How To Become A Veteran Entrepreneur

With Veterans Day just a few days away, we sat down with Michael Kothakota, CEO of WolfBridge Financial, to discuss how to become a veteran entrepreneur.

 

As a veteran of the North Carolina National Guard and someone who served in Operations Iraqi Freedom and Enduring Freedom, Michael was able to return to civilian life and become a successful entrepreneur. Below he answers questions on exactly how he was able to make the transition.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/11/How-to-Become-a-Veteran-Entrepreneur_WolfBridgeFinancial.mp3] [wpdm_file id=10]

1. You served in Iraq, how did that help you make the decision to become an entrepreneur? 

2. Did serving in a war make it difficult to transition into the business world?

3. How was the 1st year as a veteran entrepreneur?

4. Did the military help prepare for being an entrepreneur you in ways you had no idea it would?

5. I’m a veteran – how can I get my business started?

6. I’m a veteran – can you help me get my business started?

Are you a veteran entrepreneur? If so, what are some tips you can share that on how you were able to make the transition after serving our country?

Do you need help with an idea or getting a new company started? Please feel free to contact Michael Kothakota at Michael DOT Kothakota AT WolfbridgeFinancial DOT com.

Podcast: Communicating Finances with your Spouse

If you are in a marriage, or have been in a marriage, you know how difficult it can be to communicate about money and finances. Whether it is talking about one partner spending too much or figuring out the benefits or a shared bank account – none of the conversations are ever very easy.

There are keys to making those conversations more productive however, and recently WolfBridge CEO, Michael Kothakota, sat down to discuss them.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/09/CommunicatingFinanceswithYourSpouse_WolfBridgeFinancial.mp3] [wpdm_file id=8]

1. Is talking about money with your spouse important?

2. Are there times when you should hide or keep financial information from your spouse?

3. Is it important to have a shared bank account when you’re married?

4. Are there things you shouldn’t talk about with your spouse when it comes to money or spending?

5. What is the most important things you need to understand when it comes to spousal finances?

6. Is there a secret to handling financial issues in a marriage?

Do you have any secrets to share when it comes to talking about money and finances with your spouse or partner? Are there tips you can provide other married couples on how to talk about money? Feel free to share them in the comments section below.

What is Collaborative Divorce? The Video

We spend a lot of time trying to explain collaborative divorce on the WolfBridge Financial blog and our new video follows that pattern.

WolfBridge CEO, Michael Kothakota, recently sat down to discuss in simple terms what collaborative divorce really is. In the video he specifically breaks down the difference between collaborative divorce and traditional divorce and explains the role of a financial neutral in the collaborative divorce process.

What is Collaborative Divorce?

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For additional free collaborative divorce information, check out the links below:

More Free Information on Collaborative Divorce Process:

–> Interdisciplinary Collaborative Divorce: A Process for Effective Dispute Resolution

–> Podcast: The Differences Between Traditional & Collaborative Divorce

–> Collaborative Divorce in Simple Terms

–> Who is Involved in the Collaborative Divorce Process

–> Financial Benefits of Collaborative Divorce

–> Podcast: Choosing Collaborative Divorce

Should I Buy Apple Stock?

We’re avid users of Apple products at WolfBridge Financial. From the iPhone, to the iPad, to the iMac, to the new MacBook Pro with Retina display – our business functions efficiently with a great deal of everyday help from Apple. Our CEO, Michael Kothakota, even penned a blog recently titled Steve Jobs: A True American.

At some point we may look back at August 20, 2012 and see that as the exact date when we should have seriously considered the merit of Apple shares.

 

Why? Because Apple is now considered the most valuable company of all time with stock rising 1.8% to $664.74 and pushing it’s market capitalization to $623.14 Billion.

Just a few days ago Jefferies analyst Peter Misek claimed a new iPhone announcement, that should come in mid-September, would boost his price target to $900.

Some analysts are even going as far to say that that shares could reach $1,000 with the launch of the new Apple TV product.

Should I Temper my Apple Expectations?

While Apple shares have no apparent reason to head in a negative direction based on their current 5 year growth trajectory – there are always reasons for concern when purchasing shares at such a high price.

That being said, there was a point not too long ago when Apple was trading at $7 a share.

Go ahead and do the math on if you had $600 worth of shares at $7 per share. We’ll wait.

That’s right. Your $600 investment in Apple would now be worth $56,562.

Is the time right to purchase some Apple shares? Contact us and we can give you our two cents.

Interdisciplinary Collaborative Divorce: A Process for Effective Dispute Resolution

WolfBridge Financial CEO, Michael Kothakota, recently co-authored an article with attorney Randolph (Tre’) Morgan III, JD entitled Interdisciplinary Collaborative Divorce: A Process for Effective Dispute Resolution.

The article was featured in the Charleston School of Law Journal Resolved: A Journal of Alternative Dispute Resolution.

 

Morgan and Kothakota are both members of the Raleigh organization Separating Together, a group of attorneys, financial specialists, child specialists and co-parenting advisors working together to help couples and their families access the collaborative family law alternative in North Carolina.

Below is a short excerpt of the article and a link to download the PDF.

The practice of law is changing. Clients now demand quicker, less expensive, and more effective legal services. In fact, clients do not want legal services anymore. They want solutions.

This is especially true in family law and divorce matters. Fewer and fewer clients adopt the divorce is war mentality that characterized traditional divorce and family law processes. Fewer and fewer clients are willing to tolerate the emotional, financial, and legal destruction that comes with adversarial divorces. Clients want to protect their children, preserve their financial future, and begin the next stage of their lives free of the trauma of an ugly divorce. Interdisciplinary Collaborative Divorce (ICD) is designed to meet those needs.

However, most dispute resolution professionals either have not heard of ICD or lack sufficient familiarity with the process. This paper presents an overview of ICD, seeks to explain the method, and describes the professionals involved in making it a highly effective dispute resolution process.

Podcast: What Does a Collaborative Divorce Cost?

One of the most frequent questions we receive when it comes to the collaborative divorce process is a simple one – “How much does Collaborative Divorce cost?”

It’s a sensible question and certainly one that should be asked about any form of divorce you choose. It may seem like collaborative divorce must be more than a traditional divorce, right? Not exactly the case.

WolfBridge Financial CEO, Michael Kothakota, takes a few minutes to answer some of the pressing questions that most divorcing couples have when it comes to the cost of divorce.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/07/Cost-of-Collaborative-Divorce_FINAL.mp3] [wpdm_file id=6]

1. So, how bad can the cost of a divorce really

 

be?

2. What happens to a lot of these individuals who you’ve seen go through tough, financially straining divorces?

3. In your opinion, how important is it to make sure the divorce process is a smooth one?

4. Knowing that Collaborative Divorce involves a lot of professionals – is it expensive?

5. Is there are reason collaborative divorce can be more expensive?

6. OK, so collaborative divorce can potentially be more expensive, but there are hidden costs in traditional divorce that often make it more expensive from a financial and personal standpoint?

7. What are some exact cost comparisons between traditional and collaborative divorce?

8. So bottom line, how expensive is divorce?

More Free Information on Collaborative Divorce Process:

–> Podcast: The Differences Between Traditional & Collaborative Divorce

–> What is Collaborative Divorce

–> Who is Involved in the Collaborative Divorce Process

–> Financial Benefits of Collaborative Divorce

–> Podcast: Choosing Collaborative Divorce

Free Collaborative Divorce Information

Because we get a lot of good information from a lot of great people online via websites, blogs, Twitter and Facebook, we thought we would pull together a comprehensive list that includes some of the great places where you can find free collaborative divorce information online.

Check out some of the links below and please let us know if we are missing any other great sources in the comments below or on our Facebook Page.

Twitter

@PeaceADRLawyer –> collaborative practice lawyer settling cases in a peaceful, dignified way. Love music, craft beer, Detroit & U-M sports, husband & lucky father of 3 teen boys.

@SacDivorce –>The family law attorneys at Bartholomew & Wasznicky provide families and individuals throughout the Sacramento region with exceptional legal representation.

@CollabLawKerry –> Collaborative Divorce Attorney in the Triangle Area of North Carolina dedicated to client-determined resolution to separations and divorce.

@LanderholmLaw –> Portland, Oregon Family Law (divorce, child custody, child support and spousal support)

Blogs/Websites

Facebook

Podcast: Choosing Collaborative Divorce

As mentioned in previous posts, the WolfBridge Financial team works with groups like Separating Together and the North Carolina Association of Collaborative Divorce Professionals (NCACDP) to promote the Collaborative Divorce process.

In a new podcast from WolfBridge Financial CEO, Michael Kothakota, we cover the process of choosing Collaborative Divorce. This podcast could be extremely helpful if you are in the midst of a divorce and are unsure as to what you should do. It explains whether or not you may be right for collaborative divorce and how you can get the process started. A full list of the questions asked can be found below.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/07/Process-of-Choosing-Collaborative_FINAL.mp3]

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1. Who is right for collaborative divorce?

2. What if you don’t think your spouse will be cordial in the collaborative meetings?

 

 

3. How can I get the Collaborative Divorce Process Started?

4. What questions should I ask collaborative divorce professionals before choosing one?

5. I know the collaborative process puts a great deal of emphasis on making sure the kids aren’t forgotten. Can you explain how they are involved in the process?

6. What if I have additional questions about the collaborative divorce process?

Additional Free Information on Collaborative Divorce Process:

–> Podcast: The Differences Between Traditional & Collaborative Divorce

–> What is Collaborative Divorce

–> Who is Involved in the Collaborative Divorce Process

–> Financial Benefits of Collaborative Divorce

New Tax Deduction for North Carolina Business Owners

A few weeks ago the North Carolina General Assembly passed law G. S. 105-134.6(b)(22).

Why is that important to you? Because if you are a business owner, beginning with the 2012 calendar, you have a new way to save some money.

 

Here is the verbiage directly from the North Carolina Department of Revenue Directive:

This directive addresses a new deduction available for taxpayers who include net business income in federal adjusted gross income (AGI) as reported on the North Carolina individual income tax return. The law allows a deduction of up to $50,000 of net business income included in AGI that is not considered passive under the Internal Revenue Code (IRC). In the case of a married couple filing a joint return where both spouses report a net business income, the maximum dollar amount applies separately to each spouse’s net business income included in AGI, not to exceed a total of $100,000 (maximum $50,000 each). This deduction is available for tax years beginning on or after January 1, 2012.

Now that you’ve read the official verbiage – here it is broken down in layman’s terms.

–> The deduction can be for both spouses (husband and wife). So if your spouse doesn’t have any ownership in the business – it may be time to reconsider that. If you both are bringing in business income then you can get a deduction of up to $100,000 total.

–> The deduction is not for passive income. It only applies to your business if your are actively participating in the day-to-day workings of the business. If you are an entrepreneur who owns and runs his own company – this deduction is for you. If you own a business, or part of a business, strictly in a financial sense then you won’t receive a deduction.

–> The deduction is for individuals that OWN a business. Businesses owned by individuals include proprietorships, partnerships, LLCs, LLPs and “S” corporations.

–> The deduction is for NET business income. For example, if you have $55,000 of business income but $75,000 of business losses, you have 0 net business income, and therefore no deduction.

–> A $50,000 deduction does not save you $50,000. The full benefit comes from multiplying the net business deduction by your NC tax rate (up to 7.75%). This means that a full deduction at the top tax rate will save you AT MOST $3,875 per taxpayer ($7,750 per married couple).

If you have any additional questions about the new tax deduction and want to know if you qualify, feel free to give us a call at 919.267.6740.

The Financial Benefits of Collaborative Divorce

A typical divorce is a long, costly process – both emotionally and financially. Once in the court system, a divorce case can often take at least 18 months (or longer) to resolve. Attorney and court fees can pile up in a hurry during this time period. Because of this, family law practitioners & their clients are increasingly turning towards the collaborative divorce process to save time, money and to create better outcomes for both spouses.

Let’s take a look at just one of the benefits today though. How does the collaborative divorce process save me money?

 

The financial benefits of collaborative divorce include:

• Major reductions in court costs/fees (no trial).

• Reductions in lawyer fees associated with going to court (hearings, discovery, appearances, etc.).

• Fixed overall costs that can help with long term budgeting

Removing a trial from the divorce process also removes a host of court fees and other costs that come from having to always be in court, like additional child care, time off from work, etc. The collaborative divorce process is more flexible than traditional divorces and allows both parties to work on their own schedule. No need to take vacation days to complete the divorce or to find someone to watch your children while you’re spending two days with your attorneys. A flexible schedule allows both parties to save money.

You’re also saving money on the lawyer fees side. Since collaborative divorces are completed much quicker than traditional divorces (on average about 18 weeks), you save money with a much shorter overall process.

One thing you do need to understand is that a collaborative divorce CAN cost more than a traditional divorce – it just isn’t likely. A collaborative divorce can be counted on to cost between $16,000 and $18,000 no matter what happens. Because the cost is fixed, it is much easier to budget now and for the future.

A traditional divorce may only cost a few thousand dollars if you are extremely lucky, but typically costs will escalate anywhere between $20,000 and $50,000. Traditional divorces can even cost much more than that depending on how bad things get in proceedings.

Any divorce is going to cost money, but not all divorce processes are created equal. Collaborative divorces are an increasingly popular alternative to a traditional divorce and end up saving time, money and reducing stress on the spouses and family.

Find out more details on the Collaborative Divorce Process at the following links:

–> Podcast: The Differences Between Traditional & Collaborative Divorce

–> What is Collaborative Divorce

–> Who is Involved in the Collaborative Divorce Process

Podcast: The Differences Between Traditional & Collaborative Divorce

Divorce is a tough thing for anyone to go through. There are other ways to go through the divorce process, however, than the typical court battle most folks see on TV and in movies.

At WolfBridge Financial, we work with groups like Separating Together and the North Carolina Association of Collaborative Divorce Professionals (NCACDP) to promote the Collaborative Divorce process.

What is the collaborative divorce process? We answered that question a few weeks ago on this very blog. You can find it HERE.

In the Podcast below we want to dig deeper into the specific differences between Collaborative Divorce and Traditional Divorce. WolfBridge CEO, Michael Kothakota, answers some important questions that help differentiate the two processes and hopefully make your decision easier when choosing which route to take.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/06/Difference-Between-Traditional-Collaborative_-FINAL.mp3]

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1. What are the most basic differences in the two divorce processes?

2. Can you elaborate on the full disclosure clause?

3. How is the negotiation process different in collaborative divorces?

4. What are the different steps in the collaborative divorce negotiation process?

5. Why is the agreement made in collaborative divorce between ex-spouses considered durable?

6. How long are meetings in the collaborative process?

5 Tips For Budgeting Your Taxes for the Self Employed

No one will claim that the tax code is simple or easy to understand.  This is even more true for the self employed. If you work for yourself it’s likely that you wear many hats.  Switching between the IT guru, the project manager, the sales team and even the accountant can be taxing (sorry, that’s horrible) for anyone.

With that in mind, we’ve developed these 5 tax tips for the self employed.  These will help you budget effectively throughout 2012 so you’re not stuck holding the bill in April of 2013.

 

1)Separate Business and Personal – Set up separate bank accounts for your business and for your personal banking.  This will help keep your records straight, help your accountant if you hire one, and in general help prevent accounting errors.

2) Deductions are your Friend – Make sure you claim as many deductions as possible. Are you paying student loans? The interest is deductible. Are you paying health insurance premiums? Those are deductible as well.  Keep track of your business expenses – they should all be deducted from you income before calculating owed taxes.  Here’s a good list of deductions that might apply to your business.

3)Hold onto your Records – No one wants to get audited, but it does happen. How do you protect yourself?  By keeping good records of your business’ income & tax documents! You should hold onto these documents for years as the IRS could question your return years after the fact. A good rule of thumb is to hold onto these documents for at least 5 years.

4) Consider a Roth IRA (for the younger crowd) – A Roth IRA (and other similar retirement devices) are a good way to sock away income for retirement without paying taxes.  There are restrictions on how you can access the money (you pay a penalty for removing it early) but Roth IRAs are great investments for the self employed in their 20s or 30s.

5) Consider Deferring Income – Just bumped up into that higher income bracket?  You can defer income until the next tax year in many cases.   Not sure if you should defer income?  Check out this handy guide.

The above tips will help you save the correct amount for your taxes and hopefully help you pay the absolute minimum to the tax man.

Note that these are broad tips for the self employed and may not apply to your specific situation, so make sure you’re following the tax code & save those records!

Additional Tax Tips for the Self Employed

Our resident tax expert at WolfBridge Financial put together the following information over the last few months that may also come in handy.

Who is Involved in the Collaborative Divorce Process?

As mentioned previously in our blog post, What is Collaborative Divorce?, the collaborative divorce process is one that can help make the divorce experience easier on entire families. In this post I wanted to more specifically break down the different professionals involved in the collaborative process and what each of their roles entail.

Each professional is integral in the process and will help create an experience that not only gets you through the divorce peacefully, but helps your family long after.

———————————————————

Attorney

Experienced and specially-trained collaborative attorneys have each chosen to restrict their law practices to

 

handling family law matters outside of the courtroom. What this means more specifically is that they have chosen to not work with traditional divorce cases. Instead, they guide their clients through the practical, emotional, and financial aspects of separation, divorce, and co-parenting in a non-adversarial manner.

Co-Parenting Advisor

Psychologists are a part of the collaborative divorce process in the role of Co-Parenting Advisors. For divorcing couples who elect the “Team Collaborative Process, co-parenting advisors participate with the attorneys as part of an interdisciplinary team. The co-parenting advisors specific focus is on the children in the divorce and the type of parenting the will receive during and after the divorce.

Each parent works with their own co-parenting advisor throughout the process with the main goals as follows:

  • Help parents create and agree upon a mutually beneficial parenting plan for after the divorce
  • Coach spouses on ways to communicate effectively and without hostility
  • Prepare for their relationship as co-parents instead of spouses

Child Specialist

Additional psychologists serve another very important role in the collaborative divorce process – that of a child specialist. The role of the child specialist is to make sure the voice of the child is heard during collaborative divorce meetings. A major role in the collaborative process is shielding children from the anger and stress of their parents during such a difficult time and the child specialist gives that child an adult voice.

The child or children will meet privately with the Child Specialist to engage in discussions that help the specialist learn how the child is experiencing the divorce and what the child may not want to share directly with their parents.

Financial Specialist (aka Neutral Financial Specialist)

Financial specialists offer neutral financial analysis services during the collaborative divorce process. They guide couples toward reasonable, mutually agreeable choices regarding property division, alimony, and child support payments. These financial professionals have participated in collaborative divorce training sessions to learn how to adapt their skills to support families in transition.

Note: Michael Kothakota, CEO of WolfBridge Financial is a member of the North Carolina Association of Collaborative Divorce Professionals and Separating Together. He believes in and practices collaborative divorce.

What is Collaborative Divorce?

Divorces aren’t easy.

No matter what the final reasoning was behind making this choice – it was no doubt a difficult one. At one point you loved this person so much that you envisioned your entire life with them. Now you have a family and need to figure out the best way to transition into your new life.

Many couples end up in lengthy, high conflict situations with attorneys on both sides battling to divide property and custody of children. Other couples may have no problem splitting and simply need help getting paperwork done – the rest they can figure out themselves.

For everyone else there is an option you may or may not be familiar with yet.

Collaborative Divorce.

Couples who may not be on the same page in terms of property division, child custody and spousal support, but are willing and able to do whatever it takes to make the process run smoothly can really benefit from this way of proceeding with their divorce.

In short, collaborative divorce is a process in which you and your spouse negotiate an acceptable agreement with a variety of professionals (or a team) helping navigate the process. This may include an attorney, financial specialist, child specialist and co-parenting advisor.

There are many benefits to handling divorce in the hands of a group of professionals with your financial and family situation in mind including:

  • No trial or litigious hearings and agreement of legal procedures to cut down expenses
  • Stability through a temporary agreement
  • Voluntary exchange of information
  • A negotiated a settlement
  • Come to an agreement on how post divorce issue will be handled.
  • Mediation Training
  • Neutral Financial Specialist who helps you and your spouse understand any issues surrounding your divorce

Main Goals of Collaborative Divorce

 

While it is nice to stay out of court and save a little cash, the main benefit of collaborative divorce is that it puts the children first. The child specialist works as the voice of the children throughout the proceedings while a co-parenting specialist helps create a plan for how you can most effectively take care of your child after the divorce is complete so that he/she is not negatively affected by the experience.

At the same time, the financial specialist will serve as an un-biased intermediary to help resolve property and budget issues so that there isn’t any unnecessary burden on either party and that things are split up amicably.

What does a Collaborative Divorce Cost?

It depends on the team of professionals you end up working with. One thing that is for certain is that it is a lot less expensive than a traditional divorce. You are not paying for costs associated with hearings, discovery of information or even court delays. Instead you are typically paying hourly fees for the help of the aforementioned professionals as they help try and make this experience a much more pleasant one.

Where can I find out more on Collaborative Divorce?

The links below can be very helpful for those considering a collaborative divorce in the state of North Carolina.

Despite Consumer Confidence Growth, We Still Fear Tax Hikes

According to a recent report from Bloomberg News, “the number of Americans saying the U.S. economy is getting better rose in March to the highest level since 2004 as a decline in claims for unemployment benefits offered more evidence of a labor-market recovery.”

The Labor Department showed jobless claims had decreased by 5,000 to 348,000 last week. That number represented the lowest since February 2008.

Despite those positive numbers, the fear of tax hikes coming down, and coming down soon, has consumers running scared.

 

Economic prognosticators are sure those tax hikes are coming soon due to tax cuts, wars, the recession and our growing population of retirees. Plus the federal government continues to spend more than it takes in.

These same experts say that in 2013 the top U.S. income bracket will go from paying 35% to almost 30%.

Tax Hike Fear Fueling Roth IRAs

Already the most popular retirement saving product, holding $4.7 trillion in assets as of the end of 2010, according to Mintel Market Research, Roth IRAs are gaining popularity as consumers look for savvier ways to protect their money.

Now read this breakdown from Ross Kenneth Urken on why consumers are doing the flocking to Roth IRAs:

The Roth Individual Retirement Arrangement is a retirement plan that allows you to withdraw money tax-free in retirement. That contrasts with traditional IRAs and retirement plans, that let you deposit pre-tax funds, but tax your withdrawals.

Now, in a traditional IRA, you can deduct your contribution (up to $5,000 annually) from your taxable income. But let’s think about the future.

There’s an old business school trick called the Rule of 72 for estimating how many years it will take for an investment to double: Divide 72 by your average return on investment percentage, and you have a rough answer. So, if someone earns 8% on a Roth IRA, — 72/8 = 9 — their money will double every 9 years. Thus, $5,000 invested at age 30 will become $10,000 at 39, $20,000 at 48, $40,000 at 57 and $80,000 at 66. If that were a traditional IRA, the investor would then have to pay income taxes on the $80,000.

With the Roth, you don’t get a deduction for your contribution, so you pay the taxes on the initial $5,000 you put in. Your investment grows the same way, but when you take money out, it’s tax free. Basically, you’re choosing between paying taxes on the seeds or on the crops.

The crux of the matter comes down to people’s belief that taxes will continue to increase. Based on that premise, it’s better to pay the taxes on your initial investments now, while rates are lower, than to wait and pay a higher rate on your total returns when you remove the money at retirement.

Bottom line – your Roth is never going to be taxed again, has capital appreciation as long as it grows and you get it back tax free. This means even more to younger workers who are unsure that Social Security will be available to them once they retire.

*****

What do you think? Do you have a Roth IRA? How are you feeling about the economy in 2012?

2011 North Carolina Tax Return Pocket Card

The WolfBridge Financial blog has been focusing a lot on taxes lately – in case you hadn’t noticed.

We know firsthand how stressful tax season can be, and want to help prepare everyone in the Triangle so that you can focus more on your family and friends, instead of how much money you owe.

Here are a few things we’ve covered so far:

Today we want to help you even more.

As a sports fan, I’ve always been fond of pocket schedules and calendars because you can keep them in your wallet and they don’t make you look like George Costanza (see below)

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Introducing the 2012 North Carolina Tax Return Pocket Card

It may not be all that fancy, but we managed to put together a pocket card that has many of the key dates and details you’ll need leading up to April 15, 2012.

So instead of having to dig around on the Internet, or calling the (yikes!) NC Department of Revenue, you can simply download our card and fold it up. Then just place it in your wallet, purse, carry-on, tablet cover or anything else readily accessible and you’re ready to file those pesky taxes.

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Podcast: Do I Need to Hire a CPA to do my Taxes

As we get older we tend to own more things, have additional dependents or maybe even begin to gather income from a variety of sources. This can certainly cause stress levels to rise leading up to April 15 when taxes need to be filed.

Sometimes the toughest decision is to figure out whether we can handle doing our taxes with the help of some tax software that can be purchased at your local Target, Staples or Best Buy or if we should spend the extra money and let a Certified Public Accountant (CPA) handle it.

Sometimes it boils down to the complexity of the taxes or simply whether or not you feel like spending less money and potentially suffering through the headaches of doing them on your own.

Recently our in-house CPA, Kristen Steffen, sat down to answer a few questions on who should consider hiring a CPA and why.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/02/Should-I-Hire-a-CPA.mp3]

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If you need answers to questions not found below, please write them in the comment area or Contact Us.

  • I’m single – can’t I handle filing my taxes on my own?
  • I used to file my own taxes while I was single and now I’m married – are taxes more difficult to file now?
  • So if you’re self employed it can be much more difficult than working off of a W-2?
  • What if I was a W-2 employee in 2011 but am planning on starting my own business in 2012?
  • Are there any deductions I might not know about if I file my own taxes that a CPA would know about?
  • How do CPA’s typically charge for tax return services?
  • What if I live in North Carolina but receive income from other states – is that difficult to deal with when it comes to filing my taxes?

Divorce & Taxes: Things You Need to Know

As we continue the push towards April 15, 2012 the WolfBridge Financial team plans to focus most of our blogging efforts around offering up information that hopefully will help tax day come and go much easier than it may have otherwise.

We recently stumbled on a very helpful article and video that can certainly be useful to those of you who may have gotten divorced in the last calendar year. So check out everything we have below and feel free to download our 3 minute podcast of Tax Tips for Divorced Couples.

*****

 

OLD: Divorce -- Getting to Know Your Taxes

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DIVORCE AND TAXES: FIVE THINGS YOU NEED TO KNOW

Courtesy: Time.com

1. On Marriage Status, Go by the Calendar

Even if your divorce was finalized between Jan. 1 and April 18 this year, you are still officially hitched to your ex-spouse when it comes to filing your 2010 taxes. The flip side: if your divorce became official in December, you can’t file as married even if you were for most of the year and it would save you money. There is, however, a third status you can claim besides single or married. It’s called “head of household,” and it could save you money. The status was originally meant for single people, but some people in the middle of a divorce might qualify as well. To do so, you have to have lived apart from your spouse for the last six months of the tax year; paid over half the cost of keeping up your main residence; and be able to claim, under the rules for children of divorced or separated parents, your child as your dependent. Also, you have to file a separate tax return from your spouse, even if you are still legally married. But if you are still willing to fill out your estranged mate’s IRS forms, go ahead and check the married box. (See the top 10 celebrity relationship flameouts.)

2. Splitting the House May Be Harder Than Splitting Up

You don’t have to pay income taxes on assets that are transferred during a divorce. But if you end up getting the house, you won’t be getting it tax-free. The reason has to do with capital gains taxes, which still apply even to the recently divorced, and they come into play if you decide to get rid of your house after the divorce. Normally, a married couple doesn’t have to pay taxes on a gain of up to $500,000 on their primary residence. But now that you are single, you can only exempt half of that. So if your house sells for more than $250,000 more than what you and your former spouse paid for it, you will owe taxes. But you do get one advantage if you are recently divorced: if you moved out of the house before the divorce was final, and then ended up getting the house in the proceedings anyway, you can still claim the house as your primary residence.

3. Just Because the Kids Spend Time with You — Even Equal Time — Doesn’t Make Them Dependents

Years ago, the majority of custody arrangements were quite simple: the mother got custody of the children and, as a result, the right to call them dependents. In recent years, however, custody agreements have become quite creative and custody may be shared over weekends, vacations or during the workweek. These arrangements are complicated by the fact that neither the most recent version of the tax code nor IRS regulations define exactly what is the definition of custody or a custodial parent.

Generally, you can claim the kids as dependents only if you were designated the custodian by court order. When there is no such agreement or order, or when joint custody applies, the custodial parent is considered to be the parent who has physical custody of the child for most of the year. What happens when you share custody 50-50? Of course, you can’t both claim the same kid as a dependent. That’s against the law. Some couples switch who claims the kids from year to year in order to share the tax benefit, and if you only have one child that’s the only option. But if you have more than one kid, the best bet to avoid confusion may be to split the dependency of the kids up between the two parents, which is allowed even if both kids spend the same amount of time with each parent. (See an album of British weddings.)

4. Alimony Looks Good on Your Tax Return

In most cases, alimony, if you are the one paying it, will lower your tax bill. Even better, alimony is an above-the-line deduction, which means you don’t have to itemize to get the tax advantage. Still, there are no tax breaks for lingerers. If you and your ex-spouse continued to share a residence after the divorce, any alimony payments made during that time cannot be deducted. What’s more, the payments have to be pursuant to a written separation or divorce agreement, and cannot be considered child support. So couples who are facing extended divorce proceedings due to finances, custody battles or state laws that require extended periods of separation may still have trouble qualifying for the deduction.

5. Child Support Is Always Tax-Neutral

While alimony is considered a taxable event, child support is always tax-neutral, meaning it doesn’t affect your taxes in any way. This can provide an incentive to the ex-spouse who is making the payments to attempt to classify part of child-support payments as alimony, especially as state laws increasingly complicate the requirements for support. In recent years, for instance, parents have been required to make payments for college education. No matter how big the check — or how long a parent has to write it — the tax-neutral rules still apply.

Podcast: Tax tips for Divorced Couples Filing 2011 Taxes

Our tax expert here at WolfBridge Financial, Kristen Steffen, CPA, sat down to answer a few questions that couples who got divorced in 2011 are probably asking with tax season around the corner.

PLAY: [audio:http://wolfbridgefinancial.com/blog/wp-content/uploads/2012/01/Taxes-Divorce-2012_WolfBridge-Financial.mp3]

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Kristen addresses the following questions, and is more than happy to answer additional questions if you want to write them in the comment area below or Contact Us.

  • I was divorced in 2011, how do I file my taxes?
  • What if both parties want to file as head of household?
  • Do both parties generally have a good feel for how the taxes have been done in the past and how they should be done moving forward, or do you recommend they hire a CPA?
  • What if I received alimony throughout 2011 and didn’t work?
  • What if I was divorced in early 2012, do I still file as married on my 2011 taxes?
  • If you are planning to get divorced in 2012, does that affect how you file for 2011?
  • Are there any strange divorce tax rules you might need to know?

Best Tax Software for Apex Residents

Each new year we are required to make the decision as to whether or not we plan to spend the time to do our tax return at home in archaic free hand, purchase some tax software and spend a little less time doing it or hire an accountant that specializes in tax returns.

In 2012 this decision is no easier for our friends in the greater Apex area.  Each one of you will have to choose whether or not to spend $50 at the Target in Beaver Creek Commons or use someone like us great folks at WolfBridge Financial 

Just in case you are planning on gutting it out from the comfy confines of your own home again, here our some thoughts from our tax return staff on which tax software to use before April 15, 2012 depending on your current situation.

Simple Tax Return

You’re single or married, have a W-2 or three from your employer(s), have a mutual fund or two, maybe some bank interest and own a home and/or car.  These are also for folks who don’t need to worry about a bunch of deductions.

Tax Act – A very basic version is free for Federal and as little as $14.95 to do your North Carolina State taxes. Even if you use their deluxe edition you will pay less that 20 to file everything.

TurboTax – The free edition is free for Federal and $27.95 for state. A little more expensive than Tax Act, but with somewhat more user-friendly software interface.

Moderately Difficult Tax Returns

If you can add rental properties and tons of deductions, from those that are work related to those that are charity related, to the list of items above then you probably should consider spending a little more on some more detailed software.

H&R Block Deluxe – For about $60 total you can file both Federal and State. You will also receive mortgage interest and charitable tax deduction maximizes, help with hundreds of tax deductions and more.

TurboTax Premier – Designed for taxpayers who have several W-2s and claim common deductions, such as mortgage interest and charitable contributions, this version is a little pricy at around $80 for both state and federal but offers a ton of support options for moderately experienced users.

Complex Tax Returns

When it comes to complex tax returns that involve a small business, multiple rental properties, a large family and more there are versions of software that can be purchased for anywhere from $100 – $200.

With the cost of getting a tax return done by a professional being not much more we would highly recommend at this point you at least consult a local accountant to make sure if you do handle this on your own that you are maximizing your savings and not running from the IRS!

Do you use tax return software? If so, which do you typically go with and why? Leave your thoughts in the comments below.