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11/30/2016

2017 Tax Rates (If Nothing Changes)

Income tax graphicPending any immediate changes under a new administration, tax officials say low inflation rates will ensure that current tax brackets and most other tax system features will change only slightly in 2017 with the exception of effects of health coverage mandates.

The standard deduction will rise $50 for individuals to $6,350 from $6,300.  The personal exemption increased $4,050 in 2016 and will remain the same in 2017. The standard deduction for married filing jointly rises $100 to $12,700.

The personal exemption for tax year 2017 remains at $4,050.  However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).

But for those taxpayers who do not maintain the minimum essential health coverage in 2017, the penalty which is collected by the IRS will increase significantly. The charge for failing to have qualified health insurance coverage will be $695 or 2.5% of income for individuals and $2,085 or 2.5% of income for families.  The penalty was $325 for individuals and $975 for families in 2015. That was an increase from the penalty of $95 for individuals or $285 for families in 2014.

The 2017 top individual tax rate of 39.6% will apply to income above $470,000 for married couples, up
from $466,950.  The Affordable Care Act (ACA) or ‘Obamacare’ mandates that high-income taxpayers pay another 3.8% surtax on net investment income, so the top federal income tax rate for individuals is actually 43.4% and will remain at that level pending a possible ACA repeal.

Qualified dividends and long-term capital gains are also taxed an additional 15% or 20% depending upon income and are subject to another 3.8% net investment income tax.

Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.

These rates are set to apply to 2017 taxes which will be filed in early 2018.

Call us at McRuer CPAs if you have any questions: 816.741.7882 or contact us online by clicking here.

Trump's Take on Taxes

President-Elect Donald Trump’s tax plan promises to take a hatchet to the current tax code affecting individuals and businesses alike.  Experts and analysts have varied views about what his administration will do and how soon, but they agree that the Republican control of both the House and Senate will enable faster action and more radical moves.

Trump speakingComprehensive tax plans which would reduce tax rates for individuals and businesses while eliminating many deductions and tax breaks have been in the works, but politics prevented their introduction.  Because most of this legislation has already been written, pulling together the plans into a Trump-approved tax bill for debate could happen at lightning speed.

Considering ordinary income taxes only, the current tax code charges individuals complicated graduated tax rates from 10% to 39.6%.  Trump’s proposal includes only three individual income tax brackets: 12%, 25% and 33%.  Itemized deductions would be capped or no longer allowed and personal exemptions would be eliminated.

Under the Trump tax plan business taxes would be slashed and corporations would pay 15% instead of 35% on earnings.  A more simplified tax structure would eliminate most business deductions including interest on debt.  Depreciation of assets would also be calculated differently through a more limited and simplified tax code.

Trump plans to eliminate estate taxes which currently charge 40% tax on assets above $5.45 million.  His plan would still allow an income tax on the appreciation inherent in the assets for larger estates that would be paid when the assets are sold by the beneficiary.

America’s new President is set to be sworn in January 20th.  In the footsteps of two former Presidents, John F. Kennedy and Herbert Hoover, as billionaire real estate mogul Trump has opted to forego the annual Presidential salary of $400,000.  He is quickly putting together a team of lawmakers who will fulfill his campaign promises to slash taxes and repeal major provisions of the Affordable Care Act (see more below in “2017 Tax Rates (If Nothing Changes)”) among his first days in office.

This is a good time to review and understand your options. Contact us now to confirm your year-end tax planning session and we’ll help you determine the best tax strategy during changing times.

11/29/2016

Military Service and Taxes

Military-veteran 2Here's a quick update on tax issues affecting active duty military and veterans:

The IRS has updated its tax guide with information on the special tax benefits available to active duty military personnel and disabled veterans. Click here for more.

11/28/2016

2017 Tax ID Theft Guards in Place

Taxpayer id theftLaw enforcement officials designate identity theft as the fastest growing crime in the world.  New tax-related fraud prevention steps are set to kick in for the 2017 tax season. 

New or expanded tax-related identity theft features protecting taxpayers in 2017 include:

*37 new data elements that authenticate electronically transmitted individual tax returns

*32 new data elements that authenticate electronically transmitted business tax returns

*designation of what’s called “ultimate bank accounts” to ensure the refunds are deposited into a taxpayer’s real bank account

*the 16-digit Form W-2 Verification Code that will now be added to 50 millionW-2 forms to validate the information

*additional and more elaborate password requirements for software used by individuals and tax preparation experts that will both protect personal information and prevent multiple filings under the same Social Security number

More information resources will also be shared between federal, state and local tax authorities regarding identity-theft tax fraud. This is expected to not only help with early fraud detection, but also uncover trends that can more quickly uncover more complicated schemes that may affect a large number of taxpayers all at once.

Click here to find out more about the tax-related identity theft fraud prevention campaign called “Taxes. Security. Together.”

11/15/2016

Tax-Related ID Theft Drops

The IRS and its Security Summit partners say collective efforts to stop tax-related identity theft appear to be working.  New statistics show that the number of new people filing affidavits with the IRS claiming they have been victims of identity theft regarding their federal tax returns has dropped more than 50 percent compared to 2015.

Identity thieves typically file fake tax returns seeking refunds.  A taxpayer doesn’t know their personal information has been stolen until they file a tax return and are alerted that a refund was already issued.  So far in 2016, nearly 238,000 claims of tax-related identity theft have been filed compared to more than 512,000 in the same time period of 2015.  Overall, more than 74.5 million individual tax returns were filed in the 2015 tax year. 2016 totals are not yet available.

Identity theftThe IRS credits new systems checks with catching fraudulent returns before they are processed.  Through September of this year, the IRS stopped 787,000 confirmed identity theft returns, preventing more than $4 billion in losses from fake refunds.

More banks are also joining the tax fraud fight by using internet-related signals to stop suspect refunds from being auto-deposited, especially refunds with an unusually high dollar amounts.  Shared information between state and regional tax offices has improved fraud filters and alerts.  New hidden data elements on tax returns filed by professional preparers has also helped detect suspicious returns.

11/01/2016

New IRS Installment Payment Fees in 2017

The IRS is proposing a substantial increase in the user fee it charges taxpayers who seek to pay the taxes they owe through the agency’s installment agreement program.  But, as a means of balance, if the taxpayer chooses more online and automatic deduction options, the fee will be greatly reduced compared to 2016 rates.

Currently, it costs $120 to apply for the payment agreement which sets the taxpayer up to pay off the tax amount owed month-by-month.  The application fee can be lowered to $52 for a taxpayer who agrees to have the payment automatically deducted as direct debits (auto-debits) from their bank account.

Pvc-incremento-estados-unidos-gUnder proposed changes, the new application fee would be $225 or may be lowered to $107 if the taxpayer agrees to auto-debits.  Taxpayers who apply online, but pay by check or through the online EFTPS system would pay a $149 fee.  The fee would lower considerably to $31 if the taxpayer chooses an all-digital option by applying online and agreeing to auto-debits.

Taxpayers have the option of contacting the IRS online, in person, by phone or by mail to set up an installment agreement.  As the tax collection agency continues to update software and systems, it is finding new ways to utilize the internet to speed up the time it takes to file and process a return, collect tax payments and administer tax refunds.

Click here to find out more.

04/15/2016

Filing For a Tax Extension to Meet Deadline Time

Paying-taxesAlthough taxpayers have an extra weekend to prepare and file individual income tax returns due to the Friday April 15th federal holiday, the Monday April 18th deadline arrives with the same rules.  You must file your 2015 individual income tax return by the deadline or face penalties as well as additional penalties and interest charges on any unpaid taxes owed.

Even if you’re filing an extension allowing up to six months more time to complete and file your final return, you are still required to pay the estimated taxes you owe by the April 18th deadline.

Filing an Extension

At this point, there are only a few more days to complete your tax return on or before the deadline.  If you have a complicated return and have not yet submitted tax information to your tax preparation professional, requesting an extension of time to file may be your best option.

Form 4868 is the application you need for an automatic extension of time to file your federal individual income taxes.  The IRS will give you up to October 17, 2016 to file your 2015 individual income tax return before new late filing penalties will be assessed. You may file it any time before the extension expires.  Qualifying taxpayers who are out of the country are allowed two extra months to file and pay taxes owed without facing a penalty.  Those taxpayers include citizens who are in the military serving outside the country or live and/or work outside the United States and Puerto Rico. (Read more about military service tax benefits by clicking here.)

If you request an extension, you will still owe interest on any tax that was not paid by the regular due date, even if you qualify for the two-month extension to file your return. (Find out more about the penalties you may face by clicking here to read The Price of Missed Tax Deadlines.)

One way to escape having to file the extension request tax form is to pay the taxes you owe through an IRS venue such as Direct Pay, EFTPS or using your own credit card on irs.gov.  When you pay all that you owe online by the deadline through these venues you will receive a confirmation number for your records and do not have to file the Form 4868.  However, you will need to file your tax return as soon as you can.  On that return you will be asked to share your confirmation of paying your taxes by the deadline.  You still face a late filing penalty, but will not have to pay penalty and interest on the taxes owed. (For information about ways to pay the tax you owe, click here to read Tax Payment Options to Meet Deadline Date.)

Businesses may also apply for an extension of time to file tax returns under certain circumstances, such as being in the middle of declaring bankruptcy. Form 7004 provides a tool to request a 5-month or 6-month extension of time without paying a late filing penalty. Form 1138 allows certain corporations an extension of time to file if the entity is expecting a net operating loss carryback that cannot be calculated by the designated tax deadline date.

If you have any questions about filing an extension or meeting your tax deadline obligation, please contact us at McRuer CPAs for more information.

04/08/2016

The Price of Missed Tax Deadlines

Ouch! When you don’t file and don’t pay your income taxes on time, you’re going to pay a price in penalties and interest that will apply to the taxes you owe and the time it takes you to file your return. These penalties and interest charges begin the day after you miss the deadline...AND like the Energizer Bunny, they keep adding and adding and adding to the amount you owe until the taxes owed are paid in full and the required tax returns are filed.Money-1ccc

Interest - If you don’t pay your taxes by the deadline, interest begins right away on the amount of tax you owe.  It adds up until the day you pay the tax owed.  Even if you had what the IRS would determine as a “good reason” for not paying on time, you will still owe the interest on any outstanding amount.  Interest is charged in addition to penalties assessed.

Late Payment Penalty - Even if you make a partial payment of the taxes you owe by the tax deadline date, you will still be assessed a penalty for paying any remaining balance late.  The late payment penalty is usually ½ of 1% of any tax that is owed.  The penalty is charged for each month or part of a month the tax remains unpaid. The maximum penalty charged is 25% of what is owed.

The late payment penalty will not be charged if you can prove to the IRS that you have a reasonable cause for not paying on time.  A reasonable cause must be documented and could include things such as serious illness or incapacitation, a natural disaster or fire, the inability to obtain records, and the unavoidable absence or death of a member of the taxpayer’s family that causes a delay in completing a tax return.  However, the lack of funds to pay taxes cannot be used as an excuse to file late or fail to file a return.

Late Filing Penalty - A late filing penalty is charged even when you request an extension. The penalty is usually 5% of the amount due for each month or part of a month your return is late.  This penalty is assessed on top of the late payment penalty and in addition to interest charged on outstanding taxes.  The maximum penalty for filing late is 25%.  If your return is more than 60 days late, the minimum penalty is $135 or the balance of the tax due on your return, whichever is smaller.  Again, you may avoid this penalty if you have a reasonable cause.

Now, let’s also consider the penalties and interest owed on any late state and local tax filings or taxes owed.  Sometimes taxpayers forget that tax deadlines also apply to state and local tax filings. States, counties and municipalities have different ways of assessing and collecting taxes and also enforce penalties for failure to file, failure to file on time and failure to pay taxes.  All of this can add up very quickly.

Another issue taxpayers sometimes miss is that all the different penalties and interest charges are independent of each other and may be added one on top of the other to the original tax obligation.  They also don't go away. New tallies on remaining balances continue to calculate until all obligations are met.  This is how the interest and penalties can add up making paying on time and in full as well as filing on time a much better choice.

The longer you wait to settle current or past tax issues with late filings and payments, the more it will cost you in money and anxiety. There are ways to ease the burden. If you need more information on how much you may owe for not filing or not paying your taxes on time, please contact us at McRuer CPAs.  We’ll help you figure the cost as well as your options to pay any penalties and interest you may owe.

Tax Payment Options to Meet Deadline Date

The IRS says more than 70 percent of taxpayers will receive tax refunds this year due to tax credits and having too much of their income withheld.  Last year’s average tax refund was $2,797 and it’s expected to be close to the same average for this year’s tax season.

Meanwhile, for the rest of taxpayers who owe taxes there are new and faster ways to pay.  The IRS offers several online or direct-call opportunities to pay taxes even without filing on time. 

Paying-moneyThe Direct Pay option allows individuals to pay their outstanding taxes or estimated taxes directly from a checking or savings account.  A taxpayer receives an immediate confirmation of payment if making an instant payment or can schedule a payment to be made at a later time or at future intervals.  The IRS system does not store the payment information after the transaction to avoid online hackers.  See a previous ReSource article Another Cyberattack on Taxpayer Information for more information about tax-related identity theft occurring through IRS systems.

For the first time there’s a new cash payment option for taxpayers in partnership with two online payment processing companies including OfficialPayments.com and PayNearMe.  Individuals may now use up to $1,000 cash per day to pay outstanding taxes if they do not have or do not want to use a bank account or credit card.  Payments can be made at more than 7,000 participating 7-Eleven convenience stores across the country.

The IRS still promotes that the easiest way to pay individual and business taxes is through the Department of Treasury’s Electronic Federal Tax Payment System or EFTPS.  A relatively new feature to this online registration payment method is the EFTPS Voice Response System.  Both services are offered for free with no extra fees charged for processing and scheduling regular payments.

Through EFTPS a taxpayer can use the internet, phone or mobile device to make, schedule and review tax payments any time of day.  Businesses and individuals can schedule payments up to a year in advance. Payments can be changed or cancelled up to two days before the scheduled transaction date. This method provides a way to pay all types of federal taxes from individual to business federal income taxes, employment taxes, estimated taxes and excise taxes.

Should a taxpayer prefer to use a credit or debit card to pay taxes, the IRS accepts payments from Visa, MasterCard, American Express and other card vendors.  The taxpayer must submit the payment information through IRS-approved secure credit card processing companies.  Each processing company charges a fee for the transaction.  The system is not designed to accept high balance tax payments nor federal tax deposits. Generally, the payments are limited to 2 per year for individuals and 2 per quarter for estimated tax payments.  The providers are Pay1040.com, PayUSATax.com and OfficialPayments. You can review the the IRS-approved options by clicking here.

We’ve explained a lot about federal income taxes, but don’t forget that you also have state and local tax obligations and deadlines.  Each state, county and municipality has different ways of accepting tax filings and payments.  Most have online payment programs in place.  Check with your state and local tax collector’s office online or by phone if you have questions about how, when and where to file your tax return and make tax payments as needed.

If you continually receive tax refunds, it may be a sign that you’re having too much withheld.  The money could be put to better use than loaning it to the government for free.  On the other hand, if you owe taxes every year that you did not expect, you may benefit from strategic tax planning that could lessen your tax burden or provide a more consistent tax payment structure that could ease tax deadline pressures. 

At McRuer CPAs it is our goal to make certain you pay only the taxes you owe. Contact us to set up a tax review session with one of our tax preparation experts.

04/04/2016

Tax Freedom Day Federal and State

The Tax Foundation has released its summary on Tax Freedom Day. It reveals that April 24th is the day this year that marks theoretically how long all Americans must work to earn enough income to pay the nation’s total tax bill.

A Wikipedia entry describes how Tax Freedom Day is calculated; “Every dollar that is officially considered income by the government is counted, and every payment to the government that is officially considered a tax is counted.” The specific date is determined by adding up all federal, state, and local taxes and then dividing that number by the nation’s income.

The Tax Foundation summary reports Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes. That’s a total tax bill of nearly $5 trillion adding up to 31% of the nation’s income. The reports says, "Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.”

This year’s April 24th Tax Freedom Day is 114 days into the year (excluding Leap Day). It is one day earlier than last year, due to slightly lower federal tax collections.

If you add annual federal borrowing into the mix, that is, future taxes owed, Tax Freedom Day would occur 16 days later on May 10.

FreedomStates have different State Tax Freedom Days because they each have different tax policies. The taxation and income variances translate into higher-income and higher-tax states celebrating the date later while lower-income and lower-tax states hit the mark sooner. For example, Mississippi has the lowest average tax burden and the tax freedom day for its residents is April 5th this year. Connecticut and New Jersey’s tax freedom days are much later on May 21 and May 12, respectively.

McRuer CPAs clients in the central Midwest see the following State Tax Freedom Days: April 12 for Missouri, April 14 for Iowa and Nebraska, April 13 for Arkansas, and April 19 for Kansas.

To find out more about Tax Freedom Day click here to read the Tax Foundation’s Summary Report.

03/25/2016

Internet Sales Tax Still on the Burner

The use of the Internet can no longer be taxed, but the debate over taxing what is purchased over the Internet remains heated and unsettled.

The Permanent Internet Tax Freedom Act, signed into law in February, permanently bans any state and local taxes on Internet access. The measure also prohibits taxes on Internet-related digital goods and services, thereby ending nearly 20 debate and moratorium extensions on the matter.

Seven states that had been allowed to temporarily charge an access tax due to a grandfather clause must now phase out those taxes by 2020. The states include Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas and Wisconsin.

Sales tax calculatorSupporters of the new law say it will guarantee Americans will never have to pay taxes on the service that connects them to the Internet. Federal Communications Commissioner Ajit Pai has put it this way, “Americans need and want the certainty that the digital world will be spared the taxman.”

While Internet connection and operation services can no longer be charged access taxes, most states continue to push for a variety of sales taxes on Internet purchases. Arguments are that the taxes will protect brick-and-mortar businesses from unfair competition. The most recent legislation on this sales taxes issue is called the Marketplace Fairness Act.

The Marketplace Fairness Act would enable states to not only collect sales taxes on Internet purchases but to also impose taxes specifically on remote retailers who have no physical presence in their state. The act requires states to adopt simplified sales tax laws.

As debate has dragged on for years, technology has improved, making it much easier to track online purchases across state lines and then assess and collect sales taxes. Dozens of states are seeking to impose sales taxes on Internet purchases made within their borders. This would subject an online purchase to the same state and local taxes a product or service would have been charged at a local store. Some states are debating proposals that would tax third-party delivery services, targeting major online retailers who use regional shipping centers with massive inventories.

While purchasing tax-free products online provides an immediate cost savings for consumers, supporters of online taxes say the long-term effects of tax-free purchases are painful and deep. They argue that sales taxes generally range between 5 to 10 percent. Local businesses must impose and collect them from customers, so they suffer a 5 to10 percent price disadvantage to Internet retailers who are not required to collect sales taxes. The effects on business range from suffering lower profits to being forced out of business. Internet sales tax proponents say it’s not about supporting taxes in general, but rather about ensuring local job and business growth.

Currently, there is no uniform way to confirm the quantity and scope of tax-free online sales, which makes it difficult to accurately predict sales tax revenues for local and state budget planning. Meanwhile, the ban on Internet access and use taxes will cost states that are currently imposing some type of user fee an estimated $561 million annually. It’s expected that these states will step up their push for sales taxes to make up the difference, but there’s no agreement on the most effective tax rate.

Those who oppose online sales taxes say it’s all about grabbing more tax revenues to facilitate bigger government. They claim taxes charged on out-of-state purchases force those companies to collect taxes without representation. There is also concern that the federal government would enact a law compelling all states to collect a set rate rather than allowing each state to determine its own tax formula.

Some economists add that competition provides the best products at the best prices. They point out that the Internet and sophisticated transportation networks now allow for better consumer choices than ever before and that business is growing. They say sales taxes on those choices would be like an artificial and unnecessary price increase that would affect jobs and economies negatively.

03/24/2016

Free Tax Help and Exclusions for Military

American military on dutyThe Volunteer Income Tax Assistance (VITA) program is offering free tax help to members of the military and their families.  The assistance is available both on and off base, including sites located overseas.

VITA provides tax help through staff that has been specially trained to handle military-related tax issues.  Some of those issues include tax benefits for serving in a combat zone, unique tax filing and payment deadlines based on service status, child and dependent card tax credits and military-specific Earned Income Tax Credit (EITC) rules.

When things are more dangerous, there are income tax benefits.  Serving in a combat zone or in an area  where imminent danger exists qualifies a service member for income tax exclusions on extra income they receive.

This applies on a monthly income basis, so any pay received during any part of a month of service in a combat zone may be excluded.  The combat pay exclusion for commissioned officers is capped at the highest enlisted pay, including any hostile fire or imminent danger pay received.

When an enlisted person serving in a combat zone decides to reenlist, that person receives a reenlistment bonus.  That bonus is also excluded from gross income if it is received when the person was serving in a combat zone.

Income received outside a combat zone is not excluded from income unless the pay is designated as Imminent Danger Pay (IDP) and Hostile Fire Pay (HFP). It is extra pay to personnel who serve in an area to provide direct support of military operations in a combat zone or an area that is designated as particularly dangerous.  The Department of Defense lists those particular areas and the time for which the hostile fire pay is issued.

Military duty in areas of the world that have extremely low quality of life, or QoL, may qualify for QoL extra pay, but that extra income may not be excluded from income tax.

If a service member is hospitalized by an injury or serious illness while serving in a combat zone or IDP, their income is not subjected to tax for the duration of their hospitalization up to two years.  Disability benefits and other kinds of income related to a service member’s injuries or illness may also receive specialized tax treatment. 

While no areas are listed as designated current combat pay zones so far this year, there are dozens of locations in the world designated as Imminent Danger Pay Areas.  Each service branch is responsible for certifying a person’s entitlement to the military pay exclusion on the Form-W2 that is submitted to the IRS.

The current IDP rate is $7.50 per day, with a maximum of $225 per month.  You can imagine how helpful it is for that extra pay for serving under extreme risk to be protected from income tax.  This kind of hazardous duty pay has been a heated debate topic for many years as America’s armed forces have been stretched across the globe into many hostile areas and the Department of Defense struggles with budget cuts.

All of these military tax programs and more are overseen by the Armed Forces Tax Council (ATFC) which provides worldwide assistance to military personnel.  If you have questions about this or past tax years and your ability to qualify for military service-related tax exclusions or credits, contact us at McRuer CPAs for more information.

03/10/2016

Quick Tip To Watch For Social Security Fraud

my Social Security

Whether you receive Social Security benefits or not, you may want to make a habit of checking your Social Security Statement at least once a year.  Think about it: Are you sure no one else is using your Social Security number?

Create a “my Social Security account to watch out for:

  • Identity Theft
  • Tax-Related Fraud
  • Benefits Fraud

Go to this link to sign up:  https://www.socialsecurity.gov/myaccount/ 

03/09/2016

State-Managed Retirement Savings Accounts Now in 27 States

Retirement jar 1Several states are working on plans to help workers save for retirement. The Bureau of Labor Statistics shows that only about half of full-time workers employed by small businesses or organizations have access to an employer-based retirement plan. By comparison, the numbers show 85 percent of Americans who work for employers with 100 or more employees do have access to an employer-provided retirement plan or benefits program.

To help close the gap, some states are providing access for eligible workers to state-managed individual retirement accounts funded by automatic deductions from the worker’s paychecks.  For example, in 2017 Illinois will launch the Secure Choice Retirement Savings Program, which gives workers a retirement plan option. Full-time employees working for qualified businesses (who do not already provide retirement benefits) will be automatically enrolled into a direct deduction retirement savings plan with a minimum three percent deduction each paycheck.  The employee can choose to have more withheld or to opt out of the program entirely. The money is deposited into a Roth IRA.

The Pension Rights Center in Washington, DC has been monitoring the development of state-administered retirement plans for private-sector workers. It shows that currently 27 states have already approved or are debating proposals to launch state-based retirement plans including: Arizona, California, Colorado, Connecticut, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oregon, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.

Last September, the Government Accountability Office (GAO) published a report detailing how “half of private sector workers, especially those who are low-income or employed by small firms, lack coverage from a workplace retirement savings program primarily because they do not have access.” The GAO is recommending ways that the federal government can make it easier for states to manage such plans, while not placing a financial or administrative burden on small business.

03/07/2016

Money Fights and Millennials

A new survey of Millennial couples says choices about finances are among the top reasons they argue. There are 80 million Millennials in the U.S. alone, and they are expected to be spending up to $200 billion annually by 2017. This is the reason business, political and social experts are keeping a close eye on their habits and lifestyle choices.

Millennials are the generation generally born in the mid 1980s and up to the early 2000s.  In a joint effort, the American Institute of CPAs (AICPA) and the Ad Council surveyed couples who were between 25 to 34 years of age, employed, and married or living with a partner.  The results revealed 88% say financial decisions cause tension. Of that number, 31% say they argue about money weekly, and 20% say they argue about finances daily.

Couple fight over moneyExperts define Millennials as racially diverse, sociable (especially active on social networks), community-minded, health conscious and more liberal politically. They are apt to spend money on higher-priced goods if the products or services are connected to a “good cause” or a “healthy standard.” The problem, the survey shows, is that while Millennials seem to enjoy discussing and supporting important issues with their dollars, they fail to share their feelings and habits about money with the person they are closest to and who would be the most affected. When asked, less than 50% said they had discussed finances in detail with their loved one before marriage.

Many Millennials today enter into long-term relationships already burdened with high monthly expenses connected to credit card bills and higher education loans. Even though the survey results showed nearly half of the couples paid an equal share of household expenses, the couples said their partner had different financial habits and debt issues that made saving difficult.

The National CPA Financial Literacy Commission warns Millennials that greater spending power comes with a greater responsibility to understand a potential partner’s financial values and beliefs. A news release emphasizes, “We encourage couples to have a serious conversation about their financial hopes and dreams and the steps they need to take to get there.”

The AICPA features a “Feed the Pig” website that provides tips for Millennial couples to help them think beyond the honeymoon phase to daily money matters. If you are thinking about getting married or want to confirm financial choices to build a better financial future as a couple, contact us at McRuer CPAs.

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