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A helpful Web site with easy-to-use financial calculators and money-saving tips. www.ChooseToSave.org
Roth makes sense for kids; It's never too early to make your money grow
per Chicago Sun Times (IL) via NewsEdge Corporation :
As a new mom, the idea of turning my daughter into a baby model wasn't appealing. That is, until I did the calculation and realized that $1,000 invested in a Roth IRA at age 1 and left to grow at 8 percent for 64 years would amount to nearly $138,000 for work she wouldn't even remember.
For my daughter to open a Roth -- essentially a retirement account funded with after-tax dollars that grow tax-free -- she must have earned income. In 2007, she could put the lesser of $4,000, or her maximum earnings into a Roth. In other words, if she made $1,500, she couldn't put more than $1,500 in a Roth IRA.
Unfortunately for my daughter, her modeling career was short- lived (she didn't have enough hair) and I couldn't find a place to open a Roth for just $185. At least I tried.
For working teens like 15-year-old Marcus Roesler, a Roth is really a no-brainer. After reading about compound interest in his economics book, Roesler was sold on putting some of the money he made scooping ice cream into a Roth IRA.
The idea appealed to his dad, Brian, too. He wants his kids to enter the market young in life, concerned that by the time they retire, Social Security probably will look a lot different than it does for his baby boom generation, and his children will be forced to rely more heavily on savings.
Brian, an accountant, said the Roth is especially advantageous for kids because most kids won't make enough money early in their working life for their income to be taxed. And as long as they follow IRS rules for distribution, they won't be taxed on Roth IRA withdrawals unless Congress changes the tax code.
To sweeten the deal, Brian said he'd give $1,000 each to Marcus, his other son, John, and his daughter, Megan, as long as they also put in $1,000 of their own money.
There's no requirement that says the dollars invested in the Roth must be the same dollars earned by the child. But to contribute $2,000, the kids must have earned at least that much during the year.
The definition of earned income for purposes of opening a Roth IRA is "a gray area," said Nate Wenner, a certified financial planner with Wipfli Hewins Investment Advisors.
Wenner thinks opening a Roth with money for setting the table and tidying a bedroom might be "pushing it."
But mowing the family lawn as part of a summer business or working in a parent's office answering the phones would pass his "smell test," as long as the child is paid a reasonable amount.
To decide if your child's earnings smell OK, ask yourself this question: Would you have hired somebody else to do the work if your child couldn't? If the answer is yes, then open a Roth. But document the work, the hours and the wage earned just in case the IRS asks questions.
Accounts can be opened anywhere, from a local bank to an investment company such as T. Rowe Price or Vanguard. Brokers would be happy to open a Roth for you, but you don't need their help to start one.
Wenner suggests young people invest in a mutual or index fund made up of companies of all sizes from around the world. Then sit back and watch it grow.
WITHDRAWALS
Kids who cringe at the idea of locking their money away in a Roth IRA until retirement might be convinced to try the Roth if you tell them that any money invested there may be withdrawn free of penalties at any time for any reason.
Taking out any interest earned on the money, however, triggers a 10 percent penalty except in a few IRS-approved situations.
ROTH MINIMUMS
Author Kara McGuire couldn't find a financial institution willing to open a Roth IRA with her baby daughter's $185. But she did find one in Kansas City with a minimum initial deposit of only $200.
Some companies will waive the minimum if you agree to monthly automatic deposits. Just be careful that those monthly amounts don't exceed the yearly earned income of the account owner.
Your Credit History and How It Affects Your Future
Practical money skills are an important part of managing life. By handling your personal finances wisely, you can enjoy peace of mind, financial security, buying power, and freedom that will enhance the rest of your life-Practical Money Skills for Life.
Your Credit History A Public Record of How Well you Handle Credit
To get a glimpse of your financial future, many businesses look at your financial past-all documented in your credit report. A good credit report can not only help you obtain new financial products, but also secure a new home loan, or even get car insurance. This pamphlet explains why your credit history matters, how to correct credit report errors, what credit bureaus are, and how to keep your credit rating strong.
Establish a Credit History You'll Be Proud to Have
What Is a Credit History?
Your credit history is a financial profile. It lets lenders know how you have managed money matters in the past and helps them decide whether or not to do business with you. This history is contained in a credit report that is kept on file by credit bureaus, and may include such information as:
- How promptly you have paid off credit cards and loans
- How well you have handled other bills, such as rent and utilities
- Your checking and savings account histories, including bounced checks
- Your total outstanding debts
- How much credit you still have available on your cards
Who Can See Your Credit Report?
Your credit report can be-and most likely will be -reviewed by anyone planning to give you a loan or credit, such as loan Issuers, card Issuers, auto financing companies, and insurance companies. Your report also may be checked by landlords and potential employers. In most cases, they are simply verifying the accuracy of the information you have given them. Some lenders may also use the details in your report to determine how much credit they are willing to offer you. Credit bureaus are not required to notify you when someone asks to see your report-since access is only allowed with your authorization. So, be aware of what you're signing.
Checking Your Own Credit Report
It's a good idea to check your credit report at least once a year to see what it says about you. Just contact any of the credit bureaus listed on the back of this pamphlet. You may be charged a small fee. However, if you have been denied credit in the past 60 days, you have the legal right to receive a free copy of your report from the bureau that issued it.
How to Correct Credit Report Errors
If your credit report contains any mistakes, credit bureaus are bound by law to correct them at no charge, providing that you inform the bureau of the problem in writing within 30 days of receiving your report. Remember the report is supposed to contain accurate information-good and bad.
If the investigation of your claim does not lead to a satisfactory result, you can send the bureau a written statement of up to 100 words explaining the situation again. Be sure to include photocopies or other proof to support your claim. In many cases, the bureau will have to include your statement with any future reports that contain the disputed information.
Beware of "Quick Fixes" for Accurate Credit Problems
If you've had any late payments, foreclosures, or repossessions, this information stays in your credit report for up to seven years. If you've filed for bankruptcy, this information can stay in your report for up to 10 years.
Some companies claim they can "fix" such problems for a fee. However, it is legally impossible to alter an accurate credit history. If you find yourself in financial trouble, work instead with a budget and your creditors to reestablish a good credit rating.
A Few Facts About Credit Bureaus
Credit bureaus are independent agencies that collect personal credit information and distribute it to lenders. Although there are local agencies in many states, most credit reports are managed by the three national bureaus listed on the back of this pamphlet. All credit bureaus should have the same information about your credit history.
Tips to Keep Your Credit Rating Strong
- Complete credit applications carefully and always use the same name.
- Use your credit cards responsibly to establish a positive pattern of paying your bills on time, but don't let them reach their limit or spend beyond your means.
- Always pay bills on time and make at least the minimum payment.
- If you move, let your creditors know your new address as soon as possible to avoid losing bills or receiving them late.
- If you have problems paying your bills, contact your creditors. In many cases, they will work with you to figure out a payment plan.
To Obtain a Copy of Your Credit Report
There is typically a fee for requesting reports. Contact the following bureaus for more details.
Equifax
P.O. Box 105873
Atlanta, GA 30348
1-800-685-1111
www.equifax.com
Experian
P.O. Box 2104
Allen, TX 75013-2104
1-888-397-3742
www.experian.com
Trans Union
P.O. Box 390
Springfield, PA 19064-0390
1-800-888-4213
www.transunion.com
To Learn More About Laws that Regulate Credit Bureaus
Contact your regional Federal Trade Commission (FTC) office or the national FTC office at:
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, D.C. 20580
1-202-326-2222
www.ftc.gov
Major “extender” provisions processing to begin Febuary 3rd
The IRS announced that it will begin processing both e-file and paper tax returns on Feb. 3 that include claims for the major “extender” provisions, including deductions for:
state and local sales taxes
higher education tuition and fees
educator expenses
Any other tax returns for individuals that do not claim the extender provision can be filed as normal this month.
The Feb. 3 date allows the IRS enough time to update its systems to accommodate the tax law changes without disrupting other operations tied to the tax filing season.
If you are filing a paper tax return, IRS has specific instructions for the extender provisions. Please refer to their website for details at www.irs.gov.
Feel free to call or email me with any questions.
Lesley Johnson, EA
816-289-0476
www.JFSMONEY.com
JFS offers many services including - income tax - financial consulting - personal accounting
Beginning January 1, 2007, ALL cash gifts (of any amount) will need to be supported with a reciept in order to make a claim for a tax deduction. A letter from the charity, a canceled check or a credit card statment is sufficient documentation for your cash contribution.
Also, any non-cash item valued at more than $500 will need to be supported with an appraisal.
Please feel free to call or email with any questions.
Please feel free to share this valuable information with your friends and family.
In compliance with Federal Law, if this email was sent in error, or if you do not want future email notices from JFS simply REPLY to this email and include the word "REMOVE" in the subject line or write us at 2024 Alycia Way, Pleasant View, TN 37146. You will immediately be removed from our database and will no longer receive email from us.
Lesley Johnson, EA
816-289-0476
www.JFSMONEY.com
JFS offers many services including - income tax - financial consulting - personal accounting
Take Steps NOW to Lower 2006-2007 taxes
There are many things that taxpayers can do NOW to lower this year’s taxes.
Although Congress has yet to act on tax breaks that expired at the beginning of the year, it is widely assumed that the deduction for state sales taxes and the deduction for teachers who buy classroom supplies should be renewed.
CCH offers the following tips:
KNOW YOUR TAX BRACKET -Tax planning begins with such simple things as knowing your tax bracket – the percentage at which your top dollar of income will be taxed. Brackets currently range from 10 to 35 percent. The income levels at which the brackets begin and end are adjusted annually for inflation.
As a general rule, it’s better for anyone to pay a tax later than sooner, but in addition, people in higher brackets benefit from the annual indexing of the brackets and other items for inflation, so more of their income will be taxed at lower rates in 2007 than in 2006.
MAKING THE MOST OF DEDUCTIONS- You can exercise control over the timing of deductions, as well as income. If you have a property tax bill for 2006 that’s due in January, you can pay it in December to clinch a deduction on your 2006 return. Similar opportunities may exist with scheduling elective medical procedures or making a charitable contribution.
The question is whether accelerating deductions into the current year is always the best strategy. Sometimes it is and sometimes it isn’t. Consult your tax professional to see what is best for you.
SAVE ENERGY AND TRIM TAXES- As a result of last year’s energy legislation, you can save energy and trim this year’s tax bill, too. A number of energy-saving improvements to your home can earn you up to $500 in tax credits – and up to a $2,000 credit for major solar systems such as photovoltaics or a solar-powered hot water system. Credits are also available when you purchase a hybrid vehicle.
RETIREE, HEALTH PLANS CAN LOWER NEXT YEAR’S TAXES- The closing months of the year are often “open enrollment” periods for employee benefit plans that can reduce your taxes for next year, if not this one.
“Paying for health or dependent care expenses on a pre-tax basis and contributing to a 401(k) will directly lower your adjusted gross income for 2007,” Luscombe observed. “A lower adjusted gross income, in turn, can qualify you for more deductions and credits that are ‘phased out’ as income rises, as well as lowering your taxes directly.”
TAX SAVINGS WITH IRAs AND KEOGH PLANS- Taxpayers who aren’t covered by an employer’s retirement plan can cut their taxes by contributing to a traditional, deductible, IRA or, if they are self-employed, to a Keogh plan.
In either case, they have until April 16, 2007 to actually deposit funds in their retirement account, but the Keogh has to be set up by December 31, 2006, for any contribution to be excluded from 2006 income. An IRA doesn’t have to be established until April 16, 2007 for contributions to count against the previous year’s taxes.
NEW ROTH IRA POSSIBILITY- Another option made possible by recent pension legislation is to fund a non-deductible IRA with an eye toward rolling it over into a Roth IRA in 2010. This does not reduce current taxes, but promises tax-free withdrawals from the Roth IRA in future years. In addition, Roth IRAs are not subject to minimum-distribution rules as other IRAs are.
“What’s new here is that high-income individuals are not allowed to establish Roth IRAs or convert from a traditional IRA to a Roth. But this year’s tax legislation opened the door to conversions in 2010,” Luscombe noted.
The conversion option would be attractive to people who are currently barred from setting up a Roth IRA and who do not have any funds in a traditional, deductible IRA.
Make an appointment with us to evaluate your personal savings strategies.
You may contact us with any questions at 816-289-0476 or via email at johnsonfinancialsvc@hotmail.com.
Lesley Johnson, EA
816-289-0476
www.JFSMONEY.com
JFS offers many services including - income tax - financial consulting - personal accounting
2007 Standard Mileage Rates
Instead of using the business portion of the actual expenses of operating a vehicle, the IRS permits taxpayers to use a standard mileage rate. IRS issued the new rates effective for travel on or after January 1, 2007.
Business rate is 48.5 cents per mile (up from 44.5 cents per mile for 2006). Depreciation accounts for 19 cents per mile of this rate (up from 17 cents per mile for 2006).
Charitable rate is 14 cents per mile and is set by Congress therefore does not change until Congress makes such a change. Katrina related charitable rate is the normal charitable rate (down from the special rate of 29 cents per mile that applied in 2006).
Medical and moving rate is 20 cents per mile (up from 18 cents per mile for 2006).
Taxpayers can use the standard mileage rate for up to four vehicles used simultaneously. Previous to 2004 the rate was not permitted if a taxpayer had two or more vehicles used simultaneously.
The standard mileage rate still CANNOT be used to determine the expenses: 1) when five or more automobiles are used simultaneously in a taxpayer’s business, 2) when the taxpayer has used Section 179, bonus depreciation, ACRS, or MACRS; or 3) for automobiles used for hire, such as taxicabs.
This Revenue Procedure can be found at www.irs.gov/pub/ by clicking on irs-drop and then clicking on rp-2006-49. We can email you a pdf copy of the Rev. Proc. upon request.
Lesley Johnson, EA
816-289-0476
www.JFSMONEY.com
JFS offers many services including - income tax - financial consulting - personal accounting
Phone Tax Refunds to Range from $30-$60
by Lesley Johnson, EA
Washington (Sept. 1, 2006)- The Internal Revenue Service announced that long-distance telephone customers will be able to seek refunds ranging from $30 to $60 on their 2006 tax refunds.
"These ammounds save taxpayers from locating 41 months of old phone bills and analyzing these bills to determine the taxes paid," said IRS Commissioner Mark W. Everson, in a statement. "We believe the standard ammounds are both reasonable and fair."
Generally, anyone who paid the long-distance telephone tax will get the refund when they file their 2006 federal income tax return next year. This includes indviduals, businesses and nonprofit organizations.
The Standard amounts are based on the total number of exemptions claimed on the 2006 federal income tax return. The standard amounts are $30 for a person filing a return with one exemptions, $40 for two exemptions, $50 for three exemptions and $60 for four or more exemptions.
To get the standard amount, eligible taxpayers only need to fill out one additional line on their regular 2006 return and the IRS is creating a special short form (Form 1040EZ-T) for those who don't need to file a regular return.
The standard amounts are based on actual telephone usage data, and the standard amount applicable to a family or other household reflects the long-distance phone tax paid by similarly sized families or households. Taxpayers who paid the long-distance tax on service billed after Feb. 28, 2003 and before Aug. 1, 2006 are eligible for a refund.
Businesses and nonprofits must base their telephone tax refund on the actual amount of tax paid, but the IRS is considering an estmation method those groups may use for figuring the tax paid.
Managing Money: It CAN start with Pennies & Nickels
by Lisa Robinson, CFLE
Preschool is an important time to lay the foundation for understanding money. However, it is never too late to start teaching your children about the value of money.
Money management skills are developed through the ideas, attitudes, habits, and values we learn about money as we grow up. By giving children opportunities to learn about money management, parents help them develop into responsible adults.
Children’s readiness to learn about money depends on their interests, abilities, levels of understanding, and needs rather than their age. Parents who are aware of the many ways that children learn can help provide them with positive learning experiences starting at a young age.
Young children can learn some important basic concepts about money if they are illustrated by concrete examples. Here are some ideas.
- To learn about “money denominations,” your child can play counting games with pennies, nickels, and dimes.
- To learn about “money as a medium of exchange,” your child can purchase one item at the store.
- To learn “saving,” your child can start a piggy bank to save for a small item.
- To learn “sharing,” your child can contribute money to church or a worthy cause.
Lisa is a Certified Family Life Educator and has been working in parent education and family wellness for twelve years. She owns T.I.P.S. (Teaching Important Parenting Skills)—a consulting firm providing services across the U.S. She is a mother of 3 young children and lives with her husband and children in Plattsburg, MO. Comments or questions? E-mail KLRobinson@centurytel.net
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by Lisa Robinson, CFLE
Are you trying to decide if you should give your child an allowance? Are you wondering how much money is appropriate for your child? Should they be paid for chores? Following are some guidelines to consider when making this decision.
Have you ever noticed that people will eat differently in restaurants depending on whether or not they are paying? Have you also noticed that people take better care of things purchased with their own money? The fact is that consumers’ behaviors change depending on who is paying—and children are no different than adults.
Giving an allowance to a child can provide many benefits besides an income. With some direction from adults, children can learn about saving, delayed gratification, spending motives, and money management.
First, if possible, do not tie a child’s allowance to his or her required chores. Children should do chores as part of their responsibility to help with the family’s needs, not because they are being paid for them.
So how much is a good amount to give to a child? Depending on the family income, $1–$4 per week for children ages 6 to 8 and $4–$8 dollars per week for children ages 9 to 12 would be a good place to start. You may want to give the allowance in a variety of denominations, including both coins and bills. This may make it easier for young children to divide their allowance into various categories.
Sit down with your children and help them draw up a spending plan for their allowance. Explain to them what you will pay for (school supplies, clothes, etc.) and what they will need to use their allowance for (video games, going to the movies, etc.) Encourage them to save a certain percentage, such as 10%, of their allowance each pay period. Open a savings account at a local bank. Many banks will open savings accounts with little or no initial investment, and this will give your child the opportunity to understand how an account works. Provide a place for the child to keep the rest of his or her money such as a special envelope, box, or a piggy bank.
Helping children learn to live with their spending decisions is another benefit of getting an allowance. Children need to learn to think through their purchasing decisions and then assess whether it was a good decision or not. Allowances can also provide a sense of ownership and responsibility.
Most importantly, discuss these issues with your children. Children will not automatically learn good saving and spending patterns by simply receiving an allowance. Have regular meetings with your children to discuss sound financial behaviors.
Lisa is a Certified Family Life Educator and has been working in parent education and family wellness for twelve years. She owns T.I.P.S. (Teaching Important Parenting Skills)—a consulting firm providing services across the U.S. She is a mother of 3 young children and lives with her husband and children in Plattsburg, MO. Comments or questions? E-mail KLRobinson@centurytel.net
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Summer Jobs Can Provide a Chance for Teen to Learn Money Management
by Lisa Robinson, CFLE
Thousands of teens are thinking about applying for summer employment. Getting a summer job can be a wonderful way for teens to earn their own pocket money and start paying for a few of the items they want—CD’s, movie tickets, fast food, and clothes.
A summer job can also provide opportunities for young people to learn long-range money management skills such as setting financial goals; gaining independence and separating wants from needs.
Most young people don’t automatically understand the basics of money management. In fact, most teens experience “premature affluence” because they are not responsible for basic expenses such as rent, food, or utilities while living at home. Therefore, all of their income can go for non-essentials like music, entertainment, and recreation.
Parents can help teen learn how to manage their money by giving them opportunities to make choices and learn from the experience. One way to start is by helping teens develop realistic spending habits by making a spending plan or budget.
A spending plan involves calculating expected income including money from jobs, allowances, gifts, and other sources. Then help your teen identify longer-term goals such as a trip, a car, stereo equipment, or saving for college. Next, figure out how much must be put aside in savings each week to reach goals and how much money can be spent in other categories.
Like many adults, teens don’t know where their money goes. Parents can suggest their teens keep a log of all of their spending for a few weeks to get an idea of how they spend their money. Keeping track of spending also can make teens more conscious of spending choices and how money can be wasted on low-priority items.
One important concept that parents should reinforce is the idea of “paying yourself first” which means putting money into a savings account each pay period before beginning to spend.
Parents should avoid the temptation to tell their teens how to spend their money. Here are some money management tasks that can help teens to practice while still living at home:
• Give teens the task of balancing your checkbook
• Teach young people how to make deposits and withdrawals from an ATM machine.
• Ask your teen to do the family grocery shopping for a week. Help him or her develop a grocery list, compare ads, and select the best-priced items at the store.
• If your family is planning a major purchase, such as a car or an appliance, get your teen involved in doing the research. Have your child research consumer magazines at the library, check for quality and price, and compare financing options.
• Help your teen to use credit wisely, since even teens receive credit card offers. Have your child review your monthly statement, explaining the importance of paying the balance in full or making the largest payment possible. Talk about how the finance charges add to the cost of the purchase.
Lisa is a Certified Family Life Educator and has been working in parent education and family wellness for twelve years. She owns T.I.P.S. (Teaching Important Parenting Skills)—a consulting firm providing services across the U.S. She is a mother of 3 young children and lives with her husband and children in Plattsburg, MO. Comments or questions? E-mail KLRobinson@centurytel.net
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How to Save Dollars for Family Fun
by Gwen Ellis
- Plays - To save money, go to local events. High school and college plays are performed well and are lots of fun. Civic theatre is fresh, innovative, and fun. It is also inexpensive.
- Symphony and other musical events - Get a season pass for your family. It’s cheaper than individual tickets. Go to a local college concert. It will probably be free. Watch for summertime outdoor performances by local musical groups.
- Volunteer - Volunteers often get free passes after they do so many hours of volunteer labor. You can use these passes for any member of your family.
- Half-price tickets - Buy tickets at half price the day of the show. Find where these ticket outlets are in your city.
- Rush tickets - Buy tickets minutes before the show for the best bargains. These are called “rush” tickets. They go on sale at the box office about twenty to thirty minutes before the event begins. But don’t count on getting the tickets. If this is to be a family event, you’d better have a back-up plan.
- Classified ads - Often season-ticket holders can’t attend all of their show and may sell single-event tickets for a particular performance at a discount.
- Free tickets - Let your friends and business associates know which events your family likes to attend. They may give you tickets to events. I once had the privilege of attending a U.S. Air Force football game with fifty-yard-line seats because a neighbor knew I wanted to go and take my parents. Also, check with your company and let them know what events you like to attend. Organizations give corporations blocks of tickets for sporting events, the theatre, and the symphony.
- Free days - Many art museums have a free day each week, or for some, once a month. Check their web site or call to find out when it is.
- Outdoor art festivals - These are free.
- “Freebies for families” - Type that title into a search engine on the Internet for free gifts of all kinds.
Taken from “Simply Fun for Families” by Gwen Ellis. Used by permission of Fleming H. Revell, a division of Baker Publishing Group, copyright © 2005. All rights to this material are reserved. Materials are not to be distributed to other web locations for retrieval, published in other media, or mirrored at other sites without written permission from Baker Publishing Group. www.BakerPublishingGroup.com
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Do you have any idea what you are worth? Your NET WORTH?
To calculate your Net Worth, you simply compare all that you HAVE to all that you OWE. Now, if you owe more than what you have, this does not mean that you are worthless. It merely means you need to take action toward your financial goals.
This calculation is a great tool to help you plan for your financial future. By listing out all of what you have: cash, investments, house, car(s), etc. and listing what you owe: mortgage, auto loan(s), student loan(s), etc., you will be able to strategize your steps to meet your goals. Please keep in mind that this does take some time and a lot of patience. However, the end result is worth it. Net Worth Statements are also useful for other purposes, such as when applying for a mortgage, credit card, car loan, or college financial aid for your kids.
To receive a complimentary Net Worth Statement for you to calculate your financial picture, please contact Johnson Financial Services. They will be happy to mail out a form or email a spreadsheet file for you. As always, contact them with any questions.
—Provided by Lesley Johnson, EA. Visit www.JFSMONEY.com or call 816-289-0476 with questions or for your FREE Net Worth Statement. JFS offers many services including - income tax - financial consulting - personal accounting.
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How To Find an Accountant
Finding an accountant to prepare your taxes is a relatively straightforward process.
Here's how:
1. Ask yourself why you need an accountant.
2. If having your taxes done quickly is most important, you should go to H&R Block or another retail tax company. They are specially trained to get your taxes done quickly.
3. If creating a tax plan for your future is most important, you should seek out the advice of a licensed tax professional, such as a Certified Public Accountant.
4. If handling a complex tax situation is most important, you should find an accountant who specializes in your problem. Special circumstances include living outside the United States, day trading in the stock market, or owning a small business.
5. Call around to a couple of tax offices to ask about their prices and how quickly they can schedule an appointment.
6. Ask what their price range is.
7. Ask about any guarantees the accountant offers.
Tips:
1. A CPA is a professional accountant licensed by the state. Best for corporate accounting, tax audits, and business consulting.
2. An Enrolled Agent is a tax professional licensed by the IRS. Best for complex tax issues, tax audits, and responding to tax collectors.
3. A Tax Preparer may be registered by the state. Best for straightforward tax returns.
4. The national Tax Franchises are H&R Block, Jackson Hewitt, and Liberty Tax. Offices nationwide. Often fast, courteous, and convenient.
5. Expect to pay from $150 to $450, depending on how complicated your tax return is.
What You Need:
· All your tax documents
· Photo identification
· Social Security Cards for yourself and your dependents
· Checkbook for direct deposit of your refund
· Copy of last year's tax return
Source: From William Perez,”Your Guide to Tax Planning” http://taxes.about.com/cs/ht.htm
Questions? Comments? Contact Lesley Johnson at 816-289-0476. JFS offers many services including - income tax - financial consulting - personal accounting. www.JFSMONEY.com
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by Kerrie McLoughlin
DEFINITION: Typing the orally dictated notes of healthcare professionals into written transcripts so the transcripts can be filed, reviewed at a later date, etc.
REQUIREMENTS: Accreditation is preferred by most employers. You’ll also need a computer, special software (medical spellchecker, electronic dictionaries, line counter), transcription equipment, specialty word books (e.g., drug index, medical abbreviations), a telephone and possibly a fax machine.
INCOME: After a couple of years of experience, expect an average of $12-20 per hour in an office, depending on what part of the country you live in, how fast you can type, etc. You can be paid by the word, line, page or project (most commonly by the line).
PROS: You can learn this field in the comfort of your home, thanks to home study courses. Once you are experienced, you could get the opportunity to work in the comfort of your home. Some employers supply all equipment for you.
CONS: Carpal tunnel syndrome; tight deadlines; difficulty deciphering what a healthcare professional is saying on tape. You need to invest some time working outside your home before you can start doing medical transcription as an at-home business, not to mention taking some challenging, time-consuming and sometimes costly courses first.
CAUTION: NEVER pay for lists of potential employers. Be sure this is the career for you before investing the time and money in training and equipment.
WHERE TO BEGIN: Go to www.mtdaily.com for good information about this field and links to national and local training programs, job listings, and much more. I would also read "The Medical Transcription Career Handbook" by Keith A. Drake and "The Independent Medical Transcriptionist" by Donna Avila-Weil and Mary Glaccum. See some other helpful links below to help you get started:
www.techskills.com (Health Services training programs)
www.blackboard.com (free online medical terminology courses)
www.medicaltranscription.com
—Kerrie and her husband Aron are the parents of three young children. In her vast free time, she reads, walks, prays, journals, and scrapbooks. mommykerrie@yahoo.com
Forfeiting College Education Tax Credits?
National Association of Tax Professionals (NATP) Appleton, WI – How many college students or parents with college-age children don’t fret about money? College is expensive and there is little to defray the costs for most students. So why do 27 percent of taxpayers fail to claim a tuition deduction or tax credit on their tax returns? Good question.
A September 2005 report to the Senate Finance Committee issued by the Government Accountability Office (GAO), stated that 27 percent of all families that were eligible for education credits or deductions did not claim them. Why? GAO Investigators blame complex rules for tax returns.
The two education credits, the Hope and the lifetime learning credits, are subject to income limits. For 2005, education credits are reduced if your modified adjusted gross income (MAGI) is between $43,000 and $53,000 ($87,000 and $107,000 if married filing jointly.) If your income is above these amounts, you are not eligible. Additionally, it is important to note that only one person may claim the credit—the person who claims the student as a dependent on his or her tax return. If you have more than one student in any given year, you can choose the credit on a per student basis.
Hope Credit
The Hope credit is 100 percent of the first $1,000 and 50 percent of the next $1,000 of qualifying expenses, with a maximum credit of $1,500 per eligible student. (Some limitations apply.) The credit is available to students who:
- Have not completed the first two years of post-secondary education at the start of the tax year.
- Have enrolled in a degree or certification in an eligible educational institution at least half-time.
- Have paid expenses after December 31, 1997 for academic periods beginning after that date.
- Have not been convicted of a felony in connection with a controlled substance.
Lifetime Learning Credit
This credit is available for expenses paid after June 30, 1998 for academic periods beginning after that date. The credit is 20 percent of the first $10,000 of qualifying expenses for all eligible students in the family, with a maximum credit of $2,000 per family. (Some limitations apply.) The credit is allowed for:
- One or more courses taken by the student during the year.
- Any and all post-secondary education including graduate courses, for any number of years.
How do the credits work? You, your spouse, and any other dependent you claim on your tax return for the year qualify for the Hope or lifetime learning credits if you have qualifying expenses that include:
- Amounts spent for qualified tuition and related expenses required for enrollment or attendance at an eligible educational institution.
- Fees for course-related books, supplies, equipment, and student activity fees if they are a condition of enrollment or attendance.
Qualifying expenses do not include insurance, medical expenses, room and board, transportation, or other personal living expenses.
Tuition and Fees Deduction
Another under-claimed tax break is the tuition and fees deduction that can reduce the amount of income subject to tax by as much as $4,000. Because this deduction adjusts your income, the IRS taxes less income. Another plus—you do not need to itemize your deductions on IRS Form 1040 to use this deduction. This deduction may be beneficial to those who cannot take either the Hope or lifetime learning credit due to income limitations. If your MAGI does not exceed $65,000 ($130,000 if married filing jointly) you can take a maximum deduction of $4,000 per year. If your MAGI is greater than $65,000 ($130,000), but less than $80,000 ($160,000 if married filing jointly), your maximum tuition and fees deduction is $2,000. There is no benefit for MAGIs larger than $80,000 ($160,000).
You cannot claim any education benefit if:
- You claim a deduction elsewhere for the same amount (i.e. a business expense);
- You pay qualified expenses with tax-fee funds such as scholarships, grants, employer or VA assistance benefits (unless the student waives the tax-free treatment); or
- There is a tax-free withdrawal from a Coverdell education savings account in any year in which the proceeds pay for the same education expenses used in claiming the education credit.
How do you choose the right credit? The government will not allow the use of both a credit and a deduction for education, at least not for the same student, and only one credit or tax-free withdrawal from a Coverdell education savings account is allowed for each student in any tax year. “Credits are always better (if you are eligible) because they reduce your tax liability dollar for dollar. A deduction merely reduces your overall income subject to tax. A $4,000 deduction will save you $600 in tax assuming you are in the 15% tax bracket. A $1,500 credit will save $1,500 in tax. Most people will use the Hope credit for the first two years and the lifetime learning credit thereafter,” advises Cindy Hockenberry, enrolled agent and NATP tax information analyst. She adds, “Those who do not qualify for the credits may qualify for the tuition and fees deduction.”
College is expensive enough. Use the education benefits available to you to defray costs.
Please share this $ tip with family and friends. If you would like to be added to our monthly email list please call at 816-289-0476 or email us at johnsonfinancialsvc@hotmail.com.
Provided by: Lesley Johnson
www.JFSMONEY.com
JFS offers many services including - income tax - financial consulting - personal accounting
For more information on this and other tax issues, call Johnson Financial Services at 816-289-0476. Tax professionals are experts who keep up-to-date on tax law changes. We can save you time and offer insight on how to use the tax breaks available to you.
Mystery Shopping: It’s Not a Scam
by Kerrie McLoughlin
REQUIREMENTS: A good memory, discretion, above-average communication and organizational skills, and transportation. It’s extremely helpful if you have a computer at home and access to a fax machine.
INCOME: Minimal to start, but you get free food, hotel stays, etc. in addition to payment. A typical fast-food restaurant job may pay $5 plus a free meal or drink, while a typical retail shop job may pay about $12.
PROS: You can choose only the jobs you want. You can usually take your kids with you if needed.
CONS: The pay is minimal, plus you have to hustle to a computer and fax machine to get your report to the mystery shopping company.
CAUTION: NEVER pay for a list of potential mystery shopping clients. If you sign up with the right companies, the jobs will come to you. Beware also of being inundated with e-mail from companies with specific jobs in the subject line. Once you click on the link, you will most likely be asked to give credit card information, even for a “free trial.”
WHERE TO BEGIN: Read “Mystery Shopping Made Simple” by Dr. Ilisha S. Newhouse. I have personally signed up at www.cybershoppersonline.com and have actually been paid and reimbursed by them after doing several fast-food restaurant jobs and one retail job. I wouldn’t recommend blindly surfing the Internet and giving out your personal information because you’ll end up with tons of spam in your e-mail inbox. Stick to the sites offered in the book cited above, write a great bio, and wait for the jobs to be offered to you.
—Kerrie and her husband Aron are the parents of 3 young children. In her vast free time, she reads, walks, prays, journals, and scrapbooks. Comments or questions? mommykerrie@yahoo.com
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Childcare at Home: So Many Options
by Kerrie McLoughlin
REQUIREMENTS: You should love kids and have space for them to play and nap in. A childproofed home and healthy snacks and drinks are a must. You may also need a license (see Caution, below).
INCOME: This varies greatly depending upon where you live. You can expect to earn from $2-9/hour part-time; $75-300/week full-time per child. Charge more for infants because they require more care. It’s also expected that you give a discount for other children in the same family.
PROS: It’s flexible. You can take care of kids on a part-time basis (e.g., after-school care; a few days per week; evenings; or when a parent has an appointment or meeting) or on a full-time basis (e.g., year round; just over the summer; or during school breaks). You can choose whether to care for infants, toddlers, older kids, or a mix. It’s also a great way for your own kids to learn how to get along with others.
CONS: Your home will be a mess, and things could get broken. If you run a full-time daycare, your errands and chores will have to wait.
CAUTION: Check with your state for licensing requirements. From any online search engine, look up, for example, “Department of Child Welfare (or try Human Services), Colorado” or try the section of your phone book which lists state offices. If you aren’t sure where to call, try any state office and they should be able to give you the appropriate phone number. Also, keep detailed records (clients, dates, income) for the IRS.
WHERE TO BEGIN: Make a flyer with your information, qualifications, and rates (optional). Put copies up where parents frequent (libraries, churches, grocery stores, etc.). Once you get started, word of mouth will be your best advertising.
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Working in the Childcare Business: Churches & Health Clubs
by Kerrie McLoughlin
REQUIREMENTS: You must love kids and have transportation.
INCOME: This varies greatly depending upon where you live. You can expect to earn anywhere from $6-12/hour, usually paid via payroll check with taxes taken out; however, some churches pay upon completion of each job.
PROS: You get to keep your own kids with you. If you work at a health club, you generally get a free membership. Your kids get a preschool-type experience free of charge. You get to set your own schedule. Options include mornings, afternoons, evenings, and/or weekends. You could also only be used as a substitute sitter, on a weekly basis, or only for special, one-time events.
CONS: Sometimes it’s hard to rouse your own kids, feed them, and get all of you to a job on time.
CAUTION: Consider the cost of gasoline and driving distance when agreeing to a job. Keep a meticulous calendar so you never double-book or pull a no-show. Also, watch out for aggressive children. If you know your own child can be aggressive with others, this may not be the money-making opportunity for you.
WHERE TO BEGIN: Call health clubs and churches near your home. Make sure the health club has childcare and that they’ll let you bring your own child(ren) along. If so, fill out an application. Expect a background check at both churches and health clubs. The key to getting church jobs is to get your name on a substitute sitter list, which could lead to something permanent since turnover is high. You’ll then meet other sitters, and word of mouth will be your best friend. If you’d like a full schedule, contact many churches.
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Myths about saving money on food
• People use coupons to save money. They buy in bulk, thinking the bigger the product, the bigger the value. They go for the generic brand often, mistakenly thinking that it’s cheaper. Though it can be, that’s not always the case. The following are myths that have endured time but are false upon further examination.
• To save money, you have to use coupons. False. You can save money on food without them. It just takes a little more planning, like looking for the two-for-one sales and special holiday sales. A store’s shopper club also has deals available only to its members.
• Wholesale stores are the cheapest thing around and the greatest thing since sliced bread. False. While, yes, certain items bought in quantity may save you money, your favorite brand might not always be there. Also, check and compare prices, calculating the per-unit price of the bulk against the single-item price. Sometimes the single-unit item costs less.
• Store brands are always cheaper. Wrong. Sales frequently bring brand names close to store brands. When you whip out the coupon or find the two-for-one sale, suddenly brand names are cheaper.
You can save money by shopping at several stores. No way. Besides the extra gas mileage, consider if your time is worth the few pennies you might save.
—adapted from The Dollar Stretcher newsletter
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Creative tips for pinching pennies
Every payday, you wonder where all the money goes. Here are a few unorthodox tips to saving that extra dollar or two.
• Store open containers of items like ketchup, cottage cheese, and sour cream upside down. The contents will remain fresh and will be far more usable than had you stored them upright. Storing this way lengthens the life of the product.
• Buy spices by the bulk at health food stores. Did you know that one ounce of ground cinnamon in a health food store will run you roughly 39 cents, while the same amount prepackaged in a small bottle will cost $2 at the grocery store?
• Instead of using a special, no-spot drying agent in your dishwasher, fill the rinse receptacle with white vinegar.
• Make your own baby wipes by cutting one roll of high-quality paper towels to form two short rolls. Place them in a plastic container that has a lid. Create a mixture of two cups of water, one tablespoon of baby shampoo and two tablespoons of baby oil and pour it over the towels.
• To prevent month-end credit card statement shock, always set enough money aside to pay the bill when it arrives. Never charge anything that you can’t pay off by the end of the month.
—adapted from The Cheapskate Monthly newsletter 10/03
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Can You Afford to Have Kids?
by Lesley Johnson
As a mother of three (soon to be four), my parental and personal advice is: you cannot put a price on the joys, happiness, worries, and headaches that children provide us. However, as a financial advisor, there are many financial aspects to consider and planning can still be accomplished.
First and foremost, if you are currently working you need to be aware of your employer’s policies regarding maternity leave and disability insurance. You may encounter a reduced income during the time you are off for the birth of your child.
Secondly, you need to understand what your health insurance covers for prenatal care, birth, and hospitalization. Plan for your co-pays, deductibles, etc.
Next, what will you do once the baby arrives? Will you continue to work? Will you stay at home? Either choice requires some planning. You will experience increased expenses, such as day care if you return to work. And you will most likely see a decrease in the family income if you stay home. This is a very personal decision and needs to be considered carefully.
Of course, there are all of those necessary accessories that babies require— smaller beds, diapers, formula, clothes, car seats, strollers, swings, etc. Baby showers are a great way to help you acquire many of these items—so are friends, family, and bargain hunts. Keep safety in mind, but don't blow the family budget on the latest baby gadget. Instead, use the money to stash away in Junior’s college fund.
There are some tax benefits to having kids, too. For years 2005 - 2008, the child tax credit is $700 per qualifying child. (The credit is reduced once adjusted gross income thresholds are met.) There are also credits available for dependant care and adoption expenses. Please seek the advice of your tax professional for details regarding your particular situation.
Most importantly, ENJOY! Kids are worth every penny you spend.
Information provided by Lesley Johnson of JFS. JFS offers many services including income tax, financial consulting, and personal accounting. www.JFSMONEY.com
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Clothes Call
• When hitting those back-to-school sales, remember to save some money for those new fads that show up the first few weeks of school—those things the kids just can’t do without.
by Cheryl Gochnauer
A few years ago, my husband, Terry, sacrificed his bass boat so I could stay home with our daughters. I remember thanking him and saying, “Don’t worry, Babe. We’ll get you another boat someday.”
A few months ago, I made good on that promise, and we bought a boat.
A few weeks ago, the only vehicle we had that would pull the boat, our 11-year-old minivan, blew its transmission.
It was time to go car shopping.
“FOUR HUNDRED dollars a month? For a USED car?” I sputtered, clutching the desk at the local dealership. The salesman didn’t blink.
Neither did salespeople at the dozen other lots I cruised over the next week. A grand delusion had swept the dealerships in our city: Everybody else is in hock up to their necks; you should be, too. Guilt-free and 0 % down. Aaacck!
A few hours ago, I decided a $1,500 rebuilt transmission didn’t sound so bad after all. Hey—our van may be old, but it still looks good and it’s comfortable. With a little TLC, we’ll be able to eke another year out of this baby. (At least, that’s what the transmission shop guarantees.)
And it’s the best financial decision for us at this time. After all, $125 a month ($1500 divided by 12 months) for a decent used van beats any deal I’ve heard this week. In fact, after being floored with $400-plus quotes, I actually feel like I’m saving money!
It’s all in your perception. For instance, I recently spoke with a mom who wanted to come home, but they needed to cut out a car payment first. The problem: they were “upside-down” in their loan.
“We owe $10,000, but the car’s only worth $8,000.”
She thinks they’re stuck with a $10,000 balance, but take another look. If it were me, I’d consider selling the car for $8,000, immediately reducing the balance to $2,000.
Since the car was collateral for the loan, my finance company would want the remaining $2,000 when the car is sold. So, I could either take the money out of savings, get a small home equity loan, or take a cash advance on my credit card to pay it off.
Better yet, I’d set a goal with my husband of saving the $2,000 difference while I was still working, then sell the car. If I needed a replacement car, I’d concentrate on picking up something we could pay cash for. Network with friends and family to find that elusive “little old lady’s car” or similar, inexpensive transportation.
Here are some helpful online resources as you look to trim or control your budget:
• The Dollar Stretcher www.stretcher.com
• Miserly Moms www.miserlymoms.com
Comments? Email cgochnauer1@msn.com or visit Cheryl at www.homebodies.org. Copyright 2002 Homebodies.Org, LLC
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Diet Snapple 16 oz. --------- $1.29 $10.32 per gallon
Lipton Ice Tea 16 oz. --------- $1.19 $9.52 per gallon
Gatorade 20 oz. --------- $1.59 $10.17 per gallon
Ocean Spray 16 oz. --------- $1.25 $10 .00 per gallon
Brake Fluid 12 oz. --------- $3.15 $33.60 per gallon
Vick’s Nyquil 6 oz. --------- $8.35 $178.13 per gallon
Pepto Bismol 4 oz. --------- $3.85 $123.20 per gallon
Whiteout 7 oz. --------- $1.39 $25.42 per gallon
Scope 1.5 oz. --------- $0.99 $84.48 per gallon
And this is the REAL KICKER...Evian water 9 oz. for $1.49 or $21.19 per gallon. $21.19 FOR WATER!
So, the next time you’re at the pump, be glad your car doesn’t run on Scope, Whiteout, Pepto Bismol, or Nyquil!
Information sent to us via email. Author unknown...but probably someone from the big oil companies!
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