Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Jul 21

    Many Americans appear to be living one big expense away from disaster. A 2014 Federal Reserve poll discovered the startling fact that almost half of all U.S. households could not come up with $400 to cover an emergency expense. They would need to sell something, or borrow cash, to do so.

    If you find yourself belonging to that category, then I have some ideas (11 of them, in fact) I think will help. In my experience, if you want to get out of a hole, you study the behavior of those who have already made it out. And you do everything you can to copy that behavior.

    Yes, some people have been fortunate enough to inherit wealth, etc. But many, MANY more of those who have wealth came about it in a different way.

    Now, so that YOU do not find yourself in the unfortunate place of not being able to scrape up $400 in an emergency … read this now.

    Becoming a household that will be able to ride through instability and uncertainty is only going to become MORE important in future years, not less. So, that being the case, here is a portrait of those who are able to achieve this status.

    You’ll notice that these are just as significantly about your mindset as you relate to your finances, as about your behaviors.

    Here’s what the Financially Secure look like …

    1) He always spends less than he earns. In fact, his mantra is that over the long run, you’re better off if you strive to be anonymously rich rather than deceptively poor.

    2) She knows that patience is truth. The odds are you won’t become a millionaire overnight. If you’re like her, your security will be accumulated gradually by diligently saving your money over multiple decades.

    3) He pays off his credit cards in full every month. He’s smart enough to understand that if he can’t afford to pay cash for something, then he can’t afford it.

    4) She realized early on that money does not buy happiness. If you’re looking for financial joy, you need to focus on attaining financial freedom.

    5) He understands that money is like a toddler; it is incapable of managing itself. After all, you can’t expect your money to grow and mature as it should without some form of credible money management.

    6) She’s a big believer in paying yourself first. It’s an essential tenet of personal finance and a great way to build your savings and instill financial discipline.

    7) She also knows that the few millionaires that reached that milestone without a plan got there only because of dumb luck. It’s not enough to simply “declare” to the universe that you want to be financially free. This is not a “Secret”.

    8) When it came time to set his savings goals, he wasn’t afraid to think big. Financial success demands that you have a vision that is significantly larger than you can currently deliver upon.

    9) He realizes that stuff happens, and that’s why you’re a fool if you don’t insure yourself against risk. Remember that the potential for bankruptcy is always just around the corner, and can be triggered from multiple sources: the death of the family’s key breadwinner, divorce, or disability that leads to a loss of work.

    10) She understands that time is an ally of the young. She was fortunate (and smart) enough to begin saving in her twenties, so she could take maximum advantage of the power of compounding interest on her nest egg.

    11) He’s not impressed that you drive an over-priced luxury car and live in a McMansion that’s two sizes too big for your family of four. Little about external “signals” of wealth actually matter to him.

    And a little bonus, if you will: She doesn’t pay taxes which could have been avoided with a simple phone call to her tax professional. She plans ahead, before tax time.

    “You cannot control what happens to you, but you can control your attitude toward what happens to you, and in that, you will be mastering change rather than allowing it to master you.” – Brian Tracy

  • Dec 22

    Did you know that the average student loan balance is $24,803? Student debt is taking a heavy toll on borrowers, according to an American Institute of CPAs survey, which found that 75% of respondents or their children had made personal or financial sacrifices because of monthly student loan payments. Sacrifices included putting off saving for retirement (41%); delaying car purchases (40%); postponing a home purchase (29%); and even waiting on marriage (15%).

    Among the most troubling findings were that only 39% fully understood the burden that student loan debt places on their future and 60% had at least some regrets about the decisions on financing their education. That’s why it’s always critical to understand the full potential impact of your financial choices. The good news is that we can help. Contact us with all of your financial questions and we’ll provide the knowledge and insight you need to make the best decisions for you.

  • Feb 7

    Q: What’s my tax liability in a foreclosure?

    A: When you borrow money it’s not a taxable event because it’s assumed you’ll pay it back. But with most types of debt relief, you have income because it’s an enhancement to your balance sheet. That’s true even if you never actually received any cash. The IRS considers any forgiven debt of more than $600 as taxable income.

    There are some exceptions however:

    1. a discharge of debt in a bankruptcy proceeding under Title 11;
    2. a discharge when you are insolvent outside of bankruptcy;
    3. a discharge of qualified farm indebtedness;
    4. a discharge of qualified real property business indebtedness, and
    5. a discharge of qualified principal residence indebtedness before January 1, 2014.

    Note the date in number five above. Since January 1, 2007 there has been an exception for qualified principal residence indebtedness. Taxpayers did not have to recognize income from the discharge of that debt. However, that’s now gone away. Assuming, of course, Congress doesn’t change the law retroactively.

    Think of it this way: John ran up $15,000 in credit card debt but he settles the debt for $10,000. If the lender is unable to collect the remaining debt and writes it off as a loss, then John should expect to pay taxes on the $5,000 of the debt that was forgiven. The IRS considers that $5,000 of debt relief as a windfall because you used that money to buy stuff, like clothes, dinners at restaurants, a new bike, and you no longer have the obligation to pay it back.

    Be on the lookout for a Form 1099C. If you had debt relief, it’s an important tax document and should be reported on your tax return for the year in which the debt was forgiven.

    Many people don’t realize they have to report it, just don’t think about it, or they ignore the form and just toss it out.

    You also need to make sure the Form 1099C is correct. Nina Olson, head of the IRS’s Office of the Taxpayer Advocate, has warned Congress that financial institutions have issued 1099Cs for debts they haven’t even tried to collect for some time. Beware, taxpayers have been known to receive duplicate 1099Cs for the same debt and have found it difficult to reconcile with the IRS, according to Ms. Olson.

    Do you have a question for the Taxpert that you’d like to see answered in a future Taxing Times? Or perhaps just an issue you’d like the Taxpert to address? Send the Taxpert a note to Taxing Times, 1050 Hillcrest Rd., Ste A, Mobile, AL 36695 or an email to: taxpert.zl@comcast.net.