Monday, September 29, 2014

Establishing Legal Residency in a New State


  • Locate a place to live in the new state of choice. Purchase a home if you can, although it is not required.  You must spend at least 6 months and 1 day at this new home to claim residency in your new state.  The new state must be your “Domicile” (generally meaning "permanent home").
  • Spend substantial time in the new “home” state during vacations and holidays.
  • Next, establish a home address with the U.S. Postal Service by going to the nearest post office and filing a change of address form.  The new home must be your primary mailing address.
  • Have your important documents transferred to your new home address (insurance, memberships, licenses, etc.).  
  • Obtain a driver's license and car registration in your new home state, or apply for a non-driver's state ID card if you do not drive.
  • Register to vote in your new home state.
  • Register motor vehicles in your new home state and make sure insurance rates are based upon your new state residency.
  • Establish a banking relationship in the new state.
  • Establish new professional relationships such as an accountant, lawyer, dentist and doctor. 
  • Establish social groups and relations in the new home state, such as joining a health club, country club, civic, or business groups.
  • Become a member of a local church.
  • If you have professional licenses, have them transferred to your new state. Do this by contacting the governing board of your occupation in the new state (nurses, physicians, social workers, attorneys, etc.). Temporary licensing can often be granted immediately while you are waiting for the permanent license.
  • Purchase a resident hunting or fishing license in the new home state, and if you continue these sports in your previous state purchase a non-resident license there.
  • If retaining any property in your previous state, make sure it is “non-homestead” (if applicable) property for property tax calculations.

NOTE FOR MINNESOTA RESIDENTS:  Minnesota courts have recently demonstrated in their rulings a reluctance to let the taxpayer establish a residency change while maintaining a “presence” in Minnesota.  The court cases suggest that a complete break with Minnesota must be established in order to evidence a taxpayer’s intent to change residency from Minnesota to another state.  Not all states have been as aggressive as Minnesota in establishing difficult rules to comply with.  Check your home state rules for specific requirements.

IF YOU CHANGE STATES FROM MINNESOTA- RECOMMENDATION:   Stay out of Minnesota (well) over half the year.  OVERDO residency changes related to intent factors!  Keep excellent records!  If you receive a residency audit notice from Minnesota, we recommend you retain a Minnesota tax attorney.

Wednesday, September 10, 2014

Fall is Tax Time

It’s the end of summer, the best time of the year to think about your income taxes. Seriously! 


Granted, there are some last minute moves that can and must be made at year-end, by December 31. Why wait until December?  More than halfway through the year is great for planning. You have a good idea of what your earnings will be, and you have time to take steps that could cut the taxes you will have to pay.

If you have not filed your 2013 tax return because it is on extension (you have until October 15, 2014), get it done now. Rushing through it in October is not a positive move.

For 2014, will you owe or get a big refund? You probably should adjust your withholding if either is the case.  Payroll withholding should provide “just enough,” not too much and not too little. Changing your withholding is easy. Just submit a new W-4 to your payroll office.

Do you pay estimates?  Now is a great time to reassess your estimated tax situation. You can adjust your 3rd quarter, (due September 15) and 4th quarter payments.

Is your 2014 tax-filing material building up in a pile? Straighten it out now. It will make it filing your return next year much easier.

Your favorite non-profit organization will happily pick up unwanted household items and clothing any time of the year. So help out the charities now. Just be sure to get a receipt and put it in your newly created tax filing system. Household goods, furniture, clothing and nick-knacks can add up to very meaningful contributions. List them out with the following information:  Description of item, approximate acquisition date, original purchase price or original value, date of donation, organization receiving donation, condition of item, (excellent, good, fair, etc.), estimated value (10% - 30% of original).  You will be surprised at the amount of the donation. If any item exceeds $5,000 in value you must obtain an outside, independent appraisal.

Earlier is better when it comes to retirement plan contributions. 


There are many other moves and ideas you can make or do. Contact your Wealth Advocate for more tax planning ideas.

Wade Financial Group is on your side for tax planning.

Monday, September 08, 2014

Reminder: Third Quarter Tax Payments Due

The 3rd payment of your estimated individual income tax is due on September 15, 2014.

If you mail your payment and it is postmarked by the due date, the date of the U.S. postmark is considered the date of payment.  If your payment is late or you did not pay enough, you may be charged a penalty for underpaying.

If you are paying an estimated payment based on your prior year total tax, you are paying a “safe harbor” estimate.  This safe harbor estimate allows you to have significant increases in income and will not incur a penalty if all your estimates are paid on time.  If you are not paying an estimate based on your prior year tax and if you need to change your estimated tax payment we are available to assist you or you may call your tax preparer for assistance.

There are several methods to pay your estimated income tax:

  • Pay by check using the US mail.  Be sure to enclose the estimated payment voucher with your check and write your social security number on your check and note that it is for the 3rd quarter of 2014 taxes.  The IRS prefers you to not staple your check to the voucher.  The mailing address for Minnesota residents is:
    • Internal Revenue Service
    • P.O. Box 802502
    • Cincinnati, Ohio 45280-2502
  • Pay online at www.irs.gov/e-pay.  You can pay using either of the following electronic payment methods:
    • Direct transfer from your bank account
    • Credit or debit card
  • Pay by phone: for the latest details on how to pay by phone, go to www.irs.gov/e-pay
    • To pay by phone by direct transfer from your bank account call EFTPS Customer Service at 1-800-555-4477
    • When paying by phone using a debit or credit card the IRS charges a “convenience” fee which varies by provider, card type and payment amount.  The providers to call for paying by debit or credit card are:


Wednesday, September 03, 2014

Save the Date: October 16-25

Wade Financial Group has teamed up with the Twin Cities Film Festival for 2014 and as a Wade Financial Group Client, you can get the best seats in the house! 

We are proud to announce that we are the Red Carpet Sponsor for the festival, which means that we can offer our clients complimentary tickets.

The events and film schedule is not yet published but we'll keep you updated and let you know how to reserve tickets. We hope you'll be able to join us for one or more events next month.

This Friday, September 5 is the first event leading up to the film festival: the End of Summer Sneak Preview & Member Drive.  It is $15 with a Twin Cities Film Festival membership or $20 to the public and will feature a silent auction, cocktails and appetizers, and a sneak preview of the 2014 Twin Cities Film Festival's most anticipated films. Tickets can be purchased here

Stay tuned for more updates.

Wednesday, July 09, 2014

Covered Call Writing

When reading articles on the topic of covered calls, talking to others and analyzing various options, be sure to really understand the pros and cons of your decision.  Below we discuss several of the most important topics.

Shorter Term or Longer Term?

Like most topics, there is often lively debate as to which is better: longer or shorter calls. We generally prefer writing options that have a shorter time to expiration; usually a year or less.  We do this for several reasons.

When you write covered calls further out in expiration, you lose control over your money.  It gives you much less flexibility if something in the marketplace or the company changes.  What if volatility changes, the stock market crashes, the company does great or terrible?  If any of these scenarios occur, you are “locked” in to that expiration date.

Additionally, the benefit of receiving more income by going further in expiration decreases exponentially. When you sell an option, you want the price of that option to decline.  Because time decay happens more quickly closer to expiration, we prefer to sell shorter term calls to take advantage of this.

Here is a chart and link that explains the issues with using longer-term options.

Take a look at this article, which goes on to further explain that for each option a “sweet-spot” exists with the optimal time to expiration/option price. We agree!


What is the Best Strike Price to Go After?

Answering this question is more of an art than the previous question.  A very generic answer depends on how much income you want from the covered call and at what price are you comfortable “selling” the stock if the stock did go above your strike price.  The more complex answer may start to sound Greek to many investors.  That is because options have various metrics which they are measured by: Delta, Vega, Gamma, Theta, and Rho.  All of these are important for different types of options. Some of our clients receive ongoing solicitations from other advisors who do not understand these concepts. We do! This knowledge and experience is why it is great to have WFG as your advisor! We analyze all that for you before we make a suggestion.

Timing

The last issue is timing.  Think back to the day you met your significant other.  How amazing was that timing? We all know, timing is everything. Though it is nearly impossible to predict accurately, the best time to write options is when volatility is higher relative to its average.  Option prices are directly related to the volatility.

For example, this Bloomberg graph shows the historical volatility for CHRW (C.H.Robinson) over the previous year (this graph is for illustrative purposes only).

The yellow line is the volatility over 30 days and the white line is over 10 days.  This type of graph helps to determine the best time to write covered calls, regardless of expiration or strike price.

Summary


Although writing covered calls are an easy exercise to execute, it still requires a lot of attention to detail. Make sure you are analyzing these variables when you write calls.

Thursday, June 19, 2014

Emerging Market Opportunities

In our continuous search to improve upon our emerging markets success in the beginning of 2014, we would like you to consider another demonstration of country-wide performance, the 2014 World Cup.  The World Cup occurs every four years, and showcases the most talented soccer players from around the world.  For the preliminary round, countries are split into eight groups, each consisting of four teams.  We have taken these same groups, and used them to display financial, rather than physical, performance metrics.  Each group has been sorted by year-to-date return.

Group A-D
To demonstrate present and projected valuation, the current and forward price-to-earnings ratios are also listed.  As a reminder, price-to-earnings ratio is defined as current price divided by trailing 12-month earnings per share.  Greece, for example, would be the only country in this list with negative earnings, given their negative P/E ratio (-3.3). Italy’s P/E ratio is so alarmingly high (287.1) because the country has just recently generated positive, albeit still very low, earnings.
Group E-H
Forward P/E is the ratio of a country’s current price over its projected earnings for the next four quarters.  The best way to use this information is to compare the forward P/E ratio with the current P/E ratio, keeping in mind that lower is better.  Since the bulk* of these countries have forward P/E ratios that are lower than their current P/E ratio, a vast majority would be expected to see increased country-wide earnings over the next year.

As we have recently mentioned, we currently see a much greater opportunity in emerging markets as opposed to developed markets.  Developed markets, for the most part, performed very well in 2013 while emerging markets lagged far behind.  Based on historical evidence, we feel that this performance gap will continue to shrink throughout the rest of the year.  Each emerging market carries with it a different set of economic circumstances, however, which is why we are continuously focusing on selecting emerging market countries for our Alternative (ALT) strategy that we feel are most poised for future off-field success.

*Excluding Belgium, Argentina, Russia, and the special circumstance of Greece.