September 19, 2017 § Leave a comment
This summer our firm participated in the Des Moines Corporate Games. The Des Moines Corporate Games is a company based competition that started June 1st and ended July 31st, that enables and supports teamwork, company pride and corporate wellness through health competition. Employers are split into three divisions: Large, Medium and Small. The division you fall into is based on the number employees at your company. 2017 was the second year for the Des Moines Corporate Games and McGowen, Hurst, Clark & Smith P.C.’s first year participating in the games.
There were 26 events this year, including Zumba, yoga, dodge ball and kickball tournaments, cross country race and track and field events. I’m proud to report that we participated in 23 out of the 26 events the Corporate Games offered. For most of the summer, we were in close race for first place with Fidelity & Guaranty Life and through hard work and teamwork we were able to secure a first-place finish in the 2017 Des Moines Corporate Games.
Winners of the Des Moines Corporate Games were announced on August 18, 2017, on the Grand Concourse at the Iowa State Fair. A group of our employees was there to receive our 1st place trophy, which is now proudly displayed in our reception area. A great time was had by all who participated in the games, and it gave employees who do not typically work together the change to have interaction. We are ready to defend our 1st place trophy in the 2018 Des Moines Corporate Games.
For more information on the Des Moines Corporate Games, please visit their website at http://dmcorporategames.org/. Check out their Facebook page and Twitter account for pictures and tweets from the 2017 Des Moines Corporate Games.
September 6, 2017 § Leave a comment
The calendar change from August to September signals many things – the start of football season, the transition to fall and of course, the beginning of a new school year. For the kids, going back to school means early bed times, early mornings, and homework. For the parents, going back to school means shelling out money for school supplies, lunch money accounts, new clothes, fees for books and transportation, and admissions to school events and other extracurricular activities. As a parent of a sophomore and an 8th grader, I know all too well that sending kids to school can get very expensive in a hurry.
While the demands for money for this or that never seem to stop once the school year starts, it is nice to know that the Iowa Tuition and Textbook Credit is available to provide a little kickback come tax filing time. Iowa allows a credit for tuition and other school related fees for dependents attending Kindergarten through 12th grade at an accredited Iowa school. The credit is limited to 25% of each dependent’s first $1,000 of qualifying expenses (maximum of $250 per dependent per year). At first glance, you may not think it is worth the effort to identify any qualifying expenses, but the list of items included in the credit may surprise you. The following is a partial list of some expenses that qualify and a few that do not to consider as you send the kids off to school.
- Tuition paid to an accredited private school (K-12)
- Textbook fees and fees for other required instructional materials
- Rental or purchase of “non-street” costumes for school plays; rental of prom dresses or tuxedos for school related functions and dances; Uniforms for band or school athletic teams – including football or soccer cleats or other footwear not suitable for everyday wear
- Drivers education classes if paid to the K-12 school
- Dependent’s fees for admissions to school related activities, athletic events, dances
- Parking fees paid to the school
- Rental of musical instrument for school band
- Expenses for textbooks or other items for home schooling or schooling outside an accredited school
- School lunches
- Tutoring not paid to a school
- Purchase of prom dresses and tuxedos; Purchase of clothes that can be worn outside of the related school function (basketball shoes, t-shirts for extracurricular activities)
- Drivers education classes paid to a third-party provider (Street Smarts, Drive Tek)
- Purchase of musical instruments
- Registration fees, uniforms, shoes and admissions related to non-school sponsored athletic teams, dance or music classes, and events (league sports, private dance or music lessons)
As you can see, it really doesn’t take long for the qualifying expenses to add up in a hurry and can provide for a nice credit on your Iowa return. As always, ask your MHC&S tax professional if you have questions on what may or may not qualify.
A full list of qualifying/non-qualifying items can be found here: Iowa Tuition and Textbook Credit
July 12, 2017 § Leave a comment
Change and transition. Those are everyone’s favorite things, right? Accounting is always changing, and the Financial Accounting Standards Board (FASB) continues to work on projects and updates to improve the information provided to users of financial statements. In August 2016, FASB released Accounting Standards Update 2016-14 Presentation of Financial Statements of Not-for-Profit Entities (ASU 2016-14). The goal of ASU 2016-14 is to improve the information presented in the financial statements and notes about a not-for-profit entity’s (NFP’s) liquidity, financial performance and cash flows. The idea is that this will give donors, grantors, creditors and others a better picture of the organization through the financial statements.
Of course, these improvements come with a lot of change and transition that will be necessary in order to implement this new presentation. While change and transition can sometimes be overwhelming and maybe even scary, the good news is there is time before the required implementation date. The effective date is financial statements issued for fiscal years beginning after December 15, 2017. That means if you are a June 30 year end, the new presentation is not required until your financial statements for the year ended June 30, 2019. While 2019 may seem to be far in the future, if you present comparative financial statements, you will want to start thinking about those effects now so that you are ready to make the transition when the time comes to implement.
Below is a summary of the most significant changes:
- NFP’s will present two classes of net assets (with donor restrictions and without donor restrictions) instead of three (unrestricted, temporarily restricted and permanently restricted).
- NFP’s may use either the direct or indirect method of reporting cash flows, and no reconciliation to the indirect method is required if the direct method is used.
- Enhanced disclosures regarding:
- Self-imposed limits or designations on the use of resources without donor restrictions,
- Composition of net assets with donor restrictions,
- Qualitative and quantitative information for how the entity manages its liquid resources available to meet cash needs for general expenditures within one year of the balance sheet date,
- Expenses by both their natural classification and their functional classification along with the method used to allocate costs among program and support functions, and
- Underwater endowment funds including policy concerning appropriations from the funds and amount by which the funds are deficient.
- NFP’s will report investment return net of expenses, and there will be no requirement to disclose those expenses.
- In the absence of explicit donor stipulations, gifts of cash or other assets used to acquire or construct long-lived assets will move to net assets without donor restrictions when that asset is placed in service.
I recently attended the American Institute of Certified Public Accountants (AICPA) Not-for-Profit Conference in Washington, D.C. The consensus at the conference was that NFP’s would likely have the most challenges with the liquidity disclosures and the classification of costs. AICPA has provided some great templates for these items, and we will be passing along these templates to our clients this fall. In the meantime, be sure you are asking your accounting department, CPA or Finance Committee about these very important changes so that we may all work together to make this change a smooth transition.
June 13, 2017 § Leave a comment
My husband and I recently found out we are expecting our first child, a baby boy, in November. We couldn’t be more excited to embark on this journey together, along with our parents, who will be first- time grandparents. Needless to say, this little miracle will be given lots of love and attention.
Our lives will be changing greatly when our baby boy arrives. We know we will be learning much about patience and selflessness, as this world, up to this point, has revolved around our individual wants, needs, and schedules. As I am entering into my fifth month of pregnancy, I have developed a new personal perspective on some important life lessons, which I would like to share.
- Gratitude: From seeing the positive sign on the home pregnancy test to hearing the baby’s heartbeat for the first time, I have such immense gratitude for this precious life. Before we knew we were going to have a baby, I would go through each day’s routine, just tending to everyday responsibilities. I now find myself taking in moments throughout day to reflect on the richness of my life and the undeserved blessings I have been given. During this time, it has become more evident to me that important life events can heighten present-moment awareness and reflection.
- Family: On the day we found out we were expecting, we immediately called our parents to share the wonderful news, knowing how thrilled they would be. In becoming a first-time mommy, I now have a new appreciation for my mom and my mother-in-law, as I look to them for advice, guidance, and wisdom. It has created a unique, special bond between us, now that I am a member of the very elite club of motherhood. More than ever before, I recognize how critically important my parents are in my life, and I need for them to know how much they mean to me. It has become very real to me that the love and support of family is the greatest gift.
- Nutrition: After finding out I was expecting, I started reading books to learn about better nutrition, knowing full well that I had to do away with some food and drinks that were not good for me (e.g., I love Coke and fried food!). I’m now being much more careful, and I hope to maintain better eating habits once the baby arrives. It’s not unusual that sometimes it takes a major change in life’s circumstances to recognize that adjustments need to be made. I regret that it took pregnancy for me to incorporate a healthier lifestyle, but it has certainly aroused in me the desire to take better care of myself and to think about the importance of being a good example to our little one.
- Priorities: As I have heard from my working mom friends, once this baby arrives, priorities will shift dramatically, as this tiny, new bundle will require our utmost attention and be our primary focus for a period of time. Work-life balance will take on a whole new meaning, as consideration must be given to the best interests of our son. The responsibilities of parenthood can seem overwhelming at times. It is a process I look forward to experiencing, as we navigate through the coming years.
Whether you have a family or are single, I believe that all of these lessons learned are always a good reminder – living your life filled with gratitude, loving on your family, becoming informed about nutrition to improve your health, and making your family a priority.
May 3, 2017 § Leave a comment
Now that tax season is over it’s time for some spring cleaning in my house. Do you ever feel like your house has “stuff” everywhere? With two small children at home, I am working on the fact that everything can’t always be in its “home.” We don’t schedule a day for spring cleaning; it just happens. I open a closet or drawer, and this turns out to be the day where everything has to go. This is our spring cleaning day. It’s time for the “stuff” to find a new home, Goodwill or garbage. Recently I had to add boxing up items for a younger child to the list. On these spring cleaning days, my favorite place is the garbage. I get in the toss mode. It has to leave the house. I can’t believe the amount of “stuff” we collect over time.
I know the next place for spring cleaning to hit in my house. I have been avoiding it… my home office. During tax season, no personal records seem to get filed or scanned. I am an over saver when it comes any bill, paperwork or receipt. My home office filing is much like a business.
At McGowen, Hurst, Clark and Smith, we have general guidelines for your home records and to help build policies for your business. These guidelines apply to hard-copy and electronic records.
- Partnership agreement and amendments
- Operating agreement and amendments
Permanently or for seven years following entity liquidation:
- Copies of tax returns as filed
- Tax and legal correspondence
- Financial statement audit reports
- General ledger and journals
- Financial statements
- Real estate records
- Corporate stock records and minutes
10 Years after expiration of agreement:
- Bank statements
- Deposit slips
- Sales records and journals
- Revenue records
- Employee expenses reports and records relating to travel and entertainment expenses
- Cancelled checks
- Paid vendor invoices
- Employee payroll expense records
- Inventory records
- Expense records
- Capital asset records – tax life of the asset plus three years
- Personnel and other employment records – seven years following termination
These guidelines will help as I tackle my home office. I do have to add one personal item to the guidelines: permanent retention of 10-15 coloring/art projects per year. Any parent knows how these multiply. My four-year-old “creates” somewhere between 2 to 4 pages per day. You do the math… they are everywhere. And don’t get caught putting ANY coloring pages in the garbage.
We wish you the best of luck in your own spring cleaning endeavors. Please let us know if you have any questions on retention guidelines.
April 24, 2017 § Leave a comment
My husband and I are young professionals, and we try to make good choices with our money and credit. Almost two years ago, we bought our first place together, a modest townhouse, and combined our bank accounts. Through these processes, we reviewed our credit scores, and we were happy with them. They were quite good, especially considering our short credit histories due to our young ages.
Fast forward to now, nearly two years later, and we’re ready to move into a larger house. We knew what we could afford and started looking around with our realtor. Since we were confident in our calculations on affordability, we thought it best to wait for banks to dig into our credit until we were ready to make an offer. We found a place we liked, and the price was right, so that weekend, we submitted our online application for a new mortgage.
The following Monday, I received a phone call from the lender. I must have looked like a cartoon character as my mouth dropped open when he told me how low my husband’s score was. What? That couldn’t be possible! He has no loans besides our current mortgage, and we pay our credit cards in full every month, using them only to about 5-10% of our limits.
I immediately went to www.annualcreditreport.com and checked all three of my husband’s credit reports. This site allows you to check each of your reports (Experian, Equifax and Transunion) once each year for free in compliance with the Fair Credit Reporting Act, and it’s very simple to use. A good strategy to regularly check your credit is to space these checks out and check one report every trimester to maximize your free opportunities, but in our situation, we needed them all at once. You can always pay for another credit report later in the year if necessary.
We discovered there was an error on two of his three reports. It was a collections account for money that my husband owed to an old employer, but we paid it immediately upon receiving it over a year ago and had no prior knowledge of the debt before the collections notice. However, these are considered “serious delinquencies” and will stay on a credit report for seven years if no action is taken against them.
It was time to file disputes. We were a bit concerned about disputing, because these errors were technically not fraud. However, we learned that you can dispute items that you own and items that you don’t. In other words, you can dispute items that are technically yours but should not be on your report, like my husband’s collections items, and items that are fraudulent and are in no way legitimately connected to you – not yours.
We opted to file our disputes online with each of the two bureaus that displayed the collections account. To do this, we went to each of their individual websites and located the option to file a dispute. We chose the option to file a dispute for an item that my husband owned, and we had a chance to write an explanation of our dispute after answering a couple other questions. You are also given the opportunity to attach supporting documents if you have any. It was surprisingly simple, and upon completing our dispute with each bureau, we received a confirmation email with instructions on how to check the status of the disputes.
Each bureau will solve disputes within 30 days unless there are circumstances which require deeper investigation and/or assistance from other parties in the investigation. My online research (fueled by my impatience) revealed that many disputes are solved in about two weeks, although the bureaus will neither confirm or deny this. Fortunately, our disputes were simple and were both solved within one week. And to our relief and surprise, both bureaus deleted the collections account from my husband’s report! We did a quick, free check of his credit score on www.creditkarma.com to see if his score had gone up. This is a soft check, so it does not negatively impact your report or score. The shocking result: his score went up a whopping 80 points! We were appalled to think that an error on a credit report could affect a score that much and prevent someone from getting a loan.
Happily, we were able to get our credit rechecked and get everything back on track the way we originally planned for our new house. But had we been checking our credit over the last two years, we could have significantly reduced the added stress of a situation that can already be stressful on its own. The FTC has reported that one in five Americans has an error on their credit report. Our advice is to check it regularly to avoid a situation like ours.
Checking Your Report
Check your credit reports once each year for free. Visit www.annualcreditreport.com to obtain one report each from Experian, Equifax and Transunion every twelve months. If you don’t have credit concerns, check only one each trimester to spread out your free opportunities.
If you find a mistake on your credit report, you can submit a dispute online through the appropriate bureaus’ sites (www.experian.com, www.equifax.com or www.transunion.com), or you can submit a dispute via mail.
Checking Your Score
Contrary to popular belief, checking your credit score does not hurt it. You can use reputable sites to check your score using only a soft inquiry, which does not impact your score. (Hard inquires for new credit cards and loans are examples of items that would negatively impact your credit.) Some credit cards, like Discover, include your FICO score with your monthly statement. Non-customers can use this service through Discover’s website as well. Www.creditkarma.com is also a reliable source for your credit score. You may also consider checking your online banking information or asking your bank if they have it readily available for you if you are not comfortable reviewing it online with a third party.
No matter how careful you are with your money and your credit, you can never be 100% sure of your situation unless you take steps to be proactive in monitoring it. If you have concerns, talk to your CPA or financial advisor about how you can protect yourself from credit mistakes.
Marketing Supervisor – McGowen, Hurst, Clark & Smith, P.C.
April 11, 2017 § Leave a comment
529 plans, which are tax-advantaged saving plans used for higher-education expenses, have grown in popularity since they were first introduced in the late 1990s. In fact, many of you might already have them for your children or grandchildren. While it is pretty well known that these plans allow savings for college and post-secondary education to grow tax-deferred and allow for tax-free withdrawals for qualified expenses, this blog post is going to focus on some of the lesser known features of these plans. Every state sponsors at least one version of their own 529 plan. This article focuses on the features and benefits of Iowa’s versions of 529 plans – College Savings Iowa & the IA Advisor 529 Plan.
While the most common owner (also referred to as the participant) of 529 plan accounts are likely parents and grandparents, almost anyone can open a 529 plan account.
In order for Iowa taxpayers to qualify for the State of Iowa tax deduction allowed for contributions to Iowa 529 plans, you must be the owner of the account.
You can be the owner for multiple 529 plan accounts with each account listing a different beneficiary. For 2017, Iowa taxpayers can deduct up to $3,239 in contributions to Iowa 529 plan accounts per beneficiary. That means if a husband has two accounts – one for each of his two kids, and his wife has two accounts – again, one for each of their two children, they could potentially deduct up to $12,956 (4 x $3,239) in contributions for 2017. Another example, grandparents who have accounts set up for each of their six grandchildren could potentially deduct up to $38,868 in contributions (12 x $3,239) for 2017. It’s important to note that there is not a Federal income tax deduction for contributions to 529 plans. Additionally, to qualify for the Iowa tax deduction, you must be an Iowa taxpayer and contribute to a College Savings Iowa or IA Advisor 529 Plan account.
The owner retains control over the account and has the right to make the investment selections. The account owner also has the ability to name a successor owner (and in some cases transfer the ownership) as well as the authority to name and change the account beneficiary.
Flexibility Regarding Account Beneficiaries:
The beneficiary does not have to live in Iowa. The beneficiary does not have to be related to you, and you can even name yourself as the beneficiary.
You can transfer a portion or all of the account assets at any time to a new beneficiary. The new beneficiary just has to be an eligible “family member” of the original beneficiary. So if the original beneficiary decides college isn’t for them, you can easily transfer the funds to a new beneficiary. As you can see by this table – the “family member” definition is pretty expansive.
The aggregate maximum that the same beneficiary can have across all State of Iowa 529 plans that they are named as beneficiary to is currently $420,000.
There’s virtually no waiting period to withdraw the funds other than the reasonable time frame required to ensure that the deposits clear. Why’s that important? It means that instead of paying out of pocket for qualified expenses, you can deposit that amount into a new or existing 529 plan account – qualify for the State of Iowa tax deduction – then use the funds right away to pay for eligible expenses.
There’s also no age limit to use. Want to enroll in college after you retire? No problem – you can use funds from your 529 plan account toward qualifying expenses.
The list of expenses that qualify for tax-free withdrawals is greater than just tuition and mandatory fees. Additional expenses that qualify are:
- Books & required supplies,
- Computers, including software & related hardware (e.g., printers),
- Internet access and related services,
- Equipment required for enrollment or attendance,
- Room & board (For any academic period the student is enrolled at least half-time), and
- Certain expenses for special needs students.
While there is a 10% federal tax penalty – in addition to income taxes – on earnings if the money withdrawn isn’t used for qualified expenses, there are several important exceptions where the account assets can be withdrawn penalty free. If the beneficiary receives a scholarship, an amount up to the scholarship amount can be withdrawn penalty free. Penalty free withdrawals are also available if the beneficiary enrolls in an eligible U.S. military academy, becomes disabled or passes away.
A Couple Things to Be Aware Of:
Once the beneficiary of your 529 plan is ready to start their higher education experience, it is important to have a plan for withdrawals. For example, if a beneficiary has both a parent-owned 529 plan account and a grandparent-owned account, it may be beneficial to take withdrawals from the parent-owned account in the earlier years of college, while waiting to tap into the grandparent-owned account until the later years. The reason: financial aid eligibility. Funds distributed from a non-parent owned account are treated as untaxed income to the beneficiary – which will increase the beneficiary/student’s reported income on financial aid forms. Assets held in parent-owned accounts are considered as the parental assets. Parental assets hold less weight in determining financial aid awards than the assets of the student.
Withdrawals from 529 plan accounts can also affect your eligibility to take advantage of other tax incentives, such as educational tax credits. You cannot “double-dip” and use the same qualifying expense(s) for both benefits. For this reason, it is important to consult your tax professional and make sure that you plan for the full implications of any withdrawals.
It’s easy to set up a 529 account through collegesavingsiowa.com. However, if you’re not comfortable doing it yourself, you can work with a financial advisor to open an Iowa Advisor 529 Plan. Both plans offer the same benefits to Iowa taxpayers.
One final note…
The information contained in this article was necessarily brief and is not intended to be taken as advice for anyone’s individual situation. To determine the best action plan for your individual situation, consult with your tax professional. For more information, visit collegesavingsiowa.com.
Kellie Masters, CFP®
Financial Services Manager – Wealth Advisors of Iowa