Archive for the ‘General Information’ Category

How much should I have withheld from my paycheck?

Friday, April 23rd, 2010

Shocked by the size of the check you just wrote to the IRS?  Or happily planning how to spend that large refund check?  Ideally, your withholding should be sufficient to avoid penalties but not so high that you’re giving Uncle Sam a fat tax-free loan.

The IRS has a  useful calculator to help you determine what your federal income tax withholding should be.   Be aware that the calculator isn’t suitable for everyone.  For example, if your income is hard to predict or you pay self-employment tax, the results won’t be as reliable.  After you run the calculations, the site tells you exactly how to adjust your W-4 at work so you’re having the correct amount withheld.  If you receive a pension or annuity you can use IRS Form W-4P to start or change withholding from these payments.

For the withholding calculator, go to http://www.irs.gov/individuals/article/0,,id=96196,00.html.

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Credit vs. cash: Teaching college students to be financially responsible

Monday, March 1st, 2010

Is having a credit card a good idea for a college student?  It can be.  Whether or not you agree, there are new rules in effect that are really good news  for parents and students.  As of February 22, 2010, getting a credit card is much harder if you’re under 21, thanks to the Credit Card Act of 2009.  If you are under 21, you will be able to get a credit card only under certain conditions:

  • a student must be able to prove sufficient income to support credit card payments; OR
  • the student can get an adult cosigner; OR
  • a student can be an authorized user on someone else’s card.

Promotions for credit cards (you know, the free T-shirts, etc.) will be not be allowed within 1000 feet of a college campus.

It’s high time these new, stricter guidelines were put into place for kids and credit cards.  According to USA Today, in 2008, college seniors with at least one credit card graduated with an average of $4,138 in credit card debt.  There have been stories of college students who committed suicide because they felt they would never be able to pay off their credit card debt.

The new law should help protect students from their own irresponsibility.   But what’s the best way to help students learn financial responsibility?  I would argue that learning how credit works is an important part of it, but probably not the most important part.  I also believe that the best ways to learn responsibility depend on the child, as I discussed in a February 13 New York Times article.  Some key elements include giving the child some financial independence and letting him or her learn from making small mistakes.  Nothing drives home the importance of budgeting quite like running out of money before payday and living on ramen noodles for a couple of days.  Is it important for a new college graduate to have a great credit score?  Maybe.   However, it’s probably more important to teach your student to save for financial goals rather than borrowing for them.  If you think having a credit card is important for your student, I’d recommend setting spending limits by getting a prepaid credit card and letting your student know it’s only for emergencies.

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Posted in Credit cards, Debt Management, General Information | No Comments »

Get in line now for Tennessee Hope Scholarship, other college financial aid

Thursday, January 28th, 2010

If you or someone you know will be going to college this summer or fall, it’s time to apply for college financial aid.  For most students, this means filing the FAFSA, or Free Application for Federal Student Assistance.  It’s easy to submit the FAFSA online at www.fafsa.ed.gov.

Like most things invented by our federal government, the FAFSA is complicated and confusing, not unlike doing your federal income taxes.  Luckily the FAFSA has recently been simplified somewhat.  One nice change is that you can now get instant estimates for Pell Grants and student loans as you work through the form.  Another change on the horizon is being able to upload info from your federal income tax return directly into the FAFSA form.

Before you start completing the FAFSA online, get your records together. You’ll need your Social Security number, drivers license, and alien registration number if you’re not a U.S. citizen. You will need your 2009 income tax returns and W-2s. Get together statements for savings, checking, and investment accounts. Also have ready records of any non-taxed income you or your parents receive, such as welfare payments, EIC, and Social Security. You can complete the FAFSA using estimated tax information. Then, when you get your 2009 income tax returns completed, you can go to the FAFSA website and update the tax-related questions on the FAFSA–but be sure you do so before the applicable deadlines. Be sure to sign your FAFSA, either electronically or by signing and mailing the paper page provided on the website.

Be aware of the various financial aid deadlines.  To receive the Hope Scholarship for the Fall 2010-2011 school year, you must submit the FAFSA by September 1, 2010.  Colleges have their own deadlines by which they prefer to receive the FAFSA as well.  For federal student aid,  online FAFSA applications must be submitted by  June 30, 2011.  Online FAFSA corrections  must be submitted by September 15, 2011.

There’s a lot of good information out there to tell you more about all the money available for college.  Visit www.fastweb.org and for information about financial aid offered by the State of  Tennessee, try the Tennessee Student Assistance Corporation at www.tn.gov/collegepays.

Posted in Education planning, General Information | No Comments »

Homebuyers Tax Credit to Be Expanded

Thursday, October 29th, 2009

A Senate panel has worked out a deal to extend the homebuyers’ tax credit program through April 2010. Income limits for eligibility would be extended too–to singles making up to $125,000 a year and couples making up to $225,000. Repeat buyers are included in this new expansion, but their tax credit will be $6500 versus $8000 for first-time buyers. Sales agreements must be in hand by April 30, but buyers will have until June 30 of next year to close the sale.

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Posted in General Information, Tax Planning | No Comments »