I have been asked by quite a few of you about the TN Sales and Use Tax. Many of you have received an email from Amazon (or Amazon affiliates) regarding online purchases and the TN use tax due. There has been recent legislation regarding out of state purchases here in TN. Matter of fact, new legislation was signed into law March 23, 2012 to solidify the state’s position to collect use tax (sales tax) on out of state purchases.

Although the “use” tax language has been around since 1947, the recent changes have propelled this to the forefront, especially with Amazon. The connection to Amazon makes sense due to the giant tax relief TN has extended to Amazon to open a facility here in the state. Maybe this is one way Amazon is giving thanks back to the state.
What is Use Tax?

Simply put, use tax is essentially the same as sales tax. Sales tax is charged by merchants, retailers, and other organizations at the point of sale. Use tax is a tax imposed on products purchased out of state which had no sales tax charged against it. Again, use tax is a tax (sales tax) charged against an item purchased out of state but “used” in TN. Most use tax issues will come from purchases made from online retailers with no sales tax paid, such as Amazon.

Why now?
Again, it makes sense why the state is now pursuing this more aggressively. Recent gift tax laws have changed, which will reduce revenue to the state. All of this, when the state needs money, points to the fact that TN is going to get more serious about collecting use tax.

How do I file?
I can actually discuss the use tax return first hand, for I filed my own use tax return last week. The filing is very simple and can be completed online with this link: https://apps.tn.gov/usetax/

Filing Facts: What’s needed?
You will need personal info, such as name, address, and SSN. You will also need the total amount of purchased made from out of state. For those who received the email from Amazon, the amount in the email is the total. There is a section on the return which ask how many purchases where made and the date. After speaking with the state, I have learned it is okay to combine purchases, as well as insert any recent date for the date of purchase.

The online form is very simple to complete, and the tax is automatically totaled. Please note when filing online you only have a couple choices of payment. Credit Cards are accepted (all but VISA oddly enough), but there is a 2.49% processing fee. You may also pay with a bank draft, which was my choice. The funds will be pulled directly from the checking or savings account of your choice.

While we don’t enjoy writing a check to the state for additional tax due, we also need to be aware that this is also an effort to protect local merchants and retailers. Another bit of news on this topic: Amazon will begin to charge TN sales on purchases soon, if they aren’t already doing so. This means the Amazon issue will be a onetime occurrence. Other out-of-state purchases (with no sales tax charged) will still be subject to use tax though.

The bottom line: If you owe use tax, it’s important to pay it. It’s better to pay it now than to have it jump up and bite you later.

Nothing epitomizes spring more than the iconic tradition known as The Masters. Held in the quaint, southern town of Augusta, Georgia, The Masters symbolizes everything southern….hospitality second to none, a measured pace of life, and most of all: breathe taking beauty!

On April 8, 2012, at 8:10am, my wife and I entered gate 6 of Augusta National. Easter Sunday at the Masters: Heaven on earth! Molly and I marched straight to hole 16 and placed our two chairs for the day.  One of the wonderful traditions of the Masters is the sacredness of the chair placement.  Once a chair is put down, it won’t be moved or touched.

Molly and I meandered up and down the hills and valleys and under the towering Loblolly pines of Augusta National soaking in all the beauty. Not a blade of grass out of place.  Every breathe was full, and every step was relaxed and un-hurried.  As the day warmed up, the competition of the tournament did as well.

Giant roars could be heard from all corners of the course: the first of which shook the earth immediately after Bo Van Pelt carded a hole-in-one. Not long after Van Pelt’s ace was a second roar that was a crescendo of oohs and aahs that burst into an eruption of excitement, which seemed to last for an eternity.  Louis Oosthuizen did the near impossible: a double eagle (AKA, an albatross).  For those non-golfers out there, a double eagle is achieved by holing out the second shot on a par five.  This feat is considered much harder, and statistics prove it to be so, than a hole-in-one. So far we were in the wrong place for both great shots and missed them both, but the day was not over.

We made our way around the course to see all the must-see locations.  We sat in the bleachers at Amen Corner, I showed Molly where Phil carved his second shot from the trees on the par 5 13th back in 2010, we watched our home-town hero (Brandt Snedeker) tee off on hole number one, we bought traditional Masters food (Yes, still the most inexpensive sports concessions anywhere), and Molly received a knuckle bump from her Irish brethren Padraig Harrington.

Speaking of Molly, this is a not an event I simply drug my wife to. This is an event that is near and dear to her heart, as well. She grew up gathered around the TV on Masters weekend with her family. This meant as much to her as it did me…..if not more.  She relished every moment.

After making our way around the course, we decided it was time to head back to our chairs at 16 (of course they were still there and untouched) and watch the leaders navigate this tricky par 3.  We saw Tiger hit it long.  We saw Matt Kuchar bogey after the crowd cheered him on as he approached the green….all shouting his signature cheer “Kuuuuuch”…sounding oddly like boos.   We watched 8 or so groups play through 16. We chatted with folks from all over….folks from South Africa, Australia, United Kingdom, and even some folks from here in the states.

At 16 we got our money’s worth.  We watched Adam Scott stand on the tee ready to hit his approach.  His languid swing sent his ball high in the air landing softly some 15 feet short of the hole. The crowd began to sigh as the ball rolled towards the hole.  The ball disappeared into the bottom of the cup, and the crowd erupted.  We saw a hole-in-one on Masters Sunday!

After the cheering finally stopped we watched the final couple groups come through, including Bubba Watson and Louis Oosthuizen.   Bubba birdied 16 to grab a share of the lead.  Game on! We scampered to the 18^th green to get a view for the finish.

Molly and I stood in a sea of people on the 18^th green and watched Bubba and Louis hit their approach shots. The pressure was mind-bogglingly thick.  It’s really quite amazing that a crowd that large can become deafeningly quiet.  While the players were preparing to swing, you could hear a symphony of nature.

We watched the first play-off hole, which was played on number 18 again. Again, they tied and moved to hole number 10. Molly had our fill of large crowds and headed for the hospitality house, which was a great way to cap off the day.  We watched the highlights of the last few holes in regulation and then the amazing shot Bubba executed on the 2^nd play-off hole to win the green jacket.

What a day! We were on the course the entire day….enjoying every minute. I can’t describe the experience any better than simply to say it was “perfect.”

Alright, so I bet you are now wondering what all this has to do with financial planning? Well, for my type of planning, it has a lot to do with it. Our little trip down to Augusta was not cheap, but I can assure you it was more than worth it.  Molly and I created a memory we will carry forever.   The money we spent was one of the best investments I have ever made.

So, while we all need to make sound investments and focus on tomorrow, this blog post is simply a follow up to my last post……think of it as a living example. Making memories with family and friends is always a solid investment!  Good planning, hard work, and balance is needed to walk through this crazy world in which we live. Again, this post is not a prescription to run up your credit cards on fancy cruises, crazy travel, or on a TV the size of king size bed..…it’s simply about perspective. We need to create balance between today and tomorrow.

Knowing the purpose of why you save money will help you know where to spend it.  Hapless spending will leave you feeling empty and frustrated.  Focus spending on the things that bring you joy. I did, and it was simply perfect!

Perception is not always reality.  This is certainly true when it comes to financial planning. Many people feel that advisors are here to pull the reigns when spending gets out of control.  Well, that is true in some cases (maybe all cases for some advisors), but for my practice it seems that guiding my clients to enjoy their money is more the norm.

I live in a city where a radio show-host clobbers listeners to eat rice and beans today so that filet can be enjoyed tomorrow.  I take issue with this mentality. I have seen the side effects of this tactic. People can develop the inability to enjoy their money (Rice and beans becomes the only acceptable emotional option). Becoming a scrooge is not what most people desire, but it happens more often that I care to admit.

Balance is the key to enjoying the gifts our financial stability can produce. While I don’t advocate overspending (and sometimes do see that in my practice), creating balance and enjoying our money is truly rewarding when properly executed.

Most advisors won’t tell their clients to spend their money.  Often this is driven by the commissioned connection to the clients’ assets, but, as a Fee-Only Advisor, my job is to give the clients advice that is in their best interest and not my back pocket.  I always strive to deliver holistic advice, and often this advice is to loosen the purse strings….enjoy life!

I don’t have a crystal ball and have no idea where the market is heading, but I do tell my clients that creating memories with family and friends is always a great investment. Life is short (or long depending how you look at it). Life is a wonderful gift (but also challenging), so we have to create balance with our assets.

Do you find yourself constantly with your nose to the grindstone? Are you always saving for tomorrow? What about today? Are you one who finds yourself saying “someday?”  Well, someday needs to start today.

Maybe this line of thinking sounds antithetical to normal financial rhetoric. Maybe the advice you have been receiving is the wrong advice. By no means am I saying it’s acceptable to blow all your cash.  More importantly, I’m simply stating we need perspective when it comes to managing our assets and putting them to good use.

One of the best ways I have found to strike a balance is to determine if goals and values mesh.  This is one of my favorite aspects of my job.  I love helping my clients look for and fund their “it.” Again, it’s about balance…..simply haplessly spending money will leave you empty.  Spending with purpose that is connected to your goals, values, and your “it” will create joy…..most often leaving you with memories that our priceless.

So, the next time you hear some talking head on the TV(or the radio) telling you to squirrel all you money into the next greatest investment, think about the big picture.  Think about the things you are doing with your money. Enjoy it (obviously, within reason).  Go out and create memories you can carry with you for a lifetime!

As a financial advisor who prepares taxes, I see various degrees of substantiation when it comes to non-cash charitable donations (i.e. Goodwill). Everything from handwritten receipts (which don’t work) to detailed records show up in my office.  The difference between the two can affect your taxable bottom line. Remember, the better the substantiation, the easier it is to properly value your donation.

This past Sunday, while the weather was cold and dreary, we decided it was time to clean out our closets.  Molly and I went to work piling up Goodwill items.  We enlisted the help of our kids with the task. Hanna created a spreadsheet to itemize and categorize the goods. Yes, even our teenager was eagerly involved since the work revolved around a computer.  Greta took pictures and packaged up the items. Michael simply added sound effects and destroyed piles, so we sent him off to his lair where he could build and destroy his own piles.

Within an hour or two we had several bags of well-organized goods to deliver to Goodwill. Hanna finished the spreadsheet and printed the pictures.  I made a quick trip to Goodwill and dropped off a car-load of clothing.  Of course, I retrieved the receipt and returned home to finish up the job of filing away my records.

The IRS requires substantiation of non-cash donations. I always tell clients to do four things when donating non-cash items:

1. Get a receipt with a date of donation
2. Create and itemized list of goods donated
3. Take pictures
4. Track mileage

Following the above protocol will allow you to properly value your donations, which will more than likely lead to higher donation values…..which in return saves you tax dollars.

One note: remember that all items donated need to be in good or better condition for the IRS to allow the donation. Pictures should cover this need, as well as substantiate the value of your donation.

Our Sunday afternoon proved to be a profitable venture. When all was said and done, our donation will save us over $200 in taxes…..that’s like putting $200 in our pocket. Plus my closet is clean!  The bad news is my kids want their cut of the loot, but that’s a blog post for another day!

Any of the above information is intended for informational purposes only and is not intended to be considered tax advice or implemented as such.

Technology is a wonderful thing…..when it works. We live in a highly technical society. We communicate differently than we did 10, 20, and 30 years ago. Skype, text, and social media seem to be the methods of choice for today’s tech savvy folks. My kids may never understand the sound of accomplishment that comes from moving the carriage on a typewriter after the completion of a well-penned line. They may also never see piles and piles of paperwork that are required for document retention. That problem is solved with the aid of computers.

Many people make the mistake of using their personal and business computers to save important documents as their sole means of storing valuable data. While using an accessible computer is certainly an easy solution, it should be noted that computers do fail.

What would you do if your computer’s hard drive crashed today? Would you have the necessary data to get back up and running in a reasonable timeframe? While the thought of losing music and pictures will sting, losing important personal and business documents could be devastating.

Small business owners are especially at risk. Those of you who use accounting software, such as Quickbooks, are walking a tight rope if your data is not backed up. Ask yourself this question: what would I do if my hard drive failed? The risk of losing data is very serious and very real.

The good news is the solution is usually pretty simple…..back up data to a SECURE off-site facility. Just like flat-screen TVs, off-sight data storage is getting less expensive. There are many options to choose from. Companies such as Crashplan, Mozy, Carbonite, Sharefile, I-Cloud, and many others are inexpensive ways to secure your data. Note: Due diligence is required on your part to make sure that the back-up chosen meets the security requirements of your industry, if you are backing up business documents.

What to look for

1. Storage Space
How much data do you intend to back up? Music and pictures can eat up a great deal of space, so make sure you know how much you need before you start the search.

2. Security
This is extremely important for sensitive data, such as tax returns. Again, due diligence is required to make sure the site you chose has the right amount of security to protect your documents.

3. Complexity
How hard is it to retrieve data? If you are technically challenged, then make sure you can easily acquire and retrieve your data without calling customer service. Some providers as quite simple and others are more complex.

4. Price
Obviously, price is a big part of the decision, but make sure you compare from an apples to apples standpoint. You must factor in items 1-3 into the price situation to make a solid decision.

In our crazy high-tech world, data is king. Many of us can put the data of our entire financial lives on a thumb drive the size of a fingernail. It’s staggering the power of technology, but we must respect the fact that technology does sometimes fail. So, don’t rely simply on your computer to store all of your information. Take the time to set up proper back-up protocol and secure your data. You’ll sleep better as a result!

Happy Happy Joy Joy….Happy Happy Joy Joy! Stick a hot poker in my eye, and you’ll understand my feelings about the reporting requirements for small business owners and the 1099. While I understand the concept and reasons for this reporting requirement, it’s simply a pain. Ok, I’ll get of my soapbox, stop complaining, and deliver the lowdown.

If you are a small business owner and pay an individual or business more than $600 in a year, you (the business owner) will need to send that business or individual a 1099. This reporting requirement is put in place to allow the IRS a means to track income for business owners, which can lead to additional revenue for the coffers….and the coffers need revenue!
The small business owner is also required to submit a document called a 1096 to the IRS summarizing all the 1099s reported.

Exceptions
There are some exemptions and exceptions to the amounts listed above. For example, if you pay someone more than $10 in royalties, a 1099 must be sent. If you pay an incorporated company, you do not need to mail a 1099. If you pay an attorney more than $600, even if incorporated, you must supply a 1099. For a complete list of guidelines, click here to review the filing instructions from the IRS.

Important Dates
1099s need to be received by recipients on January 31st or earlier.
1096 (transmittal to the IRS from the business) must be received by the IRS on Feb 28th or earlier.

Helpful hints
• If you pay someone more than $600 a year, have that person complete a W-9. This document simply asks for the necessary information to complete and properly report a 1099. You can find an IRS copy of a W-9 here.
• Keep up as the year goes on. As the year progresses, it may be helpful to track your expenditures to see who you are paying and how much. If someone is getting close to the $600 mark, have them complete a W-9. Remember, it’s easier to ask someone to complete this form prior to paying them!
• Track expenses with software. This is the best way to assist in the above scenario.

Conclusion
If you are a small business owner, it’s important to follow the appropriate protocol. There are many exceptions, exclusions, and details when it comes to 1099 reporting, and the worse thing to do is nothing. Be proactive and speak with your tax preparer to determine if you need to file this informational return. The IRS is cracking down and penalties are on the rise. So jump in….the water’s uncomfortable, but it’s better than the alternative. Stay proactive and keep your business compliant.

Happy New Year!
I can hardly believe it’s 2012. As a child, the thought of the year 2012 would conjure up futuristic visions of space-age technology. To some degree, today that technology is a reality. What will tomorrow bring? Imagine what the next ten years will bring?

What will 2022 look like for you financially? Are you doing the right things today to create financial balance between today and tomorrow? Here are a few of the changes put into place within our tax code to allow you to save for your future:

401k & 403b contribution limits increased from $16,500 to $17,000. The catch-up provision remains unchanged at $5500 for those 50 and older.

Traditional and ROTH IRAs remain unchanged at $5000 with a $1000 catch-up provision for those 50 and older.

The maximum amount allowable for SEP contributions increased by $1000 for 2012 from $49,000 to $50,000.

SIMPLE IRAs remain unchanged at $11,500.

Health Savings Accounts also will see an allowable increase for contributions:
Single =$3100
Family =$6250

While the above changes do not represent the entirety of the tax code changes (I only wish!), the above list is simply a quick guide to some of the more commonly used investment vehicles. It’s also wise to speak with your tax preparer to discuss the ability to maximize the tax advantages available for your specific situation.

Our tax code gives us many opportunities to create tax savings while saving for our future, especially for self employed individuals. We need to take advantage of these opportunities. I would suggest making a commitment (maybe as a New Year’s resolution) to make the most of the above opportunities and save for your future.

One of my favorite financial tenets is to “Control What You Can Control.” Essentially, your tomorrow will be financially brighter if you can control how much you spend, how much you save, and how much you pay in taxes. By utilizing a tax-advantaged retirement plan, two of the three tenets can be met: savings and controlling taxes.

As a holistic financial advisor, I don’t simply throw out the new retirement contribution limits as a matter of fact. I discuss these limits as a way to encourage us all to take advantage of saving for our future, reducing taxes, and creating a balanced life financially.

I wish you all a joyous 2012!

Happy Thanksgiving!
This is always one of my favorite weeks of the year. I really enjoy the relaxed time with my family, and, of course, the over-indulgent feasting….even our kids love our Thanksgiving meal.

You might ask what this has to do with financial planning. Well, I might suggest you turn the question around…..what does financial planning have to do with being thankful? It’s often hard for us to take the appropriate time to be thankful for what we do have. Our fast paced world tends to point us in the direction of over-achievement and not self-satisfaction and contentment. We want the next best thing, the latest and greatest new gadget, the best house, and on and on.

Is what our crazy world teaches us really what we truly desire? Or, is want we want right in front of us?

One of my favorite meetings with clients is my goal setting meeting. This meeting enables clients to communicate their true desires. Years of doing this meeting with clients have revealed a simple truth: what people truly want can’t be bought….and that is simply meaningful relationships with those we care about.

Back to my question: what does financial planning have to do with being thankful? This is a big part of what I do with my clients. I truly encourage them to focus on things that have true meaning in their lives….things in which they are thankful. Certainly wise financial planning can assist in creating experiences that can enhance our relationships….vacations, travel to see family and friends…etc.

So, yes, financial planning does have a connection to the things in our lives in which we are thankful. If we are wise with our financial resources, we can enhance our relationships….regardless of our place on the career ladder.

During this Thanksgiving Holiday, what are the things you are thankful for? I would encourage you to take the time to explore your connection of your life and your financial resources. Are they working together hand and glove?

For me, it’s simple. I am extremely thankful for my family and friends…included in that category of friends are my clients. I enjoy my relationship with them and relish the time we spend with each other on our journey together.

Happy Thanksgiving!

Are you a business owner? Are you self employed? Is your business set up for financial success?

As a fee-only advisor, I frequently speak with business owners and individuals who are self-employed or contractors. Unfortunately, I have seen many mistakes that have negatively impacted the success of the small business owner.

For instance, improper ownership titling, improper business entity selection, improper tax reporting, poor record keeping, and omissions of favorable tax deductions can pillage profits from the business owner.

While the American dream of controlling your own destiny in the business world is still alive and well, it seems we have a few more hoops to jump through to get there. Taxes may be a bit more complicated. Hard workers and solid employees may be harder to find. Regulations and compliance seem to have a tighter grip on us all. The business environment is not as inviting as days of old.

As with any goal worth achieving, the work may be tough, but the end result is worth all the blood, sweat, and tears. The place to start is at the foundational level.

McDonald’s would not have sold a gazillion burgers if the foundation of the business was not solid. Apple and Microsoft would not have both achieved great success, all while changing our world, if they did not manage their financial picture properly.

Even if you don’t aspire to grow your business to the size and complexity of McDonalds, Apple, or Microsoft, every successful business should be built on a solid foundation. However, many busy business owners struggle with the financial aspect of their business and miss important steps that will help them achieve a more profitable business.

Free Ebook for Business Owners

That’s why I created an free ebook to help small business owners make sure they have a strong financial foundation in place that will allow them to build their business for success. In the ebook, I offer up a number of practical tips to help you set up your finances properly so you can make the most of your business.

Whether you’re a seasoned business owner, new entrepreneur or someone who wants to become self-employed, I think you’ll find this ebook to be a valuable tool for you.

To get the free ebook, just sign up for my financial tips emails. Just enter your email address below and we’ll send you a special link to download the ebook.

I hope you enjoy the ebook and find the tips helpful for you and your business!

Once you’ve read it, feel free to email me your thoughts or share your feedback below. I would love to know what you think. And, if you like what you read, I encourage you to spread the word!

The stock market has certainly had a bumpy ride over the last few years.  The instability of the market has created a large number of questions for the individual investor. One question that I have been asked by many involves stock dividends. The question goes something like this:

If money market and CD rates are paying laughable returns, why not invest in solid dividend paying stocks to get a better return on investment?

In a perfect world, it would be great to buy a stock and use the dividend paying ability of the stock to shore up income needs. But, we don’t live in a perfect world, and, unfortunately, the dividend approach does involve risk.

Let’s first review how a stock’s dividend works.  If someone owns 100 shares of XYZ stock that is trading at $100 a share, the value of the stock is worth $10,000.00. If the stock pays a dividend of $3 a share, the stock’s dividend yield is 3%. So, this scenario would produce a total dividend pay-out of $300.

The arguable theory is that 3% is much better than the lousy money market rates out there in today’s market. Investing $10,000 in a stock yielding 3% seems like a better way to capture a decent return, right? Why not buy a stock like Johnson and Johnson? Again, this sounds great in a perfect world, but remember we don’t live in a perfect world.

Let’s look at Johnson and Johnson, which is usually thought of as a solid stock. J&J has a nice yield of roughly 3.5%. Buy $10,000 of J&J and the 3.5% yield produces a nice little return. If an investor bought J&J in Mid July this summer, the price was hovering around $67 a share.  Move ahead to mid August and the price of the stock falls to almost $60. That produces an unrealized loss of over 10%. As of this writing, the stock is trading at close $64 a share…still a 4.5% loss.  The 3.5% yield doesn’t outweigh the 4.5% unrealized loss. This dividend strategy involves risk to the principle, which is not a risk involved ( or should not be involved) in the principle invested in money markets or CDs.

Some try to argue that the loss is simply a paper loss. This may be true, but it’s important to understand how this paper loss impacts the total portfolio. Most importantly, the asset that was once held in a safe, stable account (money market) is now put at risk.  By investing in an individual stock the total risk of the portfolio changes.

Risk should be focused. Most often the assets the investor would use for this dividend strategy are assets that are held for liquidity (emergency funds). Again, this changes the portfolio’s risk and may endanger the investor.

Three reasons why I don’t like this dividend strategy

1. The total value (principle) of the asset (Stock) is at risk. While the stock yield may outperform comparable interest rates, the total value of the stock is at risk to decline, as seen in the J&J example.
2. The company can change or stop the dividend.  There is no guarantee the company will continue to pay the dividend moving forward.
3. Individual stocks are much riskier than mutual funds. Due to the nature of an individual holding, the company’s stock could see wild swings based on the company’s performance.

The dividend yield idea may seem like a great idea on paper, but it’s important to take a closer look at the true risk involved with this sort of plan. Safety trumps yield when it comes to stability and the safety of our cash.  Investing should be done in a methodical approach. Simply chasing yield may produce a result not intended.  Focusing risk in the areas of the portfolio where risk should be held is appropriate. Areas of the portfolio which should contain little risk, such as emergency funds, should be held in stable investments, such as money market accounts. 

 DISCLAIMER: This publication is not a substitute for your common sense or for the guidance of your accountant, financial advisor, lawyer, or any other personal or professional advisor. It is designed to provide accurate and authoritative information, but neither the author nor the publisher renders any professional service (legal, accounting, investment advice, or any other professional service) to the reader through this publication. If you need expert advice for your situation, seek out and use the services of a competent, knowledgeable professional. Note that laws and rules applicable to your situation may change and may differ from those described in this publication. It is your responsibility to seek further professional guidance whenever necessary. The author, publisher, and seller jointly and severally disclaim any warranty, express or implied, for any general or particular purpose, including any warranty of merchantability. The reader should be aware that some of the information provided herein is subject to change without notice. It is the reader’s responsibility to determine whether updated information is needed.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, any US federal tax advice contained in these materials (including attachments) is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax-related penalties or promoting, marketing, or recommending to another person any transaction or tax-related