Monthly Archives: March 2015

5 Financial Areas That May Need Some Spring Cleaning

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Forbes

With the first day of spring right around the corner, this is often a time for much needed spring cleaning. That goes for your finances too! Here are some areas in your financial life that might need some cleaning up:

paperwork1) Your credit report.

It’s been estimated that 70% of credit reports have errors on them. It’s bad enough to suffer from your own mistakes. You don’t want to suffer from someone else’s too. Every 12 months, you can order free copies of each of your three credit reports at (be sure to use this official site because there are a lot of copy cats out there that aren’t actually free) and dispute any incorrect items you may find that could be hurting your score.

There are a couple of other strategies you can use to remove delinquent debts from your credit report as well. One is a “pay for delete,” in which you try to settle the debt in exchange for them removing it from your credit report. If the debt was already paid or settled, you can ask for a goodwill deletion, which is pretty much what it sounds like. Also be aware that unpaid or delinquent accounts will automatically fall off of your credit report afterabout 7 years so you might just be able to wait some of them out.

Repairing your credit is one of the fastest ways to boost your credit score, which can reduce your interest rates and insurance premiums and even improve your chances of landing a new job. You can look for other ways to increase your score for free on sites like Credit Karmaand Credit Sesame. Both sites also offer free credit monitoring so you’ll be alerted in case anything happens to your credit in the future.

2) Your spending.

If you’ve never tracked your spending, you may be shocked to discover where your money has been going. You can start by looking at the last 3 months of your bank and credit card statements and recording your expenses on a worksheet like this. The only problem is that you won’t be able to see where your cash went so for each cash transaction going forward, you might want to keep the receipt or write it down. You can also decide to only use cash for one type of expense like eating out or just make cash spending it’s own miscellaneous category.

Once you know your expenses, you can look for opportunities to save money. Some may be easy like getting rid of subscriptions to magazines you don’t read or switching to lower cost insurance policies or cell phone plans. (You may be surprised to see how even small savings like bringing coffee or lunch to work can add up over time.) Others may require making some sacrifices to free up money towards expenses or goalsthat are more important to you. The important thing is to make sure that your spending matches your priorities.

3) Your retirement accounts.

Do you still have money at retirement plans from previous jobs? If so, it could be a good idea to consolidate them in an IRA or your current employer’s plan. Rolling them into an IRA could provide you more options in how you invest the money and even how you use it since IRAs can be used penalty-free for things like education expenses and up to $10k for a first-time home purchase. Rolling them into your current employer’s plan can make it easier to manage, especially if your plan provides free investment help or guidance, and can allow you to borrow from it if necessary.

That being said, there are a few reasons why you might not want to roll over the money. One is if your former plan offers a unique investment option that you’d like to invest in but can’t otherwise access. For example, some plans offer discounted mutual funds or stable value funds with relatively high interest rates. Another is if you have appreciated company stock since you can pay a lower taxon the gain by transferring the shares directly out of the plan when you retire. But other than these fairly rare situations, it may make sense to just roll the money over.

4) Your investments.

Even if all of your money is in one account, it could be haphazardly spread out in multiple investments. While this may look “diversified” the disorganization can actually mask problems like having too much or too little of your portfolio in certain types of investments or paying too much in fees. I’ve seen people with multiple overlapping funds that all invest in the same thing.

To keep things as simple as possible, you can put everything in an “asset allocation fund” like a balanced fund or a target date fund that gradually becomes more conservative as you get closer to retirement. Because these funds are fully diversified with a mix of stocks, bonds, and perhaps other investments, they can be a “ one stop shop.” Just make sure the fund matches your risk toleranceand doesn’t charge excessive fees.

If you want a more customized portfolio, see if your account has access to investment tools like Financial Engine’s Personal Online Advisor, which is offered at no additional cost in many employees’ retirement plans. There are also a whole host of “robo-advisors” that can manage your investments at a much lower cost than a traditional financial advisor. Some like Wisebanyanand Charles Schwab's new Intelligent Portfolios™ program don’t even charge a fee at all.

If you prefer a human touch or have a more complex situation, you might want to hire an investment advisor. To avoid conflicts of interest, look for a fee-only advisor that doesn’t sell investments for a commission. In particular, you can find independent advisors that charge hourly fees at the Garrett Planning Network, monthly fees at the XY Planning Network (they specialize in Gen X and Gen Y clients), and annual retainers at the Alliance of Comprehensive Planners(most will also do your taxes).

5) Your legal documents.

Many people are afraid to get rid of old tax documents but according to the IRS, the longest you may ever need to keep tax documents is 7 years. (Yes, you can finally clean out that old filing cabinet.) Just be sure to get those documents shredded or you may find yourself back to cleaning up your credit report again.

You should also check the beneficiary designations on any retirement accounts or life insurance policies you have because those designations trump any subsequent documents you may have created. That means if your ex-spouse is listed as the beneficiary on your IRA but your will leaves everything to your current spouse, your ex is still getting that IRA when you pass away. These beneficiary designations also allow you to avoid the time and cost of probate. Fortunately, you can generally add beneficiaries to bank accounts by asking for a POD (payable on death) form and to brokerage accounts with a TOD (transfer on death) form. Some states will even let you add beneficiaries to real estate and vehicles.

Finally, check to make sure that youhave an updated will, durable power of attorney, advance health care directive, and possibly a trust. If not, see if your employer has a benefit that lets you draft these documents for free or at a discount. In any case, you can create and store a health care directive at MyDirectives.comat no cost.

None of these areas may feel as urgent as a dirty toilet or a kitchen floor that needs scrubbing so they can be even easier to procrastinate, but the impact of neglecting them can be much greater. That’s exactly why we need to set a date to take care of them. After all, isn’t that what spring cleaning is all about?

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

IRS Seeking Taxpayer ID Verification

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!


Some people are getting an Internal Revenue Service notice asking them to confirm they are who they say they are on their tax returns.


Don’t freak out. Letter 5071C is not a scam.

It’s the latest effort by the tax agency when it encounters tax returns that have indications of being identity theft, but which contain a real taxpayer’s name and/or Social Security number.

In these cases, the IRS instructs the letter recipients to go to its Identity Verification Service website,, to let the agency know that the tax return in question is valid or fraudulent.

Look for .gov

Note the .gov extension. Always look for that at the end of a tax-related URL. Web addresses ending with .com, .org, or .net are not official governmental URLs and could be the creations of con artists.

But again, Letter 5071C is the real deal.

And it’s going out to taxpayers whose identities may have been stolen via the U.S. Postal Service to the address on the suspicious return.

The IRS does not request taxpayer information via email. Neither do IRS representatives call taxpayers directly to ask this information unless they have first received a written, mailed notice.

Online ID confirmation

If you get the letter, the fastest way to resolve questions about the return is go to There you’ll be asked a series of questions that only you, the real taxpayer, can answer.

Once you do that, you can confirm whether you filed the return in question. If you did, then your 1040 will go back into the system for processing, which the IRS says should take about six weeks.

If, however, you tell the IRS via the ID verification website that you did not file the suspicious return, the agency will halt the filing and help you initiate steps to file your correct tax return.

Phone verification OK, too

Folks who are uncomfortable with the online identification verification process can call the toll-free number that’s listed in the letter. Note, however, that high call volumes mean you’ll probably be on hold for a while.

Before calling the IRS or clicking over to the online ID verification site, gather your prior year tax return and, if you’ve filed it, your current tax return, along with supporting documents, such as Forms W-2 and 1099 and Schedules A and C.

The information on these, as well as personal data such as your name, date of birth, and Social Security or taxpayer identification number will make the process go more smoothly.

If you have any questions, please give us a call.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.


The First 5 Things You Should Do If (WHEN!) You Win The Lottery

Lottery TicketWhen local Westchester resident Kevin Buchanan, a construction work from Yonkers, bought a $20 scratch off ticket on Christmas morning he wasn’t expecting to win $5 million dollars! Deciding to take the lump sum payment, Buchanan ended up taking home $3.2 million dollars. Merry Christmas to him!

Buchanan has been very down to earth about his big win: he has decided to pay some bills, buy a home and splurge on a Cadillac Escalade. Early retirement? Not for this family man, he’ll keep on working.

The first 5 things you should do when you win the lottery:

1.      Take a deep breath and do not rush to make ANY decisions regarding this new found money. There must be many thoughts going through your head, many of which will be imprudent and financially unwise. Yes you should have some fun now with a portion of your winnings, but don’t rush to make huge life changing decisions with the bulk of winnings without a well thought-out plan.

2.      Meet with a CPA to understand tax ramifications of taking a lump sum now or a payout from the lottery over time. Get some advice on future planning, including estate planning so your family is provided for.

3.      Meet with an attorney to make sure your will is up to date and provides for your family according to your wishes.

4.      Find a trusted financial advisor. Your attorney and CPA may be good sources of referrals. Interview three different advisors before selecting one. This is important as you want your new found money to work for you.

5.      Realize how fortunate you are to be in this position. Find some causes close to your heart that you can make a difference for.

We at Herman & Co, CPA wish Kevin and his family the best and are proud to see he is making the smart choices and not fleeing these winter storms to hole up on some tropical beach….yet.

Contact Paul Herman at (914) 400-0300 for a free 30 minute no obligation consultation about your individual or business needs.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.