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Posts by Cathy Troyer, CPA:
You have scrimped and saved over the years to fund your child’s Coverdell Education Savings Account and/or qualified tuition program (529 plan), but it looks like you still won’t have enough saved in time to finance the entire cost of a college education. What do you do?
Don’t go shopping for that mini refrigerator and boxes of Ramen noodles just yet. Instead, make an appointment with a tax expert who can help you develop a plan of action that strategically coordinates your child’s scholarships, education tax credits and deductions to work with your tax-favored education plan. You may be surprised at just how far you can stretch your savings.
These three college savings account strategies will get you started:
- You may already know that the American Opportunity Credit, Lifetime Learning Credit and an above-the-line deduction are available to taxpayers looking to reduce their out-of pocket, college-related expenses. Traditionally, these tax incentives are subject to certain income limitations and can only be used to cover tuition and certain fees, books and supplies – not room and board. But because distributions from a Coverdell Account or 529 plan CAN be used toward room and board (with some limitations) as well as other traditional college costs, it may be more cost effective to consider how you will pay for certain expenses to make the most of your tax incentives.
- Make sure you know the college’s policy regarding how it allocates the funds it receives from tax-favored education plans. Every school is different and knowing your school’s policy beforehand can be extremely cost effective. For example, some colleges may apply funds received directly from a plan to tuition first – instead of room and board – thereby treating those funds as they would treat an outside scholarship. If your child has a large (or full) academic scholarship awarded by the college, having the money directly transferred from the plan to the school may reduce your child’s academic scholarship while leaving YOU to foot the entire bill for the room and board. If the distribution is made directly to the child (or the parent if the plan allows this) and then paid to the college, you don’t run the risk of the college treating the plan distribution as an outside scholarship.
- Often considered the most advantageous credit for families, the American Opportunity Credit allows you to claim a tax credit of up to $2,500 (100 percent of the first $2,000 and 25 percent of the next $2,000) for qualified education expenses. But you will forfeit your chance to claim this credit if you use the funds in your education account to foot the entire tuition. Don’t just throw away $2,500. Instead, consider paying at least $4,000 of your child’s tuition and fees from a source other than your Coverdell account or 529 plan to claim the tax credit.
Coordinating education tax credits and deductions, distributions from tax-favored education accounts, and scholarships can be tricky, but they can also help you stretch your savings further than you thought was possible. Email Rea & Associates for more information.
By Cathy Troyer, CPA (New Philadelphia office)
While the reasons for drafting an ethical will may seem more personal than business-related, an ethical will can be an effective way for business owners to pass along their vision for the future of their company after they are gone.
A properly drafted last will and testament is critical to ensure your estate’s financial well-being. Perhaps equally important is your responsibility to manage your intellectual assets, including knowledge and ethical values. An ethical will, also known as a legacy letter, is a way for you to pass along information to family, friends, colleagues and even communities.
Ethical wills have been around for many centuries. They were very prevalent in Medieval Times, but lost much of their popularity in modern times. Over the past couple of decades, they have regained their popularity.
While a last will and testament details how a person’s possessions will be distributed after death, an ethical will is a way to pass on a person’s values, hopes, dreams and life lessons – among other viewpoints. Though an ethical will is not a legal document, Business Week has described it as an aid to estate planning.
What should I include in my ethical will?
- Your personal values – the importance of honesty, integrity and personal responsibility.
- Your views on work ethic, dedication to one’s chosen profession and work-life balance.
- Your views on charitable giving and community responsibility.
- How to develop and cultivate personal and business relationships.
- Your hopes and dreams for your spouse, children and other family members.
- Anything that you have learned in life and would like to pass on to others.
When should I draft my ethical will?
- Birth of a child
- Children leaving for college
- When drafting a succession plan for your business
- End of life
- Or anytime
An ethical will can be an integral part of your overall estate plan, so consider putting one together today!
By Cathy Troyer, CPA (New Philadelphia office)
Do you find yourself checking your mailbox every day? Or maybe you’re watching your bank account to see if your account balance went up? It’s the time of year that many Americans are waiting with bated breath for their coveted tax refund. If you haven’t already, you’re probably getting ready to file your tax returns in the next few weeks, and you may be wondering when you can expect to receive your refund or if there’s anything you can do to speed it up. Well, wonder no more and read on!
Speeding Up Your 2013 Tax Refund
The best way to receive your tax refund sooner than later is to file your tax return electronically and to select “direct deposit” as the delivery method for your refund. Electronic filing is faster, more accurate, and more secure than paper-filing your return. Likewise, direct deposit is faster and more secure than receiving a paper check refund. There’s no chance of your refund check being lost or stolen if it’s electronically deposited directly into your bank account. Please note that calling the IRS will not speed up your refund.
When Will You Receive Your Federal Tax Refund?
If you’ve already submitted your 2013 tax return and are curious where your refund is at, you can check the status of your federal tax refund using the IRS program, “Where’s My Refund?” This is available at http://www.irs.gov/Refunds, or you can use the mobile app, IRS2GO. If you file your return electronically, you can check the status 24 hours after your return was electronically submitted. If you file a paper return, you can check the status four weeks after your return is mailed.
In order to use “Where’s My Refund?”, you’ll need the primary taxpayer’s social security number, the filing status, and the exact amount of the refund. Your return will be in one of three stages: Return Received, Refund Approved, or Refund Sent. While using “Where’s My Refund?” will not speed up the waiting time, it’s a convenient way to check the status of your refund.
Got Tax Questions?
Author: Cathy Troyer, CPA (New Philadelphia office)
Looking for other tax-related articles? Check these out:
My co-worker, Maribeth Wright, recently wrote a blog post titled, “Are You Properly Classifying Your Workers?”. The post explained how to determine whether a worker is an employee or an independent contractor. The article mentioned that this is a hot button issue with the IRS, as well as other government agencies. In fact, according to The Kiplinger Tax Letter, the IRS is currently in the process of conducting 6,000 random audits, which are focusing on several payroll and fringe benefit issues – one of which is worker misclassification. Read the rest of this entry “