Adjusting Your Withholding

adjusting your withholding

Adjusting yadjusting your withholdingour withholding is something that should be done from time to time, especially under certain circumstances. Many people find they fill out a W-4 when they first start a job, but never again revisit the amount of exemptions. This could cost you a lot of money. If you have too much taken out of your paycheck,  you generally receive a refund come tax time. However, you are essentially giving Uncle Sam an interest-free loan. Think about it this way–you would be better off taking that money and investing it than simply handing it over to the IRS to await tax season. On the other side of the same coin is not having enough taken out of your paychecks. In this case, you may end up with an unexpected bill come tax time, or potentially even face a tax penalty.

Adjusting Withholding for Income Increases

Sounds like a no-brainer, right? You’d be surprised how many people fail to realize that a raise, a second job, a spouse getting a job, or any activities that increase your income will also have an impact on your tax liability. Generally speaking, when your income goes up, you move into another tax bracket. So adjusting your withholding to reflect more earnings can be extremely beneficial. It may also help you avoid paying tax penalties at the end of the year as the result of not withholding enough.

Change Withholding For Unemployment

Being unemployed is difficult enough for some people. It can be even more difficult if you fail to account for the lost income if you become employed again. Your total income for the year will be less. Make allowances on your W-4 to reflect that lost income.

Changes in Marital Status

Did you get married this year? Change your withholding. Get divorced? Change your withholding. Changes in marital status will change the amount of income per household. If you are married filing jointly, your tax bracket represents two people instead of just one. This changes your tax liability for your household. You also qualify for other deductions. Failing to make these adjustments on your W-4’s means you’re withholding is probably inaccurate.

Congratulations! It’s a Tax Deduction!

Having or adopting a child can cost an arm and a leg over time. But it also means…you guessed it…TAX BREAKS! More than just a bundle of joy, another human in the household means adjusting your allowances. You may also qualify for the Child Tax Credit, Child Care Tax Creditand other credits. 

Adjusting your withholding to better reflect your actual tax liability is a smart move. Ideally, your tax refund or bill should be as close to zero as possible. For help adjusting your withholding speak to your tax professional. More of a DIY person? Well, you can do that, too. The IRS withholding calculator can help you identify places where you should make adjustments. As always, our clients are important to us. If you are absolutely uncertain give us a call and we can take a quick look to make sure you’re on the right track!

 

 

Dollar and Sense–What’s Your Money Worth?

The value of a dollar is different from state to state

The value of a doThe value of a dollar is different from state to statellar is something that always seems to be fluctuating. Market trends, inflation, and other factors all play a part in determining the value of a dollar. But did you know that where you live can also be an indicator of the value of your hard-earned money? We throw around phrases like “cost of living” all the time without giving much thought to them. Certain geographic areas have larger costs of living than others. Keep reading to find out what your dollar is worth in your area.

The Purchasing Power of a Dollar Nationwide

Prices for the same things can vary significantly from one part of the country to another. Places like Mississippi, Missouri, or Ohio can stretch your money further. Meanwhile, you won’t be able to buy as much in places like New York, California, or even Colorado. In fact, Colorado is ranked number 11 in terms of more expensive areas of the country. Your hard-earned cash will not buy as much here as in neighboring states.

Value of $100 by State

The Bureau of Economic Analysis began compiling data and recently released its findings for 2014. The results are astonishing, showing nearly a $40 disparity between the most expensive region of the country (Washington D.C.) and the least expensive part of the nation (Mississippi). Essentially, you only need around $88 to purchase $100 worth of goods in Mississippi. However, you will need $118 to purchase the same amount of items in Washington D.C. Colorado lands around the $102 mark making us the 11th most expensive state in the country.

Nominal Incomes, Prices for Goods, and Other Factors

In some places, we see that things cost much more, but incomes are also higher to compensate for the higher cost-of-living. The purchasing power of your dollar takes these factors into consideration when determining how much your money can buy. For example, people in Nebraska and people in California earn approximately the same amount of money each year. Yet California’s cost of living is marginally higher than Nebraska, which means that Nebraska has a higher average income than California after adjusting for purchasing power.

Why is Purchasing Power Important?

Honestly, we need to consider the purchasing power when setting public policy. Think of things like minimum wage, public benefits, and even tax brackets. These are all denominated in dollars, yet do not take into consideration geographic differences in the value of the dollar. With different price levels in each state, the amounts are not equivalent. So people who live in more expensive areas, like New York or Washington D.C. may pay more in taxes, yet not feel particularly rich.

Most of us worry about getting the most bang for our buck. It turns out, where you live has a lot to do with how much your money will get you. That is why we can often visit other areas of the country and be significantly impacted by the purchasing power in that area. We often prepare for it when going on vacations, but we seldom consider this phenomenon when deciding on public policy on a national level.

 

Amendment 69: Benefits vs. Costs

amendment 69

Colorado has led the nation on a number of issues over the years. We were among the first to legalize marijuana, and now Amendment 69 aims to provide Coloradans with state-provided health insurance. This amendment, known as ColoradoCare, leaves a lot of questions unanswered, and it will be up to us to vote either for or against it on November 8. Here is what we know about Amendment 69 so far.

Amendment 69 Changes the Colorado Constitution:

This new amendment to the Colorado constitution sets up a statewide system to pay for health care. In order to pay for these health care services for Colorado residents, new taxes need to be imposed. These taxes will be added to almost all sources of income. This tax increase STARTS at 10% and includes taxes on all income including retirement and taxable social security incomes. Furthermore, the amendment to the constitution would establish a board of trustees to be appointed who would oversee the operations of ColoradoCare.

This new state-funded health plan would provide health coverage for people who currently do not have any. It could potentially replace the current healthcare coverage for many people. However, it is important to note that some people may still have to purchase private health insurance. Even if they carry their own health insurance, they will still be required to pay the additional taxes to fund ColoradoCare.  What’s more, ColoradoCare does not specify what happens if we travel outside of Colorado and require medical care.

ColoradoCare’s Coverage

Amendment 69 outlines the types of services which must be covered by the proposed plan. However, many services and coverage still remains unclear. Covered services include primary and specialty care, hospitalization, prescription drugs, medical equipment, and emergency care. Other types of coverage will be up to the board of trustees to determine.

Board of Trustees

Initially, the trustees for ColoradoCare will be appointed. Fifteen interim board members will be appointed by state legislators and the Governor. These board members will determine procedures for electing the permanent 21-member board of trustees in the future, and will not give Coloradans the chance to have a say about who is in charge of their healthcare. It is also reported that board members will be able to set their own salaries with impunity.

 

Impact on Taxpayers

The proposed amendment to our constitution requires the biggest tax increase we have ever seen. New taxes on wages paid by employers as well as income received by individuals would be required to raise the amount of money needed to implement ColoradoCare. These new taxes would be in addition to the state’s current income tax of 4.63%. The table below breaks down the tax rates:

Initial Tax Rates Full Tax Rates
Wage Income

Employee Tax Rate

Employer Tax Rate

Total

 

.3%

.6%

.9%

 

3.33%

6.67%

10%

All Other Non-wage Income Including all self-employment Income           .9%         10%

The measure would also exempt ColoradoCare from having to seek approval for tax increases in a regular election. According to page 6 of the blue book, “the measure exempts ColoradoCare from the existing constitutional requirements to seek approval of tax increases at a regularly scheduled November election. Instead, tax increases for ColoradoCare must be approved at a ColoradoCare election scheduled by the board of trustees. The board of trustees may request a tax increase no more than once a year.” This statement is a little bit ambiguous. What exactly is a ColoradoCare election? Do voters get a chance to decide, or is the ColoradoCare election one which takes place among the board members themselves?

Arguments For Amendment 69

The proposed constitution change would provide health care for all Coloradans. This gives residents access to healthcare regardless of their ability to pay. No deductibles reduce financial barriers to care and helps ensure individuals and families won’t face bankruptcy to pay for healthcare. Furthermore, administrative costs would be lowered which helps to reduce overall healthcare costs.

Arguments Against ColoradoCare

Proposing a 10% tax increase on all income could harm the Colorado economy. It adds a huge tax burden to individuals, companies, and could eliminate jobs. The tax increases proposed for Amendment 69 nearly doubles the state’s current spending budget. For the first several years, taxpayers will contribute roughly $2 billion dollars a year without receiving any benefits. Additionally, many individuals and businesses will pay more with the new taxes than they are already paying for health care. These taxes MUST be paid by everybody–even those who carry private insurance. With such steep tax rates for businesses, it could very well discourage businesses from operating in Colorado.

We must also consider the fact that Amendment 69 makes no guarantees that patient care will be improved or that the overall costs of health care will decrease. Coloradans may never receive the benefits promised under the proposal if federal approval is not granted or revenue isn’t sufficient. Furthermore, whatever revenue is raised is not refunded to residents even if federal approval isn’t granted. Furthermore, it leaves out critical details about how the program will be implemented with no date set for when it will begin.

The 21-member board of trustees will have the control to make important decisions about individual health care needs, yet there is limited accountability for them. Additionally, the board members are not required to have any experience in health care.

If Colorado fully switches to ColoradoCare and it fails, it could take years to re-establish health care and private markets and government programs. Additionally, taxpayers will have paid in billions of dollars for a failed program with absolutely no recourse. For a full list of pros and cons for Amendment 69, check out the bluebookAlso visit the Colorado Secretary of State’s website for more information.

Where Would the Tax Increase End?

Where it stops, nobody knows because Amendment 69 would be the first of its kind. Technically, the tax could be increased at any time for any reason without voters having a say and the initial 10% tax is simply a starting point. There is absolutely no cap on the amount of tax that can be imposed on taxpayers. So the 10% initial increase is literally just a starting point. Who’s to say it won’t increase to as much as 20%, or even 30%? What we do know is that national companies who provide benefits to workers all over the country may find themselves in a bit of a bind having to offer different coverage to their employees in Colorado. It means that employers may have to consider purchasing supplemental plans to make sure all employees are treated fairly.

There are definite pros and cons to Amendment 69. First of all, the initiative could make Colorado a leader in our country in terms of taking care of its residents. Second, it could set precedent for other states to follow suit. Also, it has the ability to take some of the control away from the national level health coverage program, which many people would favor. Of course, there are some negatives, too. The 10% tax increase is just a starting point, which could mean much higher taxes. Amendment 69 has also failed to gain the support of both republican and democratic leaders. Governor Hickenlooper, former Governor Bill Ritter, as well as Michael Bennet oppose the proposed amendment. It is ultimately up to us to decide.

Taxpayer Bill of Rights -TABOR

Taxpayer bill of rights

Taxpayer bill of rightsYou’ve probably heard of the Taxpayer Bill of Rights before, sometimes referred to as TABOR. But do you know what it is, exactly? To put it into layman’s terms, it’s essentially a contract which limits the growth of government in terms of increasing taxes. It allows taxes to increase only as a result of inflation or population growth unless larger increases are approved by a special referendum. This is not a completely new concept. Colorado adopted a version of TABOR in the 1990’s and was one of the first states to set this precedent. A 2014 press release from the IRS outlines the Taxpayer Bill of Rights for all citizens.

Taxpayer Rights Outlined by IRS

TABOR states 10 rights that those of us who pay taxes are subject to. This is a list of what we can expect as a result of dealing with the IRS.

The right to be informed

You have the right to know what you need to do in order to comply with tax laws. The right to clear explanations of the law and IRS procedures in all tax forms is something else laid out in TABOR. You also have the right to be informed of IRS decisions about your tax accounts.

Quality Service

As a taxpayer, you can expect to receive prompt, courteous, and professional service. You also have the right to be spoken to in a way which you understand. You may also speak to a supervisor about poor service.

Pay no more than what you legally owe

This one sounds like a no-brainer. However, taxpayers have the right to pay only what they owe in taxes, interest, and penalties. They have the right to expect their payments to be applied properly. 

Challenge

It is within your rights to challenge the IRS and be heard. Providing evidence in response to IRS actions is something you are allowed to do. You can expect the IRS will consider your documentation. You can also expect to receive a fair response if the IRS does not find in your favor.

Appeal

If you are not satisfied with an IRS decision, you are able to exorcise your right to appeal your case to an impartial and independent IRS office. 

Finality

This means that you have the right to know how long you have to appeal an IRS decision. You are also entitled to know how long the IRS has to audit a particular tax year or collect a debt. Furthermore, you should know when the IRS has finished an audit.

Privacy 

This means that the IRS is no more intrusive than necessary. During an audit or exam or inquiry, the IRS will respect the law and your rights. 

Confidentiality

Taxpayers can expect that the IRS be discreet with personal information. Likewise, they can expect appropriate action will be taken against employees or representatives of the IRS who violate taxpayer confidentiality. 

Retain representation

Essentially, taxpayers can find somebody to represent them to deal with the IRS. This can be an attorney, a tax professional, or any authorized representative of their choosing. If they cannot afford representation they have the right to get assistance from the low income taxpayer clinic.

Fair and just tax system

As taxpayers, we have the right to have a system that is fair and unbiased. The tax system is supposed to work for our benefit and consider facts and circumstances which might impact liabilities. 

We often think of the IRS as the bad guys. We picture them in their cubicles in Washington in bad suits and carrying briefcases and sporting comb-overs and 80’s era plastic glasses. The truth is, the IRS is there to help us. The Taxpayer Bill of Rights is designed to help us understand that we aren’t just dollars to collect–we are people who sometimes need help–whether it is help understanding the documents we received or help securing representation.

 

 

 

 

Phishing Schemes Targeting Tax Professionals

phishing scam targeting tax professionals

phishing scam targeting tax professionalsPhishing scams are a dime a dozen. We have covered a lot of different types of scams in our blogs for a couple of reasons: they are constantly evolving, and the last thing we want is for our friends, family, or clients to fall prey to the next scam. Just a week ago, the IRS published a report outlining the newest tax scheme, which is designed to target tax professionals. We are, of course, keeping on top of any and all scams designed to swindle our clients or us out of sensitive information, and are taking every available measure to avoid being victims of scammers.

Newest Phishing Scam Mimics Tax Software Company Emails

The IRS alerted tax professionals that the email scheme is the latest in a series of attempts by scammers. They use the IRS or other tax issues as a way of tricking people into giving up sensitive information. This could be passwords, Social Security numbers, or even credit card numbers to make phony payments. The targets of this scam are tax professionals, who receive emails pretending to be from tax software companies.

How the Scheme Work

This scam is rather clever. The email contains a fake software update via a link embedded in the email. Once victims click the embedded link, they are directed to a website which prompts them to download a file which appears to be an update to their professional software. The file uses the actual name of their software, which is what makes this scam so believable. Once the file has been downloaded, tax professionals think they have downloaded a software update when they have actually downloaded a program designed to track key strokes.

The IRS is Fighting Back

The IRS only knows of a handful of these cases to date. Still, they are doing what they can to raise awareness about different types of schemes and encourage tax professionals to be on the lookout for them.  The biggest tip is to never click on unexpected links in emails. This applies to tax professionals as well as individual taxpayers. They have also launched a new awareness campaign to warn tax professionals as well as individuals about security threats posed by phishing schemes. The Protect Your Clients; Protect Yourself  campaign is designed to encourage tax professionals to take additional security measures. The campaign includes the following tips for tax preparers:

  • Be Alert for Phishing Scams. Don’t click on links or open attachments contained in emails. Instead, always use the software provider’s main webpage to find out about updates or to connect to them.
  • Use Good Antivirus Software. Regularly run security scans and deep scans to search for viruses and malware.
  • Maintain Strong Passwords. Strengthen your passwords for both computer access and software access. The best passwords are a minimum of 8 characters and mix numbers, letters, and special characters.
  • Educate Yourself and Staff. Email, phone, and text are the most common ways scammers contact their victims.
  • Review Software Used for Remote Access. Remote access software is a potential target for scammers to gain access and take control of your computer.

When we think about phishing scams, we don’t typically think about tax professionals being the victims. Scam artists are getting more sophisticated each day with the schemes they employ to gain access to critical information. Targeting tax professionals is just the newest way for them to make an easy buck at somebody else’s expense.

 

Preparing for the Cost of Going Back to School

Preparing for the costs of going back to schoolSchool fees aren’t something that are typically tax deductible. Most of us already know this, but often we fail to plan for all of the costs associated with sending the kids back to school every fall. Between registration fees, school supplies, and clothes, the costs can really add up–particularly if you are preparing for more than one child to start school. Fortunately, if you plan ahead and begin preparations early, it doesn’t have to be a huge hit to your bank account all at once to send the kiddos back to school. Here are some ways to help prepare yourself for the expenses associated with the beginning of the new school year.

Make a School Budget

Figure out how much you can afford to spend on supplies, fees, and clothes and work from there. Use that budget to determine how much you will be able to spend on supplies and clothes after registration fees are paid. If your budget doesn’t allow room for all of the things your kids need to start the new school year, begin with the basics and the things that they absolutely HAVE to have for the first day of school, and work on budgeting out the rest of the items over the next few weeks.

Reuse Whatever You Can

If last year’s backpack is still serviceable, is it really necessary to buy a brand-new one for the new school year? What about some of the basics like pens, markers, scissors, and other items from the previous school year that are unused or barely used? Reuse whatever you can to help cut costs all around. If your child absolutely wants a different backpack or lunchbox than the one he used last year, consider arranging a swap with some friends or family. This can help both families reduce their overall expenses for back to school.

Start Early

Before one academic year is over, start thinking about what your kids might need for the next year. You will find that come October and November, backpacks, lunchboxes, and all of the essential back-to-school supplies are often significantly marked down. If you plan ahead, you can find incredible deals on some of the things you know your kids will need. This also applies to clothing, shoes, coats, and accessories.

Shopping at the very end of a season will often give you access to the best possible deals. Of course, there is always a little bit of a risk when you purchase ahead for the next year. Your child may experience a massive growth spurt or the supply lists may change dramatically. Still, planning an entire year ahead in terms of purchases you know you will make every single year can save you significantly in the long run.

Going back to the classroom after several months of summer sunshine and lazy days is always exciting. This is especially true when I have had the foresight to plan ahead and really budget the cost of sending the kids back to homeroom. With some foresight and thought, it doesn’t have to be financially devastating, though. Shopping early and budgeting carefully should help ease the financial burden of this time of year.

Brexit: What it Means for us

Brexit, what it means for us

Brexit has caused a bit of a rift on global markets. At the end Brexit, what it means for usof June, Britain voted to leave the European Union. There is a lot of speculation as to how this will impact us in the United States, and currently the world markets are still rattling with the vote to leave. So what does that mean? Short answer: it depends.

The Impact of Brexit on the UK

The United Kingdom is still reeling from the vote to exit the European Union. Immediately after the vote was finalized, David Cameron resigned as Prime Minister. Theresa May was appointed by Queen Elizabeth to succeed Cameron on July 13. She has stated that she has no intention of reversing the public vote to leave the European Union. However, she has also indicated that she is in no hurry to do so.

Additionally, in the wake of Britain’s exit from the EU, the vote to leave has been challenged. A court hearing is scheduled for October 13. This hearing will be held to determine whether or not Britain can proceed with the exit without Parliament’s authorization. Government lawyers are expected to argue that the Prime Minister can use Royal Prerogative powers to begin the process of withdrawal from the European Union.

Brexit Impact on Global Markets

The British pound is still losing value compared to the United States dollar. Interest rates and yields on U.S. treasury bills have also fallen. It may take years to find out the long-term repercussions of Brexit. Some financial experts forecast a hard-hitting recession in the UK as a result of the vote. However, to insure minimal impact to your portfolio, there are a few steps you can take. First, make sure you diversify your portfolio. As long as you don’t over-concentrate on investing in one country, your investments should recover quickly. Keep a global diversification plan in place, and don’t put too much emphasis on current news headlines to make your trading decisions. Rather, think global and long-term to protect your assets. For more information on the best way to diversify your portfolio, speak with your financial adviser.

The Verdict

In the grand scheme of things, there is still so much up in the air regarding the British exit of the European Union. It is still possible that a second vote will repeal the British exit. There are a lot of “what if” scenarios that are fruitless to speculate upon. Cast a wide net in terms of investments and think globally instead of focusing on one place to help protect your investments.

Summer on a Shoestring Budget

summer budgetThe summer months are here. Unpacking the kids’ backpacks after the last day of school, I noticed a few different fliers indicating where kids can eat for free over the summer months. It made me wonder how many kids rely on school simply to eat. It turns out, a lot of them do. Almost 17 million kids right here in the United States, a first world country, struggle with hunger on a regular basis according to No Kid Hungry. Summer is peak time for kids to go hungry. Additionally, if many families cannot afford to feed their families in the summer months it goes without saying there are many other experiences kids are doing without. Even those of us who are able to afford basics like food and shelter struggle with any wiggle room in the budget to keep our kids active and entertained during the time out of school. Fortunately, summer can still be fun for kids without having to break the bank.

Get Outdoors Without Spending A Fortune

Some of my most wistful memories of childhood are from the glorious summertime evenings. Growing up in the Midwest, there were fewer things better than chasing my sisters around the front yard as we played an intense game of Ghost in the Graveyard. Our house was the meeting spot for the kids in the neighborhood to play “night games”, as we referred to them. Flashlight tag, Old Mother Witch, Kick the Can, and Hide the Bat (rules for Hide the Bat were made up by my grandfather and usually involved a wiffle ball bat, all of the grandchildren in the family, and somebody wildly chasing children with the plastic bat. It was a large family. Somebody always cried. Looking back, I completely understand why.). Being outside in the sweet-smelling twilight with the sounds of children running and laughing is something that is absolutely priceless, yet costs literally nothing to do. It will provide your kids with memories that last forever. It’s probably not a good idea to teach them how to play Hide the Bat, though. It wasn’t really a good game.

Use Summer to get Creative Outdoors

Spending time at the local pool seems like a given. It also costs a small fortune for admission for an entire family. While the public pool will likely be visited at least ONCE this summer, it will likely be a one-time thing. It means that I will have to get creative when it comes to keeping the kids entertained and cool outside. I saw a great tutorial for a DIY Backyard Splash PadThere are also some other great ideas to get creative outside and keep your kids busy all without breaking the bank. 

Feeding Kids Inexpensively During the Summer

I swear, my kids spend every second of every day in the summer eating. They are all beanpoles, too. I always wonder where they put it, and I wonder how I will continue to afford feeding them. For me, it’s a little bit of a joke. For a lot of families, though, the worry about how to feed kids in the summer is very real. Most communities offer locations where kids and families can eat for free when school is out for the year. Feeding America offers a location finder for free meals during summer months. Many locations serve breakfast, lunch, and dinner, but some are only open for a few hours a day. Visit the website to learn more about the program. Colorado residents can click here to find locations where kids can get free breakfasts or lunches during the summer months.

Keeping kids engaged during the off-season for school can be a full-time gig. It can get expensive to always have activities planned for them. Whether it is trips to the zoo, museum, mall, concerts, pools, or amusement parks, the costs add up. When there is more than one child to keep engaged throughout the summer, it can be devastating to the bank account. The good news is, there are plenty of free and low-cost activities everywhere you look to keep kids happy and engaged when they aren’t hitting the books. Simply getting outside and getting moving is a great way to keep them occupied, and the cost? Absolutely free.

 

 

Value of A Dollar: Teaching Your Kids

value of a dollar

How do you tevalue of a dollarach your kids the value of a dollar? I remember a recent conversation with a friend of mine. She was adamant that giving kids an allowance was something she would NEVER do. Why should she pay her children to do things they should be doing anyways? She made a valid point. But I can also see the reasons why a parent might offer their children allowances.  It helps teach them the value of a dollar, and makes them understand they need to work to earn money. It does not just magically appear in bank accounts and wallets.

Learning the Value of Money Through Hard Work

My oldest child is 13 years old. This summer, he asked for my husband and me to purchase him a season pass to Water World. They are somewhere around $120 for an individual season’s pass. I told him we would have to think about it. I wanted more than anything to just say yes, but I knew that he would need to understand how hard his dad and I have to work for $120. I told him that we would buy him the season pass on one condition. He would have to contribute as much of his own money as he had. We would make up the difference.

At the time, he only had around $20 saved. Later, a neighbor asked if my son would be willing to spend a few hours doing some yard work. He was eager–he wanted the extra money. So he set off to do some very aggressive weeding on one of the hottest days of the year. He returned home five hours later with $60 in his pocket. I reminded him of our agreement–he would need to contribute all of the $60 he earned doing yard work that day, plus the $20 he had saved. It was amazing how quickly he changed his mind about the season pass. Once it was the money HE worked hard to earn, he was eager to reconsider his desire to spend a few days this summer at the water park. I guess that means I totally win at parenting.

Teaching Kids About Money

The value of the U.S. dollar is something that is always fluctuating. Currently, the dollar is worth 25% less than it was in 2014 according to the Consumer Price Index.  I don’t expect my kids to understand inflation and the subtleties that contribute to the fluctuating value of the U.S. dollar in the global marketplace. I DO, however, expect them to understand that everything has a price.  

2-5 Years Old

There are some ways to teach kids as young as two about money. While a two-year-old won’t really be able to comprehend fiscal responsibility and how currency works, you can begin to teach them the names of coins. Playing “Store” is another valuable way of teaching younger children about buying.

6-8 Years Old

By age 6, children usually have a greater understanding of the concept of money. A great way of teaching children this age the value of money is to open a savings account for them. Teach them to make regular deposits, whether it is with the $20 grandma sent for a birthday or a regular allowance. You can also use this opportunity to discuss interest on the account as they get a little older.

9-12 Years Old

Comparison shopping is a great tool to teach children the value of money. Teach children to read shelf tags at the grocery store and compare the bulk price per cent on items. It is also a good time to teach about quality vs. quantity. Sure, they might get more store-brand paper towels for less money, but if you have to use twice as many to achieve the same result you do not end up saving any money. Take a few moments each week on grocery or shopping trips to purchase a store brand vs. name brand product. Involve your child in a simple experiment to determine if the quality of a product is worth the price.

13-15 Years Old

The early teen years are rife with challenges for both parents and adults. This is a great time to teach teens about budgeting. If your child gets an allowance, show them how to budget it and teach them the difference between wants vs. needs.

16 and Older

Start teaching older children about credit as well as donations and charityWhen teens go off to college, they are often subject to credit card promotions and offers for students. I have known too many students who got themselves into financial trouble once they began opening credit card accounts. They had very little knowledge as to how to use them. Teach them early by using reloadable credit cards. This is a great way to help them understand the ins and outs of credit. Parents can load the cards with an entire month’s worth of allowance. Show them how to budget and manage that money over the course of the month. This will help ease them into the power a brand new credit card can yield while teaching them to use it responsibly. 

Additionally, older children and teenagers can also learn a lot about charitable contributions. It can become more than simply a financial decision to a child and segue into social responsibility. Help your child select some worthy charities he or she is interested in donating to and decide which ones are the most worthy of his or her hard-earned pennies.

The decision to give your child an allowance or not is a personal one. It can be a very good way of helping teach kids the value of a hard-earned dollar and teach them about responsible spending. As parents, many of us don’t always think about teaching our kids about money. The sooner we start teaching them the value of a dollar, though, the more likely they are to be fiscally responsible adults. What kinds of things do you do to teach your kids about money? We would love to hear your ideas in the comments below.

Keeping Records: What can Stay and Go

keeping records for the IRS

keeping records for the IRSMost taxpayers don’t have a problem keeping records for the immediate tax year. However, after the tax season is over, most of us forget about keeping records for past tax years. This results in one of two problems: if you’re like me, you don’t throw anything away. So you hold onto those tax records from when you were fifteen-years-old and had your first summer job. Or you have the opposite problem and you throw away anything you don’t think you need anymore–often this includes important records and documents. Either way, trying to recover any necessary tax documents could be something of a nightmare, but knowing the right way to manage and store tax documents will help you decide what to keep and what to pitch in the circular file.

What Records to Toss

Depending on your situation, you can generally throw anything away pertaining to your returns if it is has been three years since the filing year. There are some exceptions, of course, regarding the length of time to retain certain documents. Most previous tax year information can be disposed of three years after you file or two years after you pay a tax bill: whichever is longer. We recommend taxpayers keep records for seven years simply because it is better to have too much than not enough.

When to Keep Paperwork

It’s almost amusing what the IRS says about paperwork connected to failing to file returns or filing fraudulent returns. They say to keep records indefinitely. Seriously. You can see for yourself by clicking hereOther records to keep indefinitely include brokerage statements for taxable accounts, IRA nondeductible contributions, partnership documents, contracts, and property records (deeds and titles, namely). People who have businesses or rentals should also keep deduction documentation. There is a great article that was published in Forbes Magazine  that has a lot of information about what can stay and what can go. 

Organizing Important Documents

The best way to hold onto your important stuff is to scan it and store it electronically. If you have mountains of boxes of papers and receipts, keeping electronic copies of your stuff will make it easier to sort through. It also helps eliminate clutter, which is a total win-win if you ask me. Electronic files give taxpayers close to unlimited storage without taking up a lot of physical space. Just be sure to back up digital files so you always have what you need on hand.

You may be tempted to hold onto every receipt or paper if you have ever suffered through an audit. Although it is tempting, you really do not need to keep a record of every transaction or financial detail. Keep what you think you need. If you are in doubt, it does not hurt to hold onto the records until you speak with your tax professional. When it comes to food that might have gone bad, there is a saying. “When in doubt, throw it out”. When it comes to tax papers or records, when in doubt ask your tax professional. I know it doesn’t rhyme, but I think you all know what I mean.