Archive | February, 2014

FREE BEER!!!! [Quarter Life Crisis Guest Post]

28 Feb

By John W. Haag, Sr., CPA/ABV, CVA, CFF
Principal, Yeo & Yeo CPAs

I learned many years ago that if an article has the word “tax” in the title, it will not be read. Please excuse my desperate attempt to draw more attention to this blog — did it work?

If I asked you for $100, what would you say? You would probably want to know why. You would want to know what I am going to use it for, will you get it back, how did I determine $100 was the amount I needed, and do I really need $100 or would a smaller amount do. Yet every day that you earn money, you give a little of it away in taxes. The truth is, most people do not ask what it is being used for, how it is calculated, or how much they will get back.

As a CPA, I meet with young professionals all the time who are starting their careers and going through transitions (jobs, moving, buying houses, getting married, starting families). A common comment that I hear is, “I have never paid much attention to taxes, but figured it was about time to start having a professional prepare them.” And do not feel bad, I still hear a few “Actually, my mom still does my taxes for me.” If that is you, then I have prepared a list of some of the most important things that young professionals should know about taxes.Keep in mind that each individual’s tax situation is different and that many of the items discussed below have income limitations, referred to as phaseouts. In other words, once your income reaches a certain level, some of these credits and deductions go away.

Getting Smart
Chances are you may still be paying some higher education expenses. If that is the case, two federal tax credits may help lessen your tax bill: the Hope Scholarship Credit (American Opportunity Tax Credit) and the Lifetime Learning Credit.
The Hope Scholarship Credit is worth a maximum of $2,500 for 2013. The credit is available for the first four years of undergraduate education and can be used to cover the cost of course materials. In addition, 40% of the credit is refundable, which could enable lower-income taxpayers to get money back from the IRS. The Lifetime Learning Credit, which applies to undergraduate study, as well as graduate and professional education pursuits, could be worth up to $2,000.There is also an above-the-line deduction for tuition and fees if you are not eligible for any of the credits, which can reduce the amount of your taxable income by up to $4,000.
Up to $2,500 of interest paid on student loans may be deducted. Since this is an “above-the-line” deduction, even non-itemizing taxpayers benefit. The loans may be used for qualified higher education expenses, such as tuition, fees, room and board, and books.
Question: $1,000 deduction vs. $1,000 credit…which is better? A deduction decreases your taxable income. So if your tax rate is 15%, a $1,000 deduction would be worth $150 in your pocket. A credit decreases your actual tax “dollar for dollar.” So a $1,000 credit is worth $1,000 in your pocket. Credits win!

Moving On Up
Prior to owning a home, most young professionals take advantage of the standard deduction and do not itemize deductions. Signing for that mortgage changes this, as you may now be able to deduct property taxes, mortgage interest, points, and in some cases private mortgage insurance. This often allows young professionals the opportunity to begin itemizing deductions. In other words, they can now deduct charitable contributions (cash and non-cash), license plate fees, state income taxes, charitable mileage, etc. In today’s world, many young professionals find themselves moving to find work. Moving expenses related to work, subject to a distance and time test, can be deducted on your tax return, provided that they are not reimbursed or paid for by your employer.

marriage

Tying the Knot
Once the champagne is gone and you return from the Bahamas with your golden tans, tax time rolls around and you realize that doing your taxes is a bit different. You are no longer a single tax filer, but rather qualify to file married filing jointly. Income and deductions from both you and your spouse are combined on one tax return. I am often asked, “Can we still file separately?” The answer is yes; however, in the majority of circumstances, this will result in you both collectively owing more tax. A common issue is that in the year of marriage, one spouse has been earning a W-2 wage and having an appropriate amount of taxes withheld, whereas the other spouse has been earning a W-2 wage but claiming a large number of exemptions and has very little withholding. The first spouse thinks that he or she will get a large refund, and the other is used to paying in all the time. And therein lies your first argument. To avoid this, it is a good idea to have a discussion with a CPA together, prior to marriage, to get your financial house in good order and make sure everyone is on the same page.

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Populating the Earth
Although deducting baby formula and diapers are out of the question, there are some tax benefits for your little one. The child tax credit is available for parents with children under the age of 17, and is equal to $1,000 per child, subject to a phaseout once income gets too high. In addition, you will be able to claim a dependent exemption of $3,900 on your federal return and $3,950 on your state return. Assuming a 20% effective tax rate and 4.25% state tax rate, little Bobby or Suzie could be worth almost $1,950 a year in tax savings. That should cover a month’s supply of diapers, right?
If your company offers a Flexible Spending Account (FSA), do not pass up the opportunity to take advantage. Use this to cover co-pays, prescription drugs, or even those well baby checkups. You can elect to contribute up to $2,500 a year to an FSA, which saves not only federal and state income taxes, but also social security and Medicare taxes. A young professional could easily save $700 or more by participating.

Investments

Retirement Planning
Deductions and tax credits are a great thing; however, you do not want to forget about deferrals. This is where you defer taxes on your income, which is primarily done through investing in qualified retirement plans. Retirement vehicles such as 401(k)s and Traditional IRAs defer taxes and allow your money to be invested and grow, with taxes not being due until you actually use the money in retirement. Young professionals these days need to adopt a retirement saving strategy early in their careers and stick with it. Many times I see young professionals drawing from their retirement accounts — and paying penalties and taxes — to fund living expenses. This should absolutely be a last resort. Get in the habit of contributing to a retirement plan and let it grow. As your income increases, so too should your contributions. For example, if you get a 3% raise, increase your retirement contributions by 1%. The days of relying on pensions and social security have passed; young professionals must develop their own retirement savings plans.

Where to Now? My Thoughts
Although this blog is about taxes, I would like to expand it to include all aspects of a young professional’s personal and financial life. Young professionals are faced with a lot of changes when they enter the “real world.” They should not hesitateto seek advice from other young professionals early on in their careers. Develop relationships with an attorney, a mortgage lender, an insurance agent, a financial advisor, a CPA, a real estate agent, a primary care physician, an auto salesperson, etc. By utilizing a young professional for these types of services, you can develop a long-term relationship and grow together as they are learning their craft too. The most successful relationships that I see in my line of work are those that began many years ago and developed over time. Begin developing your professional relationships today. And regarding the Free Beer, if you ever want to talk taxes, let me know and I will buy you a beer.

Haag, JohnJohn W. Haag, Sr., CPA/ABV, CVA, CFF, is a Principal in charge of the Management Advisory Services group of the Midland office of Yeo & Yeo CPAs and Business Consultants. He is a co-leader of the firm’s Valuation & Litigation Support team. John has specialization in business valuations, litigation support, business plans and start-ups, troubled debt restructuring, mergers and acquisitions, and management studies. He is a Certified Valuation Analyst and holds the designation of Certified in Financial Forensics from the American Institute of Certified Public Accountants.

Contact John via e-mail at johhaa@yeoandyeo.com or call 800.701.3574.

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Behind the Scenes: Selecting Scholarship Recipients [Guest Post]

20 Feb

By Ben Tierney

Director of Communications, Midland Area Community Foundation

As a high school senior, I was the recipient of what I’m convinced is the most specific scholarship on our planet. It’s called the USS Indianapolis Survivor’s Fund Scholarship. To be eligible, you must be “a direct descendant of a survivor of the sinking of the USS Indianapolis”, per the scholarship website.

How rare is it to be a descendant of a survivor? For those non-WWII history buffs, the Indy (as my grandfather refers to her) was a heavy cruiser that was torpedoed and sunk by a Japanese submarine while on her way back from delivering the world’s first operational atomic bomb. Of nearly 2,000 men on board, 317 ultimately survived – after treading water and fending shark attacks for four days in the Pacific Ocean. It remains the single worst loss of life at sea in the history of the US Navy. My grandfather was a Marine on board the ship when it sunk. Incredibly, he was one of the 317.

While writing that scholarship essay to the Grand Traverse Regional Community Foundation, I remember thinking that I could have drawn them a picture of the boat in crayon and still received the award, because, honestly, how much competition could there be?

As it turned out, several other students did apply, and a group of volunteers reviewed every scholarship application to ultimately determine a winner. Looking back, I’m glad I took it seriously. I think my Grandfather was too (“I didn’t jump off a sinking ship and fight sharks for four days so you could throw your future away…”). By the way, the USS Indianapolis Survivor’s Fund Scholarship now accepts applications from descendants of non-survivors, which I believe was a positive change.

While that particular scholarship is held at the Grand Traverse foundation, the Midland Area Community Foundation holds nearly 200 individual scholarship funds. Some are very specific (though not quite “descendant of USS Indy Survivor” specific), others are very general. They all, however, have one thing in common: they need committees to review the scholarship applications.

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Midland Area Community Foundation 2013 scholarship recipients

How it works

Scholarship review committees are made up of community volunteers. That’s you. Here’s how it works: you contact the community foundation at 989.839.9661, ask for our scholarship coordinator (Heather), and let her know you’d like to help decide who receives scholarships in 2014. The time commitment can be small (review 4-5 applications) or large (review 80-100 applications) or pretty much anything in between. That part’s up to you.

You’ll read short essays from high school seniors, current college students and adults seeking to further their education. You then work with your committee to vote on which students are most deserving of the award. It’s an incredibly rewarding experience, you’ll meet new people, and you’ll be doing a great service to youth in your community.

If you have ever received a scholarship for college, you remember the feeling that went along with it. It’s an outstanding opportunity, and thanks to many donors over the past 40 years, the community foundation has been able to give more and more scholarships each year to Midland County students – totaling well over $4 million to date.

Contact the community foundation no later than March 17th to sign up. Feel free to click on my email address below and ask me anything you’d like about this or other volunteer opportunities through the Midland Area Community Foundation. Happy volunteering!

Tierny, BenBen Tierney is the Director of Communications for the Midland Area Community Foundation. His job is to tell the story of the community foundation to the public, keep donors informed, and take pictures of people holding those giant checks. Ben earned his BBA in Marketing/Management from Northwood University in 2008. He is a 2013 graduate of Leadership Midland and serves on several local committees including the Midland Area Marketing Partnership, mi-Vibe, Midland’s Open Door “Dine on the Doors” event, Riverdays and the Inter-agency Network. You can contact Ben at btierney@midlandfdn.org.

Welcome to Your “Quarter Life Crisis”

18 Feb

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So, this year on October 1st I turn the BIG 3-0! Yikes! I have never really been someone that puts much thought into age, nor have I ever thought, that I have ever acted my age (Blink-182’s  “What’s My Age Again?” song comes to mind as I typed that). But for some reason the thought the turning 30 actually kind of scares me. As many of you, I was rushing to turn 21 because that’s when the real fun started, right? And I must say that my 20’s really have been full of fun and lessons. But wow, is life different now in my 29th year of life than it was when I first turned 20. In the past decade I have graduated from college, moved to Virginia, Mississippi, Traverse City and Midland. I have gotten married, had several jobs, adopted a cat & dog (or two), bought a house, learned about the joys of home ownership and have found my dream job! Yes, really I love my job, and no I am not just typing that because I know my boss will be reading this article :).

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Now that I am barreling towards my 30’s I know life still has many more surprises, challenges, excitement and decisions ahead; and that I am going to need to call upon those around me to help me out from time to time. One of the best things about working at the Chamber, or as a member attending Chamber events, is that you get to know a plethora of people in a variety of vocations. So when I have a question about something, or need help, I usually know someone that I can call upon personally to help me out. Now I know that not everyone has the luxury of getting out of the office as much as they would like to attend events and meet new people. So that is why the MYPros Communication Committee has come up with a new featured segment we endearingly call “Quarter Life Crisis.” As we have our meetings each month we have come to realize that our age group is at a pivotal point in our lives, and that this is probably a point in many of our lives when there are more things changing and happening than ever! We are getting married, paying off student loans, buying cars & houses, paying property taxes for the first time, starting families, thinking about our children’s future and how to pay for their college and so much more! So with the help of our fellow Chamber member young professionals we will have advice relevant to young professionals from attorneys, accountants, realtors, lenders, insurance agents, financial advisors and more. We will also be sharing some of our own personal stories as we learn all about becoming an adult. I am still not sure I am ready to be an “adult;” I just don’t feel it’s for me! Anyway, I hope that you find this new segment informative, enjoyable and entertaining. Stay tuned for next week, we will have some great tax advice for YP’s just in time for tax season!

If there’s anything you would like to see featured in our “Quarter Life Crisis” segment, comment below and we will do our best to get questions answered and information out that is relevant to you and other YP’s.

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Event Recap: Ribbit, Rhythms and Red Shoes

17 Feb

Even though I’ve lived in Midland all my life, the Midland Center for the Arts keeps coming up with ways to surprise me. The MYPros event on February 8, “Ribbit, Rhythms and Red Shoes,” brought together the Center’s museum exhibits and symphony orchestra in an event that drew over 30 people, including several new faces (hi, new folks! Thanks for being there!). Here are what I found to be the three best parts of the event.

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One of the killer-but-not-really frogs. (Photo courtesy Midland Center for the Arts)

1)   We got cultured. People who aren’t very familiar with Midland sometimes say there aren’t any cultural opportunities here. To which I’d reply: In a couple hours, we saw frogs from around the world, we saw the work of local artists who have been recognized nationally, and we saw the symphony play music spanning almost a century. Then we all got in our cars and drove five to ten minutes and were home. It’s hard to beat that.

2)   We learned a few things. I didn’t realize there were frogs the size of my thumb that were poisonous enough to kill me (and though I subsequently learned the frogs at the exhibit aren’t as venomous as their wild cousins, I still whimpered). I didn’t know Shostakovich, one of the composers on the symphony program, slept with a packed suitcase under his bed in case the KGB came for him during the night (Stalin didn’t like him much). I wasn’t planning to engage my brain this particular evening, but it happened in spite of my best efforts.

And perhaps most importantly…

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The Midland Symphony Orchestra in action. (Photo courtesy Midland Center for the Arts)

3)   We were all there together. Going to any concert, let alone a classical concert, is intimidating when you’re by yourself. The best part of MYPros is having a reason to go to the places you want to visit. I heard several comments from people who “kept meaning to check out the symphony” but, let’s face it, didn’t want to go alone.

So if you want a reason to discover some of the hidden gems of Midland, then keep watching this page for events and updates. And if you were there on February 8, comment below and let us know what you thought!

Volunteering Can Actually Be Fun. Seriously. [Guest Post]

13 Feb

By Melissa Eigner

Corporate Volunteer Manager, The Dow Chemical Company
The United Way of Midland County

I’m not sure about you, but for me volunteering was something I was forced to do when I was growing up. My parents made me volunteer in the nursery at church, my high school made me volunteer to be in NHS, etc. I never really enjoyed it – it was just another thing that I HAD to do. (And no one likes doing something they HAVE to do, right?) It wasn’t until I accepted my current position as The Dow Chemical Corporate Volunteer Manager three years ago that I saw how awesome (and fun!) volunteering actually is.

Volunteering locally is a great way to get involved in your community and meet fun people!

Volunteering locally is a great way to get involved in your community and meet fun people!

So why volunteer? You probably already have hundreds of other things on your plate right now, why the heck add volunteering to it? Lucky for you, I’ve got all the answers right here.

  1. Meet New Friends – I ALWAYS hear people say, “Midland is boring. Where can I meet NEW people?” I’ll give you a hint. Hitting up the bar three times a week is not going to help you meet new and exciting people. Volunteer! At the very least you’ll meet new people who are good Samaritans like yourself! (Side note: Volunteering does, in fact, make you a good Samaritan)
  2.  Develop Job Skills & Explore Other Interests– No matter how fantastic your current job is, I’m pretty sure there are skills you are not using that you’d like to. Volunteering helps you sharpen these skills. And you might even have skills you don’t know about yet! (Maybe I’m a great painter… I just don’t know it yet!) (Doubt it)
  3.  Make a Difference – I mean, this is the obvious reason, but it’s still important to highlight. Not only will you accomplish bullets 1 & 2, but believe it or not, YOU can actually make a HUGE difference.

So how can you get involved? It’s got to be a super extensive, hard process, involving lots of paperwork, right?

WRONG!

Visit GOvolunteerNOW.org. Seriously. That’s it. That ONE website has TONS of volunteer opportunities nonprofits need filled. They post both ongoing volunteer opportunities and quick, onetime volunteer opportunities. If you see something that interests you you can sign up right on the site. You can also see a list of local nonprofit organizations by visiting www.macc.org/NonProfits.

So what are you waiting for? Go make some new friends, develop your skills and make a difference! (But only if you want to. This is not me forcing you to volunteer.)

Melissa Eigner

Melissa Eigner currently works for the United Way of Midland County as the Dow Chemical Corporate Volunteer Manager. In this position Melissa acts as a liaison between the United Way of Midland, Bay and Saginaw County and The Dow Chemical Company. Melissa received her Bachelor of Arts in Communications and Public Relations from Michigan State University in 2009 and is a graduate of both Leadership Bay County Class of 2011 and Leadership Midland Class of 2012. Melissa has an extensive volunteer background including projects with Habitat for Humanity, The National Junior Disability Championships, The Qualifier Marathon and The Alpha Race. Melissa currently lives in Midland with her goldendoodle, Torrey.

Eigner@dow.com
Melissa on LinkedIn
Melissa on Twitter

Things I’ve Learned from My Father

4 Feb

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I’ve been a daddy’s girl my entire life – I’m pretty sure I came out of the womb with a fondness for my father.  The other night I was looking through some old photo albums and remembering fun times my dad and I have had together.  Doing so, made me realize that the values my dad taught me, whether intended or not, have impacted who I am both personally and professionally.  Often we forget that we learn the most from those we interact with daily, like our parents and peers and those interactions often shape and influence who we become and the career paths we choose.  Below, are some of my favorite values my dad has instilled into who I am today.

1.  Stay Calm and Think It Through
Staying calm can be hard to do, but somehow my dad has mastered it.  I recall my 10-year-old self, fishing on a small boat with my dad, brother and little cousin and getting “hooked”, which resulted in a minnow slowly making its journey down my back.  I of course freaked out, which I’m pretty sure I’d still do today at 30 but my dad told me if I didn’t stop wailing around I was going to flip the entire boat over and we would face a much bigger problem.  I think that is something we can all relate to, we stress ourselves out thinking about how a problem is going to effect ourselves but we don’t stop to think about how that same problem is affecting others as well, maybe with a greater impact.   So next time a problem arises, stay calm and think it through and if it’s still really bad, then allow yourself to freak out.

2. Don’t Hesitate to Help Others
If you know my dad, most likely he’s helped you in some form or fashion.  That’s just the type of person he is, he’ll gladly help anyone without a single complaint.  He’s always encouraged me to help family, friends, coworkers, and strangers in any way possible, knowing that those sometimes “unpleasant experiences” will lead to more meaningful relationships and some of my fondest memories.  And you know what?  He was right.  There have been many instances where it would have been much easier to say “that’s not my job or problem” but by taking the time to help someone it has benefited me both personally and professionally.  So next time you’re trying to come up with an excuse of why you can’t help someone, make the time to help them out in any way you can.

3.  Find Laughter, Humor, or Joy in Every Situation
How does staining a never-ending fence on a humid 97 degree day sound?  Well right now it might sound tempting being stuck in this polar vortex, but it didn’t seem so great this past summer on day 4 of our staining spree.  But sure enough, I could count on my dad to be whistling away while covered in stain, enjoying the time spent with his favorite (and only) daughter.  We’re often surrounded with so much negativity that we forget to look for any positive aspect of the moment.  So next time you face a difficult or unpleasant situation, take the time to dig up some laughter, humor or joy – trust me, it’s worth it.

These core values that I have learned from my father have greatly impacted who I am today, both personally and professionally.  As a mother of two little boys I’m eager to see what values they’ll learn from my husband and I, but also what I’ll learn from them.  What are some of your favorite values you’ve learned from your parents?