Category: Blog

7 Ways to Save for a Home Down Payment

Save Home Down PaymentSo you want to save for a down payment for your dream house, but you aren’t sure how to get there. It might even feel overwhelming. But take heart, here are some tried and true methods that you can start today that will help you save sooner than you think.

Save a Fixed Amount Monthly

This is super easy, but first you need to figure out how much of a down payment you want to make. Remember, the higher your down payment, the lower your loan and monthly mortgage payment will be. With that said, put this amount on auto draft and deposit it into your savings account. Once you get used to this, you won’t miss it. Never use this savings for any other purpose except your down payment. Keep your eyes on the prize and stay the course.

Lower Your Expenses

If you don’t have a budget, make one. Review how much you’re spending on necessary items like rent, utilities and food. Also look at how much you’re spending on discretionary things, like going out to eat, subscriptions to magazines, driving instead of walking, etc. You might also evaluate how much those short-term indulgences mean to you. Only you can decide, but if you stick to a budget and start saving, the dream of a down payment can become a reality.

Skip Vacations For a Year

This one might be hard to swallow. However, if you save the money you’d otherwise spend on your vacation, you can make a significant contribution toward your down payment. If skipping a vacation is out of the question, try a staycation; or at least drive or take a bus or train to someplace near you that won’t cost an arm and a leg, like a natural park, an area lake or even, if you’re lucky enough to live near one, a beach. With every decision you make to delay gratification and focus on your long-term goal of home ownership, you’ll be more likely to stay on track.

Reduce Your High Interest Rate Debt

Credit card interest rates can really eat into the amount of money you are trying to save. If you can pay them off, do so – and start with the one that’s the highest. When you’ve paid it off, close the account and move on to the next one. You can also apply for a card with a temporary 0% interest rate (for maybe 15 months) and transfer your other balances to this one card. Good options include Bank of America’s Unlimited Cash Rewards credit card, Discover it Balance Transfer and Citi Double Cash Card.

Borrow From Your Retirement Plan

If you want to expedite getting into a house and are comfortable doing this, the look for penalty-free withdrawals from your retirement plan. Many company-sponsored 401(k) or profit-sharing plans allow you to borrow against your nest egg to purchase a home. Just ask your HR or payroll department.

Sell Some of Your Investments

While this option might not be instantly appealing, think of this as a way to move some of your current investments into another – your house. Once you’ve moved in and are paying your mortgage, you’ll be building equity. As your house increases in value, so does your investment.

Look Into Down Payment Assistance

Yes, this is a thing! There are organizations that might be able to help you, like the Federal Housing Administration, the U.S. Department of Agriculture Rural Housing Service and the Veterans Administration. Another source is your local housing authority.

These are a few options to help you move toward a down payment. But no matter what you choose, don’t wait. Get started today. This way, you’ll be packing up and moving in no time.

Sources

https://www.bbt.com/education-center/articles/top-10-ways-to-save-down-payment.html

https://www.creditkarma.com/credit-cards/balance-transfer?gclid=Cj0KCQjwtMCKBhDAARIsAG-2Eu8NmKerM3dO4cPjC0KvMCj_S3HPjJ_r4ge6MV50wWiQf51VLK4HOwUaAncZEALw_wcB

How Businesses Can Help Employees Improve their Skills

Employees Improve their SkillsBased upon a recent McKinsey Global Survey, nearly 9 in 10 (87 percent) of management and above level respondents affirmed they are currently, or within the upcoming five years, dealing with the skill gap among their employees. With the vast majority of businesses experiencing or forecasting a skills-gap, how can they close or reduce this challenge?

Due to the so-called “Fourth Industrial Revolution,” as the World Economic Forum (WEF) explains, the best scenario it sees is 54 percent of workers requiring “reskilling and upskilling by 2022.” However, the WEF points out that 3 in 10 workers susceptible to occupation disruption due to advancements in applied science obtained additional training in 2018.

It’s important to clarify the differences between re-skilling and up-skilling. Re-skilling is where workers who are displaced by industries becoming obsolete, such as coal miners, are forced to retrain for a new career, such as coding, teaching, etc. Up-skilling, in contrast, involves building and staying current in one’s field – a programmer learning the newest programming language or a marketing manager learning the latest search engine optimization (SEO) techniques.

Carve Out Skill-Improvement Time Blocks

Even for companies that strive to provide their employees with flexible time for a work-life balance, it doesn’t always guarantee companies foster a culture of self-improvement and upskilling. When personal, professional and/or global crises occur, there’s not always time for employees to learn new computer programs or the latest programming language. However, by providing employees with a few hours a week dedicated to professional development, businesses give employees the opportunity to up-skill, leading to more satisfied employees, along with limited strain on the budget.

Arrange Worker-Guided Study Groups

When it comes to learning a new skill, according to Degreed via Harvad Business Review (HBR), workers will go to their peers 55 percent of the time, second only to reaching out to their supervisor for guidance, when looking to up-skill.

Few businesses are known to have developed a system for peer-to-peer learning in the workplace. According to McKinsey, “Learning & Development officers” reported businesses letting their employees put their skills into practice to develop additional skills, along with holding academic-type instruction and “experiential learning” for developing role competency. When it comes to structured peer-to-peer learning, fewer than 50 percent of businesses have anything established. Thirty-three percent of those surveyed responded that there’s no system established to facilitate skills development opportunities between co-workers.

From HBR’s “The Expertise Economy,” one reason that peer-to-peer learning is not the first choice for employee learning is due to a common belief that those who are proficient at a particular skill often exist outside the organization, such as a paid training consultant. This belief also is reinforced due to external educational experiences normally condensed into a single session, compared to smaller and more frequent in-house sessions.

HBR argues that peer-to-peer learning leverages the business’ internal expertise more effectively. If more experienced employees share their expertise with less seasoned co-workers to increase their skills, it can be very productive. In fact, HBR lays out a four-point plan for peer-to-peer learning to maximize employee up-skilling.

By using HBR’s “Learning Loop,” businesses can help employees learn new skills and knowledge through four steps:

  1. Employees obtain new information.
  2. After assimilating the new information, they practice implementing the new information.
  3. After it’s been applied, they obtain feedback on the application.
  4. The employee then reflects on what has been learned to further assimilate the new information.

While this program must be tailored to every organization, it shows that by taking a personal approach to up-skilling employees and building on their existing knowledge and skill sets, peer-to-peer learning can be one effective approach to helping employers and their employees close the skills gap.

Sources

https://www.weforum.org/agenda/2019/04/skills-jobs-investing-in-people-inclusive-growth/

https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Organization/Our%20Insights/Beyond%20hiring%20How%20companies%20are%20reskilling%20to%20address%20talent%20gaps/Beyond-hiring-How-companies-are-reskilling.ashx

https://hbr.org/2018/11/how-to-help-your-employees-learn-from-each-other

Tax Breaks for Helping Relatives

Tax Breaks for Helping RelativesIt’s not uncommon for adult children or siblings to act as caregivers for family members or give them financial assistance for medical or long-term care needs. The problem is that all too often those providing the help don’t take advantage of the tax benefits.

Types of Care

Caregiving happens through many different avenues. For example, family members might pay for services that their elderly parents need, such as housekeeping, meal preparation, or nursing care. Outside the home, they may pay for all or a portion of the cost of an assisted living facility.

In other circumstances, individuals could directly provide the care instead of paying for it. This could happen in either the home of the person giving the care or in the home of the person receiving the care. They might also support the relative’s daily living expenses by paying for groceries, utilities or other essentials.

Assessing the Tax Breaks Available

Step one is to figure out if the person receiving care qualifies as a dependent on the caregiver’s tax return. While there are no longer personal or dependent exemptions, qualifying as a dependent opens the door to deduct medical expenses and other medical-related tax breaks. Let’s look at an example to understand the details better.

Dependent Test

Under our scenario, we have Rob taking care of his mother, Laura. Rob is allowed to claim Laura as a dependent if a set of tests are met. First, Laura’s gross income must be less than $4,300 in 2021. While this might seem low, note that tax-exempt interest and Social Security benefits are usually not included.

Second, Rob needs to provide the majority of Laura’s support in the calendar year. “Support” includes basic necessities such as clothes, a place to live, medical expenses, and transportation. In cases where the cared-for relative lives with the taxpayer, they are able to use the equivalent rental value of the housing provided. Given the broad definition of support, it’s often not too hard to meet this test – but make sure to keep diligent records, tracking the amount spent versus the dependent’s total support costs. You can always plan some extra payments near year-end to bump yourself over the 50 percent threshold.

Third, Laura needs to be a United States citizen.

Fourth, the location of the dependent matters. In the case of relatives such as parents, stepparents, grandparents, great-grandparents, and aunts and uncles, these persons can be considered a dependent even if they do not live with you. This means you can be helping them to live in their own house or care facility.

Fifth, Laura cannot jointly file a return with any other taxpayer.

Brothers and Sisters

What happens if you and some of your siblings split the support of a parent? It’s easy to see how in this case no one will meet the majority support test.

In the case of multiple support providers, someone can still claim the person as a dependent as long as all the supporting siblings agree on who makes the claim, and they file an IRS Form 2120, Multiple Support Declaration noting it.

Each Form 2120 signer must contribute at least 10 percent support for the year. The siblings can rotate who claims the deduction or keep it the same each year.

Why Dependency Matters

Given that the personal and dependent exemptions have been eliminated, you might wonder what all the fuss is about the person being cared-for qualifying as a dependent. Well, the answer is the taxpayer who can claim the dependent is the one who can itemize the dependent’s medical expenses as well.

Medical Expense Tax Benefit

The potential benefit comes when Rob is able to add his mother’s medical expenses to those of the rest his family. This can allow him to take a larger medical expense deduction when he itemizes expenses on his tax return. Remember that in order to benefit from any itemized deductions, the total of all itemized deductions must exceed the standard deduction.

Indirect medical costs also can be deducted, but only if the person cared-for qualifies as a dependent. Mileage costs for providing transportation to medical appointments and treatments are deductible. In 2021, this expense is deductible at $0.16 per mile.

Fiscal Year Funding Plus Legislative Support for Health Care Professionals and Physical Activity for All Americans

S 1301, S 610, HR 4502, HR 4346, HR 2485, S 583A bill to provide for the publication by the Secretary of Health and Human Services of physical activity recommendations for Americans (S 1301) – This bill authorizes the Secretary of Health and Human Services to publish guidelines of recommended physical activity for Americans. The bill was introduced by Sen. Sherrod Brown (D-OH) on April 22, passed in the Senate on July 30 and is under consideration in the House.

Dr. Lorna Breen Health Care Provider Protection Act (S 610) – This bill was introduced by Sen. Tim Kaine (D-VA) on March 4. The purpose of this legislation is to establish grants and require activities designed to improve mental and behavioral health and prevent burnout among health care providers. Strategies include ways to improve well-being, establish or expand programs to promote mental and behavioral health among health care providers involved with COVID-19 response efforts, and train health care providers on suicide prevention. Moreover, the bill instructs the Centers for Disease Control and Prevention to conduct a campaign urging health care providers to seek support and treatment for mental and behavioral health issues. The bill passed in the Senate on Aug. 6 and is currently under consideration in the House.

Labor, Health and Human Services, Education, Agriculture, Rural Development, Energy and Water Development, Financial Services and General Government, Interior, Environment, Military Construction, Veterans Affairs, Transportation, and Housing and Urban Development Appropriations Act, 2022 (HR 4502) – This bill authorizes appropriations for the fiscal year ending Sept. 30, 2022, for the departments of Labor, Health and Human Services, Education and others.The legislation was introduced by Rep. Rosa DeLauro (D-CT) on July 19 and passed in the House on July 29. It is currently under consideration in the Senate.

Legislative Branch Appropriations Act, 2022 (HR 4346) – Introduced by Rep. Tim Ryan (D-OH) on July 1, the bill provides appropriations for the Legislative Branch for the fiscal year ending Sept. 30, 2022. Funding for the Legislative Branch includes the House of Representatives and related committees, the Office of the Attending Physician, the Capitol Police, the Congressional Budget Office, the Library of Congress and the Government Accountability Office. The legislation passed in the House on July 28 and is in the Senate for consideration.

Access to Congressionally Mandated Reports Act (HR 2485) – This legislation would require the Director of the Government Publishing Office to establish and maintain an online portal available to the public that enables access to all congressionally mandated reports. This bill was introduced by Rep. Mike Quigley (D-IL) on April 13. It is currently in the Senate after passing in the House on July 26.

PRICE Act of 2021 (S 583) – In an effort to encourage and promote innovative procurement techniques within the Department of Homeland Security (DHS), this bill directs the Management Directorate to publish an annual report on a DHS website. The report will provide details on how DHS projects met goals such as improving or encouraging better competition, reducing time to award, achieving cost savings, achieving better mission outcomes or meeting the goals for contracts awarded to small business concerns. The bill was introduced by Sen. Gary Peters (D-MI) on March 3. It was passed by the Senate on July 29 and is currently in the House.

Is Your Business Ready to Outsource Accounting?

Outsource AccountingAccurate and timely accounting is critical for any business’ survival. At the same time, it’s important for entrepreneurs to pour their energy into core business activities and not waste time on day-to-day bookkeeping. Unfortunately, the cost of setting up a full-time accounting department is prohibitive for small and mid-sized businesses. Thankfully, there is an option to outsource functions such as bookkeeping, payroll, tax services, financing, budgeting, chief finance officer services, and more to a third party.

In this article, we discuss how to know if you are ready to outsource, the benefits, and how to choose the right professional.

How to Know if You Should Outsource

Here is how to know when you need to outsource.

  • Business growth – when you start adding more employees and your business is expanding, you might be more likely to commit financial errors. You may also realize you are experiencing difficulties in handling payroll and invoicing and need more than basic bookkeeping.
  • When your business accounts start to take too much of your time – you barely have time for your other responsibilities and you spend more time checking your business accounts.  
  • Multitasking – if you find yourself multitasking or having employees spend extra hours on roles they were not initially employed to do.
  • Need an expert’s opinion – you do not feel confident in your ability to handle bookkeeping, or you need another person to check the accuracy of your accounts.
  • Need to reduce costs – running a profitable business requires a check on operation costs. An in-house team comes with extra costs, including recruiting, training, managing more employees, updated software, etc.
  • You suspect fraud – when you suspect abnormal transactions or want to prevent possible fraud in your business. Unfortunately, as a small business, you can’t afford to hire a chief finance officer and have no one to implement fraud protection controls.
  • Investors – when you have investors, you may be required to involve a third party for an unbiased financial assessment.
  • Latest accounting software – if your business needs the latest accounting software to stay up to date with technology, but the cost is too high for your business.

Benefits of Outsourcing Accounting

Choosing to outsource your accounting can be uncomfortable as it means you are allowing a third party to have control over a very important part of your business. But your business could miss out on the following benefits:

  • Access to a professional dedicated team. It is the role of the accounting firm to keep up with tools, regulatory requirements, and systems that meet accounting standards. This guarantees your business is compliant and avoids taxation issues.
  • A trained professional will take a proactive approach, as they check for any red flags in your finances, expenditures, or cash flow.
  • Save on cost. It costs less to outsource than build an in-house accounting department. You avoid overhead costs such as employee salaries, insurance, and benefits, among others. You only pay for the accounting service you use.
  • Increased operational efficiency – an outsourced team will advise on the right accounting system for your business. They take care of automation, which will speed up processes and thus enhance operational efficiency.
  • Better decision making – you have access to industry insights and financial and management reports that will help make better decisions.
  • Access to the newest technology – it’s the business of the accounting firm to ensure they provide their clients with the latest accounting technology.

How to Choose the Right Firm

Having seen why you need to outsource and the benefits that come with it, the next step is to choose the right firm to outsource your accounting and bookkeeping needs.  

First, you need to be clear about the actual services you need. This will help you choose a firm that aligns with your business values.

Where possible, look for recommendations from existing clients on the expertise, experience, and reputation of the firm. Be sure to check the payment schedule that will work best for you, whether they charge an hourly fee or monthly. Don’t ignore what is included on the packages offered. Other things to check for is their package flexibility, the onboarding process (should allow to define roles, expectations, communication policies, and procedures).

Most importantly, ensure that you understand the terms and conditions before signing a contract in case you need to terminate the agreement.

Conclusion

Whether you are a small business, medium sized, or a non-profit, with time your accounting functions will go beyond what your bookkeeper can handle. The best option is to outsource a dedicated team that acts as your accounting department or complements your existing accounting staff. 

How to Catch Up on Your Retirement

How to Catch Up on Your RetirementIf you’re 40 or 50 and aren’t where you’d like to be in terms of saving for retirement, don’t despair. You can remedy this situation. And since people are living well into their 80s and 90s, it’s never too late to start. Here are a few things you can do.

Max Out Your 401(k)

This could be a game-changer. Stuart Ritter, a certified financial planner with T. Rowe Price, recommends that you save at least 15 percent of your income for retirement, including the amount your employer matches. If your company is contributing 3 percent, then you should save 12 percent. If you can’t go this high, then increase the amount by 2 percent each year. So, if you’re saving 3 percent this year, bump it up to 5 percent, then 7 percent, and so on. If you’re under 50, try to hit the $19,500 limit. After you turn 50, you can increase your annual savings to $6,500 on top of this $19,500 limit. Note: You have to be 59 ½ to withdraw money without any penalties. However, the early withdrawal penalty doesn’t apply if you’re 55 or older in the year you leave your employer. All this to say that the sooner you start doing this, the more you will save and the more you’ll have down the road.

Contribute to a Roth IRA

With this product, you can grow your money on a tax-deferred basis. For instance, if you’re 40 and invest $6,000 each year at an 8 percent return, then by the time you’re 65 you’ll have more than $473,726. Even if you wait until you’re 50 and save 6k a year, using the same rate of return, you’ll save as much as $175,946 by the time you’re 65. However, there are some income limitations. If you’re single and your modified adjusted gross income is more than $125,000, your contribution limit is reduced. If you’re single and make over $140k, you can’t contribute. Michelle Buonincontri, a certified financial planner, says that the beauty of Roth IRAs are that they allow for tax-free compounding. Further, when withdrawal rules are followed, the withdrawals, including the earnings, will be tax-free. And when you’re in the withdrawal phase, it can minimize taxable income, which can add up and help your money last longer during retirement.

Take Advantage of Your Deductions

Not everyone takes standard deductions. That’s why if you have a significant amount of mortgage interest, deductible taxes, charitable donations, and business-related expenses that your employer doesn’t reimburse you for, you’ll most likely want to itemize your deductions. Talk to your CPA and figure out whether this is a good plan for you. Then start saving your receipts and keeping good records. As you get closer to retirement and if money is tight, remember: it’s not what you make, but what you save that makes the difference.

Don’t Forget About Home Equity

While home equity probably shouldn’t be used as your main source of income when you’re retired, it’s a viable solution. Retirees might consider borrowing against it to fund living expenses. In fact, you can use a home equity line (HELOC) to draw from when needed. Other options include selling, downsizing, and either living off the equity or investing it. But before you sell, you should consider tax consequences. Married homeowners who file a joint tax return can make up to $500k without owing taxes on capital gains. If you’re single, the cap is $250,000.

Get Disability Coverage

The reason for this is simple: to protect yourself and at least a portion of your income and retirement savings in a worst-case scenario. It is always a good idea to have a contingency plan.

Consider Your Cash Value Policies

This is a last resort, but again, a good option, especially if the original need for your insurance policy is no longer there. However, before you do anything or access its cash value, consult your tax advisor or insurance professional first.

No matter what your situation is, you can save for your future. All you have to do is begin now and take it one day at a time.

Sources

https://www.investopedia.com/articles/retirement/08/catch-up.asp

https://www.kiplinger.com/retirement/retirement-planning/602191/401k-contribution-limits-for-2021

https://money.usnews.com/money/retirement/401ks/articles/how-to-take-advantage-of-401-k-catch-up-contributions#:~:text=The%20401(k)%20Catch%2DUp%20Contribution%20Limit%20for%202021&text=Once%20you%20turn%2050%2C%20you,temporarily%20shield%20from%20income%20tax

How and Why to Develop a Bring-Your-Own-Device Policy

Bring-Your-Own-Device PolicyWith the internet available for essentially all employees and remote work becoming a part of more businesses’ operations, developing a bring-your-own-device (BYOD) policy is almost necessary to help employees be more productive and safe while working. Research shows there are many reasons why businesses should develop the right type of BYOD policy.

According to Intel and Dell, 61 percent of Gen Y and 50 percent of workers 30 and older think the electronic devices they use at home are more capable in completing tasks in their everyday life compared to their work devices.

Frost & Sullivan found that connected handheld technology helps employees, making them about one-third more productive and reducing their average workday by 58 minutes.

A BYOD policy simply means that companies permit their workers to use their own smart devices to perform job-related tasks. It can be beneficial for a company, especially a smaller one; but it’s important to evaluate the advantages and disadvantages before implementing one.

Advantages

One of the most obvious reasons for a business to develop and implement a BYOD policy is due to the proliferation of technology. Along with saving employers money by not having to provide a work device, there is no need to provide costly training on how to use the device. A 2016 Pew Research survey determined that 77 percent of U.S. adults have a smartphone. For those ages 18 to 29, more than 9 in 10 (92 percent) own a smartphone. In 2021, even more adults likely have at least one smartphone.

Potential Drawbacks/Legal Considerations

According to a 2017 Pew Research Center report, there’s a significant portion of smartphone users with less-than-ideal security habits. For example, 28 percent of respondents don’t secure their phone with a screen lock or similar features. Forty percent said they update their apps or phone’s operating system only when it’s convenient for them. Less common, but equally alarming: Between 10 percent and 14 percent of respondents never update their phone’s operating system or apps.

Without a proper system setup there are more security risks, including reduced or compromised company privacy and a lack of basic digital literacy among employees. Mobile Device Management software can help monitor, secure, and partition personal and business files in a dedicated area, providing more confidence when permitting employees to BYOD.

Other considerations for a BYOD policy might include prohibiting employees from downloading unauthorized apps; performing local back-ups of company data; disallowing syncing to other personal devices; not allowing modifications to hardware/software beyond routine installations; and not using unsecured internet networks.

Depending on how employees are classified by the Fair Labor Standards Act (FLSA) for overtime compensation, businesses may be liable for overtime wages if non-exempt employees perform their duties outside the office. If non-exempt employees perform duties beyond “40 hours of work in a work week,” as the U.S. Department of Labor outlines, businesses could be liable for additional wages paid if they use their device for work-related tasks.

While each company has its own needs and unique workforce, crafting a BYOD policy that increases productivity while maintaining security and privacy can give businesses a competitive edge.

Sources

https://i.dell.com/sites/content/business/solutions/whitepapers/it/Documents/intel-imr-consumerization-wp_it.pdf

Employees Say Smartphones Boost Productivity by 34 Percent: Frost & Sullivan Research

https://www.pewresearch.org/fact-tank/2017/01/12/evolution-of-technology/

https://www.pewresearch.org/fact-tank/2017/03/15/many-smartphone-owners-dont-take-steps-to-secure-their-devices/

https://www.dol.gov/agencies/whd/flsa

How to Turn a Summer Job into a Tax-Free Retirement Nest Egg and More

Summer Job into a Tax-Free RetirementTis the season for summer jobs for high school and college kids. These seasonal jobs are more than just an opportunity for teens and college students to earn some money and gain experience. They also provide the opportunity for seeding a significant retirement nest egg and even a down payment on a home through a Roth IRA.

Seems too good to be true? Well, it’s not – but as always, the devil’s in the details, and it is not exactly a free lunch. So, let’s walk through exactly how this all works.

Step 1 – Earned Income

First, teen or college students must get a job that pays – and the more the better. This is because the gateway to opening and contributing to a Roth IRA is earned income. The magic number for earned income to max out a Roth IRA in 2021 is $6,000, as this is the contribution limit. This is because contributions are limited to the lesser of the $6,000 limit or 100 percent of earned income.

Step 2 – Make the Roth IRA Contributions

The next step is to make the contributions to the working child’s Roth IRA. Let’s be honest here. It is a rare case where a kid is going to take all or nearly all their summer job earnings and stash them away in a Roth IRA for 50+ years down the road. There is a way around this, however.

A parent or grandparent can contribute to the Roth IRA in the child’s[h1]  name, with two nuances. First, this contribution is still governed by the earned income limits discussed above. Second, these amounts count toward the $15,000 per year gift tax exclusion ($30,000 if married) so it will eat into that. Lastly, do not forget the deadline to make 2021 Roth IRA contributions of any type is April 18, 2022.

How Much is This Worth?

While $6,000 or so may not seem like a lot, it can make a significant difference over time due to the power of compounding returns from such a young age – coupled with the tax advantages of a Roth IRA.

To illustrate the power of this tax and investment move, let us take a scenario where a high school kid makes the $6,000 per year over three summers from age 16-18 before heading off to college, and the Roth IRA contribution is maxed out.

With contributions at just $18,000 and NEVER putting in another dime again, this will turn into the following amounts under different assumed investment returns by the time they are 66 (40 years of compounding).

  • 6 percent return = $313,000
  • 8 percent return = $783,000
  • 10 percent return = $1.93 million

Now, before you get too excited, you must understand that 40 years from now $300,000 will not be what it used to be if inflation continues at historical rates – but the point remains. This simple move made over just a few years can create significant tax-free wealth.

Side Benefit

Due to the characteristic of a Roth IRA, the other beneficial options relate to withdrawal. First, the contributions can be accessed any time before age 59 ½ without penalties or taxes. Second, even after all the initial contributions are removed, a first-time homebuyer can take up to $10,000 without the 10 percent early withdrawal penalty to help fund the purchase, although they will owe income tax on the withdrawal if it has been less than five years since the initial contribution.

Be VERY careful here though, because any withdrawals will dramatically lower the investment returns noted above.

Conclusion

Funding a Roth IRA for a high school or college child or grandchild can give them a tremendous head start in life. A few years of relatively small contributions early on can create substantial wealth over time due to compounding of returns and the tax advantages of the accounts.

Blocking Voter Expansion, Proposing Greater Scrutiny of Inspectors General, and Paving the Way for Climate Change Measures

hr 12, s65, s1251, hr3684, hr2662For the People Act of 2021 (HR 12) – This bill is designed to improve voter access to the ballot box by expanding automatic and same-day voter registration, vote-by-mail and early voting. The legislation also contains provisions that limit removing voters from voter rolls, strengthens ethics rules for public servants, reduces the influence of big money in politics and addresses other anti-corruption measures. The bill was introduced by Sen. John Sarbanes (D-MD) on Jan. 4 and passed in the House on March 3. In early July, the bill was blocked by Republicans in the Senate and its status is pending further action that may be taken by Senate Democrats.

Uyghur Forced Labor Prevention Act (S 65) – This bipartisan bill is designed to prevent goods from entering the U.S. market that are made via forced labor in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China. It would also enhance existing asset- and visa-blocking sanctions of foreign individuals and entities responsible for human rights abuses connected to forced labor in Xinjiang. The bill was introduced by Sen. Marco Rubio (R-FL) on Jan. 27. It was passed by the Senate on July 14 and is currently in the House.

Growing Climate Solutions Act of 2021 (S 1251) – This bill was introduced by Sen. Mike Braun (R-IN) on April 2. The purpose of this legislation is to reduce barriers to entry for farmers, ranchers and private forest landowners in certain voluntary credit markets. In order to participate in the program, providers must offer technical assistance to help landowners utilize sustainable land use management practices that prevent, reduce or mitigate greenhouse gas emissions, or sequester carbon; or be a third-party charged with verifying the process for voluntary environmental credit markets. The bill passed in the Senate on June 24 and is currently under consideration in the House.

INVEST in America Act (HR 3684) – This bill authorizes federal funds for highways, highway safety and transit programs. It includes strategies to reduce climate change impacts of the surface transportation system; revises Buy America procurement requirements for highways, mass transit and rail; establishes a rebuild rural bridges program to improve the safety and state of good repair of bridges in rural communities; and other purposes. The legislation was introduced by Rep. Peter DeFazio (D-OR) on April 19 and passed in the House on June 29. It is currently under consideration in the Senate.

IG Independence and Empowerment Act (HR 2662) – Introduced by Rep. Carolyn Maloney (D-NY) on April 19, the bill amends the Inspector General Act of 1978. Some of the provisions include: allowing an Inspector General to be removed only for cause; requiring that Congress be notified before an IG is placed on nonduty status; requiring the president to explain any failure to nominate an IG; adding provisions regarding acting IGs when an IG position is vacant; notifying Congress when an allegation of wrongdoing made by a member of Congress is closed without referral for investigation. The legislation passed in the House on June 29 and is in the Senate for consideration.

Technology Driven Accounting: How to Prepare Staff for a New Age in Accounting

How to Prepare Staff for a New Age in AccountingTechnology has no doubt changed the traditional way of doing things. Businesses and professionals are left with no choice but to adopt new technology to remain relevant in a changing environment.

However, the successful adoption of this new age in accounting can happen only if you prepare your staff in advance.

Why it’s Necessary to Prepare for the New Age Accounting

Technology offers many benefits; however, the constant rapid changes in technology create a major challenge to organizations and even to the professionals/employees. Some decide to stick with systems with which they are already proficient. Unfortunately, such a decision is not an option if you want to remain relevant in a changing accounting landscape.

Technological changes that have affected the accounting field can be attributed to technologies such as 5G, data analytics, robotic process automation (RPA), computer-assisted auditing technologies (CAATS), blockchain, and cloud computing, among others.

These technologies are literally creating new roles in the accounting field. For instance, automation will take away some accounting jobs, such as data entry, payroll, tax handling and bank reconciliations – thanks to Enterprise Resource Planning (ERP) systems and more advanced systems like Robotic Process Automation (RPA).

The effect of technology in the accounting field has made such an impact that the AICPA and NASBA are supporting a CPA evolution. This is aimed at incorporating changing skills and competencies in the accounting field. As a result, this will include a new curriculum and new CPA exams expected to be launched in 2024.

Despite the disruption in the accounting field by technology, it has introduced many new opportunities. Consider this: while automation takes care of repetitive tasks, the accountant can devote more time to planning, organizing, and advising. This enables the accountant to add more value to an organization as they focus on major tasks.

However, this advantage will benefit only those who are well prepared in advance and ready for the new form that accounting is taking.

How to Prepare Your Staff for a New Age in Accounting

Change is not always welcome, but preparing your staff in advance will help ensure a smooth transition. Here is how to prepare your staff:

  • Communicate
    Let your employees know the intended changes in roles as well as new technologies that you plan to implement. Employees also can play a role in selecting technologies best suited to your business operations.
  • Mindset Shift
    Help employees accept the technological changes. They need to shift their mindset and accept the changing digital landscape. This will help with expediency and the ability to take advantage of its benefits.
  • Upskilling and Reskilling
    Give employees a chance to enhance their abilities. They also should learn new things to ensure they have relevant skills to continue working in advanced areas of accounting that require innovation, critical thinking, decision making, etc. Where necessary, they could learn basic programming and even basic automation for more advanced roles like data analysis. Gaining new skills will help your business transition from old systems to new ones, without necessarily hiring new staff.
  • Soft Skills
    Accountants now more than ever need to learn non-technical skills so that they can easily interact with people. If they are expected to take up advisory roles, they should be good at problem-solving, communication, relationship skills, business acumen, etc.
  • Emerging Business Models
    Let your staff be aware of new business models, such as microservices, marketplace platforms, and do-it-yourself models. This especially affects accounting firms whose employees need to be creative on how to leverage these models.
  • Positive Culture
    Develop a culture that enables staff to compete at a new level to keep their morale up so they are not worried about losing their jobs.
  • Stay Updated
    Keep everyone up-to-date with trends even when you don’t intend to implement every new technology that comes up. It helps to stay in the loop of what’s happening in the accounting field.

Keeping up with evolving accounting trends and changes will save you from losing clients. Preparing your staff for the new age of accounting will help your business provide value beyond traditional accounting to your clients. This is because you will be serving as business consultants and strategic partners as opposed to simply accounting experts.