Difference in Marginal Tax Rates and Brackets
One of the most widely discussed changes in the 2018 tax reform bill involves income tax brackets and marginal tax rates. Tax brackets refer to specific ranges of income and their corresponding tax rates. Marginal tax rates apply to different levels of income—the higher the income, the higher the tax rate. What this means to you is that your income is not taxed at one rate but at several different rates, depending on your income.
For example, if your income is $120,000, your tax rate isn’t a flat 50%. You’re actually taxed 10% on the first $20,000, 20% on the next $20,000 and so on, according to the chart. So instead of paying $60,000 in taxes ($120,000 x 50%), a person making $120,000 would pay $38,000 in income taxes.

For 2018, the tax brackets have shifted, and almost all of the marginal tax rates have been cut. That means nearly everyone will have lower income tax rates (on the same income) in 2018.
2017 Marginal Income Tax Rates and Brackets2017 Marginal Tax RatesSingle 2017 Tax BracketMarried Filing Jointly 2017 Tax BracketHead of Household 2017 Tax BracketMarried Filing Separately 2017 Tax Bracket10%$0 - $9,325$0 - $18,650$0 - $13,350$0 - $9,325
15%$9,326 - $37,950$18,651 - $75,900$13,351 - $50,800$9,326 - $37,950
25%$37,951 - $91,900$75,901 - $153,100$50,801 - $131,200$37,951 - $76,550
28%$91,901 - $191,650$153,101 - $233,350$131,201 - $212,500$76,551 - $116,675
33%$191,651 - $416,700$233,351 - $416,700$212,501 - $416,700$116,676 - $208,350
35%$416,701 - $418,400$416,701 - $470,700$416,701 - $444,550$208,351 - $235,350
39.6%Over $418,400Over $470,700Over $444,550Over $235,350Chart: 2017 Marginal Income Tax Rates and Brackets(2)
A single individual with a taxable income of $100,000 in 2017 paid $20,981.35 in taxes: (8,100 x 0.28) + (53,949 x 0.25) + (28,624 x 0.15) + (9,325 x 0.10).
2018 Marginal Income Tax Rates and Brackets2018 Marginal Tax RatesSingle 2018 Tax BracketMarried Filing Jointly 2018 Tax BracketHead of Household 2018 Tax BracketMarried Filing Separately 2018 Tax Bracket10%$0 - $9,525$0 - $19,050$0 - $13,600$0 - $9,525
12%$9,525 - $38,700$19,050 - $77,400$13,600 - $51,800$9,525 - $38,700
22%$38,700 - $82,500$77,400 - $165,000$51,800 - $82,500$38,700 - $82,500
24%$82,500 - $157,500$165,000 - $315,000$82,500 - $157,500$82,500 - $157,500
32%$157,500 - $200,000$315,000 - $400,000$157,500 - $200,000$157,500 - $200,000
35%$200,000 - $500,000$400,000 - $600,000$200,000 - $500,000$200,000 - $300,000
37%Over $500,000Over $600,000Over $500,000Over $300,000Chart: 2018 Marginal Income Tax Rates and Brackets(3)

Now compare that to the 2018 marginal tax rates. A single individual with a taxable income of $100,000 in 2018 will pay $18,289.50 in taxes: (17,500 x 0.24) + (43,800 x 0.22) + (29,175 x 0.12) + (9,525 x 0.10).

Not only will taxpayers see lower rates, but the shift in tax brackets will also remove what used to be an unintended tax penalty for married filers. Under the 2017 tax thresholds, some married filers were pushed into a higher income bracket when they combined their income with their spouse’s. The new brackets double for joint filers, so any marriage penalty is effectively removed for 2018.

Difference in the Standard Deduction
Another important difference in the 2018 tax reform bill is that the standard deduction has almost doubled.

The standard deduction is an automatic reduction in a taxpayer’s tax obligation. U.S. taxpayers have long had the option of taking the federal standard deduction or itemizing their deductions—identifying which expenses they qualify for and calculating their deductions one by one. Itemizing is more of a hassle, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.
Changes to the Standard DeductionFiling Status2017 Standard Deduction2018
tandard DeductionSingle$6,350$12,000
Married Filing Jointly$12,700$24,000
Married Filing Separately$6,350$12,000
Head of Household$9,350$18,000

Chart: Changes to the Standard Deduction(4)
At first glance, the increase in the standard deduction makes itemizing look even less worthwhile. But, the 2018 tax reform bill also eliminates the personal exemption—the amount a taxpayer gets to deduct from their taxable income for themselves and any dependents claimed on their tax return. Here’s how those two changes play out:
In 2017, the personal exemption was $4,050 per person and dependent.(5) So, in 2017, a married couple filing jointly with no dependents who made $100,000 received a $13,000 standard deduction and $8,100 in personal exemptions, leaving them with a taxable income of $78,900. In 2018, that same couple will receive a $24,000 standard deduction and no personal exemptions, leaving them with a taxable income of $76,000.
Essentially, the tax reform bill simplified this portion of the income tax process. In many cases, the increase in the standard deduction will make up for the elimination of personal exemptions, leaving most Americans with quite a bit more money in their pockets.
Changes to the Personal Exemption
Filing Status 2017
Personal Exemption 2018
Personal Exemption Single With Income Less Than $261,500
$4,050Removed
Married Filing Jointly
With Income Less Than $313,800$4,050Removed
Head of Household
With Income Less Than $287,650$4,050Removed
Married Filing Separately
With Income Less Than $156,900
$4,050 Removed
Chart: Changes to the Personal Exemption(6)

Difference in Child Tax Credit In our current tax code, if parents make less than $110,000 jointly and $75,000 individually, they receive a $1,000 Child Tax Credit for qualified children under the age of 17.(7) The 2018 tax reform bill increases that credit to $2,000 per qualified child and raises the income limits for the credit to $400,000 jointly and $200,000 individually.(8) This means a lot more people will be able to receive tax credits for their children. Woo-hoo! The kids are finally paying off!

Changes in Child Tax Credit Thresholds
Filing Status
2017 Child Tax Credit Threshold 2018 Child Tax Credit Threshold Single$75,000$200,000
Married Filing Jointly $110,000 $400,000Chart: Changes in Child Tax Credit Thresholds
More Changes for Taxpayers With Kids If you have children, you may have a 529 college savings plan in place. This savings plan acts similarly to a Roth IRA for your kids’ college education. Funds within the account are invested and grow tax-free, but they can only be used for qualifying college expenses. The new tax reform bill changes this significantly.
Starting in 2018, if you have a 529 savings plan for your child, you can use it for levels of education other than college. For example, if you have children in private school, or if you pay for tutoring for your child in kindergarten through twelfth grade, you can use money from your 529 for these expenses tax-free.
While it may seem like a benefit to use a 529 plan prior to college, you should work with a qualified investing professional to make sure—especially if you want to use the 529 plan sooner than you had originally intended. Taking too much out of a 529 plan early can completely negate the compounding growth effect the account could experience if the money is left alone.
As you consider college funding, don’t forget the Baby Steps! Paying off consumer debts, saving three to six months of expenses in an emergency fund, and contributing 15% of your income into retirement all come before college savings. There are a lot of ways to plan for college without going into debt!
Differences for HomeownersMortgage deductions in the new tax reform bill were a hotly debated topic. You may have heard whispers of disappointment in the final outcome. Here’s what everyone’s talking about:
Currently, if you itemize your deductions, the IRS allows homeowners to deduct the interest they pay on their primary residence and/or second home, up to a maximum of $1 million in original mortgage principal. This can include more than one loan—as long as the total is below the $1 million limit—and can include loans to refinance your home as well as mortgages to purchase the home. The new maximum in the tax reform bill is $750,000 in original mortgage principal. Not to worry, taxpayers with existing mortgages in between $1 million and $750,000 will be grandfathered into the old deduction.(9)
Taxpayers are also currently allowed to deduct interest paid on home equity debt, up to $100,000. The Tax Cuts and Jobs Act has removed that deduction for 2018.(10)
If you’re thinking of buying or selling a home and wondering how the tax reform bill could affect you, get expert advice from a top agent in your area.
Mike McVay, Pensacola Tax Accountant - 850-725-5696

Difference in the Alternative Minimum Tax The Alternative Minimum Tax (AMT) was put into place to ensure that top-income earners paid appropriate taxes. Basically, upper income taxpayers have to calculate their taxes two ways—once under the traditional tax system and once under the AMT—and pay whichever amount is more. Much of the AMT is fairly complicated, however, the AMT tax brackets are not. While the standard tax system has seven brackets, the AMT system has only two—26% and 28%. Below a certain income amount, the 26% rate is applied, and over that amount, the 28% rate is applied to the rest.
Once taxpayers have calculated what they owe in the AMT process, they can deduct an exemption from that amount. The problem is that these exemptions weren’t properly set up to account for inflation. So as time passed, more and more Americans were affected by the AMT—even those who it was never intended for, like the middle class. To address this issue, the Tax Cuts and Jobs Act makes the minimums for the AMT system much higher to avoid the average Joe from having to run their numbers twice. Here’s how the AMT exemptions are changing for 2018.
Changes to the Alternative Minimum Tax Exemption Filing Status
2017 AMT Exemption 2018 AMT Exemption Single or Head of Household$54,300$70,300
Married Filing Jointly$84,500$109,400Chart: Changes to the Alternative Minimum Tax Exemption
2017 AMT Exemption(10), 2018 AMT Exemption(11)
In addition, the income thresholds at which the exemption amounts begin to phase out are dramatically increased. Currently, these are set at $160,900 for joint filers and $120,700 for individuals, but the new law raises them to $1 million and $500,000, respectively.
So, what does this mean in plain English? The new tax reform bill significantly increases the exemptions for AMT. Therefore, if you’re one of the many Americans who has to use the AMT for your yearly taxes, you will be seeing increased standard exemptions and higher tax thresholds for the 26% and 28% tax rates. Win-win!
Take Our Quiz: Do You Really Need a Tax Advisor?
Difference in the SALT DeductionThe SALT deduction is another deduction that was heavily deliberated before the tax reform bill was voted in. SALT stands for "state and local taxes" and refers to taxpayers’ ability to deduct their state income taxes and/or sales taxes, if itemizing deductions. In previous years, there was no limitation on the deduction of state and local taxes, which was an advantage to those living in high tax states like California and New York. The new tax reform bill keeps the SALT deduction but limits the total deductible amount to $10,000, including income, sales and property taxes.(12)
The Estate Tax Exemption The estate tax is a tax on inherited money and property. Currently, heirs pay a tax rate of 40% on any inherited property valued at over $5.49 million.(13)
In the new tax reform bill, individuals have a $11.2 million lifetime inheritance tax exemption and married couples can exclude inheritances of $22.4 million.(14) As you can probably imagine, this won’t leave too many families paying the estate tax.
What About Charitable Donations?Under current tax law, you can deduct up to half of your income in qualified charitable donations if you itemize your deductions. That makes it a popular deduction for people at all income levels
 The new tax reform bill has increased that limit to 60% of your income.(15) What a great incentive to get taxpayers to donate to charities!
However, donations made to a college in exchange for the right to purchase athletic tickets will no longer be deductible.

What About Medical Expenses?Another frequently used deduction is the medical expense deduction. Prior to the new tax reform bill, you could deduct unreimbursed medical expenses above 10% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken.(16) 

The new tax reform bill has reduced that hurdle to 7.5% of your AGI.(17) So, if your AGI was $100,000 in 2017, you could deduct medical expenses over $10,000. In 2018, if your AGI is $100,000, you will be able to deduct unreimbursed medical expenses over $7,500.
What About Health Care (Obamacare)?The Affordable Care Act, otherwise known as Obamacare, remains in effect for 2017. However, the new tax reform bill removes the individual mandate penalty, meaning that people who don’t buy health insurance will no longer have to pay a tax penalty.
It’s worth noting that this change doesn’t go into effect until 2019, so for 2018, the "Obamacare penalty" can still be assessed.
Other Deductions That Are Disappearing Other deductions that didn’t make it past the chopping block in the new tax reform bill:

• Casualty and theft losses (except those attributable to a federally declared disaster)
• Unreimbursed employee expenses
• Tax preparation expenses
• Alimony payments
• Moving expenses
• Employer-subsidized parking and transportation reimbursement

Don’t worry, teachers can still deduct classroom supplies!
Have a small business? 
Check with a tax pro for help with the specifics on what’s best for your business.
But What Does It All Mean?

The one thing that’s clear through all of this is that taxes are complicated. Even the IRS is scrambling to keep up with all the changes in the new tax reform bill.
Add to that the fact that millions of Americans overpay their taxes each year, and it’s easy to see why you need a tax professional now more than ever.(18) A pro handles the heavy lifting of tax preparation and makes sure your taxes are done right. No more overpaying! 

Just one missed deduction could cost you far more than the fee of a professional.
But what about tax software or online tax prep? Prior to the new tax reform bill, it might have been safe to rely on those options to file your yearly taxes. But with all the changes coming, there’s no guarantee these programs have caught up. If any year is the year to work with a tax advisor, it would be 2018.
Mike McVay, Tax Accountant in Pensacola - 850-725-5696 - www.PensacolaFLTax.com

A hobby is something that casually brings in money, but you don’t really have the intention of making a profit with it.
A business has the goal of eventually making a profit. It’s ok if it’s not making a profit in the first couple years, but after the third year, you’ll need to show a profit on your tax return to prove to the IRS it’s not a hobby.
The big downside to a hobby is that if your expenses are more than your income that year, you can’t deduct more expenses than the total income you brought in.
Sarah set up a single-owner LLC in her state after learning that this structure provides a little more legal protection than staying a sole proprietor (which is the default for any business). Then, she went to the bank to set up a separate business checking account. She took all her business paperwork and it took about 45 minutes to sign all the papers and get it set up at her bank. Now she has a place for all her payments to go in and all her business-related expenses to come out of so when it’s time to do her bookkeeping, she’s not trying to remember all her expenses!
Mike McVay, Tax Accountant - 850-725-5696 - Mike@MikeMcVay.com

Tax Reform 101
The Tax Cuts and Jobs Act of 2017 officially starts affecting tax returns this year, so your taxes next January will look a bit (or a lot) different. Let’s walk through some of the most significant changes to the tax law, so you know what to expect.
Tax Brackets
The tax brackets have gotten a facelift. The tax rate for the 10% bracket and the 35% stayed the same, but the income amounts for both were raised. A raised income amount in a tax bracket means that you can earn more money before moving up to a higher tax rate.
In the other 5 brackets, the tax rate was lowered, and the income amounts were adjusted.
In general, it means more income will be taxed at lower rates, so virtually everyone will be subject to lower taxes in 2018

New Standard Deduction Amounts and the Personal Exemption
Until the new tax bill, you would get a personal exemption for yourself, your spouse and each dependent in your household. The personal exemption amount, $4,050 per person in 2017, would reduce your taxable income. The personal exemption has been repealed in favor of raising the standard deduction, which also reduces your taxable income but only applies to each filer, not each person in the household.
​
Taxpayers can still itemize deductions, but many won’t have enough individual deductions to merit itemizing. This is also because all itemized deductions have been repealed except state and local income taxes (capped at $10,000), mortgage interest, medical expenses, disaster losses (attributable to a federally declared disaster), charitable contributions (up to 60% of income), and other deductions not subject to the 2% floor. Deductions for unreimbursed employee expenses, tax preparation fees and safety deposit boxes have been eliminated.

Most small-business owners would say one thing they would meticulously avoid if given the chance is a tax audit. But rather than living in fear of the unknown, let’s take a look at some of the most common triggers for a small-business tax audit. The IRS uses a computer program called the Discriminate Function System (DIF) that analyzes returns and flags them if they are outside statistical norms. When a return receives a high DIF score, an agent reviews it to determine if it should undergo an audit. Luckily, there are some common areas known to trigger flags and audits on small-business tax returns — and if you avoid them on your returns, your odds of an audit will likely be reduced. Here are eight areas you should pay special attention to when filing your small business taxes.
1. Having a Higher Than Average Income According to an AP story, just 0.9 percent of people who make less than $200,000 were audited last year, compared to 10.9 percent of those who made $1 million or more. With the substantially increased odds of an audit for higher income brackets, you’ll need to keep meticulous financial records in case y­­­ou get the call.
2. Out of Proportion Deductions Large deductions that reduce the amount of your taxable income may raise a flag if they are out of proportion with your income. The IRS uses tables to determine how much is too much for different income brackets when it comes to deductions, although the tables are not made public. For example, an IRS agent will want to know more if you claim charitable deductions that are not in line with your income. In addition, a small business that has a low income will create a flag if its deductions are larger than normal for that income range. Sometimes those lopsided deductions are legitimate — such as when first starting a business or during lean years. You should absolutely take the deductions that you’re entitled to, but be sure you have detailed records to back them up.
3. Numbers That Have Been Rounded or Averaged Rounding up or averaging numbers in everyday life might be acceptable, but when it comes to your tax return, it can trigger an audit.  If you made $60,002.36 last year, don’t report your income as $60,000 or you may find yourself sitting across the desk from an IRS agent. They tend to believe that if you’re sloppy in this area, the rest of your return may not be entirely accurate.
4. Home Office Deductions Last year, the IRS simplified the home office deduction method, but the requirements necessary to take it have not relaxed. You can still only claim a portion of your home if it is exclusively dedicated to your business. For instance, if you use a corner of your bedroom, it won’t qualify for the deduction because the room is used for personal use as well.
5. Claiming Business Losses Year After Year The IRS will take notice if you claim that your business is taking a loss year after year, and may initiate an audit. They know some people claim hobby expenses as business losses, and under the tax code, that’s illegal. If you run a legitimate business that continuously reports a loss, the IRS may assume you are taking deductions you’re not entitled to in order to avoid paying taxes. But some business owners do experience a few bad years, and can clear up the matter by first proving that their business is legitimate, and then justifying the deductions with their records.
6. Filing a Schedule C The schedule C is where small-business owners can take the deductions that will lower their taxable income, and many people believe that filing one will increase the chances of an audit. The IRS does scrutinize these types of returns more closely. Don’t let fear of an audit keep you from claiming legal deductions. Just make sure that you have careful documentation to justify all of them. If you don’t want to file a schedule C, you can set up your business as a separate entity and run all of the business expenses through it.
7. Excessive Deductions for Business Entertainment Everyone has heard stories about business owners taking a family trip to Hawaii, and then writing it off as a business expense. Or about the business owner who continually takes friends out to eat, and then writes off the expense on their taxes. Unfortunately for those people, the IRS has heard the same stories. If a tax return includes higher-than-average entertainment expenses, it will set off an alarm with the IRS and increase the chances of an audit. If you’re going to deduct these types of expenses, you must keep records for each write-off that includes when and where it occurred, who was in attendance, the purpose as it relates to your business, and a record of what was talked about. You’ll also need to keep receipts for expenses greater than $75 when you’re traveling for business.
8. Claiming Your Vehicle As 100 Percent Business Use When deducting for business use of a car, you’ll have to choose between the IRS standard mileage rate and actual expenses. Deducting both of these on your tax return will bring the IRS knocking. In addition, if you claim 100 percent business use on the depreciation form for your vehicle, you’ll need precise records that include mileage logs, dates, and the purpose of every trip.

Mike McVay-Tax Accountant - 850-725-5696 - Mike@MikeMcVay.com

It all starts with a simple conversation. Business Owners need trusted, simple advice on complex issues. Your Taxes and Finances are complex. To maximize results, they must work together. That’s what we do. It’s worth a chat, isn’t it? The Tax Blueprint® provides a clear, proactive, strategic tax reduction plan that is customized specifically to you and your business.

A basic business fundamental is to maximize money coming in, and minimize money going out. The easiest way to increase profit is by not spending it unnecessarily. A Strategic Tax Plan is a true “business fundamental,” and odds are you don’t have one.

We use the New IRS Tax Code comprehensively to ensure you only pay what you must. The tax code exists to help you pay less tax, but very few know how to utilize it. Every tax reduction strategy we employ in the Tax Blueprint is sourced and referenced directly to the new 2018 IRS Tax Code. Every strategy is legal, ethical, and moral. The blueprint drills into your business and personal finances in a way to set up a plan to save you thousands in 2018 taxes. 

Mike McVay, Tax Accountant - 850-725-5696

McVay adds Advanced Reporting and Predictive Analytics to his
line of accounting products.  

The current age of information and digitalization has brought with it new technologies and methods for improving business operations and maintaining competitive advantage:

• New big data technologies enable cost-effective storage, processing and analysis of large amounts of data;
• Modern and intuitive user interfaces allow more user groups to draw insights and make informed decisions; and
• Advanced analytics software enables better analysis, and analysis of relationships and future events.

Since modern techniques and technologies to accelerate or otherwise improve decisions or processes along the value chain are now widely available, it is important to carefully evaluate how advanced analytics can be used within your company in order to keep pace with the competition.

Advanced reporting that brings your financial data to a new level. Integrate your Google Analytics to better forecast and make wise major decisions. 

Mike McVay, Accountant * 850-725-5696 * Mike@MikeMcVay.com

1. MASSAGES
Yep, that’s right. Our CEO, John Pollock, confirmed that massages can indeed be tax write-offs as long as they are a doctor’s order. The next time someone says taxes stress them out, share this tax tidbit with them!
2. GAMBLING LOSSES
Whether you were dealt a bad hand, picked the wrong numbers, or bet on the wrong horse; the IRS allows you to write off your gambling losses. The one caveat — your losses can never exceed your winnings. So, if you won $500 dollars, the most you can write off is $500 in losses.
3. BABYSITTING OR DAYCARE EXPENSES
In order to claim the up to $3000 per child credit, you must be working, at a work-related function, or doing charity work when the babysitting and daycare expenses occur. Sorry, getting a babysitter to go to the movies on a Friday night doesn’t count. 
4. SUMMER BBQS (OR WINTER BONFIRES) AT YOUR HOME
These fun functions only qualify as business expenses if there is a bona fide business discussion before, during, or after the S’more smushin’.
5. YOUR BACKYARD POOL
You can deduct your backyard pool as an on-premise employee athletic facility. According to Code Section 132(j), if you have a home-based business and one or more members of your household qualify as employees, you may be entitled to this tax deductible.
6. INCOME FROM RENTING YOUR HOUSE
Believe it or not, you can rent your home to your business for up to 14 days of tax-free income. Sometimes called the Augusta rule, Section 280A(g) of the Internal Revenue Code, gives you permission to rent out your home for up to 14 days per year. Bonus–you don’t have to report the income! You can read more about this rule here.
7. FULLY DEPRECIATED BUSINESS PROPERTY
You can use a “gift-leaseback” to deduct the equivalent of fully depreciated business property all over again. It’s the gift that keeps on giving!
8. YOUR CHILD’S BRACES
According to The Nest, a popular finance blog, you can deduct your child’s braces as a business expense or even as a rental expense, as long as you itemize. In addition, there are a few other factors involved, including your income and your total medical expenses.
9. BEER
If you are a small business owner and you offer your customers a free drink to improve business, the courts have ruled you can write off a free cold one as a tax deduction. I’ll cheers to that!
10. QUITTING SMOKING
Programs that help you quit smoking can be tax write-offs, as long as they are prescribed by a doctor. In addition to improving your health, you’ll also be decreasing your tax liability. That’s what I call a “win-win”!

Please note that there are usage rules tied each of the tax write-offs listed above. Please contact a tax professional to help you determine which write-offs make the most sense for you and your business.

McVay adds a frantasic new tool to his client offerings. An important tool that allows growth, stability and proper decision making. 
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Key Performance Indicators (KPIs) can keep you on track and let you know whether your efforts are paying off. KPIs will also help you determine if you’re spending too much time on something that’s not worth it and prioritize your tasks accordingly.

Clients can add this new reporting to their monthly service. 

Mike McVay, Accountant 850-725-5696

When it comes to retirement planning, most people focus on how much money they need to save up before they quit their jobs for good. But that's only half the battle. You also need to know how much money you can withdraw from your savings each year in retirement without exhausting your funds.

Conventional wisdom says that retirees' biggest challenge will be reining in their spending to avoid running out of money during their golden years. However, 68% of retirees aren't withdrawing any more from their 401(k)s or traditional IRAs than they're required to per their required minimum distributions. (i.e., the minimum amount you are required to withdraw from your retirement accounts each year once you turn age 70 1/2), according to a study from Ameriprise Financial.

That's not necessarily a bad thing -- after all, frugality is a good trait for a retiree living on a fixed income. However, the study also revealed that only 21% of retirees feel confident about how much they can withdraw each year to ensure their money lasts the rest of their lives.
In other words, retirees aren't spending their money because they don't know how much they can spend safely.

Making your money last through retirement. The bad news is that there's no magic formula to determine exactly how much you should withdraw each year. The good news is that you don't have to blindly guess and hope for the best.

The 4% ruleOpens a New Window. is an oft-used guideline that's a great place to start. The rule states that if you withdraw 4% of your nest egg during the first year of retirement and then adjust that amount each following year for inflation, your savings should last roughly 30 years. For example, if you have $500,000 saved for retirement, you'd withdraw $20,000 the first year ($500,000 x 4%). If inflation came to 2% over that year, then you'd withdraw an extra 2% of the base $20,000 (or $400) during the second year -- that's $20,400 altogether.

Of course, no rule is foolproof, and the 4% rule is no exception. For one, it assumes your retirement will last 30 years or less. That may sound like a long time, but with life expectancies continuing to increase, there's a good chance your retirement will last longer than three decades. The Social Security Administration estimates that 1 in 4 Americans aged 65 today will live past age 90, while 1 in 10 will make it past 95. So if you retire at 62 and live past 92, you could run out of money even if you diligently follow the 4% rule.

That being said, it's better to have a plan -- even a rough one -- than to simply withdraw however much you think you need each year and hope you won't run out of money down the road.

Planning for retirement -- the right wayBefore you can figure out how much money to withdraw from your savings each year, you should determine how much you'll need to make ends meet. Then you can work backwards to make sure you've saved enough to meet that goal.

To start, create a thorough budgetOpens a New Window. detailing all your expenses to calculate how much you spend each year. Some of these expenses may change once you retire -- for instance, you may spend less on fuel when you no longer have to commute to work, but you'll likely face rising healthcare costsOpens a New Window. as you get older -- so try to account for that in order to paint an accurate picture of your income needs in retirement.
Group your expenses into different categories based on how important they are. For example, you may have one category for necessary expenses (your mortgage, groceries, car payment, etc.) and another for nice-to-have expenses (travel, hobbies, etc.). Then when you calculate your total yearly expenses, you'll have a more realistic view of how much you truly need to get by versus how much you'll need to live comfortably.

It's also a good idea to consider how much you'll be receiving in Social Security benefits, as that will give you a better idea of how much annual income your independent savings will need to provide. The average beneficiary receives around $1,300 per month (or $15,600 per year), which can go a long way in covering expenses.

Once you know how much money you'll need to cover your basic expenses, you can work backwards using the 4% rule to determine how much you should save by the time you retire. For example, say you need $40,000 per year to cover all your basic expenses or $50,000 per year to live a more comfortable retirement. If you're receiving $15,000 per year in Social Security benefits, that means you'll need to come up with $25,000 to $35,000 on your own each year. Working backwards, if $25,000 or $35,000 amounts to 4% of your total retirement fund, multiply those numbers by 25, and you'll have your retirement savings target.

In this instance, that amounts to between $625,000 and $875,000, depending on the lifestyle you're aiming for. So if you want to withdraw 4% of your nest egg the first year, and you know you'll need a total of $40,000 per year, then you'll need $625,000 in independent savings by the time you retire. If you want an extra $10,000 per year in fun money, you'll need to stash away another $250,000 by retirement. McVay Business Services offers Pensacola retirees and VETS a better way to handle their elder care. See more....

Retirement planning isn't an exact science, but that doesn't mean you can't plan strategically. Even a rough estimate of how much you're able to withdraw each year will help your money last longer, which will, in turn, make retirement far more enjoyable.

The $16,728 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.
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Mike McVay, Elder Tax Accountant - 850-725-5696 - Mike@MikeMcVay.com 
www.PensacolaFLTax.com

We have helped countless business get a handle on these irritating and costly details when running their business. If you have any of these issues we can help clear them up and put your business on a path to success!

• Entity Advise & Formation - State tax or filing issues
• Back Tax Issues or Filings - I.R.S. or State 
• ​​I.R.S. Tax Payment Plans - Tax Agreements - Liens or Garnishments 
• QuickBooks Clean Up/Tune Up - QuickBooks a mess. Not for us! We know our QuickBooks!
• Bookkeeping - Stress free full service or hybrid bookkeeping at affordable prices
• Payroll Processing - We are one of the largest payroll processors in the area. Our great prices and attention to detail keep our clients happy. Let us so the payroll and you have ZERO headaches. 
• CFO Services - Have a degreed accountant manage, post and code your back-end accounting program  and reconciliation for as low as $250.00 per month.
• Past year tax filings and audit assistance - Not an issue with us. We can pull transcripts and get you caught up in no time. 
• Loan Financial Compilation - Having issues getting a loan. We know what the bankers are looking for. We can successfully provide you with financials they can understand and make you look great! 

Have you experienced or heard of accountants not calling you back with you have an issue. We have a reputation of super fast response. We know your time is valuable as well and your business regardless of its size gets our prompt and full attention. 

Make a change today and you will be glad to have Mike McVay, Accountant on your side. Read our reviews from some of the many clients that rave about McVay's services and prices. 

McVay Business Services 850-725-5696 Mike@MikeMcVay.com - www.PensacolaFLTax.com

Federal law requires most employers to withhold federal taxes from their employees' wages. Whether you're a small business owner who's just starting out or one who has been in business a while and is ready to hire an employee or two, here are five things you should know about withholding, reporting, and paying employment taxes.
1. Federal Income Tax. Small businesses first need to figure out how much tax to withhold. Small business employers can better understand the process by starting with an employee's Form W-4 and the withholding tables described in Publication 15, Employer's Tax Guide. Please call if you need help understanding withholding tables.
2. Social Security and Medicare Taxes. Most employers also withhold social security and Medicare taxes from employees' wages and deposit them along with the employers' matching share. In 2013, employers became responsible for withholding the Additional Medicare Tax on wages that exceed a threshold amount as well. There is no employer match for the Additional Medicare Tax, and certain types of wages and compensation are not subject to withholding.
3. Federal Unemployment (FUTA) Tax. Employers report and pay FUTA tax separately from other taxes. Employees do not pay this tax or have it withheld from their pay. Businesses pay FUTA taxes from their own funds.
4. Depositing Employment Taxes. Generally, employers pay employment taxes by making federal tax deposits through the Electronic Federal Tax Payment System (EFTPS). The amount of taxes withheld during a prior one-year period determines when to make the deposits. Publication 3151-A, The ABCs of FTDs: Resource Guide for Understanding Federal Tax Deposits and the IRS Tax Calendar for Businesses and Self-Employed are helpful tools.
Failure to make a timely deposit can mean being subject to a failure-to-deposit penalty of up to 15 percent. But the penalty can be waived if an employer has a history of filing required returns and making tax payments on time. Penalty relief is available, however. Please call the office for more information.
5. Reporting Employment Taxes. Generally, employers report wages and compensation paid to an employee by filing the required forms with the IRS. E-filing Forms 940, 941, 943, 944 and 945 is an easy, secure and accurate way to file employment tax forms. Employers filing quarterly tax returns with an estimated total of $1,000 or less for the calendar year may now request to file Form 944,Employer's ANNUAL Federal Tax Return once a year instead. At the end of the year, the employer must provide employees with Form W-2, Wage and Tax Statement, to report wages, tips, and other compensation. Small businesses file Forms W-2 and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration and if required, state or local tax departments.
Questions about payroll taxes?
If you have any questions about payroll taxes, please contact the office @ 850-725-5696