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By Rosemary White, February 15, 2012 11:42 am

If you’re in the throws of pulling your 2011 income taxes together, I thought you might want a quick primer on a few of the changes in the law that might affect you.  It is, after all, difficult to keep up:

   *  The deduction for business mileage had two levels last year.  41 cents per mile through June 30th and 55.5 cents from July 1st on.  Higher gasoline prices are the reason.  This is why keeping good records is so important

  *  If you converted some of your IRA to a Roth back in 2010, you were given two years to pay the incomes taxes on the conversion.  The first half of the taxes is due with your 2011 return; the remainder with your 2012 filing

  *  There’s a new box on your W-2.  It shows the amount of your employer-provided health care benefits.  The amount is NOT taxable…it’s for information purposes only.  The IRS will be using this data in the future to enforce aspects of the new health care law

  *  Keep an eye out for the 1099-K.  It’s a new way for the IRS to track taxpayer income, especially if you earn income through PayPal, Amazon, eBay, etc.  So, if you sell a lot of stuff online, this will apply to you.  If you get a 1099-K, be sure to follow the new form’s reporting rules carefully

  *  The 1099-B:  another new form.  This should make reporting a bit easier if you acquired an asset after January 1, 2011 and then sold it.  New cost basis rules require brokerage firms, etc. to note the             post-1/1/11 asset’s basis so this should take the guesswork out of trying to figure out what you originally paid for an asset.  Assets bought or inherited before 1/1/11 may still require digging to come up with your best guess on when the asset was acquired.  But, eventually, this won’t be a problem

I hope these changes get you in the income tax mood.  Always best to get things done in plenty of time before the filing deadline, which, by the way, is April 17th, due to the fact that the 15th is on a Sunday and the 16th is Emancipation Day in the District of Columbia.  Do you know the history of Emancipation Day?   Good luck on your taxes.  Until next time, here’s to good planning!

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By Rosemary White, February 9, 2012 9:37 am

Sometime this spring you’ll probably want to sit down when you get your 401(k) statement.  Hopefully not because your account has tanked, but because you’ll be able to see all the fees associated with your plan.  This is a big change, brought by new Department of Labor regulations.   Depending on who your employer chose to provide your 401(k) plan, the expenses may prompt an outcry from employees who see high fees and think some of that money would be better off in their respective accounts.  I agree.  More than 72 million workers have $3 trillion invested in their 401(k).

Most folks have never had a clue what fees they’ve been paying.  The new rules will require an explanation of any administrative and individual expenses charged to each account.  The information will have to be provided quarterly.  It’s going to force plan providers to lower their fees and you may see a different 401(k) plan at some point due to increased competition.  This is all a good thing.  Plan providers, as you might imagine, have never support the new transparent approach to 401(k) fees and expenses.  But high fees have become one of several casualties from the recession and corresponding turmoil in the markets in 2008 and 2009.  When accounts take a hit, people look at everything to improve performance.   Expenses and fees always count in my book.  Once you get your first look, let me know how bad it is.  Until next time, here’s to good planning!

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By Rosemary White, February 2, 2012 4:13 pm

The conventional wisdom around the country is that Massachusetts is generally “out in front” on many issues of the day.  Legalizing gay marriage and instituting Romneycare come to mind.  OK…maybe we’ve got that label for good reason.   But that hasn’t been the case when somebody dies and the state’s probate laws kick in.  Downright antiquated is how some have described the Massachusetts probate process.   But thanks to the state legislature, our probate rules are now governed by the Uniform Probate Code, and big changes have arrived.

Intestacy laws have changed.  If you die without a will, the state’s intestacy laws lay out who will inherit what.  (Don’t be a knucklehead.  Get your will done this year.)   Under the old laws, your surviving spouse would inherit 50% and the spouse’s kids would inherit the other 50%.  But now, if the spouse’s kids were also the children of the deceased, the spouse will inherit 100%.  I guess the thinking is that the spouse will need the assets more now.  Once the surviving spouse passes, the children will inherit what’s left.  Sorry, Junior.

Some protection from creditors.   The new law provides for “exempt property”, thereby protected from creditor claims.  Up to $10,000 of personal property and $18,000 for a “family allowance” are now provided while the probate process plays out.

New probate terms.  No longer will “executors” be running the show when an estate is probated.  The new, more contemporary term is “personal representative”. 

Probate process will be a speedier.  I’ll say.  In the old days, it could take up to 45 days for a personal representative to be appointed by a court.  Now, it can happen as quickly as seven days.  If there are no disputes, no sense letting the grass grow.

Probate shorted from 50 years.  Unbelievably, Massachusetts probate law used to allow up to 50 years for an estate to be probated.  Sounds like an effective delaying tactic if, say, Fred’s children were dragging things out so their evil aunt, Gertrude, wouldn’t inherit Daddy’s millions.  Until the new rules, estates must be settled within three years.   So, unless Gertrude is on life support, I’d say the kids are out-of-luck. 

So, like so much in life, you and your family will be better off if you plan now for things during your lifetime and beyond.  I never like surprises.  Good luck.  Until next time, here’s to good planning!

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By Rosemary White, January 19, 2012 12:58 pm

I’m always really leery of freebies.  I always assume there’s a catch…somewhere…somehow.   And so it was when I got my T-Mobile Value Visa Prepaid Card in the mail from Citibank.  What are they up to?

With a balance of $25 on the card, the letter said I can use the pre-paid debit card at any retailer that takes VISA.  (Does this mean I can use the card and maybe win ten Super Bowl tickets like in the TV commercials?  Now that would be of interest!)  I can spend the $25 at any T-Mobile store, of course or I can just go across the street to the Citibank branch and get the $25 in cash.  Why don’t they just call it a gift card?  I received the debit card because I added mobile broadband for my laptop so I don’t have to be limited to just mobile hot spots.  It was clear from the mailing, Citibank is targeting younger consumers with this offer.  Oh well.

This must be a lost leader for both T-Mobile and Citibank.  T-Mobile is probably counting on people coming to their stores and spending more than the $25 face amount.  I can’t imagine that T-Mobile coughed up the money.  I suspect Citibank wanted access to some of T-Mobile’s customer list and offered to provide the debit cards and the corresponding $25.  Even if 100,000 debit cards were issued, each valued at $25, that’s a potential cost of $2,500,000 for Citibank.  A drop in the bucket for them, I’m sure.  Even if only 20,000 people activate their cards, Citibank is sure to make money on its investment.  People who activate, but forget to use the card will get charged a $3 monthly fee.  Taking a cash advance generate additional fees.   Plus the bank has tens of thousands of possible new customers for credit cards, banking and other services.   Citibank will probably get that $2.5 million back before the end of the first quarter.    And T-Mobile?  New revenue through additional sales and, who knows, maybe the company was paid a fee by Citibank to get access to its customer list.

So, in the end, rather than being on anybody else’s mailing list, I decided not to activate the debit card and do what I always do with plastic that comes in the mail.  You might want to consider doing the same.  Until next time, here’s to good planning!

I'll Be Mailing It Back...

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By Rosemary White, January 12, 2012 10:09 am

There’s a new report that’s raising serious concerns about the risks we may all face when calling customer service centers.  The issue is whether the representative you’re speaking to is located in an off-shore call center.   Unlike the United States, most countries don’t have legal safeguards against fraud and identity theft.   I don’t know about you, but I don’t want my credit card information being stolen by someone in another country.

Getting the most attention are India and the Philippines, two countries that have the largest number of call centers used by U.S. corporations.  India did pass data privacy laws last year but the Indian government specifically exempted outsourcing companies from having to comply with the law.  The Philippines has no data protection laws and has seen more growth in their outsourcing business as more and more Indian call center work is being “sub-outsourced” to them.   Workers in the Philippines, apparently, are cheaper than those in India.  And, most foreign companies do not do background checks on those they hire.

What can you do?  

               *  When you are on the phone and about to use your credit or debit card, ask where the customer service representative is located.  If he/she is honest and acknowledges being outside the U.S., maybe there is another way to pay for your product.  Inform the rep of your concerns.  “Nothing personal, but I’m concerned about identity theft.”

                *  Support The U.S. Call Center Worker and Consumer Protection Act, a recently-introduced bill in Congress (Rep. Tim Bishop, D-NY) that has bipartisan support.   Contact your Senator and Congressperson.  This legislation would make American outsourcers ineligible for guaranteed federal loans and grants for five years.   Non-U.S. customer reps would have to disclose their location when asked by American callers and would have to transfer the call to an American call center if the customer requests it.   

Given the lack of safeguards for American consumers, you could be financially devastated if your information is stolen.  The United States has no authority to pursue restitution in other countries.  The report was written by researchers for the Communication Workers of America, a union that represents more than 150,000 call center workers in the United States.  The union says more than 700,000 American call center jobs have been outsourced by U.S. companies in the last several years.    Stay safe out there!  Until next time, here’s to good planning!

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By Rosemary White, January 4, 2012 3:59 pm

Happy 2012!  The holidays are now behind us so it’s a great time to turn your attention to your finances.  There may have been several things about money you weren’t thrilled about in 2012.  If you don’t make some course corrections in 2012, you’ll most likely end up at the same place this time next year.  Take the reins now and don’t let that happen.   My first suggestion is to figure out where your money goes every month.  Get yourself an online budgeting system.

I have used one for a while now.   There are many options out there… Mint.com and BudgetSimple.com come to mind.  Whatever you use, you’ll be amazed at how effective it is if you take a few minutes each month to enter in your correct income and expenses.  There’s no need for fibbing…nobody will see this but you.  But I think you’ll find that by tracking your expenses, you’ll be able to see patterns in your spending habits which, in turn, will help you focus on reducing unnecessary spending.   Do you eat out too much each week or buy a fancy coffee drink two or three times a week?  That only lightens your wallet and expands your waistline. 

So, try an online budgeting system as one New Year’s resolution.   Give it your best effort for at least two months.  I think you’ll be amazed and encouraged about how you can take control of your spending.   Next, increased savings should be on your plate…not that fancy bagel.  I’d be interested in which system you end up using.  Good luck.  Until next time, here’s to good planning!

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By Rosemary White, December 16, 2011 7:15 am

There’s not many trading days left in 2011.  But there’s still time to sell those losing stocks and take your losses on next year’s tax return.  It’s called tax loss harvesting and most people wait too long.  It’s basic human nature, I guess.   If you bought a stock at $20 per share, and it’s dropped to $12, you figure your loss is only on paper.  If you just hold onto it long enough, the stock will return and then surpass your original cost.   That often doesn’t happen.

There’s the January Effect that some researchers support.  That’s where stocks that drop in one year tend to outperform in January of the following year.  But the January Effect may be partially due to tax loss harvesting that investors partake of.  Lots of people selling particular stocks…the selling puts downward pressure on the share price so the stocks drops even more.  Then, in January, the price starts going up.  This is where your particular situation becomes important.  Are the stocks you’re eyeing to dump still a good fit for your overall portfolio?   How’s the long-term outlook for the affected industries?  Would selling the downers help on your income taxes.  Remember you can deduct up to $3,000 of tax losses a year and you can carry over any unused losses for as many years as it takes to use up all those losses.   Work with your financial and tax persons.

The S&P 500 is roughly 5% below where it started 2011.  So, give this another look.  Good luck.  I’m taking the next couple of weeks off from blogging.  In the meantime, I hope you and your family have a wonderful holiday and a Happy New Year!  All the best in 2012!

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By Rosemary White, December 14, 2011 12:53 pm

The answer is a very big “most likely”.  If you’ve bought anything on Amazon.com, I’m sure you’ve probably noticed that you haven’t had to pay any sales taxes.  That’s generally been the case for most online retailers.  Federal sales tax policy requires a “physical presence” in a state before sales tax must be paid.  But Amazon has been pushing federal legislation that would permit states to collect such sales taxes.  I guess it’s been inevitable but it does seem odd Amazon would take such a position.  Amazon is, of course, one of the largest internet retailers.

California passed a law earlier this year that allows for the tax collection, but Amazon was able to negotiate a start date of September, 2012.  I think they want a federal law so all online retailers have to play by the same rules.  Florida, Indiana and Connecticut have followed California’s lead.  More state are sure to follow.  So, getting a national law passed may eliminate the sales tax patchwork that would be sure to exist.  So, that’s why the Marketeplace Fairness Act has become Amazon’s #1 priority, other than increasing sales, of course.  So, stay tuned.  It’s just another reason to shop around and get your best deal.  You may have an additional tax to pay.  Until next time, here’s to good planning!

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By Rosemary White, December 9, 2011 10:12 am

I never thought I’d say this, but home mortgages have become even cheaper. This summer, economists and real estate industry analysts looked at skidding Treasury yields and wondered just how much further interest rates on home loans could fall.  The answer: perhaps even further.

On November 17, interest rates on 15-year adjustable rate loans averaged just 3.31%. Rates on conventional 30-year home loans averaged 4.00%, and average rates for 5/1-year ARMs and  1-year ARMs were respectively at 2.97% and 2.98%, according to the U.S. government.  I remember being thrilled, almost 30 years ago, getting my condo refinanced at 10.75%.  That was the going rate in the early ’80s. 

Those able to refinance are seizing the moment. If you can do it, keep your long-term goals in mind. Years ago, a refi came down to one factor: if you could knock a couple of percentage points off your interest rate, you did it. Today, it’s a bit more complex. There are three aspects to consider: a) how much you can save per month, b) lender points and fees, and c) how long you intend to live in your home.

How long will rates stay this low? It is truly hard to say and recent history has illustrated that. On April 10, 2010, a New York Times headline blared: “Interest Rates Have Nowhere to Go but Up”. At that time, the average rate for a 30-year fixed mortgage was 5.31%. Look where it is now.  Interest rates will move significantly north at some point, so a window of opportunity beckons – and no one really knows how long it will stay open.

Think before you make a move. Before you get out that pen and sign anything, talk about your options for refinancing with a qualified mortgage specialist, and talk to your financial consultant to see how your choice to refinance relates to your overall financial situation.

The spouse and I are, thankfully, within spitting distance of having our home paid off.  That will be a big day…maybe worth a party.  But if we had more time left, we’d seriously consider refinancing.  If you choose this option, I hope it goes without a hitch.  Until next time, here’s to good planning!

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By Rosemary White, December 6, 2011 2:58 pm

OK…there’s less than 30 days before the end of 2011.  That means, you don’t have much time to think about what you need to do to save money on your income taxes next April.  I know you don’t want to think about from Form 1040, but what if you could save some money?  So, here are a few quick ideas for you to ponder before December 30th (the 31st falls on a Saturday):

   *  Are there any investments you can sell that will generate a loss?  You can claim investment losses up to $3,000 per year and anything over that amount can be carried over from year to year to offset gains.  Nobody knows what the capital gains rate will be after 2012 (currently 15%), so even if you sell an investment and have no losses to offset, the tax owed may be minimal and worth paying if you need to cash out of something

   *  If you’re self-employed, 2011 expenses must be taken by the end of this month if you want to reduce your taxable income.  If you’re able to project income this year vs. next year, will you get a bigger bank for your buck if you bunch your expenses after January 1st? 

   *  Energy credits were extended through 2011.  If you install insulation, windows or energy efficient heating or air conditioning units may qualify for up to $500

   *  Section 179 for business owners.  This one allows you to write off up to $500,000, but only through the end of the month, for machinery, equipment and vehicles placed into service.  In 2012, this drops back to $125,000

   *  If you are able to prepay college tuition for some of 2012, you may qualify for the American Opportunity Tax Credit.  The maximum credit is $2,500.  You’ll have to have an Adjusted Gross Income of $160,000 if you’re married and filing jointly or $80,000 if you file as a single.  This would ease the pain of big tuition bills

These are just a few ideas to think about.  But don’t think about it too long.  Be sure and check with your tax preparer to firm up your course of action.  As with so many things in life, a little planning goes a long way.  Good luck.  Until next time, here’s to good planning!