Appliances Don’t Qualify for the Energy Credit & Other Tax Tips

To stay informed of changes to the tax code, I attend an annual tax update seminar every January. Here are a few tips I learned from this year’s event:

The personal energy credit has been extended:

The $500 lifetime credit (10% of cost up to $500) for energy efficient improvements has been extended until 12/31/16.  I am excited about this one since we installed a new furnace and water heater in 2015 – although $500 doesn’t come anywhere close to covering 10% of what we spent. 

It is important to note appliances do not qualify as an energy efficient improvement despite the sales rep at your local appliance store* insisting they do.  According to Energy Star, upgrades to biomass stoves, air source heat pumps, central air conditioning, gas, propane, or oil hot water boilers, gas propane or oil furnaces and fans, insulation, roofs, water-heaters (non-solar) windows, doors and skylights do qualify if they are upgraded in an existing home that is your principal residence. New Construction and rentals do not apply.

Audits of charitable donations are on the rise:

Our speaker, who works as a tax preparer, has seen an increase in client audits of charitable donations in recent years. To make sure your donations are not disallowed make sure you have proper documentation.

For Cash donations under $250 you will need a cancelled check, credit card receipt or written communication from the charity.

Cash gifts over $250 must be substantiated by the charity. 

Noncash donations under $250 must be supported by receipt, written communication from the charity or written records.

$250 or over must be substantiated by the charity.

$500 or over must include acquisition detail.

$5000 or over requires written appraisal.

Documentation requirements:

Written support must include the name and location of organization, date of donation, description, value and condition.

Those coupons you receive with only a date stamp when you drop your donations off at a goodwill or charity drop boxes are not considered adequate substantiation. Our speaker has seen these types of donations disallowed.  With those coupons the IRS cannot verify you actually donated ten sweaters, they were worth $25 and were in excellent condition. Instead she recommends dropping items off at the charity’s main location the requesting applicable documentation.  If that isn’t possible she suggests taking photos of your donations.

You can stack these childcare deductions:

Child and dependent care credit

The child and dependent care credit is allowed for children under age 13 and other qualifying dependents.  Eligible expenses are limited to $3000 for one dependent, $6000 for two or more. Income limits do reduce the credit, but don’t phase it out completely.

Flexible spending FSA deductions

Take advantage of employer sponsored flexible spending FSA deductions.           You can contribute up to $5000 in employer sponsored FSA account.  The FSA plan then reimburses your dependent care expenses using pre-tax dollars.

You can’t use the same child care expenses for both the credit and the FSA deduction, but you can stack them.  Meaning if you have $8000 of annual expenses you can deduct $3000 as a tax credit and be reimbursed $5000 from an FSA plan.  Just remember a portion of the dependent care credit could be phased out due to income limits.

*According to an auditor I know who used to audit appliance stores the mark-up on appliances is 300%.

Do you have any tax saving tips to share?

Should Mom Pay for Daughter’s Blue Hair?

 Kim asks:

While home from college over winter break, my 20-year old daughter asked for $300 to get her hair highlighted blue.  My husband refused to pay for such a ridiculous expense. She then stormed out of the house spending most of her remaining break with friends.  We’ve paid for her hair styling in the past, but she usually didn’t spend more than $75.   

My husband and daughter have a history of conflict beginning two years ago when he took away her phone and car until she broke up with her boyfriend - who we both thought was a loser.  She broke up with him a month later right before she left for college. The relationship between my daughter and husband hasn’t been the same since. We pay her tuition and give her $400 a month spending money.  She uses this money to pay her rent which is $300 and to buy food.  She also has a credit card.  I’ve been paying her credit card bill each month which has been as high as $600 and am starting to resent it.  My husband thinks I’m spoiling her and that she needs to pay her card with her own money. I would like her to save her money for graduate school.

We also don’t like her new boyfriend, but I won’t let my husband force another break up.  She was so cold towards him the last time. I want my daughter to be successful and happy what should I do?

Should Kim pay for her daughter’s blue highlights?
I asked my own stylist if blue highlights were popular at her salon.  They are not, her salon doesn’t even stock blue dye. Blue highlights are expensive because it requires a two-step process that involves stripping the natural color from your hair then adding the blue color. She doesn’t recommend blue because it requires a lot of maintenance to keep blue looking good. Blue doesn’t hold up well on hair and may fade to an ugly green after only a few weeks.  She also thinks at twenty Kim’s daughter is an adult and needs to have adult hair – which is not blue.  If she wants to have a little fun with color, she recommends purchasing blue hair extensions instead.  The one below can be purchased here for $9.99.

What is really happening here?
You are both treating your daughter like a child and she is acting like one. Do you really think your husband forced you daughter to break up with her boyfriend?  I don’t.  I think she broke up with him because she wanted to.  If she didn’t want to break up with him she would have told you they broke up just to get her stuff back then continued to see him behind your back.   Check out this post where I answered a question on how to get your daughter to break up with a loser. (Short answer - you can’t.) I also think your daughter knows her frivolous spending irritates her dad which is why she asks for things like blue hair.

You and your husband need to stop playing good cop/bad cop in regards to money. It isn’t good for your relationship with your husband or your relationship with your daughter. I suggest the three of you sit down and go over your daughter’s fixed expenses.  I’m sure $400 is not enough to cover rent, food, utilities, gas and other miscellaneous school expenses. You and your husband need to agree on an amount you are both willing to give your daughter each month then you Kim can’t give her more after the fact. Be very clear how much you are giving her then let her know she will be responsible for the rest.  Instead of saying I’ll pay $75 for this, but I won’t pay for that, just give her $500 and let her manage her own money. I would be very surprised if her credit card spending does not go down once she has to dip into her own savings.

Do you require your children pay a portion of their expenses while in college? How did you determine how much to give them? Did you ever try to manipulate their decisions with money or stuff?

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The Problem with Recruiting Companies

When my employee resigned resigned last year, our human resource manager decided to use a staffing agency to replace her.   She went with a prominent agency who sold us on temp-to-perm. The perfect candidate had just walked through their door and could start the next day. We wouldn’t even have to interview her. Instead, we’d conduct a working interview – evaluate her work for one full day for free.  If we felt she was a good fit we’d keep her, if not they would provide a new candidate. 

I reviewed the candidate’s resume which looked promising.  She had 7-years of solid accounts payable experience. She had left the payables job a year ago after a management change. Since her degree had been in marketing, she had decided to try to get into her field by taking a job in retail.  After a year of working retail she now thought she had made a mistake and wanted to get back into accounting.  I agreed to the working interview.

My current employee had two weeks remaining of her 3-week notice. I wanted her replacement to get as much training with her as possible. When the temp she showed up the next day – five minutes late – I introduced her to my current employee who immediately began the training process.

At the end of the day I met with the temp.  We talked about her accounting background. She provided some great ideas to improve the efficiencies of our payable systems.  Of course I was impressed.  She did say she would have a hard time making our 8:00 start time because she needed to wait until after her daughter was on the bus.  We agreed to an 8:15 start time. After working for us 90-days, if all went well I told her we would offer her a permanent position.

She was a great employee for about a month.  Then the 8:15 became 8:30.  Sometimes it was 9:00 and even 10:00.  There was always an excuse and most of the time she called in: she had a tooth ache, she needed emergency dental surgery, her daughter missed the bus, she was sick, her daughter was sick, her car wouldn’t start, her sister needed a ride, her car wouldn’t start again and lastly she had forgotten to take out the garbage. I’d had enough.  I gave her a warning.  She needed to be at work every day on or before 8:00 for the next 3-weeks, not 8:15, but 8:00 or I was not going to make her a permanent employee.  I also gave her work related goals.  Forget about all those great ideas she had; she wasn’t coming close to keeping up with the daily work. 

The next day she was 5 minutes late. She continued to be 5 – 10 minutes late every day for about two weeks.  Then she woke up with a stomach ache and called in saying she would be a couple of hours late.  I was done. My boss didn’t even get a vote – he still liked her ideas.  I called the agency requesting a new candidate.  The agency provided a new temp in two days.

The funny thing is in follow up conversations with the agency they told me there was a note in my previous temp’s file:

She had called 2 weeks earlier (the day I had given her the warning) and asked the agency to reassign her.  She didn’t like our processes and didn’t want to work for me.

No one at the agency had bothered to let us know. 

We were offered discounts for our new temp.  They also performed a background and reference check on our previous temp. Based on their discoveries, which they wouldn’t share, they weren’t going to use her again.

My new temp worked is a gem and after 90 days she became a permanent employee. 

One day shortly after my new temp became permanent she shared her experience working with this employment agency. Her job with my company had not been her first temp-to-perm position. She had been with a different company previous to ours.  This company offered her a permanent position.  She told the agency she didn’t want the job.  She didn’t like the work and her office was in the basement.  It reminded her of the mailroom in the movie Elf.

http://www.simblissitycottage.com/2014/03/transitioning.html

The agency wouldn’t take no for an answer telling her to think about it.  They called her a few days later and gave her one of the strongest sales pitches she has ever been subjected to, but she stayed firm and said no.

Now I know why the agency never told me us my previous temp had asked to be reassigned:

They were trying to change her mind.

The problem with recruiting agencies (or at least this one) is that they are only concerned with the sale. They don’t seem to care about the companies they are working for or their recruits.  They just want to earn a commission.  And what is up with not performing background and reference checks prior to a permanent offer?  I was told this is standard policy. I can’t help but wonder if our HR manager would have recruited this candidate instead of the agency we would have spotted something and not wasted almost three months of training time.

Have you had a bad experience with a recruiting company?

A "Savvy" New Year

If I could summarize 2015 in one word it would have to be “overwhelming.” It began with having a stressful year-end close after the company I work for had its busiest December ever – I am the accounting manager. Then the day after our year-end audit was completed one of my employees resigned. Her replacement didn’t work out, but of course we didn’t discover she was inept until after she had incorrectly posted a month and a half of payables. I spent most of the summer correcting her work, training a new hire, a summer intern and lastly a part-time employee. On my summer intern’s last day she told me she would never want a job like mine because it seemed - overwhelming.

The good news is after numerous meetings and discussions with my boss and company owners they authorized me to hire a part-time employee. She is awesome and for the first time in the 16-years I’ve been at this company I have someone to help me with “MY” work. So far, I am experiencing the easiest January I’ve ever had. There are rumors that we switching our business software in 2016, so this lull in my workload is most likely temporary. 

I started 2015 with the goal to live healthy on a budget. Living healthy quickly went awry as I began working eleven hour days. I stopped going to the gym and became a frequent visitor to the work candy bowl. Once work settled down, I cancelled my gym membership and joined Jazzercise which is a better fit for me. Their location and class schedule is more convenient and I find the classes more enjoyable and injury free.

But I didn’t get back to working out on a regular basis, until Jazzercise announced their holiday challenge. If I worked out 20 times between November 15 and December 24th, I would win a cosmetic bag:

 

 

I didn’t need or want the bag, but I enjoyed to process of signing in each night and working towards an achievable goal.  With one day to spare, I am happy to announce I took home the little bag.

There is a new challenge for February – attend 30 classes in 35 days and win a tank top.  I know this isn’t a doable challenge for me.  With my work schedule and other priorities I can't realistically attend more than 25 classes.  The Jazzercise owner seemed dejected when I told her so.  She wants everyone to succeed.

Which brings me to my birthday challenge - to become savvy at 53. Back in July I set a goal to read 200 nonfiction books in five years.  The premise is 200-500 books is the equivalent of one good mentor. To date I have read ten books:

1. The Warmth of Other Suns: The Epic Story of America's Great Migration by Isabel Wilkerson

2. The Gifts of Imperfection: Let Go of Who You Think You're Supposed to Be and Embrace Who You Are by Brene Brown

3. Flow: The Psychology of Optimal Experience by Mihaly Csikszentmihalyi

4. Stalin's Daughter: The Extraordinary and Tumultuous Life of Svetlana Alliluyeva by Rosemary Sullivan

5. Half the Sky: Turning Oppression into Opportunity for Women Worldwide by Nicholas D. Kristof

6. I Am Malala: The Girl Who Stood Up for Education and Was Shot by the Talibanby Malala Yousafzai

7. The Only Woman in the Room: Why Science Is Still a Boys' Clubby Eileen Pollack

8. Into Thin Air: A Personal Account of the Mt. Everest Disaster by Jon Krakauer

9. Between the World and Me by Ta-Nehisi Coates

10. Bad Feministby Roxane Gay

At this rate I’m not going to make my goal, but I don’t want to quit.  So instead I’m giving myself an attainable goal for 2016 - I plan to read 30 nonfiction books.   

Another piece to becoming savvy at 53 is to write down 10 ideas a day. I am happy to report I have kept up with this and have several post ideas I hope to share in the future. My ultimate goal is to bring back Ask Savvy which are my favorite blogging posts.

What are your goals for 2016?  Are they realistic and attainable?

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