Agranovich Accounting: October 2015 Letter

While the temperatures start to cool off from the highs of the summer, the election cycle is beginning to really heat up. Included in this month's newsletter are a few of the known tax changes for 2013. There are also articles discussing businesses' annuity billing practices, giving children allowances, and ideas to control your email spam.

Allowances: What's Happening Today?

A recent survey conducted by Harris Interactive for the American Institute of CPAs explored what parents are paying their children in the form of allowances. The survey was conducted in July 2012 using a telephone survey of 1,006 parents aged 18 or over. What were some of the key findings?
	61% of parents pay their children an allowance
	54% of parents start paying by the time their child is age 8
	48% of parents pay their children for good grades (average rate for an A? $16.60)
	89% of parents surveyed expect their children to earn their allowance with at least one hour of work per week.
	On average children spent 6.2 hours per week on chores
	Only 1% of kids save any of their allowance
	The average allowance? $65 per month ($780 per year)

Ideas for you

Opinions vary greatly regarding whether to give allowances, how much to pay, whether to require chores for payment, and whether to pay for good grades. If you are considering giving an allowance here are some ideas to consider.

	Set clear expectations. If you decide to pay an allowance make sure your children understand the rules. When will they receive it? What, if anything, must they do to receive it? What are the rules?
	Use an allowance to teach other things. Consider using the allowance to teach savings, charitable giving, and budgeting in addition to spending. Perhaps some of the allowance should be used to donate to church or a food-shelf. Have your child save for a larger ticket item like a bike or computer game. Perhaps a teen child should pay for their cell phone. Consider requiring part of the allowance be saved for college.
	Know the downside. If you require chores for pay, what happens if the work is not done? Perhaps a base allowance would work for you with bonus payments when special chores are done. Using an allowance to help understand the concept of work can be a good lesson if handled consistently. The downside to this approach is that your child may begin to think they should be paid for taking part in normal family activities.
	Use allowances as a discussion opportunity. A regular allowance gives you an opportunity to help your child learn important financial lessons. This is especially true if the allowance is used for things other than entertainment. This ongoing lesson can deeply establish an understanding for budgeting and savings and help your child create the association of work with income.

Given that schools often overlook this important topic, establishing good financial habits at an early age can pay dividends for your children during their adult years.

Preview Key 2013 Tax Figures

While official numbers for 2013 are not yet released by the Internal Revenue Service (IRS), many figures are formulas set within the Internal Revenue Code (IRC) or are based on the Consumer Price Index (CPI) published by the Department of Labor. Using the release of CPI figures in late August, a number of reference resources are projecting key figures for 2013. They are noted here for your planning purposes:

Tax Brackets: While the actual tax brackets are not set for 2013, the rate of inflation that impacts the income levels for each tax rate is anticipated to go up 2.5%. Please recall that if Congress does not act, the 10% income tax bracket becomes 15% and the top income tax bracket moves from 35% to 39.6%.

Personal Exemption: $3,900 in 2013 ($3,800 in 2012)

Standard Deductions:
Tax Year		2013	*2012*
Single		$6,100	$5,950
Head of Household		8,950	8,700
Married filing Joint		12,200	11,900
Married filing separately		6,100	5,950
Dependents		1,000	950
65 or blind:	married	Add $1,200	Add $1,150
	single	Add $1,500	Add $1,450
Other Key figures:
Tax Year		2013	*2012*
Gift tax exclusion		$14,000	$13,000
Roth and Traditional IRA Contribution limit		5,500	5,000

Caution: Remember, significant pre-scheduled tax law changes will automatically be put in place in 2013 unless Congressional action is taken. The figures noted here are most likely not to be changed by Congressional action.

Everyone Wants a ''Tiny'' Piece of Your Income

There is an old wisdom:

Put a live frog in hot water and he'll jump out.

Put a live frog in cold water, turn the burner on and you'll have frog legs for dinner.

This wisdom is not lost on some businesses as they have learned it's easier to sell you a service once and then bill you for it automatically over a long period of time versus reselling the service to you each year. This form of billing called "annuity billing" is quickly becoming common practice for many businesses. To make matters more complicated, certain businesses look for ways to add annuities on top of annuities. So who are the biggest users of this strategy?

	cell phone companies*
	cable and satellite television companies*
	garbage haulers
	banks*
	credit monitoring services
	cloud computing services (storage; file sharing)
	any "of the month" clubs (books; music; fruit; meats)
	land-line telephone companies*
	maintenance contracts from service providers (heating; air conditioning; landscaping)
	subscriptions (newspapers and magazines)
	Other on-line services (finding/rating local supplier services, online TV viewing, sports viewing packages)

* often contain multiple annuities within a bill

Action to take now

	Create a list of your annuities. Check your telephone and cable bills and list each monthly annuity charge separately. This will show you your actual monthly cost and your annual cost of annuities.
	Note long-term contracts. Check the annuities for any exit penalties and "auto renewal" clauses. Write the auto renewal companies immediately to formally move to month-to-month after the initial contract expires.
	Review the usefulness of an annuity. Start closing down those less valuable to you.
	Move to annual billing where possible. This requires the product to be resold to you each year.
	Look for alternatives. Perhaps it is more cost effective to drop a group of premium channels in your cable package and replace them with an online viewing service like NetFlix (or vice versa).
	Eliminate overlap. Do you need a landline telephone AND a cell phone? Can you combine your wi-fi and cable services to save money?
	Eliminate autopay. This out-of-site out-of-mind technique is wonderful for the annuity billers. Paying for a service each month is a simple reminder of the cost of the service and a subtle hint to assess the value of the service to you.

The problem with annuities is they slowly carve out portions of your income for many years. Perhaps it is time to jump out of an annuity or two and save some money.

The Problem of E-mail SPAM

Understanding CAN-SPAM

Turning back the clock to 2003, many states fed up with the flood of unwanted emails started passing their own anti-spam email laws. This stimulated the Federal Government to act in an attempt to make compliance a reasonable endeavor. This was done with the passage CAN-SPAM legislation. What is in the CAN-SPAM legislation? With the passage of the Federal anti-spam law CAN-SPAM, all emails need to follow these basic rules:
	They may not use false or misleading header information. This includes, but is not limited to, the "from", "to", and "reply to" routing information. It also prohibits the use of misleading or false domain names and email addresses.
	Subject lines may not be deceptive. The subject line of the email cannot mislead you in order for you to open the email.
	Advertisements must be clearly marked. There should be no confusion that the email you are about to read is trying to sell you something.
	Email senders must tell you where they're located. This can be a street address or a valid post office box.
	You must be able to opt out of future email. The email must provide a clear way to allow you to opt-out of getting email from the sender in the future.
	Email senders must honor your opt-out request promptly. If you ask to opt-out of future emails, the email sender must honor your request within 10 business days. In addition, the email sender must keep their opt-out mechanism open for at least 30 days after sending you an email. This request also prohibits the potential spammer from forwarding your email to anyone else for future use.

What you should know

	No one may send you an unwanted email. If they do, they are legally required to honor your opt-out request.
	Exceptions to receiving unwanted emails abound. Key among them are: If you are already a customer If the email company is a non-profit If the email company follows the CAN-SPAM rules But even these suppliers must honor your opt-out requests
	Your best defense is a good spam filter. These can be provided by your internet provider who subscribe to lists of known spammers and then will automatically block these senders. You can also filter emails using your computer's email software.
	The best spam filter is multi-layered. This includes using both your internet service provider and your email software based filter.
	Look to specific identification for further filtering. Most services allow you to specifically block addresses from sending you emails and they require the sender to manually confirm sending the email to you by entering a code. Prior to receiving the email, you must ok the sender. This keeps large spammers at bay, at the cost of inconveniencing your friends.
	Consider having two email accounts. Use one email for family & friends and the other email for business and internet commerce. In all likelihood the "commerce email" will be the primary source of spam. When the spam gets too heavy simply close down the "commerce email" and reopen a new one.