Articles

What Do Your Taxes Pay For?

Tip: Mid May. If the government had raised taxes enough to cover federal borrowing, we would have had to work until May 6 just to cover the tax bill.
Source: Tax Foundation, 2018

Taxes are one of the biggest budget items for most taxpayers, yet many have no idea what they’re getting for their money.

In 2017, as in recent years, Americans spent more on taxes than on groceries, clothing, and shelter combined. In fact, we worked until late April just to earn enough money to pay our taxes. So what do all those weeks of work get us?1

Fast Fact: In the Hole. In fiscal 2018, the federal government will spend $804 billion more than it collects in revenue. The government borrows the funds it needs to cover this shortfall by selling Treasury securities and savings bonds.
Source: Congressional Budget Office, 2018

The accompanying chart breaks down the $3.95 trillion in federal spending for 2017 into major categories. By far, the biggest category is Social Security, which consumes one-fourth of the budget. Income security, which includes food assistance and unemployment compensation, takes another 13%. Defense and related items take 15% of the budget, and 28% goes to Medicare and health programs.2

Are taxes one of your biggest budget items? Take steps to make sure you’re managing your overall tax bill. Please consult a tax professional for specific information regarding your individual situation.

Pieces of the Federal Pie

More than 60% of 2017 federal spending was used for Social Security, Medicare, defense, and related programs.

Pieces of the Federal Pie

Source: Pew Research Center, 2018
  1. Tax Foundation, 2018
  2. Pew Research Center, 2018
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

A Home Insurance Claim: To File Or Not To File

Insurance is meant to protect you against financial loss. But is it really meant to protect you from any and all financial loss? When it comes to filing a loss claim on your home insurance, there may be times when not filing may be the wisest course of action.¹

According to one study, filing just a single claim could increase your monthly premium by 20%, depending on where you live.²

What About My Premium?

Some insurance companies may protect you against premium increases, and in Texas insurance companies are prohibited from increasing rates following a first claim. However, if it means your premium will rise, you may need to decide whether it makes sense to file a claim.

It may not pay to file a claim when:

  • The claim amount is small. Your policy will have a deductible, so even claims of $1,000 to $2,000 may not have a favorable long-term cost benefit.
  • You’re not covered for a loss. Read your policy first to determine coverage. The simple act of filing a claim (even for a claim that won’t be paid) may result in higher premiums.
  • You have filed a claim within the last seven years. Since previous claims are tracked by an industry database for seven years, it may result in higher premiums.

Another factor to consider: you may want to file a claim regardless of dollar amount if someone is injured on your property in order to protect yourself in the event that you are sued by the injured party.

  1. Several factors will affect the cost of homeowner’s insurance, including the location, size and contents in the home. You should consider the amount of your deductible and level of coverage before purchasing a policy. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
  2. National Association of Realtors, 2018
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.

Is a SEP-IRA Right for Your Business?

If you’re like many small business owners, running your own business is an all-consuming endeavor.

In the face of everyday demands, choosing a retirement plan for your business can become a casualty. The idea of establishing a plan could evoke worries about complicated reporting and administration.

If this sounds familiar, then you may want to consider whether a Simplified Employee Pension (SEP) may be right for you.

A SEP can be established by sole proprietors, partnerships, and corporations, including S corporations.

The advantages of the SEP begin with the flexibility to vary employer contributions each year from 0% up to a maximum of 25% of compensation, with a maximum dollar contribution of $55,000 in 2018.

Employees Vested

The percentage you contribute must be the same for all eligible employees. Eligible employees are those age 21 or older who have worked for you in three of the last five years and have earned at least $600 (in 2018). Employees are immediately 100% vested in all contributions.

There are no plan filings with the IRS, making administration simple and low cost. You only need to complete Form 5305 SEP and retain it for your own records. This form should be provided to all employees as they become eligible for participation.

Unlike other plans, a SEP may be established as late as the due date (including extensions) of your business’ tax filing (generally April 15th) for making contributions for the prior year.

A Menu of Options

Each eligible employee will be asked to establish his or her own SEP-IRA account and self-direct the investments within the account, relieving you of choosing a menu of investment options for the plan.The rules for accessing these funds are the same as those governing regular IRAs.

Distributions from SEP-IRA and traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.¹

Unlike the self-employed 401(k), which is only available to business owners with no employees, you cannot take a loan from your SEP assets. Distributions from 401(k) plans are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.¹

The SEP earns the “simplified” in its name and stands as an attractive choice for business owners looking to maximize contributions while minimizing their administrative responsibilities.

1. IRAs have exceptions to avoid the 10% withdrawal penalty, including death and disability.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2018 FMG Suite.