- Tips for Accumulating Tax Data
- Standard Deduction & Personal Exemption Increase
- Gift Tax Exclusion
- Social Security Limits
- Financial Planning Process
- Record Retention Schedule
- Current Mileage Rates
- Minimum Wage Rate
- Retirement Plans
- Health Savings Accounts
Standard Deduction & Personal Exemption Increase
Standard Deduction and Phase-Out Levels
The basic standard deductions are:
Married, filing joint return
Head of Household
Unmarried (not surviving spouse or head of household)
Married, filing separate return
"Kiddie" standard deduction alternative amount
|The additional standard deduction amount for the aged and blind (if the individual is also unmarried and not a surviving spouse, $1,850 in 2023 and $1,750 in 2022).||$1,500||$1,400|
Personal Exemption Amounts
|Personal exemption amounts||$0.00||$0.00|
The phaseout of the personal exemption deduction is suspended for tax years 2018 through 2025.
Gift Tax Exclusion
The annual gift tax exemption is $17,000 in 2023 and $16,000 in 2022.
Social Security Limits
The social security tax rate has remains at 6.2% for both employee and employer.
The Medicare tax rate remains at 1.45% for both employee and employer.
|Social Security Wage Base||$160,200||$147,000|
|Medicare||No Limit||No Limit|
The Maximum Amount of Earnings and Still Receive Full Benefits
|Under Full Retirement Age||$21,240||
|Year Reaching Full Retirement Age||$56,520||$51,960|
|Over Full Retirement Age||No Limit||No Limit|
Full retirement age (also called "normal retirement age") has been 65 for many years. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959.
Financial Planning Process
Often the first area that comes to mind with financial planning is investing. Although a sound investment strategy is one of the important aspects of financial planning, it should be considered as part of an overall plan. The Institute of Certified Financial Planners (ICFP) defines financial planning as follows:
Personal financial planning is the organization of an individual’s financial and personal data for the purpose of developing a strategic plan to constructively manage income, assets, and liabilities to meet near and long-term goals and objectives. Important to the success of the personal financial planning process is the monitoring and periodic review of the plan to assure that it continues to meet the individuals’ needs.
The financial planning process is generally divided into seven different functions:
- Determine goals and objectives and identify resources and means to achieve them.
- Gather relevant data.
- Review and analyze data
- Prepare preliminary analysis of current financial situation and reassess goals.
- Present a report and make recommendations.
- Implement or coordinate implementation of recommendations.
- Monitor performance and update plan.
The focus of financial planning is on seven areas that include the following:
- Retirement and financial independence planning - Much of the burden and risk of planning for retirement has shifted from employers to employees. Also the availability of funds under our social security system is subject to change. A review of your expected retirement needs, along with assets currently available, the amount of your savings, and the length of time to your desired date of retirement should be considered.
- Integrating tax and financial planning - Careful consideration of income tax implications is necessary for decisions made during the financial planning process. Coordinating income tax planning concepts and issues with your financial planning goals and objectives should be implemented on an ongoing basis.
- Estate planning - Estate planning is also an important part of one’s financial plan to assure care of loved ones as well as for the managing, administering and distribution of your assets. An up-to-date will is essential, along with the possible use of a living (revocable) trust, and a durable power of attorney. Part of this process should include a review of how your assets are titled, since the best estate and financial plans can be thwarted by improper titling of assets.
- Risk management and insurance needs - Risk management and insurance planning calls for obtaining the appropriate amount of health, life, auto, homeowners, general liability, and long-term care insurance. The goal is to allocate premium dollars to reduce significant risk and exposures. This includes using the appropriate deductibles and, in some cases, deciding not to insure against a potential loss. However, one should never risk a large loss to save a small premium.
- Cash management, budgeting, and debt management - Current expenditures can be reviewed and a budget prepared that would document modifications based on one’s goals. Included would be a review of the terms of all outstanding debt to investigate opportunities to refinance at more favorable terms. Providing an emergency fund for contingencies is important. This can be accomplished with additional savings and/or a home equity line of credit.
- Education planning and income splitting - Education costs continue to increase at a higher rate than the rate of inflation. A review of the progress toward funding education should be completed along with investigating potential sources of financial aid.
- Investment planning and asset allocation - An appropriate investment strategy can only be made after considering the other components to one’s financial plan. In this fast changing world of investing, there are many opportunities available today not previously available. A good example is the increased popularity of online investing. Keep in mind, however, that studies indicate that a proper and wise allocation of investments is the largest determinate of investment success. For most, this is more important than individual stock selection or being able to potentially time the ups and downs of the market. One must be sure to distinguish between investing and speculating.
Determining the direction and priority of your financial goals can be a difficult task. For example, your retirement date and lifestyle expectations will determine how much you will need to save for retirement and how you will want to invest those savings. The following are some questions you can ask yourself that could assist with the financial planning process:
- Have I established attainable goals?
- Have I made a review of my current financial status?
- Do I have a personal budget?
- Do I have a contingency plan?
- Do I have an estate plan?
- Is my homeowner and auto insurance coverage adequate?
- Is my life insurance coverage adequate?
- Do I have an investment strategy and have I recently reviewed the components of my investment portfolio?
We hope the above provides a good overview of the financial planning process. Our assistance can range from informal consultations regarding the above areas to a more detailed analysis and financial plan preparation and implementation.
Record Retention Schedule
Capital stock and bond records, ledgers, transfer registers, stubs showing issues, record of interest coupons, options, etc.
Charts of accounts
Checks (canceled for important payments, i.e. taxes, purchases of property, special contracts, etc.) (filed with transaction papers)
Contracts and leases in force
Copyrights, patents, trademark registrations
Corporation charter, minute books and bylaws
Correspondence (legal and important matters only)
Deeds, mortgages, easements and other property records
Financial statements (end-of-year, other months optional)
General ledgers and journals
Insurance records, current accident reports, claims, policies, etc
Property records - including costs, depreciation reserves, end-of-year trial balances, blueprints and plans
Tax returns and work papers, including records to support carrybacks and carryovers
Retain 7-8 years
Accident reports and claims (settled cases)
Accounts payable ledgers and schedules
Accounts receivable ledgers and schedules
Canceled checks (except checks kept permanently)
Contracts and leases (expired)
Expense analysis and expense distribution schedules
Inventories of products, materials and supplies
Invoices to customers
Invoices from vendors
Maintenance and repair records (buildings and machinery)
Notes receivable ledgers and schedules
Option records (expired)
Payroll records and summaries, including payments to pensioners and timesheets
Plant cost ledgers
Purchase orders (purchasing department copy)
Scrap and salvage records (inventories, sales, etc.)
Voucher register and schedules
Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc. for travel and entertainment)
Retain 6 years
Employee disability benefits records
Employee withholding tax statements
Equipment leases (after expiration)
Fire damage reports
Monthly trial balances
Retain 2 years and less
Purchase orders (except purchasing department copy)
Stockroom withdrawal forms
* The above listing is only a guide and is not all inclusive. If you have any questions or need additional information, please contact us at (540) 662-7070.
Current Mileage Rates
The standard mileage rate for business mileage (in lieu of using actual expenses), as well as the standard rates for use of your car for medical and moving or charitable purposes are as follows:
Jan. 1 - Dec. 31, 2023
July 1 - Dec. 31, 2022
|Business||65.5 cents/mile||62.5 cents/mile|
|Medical & Moving||22 cents/mile||18 cents/mile|
|Charitable||14 cents/mile||14 cents/mile|
Current Minimum Wage Rate
The current FEDERAL minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009. As of January 1, 2023 Virginia has mandated a minimum wage of $12.00 per hour and Maryland has mandated a minimum wage of $13.25 per hour.
Below are the annual contribution limits on elective deferrals for retirement plans.
Indexed Contribution & Benefit Limits for Qualified Plans
|Type of Plan||2023||2022|
|Individual Retirement Accounts (IRAs)*||$6,500||$6,000|
|Section 401(k) plans or SAR-SEPs*||$22,500||$20,500|
|Section 403(b) plans*||$22,500||$20,500|
|Section 408(p)(2)(E) SIMPLE Contributions*||$15,500||$14,000|
|Section 457(b)(2) limit*||$22,500||$20,500|
|Section 415 limit for:|
|Defined contribution plans^||$66,000||$61,000|
|Defined benefit plans||$265,000||$245,000|
|Highly compensated employees Section 414(q)||$150,000||$135,000|
|Top Heavy Key Employee Officer compensation limit||$215,000||$200,000|
|Governmental "Grandfathered" plan compensation limit||$490,000||$450,000|
|*Age 50 Additional contributions|
|401(k) type plans||$7,500||$6,500|
|^ The Section 415 compensation limit for defined contribution plans is $330,000 for 2023 and $305,000 for 2022.|
|- Nondeductible Contributions|
|- Qualified tax-free distributions|
|- AGI limit for maximum contributions:||2023||2022|
Health Savings Accounts
|Catch-up for those age 55 and older||$1,000||$1,000|
For 2021 and 2022, the minimum deductible for a high-deductible health plan (HDHP) is $1,500 in 2023 and $1,400 in 2022 for self-only coverage and $3,000 in 2023 and $2,800 in 2022 for family coverage. The maximum out-of-pocket limit is $7,500 in 2023 and $7,050 in 2022 for self-only coverage and $15,000 in 2023 and $14,100 in 2022 for family plans.