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
Advisory Services offered through Wealth Advisors of Iowa, LLC, a State of Iowa Registered Investment Advisor, and an affiliate of McGowen, Hurst, Clark & Smith, P.C. Certified Public Accountants and Business Advisors
March 20, 2017 § Leave a comment
Have you ever been pulled into the middle of a discussion with opposing views or been on the opposing side of a discussion with someone? Perhaps it was at work, home, or even a Facebook post. Perhaps you’ve even been hit square on with comments or views that are in direct opposition of what you believe, think, or feel to be true. How do you handle these situations? Do you fire comments back from a place of emotion? Do you contemplate what the other person is saying to see if there is some truth to the comments? Do you remain quiet and not voice your thoughts only to harbor resentment and ill will towards the other person?
Here are some tips to consider implementing the next time you are faced with a potentially volatile conversation.
- Choose humility. Disagreements or full blown arguments usually involve an attitude that says, “I’m right, you’re wrong.” Sometimes difficult discussions turn into debates because someone wants to “win” the conversation. Discussions that lead to mutual understanding, connection, and growth of the relationship need to involve humility. You can’t change how the other person is going to approach the conversation, but you can choose to approach it in a manner that says, “your view is important and at this point in the discussion, I’m going to put your thoughts above my own for the sake of getting to common ground.” How the conversation goes forward, first begins in your mind so learn to train yourself to think of others before yourself for the sake of the common good.
- Listen with intent. The kind of listening where you’re actually paying attention to the other person rather than thinking about what you are going to say next. You’ll know if you were able to do this or not by what comes out of your mouth. If you ask follow up questions to what the other person has just said, then you were really listening to them. If you make a statement that is contrary to what they just said, then you were formulating your argument mentally, rather than listening. Try not to share your view until you are fully able to grasp what the other person is saying. Keep asking following up questions of the other person until you are able to paraphrase back to them what you thought you heard. This has two purposes. First, it will allow you to better understand the other person’s view and know where they’re coming from. Sometimes people do not articulate what they really mean the first time but by asking follow up questions you will be better able to get to what the real issue is. Second, if there is emotion in the conversation, it calms the other person down and allows them to know that you want to understand their viewpoint rather than argue with them.
- Give the other person time to share their thoughts. Try not to interrupt when the other person is speaking. Allow the person to express themselves fully even if it takes time to do so. Keep in mind, as you are intently listening, that you may not get to express your thoughts at all at this point in the conversation. Be okay with that since if you were to get to express your thoughts at this point anyway, the other person would most likely be thinking of their retort rather than actually listening to what you are saying.
- Be empathetic. Empathy is the ability to understand and share the feelings of another. While you may not possess the ability to “share” the other person’s feelings, you can at least understand them. Showing signs that you care about what the other person is saying will redirect the other person’s conversation from one that may be combative to one that is more peaceful. If you don’t actually care about what the other person is saying, see tip #1.
- Share your opposing viewpoint and thoughts only after adequate time has been given to the other person to express themselves. Have you paraphrased back to them what you think you heard and responded with genuine interest and care? You’ll know how the rest of the conversation is going to go based on whether or not the other person asks to hear your thoughts or not. If they don’t, then consider that they may not be at a place yet to actually hear what you are going to say. Perhaps it may be best to take a break from the conversation to allow their thoughts to linger awhile. This doesn’t mean that you’re “weak” or that they “won,” it simply means that you are aware that with the level of emotion that is present, getting to a place of mutual understanding and agreement will be nearly impossible until a later time.
- Try not to make the points of disagreement personal. Rather than saying things like, “I think you’re wrong,” say things like, “I don’t see it that way.” Someone is more apt to see your point of view and even eventually agree with you, if they don’t feel personally attacked. The goal is to keep the emotion to a minimum when discussing a topic that has the potential for an emotionally explosive reaction.
- Be genuine. Don’t ever feel as though you have to keep your thoughts to yourself just because someone else doesn’t agree with them. Just know that if you blurt them all out the minute you think or feel them, the reaction of the other person may not be as favorable as what it could be had you waited and implemented tips 1-6.
- Practice listening. If you are not a natural listener then it will suit you well to practice this skill. Listening is the main skill necessary to keeping peace. Find someone you trust and tell them that you want to practice listening with them. Let them share a story and then you state back to them what you think you heard. Let them critique you and share their thoughts, in a caring manner, on how they think you listen on average. Be open to their feedback and know that it’s a skill that takes time to do well. Even small improvements in this area will make a big impact on the relationships in your life. Epictetus was on to something when he said, “We have two ears and one mouth so that we can listen twice as much as we speak.”
March 6, 2017 § Leave a comment
Kids are geniuses. I have four kids, which generally leads me to be around kids a lot of the time. Lately, I’ve come to realize that they often teach me much more about the world than I teach them. Hence, kids are geniuses.
This makes me think back to the book All I Ever Really Needed to Know I Learned in Kindergarten, by Robert Folghum. When I was younger, this poster was everywhere, and being around the kindergarten age, I really didn’t understand what it was all about. Now, as an adult, it makes much more sense. Here are a few of the quotes from the book:
- Share everything.
- Don’t hit people.
- Put things back where you found them.
- Don’t take things that aren’t yours.
- Say you’re sorry when you hurt somebody.
- Warm cookies and cold milk are good for you.
- Learn some and think some and draw and paint and sing and dance and play and work every day some.
- Take a nap every afternoon.
- When you go out into the world, watch for traffic.
- Hold hands and stick together.
- Be aware of wonder.
Here are a few things my kids have taught me lately that I would add:
From the 10-year-old, I have learned new responsibilities can be very exciting. Often as adults we get overwhelmed by our responsibilities and the thought of taking on more. Not a 10-year-old. Recently, he needed to be at baseball practice a few minutes after my husband and I get home from work. We needed him to cook part of dinner so he could eat before he left. Cook…on the stove…by himself. He was so excited to be given this responsibility! The idea of taking this on leads him to independence, which is something that excites a 10-year-old and makes a parent realize he will turn into an amazing adult.
From the 8-year-old, I have learned the power of goal setting and positive thinking. She is the most driven 8-year-old I’ve ever met. She is a gymnast. Gymnastics is lots of fun, but the training is difficult. She is in the gym five hours each week, and that’s not counting all the flips she is constantly doing around the house. About a month ago, she decided it was her goal to move up to the next level. She wrote her own goals and has been diligently working on them. She is also one of the most encouraging people I’ve ever met. She truly loves life and loves to keep those around her positive. She leaves encouraging notes around the house, tells others she loves them and appreciates them freely, and always has a smile to offer.
From the 4-year-old, I have learned it’s good to follow the rules…most of the time. At four, he is testing his independence. He knows the rules and recently has discovered life is often easier if you follow them. After all, spending four minutes in time out or having electronics taken away is never fun. However, he has also realized sometimes it’s not worth it to follow the rules. Sometimes it’s more fun to jump into the pool in your clothes. Sometimes you just don’t want to eat your vegetables. Enjoy life…have fun…sometimes follow what your heart wants even if your brain says it’s not the smartest choice.
From the 2-year-old, I’ve learned it’s important to forgive. The 2-year-old room at daycare can be brutal and tons of fun all on the same day. Biting is common among 2-year-olds, and there is another little boy in my son’s class who loves to bite. Inevitably, about once a week he gets bitten…hard…it leaves teeth marks. The ironic thing is that this little boy is also one of my son’s closest playmates. They love to play together. My son never holds a grudge. It’s just not something a 2-year-old does. Just play and have fun without reservation.
My list is endless. There are many times it feels like the adults of this world have become mean and disrespectful. They are ungrateful for everything they’ve been given. There is so much we could learn from the young hearts around us. Here is a parting thought from Robert Folghum’s book:
Think what a better world it would be if we all – the whole world – had cookies and milk about three o’clock every afternoon and then laid down with our blankets for a nap. Or if we had a basic policy in our nation and other nations to always put things back where we found them and clean up our own messes. And it is still true, no matter how old you are, when you go out in the world, it is best to hold hands and stick together.
February 20, 2017 § Leave a comment
Many Americans are taking on second jobs, or “side hustles.” Some do it for extra spending money, some for retirement, some simply to pay the bills. But no one side hustles more than millennials. A whopping 44% of those between the ages of 25 and 34 have taken on a second job, in addition to 39% of those between 18 and 24 years of age. It comes as no surprise: young professionals strive constantly to better their resumes and portfolios, and student loan debt is higher than ever – both on an individual and national level.
Side hustles today are a little different than they used to be. Thanks to technology, the entire job market is evolving, and second jobs are no exception. Some still opt for the classics: waiters and waitresses, bartenders, baristas, etc. But many millennials are looking for the freedom of doing their own thing on their own terms in their own homes (or wherever they can plug in a laptop). Now, people are opting for other jobs like driving with Uber, designing websites, hosting with AirBNB, blogging, freelancing and so much more.
But don’t cozy into your couch to start working on your side hustle just yet. There’s a lot of work that can go into making this extra job successful. Here are some items to consider before getting going:
- Be careful that you don’t lose money. Earning extra money appears glamorous, but keep in mind that with any business comes expenses. Whether these expenses come in the form of maintaining your car or home or purchasing supplies, materials or software, they will still affect your bottom line. Keep accurate records of every cent those goes into and comes out of your hustle. Consider opening a separate bank account just for your side hustle.
- Yes – this money counts toward your overall taxable income, and with a side hustle, none of those taxes are coming out throughout the year like they might at your day job. Fortunately, you can deduct expenses you put into the work, but keep a good chunk of money aside for those taxes. Uncle Sam may take as much as 50% of your extra earnings in both income and self-employment taxes.
- Speaking of taxes, you’ll need to file a Schedule C at tax time to report these earnings and expenses. Keeping up-to-date, accurate records will make this much easier on both you and your tax preparer. Again, consider opening a separate bank account and using an accounting program.
- Don’t let it affect your primary job. Do you have the time and energy to commit to another line of work? Does your side hustle conflict with the work your employer does? Remember that this is extra income; don’t let it jeopardize your base income.
- Likewise, don’t let it affect your home life. How will this lack of free time affect your personal relationships with friends, significant others or kids? Weigh the pros and cons of money versus time, and make sure what you make per hour is really worth it.
For those of you readers who work with and/or supervise individuals with side hustles, it can be an interesting experience, but if they are careful and mind the ideas above, it will hopefully never come between them and their job. Simply respect that they have goals outside of work, and having that extra job or income is a means of achieving that goal. But if it interferes with their performance, don’t hesitate to speak with them about it.
Side hustles can be difficult, interesting, and somewhat scary, but they offer individuals and communities many growth opportunities. If you need a small job done, there’s likely someone in your community who can do it well and for a good price, and shopping local is always a great idea.