Sunday, March 27, 2016

Requesting “Doggie Bag” at a Business Lunch

Amy writes:

When I graduated from college my mentor gave me a list of business rules* to follow.  One of her recommendations was to never take anything home from a business lunch in a doggie bag because it makes you look cheap.  Recently at an interview lunch, I was nervous and unable to eat more than a few bites of my entrée.  While I would have appreciated the leftovers, when the waitress asked if I needed a take-out box I said no.  My interviewer appeared annoyed and asked why I wasn’t taking my leftovers home.  I blurted out I was told you should never request a doggie bag at a business lunch.  He said that was ridiculous and I walked out with a doggie bag.  Was I wrong?

Dear Amy,

In this instance I think you were not wrong to refuse the doggie bag, you were wrong to not attempt to eat more.  When you didn’t accept the take-out box the interviewer must have thought you were being wasteful. I once attended a business lunch where a guest ate only a few bites of her salmon entrée.  She too refused the take-out bag.  I didn’t say anything, but surmised she had not liked the food.   

In choosing what to order at a business lunch, I always select the easiest item to eat in the mid-priced category.  Usually for a lunch this is a sandwich.  I then focus on eating the main entrée leaving the sides especially fries or chips for last.  If I can’t finish all my food, it still looks like I’ve eaten the majority of my plate.  I also sometimes stop eating if everyone else has long since finished.

On a side note, the person requesting the lunch should always pay the bill.  I’ve had a couple of business meetings at coffee shops where the party requesting the meeting was late.   I usually give them a few minutes, then go ahead and buy my own coffee.  This too is probably a mistake, but it just feels weird to me to sit there with nothing and wait.

Do you request a doggie bag at a business lunch?  What about coffee shops, if you are the first to arrive do you buy your own coffee?

*Other items on her list were to never hang your sweater over your chair, never let them so you cry and to always go alone to networking events – you are forced to meet other people.

Sunday, March 20, 2016

Rethinking My Decision to Prepare My Own Tax Return

I have always considered my ability to prepare my own taxes a side benefit of my CPA license. I work in industry, so I don’t prepare anyone’s taxes other than my own, but felt I was proficient enough to prepare my own return. This year was different than prior years in that my husband had pension and social security income for the first time, we sold investments and I was hoping to use the personal energy credit for the water heater and gas furnace we had purchased in 2015. I spent three weekends preparing our returns and in hindsight think perhaps I should have used a professional preparer. Here are a few things I learned:

Only 85% of social security benefits are included in taxable income.

My husband started receiving social security last year, since I work full-time I knew we would pay tax on this income, but was surprised TurboTax included only 85% of this benefit as taxable income. According to the SSA website
No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules.
Pensions are taxable, but not according to my husband’s 1099-R.

On the form 1099-R my husband received for his pension, the taxable amount box was blank and the taxable amount not determined box was checked. When I entered the 1099-R exactly as provided, TurboTax concluded the pension wasn’t taxable. After reading TurboTax guidelines concerning pension income, I decided the pension income had to be taxable and entered it accordingly.

Remember the personal energy credit I was so excited to take advantage of:

From my post Appliances Don't Qualify for Energy Credit:
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 turns out:

The energy credit for natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater is capped at $150.

TurboTax did not ask for any information on water heaters, so we did not receive a credit for the new heater. Today I found the following on the website:
Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300.
Perhaps I missed something for the water heater, but at the time I determined we were only eligible for the $150 credit. 

Establishing cash basis for our sold investments was kind of nightmarish:

The 1099-B I received for our sold securities included basis for only a portion of our sold investments – there was a section for transactions for which basis is reported to the IRS and another section titled transactions for which basis is not reported to the IRS.

My boss, who prepares taxes on the side, informed me there was a law change about four years ago requiring brokerage firms to provide basis information for mutual funds purchased after January 1st, 2012. Since the assets we sold included mutual funds purchased both before and after January 1st 2012, the 1099-B provided basis only for the assets purchased after this date.

I called our brokerage firm who was able to provide the original cash basis for all our sold investments. I then had to reconcile the basis by each individual asset by date (there were several pages of these). The final cash loss I calculated did not equal what was on the 1099-R. In the end, my husband pushed me to file with the information I had. The loss wasn’t off by a lot only about a hundred dollars and I did use the lessor loss. If we are ever audited and I was wrong at least the IRS will owe us money.

Taxable losses can be deducted up to $3000 and the excess can be carried over to future returns:

According to the IRS website:
Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040.

Losses in excess of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses is used up.
Okay I am sure I knew this when I took the CPA exam, but didn’t make the correlation when we sold the assets. I deducted the loss and am not questioning this one further.

Our taxes are filed – I paid $92 for the federal and state TurboTax Premier. I know of a tax preparer who sets her fee based on the number of forms she prepares, so I imagine I would have paid $250 or more if I’d have hired someone to prepare this return. My co-workers tell me my boss’s fees are reasonable, but I didn't want him to know my entire financial situation. I think I will be okay preparing my return next year, but if we ever sell securities again I will strongly consider seeking professional help.

Do you prepare your own tax return? Are you sure you took advantage of all the incentives available?

Disease Called Debt

Sunday, March 13, 2016

Why Your Spouse Hides Money?

In a previous post I mentioned I’ve had a few requests over the years from employees who wanted to hide money (commissions, bonuses and pay increases) from their soon to be ex-spouse during a divorce. Divorce, though, is not the only situation where I’ve received requests from employees wishing to hide money.

When the company where I work was in the process of transitioning payroll processing to an outside provider our owners decided to make direct deposit mandatory.  Check distribution had become a nightmare for our in-house payroll staff.  One week an employee would want their check mailed to their work location, the next to their home, sometimes they changed their request more than once for the same paycheck. If a payroll clerk made a mistake or didn’t get the latest message she was verbally abused and complaints were made to the owners.

Not everyone was in favor of direct deposit:

When the mandatory direct deposit announcement was made, several employees at one of our locations threatened to contact the department of labor.  They felt their rights were being violated. These employees were paid via commission and were using a portion of their check, unbeknownst to their spouse, to fund their weekly poker game. Since commissions fluctuated, their spouse didn’t miss what she wasn’t aware of.  Mandatory direct deposit is not legal in all states, but is in the state of Wisconsin, so our owners went with their mandatory direct deposit plan. Pay-stubs were mailed to the employee’s home.

After the transition to direct deposit, complaints stopped and conflict over paycheck whereabouts subsided.  That is until we announced we were issuing separate bonus checks this year. The same group of employees from above requested these checks be mailed to their work location rather than their home. They didn’t want their spouse to know they had earned a bonus. They actually made the comment, “If we screw this up heads will roll.”

The above employees were all male, but I also know a wife who hid money.  When my male co-worker’s spouse changed jobs a few years ago she failed to tell him she had neglected to roll over her 401(k) distribution money into another qualified plan.  He discovered this upon receiving an unusual 1099 the following year.  When he asked where the money had gone, she confided she used it to pay down credit card debt. Debt that currently had a balance of over $20,000. This debt also came as a surprise.  Her credit card statements had been mailed to her sister’s house. What had the credit cards been used for? Nothing in particular; clothes, shoes, purses, and expensive beauty products.

This marriage survived, but just barely. My co-worker took over the management of their finances, he cut up her credit cards, she took a side job cleaning offices to help pay down her debt, he opened a checking account in his name and gives her a monthly allowance.   He has tried to teach her about money, but thinks she’s not listening.  She spends her entire allowance each month without saving a single penny. He confided he has a hard time trusting her and occasionally checks her vehicle’s trunk for hidden purchases. 

I suggested perhaps he is not the best person to teach her about money:

I am sure it is hard for him to not let his anger surface during these money lessons making it easy for her to shut him out.  I’ve heard good things about NFCC and Dave Ramsey’s classes which are commonly held at local churches.  I recommended they attend a class or financial counseling session together. He vehemently disagreed. She needs financial training not him and refuses to go with her.

I had a conversation with her recently when she stopped by our office, she tells me they don’t have cable or internet at home and she finds this burdensome.  She was also on her way to buy some Aveda shampoo because it made her hair smell so nice.

They need help setting joint goals:

He wants to move to a bigger home, to save for their son’s education and to save for their retirement.  I’d be surprised if she doesn’t want these things too. A counselor could help them prepare a budget they both could live with. She also needs to learn how to spend less than she earns and the importance of an emergency fund.

Why do spouses hide money?

A spouse may feel since they are the one who earned the money they get to determine how it is spent, their goals aren’t in alignment, they are covering up a bad habit or they are competitive with each other.

Why do you think spouses hide money?

  *Part of Financially Savvy Saturdays on brokeGIRLrich, Disease Called Debt and DIY Jahn*

Sunday, March 06, 2016

Financial Considerations in a Collaborative Divorce

Last week I ran into an acquaintance who is in the process of getting a divorce. She tells me things are going smoothly; it is a collaborative divorce with no attorneys involved.  Both she and her spouse are going out of their way to be civil towards each other for their children – a 12 and 14 year old.  They are also amicably splitting their assets and will have joint custody.

The accountant in me had to say, “Don’t forget to discuss which parent gets to deduct the children on future income tax returns.”

She responded with “I never thought of that.” and “How do you know that?”

I’ve worked in some aspect of accounting for almost 30 years and have my CPA license, but to be honest, most of what I’ve learned about the financial pitfalls of divorce comes from co-workers and friends complaining after things have gone badly.

Here are a few tips:

Claiming your children as dependents:

Usually the parent who has custody of the children for the greater part of the year will claim them as dependent exemptions on their income tax return. This is an important designation because most often the parent who can claim their children as deductions is also the parent who receives other tax related benefits and credits.

Head of Household

This filing status is only available to the custodial parent. It provides a bigger standard deduction and looser tax tables than single taxpayer status.

Higher education costs:

The spouse that claims the children as a dependent is the parent allowed to claim the American Opportunity Lifetime Learning Credit (this can be worth up to $2,400 during the first four years of a child’s education). If you do not claim your children as dependents you can’t claim this credit even if you were the parent paying their college bills.

Get it in writing:

In joint custody situations parents can take turns claiming the children, but this has to be in writing. Make sure it is part of the divorce agreement.  If the non-custodial parent wishes to claim the child, the custodial parent must waive their right to claim the child on IRS form 8332.

Don’t assume you are entitled to the exemption because you pay child-support:

A newly married co-worker filed a joint tax return with her new husband claiming his daughter from a previous relationship as a dependent. (She thought the first parent to file gets the exemption).  The child’s mother also claimed the child despite being told my-coworker had claimed her.  His return was audited, the IRS deemed the mother as the custodial parent and eligible for the deduction.  My co-worker and her new husband had to pay back taxes were fined and required to pay interest on their return.


Alimony is considered taxable income for the recipient.  If you receive alimony make sure you make estimated payments or set aside a portion of each check so you are prepared for your tax bill the following year.

Alimony payments are deductible by the person paying them, but only if made on account of a divorce decree or written agreement. An oral agreement will not suffice and payment must be in the form of check, cash or money order.   

Retirement savings:

401(k) distributions are taxable.  If you want your spouse to be responsible for taxes on distributions they receive from your retirement account make sure your divorce papers include a (QDRO) qualified domestic relations order. Without a QDRO, you may end up paying the tax bill.

Spouses do hide money:

This is probably the biggest lesson I can give you.  During my 30 years of working in accounting departments I have been asked more than once to not pay a commission, bonus or to withhold a raise until after an employee’s divorce is final.  I’ve seen this at more than one company and the request is always granted – it is the employee’s money.

I’m not familiar with how collaborative divorces work, if lawyers are not involved I recommend consulting with one anyway to make sure all interests are covered.  Consulting with a tax accountant can’t hurt either.

Are you aware of financial pitfalls in a collaborative divorce?

Disease Called Debt