Author: Service2Client

How to be Your Tax Pro’s Favorite Client this Tax Season

How to be a good clientWhy on earth, you may ask yourself, would I care about being a good client to my tax prep professional? I mean, you are a paying client, and aside from treating them with the same decency and respect that you would show any other random person, who cares – right? Wrong!

What’s in it for me?

Honestly, it’s simply in your own best interest to be a good client. Maintaining a positive relationship with your tax professional can benefit you in numerous ways. Your tax preparer bills you in one of three ways: a flat fee (guaranteed); hourly; or a hybrid with a basic flat fee that they’ll only add to if out-of-scope issues/problems come up. Let’s look at each approach in more detail.

First, a scenario where you have a guaranteed flat fee no matter what. In this case, it’s pretty obvious to see that one of a tax preparer’s main incentives is to perform the work correctly and up to professional standards, but as fast as possible; less time equals more money. Here, being a good client means that you give your tax professional more room to be thoughtful about your tax return and even perform some planning/optimizing for the current year or next year. If you can help them prepare your return efficiently, there’s room to spare in providing you with value-added advice.

Second, when you engage a tax pro on a strictly hourly basis, saving them time on the administrative side of the return prep will equate to direct savings in your pocket. When you pay by the hour, you are paying regardless of whether they are calculating or reviewing your return, providing advice, planning, or chasing you down for missing info, open items, questions, etc.

Third, we have the scenario where you have a flat fixed fee unless you add services out of scope or things really go sideways. Here, while most tax preparers will eat a little bit of time, if you cause delays in the preparation process due to incomplete or unorganized information or you are late to respond to questions, there is a good chance you’ll get billed for that time as it wasn’t planned for and was unnecessary.

Finally, making your tax professional’s life easy will simply make you more likable as a client. And we all know that we treat people we like better.

How do I become a great client?

So, at this point, you are asking, how do I become my tax professional’s favorite client? There are a few main areas to consider if you want to establish a good working relationship and make life easier for everyone.

  • Be Organized – The more organized you can be in gathering and submitting your underlying tax documents (W-2, 1099s, etc.) and other necessary information, the better. Many tax preparers will send a tax organizer to help you fill out and organize what you send over. Following this is the best way, but any method that is clear, logical, and complete is best.
  • Submit All Your Information at Once – While it’s not always possible, don’t submit your information until you have everything. Sending over documents piecemeal is a surefire way to cause confusion and delays and makes the process rife for errors. In fact, many CPAs won’t even start a return until they have everything. Again, this isn’t always possible because sometimes a K-1, for example, is not yet available – but that should be an exception to the rule.
  • Be Responsive – To the degree that you can be responsive to follow-up questions from your tax preparer or their staff. This will ensure your return keeps moving, saving time (and therefore billable hours) that stopping and starting creates.

Conclusion

Following these tips will not only help you develop a great relationship with your tax preparer for years to come, but it also will ensure the most accurate and efficient preparation of your return possible.

Your February Financial To-Do List

February Savings TipsJanuary has come and gone. You may or may not have stuck to your resolutions, but the good news is that February is here. Now is the perfect time to hunker down and get your monetary ducks in a row. Here are a few things to put on your agenda to get your financial house in order.

Pay Off Holiday Debt

Yes, it was fun to go shopping for holiday gifts, but those interest rates are high – you’ll want to pay your balances off as quickly as possible. And here’s a tip: you can make more than one payment per billing period. In other words, instead of waiting for your next paycheck, pay some of the balance now and some later. This will reduce the interest you’d pay if you waited two more weeks to pay in full. This way, you can actually pay your credit card bills more frequently and pay less over time. While you’re at it, look for lower interest rates and transfer those balances. All it takes is a Google search for “zero balance transfer credit card offers,” and you’ll find what you need in no time.

Start Working on Your Taxes

April will be here before you know it, so getting a jump on taxes is a smart idea. Also, filing early will give you more time to figure out how much you owe, if anything. If you want to take the guesswork out of preparing your taxes, you might consider hiring a tax professional. When you make your selection, ask for a price quote. Some tax preparers often want to see which forms you need before they work on your taxes, but you can still ask for a list of fees for various types of tax help to get a ballpark idea. Here’s a red flag: if someone says they’ll base your fees on a percentage of your refund, run away. This is a violation of IRS rules.

Get a Free Credit Report

All the big reporting companies – Equifax, Experian, and TransUnion – offer a free report one time every 12 months. So why not find out? When you see the truth of your credit report, it can motivate you to change some habits, like paying earlier, more often, and on time. No one likes late fees.

Save on a Gym Membership

In January, you probably got pummeled with lots of solicitations for a gym membership at low, low prices, but in February, the prices are even lower. If you don’t want to commit, you can sign up for a trial run. You can even negotiate a deal if you ask to speak to the manager. Finally, some gyms will offer you a deep discount if you agree to use the facilities during off-peak hours or on certain days. Flexibility is the key!

Buy Things on Deep Discount

With high prices and high-interest rates, it makes sense to check out all the price cuts on Consumer Reports. On this site, you’ll find all the good stuff: cars, home and garden supplies, appliances, electronics, and more.

These are just a few of the items you can put on your financial to-do list. All it takes is carving out some time and getting started. Once you get going, you’ll probably make more progress than you ever dreamed.

Sources

https://www.consumerreports.org/personal-finance/february-financial-to-do-list/

IRS Plans to Shake Up Leadership

IRS Leadership change 2024The top leadership in the IRS is set to change. IRS Commissioner Daniel Werfel believes the changes are needed for the agency to meet its new goals. He aims to create greater flexibility and efficiency over the agency by streamlining internal processes. The changes also are needed, in his view, to adapt to the evolving landscape around tax administration – which has undergone changes due to new tax laws and technology.

What Are the Changes?

Changes to the organizational structure include reducing the Deputy Commissioner post to a single position (there are currently two); as well as creating four new positions with an IRS chief of taxpayer services, IT, compliance, and operations.

Long Time No Changes

While these changes are set to take place in the beginning of 2024, they are the first changes to take place in a long time for agency leadership. Currently, the highest rungs of the IRS organizational structure dates to the year 2000, over 20 years ago.

The last time changes were made in 2000, the IRS reorganized operations to support taxpayer segments that were the result of the IRS Restructuring and Reorganization Act of 1998.

Single Deputy IRS Commissioner Model

The change over from two at the top to a single deputy IRS commissioner position is modeled after the way the Treasury Department is structured. Doug O’Donnell, current deputy commissioner for Services and Enforcement, will step up to the post.

The Four New Positions

Other key changes in the leadership structure are the creation of four new chief positions, overseeing the areas of taxpayer service, compliance, IT, and operations.

Ken Corbin (currently Wage and Investment Commissioner) is being promoted to Chief, Taxpayer Service. Corbin served in various roles within the IRS since starting his career in 1986 at the Atlanta Service Center. His division will handle taxpayer-centered services, including the toll-free call and taxpayer assistance centers, overseeing tax return processing centers and correspondence with taxpayers.

The Chief, Taxpayer Compliance Officer role will be filled by Heather Maloy. Maloy’s career encompasses both roles within the IRS as well as private practice. Previously, she served as the LB&I Commissioner as well as other roles, including Associate Chief Counsel to a number of IRS divisions. The Chief, Taxpayer Compliance Officer role will oversee compliance work, including operations in the Small Business, Self Employed, Tax Exempt, and Government Entities divisions. She will also be responsible for the Professional Responsibility, Return Preparer, and Whistleblower offices.

The position of Chief Information Officer will be filled by Rajiv Uppal. Uppal’s current role is as the Director of the Office of IT and Chief Information Officer for Medicare and Medicaid Services centers. The Chief IT Officer role will oversee the entire IRS IT division.

Finally, the fourth new position, that of Chief Operating Officer, will be held by Melanie Krause. Krause began working at the IRS in 2021 and currently serves as the Chief Data and analytics Officer. Prior to this, she was the Acting Deputy Commissioner for Services and Enforcement.

Conclusion

Logistically, the changes should occur on the proposed timeline as reorganization changes that do not require a budgetary appropriation amendment. In layman’s terms, the IRS isn’t looking to Congress for any more money, so Congressional approval isn’t needed. As such, the changes are all but certain to take place in early 2024. The result aims to help the organization adapt to recent tax law changes and evolving technology while simultaneously streamlining the organization and making it both more efficient and effective.

Documenting Fiduciary Accounting Practices

Fiduciary AccountingFiduciary accounting, which is also referred to as court accounting, is a way to document and report financial activity during a discrete period of time for legal entities, such as a conservatorship, estate, trust or guardianship.

It’s meant to give adequate notice to all relevant parties when it comes to every consequential financial activity impacting the administration that occurred over the accounting time frame. It shows every disbursement and receipt that is managed by the legal entity’s fiduciary. It accounts for transactions beginning with the initial funding or principal and the resulting future transactions, including income.

When it comes to the format of fiduciary accounting, along with the United States having its own unique modifications, the Uniform Principal and Income Act requires checking the governing instruments, in addition to state laws, to ensure fiduciary accounting compliance is met. However, looking at the National Standard Format, the following components in a filing are accepted by most courts:

  • Documentation of incoming and outgoing monetary sums of the legal entity’s starting principal and income produced
  • Documentation of the entity’s liabilities and assets
  • Documentation of any payment the fiduciary received
  • Legally authorized individuals hired by the fiduciary, what pay they received, and their association with the fiduciary

The primary consideration is that being part of being a fiduciary is having a legal duty to the beneficiary of the legal entity, including “the duty to account” to the beneficiary. This duty to account is oftentimes required by the governing document, the state statute, a court order, linked to court proceedings or a beneficiary requesting an accounting. If this duty is breached, the fiduciary may be liable.

The accounting should ensure a reporting of every asset in the legal entity. During the first year, the beginning balance will list the assets that fund the account. For successive accountings, the starting balance and the ending asset values on the preceding accounting should be the same. Along with the assets in the custody of the legal entity being documented, any asset that has been withdrawn, paid out, or moved must also be documented. Income received from the entity’s investments is to be measured against the principal and income investment schedules to ensure that all income, dividends, and interest have been received and reported correctly.  

Reasons Why an Accounting is Done

Some of the more straightforward reasons a fiduciary accounting is done is to ensure the fiduciary is compliant. There’s also greater efficiency when doing this annually versus more infrequent intervals since mistakes can be identified and corrected sooner. The same accounting results can also be used for the entity’s tax filings.

Other reasons concern the fiduciary and beneficiaries. The beneficiary can review and challenge the accounting if there’s impropriety suspected. When the fiduciary has completed their responsibilities for the beneficiaries and entity, liability for the fiduciary may cease to exist, even if the beneficiaries decline to execute a receipt, release, and refunding agreement (or similar document). If an approved accounting is necessary to be submitted with a court, the above four documents may be considered an acceptable substitution in place of an accounting.

Regardless of the type of legal entity that requires this type of fiduciary accounting, a fiduciary that is diligent and works with an accounting and legal professional can reduce the chances of exposing themself and their supervising entities from unnecessary exposure.

Defining Materiality in Accounting

Materiality in AccountingIn the world of accounting and auditing, there is a concept called materiality. The term materiality essentially means an amount that, if erroneously omitted or included, impacts the financials of a company to the point where they don’t tell the truth. One very basic example would be if a $1 million revenue small business made a mistake recording their accounts payable, and as a result, the business has $100,000 of expenses missing from their results. This would be material. If the same exact mistake happened in a multi-billion multinational company, it would not.

When it comes to materiality in accounting, there are many nuances that need to be considered when evaluating and determining what’s material and what’s not. One way to look at materiality from an accountant’s perspective is to determine how much a particular transaction (such as a purchase) or event (such as a lawsuit) will have on a company’s financial performance. Whether it’s an omission or a mistake in calculating and reporting such an event, the way an accountant evaluates and decides how to proceed with reporting the information (or not) can make a big difference in whether or not such information is material or immaterial.

Another way to look at whether information is material or immaterial is to determine if omitting (or through an accounting mistake) such information would mislead or change a person’s actions regarding the company (investing in, providing a loan to the company, etc.). If omitting the information would influence an outside party’s decision, it would be material. If including the mistake would not change an outside party’s decision regarding the company, it would be immaterial.

One consideration is the benchmark a company uses to determine if a transaction or event would trigger a materiality classification. For example, net profit, operating income, total assets/shareholder’s equity, gross profit, or gross revenue are commonly used. However, it’s important to keep in mind that operating income might not be the best metric if the business loses money, breaks even, or is modestly profitable.

When it comes to looking at net income and a loss, what matters is how big of a percentage the loss represents against the net income. If there’s a $10,000 loss of inventory (for example, due to a termite infestation of a special type of wood) at a furniture manufacturer that has annual sales of $100 million, it would be immaterial and not necessary to report it on the income statement. However, if this occurred at a start-up furniture factory with a net income of $50,000, it would be a 20 percent loss and would certainly make a material impact to investors, lenders, etc.

Documenting Decisions

The next step is for accountants to document their judgments and the reasons why they made each type of documentation. It’s a way for the internal financial managers or the auditor to determine what was done and why. One example looks at whether or not to depreciate or expense an item – for which the materiality depends on the item’s cost.

If an office desk costs $125, depreciating the office desk seems impractical and would likely be classified as a business expense during a company’s tax year. However, depending on the size of a business’ net income, a start-up may consider it material, but an established, publicly traded consumer staple corporation buying the same item would likely consider it immaterial.

Determining (im)materiality is often a judgment call by the financial experts within a company and the auditors who evaluate companies’ financial statements. With a consistent approach, businesses can make measured decisions for their internal and external audiences.

Relaxing Small Business Accountability and Supporting Veteran Homelessness and Substance Abuse Disorders

SJ Res 32, HR 3581, HR 3848, HR 4531A joint resolution providing for Congressional disapproval under Chapter 8 of Title 5, United States Code, of the rule submitted by the Bureau of Consumer Financial Protection relating to Small Business Lending Under the Equal Credit Opportunity Act (SJ Res 32) – This resolution was introduced on June 13 by Sen. John Kennedy (R-LA). It nullifies a rule issued by the Consumer Financial Protection Bureau (CFPB) that requires financial institutions to collect and report credit application data for small businesses to the CFPB. The bill passed in the House and the Senate on Dec. 1, but President Biden has threatened to veto the resolution because he believes it would reduce transparency and accountability in small business lending.

Caregiver Outreach and Program Enhancement (COPE) Act (HR 3581) – This bill supports various Veterans Administration initiatives: 1. Authorizes funding for the implementation, coordination, and enhancement of mental health counseling and treatment for participants (family caregivers of veterans) in the VA family caregiver program; 2. Authorizes the VA to contribute to local authorities to mitigate flooding risks on properties adjacent to VA medical facilities; 3. Requires an annual survey of police chiefs, facility emergency management leaders, facility directors, etc., for data regarding VA facility security; 4. Extends certain VA home loan fee rates through March 12, 2032. The legislation was introduced by Rep. Jennifer Kiggans (R-VA) on May 22. It passed in the House on Dec. 4 and is now in the Senate for review.

Housing our Military Veterans Effectively Act of 2023 (HR 3848) – This Act is designed to address issues related to homeless veterans. It increases the maximum per diem payments to authorized entities that provide transitional housing and services to homeless veterans. It also authorizes a maximum of 200 percent of the rate for veterans who live in rural areas, areas with high veteran suicide rates, and high rates of veteran homelessness. Furthermore, the bill authorizes the VA, through fiscal year 2024, to use certain funds to provide additional assistance to homeless veterans participating in the HUD-VA Supportive Housing program and to manage the use of VA land for homeless veterans to live and sleep. The legislation was introduced on June 6 by Rep. Lori Chavez-DeRemer (R-OR) and passed in the House on Dec. 5. Its fate currently rests with the Senate.

Support for Patients and Communities Reauthorization Act (HR 4531) – This bipartisan legislation reauthorizes (through the fiscal year 2028) grants, programs, and activities that address substance use. The provisions address data collection, education, and surveillance activities; support for substance use disorder (SUD) prevention, treatment, recovery, and trauma experienced by families of SUD patients; and student loan repayment and other resources for the SUD workforce. The legislation also modifies certain drug schedules of controlled substances and permanently requires that Medicaid cover medication-assisted treatment for eligible SUD patients. This bill was introduced by Rep. Brett Guthrie (R-KY) on July 11 and is co-sponsored by 37 Republicans and 27 Democrats. It passed in the House on Dec. 12 and is currently under consideration in the Senate.

Technology Trends for Businesses to Watch in 2024

Artificial Intelligence (AI) AdvancementsThe unrelenting advancement of technology is still going strong even as we enter 2024. The business landscape is poised for transformative changes, driven by ongoing developments that demand organizations to be innovative and adaptive. Below, we explore some key technology trends that businesses should keenly observe to remain competitive.

1. Artificial Intelligence (AI) Advancements: Unlocking New Possibilities

The year 2023 witnessed widespread adoption of generative AI in various applications, from design tools to search engines and office software. This transformative shift changed the way businesses interact with technology.

Continued integration of AI is expected to redefine automation, decision-making processes, and customer experiences. Evolving AI algorithms, especially in natural language processing and computer vision, will play a pivotal role. From enhancing customer service interactions to optimizing supply chains and enabling predictive maintenance in various industries, the transformative impact of generative AI will become increasingly evident.

Tech investments geared toward meeting changing priorities will be a hallmark of 2024. More businesses are anticipated to harness AI-driven automation, particularly using Generative Pre-trained Transformers (GPTs), further streamlining operations and enhancing efficiency.

2. Cybersecurity Innovations: Staying Ahead of Evolving Threats

As cyber threats continue to evolve, businesses should anticipate increased data breaches. In response to sophisticated cyber threats, cybersecurity innovations are set to take center stage in 2024. Advanced solutions leveraging AI-driven threat detection and response mechanisms will become more prevalent. The industry will witness an intensified focus on zero-trust security frameworks, heightening data protection measures. Cyber-resilience will be paramount, necessitating proactive measures to safeguard digital assets and ensure business continuity.

3. 5G Technology Implementation: Revolutionizing Connectivity

The widespread adoption of 5G networks will redefine connectivity standards in 2024. Businesses will benefit from faster and more reliable network speeds, unlocking opportunities for innovative applications and services. The increased bandwidth and reduced latency offered by 5G will enable businesses to explore new frontiers in communication, collaboration, and data transfer.

4. Edge Computing Expansion: Real-time Data Processing Redefined

Edge computing will gain even more prominence in 2024, playing a pivotal role in real-time data processing and latency reduction. Its integration with Internet of Things (IoT) devices will enable businesses to conduct faster and more efficient data analysis at the source, paving the way for enhanced decision-making and operational efficiency.

5. Blockchain Beyond Cryptocurrency: Transforming Business Processes

Blockchain technology, often associated with cryptocurrencies, will find increased adoption in 2024 for purposes beyond financial transactions. Businesses will utilize blockchain for secure and transparent supply chain management, the execution of smart contracts, and the development of decentralized applications. Integration into traditional business processes will enhance security and operational efficiency.

6. Extended Reality (XR) Integration: Shaping Immersive Experiences

Augmented reality (AR) and virtual reality (VR) will expand across industries in 2024. These technologies will play integral roles in training, healthcare, retail, and more. Improved XR technologies will deliver more immersive and realistic user experiences, unlocking new possibilities for customer engagement and employee training.

7. Sustainable Technology Solutions: Embracing Environmental Responsibility

A growing emphasis on environmentally friendly technology will be a defining feature of 2024. Businesses will increasingly adopt energy-efficient data centers and integrate sustainable practices into product development. This shift toward green technologies is driven by environmental consciousness and the potential for cost savings and corporate social responsibility.

8. Quantum Computing Developments: Unlocking New Frontiers

Quantum computing will continue to make strides in 2024, with ongoing research potentially leading to practical applications in certain industries. Businesses, particularly early adopters like financial services organizations, will leverage quantum computing to tackle complex problems beyond classical computers’ capabilities, such as fraud detection and optimization challenges.

9. Robotic Process Automation (RPA) Evolution: Intelligent and Adaptive Automation

Robotic Process Automation (RPA) capabilities will witness enhancements in 2024. RPA will not only automate routine tasks and processes but will also integrate more seamlessly with AI, providing more intelligent and adaptive automation solutions. This evolution will contribute to increased efficiency and productivity in business operations.

10. Voice and Conversational Interfaces: Transforming User Experiences

The popularity of voice-activated technologies and conversational interfaces will continue to grow in 2024. These technologies will find applications in customer service and various business operations, enhancing user experiences. Integrating voice assistants into diverse applications will further streamline interactions and improve overall usability.

Conclusion

The technological landscape in 2024 promises unprecedented advancements, challenging businesses to stay abreast of these trends for continued growth and innovation. Staying agile and embracing these technological shifts will be crucial for businesses looking to thrive in an ever-evolving digital era.

Considerations For Paying Off a Mortgage Early

Paying Off a Mortgage EarlyFor many, buying a home is the biggest asset they will ever own. However, you aren’t able to fully benefit from that asset until you pay off the mortgage; until then, it is technically a liability. The most common length of a mortgage loan is 30 years, but most people either sell their home, refinance their mortgage – or even pay it off before the end of that term.

What are the pros and cons of paying off a mortgage early? Obviously, you no longer have to make monthly payments, so money can be directed elsewhere. It is advisable to pay off your mortgage before you retire when most people live on a lower, fixed income. By having the mortgage paid off, that money can be redirected to other household expenses and/or provide higher discretionary income.

It should be noted that paying off your mortgage doesn’t provide relief from other routine, high-ticket home expenses such as property taxes, homeowners’ insurance, or regular maintenance. However, owning your home outright means it can’t be foreclosed on and taken from you. It also provides a large financial asset from which you can tap the equity or sell for a windfall.

While paying off your mortgage can provide security and peace of mind, you should consider all the factors before going down this path. For example, you may not have enough discretionary income to devote to making extra payments to your mortgage loan principal.

Usually, in the first 10 to 20 years of homeownership, buyers are juggling a multitude of financial obligations – raising a family, building an emergency fund, saving for college, taking annual vacations, and investing for retirement. That doesn’t always leave a lot of money left over for your mortgage.

There are, however, different strategies you can use to pay off a mortgage early:

  • Pay an extra amount toward your principal along with your regular payment every month.
  • Pay an extra amount each year, such as from a work bonus or other annual windfall.
  • If you continue working after retirement age, you may want to allocate the required minimum distributions (RMDs) from a retirement account toward your mortgage.
  • Make large payments each year from an inherited IRA transferred from a deceased parent’s retirement account. Non-spouse heirs generally have 10 years to use up these funds. By withdrawing only a portion of the funds each year, the inherited IRA may continue to grow over the full 10-year period.
  • Pay off fully or a significant portion of the mortgage using other inherited funds from a deceased parent.

Not only does paying off the mortgage early shorten the life of the loan, but it also can save you tens of thousands of dollars in interest payments.

For some people, paying off a mortgage early may not be their best strategy. After all, if they have locked in a low, fixed interest rate on the loan for the entire term, their excess income may be better deployed to an investment portfolio. Over a 15-, 20- or 30-year period, regular contributions to an investment portfolio can earn even more than the equity built up in a home.

If you’re locked into a high-interest-rate mortgage, you may want to consider refinancing when rates are adjusted downward. This can help you allocate more money toward your principal. However, don’t be quick to refinance to a lower rate if you already have a low rate, as mortgages are structured to pay a higher percentage of interest on the front end of the loan. When possible, it’s best to refinance or pay extra principal in the early years of the loan rather than the later years – because refinancing could cause you to pay more interest in another front-loaded loan for another long term. Also, be aware that some mortgages have an early payoff penalty, generally during the early years of a refinance, so check before you pay it off early.

Another consideration is that mortgage interest is tax deductible, which may be a key tax saver for those in a high tax bracket.

It’s a good idea to pay off any high-interest debt you may owe, such as credit cards, auto, or student loans, before paying down your mortgage early. These debts may be costing you more money than you can save by paying off a low-interest mortgage. Once you’re debt-free, you can redeploy those payments toward your mortgage principal.

The decision to pay off a mortgage early depends on your situation and your priorities. Specifically, if you still need to build an emergency reserve fund, catch up on retirement savings, or pay down high-interest debt, you might be better off allocating money elsewhere. By the same token, if the investment markets are enjoying an upward trend and you have a low-interest mortgage, you may want to just let your money “ride” in the market so you have more available later – perhaps then you can pay off your mortgage before you retire.

How a No-Spend January Can Kickstart Your New Year

No-Spend January, how to save after the holidaysHere we go again. The new year is approaching, and those resolutions are staring us in the face – and the most common? Saving money. In fact, according to YouGov, this is the most important resolution for American adults. Now, certainly, you can’t not spend money in January (you have to eat), but the idea is to rid yourself of any unnecessary cash outflow so you can kickstart the year with some solid financial habits.

Limit Trips to the Store

Of course, you’ll need food, toiletries, and general household staples, but here’s your chance to step back and make lists, as opposed to running out to Target or Starbucks for a quick adrenaline rush. Plan your trips out. Buy store brands. Check prices. Use those coupons. Set your sights on the long view of the month, if not the year. This is one way to work toward getting fiscally fit.

Eat Everything in Your Pantry

You probably have cans of soup and pasta sitting on your shelves. Maybe even some canned veggies. Google some simple recipes with the items you have, add some spices, and voila, you’ve got a tasty, no-spend meal. Nothing like this can lead to long-term savings.

Forgo Eating Out

Once more, this tip is related to the first two. Truth is, you’ll want to go out to eat a few times – so go – but within reason. The trick is to find affordable spots with delicious grub. Another money-saving idea: split your entrees. You’ll not only save dollars but also calories.

Reevaluate Your Subscriptions

This is something that might creep up on you during the year. While you’ve been scrolling these past months, you might have seen an irresistible product, and you just had to have it – whether it was special vitamins, a hip magazine, or yet another streaming station with all those binge-worthy shows you can’t stop watching. But you might ask yourself: are these expenditures really improving my life? Once you see how much money you’ll be saving, you’ll most likely feel better (new and improved!) already.

Invest the Money You’re Saving

Now that you’ve cut back, you should have a surplus of cash accumulated over the year. So, what to do? One of the best things to do is tuck it away in a high-yield savings account. Just like with regular (traditional) savings accounts, you can withdraw when you want to. But with a high yield, you’ll most likely have a limit to how often you can take money out, which is usually six times per month without a fee. The main difference between a traditional and high-yield savings account is the interest rate. The current national average interest rate for a traditional savings account is 0.64 percent APY. Comparatively, top high-yield savings accounts pay between 4.25 percent and 5.27 percent. You in? Thought so.

Moral of the story? No-spend January is all about starting some new habits for 2024 – and watching them pay off. This way, during the new year, you’re not just working for your money, but allowing your money to work for you.

 

Sources

https://www.cbsnews.com/news/how-no-spend-january-can-kickstart-solid-financial-habits-for-2024/

 

Wage Garnishment Considerations for Business Owners

Wage GarnishmentAccording to the United States Department of Labor’s Consumer Credit Protection Act (CCPA), wage garnishments are a complex legal process for employers to account for when it comes to employment matters. This article specifically refers to Title III of the Consumer Credit Protection Act. 

Usually authorized through a court order, a wage garnishment directs an employer to withhold or garnish an employee’s wages for a certain amount or percentage to satisfy an outstanding debt. Wage garnishments also can be implemented for delinquent tax obligations and other debts owed to federal agencies of the U.S. federal government, as well as for state-level tax collectors. 

Another consideration for Title III is that for a single debt, employees may not be fired; but if an employee’s earnings are garnished for two or more distinct debts, an employer has the discretion to involuntarily separate an employee from its business. This law also permits varying amounts and percentages of an employee’s “disposable earnings” that may be withheld.

The first step is determining how earnings are defined in the course of deciding the final wage garnishment calculation. Examples include but are not limited to retirement and pension payments to the employee, hourly wages, yearly salaries, commissions, bonuses, along with profit sharing, etc.

When it comes to lump-sum payments, the CCPA requires counting earnings that are for personal services but not including non-personal service-related lump-sum payment compensation as the first step when calculating the final wage garnishment. 

Defining Disposable Earnings

The final amount able to be garnished is determined by the employee’s disposable earnings. This is defined as the earnings remaining once legally mandated deductions are factored into an employee’s earnings. Example deductions include local, federal, and state taxes, along with withholdings for unemployment, Medicare, and Social Security taxes. Voluntary deductions, such as health premiums, voluntary retirement plan contributions, etc., are not factored into the disposable earnings calculation.

When it comes to regular garnishment guidelines, which include non-support, bankruptcy, or tax-based requests, for both state and federal taxes, the maximum weekly amount is the smaller amount of either one-fourth of the worker’s disposable earnings or how much the worker’s disposable earnings exceed 30 times the U.S. minimum wage of $7.25 per hour x 30 hours = $217.50 (as of June 2023).

Looking at a weekly view, if disposable earnings are $217.50 or less, no garnishment can occur. If disposable earnings between $217.50 and up to $290 are considered, only $72.50 may be garnished, depending on how much the outstanding debt is in total. If the worker’s disposable earnings exceed $290 for a weekly pay period, up to one-fourth of the pay period’s disposable earnings can be considered to be garnished. It’s important to note that some bankruptcy court orders, state/federal tax debts, and court orders for child support and/or alimony are not necessarily subject to the garnishment ceilings discussed above.

While this information is not comprehensive for employers, it’s important to understand all the federal, state and local regulations to ensure compliance is achieved to reduce the chances for adherence complications.