Friday Financial Five – December 20th, 2013

Friday Financial Five – December 20th, 2013

Let the tapering begin

The Federal Reserve determined that there is enough positivity in the economy to begin a drawdown of their bond buying in 2014, and that’s good news. The prospect of rising interest rates, which has been a matter of when not if for some time, looks to be a certainty for next year. The trick will be to minimize the rate shock, keeping any increases at a manageable level to prevent the stagnation of the real estate and investment markets. Those thinking about financing a home or automobile in the next three to six months may be well served to accelerate the timetable.

Tax return filing dates get delayed

GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST

For the eager beavers expecting to file a tax return as early as possible, the IRS has announced the start date to accept returns and it’s been delayed by ten days. It was originally planned for January 21^st, but the government shutdown slowed the preparation process. The extra ten days will give the IRS an opportunity to test their programming and systems. Unfortunately, there will not be a ten day reprieve from the April 15^th deadline to pay taxes or file personal returns without the 4868 extension form.

Flexible Spending Account rules have changed

Those rushing to spend Flexible Spending Account balances should pause and review the rules with their employer. Effective 2013, employers can amend their cafeteria plans, allowing $500 to be rolled over from one year to the next. For businesses on a calendar year, the cafeteria plan must be amended by December 31^st.

Get a Social Security projection each year

Since the Social Security administration stopped mailing people their retirement projections, many are unaware of what to expect for a retirement income. In order to obtain current projections, go to the estimator and enter personal data. There are also basic calculators on the website that will provide projections based on age, current income, and anticipated retirement date.

Richard Covey may not be popular with the IRS

Regardless of one’s opinion on the estate tax, it’s surprising to see how much estimated tax revenue has been avoided by the implementation of Grantor Retained Annuity Trusts (GRATs). Richard Covey, the attorney who helped develop the tax shelter, calculates the government has missed out on roughly $100 billion in tax revenue since the year 2000 thanks to this technique. The irony is that the GRAT was developed in response to another tax planning technique, the GRIT, that the IRS was trying to end in 1990. The person responsible for the GRIT? Richard Covey.

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