Blog   Tagged ‘IRS’

Tax Facts {infographic}

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How much do you know about taxes?  If you’re like a lot of people, you just want to know how much you owe the IRS or how much the IRS owes you. But if you dig deeper, you will be amazed at how our income tax system has evolved and some of the interesting factoids that would astound even the most seasoned tax professional. In anticipation of Tax Day, we’ve compiled a great infographic that answers all (at least some) of your questions!
Tax Facts 2016

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UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Financial Word of the Week: Individual Retirement Accounts (IRAs)

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Financial Word of the Week

So far this month, we talked about a few savings account options, including HSAs, FSAs and 401(k) plans.  Two other common retirement savings account options are traditional IRAs and Roth IRAs.

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Traditional IRAs

A traditional IRA (Individual Retirement Account) is a savings account for retirement that gives you tax advantages. The contributions you make to your traditional IRA might be deductible from your taxes depending on a few circumstances.

The IRS sets the limit on how much you can contribute. This year the maximum amount is $5,500 or $6,500 if you are 50 or older. Even if you contribute less than this amount, your contribution is still eligible for tax deductions.

Generally, if you are contributing to a traditional IRA, you cannot access the money without a tax penalty until you are 65, have participated in the plan for at least 10 years or terminate service with your employer. You can learn more on the IRS website.

Roth IRAs

A Roth IRA is a savings account for retirement where the contributions are not tax-deductible. Roth IRAs are very flexible. You can withdraw your regular contributions without a tax penalty or fee; however, you generally cannot withdraw your earnings on the contributions without penalty until you are 59.5 or have held the account for five years.

In order to be eligible to contribute a Roth IRA, your modified adjusted gross income must be less limits established by the IRS. There are also contribution limits. It may seem like a no-brainer, but you cannot contribute more than you make in a year if your earned income is less than your contribution limit. So if you make $4,000 a year at a part-time job, you wouldn’t be allowed to contribute $5,000 to your Roth IRA using other funds like interest from another savings account.

Another advantage is if you decide to work during retirement, you can continue to contribute to the account. You can also leave money in your Roth IRA for as long as you live. Learn more on the IRS website.

While there are many savings options available, always do your research first and talk to a trusted financial advisor to ensure you are using the best account for your unique retirement goals.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

 


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Financial Word of the Week: 401(k) Plan

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Financial Word of the Week

A 401(k) plan is a retirement savings account usually offered through your employer. Some employers will offer a match or non-elective contribution to your retirement account, which is a smart way to help you reach your retirement goals faster.

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It’s important to understand the plan your company offers to ensure you are getting the full employer match by contributing as much as you need to be. Remember, your employer’s contribution match is free money!

The contribution you elect to make is taken out of your salary before taxes. The IRS regulates how much you can contribute each year. For 2015, the limit is $18,000. If you are 50 or older (and therefore closer to retiring), you can contribute an additional $6,000 as a catch-up contribution. 401(k) contributions are usually invested in mutual funds, which will be covered later in our series. Generally, a 401(k) account cannot be accessed until you are 65 without early withdrawal tax penalties.

Use our calculator to obtain an estimate of where you stand with your retirement savings.

If your employer doesn’t offer a 401(k) plan, stay tuned for next week’s post when we explore other retirement savings account options.

 


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Financial Word of the Week: Tax Exemptions

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Financial Word of the Week

To wrap up this tax month, let’s talk about exemptions—special deductions that you can use to lower your taxable income.

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Exemptions are a set amount of income that is not subject to income tax. This amount could change each year and could be reduced if your adjusted gross income is above a certain amount. For 2014, you may deduct up to $3,950 for each exemption you claim. You may claim exemptions for yourself, your spouse and any dependents.

Phaseout of Exemptions (2014)

Filing Status                                       Adjusted Gross Income Level That Reduces Exemption Amount

Married Filing Separately                                       $152,525

Single                                                                                 $254,200

Head of Household                                                    $279,650

Married Filing Jointly                                               $305,050

Qualifying Widow(er)                                               $305,050

For example, if you are married and have two qualifying children, you may be able to claim four exemptions. For 2014, this would equate to an exemption amount of up to $15,800 ($3,950 x 4).

If you can be claimed as a dependent by another taxpayer, then you are not allowed an exemption for yourself on your own tax return, even if the other taxpayer does not actually claim you as a dependent.

A dependent can be either a qualifying child or other qualifying relative, but your spouse can never be considered a dependent. Special rules are used to determine whether someone can be considered a dependent.

For more information on exemptions, refer to IRS Publication 501.

 

*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Financial Word of the Week: Tax Bracket

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FWOTW

Earlier this month, we discussed tax deductions and charitable deductions. This week, we want to talk about tax brackets.

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The United States has a progressive tax system, which means your marginal tax rate increases as your taxable income increases. Tax brackets indicate the marginal tax rate that applies to you based on whether your taxable income falls within a certain range or “bracket.” There are seven tax brackets in the United States, with marginal tax rates ranging from 10 percent to 39.6 percent.

A marginal tax rate is the tax rate you pay on each additional dollar of income. In other words, the first dollar of taxable income is taxed at the lowest rate. As your taxable income increases into the next bracket, only those dollars within that bracket are taxed at the new marginal tax rate.  The actual percent of your taxable income that you pay to the IRS is called your Effective Tax Rate.

Remember that your taxable income is the income left over after subtracting all allowable deductions and exemptions. We’ll discuss exemptions in our next tax-related financial word of the week.

To see which tax bracket might be applicable to you, please refer to the IRS website or see the below example.

Income-Tax-Rates-table

*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Tax Facts {infographic}

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How much do you know about taxes?  If you’re like a lot of people, you just want to know how much you owe the IRS or how much the IRS owes you. But if you dig deeper, you will be amazed at how our income tax system has evolved and some of the interesting factoids that would astound even the most seasoned tax professional. To get ready for Tax Day tomorrow, arm yourself with some cocktail party chatter by taking a look at the infographic below.
Tax Day infographic

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Mr. Chen is a Vice President and Portfolio Manager for UMB Private Wealth Management. He is responsible for all aspects of portfolio construction, including asset allocation, security selection and mutual fund analysis for high-net-worth clients. He joined UMB in 2013 and has 10 years of experience in the financial services industry. Mr. Chen earned a Bachelor of Science in Business with an emphasis in Financial Management from Kansas State University and Master of Science in Business with a Finance Concentration from the University of Kansas. He serves on the board of directors for the Financial Planning Association of Greater Kansas City and the Kansas City CFA Society. He is a Certified Financial Planner® and is a CFA charterholder.



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Financial Word of the Week: Charitable Deductions

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FWOTW

Last week we went over what a tax deduction is. This week we’ll focus specifically on the deduction for making charitable donations.

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If there are specific charities that you’re passionate about and want to help, the first step is to confirm that they are qualified to receive tax-deductible contributions before you give them anything.  Ask them to send you their IRS letter recognizing their tax-exempt status.  You can also call the IRS directly (toll-free) at 1-877-829-5500 or visit the IRS website to confirm an organization’s status.

Once you have confirmed their status, you need to keep track of all your donations to that organization.  The best way is to ask for a receipt every time you donate cash or property.

Some things to keep in mind:

  1. You cannot deduct contributions to specific individuals or families. Even if you give money to a qualified charity, you may not specify someone to receive the benefit.
  2. There are limits to how much you can deduct. Generally, you may not deduct more than 50% of your Adjusted Gross Income (AGI).  For example, if your AGI is $30,000 and you contribute $20,000 in cash to a qualified charity, your deduction will be limited to $15,000.  If your income is above a certain threshold, the amount you can deduct may be reduced.
  3. If you volunteer for a qualified organization, some unreimbursed, out-of-pocket expenses may be deductible as well. A deduction of this type might include mileage for driving to and from the volunteer location.  However you may not deduct the value of your time, such as income you lost because you were volunteering instead of working.

For more information on Charitable Contributions, see IRS Publication 526.

 

*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Financial Word of the Week: Tax Deductions

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FWOTW

Tax season is upon us. Have you filed your taxes yet? Our April series on tax terms will help you navigate the filing process, even if it’s for next year. Let’s start with tax deductions.

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There are several types of tax deductions.  A deduction is an expense or other amount that the IRS allows you to use to offset against your income to ultimately reduce the amount of income tax that you owe.  Certain expenses are considered “above-the-line deductions” and are deducted from your gross income.  These might include certain business expenses, alimony paid, or if you make contributions to a Traditional IRA, among others.  The income remaining is called your Adjusted Gross Income.  You can now look at another set of possible deductions, sometimes called “below-the-line deductions”.

You have two options when it comes to below-the-line deductions.  These deductions are subtracted from your Adjusted Gross Income to arrive at Taxable Income.  You simply choose the option that will reduce your Taxable Income the most:

  • Standard deduction – the standard deduction was created to simplify the life of the “average” taxpayer. Instead of making everyone responsible for documenting their deductible expenses, the IRS allows taxpayers to deduct a fixed amount as a standard deduction.  The amount of the standard deduction will depend on your filing status (single, married filing joint, etc), whether you are 65 or older, or blind. The amount might change each year.  The standard deduction would likely apply to you if your tax situation is relatively simple.
  • Itemized deduction – there are certain expenses that the IRS allows you to deduct from your Adjusted Gross Income such as mortgage interest, charitable contributions, and uninsured medical expenses to name a few. When you add up all these itemized deductions and the amount is greater than the standard deduction amount, you should use the itemized deduction amount to reduce your Adjusted Gross Income.  Just make sure you have proper documentation of these expenses or the IRS might disallow them, causing you to pay more in taxes than you otherwise would have to.

The Internal Revenue Service website has a list of potential deductions. This list details what can be deducted and the limits that apply to certain deductions.

For more advice on taking advantage of your tax credits, check out our recent blog post.

 

*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a diversified financial holding company headquartered in Kansas City, Mo., offering complete banking services, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska, Arizona and Texas, as well as two national specialty-lending businesses. Subsidiaries of the holding company include companies that offer services to mutual funds and alternative-investment entities and registered investment advisors that offer equity and fixed income strategies to institutions and individual investors.



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Tis’ the Season for Tax Fraud

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IRS tax refund scam tips

It’s tax time. As you prepare your taxes or eagerly await any refunds, it’s also time to be aware of tax scams. These scams include phishing emails, texts or phone calls that may warn of a delay with your return, promise a bigger refund or offer you a “helpful downloadable document.” These scams are designed to steal your refund, bank account information or identity by compelling you to provide your private information to the scammer.

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The IRS estimates that it paid $5.2 billion in fraudulent refunds as a result of identity theft last year. This year, in light of recent data breaches, individuals are urged to be especially careful. New scams offer credit monitoring services due to a breach or claim to be from popular tax software providers. The IRS has provided a list of The Dirty Dozen Tax Scams for 2015 to help keep us up to date on the latest scams.

In addition, be particularly aware of common tax season phishing emails like these:

  • You’re owed a refund and need to forward your bank account information for the refund deposit. The IRS does not initiate taxpayer communications through email or social media to request personal or financial information. If you receive an unsolicited email claiming to be from the IRS, send it to phishing@irs.gov.
  • Exciting offers or refunds for participating in an “IRS Survey.” This fake survey is actually used to acquire private and confidential information that is used to steal your identity.
  • Threats of fines or jail time for not making an immediate payment, or responding to the email. If you receive an intimidating email like this and even believe you might owe on taxes, contact your local IRS office and report the threatening email.
  • Documents or tools for tax preparation (e.g. “new changes in the tax law,” a tax calculator, etc.). Those “helpful” documents mentioned earlier may, in fact, be malicious files intended to infect your computer. Remember not all unsolicited email is legitimate. If you need current tax information, go to the IRS website or consult with a tax professional.

Scams don’t stop with phishing emails. Here are some helpful tips if you get calls or texts from someone pretending to be from the IRS:

  • If you know you owe taxes or think you might owe, call the IRS at 800-829-1040.
  • If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at gov.
  • If phone scammers target you, also contact the Federal Trade Commission. Use their FTC Complaint Assistantto report the scam, and include “IRS Telephone Scam” to the comments of your complaint.

Remember, identity theft doesn’t stop at tax season so exercise your “spidey sense” with any email, unsolicited text or call asking for your personal information.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Ms. Flores serves as senior vice president and Chief Information Security Officer, providing oversight of UMB’s information security and privacy programs. She joined UMB in 2010 and more than 15 years of experience in information technology and information security. She attended Kansas State University with a focus on management information systems and is a Certified Information Security Manager (CISM), Certified Information Privacy Professional (CIPP/US) and Certified Information Systems Auditor (CISA).



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Don’t let tax credits fall through the cracks

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How can you get a bigger refund when filing your taxes? These tips can help:
tax credit tips
Even if you’re dreading the process of filing your taxes this year, taking the time to know what you’re doing can equal a bigger refund check. Everything from plugging in your electric car to adopting a child can be considered for deductions, so don’t miss out on refunds this year.

The IRS offers several federal tax credit options designed to lessen the burden of taxpayers. This is especially true for low- and middle-income households, which often retain a higher percentage of their annual salaries for basic living expenses than high-income households.

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Earn tax deductions with a retirement plan
Some of the best tax deductions tend to be linked to retirement plans. With these deductions, you save money on annual taxes and invest in your future.

The Saver’s Tax Credit (previously known as the Retirement Savings Contributions Credit) is for those making eligible contributions to a 401(k), IRA, or other workplace retirement plans such as a 403(b), 457, or Thrift Savings Plan. If you’re contributing and are in a lower-income bracket, you can receive a tax credit up to $1,000 when filing alone and up to $2,000 if filing jointly.  This credit is on top of the tax advantages already associated with retirement plans, which might include pre-tax contributions, tax-deferred growth, or tax-free withdrawals in retirement.

Tax credits for small business owners
The IRS also offers potential tax credits for small business owners. One of the biggest deductions is through a home office credit.

More than 50 percent of U.S. small businesses operate at an owner’s home, according to the Small Business Administration(SBA). Unfortunately, many fear taking advantage of this tax credit will red flag an audit from the IRS. The good news is, that fear is usually unfounded.

To be eligible for a home office tax deduction, the IRS requires a portion of a residential property to be considered a legitimate home office. The home must be a primary workplace. If there is an additional office used, you cannot file a home office deduction. An exception can sometimes be made for those who work all day at an office part of the week and all day at home the rest of the week.

To figure out a home office credit, the SBA recommends calculating deductions by comparing the size of the home office versus the rest of the home. However, a business owner can also deduct expenses for a separate freestanding structure, which means a business owner can use a studio to conduct work, or a garage or barn for storage. But those freestanding structures should be exclusively for business.

Tax refunds as a way to save
Remember that getting a large refund may not always be in your best interest. It could be a sign that you’re having too much money withheld from your wages. If you have trouble saving on a regular basis, however, forced savings through tax withholdings is better than not saving at all. Just try to set aside all or a portion of your refund for the future. Some great ways to use your refund include paying down high-interest debt, building an emergency fund and investing for retirement.

 

Take a look at the IRS website for a comprehensive list of deductions, and ask a trusted tax accountant for advice on which ones apply to your situation so you can take full advantage of your options.

 

*This post is not meant to replace the advice of a tax professional.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Chen is a Vice President and Portfolio Manager for UMB Private Wealth Management. He is responsible for all aspects of portfolio construction, including asset allocation, security selection and mutual fund analysis for high-net-worth clients. He joined UMB in 2013 and has 10 years of experience in the financial services industry. Mr. Chen earned a Bachelor of Science in Business with an emphasis in Financial Management from Kansas State University and Master of Science in Business with a Finance Concentration from the University of Kansas. He serves on the board of directors for the Financial Planning Association of Greater Kansas City and the Kansas City CFA Society. He is a Certified Financial Planner® and is a CFA charterholder.



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