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News

Our news articles are posted on a regular basis to give our clients relevant and timely information about matters pertaining to our financial services. Browse through our current and archived articles to learn more.

Category: Personal Accounting

Accounting & Tax: IRS Clarifies Deductibility of Home Equity Loan Interest

For tax years 2018–2025, the Tax Cuts and Jobs Act (TCJA) eliminated the deduction for interest on home equity debt and limited the mortgage interest deduction to qualified residence debt of up to $750,000 ($375,000 for married taxpayers filing separately). In a recent News Release, the IRS advised taxpayers that interest paid on home equity loans and lines of credit is still deductible if the funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan. For example, interest on a home equity loan used to build an addition to an existing home is generally deductible (subject to the new dollar limit on qualified residence debt). However, interest on a home equity loan used to pay personal living expenses, such as credit card debt, is not deductible. Also, interest on a home equity loan on a taxpayer’s main home to purchase a vacation home is not deductible.

To discuss your specific Accounting & Tax Needs, click to contact us.

 

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Financial & Wealth :: What About Financial Aid for College?


college_financial_aid~001

What About Financial Aid for College? 

Is the financial aid game worth playing? There’s a tremendous amount of paperwork involved. The rules are obscure and often don’t seem to make sense. And it takes time.

But make no mistake, the game is definitely worth playing. Financial aid can be a valuable source of funds to help finance your child’s college education.

And you don’t necessarily have to be “poor” to qualify. In some circumstances, families with incomes of $75,000 or more can qualify.

U.S. Government Grants
The federal government provides student aid through a variety of programs. The most prominent of these are Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOGs).

Pell Grants are administered by the U.S. government. They are awarded on the basis of college costs and a financial aid eligibility index. The eligibility index takes into account factors such as family income and assets, family size, and the number of college students in the family.

By law, Pell Grants can provide up to $5,730 per student for the 2014-2015 award year.1 However, only about 28 percent of recipients currently qualify for the maximum. The average grant was $3,678 in 2013-2014.2 Students must reapply every year to receive aid.

Most colleges will not process applications for Stafford loans until needy students have applied for Pell Grants. Students with Pell Grants also receive priority consideration for FSEOGs.

Students who can demonstrate severe financial need may also receive a Federal Supplemental Educational Opportunity Grant. FSEOGs award up to $4,000 per year per student.

Article-College-Financial-Aid

 

 

 

 

 

 

 

 

 

 

State Grants

Many states offer grant programs as well. Each state’s grant program is different, but they do tend to award grants exclusively to state residents who are planning to attend an in-state school. Many give special preference to students planning to attend a state school.

College Grants
Finally, many colleges and universities offer specialized grant programs. This is particularly true of older schools with many alumni and large endowments. These grants are usually based on need or scholastic ability. Consult the college or university’s financial aid office for full details.

 

1–2) The College Board, 2014.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

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Financial & Wealth :: What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½?

Tax-Deferred Investments


What Happens If I Withdraw Money from My Tax-Deferred Investments Before Age 59½?

Withdrawing funds from a tax-deferred retirement account before age 59½ generally triggers a 10% federal income tax penalty; all distributions are subject to ordinary income tax. However, there are certain situations in which you are allowed to make early withdrawals from a retirement account and avoid the tax penalty.

IRAs and employer-sponsored retirement plans have different exceptions, although the regulations are similar.

 

IRA Exceptions

• The death of the IRA owner. Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

• Disability. Under certain conditions, you may begin to withdraw funds if you are disabled.

• Unreimbursed medical expenses. You can withdraw the amount you paid for unreimbursed medical expenses that exceed 10% of your adjusted gross income in a calendar year. Individuals older than 65 can claim expenses that surpass 7.5% of adjusted gross income through 2016.

• Medical insurance. If you lost your job or are receiving unemployment benefits, you may withdraw money to pay for health insurance.

• Part of a substantially equal periodic payment (SEPP) plan. If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer, using one of three payment methods set by the government. Any change in the payment schedule after you begin distributions may subject you to paying the 10% tax penalty.

• Qualified higher-education expenses for you and/or your dependents.

• First home purchase, up to $10,000 (lifetime limit).

 

Employer-Sponsored Plan Exceptions

• The death of the plan owner. Upon your death, your designated beneficiaries may begin taking distributions from your account. Beneficiaries are subject to annual required minimum distributions.

• Disability. Under certain conditions, you may begin to withdraw funds if you are disabled.

• Part of a SEPP program (see above). If you receive a series of substantially equal payments over your life expectancy, or the combined life expectancies of you and your beneficiary, you may take payments over a period of five years or until you reach age 59½, whichever is longer.

• Separation of service from your employer. Payments must be made annually over your life expectancy or the joint life expectancies of you and your beneficiary.

• Attainment of age 55. The payment is made to you upon separation of service from your employer and the separation occurred during or after the calendar year in which you reached the age of 55.

• Qualified Domestic Relations Order (QDRO). The payment is made to an alternate payee under a QDRO.

• Medical care. You can withdraw the amount allowable as a medical expense deduction.

• To reduce excess contributions. Withdrawals can be made if you or your employer made contributions over the allowable amount.

• To reduce excess elective deferrals. Withdrawals can be made if you elected to defer an amount over the allowable limit.

If you plan to withdraw funds from a tax-deferred account, make sure to carefully examine the rules on exemptions for early withdrawals. For more information on situations that are exempt from the early-withdrawal income tax penalty, visit the IRS website at www.irs.gov.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2015 Emerald Connect, LLC.

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Financial & Wealth :: What Is the Gift Tax?


Gift_Taxes~001The federal gift tax applies to gifts of property or money while the donor is living. The federal estate tax, on the other hand, applies to property conveyed to others (with the exception of a spouse) after a person’s death.

The gift tax applies only to the donor. The recipient is under no obligation to pay the gift tax, although other taxes, such as income tax, may apply. The federal estate tax affects the estate of the deceased and can reduce the amount available to heirs.

In theory, any gift is taxable, but there are several notable exceptions. For example, gifts of tuition or medical expenses that you pay directly to a medical or educational institution for someone else are not considered taxable. Gifts to a spouse who is a U.S. citizen, gifts to a qualified charitable organization, and gifts to a political organization are also not subject to the gift tax.

You are not required to file a gift tax return unless any single gift exceeds the annual gift tax exclusion for that calendar year. The exclusion amount ($14,000 in 2014) is indexed annually for inflation. A separate exclusion is applied for each recipient. In addition, gifts from spouses are treated separately; so together, each spouse can gift an amount up to the annual exclusion amount to the same person.

Gift taxes are determined by calculating the tax on all gifts made during the tax year that exceed the annual exclusion amount, and then adding that amount to all the gift taxes from gifts above the exclusion limit from previous years. This number is then applied toward an individual’s lifetime applicable exclusion amount. If the cumulative sum exceeds the lifetime exclusion, you may owe gift taxes.

The 2010 Tax Relief Act reunified the estate and gift tax exclusions at $5 million (indexed for inflation), and the American Taxpayer Relief Act of 2012 made the higher exemption amount permanent while increasing the estate and gift tax rate to 40% (up from 35% in 2012). Because of inflation, the estate and gift tax exemption is $5.34 million in 2014. This enables individuals to make lifetime gifts up to $5.34 million in 2014 before the gift tax is imposed.

 

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC.

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Accounting & Tax :: Saving for Higher Education: Investing in Your Child’s Future


Saving money for college is one of the most important investments most people will make in their lifetime. Fortunately, there are many investment options for college savings, with particular merits, and certain caveats to bear in mind. Investing parameters to consider include the length of time set aside for savings, the financial return on the investment, whether your child will choose college for his future, and perhaps most importantly, the tax ramifications of the investment choices.

529 Plans

A popular college savings vehicle, known as a 529 Plan, is essentially a qualified tuition plan sponsored by a state or educational institutions that is authorized by Section 529 of the Internal Revenue Service. An account holder may either invest in a prepaid tuition plan, or a college savings plan. A prepaid tuition plan allows the account holder to purchase units or credits at participating colleges and universities for future tuition (and possibly room and board), while an account holder of a college savings plan can use the withdrawals at any college or university. All 50 states and the District of Columbia offer some type of 529 plan.
The tax advantages to 529 plans are that the earnings are not subject to state or federal tax if used to cover the cost of higher education and some states allow a deduction for contributions to 529 plans. An additional benefit is that 529 plans can be funded by parents, grandparents, aunts & uncles, etc.  There is a special gift tax rule that allows five years of 529 plan contributions to be made at one time without gift tax consequences provided that no other gifts are made to that donee during those 5 years. For 2014, $70,000 ($14,000 annual exclusion times 5 years) can be deposited in a 529 plan by each donor. If the 529 investment is withdrawn and not used for college, the owners will be subject to income tax on the earnings plus a 10% federal tax penalty. Some states impose rules limiting annual portfolio allocations. Market risk must also be considered. If you have a child with a 529 plan who decides college is not for them, the account may be transferred to another family member.

Coverdell Education Savings Accounts
Coverdell Education Savings Accounts (formerly called an “Education IRA”) differ from 529 plans in that the funds can be used for primary and secondary education in addition to higher education. They are similar to 529 plans because the earnings are not taxable when used for qualified education expenses but are taxable with a 10% penalty on earnings if not. A contribution to a Coverdell Education Savings Account and a 529 plan can be made in the same year, but the contribution to the Coverdell Education Savings Account is limited to $2,000 each year. In addition, there are income limitations on the contributor to be eligible to make contributions. When the beneficiary reaches age 18, contributions can no longer be made and at age 30, the account has to be closed. Another disadvantage is that state tax deductions are not allowed for these contributions.
Custodial Accounts
Custodial accounts created under the Uniform Gifts/Transfers to Minors Act allow funds to grow in your child’s name. Gifts to these accounts are subject to the annual gift limits. Advantages of UGMA/UTMA gifts are that investment decisions are more flexible and there are no restrictions on the withdrawals. Disadvantages are that the earnings may be subject to the kiddie tax, meaning that they are taxed at the parent’s rate rather than the child’s rate. The parent also loses control of the funds once the child reaches the age of majority, which may differ on a state by state basis.

Mutual Funds            

Mutual funds provide flexibility through diversification of assets. Depending on the firm or firms managing the funds, these investment vehicles can offer great returns. Investors will be subject to taxes on gains from their dividends; however they have the advantage of being able to manage risks by balancing stocks and bonds in one portfolio. To some investors it may seem frightening that someone else is managing their money, but historically mutual funds, especially those in stocks, have proven to show great returns. So risk management and diversification may appeal to some, but don’t expect to find the income tax breaks of IRAs or 529s here.

Savings Bonds and Stock Investments

Other college saving options include the basics, such as government savings bonds or individual stock investments. These alternatives can represent the polarity of investment risk. Saving for college with bonds requires a long time of accruing interest and the investments are limited at $10,000 face value annually. Savings bonds are not taxed on their accrued interest, but their annual cap and slow growth limit their utility. Interest earned on certain Series EE or I bonds is tax free is used for qualified higher-education purposes.  Investing in stocks without a broker can be risky, and land any investor in a situation of fast gain or sharp losses. Investments in stocks are taxed on capital gains and dividend income, so even if you do make some money, don’t expect to get off scot free.

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Financial & Wealth :: How Can I Keep My Money from Slipping Away?

cash_management_basics

As with virtually all financial matters, the easiest way to be successful with a cash management program is to develop a systematic and disciplined approach.

By spending a few minutes each week to maintain your cash management program, you not only have the opportunity to enhance your current financial position, but you can save yourself some money in tax preparation, time, and fees.

Any good cash management system revolves around the four As — Accounting, Analysis, Allocation, and Adjustment.

Accounting quite simply involves gathering all your relevant financial information together and keeping it close at hand for future reference. Gathering all your financial information — such as mortgage payments, credit card statements, and auto loans — and listing it systematically will give you a clear picture of your overall situation.

Analysis boils down to reviewing the situation once you have accounted for all your income and expenses. You will almost invariably find yourself with either a shortfall or a surplus. One of the key elements in analyzing your financial situation is to look for ways to reduce your expenses. This can help to free up cash that can either be invested for the long term or used to pay off fixed debt.

For example, if you were to reduce restaurant expenses or spending on non-essential personal items by $100 per month, you could use this extra money to prepay the principal on your mortgage. On a $130,000 30-year mortgage, this extra $100 per month could enable you to pay it off 10 years early and save you thousands of dollars in interest payments.

Allocation involves determining your financial commitments and priorities and distributing your income accordingly. One of the most important factors in allocation is to distinguish between your real needs and your wants. For example, you may want a new home entertainment center, but your real need may be to reduce outstanding credit card debt.

Adjustment involves reviewing your income and expenses periodically and making the changes that your situation demands. For example, as a new parent, you might be wise to shift some assets in order to start a college education fund for your child.

Using the four As is an excellent way to help you monitor your financial situation to ensure that you are on the right track to meet your long-term goals.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

This material was written and prepared by Emerald.
© 2014 Emerald Connect, LLC All rights reserved.

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Accounting & Tax :: Identity Theft Prevention & Recovery


ID fraud

 

Recent cyber-attacks involving companies such as Target, Neiman Marcus, and Kickstarter, remind us that identity theft and credit card fraud occurs every day.

Major companies have become victims of criminal security intrusion, which affects not only the success of their business, but their customers. Every day hackers steal credit and debit card data, personal information including names, addresses, e-mail addresses, phone numbers, and most importantly Social Security numbers and dates of birth. Cybercriminals steal this information, auctioning it to other cybercriminals who open new lines of credit using stolen identities. Once this occurs, it’s extremely difficult to completely remove stolen personal information from the internet.

 

“….Cybercriminals steal this information,
auctioning it to other cybercriminals who
open new lines of credit using stolen identities.
Once this occurs, it’s extremely difficult
to completely remove stolen personal
information from the internet.”

Not only do hackers steal credit card information to make personal purchases, they also file tax returns using stolen identification to receive fraudulent refunds. In almost every case, the legitimate taxpayer is unaware this has occurred until they file their return and are notified by the tax authorities a return has already been filed in their name.

As a result of these breaches, many have asked what precautions should be taken to improve security measures and what to do once one’s identification is stolen. Our suggested action plan is to combine prevention with aggressive reporting.

How can you prevent identity theft?

1.  Review monthly statements: Be diligent in checking your credit card bill every month. This will enable you to detect erroneous charges to your account.

2.  Order and review your credit reports: By ensuring the information in your credit reports is correct and up to date, you have a better chance of detecting any signs of identity theft. At AnnualCreditReport.com you can request your free credit reports annually from TransUnion, Equifax and Experian. These three credit agencies are required by law to provide you one free credit report a year. Order your reports annually and review them carefully. Make corrections as required.

3.  Shred documents with personal information: Shred account statements and destroy expired credit cards to prevent criminals from finding your information in your trash. You can find inexpensive shredders at office supply stores such as Staples and Office Max.

4. Secure your personal information: Keep important documents such as your Social Security card and credit cards you may not be using in a safe place. Secure your online passwords by changing them regularly, making them difficult for anyone but yourself to crack.

5. Be careful how you handle paying your bills: Use online payments when possible. If you must use regular mail, be smart about how you post it. Depositing mail in a secure mailbox or by hand to the Post Office is certainly better than leaving mail unattended in a private mailbox on your house or by the curb, especially when important confidential information is included.

6. Avoid doing business with unfamiliar entities: Don’t make online purchases if you are not familiar with the company or you cannot be sure their website is secure. If a “lock” icon appears on the status bar of your internet browser, your information is safe.

7. Protect personal data saved to your computer: Install firewalls and virus detection software so hackers can’t access personal information you have saved.

8. File your tax returns early: By filing early, chances of someone else using your information before you do is diminished. File electronically through a secure website. Request your refund through direct deposit so criminals don’t have the opportunity to steal your refund check.

9. Transfer personal information from your computer: Transfer personal files to other mediums, such as CDs or flash drives, and store them in a safe place. Deleting information from your hard drive prevents criminals from accessing it when you dispose of the computer.

10. Identify scams and alert the appropriate government agencies: Criminals send mailings or create e-mails pretending to be from government agencies. If you come across a scam claiming to be from the IRS, the U.S. Postal Service, or the FBI you should report it.

What do you do if your identity is stolen?

1. Notify your bank: Cancel your checking and savings accounts. Obtain new account numbers and ATM passwords. Stop payment on any outstanding checks you are unsure of.

2. Contact all your credit card issuers: Get replacement cards with new account numbers to make sure your card can no longer be used by someone else.

3. Put a fraud alert on your accounts: Call the fraud units of the three credit reporting companies, Experian, Equifax and Trans Union. Request your accounts be flagged with a fraud alert so new credit can’t be granted without your approval. Advise each agency of the specifics of your identity or credit card theft.

4. Call your telephone, electrical, gas and water utilities: Alert these companies that someone may attempt to open new service under your name.

5. Seek legal assistance: If required, engage counsel to determine whether your rights have been violated under various credit, banking, and SSN laws.

6.  Report the identity theft: After you take proactive steps to minimize potential damage, file the appropriate reports. The earlier youfile these reports, the faster the problem can be solved.

How to file a report

• Filing Identity Theft Affidavits: Download the Identity Theft Affidavit, Form 14039, or request a copy by calling toll-free 1-877-ID-THEFT (438-4338). Use this form to report the theft to three credit bureaus, Experian, Equifax and Trans Union, as well as to credit card companies and other sources of credit.
 Report stolen checks to Telecheck: This check guarantee company will flag your file so fraudulent checks wil1 be turned down. For more information visit http://www.firstdata.com/telecheck/index.htm or call the Telecheck fraud, identity theft, and forgery line at 1-800-710-9898.
• Report the fraud to the IRS: Submit a copy of your valid government-issued identification, along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 1-855-807-5720. You can also contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
• In appropriate circumstances, report the fraud to the local Police Department, Post Office and FBI. It is important to keep a copy of the police report and save originals. This will make it easier to prove your case to credit agencies and financial institutions.
• Report fraudulent use of your Social Security number to the Social Security Administration’s Office of the Inspector. Go to http://oig.ssa.gov/contact-oig to submit a reporting form. This report should only be filed in the most extreme situations.

7.  Keep a log: Keep track of all conversations, including dates and names when discussing your identity theft with credit agencies, authorities, or credit issuers. Keep all notes and documents so they can be submitted as needed to defend any claims against you or to clear your credit history.

8.  Apply for an IRS Identity Protection PIN number: This IRS pilot program is available to taxpayers in Florida, Georgia and the District of Columbia – the three U.S. jurisdictions with the highest per-capita percentage of identity theft. The PIN number is used to avoid delays in filing returns and refunds.

Identity theft creates financial hardship, credit destruction, and generally frustrates each affected party’s financial future. Repairing your credit history can be a long and arduous effort. You should do everything you can to protect your identification. If it is compromised, stop the damage from compounding and take immediate steps to begin the repair process.

 

Resources

Are you a victim of identity theft?
 If you receive a notice from the IRS, please call the number on that notice. If not, contact the IRS at 800-908-4490 or fill out the IRS Identity Theft Affidavit, Form 14039.

Social Security Administration’s Office of the Inspector General

Reporting Fraud
If you suspect someone of committing fraud, submit a report form at: https://www.socialsecurity.gov/fraudreport/oig/public_fraud_reporting/form.htm

By U.S. Mail:

Social Security Fraud Hotline
P.O. Box 17785
Baltimore, Maryland 21235
Fax: 410-597-0118
Telephone: 1-800-269-0271

Credit Bureaus

Equifax

www.equifax.com

1-800-525-6285

Experian

www.experian.com

1-888-397-3742

TransUnion

www.transunion.com

1-800-680-7289

Report Suspicious IRS Related Emails


Report suspicious online or emailed phishing scams to:
phishing@irs.gov.

For phishing scams by phone, fax or mail, call:
1-800-366-4484

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Accounting & Tax :: Get Tax Transcripts FAST

TaxReturn

In mid-January 2014, the IRS introduced the ability for taxpayers to instantly view and print tax transcripts. Prior to the introduction of this new online service, taxpayers were able to request either returns or transcripts, which would take approximately 5-10 days to be delivered.

 

Tax return and tax account transcripts are available
for the current year plus the previous 3 processed years.
Wage and income transcripts are available for
the past 10 processing years.

The new online feature will give taxpayers instant access to:

Tax Return Transcripts — Reflecting most items from the tax return as it was originally filed. (It does not reflect any changes made after it was originally filed.)
Tax Account Transcripts — Showing any adjustments made after the return was filed, including basic data, such as marital status, type of return, gross and taxable income.
Record of Account Transcripts — Combines the information from a tax return transcript and a tax account transcript.
Wage and Income Transcripts — Provides data from W-2s, 1099s, 1098s, etc.
Verification of Non-filing Letter — Proof from the IRS that the taxpayer did not file a return this year.

To access this feature, follow this link:
http://www.irs.gov/Individuals/Get-Transcript.

After creating an account and signing in, the taxpayer will answer security questions and have immediate access to a page listing the years available for each transcript. Tax return and tax account transcripts are available for the current year plus the previous 3 processed years. Wage and income transcripts are available for the past 10 processing years.
This is a quick and easy way for taxpayers to get immediate access to their past tax return information.

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529 Lesson Plan: High Scores for 529 College Savings Program

529_plan-image

Looking for a tax-advantaged college savings plan that has no age restrictions and no income phaseout limits — and one you can use to pay for more than just tuition?

Consider the 529 college savings plan, an increasingly popular way to save for higher-education expenses, which have more than tripled over the past two decades — with annual costs (for tuition and fees, and room and board) of more than $39,500 per year for the average private four-year college.1 Named after the section of the tax code that authorized them, 529 plans (also known as qualified tuition plans) are now offered in almost every state.

Most people have heard about the original form of 529, the state-operated prepaid tuition plan, which allows you to purchase units of future tuition at today’s rates, with the plan assuming the responsibility of investing the funds to keep pace with inflation. Many state governments guarantee that the cost of an equal number of units of education in the sponsoring state will be covered, regardless of investment performance or the rate of tuition increase. Of course, each state plan has a different mix of rules and restrictions. Prepaid tuition programs typically will pay future college tuition at any of the sponsoring state’s eligible colleges and universities (and some will pay an equal amount to private and out-of-state institutions).

The newer variety of 529 is the savings plan. It’s similar to an investment account, but the funds accumulate tax deferred. Withdrawals from state-sponsored 529 plans are free of federal income tax as long as they are used for qualified college expenses. Many states also exempt withdrawals from state income tax for qualified higher education expenses. Unlike the case with prepaid tuition plans, contributions can be used for all qualified higher-education expenses (tuition, fees, books, equipment and supplies, room and board), and the funds usually can be used at all accredited post-secondary schools in the United States. The risk with these plans is that investments may lose money or may not perform well enough to cover college costs as anticipated.In most cases, 529 savings plans place investment dollars in a mix of funds based on the age of the beneficiary, with account allocations becoming more conservative as the time for college draws closer. But recently, more states have contracted professional money managers — many well-known investment firms — to actively manage and market their plans, so a growing number of investors can customize their asset allocations. Some states enable account owners to qualify for a deduction on their state tax returns or receive a small match on the money invested. Earnings from 529 plans are not taxed when used to pay for eligible college expenses. And there are even new consumer-friendly reward programs popping up that allow people who purchase certain products and services to receive rebate dollars that go into state-sponsored college savings accounts.  2 

Funds contributed to a 529 plan are considered to be gifts to the beneficiary, so anyone — even non-relatives — can contribute up to $14,000 per year (in 2013) per beneficiary without incurring gift tax consequences. Contributions can be made in one lump sum or in monthly installments. And assets contributed to a 529 plan are not considered part of the account owner’s estate, therefore avoiding estate taxes upon the owner’s death.

Major Benefits
These savings plans generally allow people of any income level to contribute, and there are no age limits for the student. The account owner can maintain control of the account until funds are withdrawn — and, if desired, can even change the beneficiary as long as he or she is within the immediate family of the original beneficiary. A 529 plan is also extremely simple when it comes to tax reporting — the sponsoring state, not you, is responsible for all income tax record keeping. At the end of the year when the withdrawal is made for college, you will receive Form 1099 from the state, and there is only one figure to enter on it: the amount of income to report on the student’s tax return.

Benefits for Grandparents
The 529 plan could be a great way for grandparents to shelter inheritance money from estate taxes and contribute substantial amounts to a student’s college fund. At the same time, they also control the assets and can retain the power to control withdrawals from the account. By accelerating use of the annual gift tax exclusion, a grandparent — as well as anyone, for that matter — could elect to use five years’ worth of annual exclusions by making a single contribution of as much as $70,000 per beneficiary in 2013 (or a couple could contribute $140,000 in 2013), as long as no other contributions are made for that beneficiary for five years.*  If the account owner dies, the 529 plan balance is not considered part of his or her estate for tax purposes.

As with other investments, there are generally fees and expenses associated with participation in a Section 529 savings plan. In addition, there are no guarantees regarding the performance of the underlying investments in Section 529 plans. The tax implications of a Section 529 savings plan should be discussed with your legal and/or tax advisors because they can vary significantly from state to state. Also note that most states offer their own Section 529 plans, which may provide advantages and benefits exclusively for their residents and taxpayers.

Before investing in a 529 savings plan, please consider the investment objectives, risks, charges, and expenses carefully. The official disclosure statements and applicable prospectuses — which contain this and other information about the investment options, underlying investments, and investment company — can be obtained by contacting your financial professional. You should read these materials carefully before investing. By comparing different plans, you can determine which might be available for your situation. You may find that 529 programs make saving for college easier than before.

 

* If the donor makes the five-year election and dies during the five-year calendar period, part of the contribution could revert back to the donor’s estate.

Sources:
1) The College Board, 2012
2) College Savings Plan Network, 2012.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. 

This material was written and prepared by Emerald. 
© 2014 Emerald Connect, LLC All rights reserved.
Jason Reid Saladino and George G. Elkin are Registered Representatives offering Securities through American Portfolios Financial Services, Inc. Member: FINRA, SIPC. Investment Advisory products/services are offered through American Portfolios Advisors Inc., a SEC Registered Investment Advisor. G.R. Reid Wealth Management Services, LLC is not a registered investment advisor and is independent of American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. Independent Portfolio Consultants is an independent financial consulting firm and is not affiliated with American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. American Portfolios Financial Services Inc. and American Portfolios Advisors Inc. does not offer tax advice. Please consult with your tax advisor.

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Accounting & Tax :: NYS Tax Refund: E-mail Notification Sign- Up

New York taxpayers can sign up to receive an email when their income tax refunds are issued instead of calling the department or checking your refund status online. 


Sign up for email today by logging into your Online Services account and selecting “Manage email” from “Account Preferences” at the top of the page.

If you have already signed up for email, but only for Bills and Related Notices, you will need to sign up for Other Notifications to get email telling you when to expect your refund.

If you have questions, please visit: http://www.tax.ny.gov

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