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Wednesday, October 10, 2012

POLITICS, TAXES & CUPCAKES



When it comes to election years we hear a lot of discussion around issues like taxes, social security, jobs, health insurance and budget deficits. 

You may already know that the Bush and the Obama Tax Cuts are set to expire or “sunset” in 2013. And unless Congress changes current law, individual income tax rates will revert to pre-2001 levels. The Bush Tax Cuts, which represent a much larger percentage of the cuts, were extended in 2010 for a two-year period by the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010, which is why 2013 is currently the magic number.

According to the Tax Policy Center one of the biggest increases for average households potentially comes from the expiration of the 2% Social Security tax reduction which was enacted in 2011 and in effect for 2011 and 2012. Also we could see the lowest income tax rate go from 10% to 15% and the highest rate increase from 35% to 39.6%.

Another increase would be generated by the changes in capital gains rates: the reverse of the phase out of taxes on long-term capital gains for people in the 15% and below tax bracket and the increase from 15% to 20% for other taxpayers. This could largely affect people whose incomes are derived mainly from what in tax-speak is called “unearned income”.[1]
 
In 2001 and 2003 Americans saw tax rates on ordinary income and qualified dividends go down; the child tax credit expanded, as was the child and dependent care tax credit. Also the limitation on itemized deductions and phase out of personal exemptions disappeared. President Obama proposes to extend those tax cuts for low- and middle income tax payers.[2]
 
In 2001, Congress voted to phase out the estate tax in steps until 2010 when it was completely repealed. The 2010 Tax Act reinstated the estate tax (35%) but increased the exemption to $5 million. And making a grand debut was the transferability of exemption balance between spouses meaning - any of the $5 million exemption not used by one spouse upon death may be added to the exemption available for the second spouse provided he or she has not remarried. If no changes are made, then in 2013, estate limits in effect prior to 2001 would be reinstated.  This denotes that estates valued at $1 million or more would be subject to tax at progressive rates up to 60%, and the portability option would disappear. However, the Obama budget proposes to permanently setting the estate tax at its 2009 level beginning in 2013 with estates worth more than $3.5 million set to pay 45% on the value that is over the $3.5 million benchmark. It would also make portability permanent, thereby allowing married couples to share a combined exemption of $7 million.

If all of this makes your head spin, like Linda Blair in the Exorcist, be assured you are not alone. Also please be aware I am neither condoning nor condemning any of the provisions, nor those who implemented, or extended them or may potentially change them or allow to them to expire. I believe education and understanding helps you to make informed decisions. Perfectly put by Dragnet’s Sgt. Joe Friday, I am presenting - “Just the facts”.

Now at this point you must be wondering what the heck cupcakes have to do with tax cuts. Well actually nothing. But I love cupcakes! I like to eat them; I like to make them; and I love to share them. So below is my recipe for Coconut Crème Anglaise Cupcakes. Try them out and let me know what you think!

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Cupcake Ingredients
2 ¼  cups of cake flour
1 tablespoon baking powder
½  teaspoon kosher salt
1 ¼  cups whole milk, room temperature
4 large egg whites, room temperature
1 stick unsalted butter, room temperature
1 ½ cups granulated sugar
Seeds scraped from one vanilla bean
2 teaspoons pure vanilla extract

Cupcake Directions
1.      Preheat oven to 350 degrees and line cupcake pan with paper liners.
2.      In a large bowl, sift together the flour, baking powder and salt.
3.      In a medium bowl, whisk together the milk and egg whites. 
4.      Beat the butter, sugar and vanilla bean seeds at medium speed for 3 minutes, or until the butter and sugar are well combined and light. Add the vanilla extract and one third of the flour mixture, still beating on medium speed.
5.      Beat in half of the milk-egg mixture, and then beat in half of the remaining dry ingredients until well mixed.
6.      Add the rest of the milk and eggs, beating until smooth, and then add the last of the dry ingredients. Beat for another two minutes or so to make sure everything is well mixed and aerated.
7.      Fill each cupcake liner about 2/3’s full. 
8.      Bake for 18-24 minutes, depending on altitude or until a toothpick inserted into the center come out clean. Let them cool before attempting to fill them or they will fall apart.

Ingredients for Crème Anglaise
2 tablespoons of  butter
¾  cup of granulated sugar
2 cups of cream
1 teaspoon vanilla
¼ cup cornstarch
½ teaspoon of salt
2 egg yolks, beaten


 
Directions for Crème Anglaise
Melt butter and add sugar, cornstarch and salt. Add cream slowly to mixture. In saucepan, heat until just boiling and immediately reduce heat. Slowly add egg yolks, constantly stirring and cook for about more 2 minutes. Add vanilla. Continue stirring. Remove when well combined and thickened. If you over cook it the sauce will break. Let it cool.

A broken sauce means either the fat of the butter or cream separates from the emulsification or due to excessive heat the egg yolks scramble and then the sauce becomes lumpy. Typical reasons for a sauce breaking are temperature too high, adding the fat too quickly, not whisking the fat into the sauce quickly enough, or allowing the mixture to stick to the sides by not stirring constantly while being heated.


Filling the Cupcakes
Using a medium round holed Wilton tip, fill a pastry bag with Anglaise and press the tip into the top of your cupcake. Gently squeeze the bag, filling the cupcake slowly so it just comes out of the top.

Ingredients for Coconut Topping
Confectioners’ sugar
Water
Shredded Coconut

Directions for Coconut Topping

Make paste using just enough water to make it smooth but not so much that it is runny. This is not exact – think of glue. Turn cupcake upside down and swirl in the frosting paste until the top of the cupcake is lightly covered.

Spread the shredded coconut onto a plate or into a bowl making sure to separate out or break up chunks and now swirl frosting topped cupcakes in the coconut. If the paste gets too stiff simply add a little more water a teaspoon at a time stirring it in as you do.

You now have yummy Coconut Crème Anglaise Filled Cupcakes!




[1] Income derived from sources other than employment, such as interest and dividends from investments, or income from rental property.

[2] Low- and middle- income tax payers are defined as married couples with income below $250,000, and singles under $200,000, both 2009 values, as indexed for inflation.

Friday, August 17, 2012

so·cial [soh-shuhl] se·cu·ri·ty [siˈkyo͝oritē]


SOCIAL SECURITY  – Some of us think there won’t be any left by the time it’s our turn but I believe there will.  True, “baby boomers” are turning 65 at the rate of about 10,000 a day,  but not all of them are taking their benefit right away (which can be claimed at a reduced rate beginning at age 62). 

Guideline #1 - You get less money when you take your benefit early.
Guideline #2 - You get more money if you take your benefit later. 

The difference between taking your benefit as early as possible or waiting until age 70 is that waiting provides for a benefit that is 76% higher.  But this also means you will have to depend on your other financial resources while you wait to reach 70 in order to get that increased amount. 

For example, consider retiring and taking your benefit at age 62 with an annual benefit of $16,440 a year. If you wait until age 66 and 6 months (depending on what year you were born), the benefit would increase to $23,376 annually; wait until you reach age 70 and you would receive $30,528 which is close to double.
  
If you’re married it may make sense to take the lower income-earners benefit sooner to help defray the cost of living expenses. This way you also lock in the largest possible survivor benefit for the remaining spouse. 

Those born between January 2, 1943 and January 1, 1955, reach full retirement age for Social Security at 66.  If you work and are full retirement age or older, you keep all of your benefits, no matter how much you earn. For people younger than full retirement age, there is a limit to how much you can earn and still receive your full benefit. Anyone younger than full retirement age in 2012 will have $1 deducted from their benefit for every $2 earned above $14,640. Yeah I know, this gets complicated and is a lot to remember.


Other Stuff  You May Not Know About Social Security:
  1. Social Security benefits are calculated using your 35 highest-paid years while working.
  2. There is no additional benefit to waiting beyond age 70.
  3. Spouses can claim benefits. Spousal benefits may be worth as much as 50% of the higher earner's Social Security payment. Two-income married couples who have reached full retirement age can even claim Social Security twice by signing up for spousal payments, then later switching to payments based on their own work record. 
  4. The Social Security wage limit for 2012 is $110,100 meaning you pay no additional Social Security tax on amounts earned over that wage limit. The base wage limit is typically adjusted every year for inflation.
  5. If you began collecting your Social Security within the last year and then change your mind, you can repay all the benefits received, and reapply for a potentially higher benefit at a future date.
  6.  6.  If you work for someone else, only your wages count toward Social Security’s earnings limits. If you are self-employed, only your net earnings from self-employment are counted towards calculating your benefit. Social Security does not count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains. 



    A Brief and Wonderful History of Social Security
     
          Although formally the Social Security Act was not enacted until 1935, it all started during the Great Depression in the early 1930's as "social insurance". Poverty rates amount senior citizens exceeded 50% and the stock market crash along with bank failures, destroyed many American's retirement savings [insert your comments about the lost decade of the 2000's here]. 

    It was President Franklin D. Roosevelt's first term when the act was passed by Congress as part of the New Deal. The goal was to help the most fragile members of society (the elderly, those effected by unemployment, poverty, widows and fatherless children).


For more information on the history of Social Security, follow this link:  

 Refresh your memory regarding FDR's "New Deal" initiative by clicking here:



      My MacGyver Moment:   Have a stripped wood screw that just keeps spinning like the one in my back door?  This is apparently not that uncommon. If you don't have a longer screw to replace it with or if a longer one won't do, try this:  Remove the screw and put a couple of toothpicks into the screw hole. I used three but put in enough to fill the hole. Then break off the ends sticking out and put the screw back in. Rumor has it chopsticks, steel wool and golf tees also work. Who knew?


The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go to IRS.gov.







Tuesday, July 17, 2012

WILL I WILL OR WILL I WON'T?

What is it that scares people so much about making a will? For some it is superstition. "If I make a will something bad will happen to me". For others they may think it is expensive, complicated or irrevocable. The truth (at least about the last three) is that NOT having a will assures those things will become a reality should someone pass away intestate (without a will).


Writing a will used to be more expensive but with the ability to compare costs and services of estate planning attorneys, you have the potential to be a more informed consumer.   Making decisions today about who you want to care for your children, how assets are to be distributed and circumventing possible tax issues are vastly important, but it does not have to be complicated.

A good place to start is by making lists:

  1. Make a list of your assets, including account numbers, phone numbers and where to locate the asset.
  2. Decide who gets what. If it is a retirement account or annuity, you can attach a beneficiary designation directly to the account or policy but remember, whatever the designation states is binding even if you name someone else in your will to receive that asset. Some states also provide for a Transfer on Death (TOD) or Payable on Death (POD) designation for non-retirement accounts. This means the asset transfers automatically upon death and avoids probate too!
  3.  If you have children who are under 18, decide who you want to raise them in the event that you couldn't and discuss naming that person as guardian. Also choose someone to manage your children's property if you leave them assets.
  4. Decide who you want to serve as executor of your estate because every will has to name someone to carry out the terms of that will. Discuss this with them ahead of time to make sure it is something they are willing to do. Handling someones financial affairs can be daunting. If you do not name anyone, the court will appoint someone for you and it may not be a choice you would have made.
  5. Once you have made these kinds of decisions, you are ready to make your will!  Having this information on paper ahead of time will help make the final process quick and efficient whether you use an attorney (which we suggest) or if you use a do-it-yourself software.
  6. Other important legal forms to complete are a health care proxy, living will, and power of attorney. A health care proxy is a legal document that allows you to appoint someone to make health care decisions for you should you be incapable; a living will or advance health care directive, contains written instructions that specifies what actions should or should not be taken regarding medical treatment if you are no longer able to make decisions; a power of attorney is written authorization for someone other than you, to act on your behalf in private, business and legal affairs with the same power as if you were acting on your own.
  7. We also suggest putting together a "treasure map" which identifies account numbers, phone numbers and where things are. A life insurance policy resting inside a safety deposit box that no one has access to or worse, no one knows exists, can have a devastating effect on your beneficiaries and loved ones. Let your executor, attorney or someone else you trust, know where everything is!

A will, power of attorney, living will and health care proxy are essential documents for all adults. Having these in place and updating especially after a life changing event (birth of a child, marriage, divorce, sale or purchase of property), is the right thing to do for you and your family. 

So will you "will" or will you won't?


For additional information and some helpful checklists see what AARP has to say by clicking here: http://www.aarp.org/money/estate-planning.

Wednesday, January 4, 2012

LAND OF THE FEE OR CAN YOU HEAR ME NOW?

2011 seemed to be a GOOD year for BAD business decisions.  It also seemed to be a GOOD year for the consumer to yell "I'm mad as hell and not going to take it anymore".  Several companies (all household names) attempted to increase their revenue by increase our fees but consumers stopped them in their tracks. Think Bank of America, Netflix and  Verizon.

Bank of America was first when they tried to impose a $5 monthly fee to use their debit card for purchases. This was in addition to fees for using the same card at ATM machines. Those fees quietly crept up and perhaps BOA thought since consumers did not create an uproar over that, this new fee may be received the same way. But such was not the case. Announcement of the fee created a consumer uproar and competing banks, Wells Fargo, JPMorgan Chase and Sun Trust (all of whom had the same plan) decided the fee was a "no go" leaving BOA as the last man standing. Why did they change their minds? Although they never disclosed how many customers bailed at the announcement, "sources" indicated that account closures were "higher than usual" and smaller institutions said acquisition rates increased significantly during the days following the announcement of the fee.

Netflix had their own announcement and what a trifecta it was! They increased their fees, capped streams per household and lost the Starz contract. Their plan to split-up the company and have members need to access two websites was short-lived and Qwikster was "quickly" abandoned. Add the power outage plague Netflix experienced and well, movies and tv shows weren't the only thing streaming. Giving customers less and charging more (60% increase) does not seem to be a very sustainable business model. Just ask Redbox who saw a huge increase in sales when 800,000 Netflix customers "streamed" out the door.

Verizon had similar ideas when it announced it would begin charging a $2 fee for customers to make a one-time credit or debit card payment on the phone or online. This "convenience fee" (more on that later) was to be implemented on January 15, 2012 but once again customers said NO NO NO. Protesting customers used social media and online campaigns to make their voices heard so loudly one can only ask "can you hear me now" and clearly Verizon did.  With pressure mounting Verizon realized their new fee was a public- relations disaster and a bad marketing move. The company smartly dropped the fee Friday, citing "customer feedback."

Hire this woman: The campaign against Verizon was led by Molly Katchpole, of Washington, who can now add two successful campaigns against big business to her resume. Katchpole also led the protest that forced Bank of America to abandon their ill-thought out $5-per-month fee for debit-card use after she obtained 300,000 signatures on a petition.

*Convenience - [kuhn-veen-yuhns]  noun    1. anything that saves or simplifies work, adds to one's ease or comfort, etc., as an appliance, utensil, or the like.    2. Allows business to get their payment faster and with less human interaction and expense.

Speaking of fees, I decided this year I am going to save every credit card solicitation I receive in the mail just to see how many I actually get. I am pretty sure I get about five a week or at least it feels like that many. 
You ever wonder how much money it costs to write the text, buy mailing lists, lay it out, have it printed, stuffed and mailed? Well I have been wondering too. And then I wonder how much of the fees and interest and annual fees that I pay subsidize these excessive mailings. One would think that after years of sending me these applications which I simply shred, they would figure out their ROI (return on investment), at least when it comes to me, is negative. If I had an employee who called one lead five times a week for years with no sale - that employee would be long gone. What do credit card companies know that I don't? "Hello, this is Peggy".
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 My one resolution for the new year is to try and reduce how much I spend on nonessential things like eating out. I'll let you know how I am doing by updating the amount each month. Sometimes dinner was my treat but here we are so far!

2011 = $1,865
2012 = $30

Oh and tax season has officially started!

Receive 10% off first-time services by emailing the correct answer to our question of the week at info@cyndiebarone.com and visit our website at www.cyndiebarone.com for more information about our services. 

The correct answer to last month's polling question - "What do people most often do with a fruitcake they receive" is re-gift it! Congratulations to JG from Nicholasville who got the correct answer.

Disclaimer: Tax advice contained herein was not written to be used and cannot be used to avoid payment of taxes or to avoid penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions. All information provided is for illustrative purposes only. You should contact an accountant, tax preparer or tax attorney for advice or information specific to your situation. This information is not to be used as a directive.