Category Archives: Banking

Tipflation and our updated 2025 holiday tipping guide

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Winston Churchill:  We make a living by what we get, but we make a life by what we give

Tipflation

Have we overdone it?  Do you think that tipping became overdone in the Pandemic?  Many today are tired of “tipflation” and believe tipping has taken over every service, including fast food, coffee shops, even retail and even medial offices. 

The tipping culture in the US originates in part from employers being allowed to pay low wages leaving some workers to rely on tips to be able to pay their bills.  In the 1960s, Congress allowed employers a “credit” for tips so they could pay workers less than the minimum wage under the theory that the workers received additional compensation from customer tips.  This is especially true for restaurants, where workers rely on tips to survive.   

But the theory does not necessarily apply to other workers.  And where tips apply, what you give should reflect the quality of service provided; it should not be obligatory. 

You may believe employers should pay more, but sometimes you are the one in that role, paying workers who rely on the tips.  Other times, you may find a service charge already added so be careful not to also give a tip. 

Update for holiday tipping

With this background on tipping in our country, we now turn to tipping for the holidays: This remains a time to say that special “thank you” to those who help get us and our families through each day, often throughout the whole year.  These tips should be “from the heart,” as a symbol of gratitude, rather than being expected. 

When you tip, please be mindful that the message you intend may not always be obvious. Your giving should show appreciation and respect.  Sometimes a smile, a kind word or even a note can really make someone’s day and have more lasting meaning than a Starbucks gift card.  Also be aware of any local customs to avoid anything uncomfortable.  This is especially if you are outside the US. 

Planning, budget and approach

Before you start giving anything, set a budget and make a list so you cover everyone fairly without overextending yourself.  Some use an “up to” method for guidance, as in “up to one session,” or “up to a week’s salary,” etc.

Like the holidays, this should be fun rather than stressful.  If you are sincere in expressing gratitude, people appreciate that you are doing what you can and often respond with the same cheer you demonstrated. 

For those you can’t tip, you can still make them feel appreciated

If you had to call emergency services or had a great experience with someone else who is not allowed to receive a holiday tip, you can send letters of thanks directly to a local hospital, fire station or police department.  You may be able to send a meal or buy coffee.  Check for any online bulletin board in your town, both to post a thank you note and to see if there are other ways to acknowledge your those you appreciate. 

“Neither snow nor rain…” – the delivery people

Despite the weather, terrain or traffic, your mail carriers, FedEx, UPS and Amazon drivers deliver your mail and packages every day and ensure that your online purchases arrive on time and in good condition.  

As you decide what and how much to give, check each particular company’s gift giving restrictions:

1.  Mail carriers – are prohibited from receiving any cash gifts and can get gifts valued no more than $20.  Unfortunately, the limit has not increased for inflation.

2.  FedEx – employees are prohibited from accepting gifts, but a wave, a smile or a note would be nice.

3.  UPS – workers are allowed to accept tips, but UPS discourages the practice.

4.  Newspaper delivery – if you still get the news in print, a gift of $15-$35 is standard.

5.  Amazon driver – we suggest the same as for newspaper delivery. 

6.  Food delivery and curbside pickup – again we suggest the same as for newspaper delivery.

Caregivers for kids, parents and pets

Caregivers for your children, parents and pets can be lifesavers as they provide care, education, exercise, and attention to those you care about most.  This is the time of year to let them know that you are thankful for all that they do.  The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

1.  Nanny/au pair – a week’s salary and a small gift.

2.  Daycare teachers – a $25-$75 gift.

3.  Home healthcare worker – from one week up to a month’s salary.  If tips are not permitted, consider cooking or baking something special.  If the care is in a senior living or hospital setting, be sure to cover the whole shift. 

4.  Teacher – a small gift and a handmade card from your child.  Note that a cash gift could be misconstrued as a bribe.  You can pool resources with other parents for a gift card. 

5.  Dog walker – depending on your walker’s schedule, you may want to give a day’s pay up to a full week’s pay.

6.  Dog groomer – from half up to the full cost for a single service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect.  If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office, or sneak a Starbucks card into their stockings. 

Home Maintenance

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way. 

1.  Trash and recycling collectors – a gift of $25-$35, which you may want to mail directly to the collection company if you can’t safely leave for the collectors.

2.  Door attendant – a gift of $25-$100, depending on their role during the year.

3.  Regular cleaning person – up to the cost of one visit.

4.  Landscapers/gardeners – a gift of $25-$50 per person or if you have just one person doing the work, up to the cost of one visit.

5.  Parking garage attendant – a gift of $25-$50.

6.  Building’s handyman, superintendent and custodian – a gift of $25-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a door attendant who is quick to carry heavy packages for you, then a larger tip may be warranted. 

Personal Services

It’s hard work keeping you fit, perfectly coiffed and beautiful, and ready to face the day.  Now is a good time to show appreciation for those efforts, especially when they help you get that special appointment when you really need it.  In deciding whether to tip and how much, consider this:

1.  Hairdresser/manicurist – if you’re a frequent visitor, tip up to the cost of one visit.  If you’re a less frequent customer, then $20.  However, if you tip generously through the year, you do not need to give an extra tip at the end of the year.  If multiple people work on your hair, divide the tip among them.  And if any of them double as your therapist, add a bit more!

2.  Personal trainer – up to the cost of one visit.

3.  Massage therapist – also up to cost of one visit.

4.  Golf or tennis instructor or sax teacher – up to one lesson or a thoughtful gift.

Good feedback is appreciated by their supervisor as well as by the people who are helping you out. 

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year.   

Send a thank you note to the supervisors of the people who provide you with great service throughout the year, letting them know how impressed you are with the service their people provide.

Enjoy the season!

  • Steven

As Scammers try harder, just be more clever! (update)

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We are constantly assaulted by texts, emails and calls with people trying to access our information for their benefit or trying to trick us into sending them payments.  How do you protect yourself?

The first step:  Think before panicking and reacting; careful observation could save you from a scam!  If you have an emotional response to a message, try to assess why and wait to respond.  Scammers use deception and emotions, so be wary.  

Second step:  practice computer and internet hygiene – install all updates, run anti-virus and malware programs, avoid suspicious interactions, freeze your credit accounts and monitor your credit, use multi-factor verification, and respond to any bona fide alerts.  Also encrypt and back-up sensitive data to protect it from access.  

Final step:  never divulge personal information without first verifying the contact independently.  For a text or email, check your account on your smartphone app or website browser – but don’t use the link in the message!  If the message is a text, you can often delete and report it as junk on your phone. 

We updated some examples of recent scams – any sound familiar? – to help you calm any emotional reaction before responding:

  • Do you really think you won a lottery you never entered?  There is the old joke that says, “what, you didn’t buy a ticket?”
  • If you don’t have a credit card with Wells Fargo, why are they calling you about a BestBuy purchase?  This may make you curious and want call only to hear the recording asking you to input your debit card number – don’t provide it!  Banks and brokers will not ask you to divulge your information.  Also, you can verify the bank numbers on line. 
  • If Amazon really thinks there is fraud, why does the person answering the call say “Thanks for calling Amazon” when the call came from them?  Why do they know nothing about your account information?  If there was a fraud, they would be telling you about the transaction instead of asking for all your account details.  Check your account on your app or the Amazon website. 
  • Do you think you won a gift from Ace Hardware, Walmart or another place where you haven’t been shopping?  Check the e-mail address or text number – if it’s not from the company, then someone is trying to gain access to your information.  
  • Should I respond to this silly personality quiz on Facebook?  No, it might be phishing for personal details for identity theft.
  • Is this great job offer for me?  If you didn’t apply, why is this company reaching out to you?  Again, check the email address or phone number independently. 
  • Do you actually think you are the one randomly chosen to receive an inheritance from someone in another country who supposedly has no heirs?  The estate mentioned is often from a country you may never have visited, and the estate is an enormous amount.  As your grandmother may have told you, “if it sounds too good to be true, it is!”
  • Does your phone or computer really have this terrible virus?  How did they detect this?  Run your own antivirus scan. 
  • If you did not buy a MacBook or AirPods and no one stole your credit card, why is someone calling from the Netherlands to claim a purchase was made on your account?  Often you can tell that the callers are not from the companies they claim. 
  • Why did you receive a Docusign message or a PDF attached to an email for your salary or benefits?  And why did it come from someone’s personal email?  Clicking on the link could allow them to install malware and gain access to your financial information – don’t!
  • It may look like a Microsoft message or some other legit message, but why do you suddenly need to update your account password or sign for a matter you don’t recognize?  Check the source of the message –official-looking messages can come from dubious senders, often outside the US.  Be wary of e-mails from random accounts rather than the actual vendor.  
  • Why is someone calling about a Zelle transfer? When you listen, the case number looks suspiciously like a phone number that could allow then to gain access to your bank account. 
  • Why is the border patrol in Texas calling you and claiming that they opened your mail and need to put a hold on your social security number?  What does it even mean to “put a hold on your social security number” and how does that even relate to contraband?
  • Why is UPS or FedEx claiming the item is undeliverable because your address is wrong?  If you did place an order, you would have confirmed the address.  Check the source of the text or email and independently verify any purchases on the vendor site. 
  • You may be worried about crime in your city, but is that robo-caller really providing funds to support police? Most police departments do not solicit funds by this way so hang up and verify any charity before donating.
  • Why are they offering tax debt relief when you are current on your taxes?  Was there some new IRS program you never heard of?  Check with us before responding. 

Summary

If something seems off, it probably is.  Try to avoid a panicked reaction when you receive a notice of an unauthorized payment, an overdue bill, a payment authorization you didn’t expect or a claim that you violated customs.  And don’t click on any link!  Go to the vendor’s phone app or website to access via a browser you trust to check before responding.  The link in a text or e-mail may appear okay but close examination may reveal some flaw.  

And here is good reminder from the IRS:

  • The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov.

The FTC suggests that you can send a screenshot to 7726 (SPAM).  This may help your wireless provider identify and block similar messages in the future.  You can also report it to the FTC at ReportFraud.ftc.gov.  And if you do become a victim, this New York Times article How to Avoid Online Scams and What to Do if You Become a Victim had information with links on what to do if you are scammed.  

Stay safe and let me know if you have any questions or comments! 

Steven

As Scammers try harder, just be more clever!

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We are assaulted by people trying to access our information for their benefit or trying to trick us into sending a payment fraudulently.  Now, with all the news on artificial intelligence, we will see even more ways we may be assaulted. 

How do you protect yourself?

The first step:  Think before panicking and reacting; careful observation could save you from a scam!

Here are some examples, starting with familiar ones:

  • Do you really think you won a lottery you never entered?  There is an old joke about not buying a ticket.
  • Do you think you won a gift on Ace Hardware or Walmart when you haven’t been shopping there? Check the e-mail address – if it’s not from the company, then someone is trying to gain access to your information.
  • Do you actually think you are the one randomly chosen to receive an inheritance from someone in another country that supposedly has no heirs?  The estate mentioned is often from a country you may never have visited, and the estate is an enormous amount, so probability says it cannot be real.
  • If Amazon really thinks there is fraud, why does the person answering the call say “Thanks for calling Amazon” when the call came from them, and why do they know nothing about your account so that they have to ask for your information?  If there was a fraud, they would be telling you about the transaction instead of asking for all your account details.
  • No one stole your credit card, and you know you did not buy a MacBook or Airpods, so why is someone calling from the Netherlands to claim a purchase was made on your account?  Often you can tell that the callers are not from the companies they claim. 
  • It may look like a Microsoft message or some other legit message, but why do you suddenly need to update your account or sign for a matter you don’t recognize?  Check the source of the message – we have seen official-looking messages from many dubious senders, including some from India, Japan, Russia or somewhere else.  Be wary of e-mails from random accounts rather than the actual vendor.  
  • Why is the border patrol in Texas calling you claiming that they opened your mail and need to put a hold on your social security number? What does it even mean to “put a hold on your social security number” anyway and how does that even relate to contraband?

If you receive notice of an unauthorized payment or overdue bill, or even a payment authorization you didn’t expect, don’t click on the link, go to the vendor’s website to access via a browser you trust to check before responding.  The link in a text or e-mail may appear okay but close examination reveals some flaw.  

The same applies if you receive a DocuSign notice:  make sure the sender is legitimate.  Clicking on the link could allow them to install malware and gain access to your financial information. 

Here’s another example:  We recently had someone claim to have seen our website and want to hire us for tax work.  When we asked for more information about their situation, including the state in which they filed, the response was a message asking to click on links to their information.  The fact that they did not respond to questions about hiring a tax professional was a tip-off.  The IRS warns:

Thieves take time to craft personalized emails to entice tax professionals to open a link embedded in the email or open an attachment. Tax pros have been especially vulnerable to spear phishing scams from thieves posing as potential clients. Thieves might carry on an email conversation with their target for several days before sending the email containing a link or attachment. The link or attachment may secretly download software onto tax pros’ computers that will give the thieves remote access to the tax professionals’ systems.

IRS

You can avert risks by being very suspicious, as well as being cautious. 

More steps:  you will also want to monitor your credit, even freeze your credit accounts, make sure your computer and smartphone software is up to date, use two-factor verification, run your malware and antivirus scans frequently, and respond to any alerts.  For more ideas such as getting an PIN from the IRS, see our post on Phishy Phone calls.  Here is good reminder from the IRS:

This New York Times article How to Avoid Online Scams and What to Do if You Become a Victim had more good ideas on avoiding scams and what to do if you are scammed.

Let me know if you have any questions or comments and stay cautious! You can always call me if you are not sure what to do.

Steven

Year-end Tax Planning 2022-2023 and Inflation

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Why year-end planning?

We are told to act before year end because it is our last chance to have an impact on our 2022 taxes.  Planning throughout the year could be even better, if you recognize when to act, but most of us are pulled in so many directions that it is hard to organize and act until there is an external pressure, such as the looming end to the calendar year.  So, when you are ready to take stock of your situation, you can make the planning effort even more productive by reviewing your investments, estate plan, and finances, not just your taxes – consider it a “financial checkup.” 

Overview

This year, there are changes that occurred due to inflation as well as legislation.  While we had expected tax increases, none materialized (there may still be tax law changes, but legislation such as the “SECURE Act 2.0,” child credit and tax extenders all remain in flux).  We review the changes that did occur before turning to actual year-end tax planning strategies. 

Impact of inflation

Is there ever a good side to inflation?  Perhaps the IRS adjustments to several tax-related thresholds that change for 2023 count, such as these:

The standard deduction MFJ             $27,700                       up from $25,900

The gift and estate tax credit              $12.92 million             from just over $12 million

The annual gift tax exclusion             $17,000                       up from $16,000

401(k) maximum contribution             $22,500                       plus $7,500 (for over 50)

IRA max.                                            $6,500                         plus $1,000

SEP-IRA max.                                    $66,000

The tax brackets at which rates increase have also gone up, so more is taxed at lower the brackets.

Inflation Reduction Act

The Inflation Reduction Act passed this summer and included changes to tax laws regarding energy saving credits.  The Act also contained other provisions, such as the 15% AMT for C corporations and 1% stock buyback tax.  It’s unfortunate that the abbreviation for the act is IRA, as we already have that in our tax lexicon. 

Beginning in 2023, this new law changes conditions for obtaining the $7,500 credit for new electric vehicles (EVs) and adds a $4,000 credit for used EVs (EVs that are 2 or more years old).  The Act also expanded the reporting requirements for the credits on your tax returns.  Finally, EV buyers can monetize the credit at purchase to reduce the sale price, rather than wait for their tax filing.  Remember there is also a credit for installing a home charger.

To obtain a credit for new EVs, the battery’s minerals must be extracted or processed in the US or a free-trade partner.  The battery must also be manufactured or assembled in North America.  Final assembly of the EV must be in North America.  There are price ceilings on EVs and income limits on claiming taxpayers. 

The Act extend and expanded home energy credits but also expanded the reporting requirements.

Tax planning

Start with this goal: to lessen the total tax due in 2022 and 2023 combined.  Usually that means delaying income to 2023 and accelerating deductions to 2022.  For 2022-2023, the jump in the standard deduction could mean losing itemized deductions in 2023, so pay special attention to what you can shift to 2022.  As we pointed out our post for 2021 year-end planning, if you are concerned about future tax rate increases, you can use a Roth Conversions to bring future income into 2022.

Now to the planning:  Can you act at all? 

Each year, we advise that you be practical, focusing on where you can actually make moves.  For many, the high standard deduction (which is even more for over age 65 taxpayers) means you will not itemize (i.e., your total for itemized deductions is less than the standard amount so you take the higher standard deduction).  And, if you are not itemizing, you have fewer ways in which to affect change in the taxes due in either year.  If you can itemize, you have more tools for planning. 

Tools – income

You can reduce taxable income by maximizing your retirement contributions with your employer via 401(k) or 403(b) plans and IRA contributions if you are below the thresholds.  If you are self-employed, you can contribute to your own qualified plan such as a SEP-IRA. 

You may also be able to contribute to a health savings or flex account.  Be sure to see to use any flex account balances before they expire. 

Review your investments to see if you can take losses to reduce capital gains and up to $3,000 of ordinary income.  ax loss harvesting reduces net taxable capital gains, but be sure not to run afoul of the wash-sale rule.

Tools – deductions

Review your unreimbursed medical expenses, which you can deduct if the total is over 7.5% of your adjusted gross income. 

State and local taxes are capped at $10,000, so you may not be able to shift much between years.  And it is difficult to accelerate mortgage interest on first and second homes.  

Often, the place for the most change is in charitable deductions, where you can bunch two- or three-years’ worth into a single year so you can itemize.  You can use a donor advised fund (“DAF”) to bunch, by contributing all in one year, then having the DAF send annual amounts.  Also, you can transfer up to $100,000 from a traditional IRA directly to charity if you are over 70½.  Note that Congress has not extended the $300 above the line charitable deduction. 

Before you finish, check withholdings and estimates paid

Especially if you increase income in 2022, review your total paid to the IRS and state via withholdings and estimates make sure that you meet the safe harbor rules.  If not, you could owe interest for under-withholding.

And remember your estate plan review

As noted above, the federal gift and estate tax credit  is close to $12 million for 2022 and increases to $12.92 million in 2023.  If you have excess wealth, you may want to gift while you can, especially if you want to use certain trusts, like a GRAT or QPRT.  For more on estate planning updates, see our estate planning checkup post. 

  • If you do review your estate plan documents, also review beneficiary designations and asset ownership to make sure everything is current and flows correctly. 

Summary

As you review your 2022-2023 tax planning, determine what you can shift and project the impact.  Then follow through on the details. 

Let us know if you have any questions. 

Good luck and best wishes for happy and healthy holidays!

We address the impact of inflation on tax thresholds for 2022 and 2023 that affect your year-end tax planning. We also review the Inflation Reduction Act and EV credits. As in the recent years, many taxpayers will not be itemizing because of higher standard deduction (rising to $27,700 for married couples in 2023), unless they bunch charitable deductions from two or more years into one year.

Mid-Year planning – Rates, Roths and Rules

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Checking your income tax planning now is a good idea – tax planning can be done year-round.  As with any planning, acting while you can have an impact is best.  Tax laws may change before the end of 2022, e.g. Secure Act 2.0 may be adopted, but it’s still wise to know where you stand now. 

The IRS seems to have a similar thought about tax planning as they created a website with tools and resources at Steps to Take Now to Get a Jump on Your Taxes – if you check it out, let us know what you think.

First question:  did you get a tax refund, or did you owe? 

Refunds

Some people enjoy seeing a big refund, but as you may have heard, you are giving the government an interest-free loan with your money.  If you want to save, there are better ways, like an auto-debit to an IRA or to a savings account.

Not sure what happened to your refund?  There is a updated IRS tool for “where’s my refund” that now goes back three years at “Where’s My Refund?” 

The tool confirms receipt of your tax return, shows if the refund has been approved and indicates when it will be or has been sent.  If three weeks pass without receiving the refund, then you may want to contact the IRS.

Owed taxes

If you owed a significant amount for 2021, the IRS has another tool that helps make sure you have enough withheld for 2022 at Tax Withholding Estimator.  This way you can avoid penalties and interest for under withholding. 

If you do not get clear answers using the estimator tool, try comparing your 2022 paystub to your 2021 tax return, review the IRS guidance at Publication 505, or contact us for help.  

Second question: what happens if you act now?

Marginal vs. average tax rate

Knowing the rate at which additional net income will be taxed helps you make decisions such as the one in the next section, whether to convert an IRA to a Roth IRA or not. 

The marginal rate is your tax bracket, the rate at which the last portion of your income is taxed.  Any additional income would be taxed at this rate.  Your average tax rate is the percentage of income taxes to total taxable income.  You can have a low average rate but hit a high marginal rate, which may mean that taking more income into the current year would be costly. 

Time to convert to a Roth IRA?

The decision to convert a traditional IRA to a Roth IRA depends on several factors.  One is the rate of tax you pay now compared to the rate you expect to pay in retirement.  If your rate will be the same at retirement as now, then there are many reasons to convert, such as no required minimum distributions at retirement for a Roth IRA.  If your tax rate at retirement will be significantly less than currently, then converting now would be less tax efficient. 

If you want more on this decision, see “To Roth or not to Roth?” or check out Pros and Cons here.

Also, we discussed the back-door Roth IRA in our year-end post on 2021 tax planning.  

Last question:  how with this affect the rest of your finance?

Coordinate with investing and estate planning

Make sure any changes take for tax reasons do not foul your investment or estate planning. For more on estate planning, see estate planning checkup post. 

Summary

As you review your 2022 tax planning, check your 2021 returns for ideas on what to adjust, consider the impact of future tax rate increases and act when the impact on other planning also makes sense. 

Let us know if you have any questions. 

Good luck