This Just In...Current Events


Do You FSA?

Do you have a health flexible spending arrangement (FSA)? Recent changes announced by the Internal Revenue Service (IRS) modify the "use-it-or-lose-it" rule that applies to FSAs. Plan sponsors* now have the option of allowing participants to carry over up to $500 of unused funds in a health FSA to the following plan year. Here's an overview of the new rules.

  • Plans may now be amended to allow participants to carry over up to $500 of unused health FSA funds at the end of a plan year.
  • Any carryover will not count against the $2,500 limit in the next plan year.
  • A plan may allow participants a grace period, as described above, or the ability to carry over unused funds--but not both.
  • A plan does not have to allow either the grace period or the carryover option.
  • To adopt the carryover option, plans must be amended on or before the last day of the plan year from which amounts may be carried over, and may be retroactive to the first day of the plan year, provided certain requirements, including participant notification, are met.
  • Special rules apply to plan years beginning in 2013--these plans may be amended to retroactively adopt the carryover provision at any time on or before the last day of the plan year that begins in 2014.

Note: A health FSA plan can't have both a grace period and a carryover option, so plans with existing grace periods will have to be amended to remove the grace period feature in order to add carryovers.

*The designated party, usually a company or employer, that sets up the benefits of the organization's employees.

For more information, check out the full article on 360 Degrees of Financial Literacy.

Can You Afford Not To Understand?

As you may recall, the Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010. With most major provisions set to be phased in by January 2014, it's important that you understand how the various provisions will affect you. Here are some new features to keep in mind. 

  • Flexible spending accounts. The annual pretax employee contribution to a Section 125 cafeteria plan flexible spending account (FSA) is reduced to $2,500, subject to annual increases for cost-of-living adjustments. The reduction does not apply to certain employer non-elective contributions (e.g., flex credits).
  • Itemized deductions. The threshold for the itemized deduction for medical expenses increases from 7.5% to 10% of adjusted gross income, beginning in 2013. However, this increase is waived for taxpayers age 65 and older through 2016.
  • Hospital insurance. The hospital insurance (HI) portion of the payroll tax, commonly referred to as the Medicare portion, increases by 0.9% for individuals with wages exceeding $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).
  • Contribution tax. 2013 marks the imposition of a new 3.8% Medicare contribution tax on the unearned income of high-income individuals. This 3.8% contribution tax generally applies to the net investment income of individuals with modified adjusted gross income that exceeds $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).  

Looking ahead, 2014 brings the implementation of health insurance exchanges, premium and cost-sharing subsidies and the requirement that most individuals have health insurance. There are many resources available to help you understand the conditions of the law and the other upcoming implementations. Contact your local financial professional, like a CPA, if you have questions about how the law impacts you.

Understanding Legislation Impact: the DOMA Decision

Over summer 2013, the U.S. Supreme Court declared Section 3 of the Defense of Marriage Act (DOMA) unconstitutional, a decision that has sweeping financial implications for same-sex couples who were married in states that recognize same-sex marriage. Couples should consider both the immediate and long-term impacts of the ruling. Here are some of the questions to ask.  

  • Should I File Amended Tax Returns? Although tax season is long past, same-sex couples would be well advised to locate copies of the returns they've filed since they've been married. Because their unions are now recognized under federal law, same-sex couples who qualify are eligible for deductions and credits available to all married couples. If a joint return would have meant a lower tax bite in past years that are still open under the statute of limitations, they may want to consider filing amended returns for those years in order to collect a refund. If you have questions about whether this is the right step for you, be sure to contact a financial professional, like a CPA.
  • Is There Any Impact on My State Tax Return? It depends on where you live or if you've moved since you married. For example, if a same-sex couple marries in one state but lives in another that does not recognize same-sex marriage, then they will likely be able to file joint federal returns but will have to continue filing separate state tax returns.  However, official resolution is still pending on the tax treatment of same-sex couples who marry in a state that allows it but move to a state that doesn't.
  • Is My Health Care Coverage Involved? This is a good time to review your health coverage choices. For many same-sex couples, spouse coverage under an employer's health plan was previously a taxable benefit, which may have meant they chose the least expensive option to minimize the tax bill on it. If you no longer have to pay taxes on that coverage because of the ruling, you may want to reconsider which coverage is best.  

For additional questions and information that you should keep in mind, including the decision's impact on estate planning, visit 360 Degree of Financial Literacy.

In with the Fund Crowd

Entrepreneurship has always played a key role in the traditional American Dream. And in recent years, crowdfunding has become a driving force for many of those dreams. Although crowdfunding itself is not new—websites like Kickstarter and Indiegogo have helped businesses and organizations raise money through small individual contributions for some time—the JOBS Act simplified securities law and made it possible for businesses and organizations to offer or sell securities to the general public.*

According to a  recent survey conducted for the American Institute of CPAs (AICPA) by Harris Poll, just 4% of U.S. adults contributed to a crowdfunding campaign in the past year. The top reasons for contributing money included**:

  • Opportunity to be an early investor.
  • Belief in the project mission.
  • Involvement of a family member or friend  in the company or project.
  • Interest in the rewards offered for contributing.

Before contributing to a crowdfunding campaign, consider the following:

  • There's not usually a tax benefit. Many crowdfunding campaigns aren't soliciting donations that you can deduct on your tax return. If you're looking for a charitable deduction, make sure you're giving your money to a certified 501(c)(3) non-profit organization.
  • Keep track of the amount you contributed, especially if your investment buys you a piece of the company. If the business makes it big, your little piece could be worth some money and you'll need to know what you are actually making for tax purposes.
  • Set guidelines for yourself about which causes or types of project you'll support. It's especially important that you set a maximum dollar amount for investing.
  • Give to campaigns that have meaning to you. It's not likely you'll receive a return on your investment. 
  • And finally, if you're looking to invest in order to make money, talk to a financial advisor, like  a CPA.

* Taken from
** Small base (n<100). Results should be interpreted as qualitative, or directional, in nature.

What's Mine is Yours…For a Fee

Whether it's automobiles, homes, clothing or any number of other goods and services, an increasing number of people are willing to share to save. While only 7% of U.S. adults have actually used or considered using a sharing service—also known as peer-to-peer service—almost 60% would be willing to consider using such a service, according to  a recent survey conducted for the AICPA by Harris Poll. Here are some of the most common reasons for using a sharing service, as found by the survey, that you should consider.

  • Try something new without having to commit a significant amount of money. Travel is the most prominent example of this, with many sites now available that connect you with people who are willing to rent out their homes to travelers, at a usually much lower rate than hotels. Plus, staying in someone's home allows you to cut down on the expense of eating out, by giving you access to a kitchen. 
  • Avoid purchasing a product you have limited need for. Home supplies, like specific cooking or lawn care equipment, can cost big bucks, even though you may only use them a few times a year. Instead of buying new, you can save a ton by renting or buying second hand. The same goes for special occasion clothing, like tuxedos and formal gowns, or even cars, if you live in an area where you may only use a car every now and then. 
  • Treat yourself without excessive spending. Even if we know it's against our budget's best interest, we all feel the urge to splurge sometimes. Instead of letting your finances take the hit, find an option that fits both you and your budget's needs. Second hand and rental websites are popping up left and right, providing resale options for everything from clothing and accessories to electronics and home goods. While it can take some digging, the savings is well worth the effort.

What's Up Doc?

Appropriately, April is Records and Information Management Month – between tax time and spring cleaning, you may be asking yourself, "Do I need to keep this?" Here are some quick tips for some of the most common documents.

  • Tax returns and supporting documentation: You should keep your actual tax returns for life. Supporting documents like W-2s, receipts and statements should be kept for at least seven years.
  • Receipts for ATM transactions and purchases: ATM receipts only need to be kept until you confirm the transaction posted to your account. Keep restaurant receipts until you've verified that the server submitted the correct tip, and hold onto receipts for other purchases until you're certain you won't return the item. If your item has a manufacturer's warranty, keep the receipt until it expires.
  • Utility bills, credit card statements, bank statements: Unless you claim some of your bills as tax deductions, you can shred utility bills as soon as your account reflects your payment. Credit card statements should be kept for a year in case you need them for back-up purchase verification (credit cards often offer warranties on big purchases if the manufacturer won't cover a defect). Bank statements should be kept for a year, unless your bank maintains them online. Then you can safely shred, or stop having them mailed at all—some companies charge a fee for paper statements so this could also save you money!
  • Manage securely: You can save all of your information in paper files or electronically. Whichever way you choose, just make sure they're safe from prying eyes. Password protect your computer and think twice about free online storage unless you're certain it's encrypted.
  • Shred safely: When you do clean house, make sure you're disposing of documents properly. A safe rule of thumb is to shred anything that includes your name, address or any other sensitive information. Many communities hold shredding events during the month of April, so check to see if there's a drop off near you before you toss it in the trash.

For a complete list of information and document retention guidelines, check out this list
Reminder: It's Week 1 of the Ready. Set. Goal! Financial Fitness Challenge. Have you set your goals yet?

What the Fed Interest Hike Means for You

Have you heard the news? The Fed hiked interest rates a quarter of a percent last week, signaling confidence in the economy and hope that one day your savings account might actually earn more than pennies in interest!

While that could take a couple months to trickle down into your account, there's also a downside to the rate increase: your credit card interest rates are likely to take a jump pretty quickly. It's always a good idea to pay off credit card debt ASAP, but with interest rates on the rise, that goal should be taking on new urgency.

So, what will a .25% rate hike mean for your financial future? If you're like the average household, according to NerdWallet, you're paying an average of $1,292 in interest each year. If the Fed continues to increase rates like it promised (could be two more times this year), that amount will jump to $1,309. 

That might not sound like much of an increase, but over time it adds up! If you were to pay off your debt and redirect that interest amount to your IRA, over 30 years it could add up to almost $150,000! 

Now THAT'S a financial future you can get behind. Make your plan to pay off debt today.