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Some people look forward to filing their tax returns, while others recoil at the thought of paying what they owe. Regardless of which camp taxpayers are in, come April most people have a question or two related to their returns. As the deadline to file tax returns draws closer, taxpayers hoping to make the process as smooth as possible can consider these frequently asked questions and answers, courtesy of the Internal Revenue Service.

When is deadline day? Though taxpayers periodically get an extra day or two to file their returns when April 15 coincides with a holiday or lands on a weekend, there’s no such reprieve in 2025. This year all taxpayers who are not requesting an extension must file their income tax returns by April 15, 2025.

What if my address has changed? The IRS urges all taxpayers to use their new address when filing their returns. Additional ways taxpayers can update their address with the IRS is through the filing of Form 8822, Change of Address or Form 8822-B, Change of Address or Responsible Party-Business. Written statements or oral notifications are additional ways to notify the IRS of an address change, and these methods must include personal information, including the old and new address as well as the taxpayer’s Social Security number, Individual Taxpayer Identification Number (ITIN) or Employer Identification Number (EIN).

Is there an age limit on claiming my child as a dependent? A child must meet either the qualifying child test or the qualifying relative test in order to be claimed as a dependent. To meet the qualifying child test, your child must be younger than you or your spouse if filing jointly and either younger than 19-years-old or be a “student” younger than 24-years-old as of the end of the calendar year.

There is no age limit to claim a child as a dependent if a child is “permanently and totally disabled” or meets the qualifying relative test. In addition to meeting the qualifying child or qualifying relative test, you can claim that person as a dependent only if these three tests are met:

1. Dependent taxpayer test

2. Citizen or resident test, and

3. Joint return test

Taxpayers who remain uncertain about their eligibility to claim a child as a dependent are urged to contact the IRS or a tax preparation professional for clarification before filing their returns.

What should I do if my W-2 is incorrect? Employers must provide employees with a W-2 by January 31. If the W-2 is incorrect and has not been fixed by the end of February, taxpayers can contact the IRS and request to initiate a Form W-2 complaint. When such a request is initiated, the IRS sends a letter to the employer and requests that they furnish a corrected W-2 within 10 days. The IRS also sends a letter to the taxpayer with instructions and Form 4852, which can be used to file a return if a corrected W-2 is not provided before the filing deadline.

How can I file for an extension? There are three ways to request an automatic extension of time to file an income tax return.

1. You can pay all or part of your estimated income tax due and indicate that the payment is for an extension using your bank account; a digital wallet such as Click to Pay, PayPal, and Venmo; cash; or a credit or debit card.

2. You can file Form 4868 electronically by accessing IRS e-file using your tax software or by using a tax professional who uses e-file.

3. You can file a paper Form 4868 and enclose payment of your estimate of tax due (optional).

Tax day arrives on April 15. Taxpayers who have lingering questions about their returns are urged to contact the IRS via irs.gov or work with a certified tax professional.

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Receiving a tax refund this year? While it can be tempting to impulse spend, if you want to really treat yourself, financial professionals recommend using the payout for practical expenses.

According to CERTIFIED FINANCIAL PLANNING® professionals, here are smart ways to spend your tax refund that will improve your life:

Build an emergency fund: Unexpected circumstances, such as illness or job loss, can leave you with more bills and less income. Not having an emergency fund puts you at risk of having to take on high-interest debt to meet expenses. Use your tax refund to create some peace of mind for yourself and your family. And now that you’ve started the emergency fund, consider using direct deposit to funnel a portion of each paycheck into this account.

Reduce debt: Paying down debt can feel like an insurmountable challenge. And if it’s a challenge you’ve been avoiding, you can use your tax refund to kick-start your journey. Not sure where to start? A CFP® professional can help you identify which debt to prioritize first, as well as help you craft a repayment strategy moving forward.

Save for retirement: No matter your age or stage in life, a tax refund offers a great opportunity to give your retirement account a boost. Thanks to compounding, the money you set aside today in an investment account, such as a 401(k) or Roth IRA, will exponentially grow between now and when it’s time to tap your nest egg.

Set financial goals: From planning a vacation or wedding to becoming a homeowner, your goals are worth investing in. Put your tax refund toward something that matters to you.

The best thing you can do may be avoiding future refunds. While it feels great to receive a big check during tax time, a tax refund is effectively an interest-free loan you have made to the government. You’re much better off keeping more of your money throughout the year so you can invest it or use it on things you need. Consult a professional on how to adjust your withholdings to get closer to breaking even next year.

With an actionable plan and the help of a qualified financial professional, you can ensure your tax refund is put to good use. (StatePoint)

 

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By Michael Christodoulou

Michael Christodoulou

As you may know, some businesses pass along part of their profits to investors in the form of dividends. If you own shares of these companies, either directly in stocks or more indirectly through mutual funds, you may have a choice: Should you take the dividends as cash or reinvest them into the stocks or funds?

There’s no one correct answer for everyone. So, let’s look at some reasons for both choices — reinvesting or cashing out.

Reinvesting dividends offers at least two related benefits. First, reinvested dividends make up part of a stock’s total return, along with price appreciation. And second, when you reinvest dividends, you are buying more shares of the investment — and share ownership is a key to building wealth. Keep in mind that dividends can be increased, decreased or eliminated without notice.

It’s also easy to reinvest dividends. Through a dividend reinvestment plan, or DRIP, your dividends are automatically used to buy more shares of a company. And these new shares will generate more dividends that can be reinvested. 

Consequently, it’s fair to say that dividend reinvesting is an economical way to grow your portfolio. However, a DRIP does not guarantee a profit or protect against loss, so you’ll need to consider your willingness to keep investing when share prices are declining.

If you’re mainly investing for long-term growth, you may well want to reinvest your dividends. But under what circumstances wouldn’t you want to reinvest them?

For starters, of course, you may simply need the dividends to help support your cash flow. This may be especially true in your retirement years. 

But there may be other reasons to cash out dividends, rather than reinvesting them. You might already own a considerable number of shares in a stock, mutual fund or exchange traded fund and you don’t want to buy more of the same. By not reinvesting these dividends, you can use the money to help broaden your investment mix. 

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You also might want to consider taking the cash, rather than reinvesting, if the company that pays the dividends appears to be struggling or has an uncertain future. Again, you could then use the money to fill gaps in your portfolio. 

Regardless of whether you reinvest your dividends, you’ll pay taxes on them if your investments are held in a taxable account. Ordinary dividends are taxed at your ordinary income tax rates, while qualified dividends are taxed at the capital gains rate, which is 0%, 18%, or 20%, depending on your income. (A dividend is considered qualified if you’ve held the stock for a certain length of time.) 

If your dividend-paying investments are held in a traditional IRA or a 401(k), you won’t have to pay taxes on the dividends until you begin taking withdrawals from these accounts, typically at retirement. And if you have a Roth IRA or Roth 401(k), you may not pay taxes on the dividends at all, provided you’ve had the account at least five years and you don’t take withdrawals until you’re at least 59½. 

In any case, you may find that dividends, whether reinvested or taken in cash, can play a role in your overall financial strategy. So, follow your dividend payments carefully — and make the most of them. 

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook, Member SIPC.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation.

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Photo courtesy of StatePoint

Issues around money can put a strain on any couple. However, financial experts say that a strong relationship can be cultivated with financial habits that prioritize communication and shared values.

To help you and your partner get a handle on your financial health and happiness, CERTIFIED FINANCIAL PLANNER® professionals are sharing their best money tips for couples.

Be open, honest and respectful: Whether discussing debt or other financial commitments, credit scores or shared goals for the future, being transparent with one another is absolutely essential to building trust. At the same time, it’s important that conversations are conducted with respect and empathy. Understanding each other’s financial histories, starting with lessons taught in childhood, can lead to more productive discussions.

Communicate regularly: Having one conversation about money is not enough. Keeping the dialogue open helps ensure you remain on the same page over time. You may find it helpful to schedule a weekly appointment to touch base on issues such as cash flow, savings and goal setting.

Build a shared budget: Collaborating on a budget is a great way to identify your individual and shared financial priorities and can help you avoid spending surprises down the line. A CFP® professional can review your finances and help you select a budgeting strategy that you both can live with. Once in place, consider using budgeting software to seamlessly share updates.

Prepare for rainy days: Too many Americans have zero savings, leaving them unprepared for financial emergencies such as job loss, unexpected home repairs and long-term illness. Give your relationship the gift of a robust emergency fund. This will offer you everyday peace of mind, and help you avoid some stress and heartache in the face of unexpected circumstances.

Make a holistic financial plan: Work together to create an overarching financial plan that helps you meet your short- and long-term financial goals, such as buying a home, saving for your children’s education or preparing for retirement. Specially trained to provide guidance on all aspects of financial planning, including estate planning, retirement planning, investing and insurance, a CFP® professional can take a holistic look at your overall financial picture to help you fine tune your strategy.

For a happy, healthy relationship, keep an open dialogue with your partner about money. Doing so will strengthen your bond, build trust and help you reach your goals. (StatePoint)

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The days of filing paper tax returns are gone, and criminals are taking advantage. With taxpayers managing their sensitive information online, thieves are finding new ways to scam victims. In 2023 alone, the IRS reported $5.5 billion lost to tax fraud schemes. And the increased prevalence of artificial intelligence means tax scams this year will likely be more sophisticated than ever.

Scammers have an arsenal of weapons, but no matter their tactics, the goal is the same – to have you give them money or access to it. Here are scams to look out for this tax season:

Tax avoidance scams. These scams often promise rewards too good to be true. Scammers claim to have specialized knowledge on exploiting loopholes to avoid taxes or maximize returns. High-income filers are heavily targeted through offers of seemingly legitimate annuities or tax shelters.

Refund scams. In this scam, a criminal will claim to be someone official notifying of an unclaimed or incorrectly calculated refund, prompting the victim to share information – and possibly bank account numbers – to claim it.

Violation scams. This is a fear-based scam, where the criminal poses as an IRS official threatening some punitive action, claiming the victim committed a violation and needs to contact them to resolve the situation.

Filing support scams. Similar to tech support scams, criminals offer to help create IRS accounts to assist with the online filing process. Frequently posing as tax preparers, scammers will go through the motions of gathering the victim’s personal information for tax forms they never intend to file.

Social media scams. Social media serves as a great place for criminals to find potential victims and carry out tax scams, fraudulently claiming to offer different types of services or possessing unique knowledge or access.

Recovery scams. Once a victim is scammed, criminals will try to strike again – believing the victim is gullible. Exploiting a time of vulnerability, they’ll contact the victim with promises of helping them recover their losses and will leverage this as an opening to commit additional crimes.

While it is not always easy to pick out a scam, here are indicators to watch for:

• Promise of a big pay-out. If it sounds too good to be true, it probably is.

Request for your account information. The IRS will never ask for your credit or debit account information over the phone.

• Random contact. The IRS contacts taxpayers by mail first and will never contact via random phone calls or digital means. The IRS will not leave prerecorded, urgent, or threatening voicemails.

• Demands or threats. The IRS can’t revoke your driver’s license, business licenses or immigration status and cannot threaten to immediately bring in local law enforcement. Taxpayers are allowed an appeals process, so any message of “now or else” won’t come from an official channel.

• Request for you to click a weblink. Odd or misspelled web links can take you to harmful sites instead of IRS.gov.

The IRS recommends these best practices to protect against tax fraud:

• Get an early start. File early so criminals have less time to impersonate you.

• Set up a verified account. Set up your own IRS account before someone else can and use an Identity Protection PIN – a six-digit number known only to you and the IRS.

• Wait for written notice. Do not respond to any supposed communications from the IRS if you haven’t first received official notification through U.S. mail. If you get a call from someone claiming to be the IRS, hang up and call the official number on the website before engaging. Further, never click a link sent digitally as initial contact.

Apply good cyber hygiene. Do not use public Wi-Fi when filing your tax returns. Do use strong passwords, secured network connections and multi-factor authentication. Run all software updates and keep systems current.

If you fall victim to a tax scam, report it to the IRS. For more scam protection tips, visit PNC’s Security & Privacy Center at pnc.com.

One wrong click can cause tremendous damage that ends up earning bad guys a windfall. However, a little caution can go a long way in helping you avoid a costly tax scam. (StatePoint)

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Michael Sceiford

Michael R. Sceiford of the financial services firm Edward Jones recently received a promotion to the position of regional leader, responsible for the health and wellbeing of 40 branch teams. 

In addition to this leadership role, Sceiford will continue to help the people of his community with their investment needs.

Located at 640 Belle Terre Road, Building B, in Port Jefferson, the investment firm helps its customers prepare for retirement, save for education and be a tax-smart investor. For more information, call 631-928-2034.

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By Michael Christodoulou

Michael Christodoulou

In life, you often get second chances — and the same is true with investing. To illustrate: You might not have been able to contribute to a Roth IRA during your working years due to your income level, but you may get that opportunity as you near retirement, or even when you are retired — through a Roth conversion.

Why is a Roth IRA desirable for some people? Here are the key benefits:

 Tax-free withdrawals 

You put in after-tax dollars to a Roth IRA, so you can withdraw your contributions at any time, free of taxes and penalties. And if you’ve had your account for at least five years and you’re at least 59½, you can also withdraw your earnings free of taxes.

No RMDs 

With a traditional IRA, you’ll have to start taking withdrawals — called required minimum distributions, or RMDs — when you turn 73, or 75 if you were born in 1960 or later. But there’s no RMD requirement with a Roth IRA — you can essentially leave the money intact as long as you like.

Tax-free legacy for your heirs 

When your heirs inherit your Roth IRA, they can withdraw the contributions without paying taxes or penalties, and if the account has been open at least five years, they can also withdraw earnings tax free.

But even if you were aware of these advantages, you might not have been able to invest in a Roth IRA for much of your life. For one thing, you might have earned too much money — a Roth IRA, unlike a traditional IRA, has income limits. Also, a Roth IRA has only been around since 1998, so, in the previous years, you were limited to a traditional IRA.

As you approach retirement, though, you might start thinking of just how much you’d like to benefit from a Roth IRA. And you can do so by converting your traditional IRA to a Roth. While this sounds simple, there’s a major caveat: taxes. You’ll be taxed on the amount in pre-tax dollars you contributed to a traditional IRA and then converted to a Roth IRA. (If you have both pre- and after-tax dollars in your traditional IRA, the taxable amount is based on the percentage of pre-tax dollars.)

If you have large amounts in a traditional IRA, the tax bill on conversion can be significant. The key to potentially lowering this tax bill is timing. Generally speaking, the lower your income in a given year, the more favorable it is for you to convert to a Roth IRA. So, for example, if you have already retired, but have not started collecting RMDs, your income may be down.

Timing also comes into play with the financial markets. When the market is going through a decline, and the value of your traditional IRA drops, you could convert the same number of shares of the underlying investments and receive a lower tax bill or convert more shares of these investments for what would have been the same tax bill.

Finally, you could lower your tax bill in any given year by stretching out your Roth IRA conversions over several years, rather than doing it all at once.

You’ll want to consult with your tax advisor before embarking on this conversion — but if it’s appropriate for your situation, you could find that owning a Roth IRA can benefit you and your family for years to come.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook, Member SIPC.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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By Britt Burner Esq.

Britt Burner Esq.

The holiday season is upon us!  Year-end often brings questions of gifting, whether it be to charity or to family and friends.  Gifting can be gratifying and can also provide an income tax benefit as the year comes to a close.  State and federal governments handle gifting differently, making it even more confusing and difficult to navigate.  

In New York State, there is no tax imposed on gifts made during your life.  However, if you do not live for three years beyond that gift, the amount given will be added back into your estate upon your death when determining if an estate tax is owed.  The estate tax exemption in New York is $6.94 million in 2024.  So if a person dies in 2024 and had given a gifts for the three preceding years, these would be added together with the other assets they owned at the time of death to see if they are beyond that number.  Staying under the New York exemption is critical because estates that go 5% beyond the exemption will be taxed on the entire amount, this is referred to as a “cliff.” 

The federal government operates under a different scheme when calculating gift taxes.  In 2024, you can give $18,000 per year, per person with no implications or filings required.  Gifts to a single person beyond that trigger a gift tax return filing and the amounts will be applied toward your individual lifetime exemption, currently $13.61 million.  This means that if your total estate is under that amount when you add together taxable gifts made during life and transfers at death, there will never be a gift or inheritance tax imposed by the federal government.  For individuals with estates above the threshold, individualized planning should be considered to minimize or eliminate estate taxes. 

If you are looking to make a charitable donation before the end of the year, there are several ways to accomplish this. One is an outright gift of a set sum of money. This can be done through a one-time or recurring donation to a charitable organization that qualifies as tax exempt under 501(c)(3) of the Internal Revenue Code.  Making a gift to your favorite cause can also provide you with an allowable deduction on your annual income tax returns.  

Gifting during life can also come in the form of a distribution from a tax deferred retirement account.  This gift is a qualified disclaimer and cannot exceed $100,000 in a given year.  The amount of the disclaimer counts towards the account owner’s annual required minimum distribution, providing you with an income tax benefit because it will not be counted as taxable income. 

Donor advised funds are another useful way to transfer assets to charitable organizations to receive an income tax deduction, all without making an immediate determination on the recipient of the funds.  The donor advised fund can be opened with a financial institution and the contribution you make will qualify as a charitable distribution for income tax purposes. 

However, rather than giving to a certain charity, you will actually be transferring the assets to an account that can be invested and enjoy tax-free growth.  Over time you can make distributions from the fund to qualifying charities in varying dollar amounts as you see fit.  The donor advised fund allows you to designate who will be responsible for determining the charities that will benefit from the account after your death. 

Understanding the rules and tax implications surrounding gifts to family, friends and individuals is an important first step.  In addition to gifting that is made while you are alive, it is also important to engage in estate planning to determine what will occur at your death to ensure your assets are distributed the people and organizations you care about most.  If you have not started this process, add estate planning to your list of 2025 resolutions. Happy Holidays! 

Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.

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By Michael Christodoulou

Now that the calendar has flipped, it’s time for some New Year’s resolutions. You could decide you’re going to exercise more, lose weight, learn a new skill, reconnect with old friends — the possibilities are almost limitless. This year, why not add a few financial resolutions to your list?

Here are a few to consider:

Reduce your debts. It may be easier said than done, but if you can cut down on your debt load, you’ll increase your cash flow and have more money available to invest for your future. So, look for ways to lower your expenses and spending. You might find it helpful to use one of the budgeting apps available online. 

Boost your retirement savings. Try to put in as much as you can afford to your IRA and your 401(k) or other employer-sponsored retirement plan. If your salary goes up this year, you’ve got a good opportunity to increase your contributions to these retirement accounts. And once you turn 50, you can make pre-tax catch-up contributions for your 401(k) and traditional IRA. You might also want to review the investment mix within your 401(k) or similar plan to determine whether it’s still providing the growth potential you need, given your risk tolerance and time horizon.

Build an emergency fund. It’s generally a good idea to maintain an emergency fund containing up to six months’ worth of living expenses, with the money kept in a liquid, low-risk account. Without such a fund, you might be forced to dip into your long-term investments to pay for short-term needs, such as an expensive auto or home repair. 

Keep funding your non-retirement goals. Your traditional IRA and 401(k) are good ways to save for retirement — but you likely have other goals, too, and you’ll need to save and invest for them. So, for example, if you want your children to go to college or receive some other type of post-secondary training, you might want to invest in a tax-advantaged 529 education savings plan. And if you have short-term goals, such as saving for a wedding or taking an overseas vacation, you might want to put some money    away in a liquid account. For a short-term goal, you don’t necessarily need to invest aggressively for growth — you just want the money to be there for you when you need it. 

Review your estate plans. If you haven’t already created your estate plans, you may want to do so in 2025. Of course, if you’re relatively young, you might not think you need to have estate plans in place just yet, but life is unpredictable, and the future is not ours to see. If you have already drawn up estate plans, you may want to review them, especially if you’ve recently experienced changes in your life and family situation, such as marriage, remarriage or the addition of a new child. Because estate planning can be complex, you’ll want to work with a qualified legal professional.

You may not be able to tackle all these resolutions in 2025. But by addressing as many of them as you can, you may find that, by the end of the year, you have made progress toward your goals and set yourself on a positive course for all the years to come.

Michael Christodoulou, ChFC®, AAMS®, CRPC®, CRPS® is a Financial Advisor for Edward Jones in Stony Brook, Member SIPC.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

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There are three different property tax exemptions available to veterans. METRO photo

By Britt Burner, Esq.

Britt Burner Esq.

While a trust technically becomes the owner of your home when you sign a deed transferring ownership to a grantor trust, rest assured that you will still receive the same real estate tax exemptions and/or benefits that you received when your home was owned in your individual name. Both revocable trusts and irrevocable Medicaid asset protection trusts fall under this category of “grantor trusts.”

Many New York residents depend on property tax exemptions/credits to make ends meet. Prime examples of this are the New York State School Tax Relief Program (STAR) and the Enhanced School Tax Relief (E-STAR). The basic STAR program does not have an age requirement, but the property must be the primary residence of at least one owner. Additionally, all owners and their spouses who live on the property must not have an income of more than $250,000 combined.

The Enhanced School Tax Relief (E-STAR) requires that the property must be the primary residence of at least one owner who is 65 or older by the end of the calendar year in which the exemption begins. Surviving spouses may be eligible to retain the Enhanced STAR benefit. For 2025, the combined incomes of all owners (residents and non-residents), and any owner’s spouse who resides at the property must be limited to $107,300 or less to receive the Enhanced STAR benefit.

There are other exemptions available to senior citizens depending on where they reside. Local governments and school districts in New York State can opt to grant a reduction on the amount of property taxes paid by qualifying senior citizens.

Regardless of a homeowner’s age or income, there are also exemptions available to veterans and those who are disabled. There are three different property tax exemptions available to veterans who have served in the U.S. Army, Navy, Air Force, Marines and Coast Guard. Local governments and school districts may also lower the property tax of eligible disabled homeowners by providing a partial exemption for their legal residence. Those municipalities that opt to offer the exemption also set an income limit.

Knowing that the property tax benefits will be preserved in a Revocable Trust or a Medicaid Asset Protection Trust can ease the concerns about engaging in this type of planning. Transferring your house to one of these trusts will prevent your estate from going into probate at your death. Probate is the Court process of validating your Last Will and Testament. The process can take time and delay the distribution of your estate. Beyond probate avoidance, depending on the type of trust you create, it may also provide the additional benefit of protecting the property from being counted as an asset for Medicaid eligibility. 

While the concept of transferring your house can feel complicated and the word “irrevocable” seems daunting, there is much that can be gained from this type of planning without the loss of valuable benefits.

Britt Burner, Esq. is a Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan and East Hampton.

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