Legal
Have a Side Hustle? Tax Season Just Got More Complicated Contributed by Arete Financial Solutions
Filling A Retirement Savings Gap Renee A. Hanson, CFP®, ChFC®, CEP®, CDFA™, CFS®, BFA®, APMA®
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re you on track to achieve your retirement savings goals? It’s important to establish a target savings amount and regularly make retirement plan contributions. It’s also vital to regularly check your progress so you know if you are on the right track. Should you determine that you are falling behind on your savings goals, it’s time to try to rectify the situation. Any or all of the following solutions can help you overcome a retirement savings gap: #1 – BOOST YOUR SAVINGS The first option to make up for a retirement shortfall is to boost your savings. For example, if you set aside $200 more per month in your retirement accounts, that could add up to more than $63,000 in 15 years (assuming a 7% average annual return before fees and taxes). Find that money by reducing current living costs, particularly discretionary expenses. You may want to refinance your mortgage to reduce house payments or transfer balances on high interest credit cards to lower your monthly payouts. Be sure to take full advantage of an employer’s matching contribution to a workplace retirement plan if you have access to one.
#3 – MOVE YOUR RETIREMENT DATE You can choose to take more time to meet your retirement savings goal. That might mean working longer than you initially expected and continuing to set money aside to close the savings gap. If you planned to retire in your 60s or earlier, you should have some room to maneuver. Assuming you are in good health, adding a year or two of work may be feasible. #4 – ADJUST YOUR RETIREMENT EXPECTATIONS If you are too close to retirement to make a significant dent in your retirement savings gap, you may need to adjust lifestyle expectations when you are done working. Take a closer look at your retirement income needs and determine where you can cut back on discretionary expenses in the years to come. Look for help Even if retirement is a long way off, you want to stay on top of your progress and make sure you are taking all of the steps you can to make your goals a reality. Talk to a financial advisor to help you assess where you stand and what you can do to avoid or erase a savings gap.
Renee A. Hanson, CFP®, ChFC®, CEP®, CDFATM, CFS®, BFA®, APMA®, is a Private Wealth Advisor with Affinity Wealth Advisory Group, a private #2 – UPGRADE YOUR INVESTMENTS wealth advisory practice of Ameriprise Financial Services, LLC. in Phoenix, For most people, time is on their side when Arizona. She specializes in fee-based financial planning and asset investing retirement assets. This provides management strategies and has been in practice for 31 years. To contact her visit www.affinitywealthadvisor.com or call (602) 923-9800. Her office is flexibility to invest your money in a way that located at 7010 E. Chauncey Lane, Suite #200, Phoenix, AZ 85054-3115. advisory products and services are made available through can generate a competitive return because Investment Ameriprise Financial Services, LLC, a registered investment adviser. you have time to overcome short-term market Investment advisory products and services are made available through Financial Services, LLC, a registered investment adviser. fluctuations. If your savings isn’t generating the Ameriprise Investment products are not insured by the FDIC, NCUA or any federal return you expected, you may want to reassess agency, are not deposits or obligations of, or guaranteed by any financial Putting needsand of clients firsta is the approach work with you find possible loss of principal institution,in. andI’ll involve investment risks to including your the holdings seek out combination of I believe fluctuation in value.And together, we’ll theinvestments right financial help youtoplan forayourand unique goals. thatsolutions have thetopotential earn Ameriprise Financial Services, LLC. Member FINRA and SIPC. track yourreturn progress over time, adjusting your plan along way Financial, to helpInc. getAllyou higher within your tolerance for risk. © 2022the Ameriprise rightswhere reserved.
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ccording to a recent survey, 45% of Americans have a side hustle in addition to their full-time job. In Maricopa County the formation of businesses rose from 4.7% to 31.9% between 2019-2020. Whether out of necessity or passion, these side jobs will have important tax consequences come April 15. “1099 contractor income is selfemployment income. It is extremely important to seek guidance from a tax professional when you have any kind of business,” says Enrolled Agent Mary L. Reha, co-founder of Arete Financial Solutions. “Working with a professional who knows and understands the tax laws in this constantly changing area can save you a lot of money.” According to Reha, those who started a side business last year need to carefully consider key items that are critical in properly and lawfully filing their 2021 taxes. PAPERWORK NEEDED: As a 1099 contractor, you need to bring documentation of your income, expenses, bank statements, P&L or revenue statements, balance sheets, vehicle mileage or actual expenses and receipts for any asset over $2,500 to your tax preparer. OVERLOOKED EXPENSES: Individuals accustomed to being a W2 employee often don’t realize the many things that can be deducted as business owners.
Your tax professional can help uncover expenses incurred that might qualify as business deductions. ESTIMATED TAXES: Self-employed individuals who expect to owe more than $1,000 in federal tax need to pay estimated taxes throughout the year to avoid underpayment penalties. A tax professional can ensure that you make the right estimated payments moving forward. RETIREMENT ACCOUNTS: W2 employees often have a 401K, but side hustle owners could also start a SEP IRA where they can contribute up to 25% of their solo business income to a retirement fund. LEGAL STRUCTURE: In addition to tax consequences, it’s equally important for anyone with a side business to have the proper legal structure to support it. “Although it is a ‘side hustle,’ it is important that people take the necessary steps to protect themselves from a legal standpoint,” says Ted Ashton, Esq., co-founder and director of the Arete Financial Solutions legal team. “Proper formation, insurance and accounting are all critical to the success and protection of you and your business.” With 70 million Americans involved with a side business, knowing how to prepare for tax day and beyond is imperative. Even though a side hustle might be more of a hobby than a real job for many, it is still a legitimate business in the eyes of the IRS and the law.
you want to go.
Renee A. Hanson CFP®, CEP®, CDFA®, CFS®, ChFC®, APMA® Private Wealth Advisor Affinity Wealth Advisory Group A private wealth advisory practice of Ameriprise Financial Services, LLC
602.923.9800 7010 E. Chauncey Ln Ste 200 Phoenix, AZ 85054 renee.a.hanson@ampf.com affinitywealthadvisor.com
Ameriprise Financial Services, LLC. Member FINRA and SIPC.
24 • March 2022 • NORTH TATUM TIMES
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