Most of the articles relating to tax tips relate to reporting your income, available deductions and credits, and changes in income tax rates.  All of that advice is important, but I thought it would be useful to focus on the lesser discussed issues of responding to an audit and record keeping.  While you may think that audits are generally targeted at the ultra-wealthy, a recent Wall Street Journal article reported that, as of last summer, 63% of new audits were targeting income taxpayers with income of less than $200,000 a year.

To help better inform you on the issues of audits and record keeping, below is a set of Questions and Answers on those lesser discussed – but still important – tax matters.

IF I GET A NOTICE FROM THE IRS, DOES THAT MEAN I AM BEING AUDITED?

Not necessarily.  The IRS may contact you for various reasons, such as:

• Verification of withholding or tax payments – you may have to provide copies of Form W-2, Forms 1099 and other documentation that substantiates payments made on your behalf.

• Unreported income – banks, investment firms, and employers are required to report annually to the IRS the income that they have paid to individuals.  If the IRS receives a report of income that does not appear to be included on your tax return, they will notify you and assess tax liability for the unreported income.  If you agree with the change, you can pay the balance due.  If you don’t agree, you will have an opportunity to protest the liability.   

• Late payment or underpayment of tax – if you are required to make estimated tax payments or submit the amount you owe to the IRS after the due date, you may receive a notice with late payment interest and penalties. 

HOW FAR BACK IN TIME WILL A NOTICE RELATE TO?

• 3 years – in general, the IRS can go back up to three years from the original date of filing or due date of the tax return. 

• 6 years – If you did not report income that you should have reported and it is more than 25% of the gross income shown on your return, or it is attributable to foreign financial assets and is more than $5,000, the time to assess the tax is six years from the date you filed the return.

• No limit – There’s no period of limitations to assess tax when you file a fraudulent return or when you failed to file a return.

HOW WILL I KNOW IF I AM BEING AUDITED?

You will receive an IRS Letter 2205-A that specifically states that your tax return for a particular year has been selected for examination.  It will also include the contact information for the agent conducting the audit, the areas of your tax return they are auditing, and what the next steps are.  You will never receive a phone call notifying you of an audit. 

WHAT DO I DO IF I AM AUDITED?

• Stay calm.  Although the IRS has an ominous reputation, most agents are very reasonable and are willing to work with taxpayers.

• Contact a CPA, Enrolled Agent, or accountant to represent you during the audit.  Their experience allows them to advise you on reasonable documentation to provide.  These professionals also provide a buffer between you and the IRS.        

• Complete a Power of Attorney (Form 2848) to allow the IRS to speak to your representative on your behalf, which will likely expedite the audit process.

• Provide organized documentation to substantiate income or deductions presented on your tax return.  If you give an IRS agent an unorganized box full of receipts and bank statements, you may inadvertently open further areas to audit. 

• Provide only the documentation needed to support the items in question.  The IRS will sometimes request documentation for only specific areas of your tax return.  There is no need to provide information beyond what they requested. 

• Upon completion of the audit, decide if you agree or disagree with the findings.  If you agree, you can request an installment agreement to pay any additional tax and penalties that are being assessed.  If you disagree, you can request mediation or a hearing to appeal the decision.

• If your federal tax return changes because of the audit, you must amend your state income tax return to reflect any changes the IRS made on your federal return.  The IRS will communicate the changes to your state tax agency; however, you may be able to reduce interest and penalties by self-reporting the adjustment. 

HOW LONG SHOULD I KEEP MY TAX RECORDS?

• Prior filed tax returns – seven years from the date of filing.  Our 2023 tax returns are due on April 15, 2024.  You should retain your tax returns for the years 2016 (due April 15, 2017) through 2023, along with all documents supporting items of income and deductions on those tax returns.

• Closing statement for the purchase of your home – permanently, unless you sell it, then for seven years after the sale.

• Investment purchases – permanently, unless you sell them, then for seven years after the sale.

• Inherited property/assets – most inherited property is revalued upon the decedent’s date of passing.  You may request Form 8971 from the executor reporting the basis of assets that you inherited. It is recommended you retain the Form 8971 permanently, unless you sell the assets, then for seven years after the date of sale.

• Bank statements, utility bills, credit card statements etc. – seven years for business owners; for individuals, it is a personal preference if you do not have items of income and deductions that you need to substantiate on your tax returns.

Special thanks to my wife Sarah Dorsey, CPA, who provided valuable assistance in the writing of this article.  As is often the case, Sarah helps me sound much more intelligent than I actually am.  Thank you to Sarah and all those hard-working accountants out there who will soon be able to take a well-deserved rest after next Monday – April 15th!

Matthew J. Dorsey, Esq. is a Shareholder with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-seven years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, mdorsey@oalaw.com and www.oalaw.com. 

Our family runs on a schedule that was set in large part almost twenty years ago, when my oldest was born. My mental health was dependent on having a knowable, consistent daily schedule, and while my son’s needs dictated that daily schedule and changed it as needed, I made it my job to stick to whatever his current schedule was and worked all other things around it.

So, for example, if the baby’s regular napping schedule fell into a 10am and 2pm pattern, then I would not leave the house during those times so that he could have his nap. If I needed to leave the house during those times, I would try to make sure that the nap could happen at its normal time — maybe while driving to where we needed to go (car-bound errands were good for this, like getting gas and going through the bank drive-through, and then continuing to ride around as needed), or I would make sure we arrived at our destination (grandparents’ house, for example) in time for me to put the baby down at his normal nap time. Not everyone understood nor agreed with this approach, but they didn’t need to — it was what I felt was needed to keep my baby healthy, our household running smoothly, and myself sane.

As more babies came, this approach became a bit trickier, leading to lots of at-home time — we didn’t go out much for a long time. Naps and nursing were most important for the babies; naps and eating were most important for the toddlers and preschoolers; all of it was done in service of regular bedtimes and peaceful nights. I learned how to nudge a schedule one way or another if I needed to for the good of the family as a whole or an unexpected happening on a particular day, but in general, we all appreciated that we knew what was happening at each part of each day.

Those baby schedules are echoed in our current schedules, even though the last baby is now five years old. We’ve always gone to the 8:00 Mass on Sundays because that’s what worked best for my first baby’s nap schedule. We still have quiet time around 3:00 or so each day — this used to be the afternoon naptime and has stayed on as a much-needed bit of downtime. I still feel a little anxiety settling in when something interferes with that 3:00 quiet time (which actually happens quite a bit these days due to sports and other after-school activities). 

This adherence to the schedule of our baby years is crumbling here and there, though. One thing that could never happen during the baby years was sleeping in. I made sure the babies were up early enough each morning that they’d nap at their regular time and be ready for their regular bedtime that night, so even on Saturday mornings when we had nothing planned, I made sure to get the kids up by 8:00 to keep us all on schedule. For all the past many years, there was never any sleeping in … and now, all of a sudden, there is! Several recent Saturdays have seen all of us sleeping in a bit — what a nice change it’s been to have slow, sleepy mornings instead of the cranky, early mornings that we all hate so much! We won’t be able to do this all the time — Saturday mornings are for basketball games in the winter and baseball games in the spring — but in between sports seasons and when we have a later-in-the-day game, we are a family that sleeps in!

Another thing that’s different is that it’s no longer a problem to allow the little guys to snooze during the day. I don’t mean a full-on regular nap — that hasn’t been a thing for a while — but sometimes my youngest will fall asleep on the couch after a particular busy day outside, and just the other night, he leaned into my shoulder and fell asleep during a movie. In the old days, I’d do whatever I could to prevent the kids from falling asleep any time that wasn’t naptime or bedtime, because doing so could mess up the whole schedule, and especially because they wouldn’t be tired for bedtime, which could mean they’re up far too late for my own level of energy. It’s such a relief that I don’t need to worry about that any more! Now, if my littlest guy falls asleep during the day, we can still put him to bed at his normal time since he’s old enough to stay in bed and not get into trouble.

I’ve written a lot this year about the changes in our family and household since we no longer have any babies or very small children in the house — I hope you’re not sick of it yet! I hope that it’s a help to those of you in the trenches of parenthood, when it seems like everything and everyone is tired, tired, tired. I was there for many, many years, and now that I’m not, I’m both amazed that we’ve moved on as well as missing those days. I’m going to say those things that parents of young children sometimes get irritated by, but they’re so true: enjoy these days, because they go faster than you think; the days are long but the years are short; and these are some of the very sweetest days in the life of parents.

Kate and her husband have seven sons ages 19, 17, 15, 14, 12, 10, and 5. Email her at kmtowne23@gmail.com.

Deflation is a term that describes a decrease in the prices of goods and services in an economy. While this may sound like a good thing on the surface, in reality, deflation can have serious negative consequences for the economy as a whole.

One of the primary reasons why deflation is a bad thing is because it can lead to a decrease in consumer spending. When prices are falling, consumers may delay making purchases in the hope that prices will continue to drop further. This can lead to a decrease in demand for goods and services, which in turn can lead to lower production levels and layoffs in industries that rely on consumer spending. This decrease in consumer spending can create a vicious cycle, as lower demand leads to further price decreases, which in turn leads to even lower consumer spending. 

Deflation can also have a detrimental impact on businesses. When prices are falling, businesses may struggle to maintain their profit margins. This can lead to cost-cutting measures such as layoffs, wage cuts, and reductions in investment and expansion plans. This can have a negative impact on the overall health of the economy, as businesses are less likely to invest in research and development, which can stifle innovation and economic growth.

Deflation can also make it more difficult for individuals and businesses to repay their debts. When prices are falling, the value of assets such as homes and cars can decrease, making it more difficult for individuals to sell these assets to pay off their debts. This can lead to a rise in defaults and bankruptcies, which can have serious consequences for both individuals and the economy as a whole. 

Another negative consequence of deflation is that it can lead to a decrease in wages. When prices are falling, businesses may be hesitant to increase wages for fear of being unable to pass on these increased costs to consumers. This can lead to a decrease in disposable income for consumers, which can further depress consumer spending and lead to lower demand for goods and services.

Finally, deflation can lead to a decrease in investment and economic growth. When prices are falling, businesses may be reluctant to invest in new projects or expand their operations, as they may not be able to earn a sufficient return on their investment. This can lead to a decrease in productivity and economic growth, as businesses are less likely to invest in new technologies and processes that can drive economic expansion.

While deflation may sound like a good thing in theory, in reality, it can have serious negative consequences for the economy. From decreasing consumer spending and business profitability to making it more difficult to repay debts and stifling economic growth, deflation can have a wide range of negative impacts that can harm individuals, businesses, and the economy as a whole. A modest level of inflation from year to year is necessary to help ensure the economy functions as it should. It is important for policymakers to be aware of the potential dangers of deflation and take steps to prevent it from occurring.

Stephen Kyne CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs.   

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities. 18 Division St, Ste 202, Saratoga Springs, NY 12866 518-583-4040

In the quest for optimal health and well-being, incorporating key supplements into your daily routine can serve as a valuable complement to a balanced diet and lifestyle. Here are the top six supplements that are widely recommended for most individuals to consider taking daily:

1. Multivitamin: A high-quality multivitamin can help fill in nutrient gaps in your diet, providing a broad spectrum of vitamins and minerals essential for overall health. Look for a multivitamin that covers essential nutrients such as vitamin A, C, D, E, B vitamins, zinc, magnesium, and more.

2. Omega-3 Fatty Acids: Omega-3 fatty acids, particularly EPA and DHA, are crucial for heart health, brain function, and inflammation regulation. Fish oil supplements or vegan alternatives like algae oil can help support cardiovascular health, cognitive function, and joint health. 

3. Vitamin D: Vitamin D plays a vital role in bone health, immune function, and mood regulation. Many people have insufficient levels of vitamin D, especially those living in regions with limited sunlight exposure. Consider taking a vitamin D supplement, especially during the winter months.

4. Probiotics: Probiotics are beneficial bacteria that support gut health and digestion. They can help maintain a healthy balance of gut flora, boost immunity, and aid in nutrient absorption. Look for a broad-spectrum probiotic supplement with multiple strains for optimal benefits.

5. Magnesium: Magnesium is involved in hundreds of biochemical reactions in the body, supporting muscle function, nerve transmission, and energy production. Many people do not get enough magnesium from their diet, so a magnesium supplement can be beneficial for relaxation, sleep, and overall well-being.

6. Turmeric: Turmeric contains a powerful anti-inflammatory and antioxidant compound that may help reduce inflammation, support joint health, and improve cognitive function. Consider a turmeric supplement with added black pepper for enhanced absorption.

While these six supplements are generally safe for most individuals, it’s important to consult with a healthcare provider before adding any new supplements to your regimen, especially if you have pre-existing medical conditions or are taking medications. Additionally, supplements should complement a healthy diet and lifestyle, not replace them.

By incorporating these top six supplements into your daily routine, you can support your body’s essential functions, promote overall wellness, and potentially improve your quality of life. Remember that individual needs may vary, so personalized guidance from a healthcare professional is key to optimizing your supplement regimen for your specific health goals and requirements.

Dr. Matt Smith has been a Chiropractor in Saratoga Springs for the past 37 years. He and his daughter Dr. Kevy Smith Minogue can be reached at www.mysaratogachiropractor. com or call 518-587-2064.

Congress enacted the Corporate Transparency Act (“CTA”) on January 1, 2021.  To implement the CTA, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) promulgated a final rule which went into effect on January 1, 2024.

The purpose of the CTA is to help protect our national security by giving the Treasury Department more information about corporate filings and the owners of companies who do business in the United States.  The main goal of the CTA is to give the government better tools to battle money laundering, terrorism financing, and other illegal activities.

Although the goal of the CTA is laudatory, the obligations it imposes on businesses are significant and not widely understood.  This may lead to significant non-compliance with CTA requirements.  I have put together the following questions and answers to give the reader a general sense of what that CTA requires.  For the purposes of this article, I am addressing the obligations of companies formed in the United States only.

What does the CTA require companies to do?

The CTA requires a Reporting Company to file information about itself, the Company Applicant, and its Beneficial Owners with the FinCEN.  Filing can be done on-line at the following website link:  https://boiefiling.fincen.gov. 

What is a Reporting Company?

A Reporting Company includes corporations, LLCs or similar entities which were created by making a filing with a state Department of State or similar office.  Similar entities include entities such as Limited Partnerships and Limited Liability Partnerships.

Are there any Exemptions?

Yes.  In fact, there are twenty-three categories of exempt entities.  They include publicly traded organizations, insurance companies, banks, credit unions, and large operating companies.

What is a Large Operating Company?

A Large Operating Company is a company that: (1) employs more than 20 employees on a full-time basis in the United States, (2) filed in the previous year federal income tax returns in the United States demonstrating more than $5,000,000 in gross receipts or sales, and (3) has an operating presence at a physical office within the United States.  

What does a Reporting Company have to disclose?

A Reporting Company must disclose its full legal name, any “doing business as” names, its business address, where it was formed, and its tax identification number.  

Who are the Beneficial Owners?

A Beneficial Owner is someone who owns or controls at least 25% of the entity or exercises “substantial control” over the entity.  

What is “substantial control”?

Someone is said to have “substantial control” over an entity if they: (1) serve as a senior officer, (2) have authority over the appointment or removal of any senior officer or a majority of the board of directors, or (3) can direct, determine, or have substantial influence over important decisions made by the reporting company.

What do the Beneficial Owners have to disclose?

Beneficial owners must disclose their full legal name, date of birth, current residential address, an identification number (i.e. a driver’s license number), and a copy of their identifying document (i.e. a copy of a driver’s license). 

What is a Company Applicant?

A Company Applicant is a person who directly files a document creating a Reporting Company and any individual who is primarily responsible for directing such filing.  There can be up to two Company Applicants.

What does a Company Applicant have to disclose?

Company Applicants need to disclose their full legal name, date of birth, current business address, an identification number (i.e. a driver’s license number), and a copy of their identifying document (i.e. a copy of a driver’s license).  As an alternative to this information, Company Applicants and Beneficial Owners may give the Reporting Company their FinCEN identifier number, if they have one.

What is a FinCEN Identifier Number?

A FinCEN identifier number is a number FinCEN can issue to a Beneficial Owner or Company Applicant after they provide their identifying information to FinCEN directly.  That FinCEN identifier number can then be given to the Reporting Company for its filing instead of giving the Reporting Company the Beneficial Owner’s or Company Applicant’s personal information, i.e. name, date of birth, identifying document, etc. 

When are the initial filings due?

For companies formed prior to 2024, the filings are due by January 1, 2025.  For companies that are created in 2024, the filings are due within 90 days of when they are formed.  For companies that are created in 2025, the filings are due within 30 days of when they are formed.

Are any filings required after the initial filing?

Yes.  If there is a change regarding the Reporting Company or the Beneficial Owners, an updated filing reflecting the change is due within 30 days of the change.

Is the information filed available to the public?

No.  The CTA database is primarily accessible only to law enforcement agencies, financial institutions with the consent of the Reporting Company to assist with due diligence activities, and to federal agencies assisting foreign governments with law enforcement activities.

What happens if a company does not file?

Penalties for willful noncompliance include civil penalties of $500/day while the violation continues and a criminal fine of up to $10,000 and/or two years in prison.

Although the CTA was enacted over three years ago, crunch time has finally arrived for its implementation because filings for Reporting Companies formed prior to 2024 are due by the end of the year.  In addition, Reporting Companies formed this year have only 90 days to file and those created next year will have only 30 days to file.

In time, the filing process will likely become easily understood and commonplace. In the short term, however, there will likely be a lot of uncertainty about whether a company needs to file and what should be included in that filing.  Owners of companies would be well advised to seek legal counsel to ensure they are in compliance with CTA requirements.

Matthew J. Dorsey, Esq. is a Shareholder with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-seven years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at 518-584-5205, mdorsey@oalaw.com and www.oalaw.com.