There is a bill in Congress HR 1056: Family Education Freedom Act of 2007 that would give every parent up to a $5,000 tax credit for educational expenses.  Sounds good, huh?  Well...if it sounds to good to be true, it just might be... . 
Rep Ron Paul introduces something  like this every year.  Check out the status of the bill here.  It never got out of committee.

As Home Education Magazine commentator Valerie B Moon states, the bill may not be all that great:

This bill may look good on the surface, but the kicker is, “Amends the Internal Revenue Code.”  To receive such a credit in this manner, a family would have to meet the requirements of the IRS who would then be in the business of writing rules saying that A, B and C are acceptable practices for receiving a credit, but that X, Y and Z are not.

H.R. 1056 — Full text 

`(e) Regulations- The Secretary shall prescribe regulations to carry out this section, including regulations providing for claiming the credit under this section on Form 1040EZ.’

HomeschoolCPA's blog is a wonderful medium to READ what HomeschoolCPA has to say, but now you can HEAR me too! 

• Just a little more money will solve all my problems
• It was on sale, so I saved money
• Homeschooling is expensive
• and the favorite among homeschoolers: I'll use it someday!
  

• the proper attitudes toward money
• what to teach at what age

From the Online Newshour at PBS comes this calculator for the Economic Stimulus Rebate checks coming this summer.

My volunteer stint at the Tax Tips Hotline for a local TV show went pretty well.  The phones never stopped ringing during my two-hour shift.  I answered 47 calls in two hours, or one every 2.5 minutes. My ear was sore!

• Economic Stimulus Rebate (about 3/4 of the calls were on the rebate program)
• Tax treatment of a home repair project
  
• Rental Property
• Amended tax returns
  
• Withdrawals from an IRA
• Tuition payments to college
• College student working in another state
• Energy credits
• Student loans
  
• Lawsuit payments

Caller (an 83 year old woman asking about filing Form 1040A to receive her Stimulus Rebate Check): "Do I put my husband's name on the form also?  He passed away."
HomeschoolCPA: "Oh , I'm so sorry.  When did he pass away, ma'am?"
Caller: "Oh, more than twenty years ago."
HomeschoolCPA (trying not to laugh): "No you don't need to include his name, then."
Caller: "Alright, what do I put for occupation?"
HomeschoolCPA: "Retired."

Does your local TV station have a call-in tax question show?  WCPO here in Cincinnati has one evening where viewers can call an get their questions answered by a CPA.  The Ohio Society of CPAs gets volunteer CPAs to man the phone lines for a few hours.

This year HomeschoolCPA will be volunteering a few of her precious hours to answer questions.  I'll probably get my face on TV during the evening news, too! (What should I wear?!)

From the National Association for Tax Professionals (NATP) comes some details on the stimulus checks we're supposed to get this summer.

You should get two notices from the IRS before your check.  KEEP THOSE NOTICES.  File them in your "Taxes 2008" folder.  You do have a "Taxes 2008" folder, right?

Also, if your 2007 refund is direct deposited, the rebates will be direct deposited to the same account.  DON'T CLOSE YOUR BANK ACOUNT!

February 14, 2008

President Signs Stimulus Package

On February 13, President Bush signed the long awaited stimulus package designed to put money into the pockets of many American taxpayers. Along with the rebate checks, the bill contains some business incentives.

The IRS has indicated that they will begin mailing the rebate checks in late spring and continue through the summer. The rebates are based on the information reported on the taxpayer’s 2007 return. If a return is not filed, the taxpayer will not receive a check even if they may otherwise qualify. Many of the taxpayers who fall into this category are not required to file because of low income. If a return is filed for these taxpayers, the IRS will send them a rebate check provided their qualified income is at least $3,000.

Recipients of Social Security, Railroad Retirement, and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X to ensure they receive their rebate.

For taxpayers who elect direct deposit for their 2007 income tax refund, their rebate check will also be deposited directly into that same bank account.

Most taxpayers will receive two notices from the IRS. The first general notice from the IRS will explain the stimulus payment program. The second notice will confirm the recipients’ eligibility, the payment amount, and the approximate timetable for the payment.  Taxpayers will need to save this notice to assist them when they prepare their 2008 tax return next year.

The full text of NATP’s summary of the stimulus package and a Treasury Department release, with examples computing the amount of the rebate, is available on NATP's website.

Nearly three-quarters of Americans (73 percent) report that they "spend less than their income and save the difference." But little more than half of them (53 percent of all respondents) say they save at least 5 percent of their income, and only 28 percent say that they save at least 10 percent of their income. Experts urge people to save at least 10 percent of their income.

More than two-thirds (71 percent) report that they "have sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor visit."

I encourage a savings rate of 10% of pre-tax income for retirement in a 401(k) plan or IRAs and 10% after taxes for an emergency fund, vacations, major purchases and college savings.  I also encourage at least 3 months of living expenses in an emergency fund.  Far more than a doctor's bill!

These statistics are REALLY scary!  What are we teaching and showing our children?  Yikes! I try to teach my daughters (and any other teenager that will listen!) that credit cards are not for emergencies.  Savings accounts are for emergencies.  Let's get our act together, America!  Save those economic stimulus checks that are coming this summer. Do not spend them like the President wants you to!

A parent over at the Homeschool2College Yahoo group asked:

Quick question regarding FAFSA( the financial aid application form). My oldest is in 10th grade and works. Will HIS income count when we file?

Yes. The FAFSA counts 50% of a student's annual earnings as being used for college.  I ask teenagers that work, "Are you saving 50% for college? You better!"  They are usually quite surprised. BTW, 35% of savings or investments in the student's name are assumed to be used for college also.

The very best article I have ever read about the FAFSA's EFC calculation was in an accounting journal a few years ago (I'm a homeschooling mom and CPA).  Here's the link.
http://www.aicpa.org/pubs/jofa/jul2005/gujar.htm

 It's a little technical because it's written to CPAs, but the diagrams are wonderful.

My brother, Dr Michael Brandl, an economics professor at the University of Texas-Austin, was recently interviewed by The Parent Code about teaching your kids about money. Here's the teaser:

What do you teach your kids about money and finance? Kids pay attention to your habits and your mistakes. It's never too late to start showing children the difference between wants and needs, always respecting the value of a dollar.

HomeschoolCPA was recently asked:

I am 16 years old and am a newspaper carrier. Do I have to pay taxes? I make around $4000.  -Sean in WY

You probably won't owe federal income tax since your earnings of $4,000 are under the $5,350 threshold for paying income tax in 2007.  You *may* owe federal income tax if you had any other jobs or had interest and dividends from a savings account, etc...

Also the IRS Code says that  a child under age 18 delivering newspapers is exempt from Self Employment tax and Social Security tax (meaning you don't have to pay self -employment or social security tax).  Newspaper carriers get special treatment (so do babysitters and lawn mowers)! Yeah!  You picked a good job (for tax purposes).

• Newspaper carriers
• Work for parents in their business
  
• Babysitting
• Lawn mowing
• House cleaning
• Pet sitting

The last four jobs must be performed by a student under age 18 and in someone's home.  They are classified as "household employees", but do not have to pay self employment (SE) tax nor Social Security tax.

What do your kids do for money?  Mine babysit, give piano lessons and do bookkeeping for one of my tax clients. Giving piano lessons is the only job that my 17yo dd pays self employment taxes on.  Babysitting and working for me in my business are SE tax-exempt.

Carol

Top 10 Ways to Avoid Trouble with the IRS
Since it's nearly the start of the tax season, I thought I'd share some tax tips:

1. Keep good records
2. Only take deductions if you can prove it with a paper receipt (especially charitable deductions)
3. If you start a small business, get a professional tax preparer to help you do your return.
4. Include all income (interest, dividends, gambling winnings, stock sales etc)
5. Check all Social Security Number on your return (number one mistake according to the IRS!)
6. Don't go to an audit meeting by yourself.  Hire a CPA or Enrolled agent. Let them visit the IRS.
7. File your return on time
8. Pay your taxes on time
9. Don't ignore letters from the IRS.  Open the mail!
10. Ignore those people that say you don’t have to pay taxes. You do!

Here's a bonus tip:  Do not put your children's earnings on your tax return.  They need to file their own return.

Just lookin' out for you!

Carol

From the good people at Good $ense Ministries comes this news about electronic budget software,

The Brave New World of Budget Software

For those wanting to move past the paper and pencil approach to budgeting, Quicken, Microsoft Money, and an Excel spreadsheet used to be the only games in town. But free online budget tools are multiplying faster than an Excel macro. The ones getting the most press are Mint.com, Wesabe.com, and Geezeo.com. However, a Newsweek article said there are over 40 such sites. Each one is trying to attract some of the 65 million people who now bank online. The sites pull information from your bank and credit card accounts (all emphasize that they are as secure as possible), helping you know where you stand financially and even offering tips for smarter spending.