Retirement Planning – Which Plan is Right for You?

Goodbye, 2017… Hello, 2018!

But wait… the end of the year means … tax season is soon to follow!

Yes, taxpayers will soon be making some pretty hefty decisions. And if you’re retiring, even more so! How can you plan for retirement now? Here are some hints and tips to help you make smart fiscal decisions as the year draws to a close.

What kind of retirement plan should you choose? 

Today, many companies offer both a traditional 401(k) and a Roth 401(k). Here’s how to know which one’s for you:

  • If you are in a lower tax bracket, you might prefer the Roth 401(k). You’ll receive rather significant tax-free withdrawals in retirement.
  • On the other hand, if you are currently in a higher tax bracket and want an immediate tax reduction, you might want to opt for the traditional 401(k). However, even if you are in a higher tax bracket now, you might still want to have a source of tax-free cash flow during retirement. If that’s the case, then go for the Roth 410(k) plan.

In 2017, the maximum you can contribute to a 401(k) is $18,000, plus an additional $6,000 if you are over the age of 50. If you don’t want to maximize these amounts, might consider paying off your credit card bills. Remember, credit card interest is not tax deductible, so it’s beneficial to pay down those credit card balances now. With regards to a home mortgage or student loans, the decision may not be so cut and dry, as these types of interest can be tax deductible.

What if your company does not offer a retirement plan? 

Open and fund an IRA account. Keep in mind, the due date to do so is April 15th, regardless of when you file your taxes.

For IRA withdrawals, IRA owners must take distributions after the age of 70.5. Carefully plan out how much you’d like to withdraw before year-end to keep taxable income low. With the money you withdraw, you could give it to your loved ones, reinvest it elsewhere, move it to a Roth IRA (for a tax-free future), or simply spend it on yourself!

Just like a 401(k), you can choose between a traditional IRA and a Roth IRA. Depending on which tax bracket you find yourself in, the benefits to opening either a traditional IRA or a Roth IRA or similar that of traditional and Roth 401(k)’s. In short:

  • If you are in a lower tax bracket, consider opening a Roth IRA.
  • If you are in a higher tax bracket, consider opening a traditional IRA.

When should I make charitable contributions?

To answer this question, you might want to consider when you’d like to experience a tax deduction. If you write a check to your favorite charity in December, your tax deduction is soon to follow in April! However, should you decide to wait until New Year’s, you’ll have to wait a year before receiving the tax benefit.

Furthermore, if you have stocks or stock funds that have gained value over time, you could choose to give appreciated securities to your favorite cause instead of a check. You’ll still be making excellent use of your funds while helping those in need!

We understand that retirement planning can be complex and confusing. Your financial future is as important to us as it is to you, so feel free to contact us if you’d like further tax planning assistance!

When Does Tax Season Start?

While you may be planning to spend the last moments of December 31st counting down to the New Year (Yay, 2018!), we at Alfano & Company will spend them counting down to the new tax season (Yay, 2017 taxes!).

It’s natural to feel that tax season doesn’t start until sometime in April. After all, you have until April 16th to file your return and so surely you can just quickly take care of it a couple of days before the deadline, right? Or you might think you should file on January 1st – after all, you don’t want to wait too long for your tax refund! However, the real start of tax season falls somewhere in between.

You can certainly start gathering your tax documents in early January if you so wish. However, if you’re waiting on a W2 or 1099 from an employer don’t expect to receive it right away. Employers have until January 31st to mail these tax forms to you, so you might be checking the mail box every day until early February before you can provide everything to your tax preparer.

Say you miraculously receive all of your tax forms the first week of the year; you can file then, right? Not quite. The IRS doesn’t open their virtual doors until January 22nd so you won’t be able to e-file until then. [Jan 22 filing date NOT confirmed – check IRS press release for actual date sometime in December]

Even if you file right on January 22rd, you may experience some difficulties retrieving your refund. Last year Congress passed a law that requires the IRS to hold refunds on tax returns where the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) is being claimed. The IRS must hold the entire refund amount until at least February 15th.

However, just because there’s a lot to wait for in the early stages of tax season it doesn’t mean you should procrastinate and file in April instead. By waiting until April you’re up against the rush of the deadline. There’s a chance you’ll have forgotten to provide your tax preparer with all necessary tax documents, and by the time you gather the remaining information needed to file your return you can end up running out of time!

What do we suggest?

Start gathering your documents as soon as they start arriving in the mail. Make sure you keep them in a safe place so that you don’t have to search your house for your W2 10 minutes before your scheduled appointment with your tax preparer. Schedule your appointment for some time during the second half of February; at this time of year Alfano & Company will be open on Saturdays and certain evenings, so we’ll be more than able to meet with you a time that works well for your schedule! This will give your tax preparer ample time to work on your return, ask for any missing information, and still have plenty of time to complete your return before the deadline. You’ll feel at ease knowing that your tax preparer didn’t feel rushed when working on your tax return!

At Alfano & Company, we’ll need your tax forms by March 19th. Even if you don’t have everything ready by this date, please provide us with everything you currently have at that time. This will allow us to begin work on your return before the April rush begins.

If you’re wondering what tax information we’ll need, you can find a handy list here. And when you are ready to schedule your appointment, click here. We look forward to working with you this tax season!

Micalah Bowden, Office Manager

Charity Scams-Beware!

In the wake of the tumultuous hurricanes, many simply want to help. Open hearts and open hands are truly appreciated during these times. However, scammers exploit this kindness.  The ESET security community comments: “The United States Computer Emergency Readiness Team (US-CERT) issued an advisory … warning the public of the danger of falling for Hurricane Harvey-related charity scams. Merciless scammers have no qualms about exploiting people’s kind-hearted nature by spreading their attacks via social networks and email, linking to counterfeit charity websites designed to steal the public’s payment card details.” How can you be generous without being taken advantage of? You must be on guard.

Donating Tips

    • Donate to charities you know and trust with a proven track record of dealing with disasters.
    • Be alert for charities that seem to have sprung up overnight in connection with current events. Check out the charity with the Better Business Bureau’s (BBB) Wise Giving AllianceCharity NavigatorCharity Watch, or GuideStar.
    • Designate the disaster so you can ensure your funds are going to disaster relief, rather than a general fund.
    • Never click on links or open attachments in e-mails unless you know who sent it.You could unknowingly install malware on your computer.
    • Don’t assume that charity messages posted on social media are legitimate. Research the organization yourself.
    • When texting to donate, confirm the number with the source before you donate.The charge will show up on your mobile phone bill, but donations are not immediate.
    • Find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials. If they should be registered, but they’re not, consider donating through another charity.

When searching online for information The ESET security community advises: “Visit legitimate news outlets if you want to keep up-to-date with developing news stories. There are many bogus fly-by-night news sites on the web who will publish anything in the hope of earning some advertising revenue…. Donating through a scam site not only benefits criminals, it also deprives charitable financial support from the people who need it the most.

Always be wary of links that offer you dramatic video footage of a news story. Malicious hackers and scammers know that the public finds it hard to resist clicking on such links, and might have planted malicious content.” Exercising discernment will ensure your generosity goes to those in need. Is the IRS offering benefits to donators?

IRS And Your Donation

On September 5, 2017 The IRS announced that a special relief designed to support leave- based donation programs to aid victims of Hurricane Harvey is in place. How does this work? The article taken from explains, “Under these programs, employees may forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2019, to charitable organizations providing relief for the victims of this disaster. Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the cash payments as business expenses.” Need help on how to make these deductions for yourself or as an employer? Contact us today.

Laura Boykins Marketing Coordinator

Save Your Important Documents

Your mom always told you: “save your important documents in a filing cabinet!”
You may wonder, “so, how long should I keep my documents ?” We’ve got some tips.

It’s a good idea to keep your tax returns indefinitely. You can generally toss supporting tax records three years after you file your return, which is the time the IRS typically has to initiate an audit.

Please note that where you live matters! Several states have four years to initiate an audit. You can find out your state’s rules here.

Save These

The following are supporting documents you should save for at least three years:

  • Forms W-2 and Forms 1099 reporting income wages, interest, dividends, and capital gains or losses
  • Forms 1098 (if you deducted mortgage interest)
  • Canceled checks and receipts for charitable contributions
  • Records showing expenses for other deductions and credits claimed on your income tax return
  • Records showing eligible expenses for withdrawals from health savings accounts or section 529 college-savings plans
  • Records to substantiate any business deductions taken on Schedule C including the original bill of sale (or receipt) for any assets used in your business
  • Keep receipts showing any retirement contributions, such as to an IRA, simplified employee pension (SEP) or 401(k)
  • Forms 1095 showing that you had eligible health insurance or records showing that you met the criteria for an exemption

What Else Should You Save?

You’ll need to save some tax records longer than the three-year audit period. One of the biggest mistakes people make is not keeping records that establish the basis of property and investments used to determine the taxable gain or loss when you sell. You should save purchase records for mutual funds, stocks and other investments held in a taxable account for at least three years after you sell the investment because you’ll need to report the purchase date and price when you file your taxes for the year in which they are sold. Brokers must report the cost basis of stock purchased in 2011 or later and of mutual funds and exchange-traded funds purchased in 2012 or later, but it helps to keep your own records in case you switch brokers or there is a discrepancy. If you inherit stocks or funds, save records of the value on the day the original owner died to help calculate the basis when you finally sell the investment; keep these records for at least the three-year audit period after the sale. Also keep records of reinvested dividends that you’ve already paid taxes on so you won’t be taxed on them again when you sell the stock.

Save records of your home purchase as well as records of any significant home improvements that increased your home’s value (such as the cost of adding an extension or a new kitchen) for at least three years after you sell your home. Up to $250,000 in home-sale profit is excluded from taxes if you’re single (or up to $500,000 if you’re married filing jointly) if you live in the house for at least two of the five years leading up to the sale. But you could end up with a tax bill if you don’t live there that long or if your profits are higher. In that case, you can add the cost of those capital home improvements to the cost basis of your home when you sell and reduce any capital gains. See IRS Publication 523, Selling Your Home, for more information about the expenses that can be added to your basis.

Keep Form 8606 showing any nondeductible IRA contributions until all of your IRA money is withdrawn (plus at least the three-year audit period) so you can prove you’ve already paid taxes on the contributions and won’t be taxed on them again.

Curious about your particular situation? Reach out to us and we’ll help you know what you should be saving!

Alfano & Company

Beware of Scammers

The IRS reports that in the 2016 tax season there was an approximate 400% surge of scammers on the prowl. This includes phishing and malware incidents.

What should you look out for to make sure you don’t fall victim to scammer? We’ll make sure you know all that you need to be on guard!

The IRS will never, and we do actually mean NEVER, contact taxpayers by email, text, social media or phone without first sending you a notice in the mail. Please note what else they will not do:

  • They will NOT demand that you pay a specific amount using a prepaid debit card, gift card or wire transfer.
  • They will NOT threaten you with incarceration, deportation or the like.
  • They will NOT demand that you pay without giving you a chance to refute the amount owed.
  • They will NEVER ask for your credit or debit card information over the phone.

If you realize you’re on the phone with a scammer:

If you do owe money to the IRS, you will receive a bill from them via US mail. What should you do if you receive a notice? Find out here. If the mail correspondence gives you pause, do not hesitate to call us for guidance.

Want more info? Click here. Or watch this video for more information directly from the IRS.

We don’t want you to be a victim! Please contact us if you are ever in doubt about contact made to you from the IRS.

Alfano & Company

Did You Hire The Right Bookkeeper?

Imagine this scenario: you currently use a bookkeeper you love, who seems knowledgeable and who provides regular reports to you and financial statements to your CPA for the preparation of your tax return. To the best of your knowledge, everything is great.

A few years into business your tax return is randomly selected for audit. You feel you have little to fear as the tax return filed by your CPA lines up perfectly with the reports from your bookkeeper. After all, you hired two professionals you feel you can trust!

However, as your CPA begins reviewing the details of your books in order to represent you in the audit, it becomes apparent that the job your bookkeeper has done is far from thorough and perhaps not even all that accurate. Your CPA informs you that this audit may end with your business paying thousands of dollars in penalties and interest.

How did this happen? Maybe your bookkeeper failed to ask you the right questions, or perhaps their pleasantness or professional demeanor masked inadequate experience. In any case, it seems your bookkeeper did not know enough about your industry or the ever changing tax code, and now it’s costing you money.

You may think that this example is extreme, but over the last 26 years we have found ourselves representing some of our clients under these circumstances in audit situations. Often, a closer look at their books has revealed major errors which were not readily apparent on year end reports and without access to their accounting software.

Finding the right bookkeeper can be a challenge for a business owner. This is especially true since many bookkeepers (even some with years of experience) have only limited tax knowledge. The large majority of these bookkeepers tend to focus on the details of the business at the expense of the big picture.

This means there are many bookkeeping services which seem to do an excellent job but, in reality, open up their clients to potential problems with the IRS or other taxing authorities.

It is with this insight that Alfano & Company LLC offers clients all-in-one accounting services from bill pay to bookkeeping to payroll to tax preparation. A business owner who works with one of our in-house bookkeepers will enjoy the following benefits:

  • Their books are triple checked by qualified tax professionals
  • Potential problems are identified and handled before they become costly
  • Reports and financial statements are demystified
  • Prepared for a worry free tax season
  • Thorough planning, including answers to questions such as:
    • How can I improve my cash flow?
    • How can I increase my profit margin?
    • Should I incorporate?
    • What marketing strategy should I pursue?
    • How much will it really cost me to hire employees?
    • How is my business really doing?


If you have struggled to find qualified, reliable bookkeepers to produce thorough, accurate, and detailed books or if you would like to experience the peace of mind of knowing your books are being maintained by true professionals then we should talk – you deserve better.   E-mail us at to schedule a complementary consultation.

If you have confidence in your current bookkeeper but are unsure as to how to truly assess the quality of their work, we can help!  E-mail us at and we can discuss scheduling an in-depth review of your books.

You have enough to think about – having the right bookkeeper on your side can ensure that the numbers don’t drive you crazy!

Liana Haydin, EA

You’ve Received a Notice!

It happened.

In between a letter from grandma and your utility bill there is a letter from the IRS. You double checked: it definitely has your name on it, and it’s thick. You left it on your desk for a day or two, trying to decide if you should open it or just throw it away (hint: always open it). You had a seat, grabbed a stiff drink and a box of tissues, and went for it.

You were hoping that the letter would say that you are exempt from income tax for life, but it didn’t. Instead it’s a bill with a giant number, plus some penalties, plus some interest. What do you do now? Here are 3 steps to take:

  1. Check your records.

The IRS sends a lot of notices each year (approximately more than 200 million) and most of these notices are sent by IRS computers. Like humans, IRS computers make mistakes sometimes; maybe they doubled your income or missed a tax payment you made. This doesn’t always happen, but it happens often enough that the first thing you should always do is check the letter against your own records. If you paid someone to prepare your tax return for that year, send them the notice and ask them to take a look, most firms will do that for free.

If you checked everything and you know the IRS is correct (for example: if you notice you forgot to include some dividend income on your income tax return) then you should pay the notice by the due date (but consider asking the IRS to forgive [use the term “abate”] the penalties, especially if you have a good record of compliance or if this was an honest mistake. You’d be surprised how often the IRS agrees).

If you checked your records and you think the IRS is not correct, things get harder. You’ll have to prove your point to them, which is not easy. Think of this as a mini court case: you vs. the IRS. You’ll have to state your reasons for disagreeing, present your evidence, and offer your version of the story; maybe the IRS will counter and you’ll need to defend your position. Worse, since everything is done on a timetable, you’re probably only going to have one shot at this. If you want help doing this reach out to me, even if you aren’t a current Alfano & Company client.

  1. Act quickly.

A lot of the most common notices (such as the CP2000 series) are proposals, meaning the IRS thinks your tax return is wrong and is nicely (ish) informing you of that. If you wait too long the proposal becomes reality in the eyes of the IRS and they will send you a bill. If you don’t pay the bill, they’ll send a more urgent one, then they’ll levy your state income tax refunds, then they’ll levy your bank account or put a lien on your house. Don’t let it get that far, handle this problem at the beginning.

  1. Reach out for help.

The IRS is a big, complex organization with procedures for everything, some of which make sense and some of which don’t; I deal with them every day but it still gives me a headache sometimes. If you feel out of your depth don’t try to bluff your way through it, it just never works. Find someone who knows what they’re doing and ask them to help (OK, you’ll probably be paying them more than asking them, but it’s worth it). Be careful here: there are companies out there who prey on people in your position, be wary if anyone guarantees results or needs a really big retainer up front before they’ll do anything (but a retainer of 30-50% of the estimated fee is common in the industry, especially if you are a new client). If you’re sitting down with someone, ask them how much experience they have in dealing with the IRS, ask them if they’ve seen cases like yours before, and ask them for the realistic chances that they can secure a better outcome for you. If you get a bad feeling from them, take your business elsewhere.

Of course, solving tax problems is what I do so I hope I’m the first one on your list. Stay safe out there.

Mike Hayidin, EA

P.S. in this post I’m primarily talking about notices such as the CP2000, CP503, CP504, or Letters 1058/LT11/3172. If you’ve received a notice indicating the IRS is beginning an AUDIT (“Your Return has been Selected for Examination”) much of this post won’t apply, but I’m going to be covering what do to in that situation in a future post.


What’s The Deal With Estimated Taxes?

Did I really make that much?

Where did all my money go?

How am I going to pay my taxes?

Some of you may know this feeling: it’s April, you just finished your tax return for last year, and you owe A BUNCH OF MONEY. Maybe you’re sitting down with your accountant and explaining that you don’t have the money to pay your taxes because you just really needed a vacation, or that the Zeppelin 2.0 is going to be a great investment one day, or maybe he’s telling you that pet psychics aren’t deductible (didn’t see that coming).

How do you avoid being in this situation?


If you’re self-employed or have significant non-wage income (like investments, alimony, or gains from the sale of assets), estimated tax payments are a great way to ensure you aren’t hit with a big surprise in April. Plus, if you don’t make them you may be subject to penalties when you file your return (talk about adding insult to injury!). Here are some quick facts about estimated tax payments:

  • You generally have to send in either 90% of the current year’s tax or 100% of last year’s tax to avoid penalty (but the penalty generally isn’t assessed if you owe less than $1,000 on your tax return)
  • You’re supposed to make your estimated tax payments 4 times per year, normally April 15th, June 15th, September 15th, and January 15th (of the next year)
  • You can make your estimates either by mailing in a check (with Form 1040-ES) or via the INTERNET (
  • If you make the first 3 estimated tax payments but your income is lower this year than in years’ past, you may not have to make the 4th one
  • There are different rules for calculating estimated tax payments for Farmers and Fishermen
  • If you should be making estimated tax payments we will set you up with them when we finish last year’s return

If you make your estimated tax payments you increase the chances you’re going to have a stress free (and surprise free) tax time… doesn’t that sound great?

Not sure if this applies to you? Reach out to me by emailing – even if you aren’t a current Alfano & Company client we will review your situation and advise you, before you spend all your money on that dream vacation!

Mike Haydin, EA

Have fun out there!