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Friday Financial Five – April 3rd, 2015

Friday, April 03, 2015


Retirement Plan Tax Deadlines Approach

Tax payers have less than two weeks to make the appropriate contributions to IRA accounts in an effort to save some tax dollars and help their retirement picture. Traditional and Roth IRAs must be created and funded by April 15th for the 2014 tax year. Both allow $5,500 contributions for those that qualify, with an extra $1,000 possible for those 50 and over. A SEP IRA can be established and funded by the employer’s tax filing dates, including extensions and allows for a contribution up to $53,000. Qualified plans and SIMPLE IRAs need to have been created in 2014 to qualify for funding in that tax year.

April is a Big Month for Tax Prosecutions

Bloomberg cites a TRAC Research Center study out of Syracuse which details the increase in tax prosecutions that take place in April. This is no coincidence, as the IRS would like to influence those filing returns that are not entirely accurate. The number one classification of IRS criminal charges filed is “fraud and false statements”. Getting audited is still improbable, as less than two percent of Americans get audited and most are in the higher income category. However, the government would like to use this month to remind taxpayers of their “responsibility under tax law”.

The Most Financially Literate States

Everyone loves lists, and Wallethub is great at creating metrics that allow us to compare different areas of the country. Their latest analysis examines financial literacy in a country that’s racked up more than $133 billion in credit card debt in the last few years. The analysts divide literacy into two groups: Knowledge/Education and Planning/Daily Habits. The runaway winner for financial literacy was New Hampshire, while Massachusetts was very strong in third place. Rhode Island placed weakly in thirty-ninth, while Nevada and Mississippi occupy the bottom two slots of the chart.

Obamacare Takes a Hit in New York

For states that created exchanges instead of using healthcare.gov, there has always been a question about how the program gets funded once the federal grant money runs out. New York provided a not so promising precedent, as the legislature voted down a proposal to tax health policies to fund the state exchange. According to the legislature, the added tax drives the premiums up to a point that defeats the purpose of having the exchange in the first place. This may prove problematic for other state exchanges looking for ways to generate revenue in the face of state legislatures looking to reduce spending.

Colleges Claiming to Cover Demonstrated Financial Need

Decision time approaches for those entering college in the fall. The qualitative factors of the different schools are important, but the final choice may simply come down to money and the perceived “bang for the buck”. A list compiled by Lynn O’Shaughnessey from the College Board’s Common Data Set presents all 63 universities that claim they meet 100 percent of students’ need. These are many of the top universities in the country. Those that have received the financial package from one of these top schools may not necessarily feel like they’re meeting each family’s financial need, but according to this list and the school’s data, they are.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected]


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