Servion Financial Advisors Newsletter - March 2022

MARCH 2022

In This Issue Announcing Diane Rekuski’s Retirement Tax Time is the Right Time for a Budget Checkup What to Know Before Filing Your 2021 Tax Return Women’s History Month: Women in Investing Standard Deduction or Itemized Deductions?

ANNOUNCING

Diane Rekuski’s RETIREMENT

After spending more than seven years with Servion Financial Advisors as a registered administrative assistant, Diane Rekuski has retired. We are deeply grateful for everything Diane did for clients, from processing transaction paperwork to assisting with rollovers.

Most of all, Diane provided friendly, professional service to the members of our partner credit unions. Members loved her, and so did we!

Congratulations on reaching retirement, Diane, and best of luck on your next adventure!

Tax Time is the Right Time for a Budget Checkup Millions of Americans are getting ready to file their tax returns.

That means digging through shoe boxes and file folders looking for receipts; gathering mortgage, retirement, and investment account statements; and relying on computer software to find every tax break available.

As long as you’re going through all your finances for tax purposes, why not use the opportunity to get even more out of this exercise?

With all your financial information in front of you, there’s no better time to make a budget. By creating a budget, you’ll be able to get a handle on where your money is going and discover places you could save.

Six-Step Process A thorough budget checkup involves six steps: Start by dividing expenses into useful categories.

Creating Some Categories Some possibilities: home, auto, food, household, debt, clothes, pets, entertainment, and charity.

Don’t forget savings and investments. It also may be helpful to create subcategories. Housing, for example, can be divided into mortgage, taxes, insurance, utilities, and maintenance.

Go through all the receipts and statements gathered to prepare taxes and get a better Following the Money understanding of where the money went last year. Track everything. Be as specific as possible, and don’t forget to account for the cost of a latte on the way to the office each day.

Knowing how much was spent per budget Projecting Expenses Forward category can provide a useful template for projecting future expenses. Go through each category. Are expenses likely to rise in the coming year? If so, by how much? The results of this projection will form the basis of a budget for the coming year.

Add together all sources of income. Make sure to use net income.

Determining Expected Income

It’s time for the moment of truth. Subtract projected expenses from expected income. If Doing the Math expenses exceed income, it may be necessary to consider changes. Prioritize categories and look to reduce those with the lowest importance until the budget is balanced.

If it’s not in the budget, don’t spend it. If it’s an emergency, make adjustments elsewhere.

Sticking to It

What to Know Before Filing Your 2021 Tax Return Federal income tax season is once again upon us. For many Americans, this year’s returns will be more complex because of job or residency changes, stimulus payments, child tax credits, unemployment insurance claims or other COVID pandemic factors.

“The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don’t face processing delays,” IRS Commissioner Chuck Rettig said in a statement.

Sources: https://www.cnet.com/personal-finance/taxes/tax-season-has-begun-everything-to-know-before-you-file-your-2021-tax-return/ https://www.ky3.com/2022/02/07/irs-things-consider-before-filing-your-2021-taxes/ https://www.11alive.com/article/money/taxes/how-to-file-2021-taxes/85-4df96979-a1cf-4004-b4cf-691ea34bf81b

Here are the important things (and dates) to know as you’re getting ready to file your 2021 return.

What’s the deadline for filing your 2021 federal tax return?

After postponing deadlines in 2020 and 2021 because of the COVID-19 pandemic, the IRS set April 18, 2022, as the deadline for filing a federal tax return this year. The usual date of April 15 is not applicable this year because April 15 is a recognized holiday, Emancipation Day, in Washington, D.C. “By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do,” according to a statement from the IRS. What about state taxes?

Most of the 41 states that collect income tax adhere to the federal deadline. That includes Minnesota. A few states, like Delaware and Iowa, for example, give people until April 30 for state taxes.

What if I file for an extension?

Taxpayers requesting an extension will have until Oct. 17, 2022, to file their 2021 tax return. Be aware that filing an extension doesn’t push back the deadline for when you need to pay the IRS: You still need to pay an estimate of what you owe by April 18 to avoid late penalties. An extension just gives you more time to complete your tax return.

Consider filing electronically and choosing direct deposit The IRS suggests to file electronically, if possible, and choose to get your return via direct deposit to get your return back faster. Taxpayers can file electronically through a tax professional, IRS Free File or commercial tax prep software.

If you don’t have a bank account, you can visit the FDIC website or use the National Credit Union Administration’s Credit Union Locator Tool to find an institution that allows them to open an account online.

Child tax credit This tax-filing season requires that people report the advanced child tax credit when filing taxes. Anyone who received an advanced child tax credit payment will receive Letter 6419 showing the payments.

Third stimulus check If you received a third stimulus check you’ll need to report that. Letter 6475 is being sent by the IRS to those who received the third check. It will help taxpayers determine whether they are eligible to claim the recovery rebate credit (RRC) for any missing stimulus payment. People who are eligible for the recovery rebate credit must file a 2021 federal income tax return to claim their remaining stimulus payment.

Unemployment If you received unemployment during 2021, as so many people did due to the pandemic or other reasons, you must report it as income on your tax return.

Working from home You cannot deduct work expenses that you incur at home for work you perform as an employee on a company’s payroll. The home office deduction only applies to people who are self-employed, such as freelancers, consultants, entrepreneurs, gig workers, and other independent contractors.

WOMEN’S HISTORY MONTH:

WOMEN IN INVESTING Women today have more control over their own financial security than at any point in history. Whether married, single, working or staying at home with kids, women can take steps to improve their financial health and gain confidence about their future economic positions.

Women face different financial planning issues than men. For example, women have a longer life expectancy than men by about five to eight years, so women’s financial plans must account for those extra years.

And, despite recent gains in the pay equality movement, women still earn less on average than men, which means women usually end up with lower Social Security benefits. This reality must be accounted for when building a financial plan.

Additionally, women need to think about a variety of personal and family-related issues when embarking on a financial planning journey. Examples of things to think about include:

• College funding for children • Caring for an aging parent • Divorce • Retirement • Widowhood So how can you protect yourself and make sure your financial goals are being met?

What are your options for seeking help in getting your finances in order?

Consider meeting with Servion Financial Advisors (SFA). Our team enjoys working with women on all aspects of investing and financial planning. Together, we can start making decisions that positively impact your financial future.

Standard Deduction or Itemized Deductions?

At tax time, everyone wonders whether they are better off taking the standard deduction or itemizing. The truth is, about 90 percent of taxpayers take the standard deduction because the amount is so high.

The standard deduction is the portion of your income that’s not subject to income tax. Anyone can take the standard deduction, unless you itemize deductions on Form 1040 Schedule A. The Tax Cuts and Jobs Act (TCJA) of 2017 nearly doubled the standard deduction in 2018 and the amount remains high until 2025. Here are the standard deduction amounts by filing status for the 2021 and 2022 tax years: FILING STATUS

2021 STANDARD DEDUCTION

2022 STANDARD DEDUCTION

Single

$12,550

$12,950

Married Filing Separately

$12,550

$12,950

Heads of Household

$18,800

$19,400

Married Filing Jointly

$25,100

$25,900

Surviving Spouses

$25,100

$25,900

ITEMIZING DEDUCTIONS If the value of your itemized deductions is greater than your standard deduction, you can choose to itemize. Here are a few of the itemized deductions available: • State and local taxes (SALT): The combined deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.

• Mortgage interest deduction: You can deduct your mortgage interest on up to $750,000 of debt (the limit is $1 million if you bought the home before Dec. 16, 2017).1 • Charitable donations: The cash donation limit of 100% of AGI remains in place for 2021. Note that this limit is not automatic; you must elect it on your Form 1040.2 • Medical expenses: You can deduct medical expenses that exceed 7.5% of your AGI. • Miscellaneous deductions: You can no longer deduct miscellaneous itemized deductions—unless you claim a deduction related to unreimbursed employee expenses.3 Sources 1. IRS Publication 936 (2021): https://www.irs.gov/publications/p936 2. IRS “Expanded tax benefits help individuals and businesses give to charity in 2021” https://www.irs.gov/newsroom/expanded-tax-benefits-help-individuals-and-businesses-give-to-charity-in-2021 3. IRS Publication 529 (12/2020): https://www.irs.gov/publications/p529

651-631-3111 • servionfa.com

Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker-dealer and a Registered Investment Advisor. Investments are: • Not FDIC/NCUSIF insured • May lose value • Not financial institution guaranteed • Not a deposit • Not insured by any federal government agency. Cetera is under separate ownership from any other named entity. 500 Main Street, Suite 100, New Brighton, MN 55112. 651-631-3111.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty.