Spring is a time of growth and renewal. I always enjoy seeing our flower beds come back to life in the spring after a cold winter. One springtime tradition that my family has is to take a road trip to enjoy the Texas wildflowers in full bloom (and often some Texas barbeque). One of our favorite flowers is the state flower of Texas – the bluebonnet. One interesting fact about bluebonnet seeds is that they germinate in September through December – in the middle of winter! These seeds go through the winter months growing below ground while our plants above ground are freezing and dying. That process of growth beneath the surface produces the abundant flowers that we enjoy in spring.

Establishing good financial habits can be like planting bluebonnet seeds. It should be done early, can grow “beneath the surface” for a season, but provide stunning results once mature. Here are a few good financial habits to consider this spring that can lead to future financial growth:

1. Start Saving Early
One of the best financial habits that you can develop is to start saving early. Whether it’s for a rainy-day fund or for long-term goals like retirement or a down payment on a house, the earlier you start saving, the better off you’ll be in the future. Even small amounts of savings can add up over time with the power of compound interest. Even the mighty oak started out as just an acorn!

2. Build Good Credit
Credit is essential for many aspects of your financial life, including buying a house, getting a loan, or even renting an apartment. Building good credit takes time, so it’s important to start early by making timely payments on your credit cards, loans, and other bills. Keep your credit utilization low and avoid opening too many credit accounts at once. Good credit is like using good soil – it’s the foundation that the rest of your goals like buying a home or car can be built.

3. Invest in your education
Investing in your education is one of the best ways to improve your earning potential over the long term. Whether it’s going back to school for a trade or degree, or taking courses to enhance your skills, investing in your education can pay off in the future by opening up more career opportunities and increasing your earning potential. A good education is like Miracle Grow – and it’s a miracle how much it can make your income grow!

4. Develop a budget
Developing a budget can help you stay on track with your finances and avoid overspending. Make a plan for your income and expenses, and stick to it! This will help you develop good financial habits and avoid debt. I personally use an app for my budget that I can check daily to see if I’m on track. Like a well-planned garden, a budget can keep your spending on track and within expectations.

5. Practice smart spending habits
It’s easy to get caught up in the latest trends or to spend money on things you don’t need. Practicing smart spending habits, such as shopping for bargains, buying used items, and avoiding impulse purchases, can help you save money and avoid debt. One tactic that companies use extensively today is to sign up for a “free trial” or subscription to use their products. A recent study showed that 51% of Americans have unwanted subscriptions. Get out your pruning shears and cut back those weeds so your financial health doesn’t get choked out by unnecessary subscription fees.

Planting these seeds now can lead to a financial future that is in full bloom. If you want the help of a professional along the way, consider hiring a CFP® professional to help your plant the seeds for tomorrow’s financial success.

Published in the Victoria Advocate

David Faskas is a CFA and CFP® professional with KMH Wealth Management, LLC. He specializes in investments and portfolio management. He is the Chief Investment Officer, Chief Financial Planning Officer, and a managing member of the firm.

 

It is everyone’s favorite time of the year, right? Maybe not so much. As a tax preparer, I often get questions during this time from family and friends regarding their own personal tax returns. Questions usually stem from the idea of “getting something back”, or often sound something like, “I paid for this during the year, isn’t that tax deductible?” Another question that comes up fairly often is “Can I claim him/her as a dependent on my tax return?” A fair question that can depend on several variables.

There are two different types of dependents that can be claimed by a taxpayer. A Qualifying Child and a Qualifying Relative. Each type comes with its’ own set of rules that allow a taxpayer to claim that individual as a dependent.

A Qualifying Child must be a close relative, pass the age limit test, pass the residency and filing requirements, and pass the support test. The child must be the son (stepson), daughter (stepdaughter), brother (stepbrother), or sister (stepsister) of the taxpayer. The child may also be a descendant of any of the above and still qualify. An adopted or foster child of the taxpayer would also qualify. Only a resident of the United States, Canada, or Mexico may be claimed as a qualifying child. The child must be under the age of 19, unless a full-time student in which case the child must be under the age of 24. The child must live with the taxpayer for more than half of the year. A college student living on campus and coming back home for major breaks will typically not disqualify them from the residency test. The child may also not file a joint tax return with another taxpayer. Finally, the child must not have provided more than half of his or her own support. A dependent being awarded a scholarship is not considered contributing to half of his or her own support

When it comes to claiming a Qualifying Relative as a dependent, some different parameters are at play. The same support test applies for a qualifying relative as a qualifying child. Children (stepchildren), grandchildren, brothers (stepbrothers), sisters (stepsisters), nieces, nephews, parents and grandparents are the most common persons that can be considered a qualifying relative. A non-relative may qualify as long as they live with the taxpayer for the entire year. The relative may not file a joint tax return and must be a resident of the United States, Canada, or Mexico. The gross income limitation applies to those who are trying to claim someone as a qualifying relative. The relative’s gross income must be under a threshold of $4,400. This amount does not include Social Security income, tax-exempt interest or scholarships that the relative receives.

A common situation that arises with multiple support dependents and/or children of divorced parents, is who gets to claim a qualifying child or relative. A multiple support declaration may need to be filed when multiple taxpayers contribute, in total, over 50 percent of the dependent’s support, but no one taxpayer contributes more than 50 percent individually. In this case, Form 2120 will need to be filed and the taxpayers may decide amongst themselves who gets to claim the dependent on their tax return. In most cases, the parent who has custody of their child for the majority of the year will get to claim the child for tax purposes. This is independent of who actually provides more than one-half of the support for the child.

If you have made it this far, you may feel overwhelmed with all of the “nit-picky” rules that come with the territory. While it is a lot of information, it is imperative that you consult with your Certified Public Accountant with any questions you may have when it comes to being able to claim a dependent. You may be eligible for a list of beneficial credits on your tax return.

Published in the Victoria Advocate

Hayden Schilling, CPA is a staff accountant for Keller & Associates CPAs, PLLC.

The holidays have passed, the calendar has turned to a new year full of resolutions. January is Financial Wellness Month for those of you that resolve to get your finances in order. One way to get a jump start on this initiative is to get your tax documents together to file later this month when the IRS opens electronic filing. At the time of this writing, our team of CPAs is currently working hand in hand with our clients to meet their initial deadline on January 31, 2023, for their information return filings such as 1099s and W-2s.

While these information return filings may not apply to you, I want to share some frequently asked questions we receive and provide guidance to answer them.

Why should I file my tax return as early as possible?
Filing early has many advantages. For starters, filing as early as possible helps to mitigate some of the exposure to possible identify theft. Cyber criminals are notorious for attempting to front run filing incomplete, fraudulent returns in their victims’ names in order to re-route the victim’s tax refund into the criminal’s bank account. Further, those who file their return early will likely get their refund sooner, or if they owe tax, will have more time to ensure funds are in place to pay by the April 18, 2023, deadline. April 15th is on a weekend and April 17th is Emancipation Day in Washington, DC.

What is the easiest way to determine what documents I need?
A good general rule of thumb to start is to examine your tax return from the previous year. For clients of our firm, we send them a document known as an organizer which illustrates the names and amounts of the documents they previously had to guide them through organizing current year documents. For those who may prepare their own return, find your 2021 tax return and walk through it to compile a list of documents you may need.

When can I file my return?
As of this writing, an official filing date has not been announced. If history is any guide, the week of January 23, 2023, will likely be the opening of the IRS beginning to accept tax returns.

Should I file my own return or hire an accountant?
Generally, you should seek the assistance of an accountant if you had a major life event or milestone such as marriage, divorce, child birth, new homeownership or an inheritance. Also, those with small businesses are likely to benefit from the services of a Certified Public Accountant to help navigate the business filings related to businesses. This is true even for those who may work in the gig economy or have a side business in addition to their day job.

I often tell clients and prospective clients the more organized you can become, the easier your tax return filings will be. This is especially true for our clients who we recommend at least one mid-year tax projection as well to ensure we are on track and no surprises await in April. Hopefully, these tips will get you started to a smooth and uneventful tax season.

Published in the Victoria Advocate

Kyle W. Noack CPA/CFP® is Chief Executive Officer of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

 

As I write this column, all of our family has joined us out of town for the Christmas and New Year’s Day holidays. Four kids, two husbands, one fiancé, four dogs (plus our two dogs), two cats and maybe a partridge in a pear tree. No grandkids yet, and no pressure. We were married ten years before our oldest, Missy, blessed us. Everyone is working remotely (including Phyllis and me) and silence is in short supply!

I am so thankful to have this rare time together, no matter how many things are on all of our collective work lists. Phyllis and I take deep breaths and enjoy having everyone together. Phyllis is the master organizer and Christmas is her favorite time of the year. We both just keep working as we can while juggling the family!

Our Christmas gifting has shifted this year to totally Secret Santa for all of us. In prior years, it was just the kids, but now it just makes sense. One special gift limited to a budgeted amount shifts the focus from the gift to the person. Everyone has to really think and research, if you will, what best suits the recipient of their special gift. I can’t wait for Christmas Day.

We give regularly to our church and other favorite charities. This time of year we review our tax status and consider some special charitable gifts. I have said this in a previous column, you will never miss the money you give to those in real need! I encourage you to do the same.

We have tried to instill a planning mentality within our family. Phyllis and I were fortunate to have had parents that provided for us. In reality, our parents really sacrificed and planned for us so we received the education we needed without the burden of debt. They also instilled in us a strong work ethic during our formative years, expecting us to work for our spending money, which we both did.

We endeavored to do the same for our children. We started saving on a regular monthly basis as soon as we could after they were born. This paid off as we had what we needed for them to attend college with a little “get to work” money after graduation. Missy graduated from high school in 2008, a bleak year for the markets, but it worked out. One of our daughters went out of state for college, which threw us for a loop, but it also worked out.

Over our careers starting in 1979 and 1980, there have been a number of bleak times in the markets, but when you keep a long term perspective and stay consistent in your savings and investments, things seem to work out. Just for grins, Google what inflation and mortgage rates were in 1980.

Have a financial plan. If you don’t have a plan, make a plan! Make sure you have a good CPA that understands your needs. In addition, make sure you have a CERTIFIED FINANCIAL PLANNER™ professional that places your best interest ahead of their own.

I hope you have a wonderful holiday and a great 2023!

Published in the Victoria Advocate

Lane Keller CPA/CFP® is a managing member of Keller & Associates CPAs, PLLC and KMH Wealth Management, LLC.

I’ve never had more to be thankful for this Thanksgiving – I have my whole family. Six weeks ago, I almost didn’t. My 4 year-old caught the flu last month and required a visit to our rural ER. Unbeknownst to us, he was in critical condition with a collapsed lung and a cascading list of complications. Ultimately, he required helicopter transport to a larger hospital where he was admitted to the Pediatric ICU and released 4 days later. Although I am sifting through over $150,000 in medical bills, this Thanksgiving I’m lifting praise and thanksgiving that we still have our son.

When surprise medical bills suddenly take dominance over your financial life, it quite literally pays to understand your rights and your payment options. I’d like to share with you the knowledge I’m employing to navigate our flood of medical bills. First, I have come to expect billings errors. I review medical bills closely and request an itemized bill if I have questions. Keeping accurate records will help if I need to file a billing dispute.

If you are covered under group or individual health plans, the No Surprises Act protects you from receiving surprise medical bills for most emergency services, non-emergency services from out-of-network providers at in-network facilities, and services from out-of-network air ambulance services. While my provider and my insurer work to settle the $46,000 helicopter bill between each other, I know that I am only required to pay up to my out-of-pocket maximum for the policy year.

To avoid exceeding my out-of-pocket limit, I pay medical bills in the order the claims are filed with my insurance company – not in the order received through the mail. Insurance companies process claims in the order they are filed. If I pay a bill out of order and jump ahead, my insurer can’t help and chances are I will have to fight the provider for a refund. You can log into your health insurer’s online portal to see a chronological list of claims. I keep that list, along with accurate records of the bills I receive, and those I have paid. As I approach my out-of-pocket limit, I may face a $1,200 bill, but only have $500 left to reach my out-of-pocket limit. At that point, I will contact my insurer to compare records. They will likely ask me to contact the phone number on that bill (and possibly all remaining bills) and request the provider to resubmit the claims.

In all cases, cash is king and gives you negotiating power. This can be helpful if you do have insurance, but don’t expect to reach your out-of-pocket limit for the year. I personally have saved thousands of dollars on medical bills for something as routine as childbirth, simply by contacting the billing department of the service provider and asking “What discount can you offer if I pay in full?” You may be surprised with a substantial discount.

Be mindful of the implications of medical debt on your credit. Most healthcare providers don’t report to credit bureaus; your bill would likely be sold to a collection agency before appearing on your credit report. After the bill goes to collections, the three main credit bureaus provide a 365 day grace-period to resolve the debt before the collection account appears in your credit history. Utilize that grace period to work out a payment plan with the provider that works for your budget, or negotiate with the collector who can typically offer steeper discounts than providers.

When considering the lifelong impact of surprise medical costs on your long term financial plan, knowing your rights and your options can save you tens, possibly even hundreds of thousands of dollars. A CERTIFIED FINANCIAL PLANNER™ professional can help you understand the nuances of health insurance and develop a plan to pay off all types of debt. If you believe you have been wrongly billed, you may contact the Department of Health and Human Services (HHS) at: 1-800-985-3059 or visit www.cms.gov/nosurprises to learn more about your rights and your options.

Published in the Victoria Advocate

Hannah Gohmert is a CFP® professional and the Chief Compliance Officer of KMH Wealth Management, LLC.