The Top Do's and Don'ts for Tax Time

Last week, the IRS issued a press release that the delayed returns, any returns including Schedule A (itemized deductions), the educator expense deduction or the tuition & fees deduction – will begin to be processed on Feb. 14 – Happy Valentines Day! This is good news because taxpayers didn’t know when their returns might be processed and rumor had it as late as the end of February. The delay followed the Dec 17 enactment of The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which extended a number of expiring provisions. So you can file now and the sooner you file, the sooner you will get that tax refund back, especially if you e-file and select direct deposit. I’ve been doing a lot of research on taxes this year and my best tips are listed below, courtesy ofhttp://www.TaxACT.com TaxACT Free Federal Edition, a free filing solution that quick, easy, and available to everyone.


DO:



• Do Get Organized Ahead of Time – I recommend my “Sixty Minute Tax Workout” where you whittle down the tax task a bit at a time. Get organized before you sit down by gathering all your W-2s, 1099s, and other tax documents.


• Do Get Smart – Familiarize yourself with the new tax law changes by going to IRS.gov and look at Publication 17, the first few pages summarize the major changes. You can also go to taxact.com/taxinfo.


• Do Ask Questions – It’s smart to ask for help when you don’t understand something about your return. Use the Answer Center in TaxACT, type in your question and get fast answers. Or, email your question for free.


• Do E-file – For the fastest refund (in as few as 8 days with direct deposit). Unlike paper filers, e-filers get an e-mail when the IRS has processed your return.


• Do Get it Free – Use a free tax preparation solution. I recommend TaxACT Free Federal Edition. You can print, prepare and e-file simple complex return absolutely free. TaxACT will guide you step by step through your return and all the tax law changes. Includes free tax help via e-mail. Even if your return won’t be processed by the IRS until February 14th, there’s no reason to wait. You can prepare and e-file with TaxACT now, and they will let you know when the IRS has processed your return.


• Do Pay What You Can – If you cannot pay your tax balance, then file and pay as much as you can by the April 18th deadline to avoid penalties and interest. Call the IRS to discuss payment options, including installments.


DON’T:


• Don’t Forget to Import – Save time and aggravation by importing key data from a PDF copy of last year’s return. If you have multiple W-2s, a 1099 or investment data, use the quick entry features available on TaxACT Free Federal Edition at taxact.com.

• Don’t Procrastinate – Although this year’s filing date is April 18, 2011, don’t procrastinate because rushing can = errors.

• Don’t Get a Cash Advance On Your Refund – When you can get your refund in as little as 8 days by e-filing and selecting direct deposit, it’s a dumb money move to pay all kinds of interest to get your cash a few days earlier. You need that extra money, don’t throw it away!

• Don’t pay more than $15 to e-file State Taxes – If your state charges income tax, then all your federal info transfer to your state when you use an online solution such as TaxACT. The federal solution is free and the state solution costs less than $15.

• Don’t Use A SmartPhone Application – TurboTax released a smartphone application for 1040EZ returns. When it comes to taxes, it’s not about saving time as much as it is about ensuring accuracy and getting the largest refund you possibly can. Spending the extra few minutes could mean a bigger refund or less taxes owed.

• Don’t Spend your Refund on Disneyland or a new iPad – Instead, use 50% of the refund to pay down credit card debt and the other 50% to build up your emergency fund. You may not get the mouse ears this year, but you’ll be in better financial shape!

Ellie Kay

America's Family Financial Expert (R)

Five Top Money Moves for 2011

This week I'll be on over 25 television and radio stations talking about the Top Five Money Moves for 2011.



According to a recent survey, 40 to 45% of American adults make one or more resolutions each year. Among the top new year’s decisions are resolutions about weight loss, exercise, and money management or/ debt reduction. While a lot of people who make decisions during the new year do break them, research shows that making a decision to change is useful. People who explicitly make resolutions are 10 times more likely to attain their goals than people who don't explicitly make resolutions.

If one of your resolutions involve getting fiscally fit, then there are five things individuals, couples and families should do every January, year in and year out, to help their financial picture. These five money moves will help you pay down debt, save more in your emergency fund and be prepared for possible financial setbacks in 2011. They include:



1) CUT COSTS ON FIXED EXPENSES – there are some expenses that people rarely check, but they could be missing out on hundreds of dollars of savings. For one thing, it’s important to call your homeowners insurance provider and ask about getting a better rate. Oftentimes, you don’t think about this policy because the bank may cover this premium and you put that renewal to the side—wrong answer. The other biggie in fixed expenses is auto insurance. If you drive less, in safer ways, and during safer times of the day you can save money on your car insurance. With Progressive’s Snapshot Discount you can save up to 30 percent. It’s currently available in select states so go see if it’s available where you live. A lot of these money savings tips are courtesy of Progressive Insurance, where you can compare rates with a local insurance agent or online at. It’s a good idea to look at the rates listed from different insurance providers because drivers who saved when switching to Progressive reported saving an average of over $500. Shopping around can add up big time! One final, quick tip to cut costs by shopping around, is for groceries. Go to www.couponmom.com where the site will tell you what’s on sale in your neighborhood, which items have coupons, double coupons and store coupons. Using this layered savings approach in the store helped our large family save hundreds of dollars a year on food.



2) COMPLETE TAXES EARLY & FREE– The sooner you file, the sooner you’ll get your refund. When you have your tax forms, do your “Sixty Minute Money Tax Workout”. I recommend TaxACT Free Edition has everything you need to prepare, print and e-file your federal return free. I’ve partnered with TaxACT because it guides you step by step through your return and guarantees your biggest refund. It’s fast, easy and even offers free help. Remember to e-file and choose direct deposit for the fastest refund. Go to TaxACT.com. And once you have that refund, put the money to smart use.



3) CATCH UP ON SAVINGS – In money moves one and two, you freed up extra money by cutting costs and getting your refund back early. I recommend that you take a hard look at your emergency fund. If you are a single income family, you should have twelve to fifteen months of living expenses in this fund. If you are a dual income family, you need six to nine months of living expenses. With unemployment hovering between 9% and 10% in early 2011, it’s important that you save for a rainy day. Use 50% of that tax refund and money saved from cutting fixed expenses to help build up your emergency fund. Then every time you save money on expenses, write a check or transfer those funds into this important account. It will become a habit and you’ll build that account up more quickly.



4) CUT DOWN DEBT – You took 50% of the money you gained from steps one and two and put it in your emergency fund—good job! Now it’s time to use the other 50% to pay down credit card debt and get started on the “snowball effect” of getting rid of consumer debt. This snowball plan works by paying off the credit card with the highest rate first. Then you take the payment you would have made on that first card and put it toward the next card on your list. Each time you pay off a card, you keep taking what would have been that minimum payments on paid off cards and put them toward the next credit card balance. By the time you get to your last few cards, you are paying 2, 3, 4 times the minimum payment, thus getting ahead of interest charges and paying your debt down more quickly.



5) CARE AND SHARE MORE – This is a good time of the year to map out a strategy to give more and get more out of your giving so that you can itemize your deductions. Go through closets and donate clothing and furniture to IRS- approved charities, but keep track of your donations. Ask charities for receipts. You usually get more for each item than you would selling it at a yard sale. Getting certified values for your donations is where a solution like TaxACT can also help. Remember, monetary donations and certain expenses for volunteering are also deductible.

Happy 2011

Ellie Kay

The Sixty Minute Money Workout

Today's blog is a test: do my kids read my blog or not? For example, here's a pic of my son , from a few years ago, making a New Year's resolution to be more buff. He's now a senior, how long will it be before I'm forced to remove the photo.

According to a recent survey (Source: Auld Lang Syne) 40 to 45% of American make one or more resolutions each year. Among the top new year’s decisions are resolutions about weight loss, exercise, and money management or/ debt reduction.
The following shows how many of these resolutions are maintained as time goes on:
- past the first week: 75%
- past 2 weeks: 71%
- after one month: 64%
- after 6 months: 46%
While a lot of people who make decisions during the new year do break them, research shows that making a decision to change is useful. People who explicitly make resolutions are 10 times more likely to attain their goals than people who don't explicitly make resolutions.
If you are wanting to make a decision to get fiscally fit in the new year, then take a look at my newest book, The Sixty Minute Money Workout (Waterbrook, 2011) Let’s go through each part of the workout:

Boundaries:
As people prepare for the workout, it’s important to establish boundaries, here are some of the things that you need to know before you begin.
First of all, people need to understand that you don’t have to be a couple in order to do the workout. You can do it by yourself, or with a trusted friend, or even a family member who isn’t your spouse if you are single. But whoever you do the workout with, it’s important to set some boundaries to prepare:
• no condescension or negativity
• no interrupting your workout partner when they are talking
• no name calling
• no throwing food - :-)
• start by saying one positive thing to each other
• end by saying one positive thing to each other
• create an environment that encourages comfort and success
• have a timer on hand
• Do the pretest to prepare you for the work. Each pretest will vary according to the chapter or topic you choose.


Part 1 - 5 Minutes - Make Up Your Mind Warm-Up
Here is where you set your timer for each section. When the timer goes off, then move on! In this section, you set the topic for the hour and begin with a "can do" attitude. It’s important to begin by saying or doing something positive. If you’re working out with a spouse, then begin by taking your spouses hands, looking into their eyes and saying something affirming.

Part 2 - 10 minutes - Strength Training
While step one was to start with affirming words and decide on your money topic, this next section is a time to write down goals on paper so that you will have a tangible and objective standard to work toward. Decide how you would like to see the topic resolved today, in six months and what the outcome of your goals will be in the long run. This gives you both a temporary focus (for today) and a long term focus (for the next few months) as well as a big world picture (for the long term.) Your goals will depend on your topic of the day. For example, if you are discussing a budget your goals might include: a) to set up a budget that is real and workable, b) to stay on that budget for the next six months in order to learn how to spend less than what you make, c) to have a budget become such a habit that it is a financial vehicle that will get your family out of consumer debt, help you pay for your kid’s college and fund your retirement.

Part 3 - 20 Minutes - Cardio Burn

In this step, you give feet to your goals. If you’re setting up a budget, then you write down the specifics and course of action for your topic of the day. This may not seem like a lot of time on this section, but realize that you may not get it resolved during the first workout. The key is to keep the discussion moving and work on what you can, whatever you missed, you can get the next time around. Go to my tool section for free online financial tools, http://elliekay.com/financial-resource-center.php

Part 4 - 20 Minutes - Taking Your Heart Rate
This is the point where you do any “work” that needs to be done after you’ve written a step by step plan from the previous section. For example, if you need to save money on your expenses in order to live on the new spending plan you set up, then you could spending this time on quick ways that will save you hundreds of dollars:

1) Save on Tax Preparation - Go to www.TaxAct.com in order to prepare and file your federal income tax return for free. This free software asks you all the right questions to make sure you are getting every deduction that you have coming your way.

2) Save on insurance – Go to www.progressive.com to compare auto insurance. It only takes a few minutes to get several quotes from different companies. You can save as much as $500 by shopping around.

3) Save on groceries – When you can combine sales, coupons, double coupons and store coupons, then you can save thousands of dollars every year on your grocery bill. We’ve saved over $160,000 in the last 20 years by doing this. Go to www.couponmom.com and enter your zip code they will show you what is on sale and what coupons match up with the sales items to get things for pennies or free.

4) Save with Social Media – By going to the www.facebook.com page of your favorite retailer or signing up to follow a beloved restaurant on www.twitter.com, your savings can add up to hundreds of dollars every year. Social media followers are often the first to know about limited offers or free items. For example, my college student daughter, in Chicago follows her favorite cupcake store and by saying the word of the day, she gets a $5 cupcake free. That’s a savings of $1865 every year! Somedays, she gives the cupcake away—so she saves and shares!

Part 5 - 5 Minutes - Congratulations Cool Down
The workout has gone by quickly and now the last 5 minutes are dedicated to the “Congratulations Cool Down.” End your workout and sit back, grab a glass of something cool to drink and reflect on all you've accomplished in just one hour! You started on a positive note and you’re going to end positive as well. Take this time to tell your partner one thing that you appreciate about today’s workout in order to end the discussion well.

Keep in mind that just as you don’t get physically buff in just one workout, your finances aren’t going to get in shape after the first try either. But after you and your mate have exercised with this money workout a half a dozen times you’ll find you are making progress that can revolutionize your finances in only an hour a week!

Ellie Kay
America's Family Financial Expert (R)

The Gift of Communication - Christmas Gifts that Keep Giving

In my series on “Gifts that Keep on Giving” I’m reminded of my college daughter, Bunny, and the fun we had staying at the Drake hotel in Chicago on a business trip. I really miss seeing her and today’s gift is perfect for her and her friends, it’s the “gift of communication.” When she was little, she talked non stop and now that she’s grown, she still love to chat whenever possible!


In my work with families who are on a budget, I have found that many have had to rethink their cell phone plan. In an effort to pay the bills, they may have had to cancel a cell phone plan or in some cases, they don’t have the credit to establish that service. In my quest to find a great communication alternative, I came across a cool new partnership in prepaid plans. This year, if you want to give the gift of communication to a family who is on a budget or a struggling college student, you can do so through a prepaid phone from Boost and Virgin Mobile as well as prepaid mobile broadband with Virgin Mobile’s Broadband2Go plans.

This is a partnership that is easy for me to talk about because it really benefits people who are on a budget. Let’s face it, those who need to limit their expenses, still need the ability to have a cell phone or connect to the internet. Whether you are happily employed or unemployed, it’s important to be able to pursue work situations through the use of a cell phone and through broadband connectivity.

Prepaid cell phones:

I think that prepaid cell phones are perfect for those who might not otherwise be able to afford or have the credit to qualify for a contract plan. I’ve also found they are a good option for families who have members who routinely go over their traditional cell phone limits, sometimes costing their parents lots of dollars in extra charges each month. (Ahem, not that this has ever happened to the Kay family! All I will say is: the leaves were raked and the laundry was folded by penitent teens for the several weeks.)

Prepaid plans from companies like Boost and Virgin Mobile were created for consumers such as college students who want to be able to afford freedom and independence on a budget. However, economics aside, cell phone plans such as the Virgin Mobile $25 Beyond Talk plan or the Boost Mobile $50 Unlimited plan keep both students and their parents happy. Parents appreciate being able to keep in contact with their kids, especially if there's an emergency. On the other hand, students, many of whom spend little time in their dorm rooms or apartments, like the flexibility and convenience of not having check if they’ve gone over their monthly allotted minutes.

Prepaid Mobile Broadband:
Another great gift of communication involves giving the gift of connectivity! Whether you are searching for a job, or the best price on a new pair of jeans, you need to be connected. Virgin Mobile’s Broadband2Go plans offer unlimited 3G, nationwide internet access for $40 a month with no contract. The Virgin Mobile MiFi device allows up 5 wireless enabled devices to connect at one time, so college roommates can share their gift all year long & divide the costs among themselves.

When you are selecting your gifts this year, be purposeful and try to give a gift that will keep on giving the whole year through. And Bunny, keep on calling, I love to hear how those finals are coming along!

Merry Christmas!
Ellie Kay
America’s Family Financial Expert ®

Give the Gift of Education

Christmas is one of my most favorite times of the year and this year, more people are getting into the idea of gifting than last year. In fact, according to a recent survey, 73% of consumers say that they will spend the same as last year during the fourth quarter, and 18% of consumers report that they will spend more. So spending is back up again, but I think that strategic spending is more important now than ever.
It’s important for consumers to be careful and thoughtful in the decisions they make when it comes to buying gifts this holiday. That’s why I’ve partnered with Upromise to tell my friends about the gift of education. So while parents and grandparents (even favorite aunties) are splurging on kids, why not work on saving for kids, too by providing for that cute kid’s college education?

You can open a 529 account for any beneficiary, or gift money using Ugift into an Upromise Investments 529 plan. If you don’t already have a 529 plan, then you are really missing out because the contributions can benefit from tax deferred growth. Also, gifting into one of these plans this time of year also means that you can possibly take advantage of year end tax deductions. Just check to see if you are eligible for states income tax deductions or credits for saving for college. For example, parents and grandparents can contribute as much as $13,000 ($26,000 if married filing jointly) into a 529 plan without incurring gift taxes. A special rule allows married couples to gift up to $130,000 ($65,000 if single) as long as no additional gifts are made to that beneficiary over a five year period. This also applies to recent college grads who might appreciate a meaningful gift to help pay a student loan payment. Plus, you don’t have to be a parent or grandparent to participate, other friends and family can make contributions to your child’s 529 plan by gifting money or by buying gifts, which brings me to my next point—how to save money by spending money.

Most people, know about Upromise from signing up for their buying program. I’ve been participating for years by going to Upromise.com and then purchasing through participating online retailers. These are stores where I would shop anyway and I get anywhere from 1% to 25% back for the purchases I make. And our family isn’t the only one doing this. Last year, during the holiday season Upromise members received $12 million in college savings rewards from eligible holiday spending. Because membership is free and members have collectively earned $575 million in college savings from purchasing items online or even by buying gas or groceries. I book a lot of travel for my business and often find myself eating out—all these are also included toward my children’s 529 plans.

So consider giving the gift of education to a child you love—either by saving or spending, and the world will be a much smarter place!

Happy Holidays!

Ellie Kay
America’s Family Financial Expert ®
www.elliekay.com

Gift Cards and the New Card Act

Christmas past, Christmas present and Christmas future! I love looking back at holiday pix when my babies were babies, that's part of the fun of the season.

Recently, I was on ABC NEWS, talking about the fact that for the past three Christmas seasons, the present at the top of most people’s list is the gift card. While recent surveys indicate that people love to give and get gift cards, this year, gift cards are not just for those who are short on time or scrambling for ideas. In a post recession economy, gift cards can help some families make ends meet for months to come. This year, there’s good news for those in the market for gift cards, the Credit Card Accountability, Responsibility and Disclosure Act enacted last year has imposed new restrictions on gift cards so they are more consumer friendly.

Understanding the new CARD Act rules will help you make the best selection when purchasing gift cards. First of all, there are different kinds of gift cards, so it's important to know the options and how to you decide which card to buy. There are basically two kinds of gift cards and they each have had their advantages as well as drawbacks. The credit card or bank issued cards have the advantage that they can be used almost anywhere, but traditionally, they’ve been racked with fees, including a hefty purchase fee. The other kind of card is a retailer card, which may not have the fees attached, but the obvious disadvantage is that they can only be used at a specific retailer.

Billions Lost in Christmas Past

Over the past several years there have been billions of dollars lost each year. Consumer have lost out because of expiration dates on cards, fees that can deteriorate their worth, and lost or misplaced cards. Plus, some businesses went under and the customer who had not yet finished using their card was out of luck.

CARD Act is Helping With Christmas Present

The CARD Act changed the scene on behalf of the consumer when it comes to gift cards in several ways. For example, gift cards sold after Aug 22, 2010, can’t expire in less than five years. The law also bars issuers from charging an inactivity fee unless the card has been dormant for at least 12 months. In the past, some gift card issuers deducted inactivity fees after only 30 days. Issuers are also barred from charging a fee to replace a lost or stolen card.

Even though these restrictions can do away with a lot of unpleasant surprises, it’s not all smooth sailing, there are still some drawbacks that people should be aware of. The first area is purchase fees. If you decide to give someone a gift card from a credit card or bank, then you need to expect to pay more than the face value of the card. All eight of the general purpose cards included in Bankrate.com’s annual gift card survey charge between $3.95 and $6.95.

Why do credit card and bank issuers charge these fees? What kinds of services do they pay for?

They do pay for a variety of services, including the infrastructure that allows gift card holders to check their balances online. To contrast that with retail cards, none of the 46 retailers and restaurants in the Bankrate survey charge a purchase fee for their gift cards. Some retailers go even further, offering customers a gift or discount with the gift card purchase.

Beware the Ghost of Christmas Future

There are still areas where you should consider the future in purchasing your gift card. While the CARD Act restricts inactivity fees it doesn’t eliminate them. Consumers who allow them to languish for a year or longer could still get hit with fees, which are typically subtracted from the value of the card. Most of the general purpose cards in the Bankrate survey charge a $2.50 per month inactivity fee if the card isn’t used after 12 consecutive months. But this is primarily true for the credit card and bank based cards, not for retailers and restaurants.


Isn’t there suppose to be full disclosure at the point of sale for any kind of gift card and how do you decipher these disclosures, they can be really confusing?

All of these disclosures, as mandated by the CARD act are now suppose to be on the back of the gift card itself. The info is supposed to include fees, expiration dates, and a toll free number. In July, though, Congress agreed to extend the disclosure deadline until Jan 31, 2011 for gift cards produced before April 1st. So this holiday season consumers won’t get in on that part of the good deal. This is because Congress granted a reprieve. You would think it would be a good idea, especially during the holidays, to have full disclosure for the consumer. But the gift card industry would have had to destroy 100 million gift cards, which might have had a negative trickle down effect for the industry, and would have also made it virtually impossible for card manufacturer’s to meet retailers’ order in time for the holidays. So be aware of the fact that the cards you buy this holiday may have some outdated information on them. You can find the correct information through websites that the retailer will give you as well as signage and advertisements.

Ellie Kay
"America's Family Financial Expert" (R)

Thanksgiving Family Tradition - Our Thankful Tree

There are some family traditions that are passed along from generation to generation. Then there are others that we establish for ourselves.

Well, it's time (again) for the 22nd annual "Kay Thankful Tree"!

Yes, for over two decades now, we have been collecting the following statement from our friends and family:

____________________(state your name) is thankful for __________________.

We print your message on a "leaf" and tape it on to our "Thankful Tree." At the beginning of November, the tree is bare, but as the season goes on, it gets full of your thanks. We then save each leaf and put it in an envelope marked 2010.

The photo here was our family featured in Woman's Day magazine from a decade ago. The photographer took 8 rolls of film just to get this one shot. There was an entire roll, where Joshua (the youngest) was missing and we didn't notice. We found him in the other room, playing with his army men because he was bored with the photo shoot.

We have leaves from way back when Daniel was thankful for his dinosaur, Philip was thankful for his red blankie, Bethany was thankful for flowers, Jonathan was thankful for his pacifier and Joshua was thankful for his sword!

So please don't forget to add what you (individually or as a family) are thankful for this year!

Ellie Kay