing in them does include certain costs, which may include: operating expense ratio (OER), trading costs, commissions (if applicable), bid/ask spreads, and changes in discounts and premiums to an ETF’s net asset value.

Your financial professional can review costs and help you decide whether mutual funds or ETFs will fit into your investment plan.

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April 2025 Client Profile

The Roberts family hired a live-in au pair to help care for their children while the parents work. One of their co-workers mentioned something about a “Nanny Tax,” and the Roberts aren’t sure if it applies to their situation.

In the IRS’s eyes, nannies fall into the category of household employees. With a few exceptions, if your nanny is considered an employee because you control when and how they work, you’ll need to withhold and pay Social Security and Medicare taxes if they earn at least $2,800 in 2025, ($2,700 in 2024). You may also need to pay federal unemployment tax if they earn more than $1,000 in a calendar quarter. This is on top of any state employment taxes you may be required to withhold or pay.

And while you’re not required to withhold federal income tax, your employee may ask you to. You would need to get a Form W-4 from them. If you withhold any taxes from your employees, you’ll need to provide a W-2 each January. Incorrectly classifying your nanny as an independent contractor to avoid paying payroll taxes can have harsh consequences.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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What to Know About 401(k)s

One of the common retirement plans offered by employers is a 401(k) plan. These plans make saving for retirement convenient. But make sure you understand the basics so you can capitalize on plan options and determine how your 401(k) fits into your overall retirement strategy.

ELIGIBILITY RULES

Some employers allow new hires to enroll in the company 401(k) plan on day one, and some even offer automatic enrollment. But employers can have waiting periods of a few months to a year before you’re eligible to participate. To get the most from the plan, however, sign up as soon as you’re allowed.

IT’S A MATCH

Many companies offer a matching contribution to employees who participate in the company plan. While amounts vary, matching contributions are usually a fixed percentage on a predetermined portion of an employee’s annual salary. For example, an employer may contribute fifty cents for every dollar you contribute, up to 10% of your salary. So if you earn $60,000 per year, you could receive a $3,000 annual contribution from your employer, provided you contribute $6,000 each year.

KNOW YOUR LIMITS

The IRS places limits on the amount you can contribute to qualified retirement plans each year. For 2025, the limit is $23,500, but if you’re 50-59 or 64 and older you can contribute catch-up contributions of an additional $7,500. New this year: Catch-up contributions for employees 60-63 are capped at $11,250. Any 401(k) plan can set its own contribution limits, which may be less than the IRS limits.

VESTING

The money you contribute to a 401(k) is yours to keep from day one. But the contributions from your employer may come with a contingency, also known as a vesting schedule. That means you may need to work for the company for a year or more before you gain 100% ownership of the company’s contributions.

TAKE OUT

Although you may not plan on tapping your 401(k) account before retirement, sometimes life’s events require you to do so. Some plans will let you take a loan that you repay with interest over time. Or you may be able to take a hardship withdrawal that doesn’t require repayment. But you’ll have to pay income tax on the amount withdrawn and if you are under age 59 1/2 there is an additional 10% federal tax penalty.

Consider this option as your last resort, because that money will no longer be there to grow for retirement.

401(k) plans that offer automatic enrollment have experienced significantly increased participation rates —94% compared to 67%.