Earlier this year, Citibank surprised a number of it’s credit card customers, and not in a good way. The customers had opened new accounts with Citibank, and we rewarded with frequent flyer miles as a thank you. Citibank then issued Forms 1099-MISC to the recipients of the miles, making the assumption the value of the miles was taxable to the new account holders.
Since then Congress and the public have all gotten involved in trying to get the issue sorted out. Are the miles really taxable income – the same as getting cash to open a new account? The closest thing we have to guidance is a 10-year old IRS pronouncement that doesn’t actually answer that question, but instead just states the IRS will turn a blind eye to the whole topic.
How this plays out will be interesting. When, and if, a resolution is reached, we’ll bring it to you.
Teaching kids to respect money and manage it well seems to be a life-long process for parents. According to a survey conducted by the AICPA though, it’s a lesson that is not being taught at all in 3 of 10 American households, despite most parents believing it was an important one.
The National Financial Literacy Commission suggests the following when talking to your kids about money.
Start early. As soon as children are able to express a want, discuss basics like delayed gratification that are the foundation for budgeting and saving for a goal. Require children to save some of their birthday cash and money earned in after-school jobs. Give them small jobs to earn an allowance to pay for toys or other wants. Make saving fun by giving them a grocery list, and have them clip coupons and comparison shop by reviewing store fliers. Split the savings with them to reward their effort.
Speak in their terms. A child might not care about money for college and may be more interested in money to buy a toy or spend with their friends. Create teachable moments around things your children care about. Also, show them the statement for their college savings account to build an understanding of compound interest and saving toward a long-term goal. The real learning will occur when your child tries to figure out how to earn and save for a toy or other item you decide not to purchase for them.
Repeat often. The more you discuss good financial habits, the more likely your child is to make them a part of their daily life. During dinner, talk about saving for a big purchase, such as a family vacation, and how it might affect the budget. Show them your pay stub to talk about taxes and saving for retirement, and review their savings account and college account statements with them.
Walk the talk. No matter what you say to your children about money, your actions are even more important. If you cave in easily when they make a fuss over a toy at the store, you will have difficulty convincing them to delay gratification and stick to a budget.
Travel for business can be a tricky thing to navigate. Some go on a trip that is only for business, but many, especially business owners, may tack on some personal time to either end of a business trip. In the end, what can you deduct? The following are some general rules to keep in mind.
Within the U.S. all your costs to get to your destination are deductible if the primary purpose of the trip is for business. Usually, this means you spend more than half your time conducting business. If the trip isn’t more than 50% for business, you can’t deduct any of the travel costs, and travel costs for family not conducting business aren’t ever deductible.
Costs on your days spent conducting business are deductible, with meals and entertainment limited to 50%, and all other costs such as hotels and cabs allowed at 100%. Again, these expenses need to relate directly to business.
Remember, the key here is that there needs to be a business purpose for the trip. Taking a vacation and spending a few hours out of a week discussing business won’t completely convert an otherwise personal vacation to a totally deductible business expense. As always, we’re here to help!
In the past week, both House Republicans and Senate Democrats have introduced bills to extend the Bush-era tax cuts, most of which have either already expired or will expire at the end of this year.
The Republicans are moving to extend the cuts for all taxpayers, while the Democrats are pushing to extend them for only those earning $250,000 or less. Each plan faces almost certain refusal by the other side of the aisle, which leaves taxpayers in the same position they were – with expiring tax cuts and no good prospect for renewal.
We’ll keep you informed of all the latest as things develop.
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