January 2014 Letter

With a flip like a light switch, a number of tax provisions that have been repeatedly extended year after year are now turned off once again. Outlined this month is a list of the more common expiring laws. Also included are five ideas to make 2014 a financially successful year, a general interest article describing the increasingly popular Crowdfunding concept, and a review of the health insurance penalty beginning this month for the uninsured. As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

These Oft-extended Tax Provisions are Now Gone Is it real this time? In one of the most visible expressions of confusion in tax policy out of Washington D.C. is the treatment of a short list of tax laws that have been repeatedly extended only to expire only to be extended once again. A list of the more common expired tax code provisions is listed here for your reference. These laws expire on midnight December 31st, 2013 unless...once again... the laws are extended. Teacher $250 deduction for qualified classroom expenses. Deduction for state and local general sales taxes (in place of state income tax deduction) Deductibility of home mortgage insurance premiums Tuition and fees deduction 50% additional first year depreciation deduction Tax-free distributions from retirement plans for charitable contributions Action to take Don't count on it. Please do not plan on receiving any of these tax benefits in 2014. Review your 2013 tax return and adjust your withholdings to account for the additional income you will expose to tax without these deductions. Be prepared for anything. While none of these popular deductions may be available to you in 2014, if the past is any indication these laws may be extended once again. Lack of planned implementation of tax laws make it necessary for us to anticipate (guess) what might happen. So save those receipts! Review your options. The elimination of some of these tax laws does not mean there are not similar benefits in the other areas of the tax code. Here are some examples: Depreciation. Review Section 179 accelerated depreciation and alternative accelerated recovery methods. Tuition and fees deduction. Review other educational based tax benefits such as the American Opportunity Tax Credit and the Lifetime Learning Credit. Charitable contributions from retirement plans. Look at donating investments that have appreciated in value. Review the possibility of matching donations from your employer. Will we ever return to a time when tax laws are predictable? Who knows for sure. But in the meantime the best you can do is to be as prepared as possible.

Crowdfunding: Using the Internet to Raise Funds When the internet first hit the scene, few of us could dream of the possibilities this instant global connection would enable. While many of us use the internet to search for information, shop online, or stay connected to friends via social media, there are other emerging uses that are less well known. One of them is a type of Crowdsourcing called Crowdfunding. What is it? To understand Crowdfunding you must first understand Crowdsourcing. According to Wikipedia; Crowdsourcing is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people, and especially from an online community, rather than from traditional employees or suppliers. A classic example of Crowdsourcing is when NASA needed millions of photos classified into categories within their database. Instead of paying employees to do this, they set up a tool and asked people over the internet to categorize their photos for them. The project was done in no time and with low cost. Crowdfunding is using this Crowdsourcing concept to raise funds. It leverages the instant global reach of the internet to generate awareness of a defined cause and then facilitates the collection of money for that cause. How is it used? Would you consider sending money to someone you don't know? Traditionally the answer would be no, but the delivery of Crowdfunding is so clever that it has become popular. Here are some of the common uses of Crowdfunding; Artistic Development. Struggling musicians found Crowdfunding a great way to raise funds to purchase studio time to develop their music. In return for a small donation, you might receive free downloads of their tunes or a free gift like a t-shirt. Inventions. Inventors with ideas, but no funds use Crowdfunding tools to define their concept and search for investors to help fund development. By keeping the individual investment low and the number of participants high, the risk to any one person giving money is manageable. In return, investors might receive a free product or a discount when the invention hits the market. Medical Needs. To help address the high cost of medical procedures and facilitate the collection of donations, sites are set up to help collect money for medical needs. Imagine someone you know that is diagnosed with cancer or Lou Gehrig's disease. Crowdfunding tools can help a family in need collect donations to help the patient. Funding Education. Crowdfunding is even used to help people pay for college and graduate school. The typical means of collecting these funds is a pure donation. You set up your request and solicit donated funds based upon your story. More progressive Crowdfunding educational models actually provide a return on your investment with receipt of part of the student's future earnings. Charitable Causes. There are even Crowdfunding sites that help small charitable organizations generate funds for their cause. One of the more unique is kiva.org, where you donate $25 to help third world entrepreneurs start a small business. These sites make it easy for prospective donors to find organizations that align with their interests and it helps small organizations compete with the fund raising practices of large charitable groups like United Way and the Red Cross. Things to consider. Is Crowdfunding in your future? Here are some things to consider. Understand the model. Each Crowdfunding site typically has a specialty. Know what it is. Also understand their model and the costs associated with their fund raising practices. Know their track record. One of the reasons Crowdfunding works is because the "crowd" also identifies the bad apples. If a Crowdfunding site is questionable, you can find negative comments about experiences with the site. The same is true with individual projects or requests. Keep your investment small. Most Crowdfunding requests are small. That makes the individual risk for any one donation or investment small as well. This is something to consider prior to taking part in any Crowdfunding exercise. Common Crowdfunding Sites If you wish to know more, here are some Crowdfunding sites that have been around for some time. Remember, these sites are noted here for illustrative purposes only, no endorsement is implied. Web Site Primary Purpose ArtistShare.com artist fundraising Gofundme.com multipurpose Indiegogo.com multipurpose Kickstarter.com art/creative projects Fundable.com small business investment Crowdrise.com charitable donations Kiva.org third world entrepreneur funding

Five Ideas for a Better 2014 As you buckle down and try to make plans to accomplish your 2014 resolutions, don't forget to conduct an annual review of things that impact your paycheck. Here is a checklist of five financial items to review: Conduct a new withholding calculation. There is nothing worse than a surprise at tax time either with a large tax bill or an overly large refund. Estimating proper withholdings was tough to do in 2013 with all the tax law changes. Now that you know the impact of these new laws, make the necessary adjustments to your 2014 paycheck to account for this new tax reality. Review your insurance. Every year you are inundated with detailed legal language that updates your insurance policies. They never seem to give you the full policy, just changes to certain sections. The point? The policy you signed up for is no longer the insurance policy you currently have. Go through a review of your insurance needs and determine whether your policies are still meeting those needs. Your insurance agent should be well versed on the recent changes and can help you work through this process. Conduct a credit check. Identity theft is reaching epidemic levels. The IRS admits paying out a billion in fraudulent refunds, while credit card information is being stolen by the millions from large retailers. Your best defense is to stay vigilant by reviewing your credit reports for any suspicious activity and by reviewing your credit card and bank statements. Remember you are eligible to receive a free credit report from each of the primary credit bureaus each year. Here is the link to request yours:  www.annualcreditreport.com Review your investments. If you haven't already done so as part of your year-end tax planning, now is a good time to review and rebalance your investments. Do your investments match your risk tolerance? Do they reflect your age and financial needs? If you need help with this exercise do not hesitate to contact a trusted advisor. Set up a household budget. With all the companies attempting to annuitize their billing (monthly bills for things like: cell phones, cable, credit reports, insurance, garbage and banking) it is easy for spending to unknowingly get out of hand. By conducting the simple exercise of forecasting your income and anticipated expenses for the year you can avoid surprises. Remember to set savings goals, including goals for major purchases and vacations. While there are certainly other areas that you should review each year, the ones mentioned here go a long way to ensure your 2014 financial health is in good condition.

Health Insurance Penalty Starts Now Time to be thinking about health insurance The health care legislation commonly known as Obamacare has many provisions that are being implemented over a number of years. As we start 2014, those that currently have no health insurance could be facing a tax penalty. Beginning in January, 2014, everyone will be required to have health insurance or face a potential penalty. The initial penalty will be $95 per individual, $285 per family or 1% of your income whichever is greater. There is also a potential penalty assessed on employers who fail to offer employees health care insurance. What is not known, is whether there will be some penalty grace period due to all the sign up problems with the government's web site. If you are uninsured, your best defense is to review your health insurance options and register for an appropriate health insurance policy as soon as possible. Health Insurance Details Every state is required to have an insurance exchange. This exchange is a web site where everyone can view health insurance options. Unfortunately, this is the area of Obamacare that has seen a lot of negative press due to system problems. No pre-existing condition limitation. You are no longer to be refused insurance because of a pre-existing condition or be charged an incremental premium based on health or gender. Buy or pay the penalty? Hopefully, not many will be faced with this dilemma. Part of the health insurance bill is the requirement for most small businesses to offer a qualified plan or face a penalty billed to their business. Will I be penalized? There are exceptions to the penalty if you have to spend more than 8% of your household income on the cheapest health care insurance premiums. There are also subsidies if you cannot afford health care insurance. This is in the form of a health insurance premium tax credit if your household income is between 100 and 400 percent of the federal poverty level. If you do not have health insurance start looking now. With proper planning you should be able to avoid the unpleasant task of facing a tax penalty at the end of 2014.

As always, should you have any questions or concerns regarding your situation please feel free to call.