Money Blue Book

The end of the year is here, but don’t just take it easy and forget about important end of the year financial moves you may need to make. For those who have one through their employer, make sure you’ve fully maxed out your Flexible Spending Account (FSA). For the remaining unused funds, my usual end of the year routine is to get creative and spend the rest on qualified health care items like Tylenol, Advil, and over the counter cough medication like Delsym and Robitussin. Covered FSA medical expenses also include items like contact lens solution and eye care drops. If you have no immediate health needs, it’s always a good idea to stock up on emergency, medical kit type supplies like Band-Aids, gauze, and Betadine for common scratches and scrapes, particularly if you have kids.

What Is A Flexible Spending Account And How Does It Work?

Flexible Spending Accounts are tax advantaged arrangements set up by some employers to allow employees to set aside a pretax portion of their regular paycheck to pay for qualified expenses, usually for medical care, but frequently also for child care costs. The smart use of pre-tax savings through FSA’s can help you save up to 30% of the cost of out-of-pocket medical related expenditures. Most people contribute about $1,000 towards their FSA, but it varies depending on individual need.

Benefits of the Flexible Spending Account Include:

1. Contributions towards your FSA are pre-tax.
2. When you provide receipts to get reimbursed, the FSA reimbursements are tax free.
3. Convenient FSA debit cards are now frequently being used to make it easier for employees to use the funds in their FSA.
4. Medical FSA’s are pre-funded by the employer - when you set aside an amount for the year, the entire amount is available for use immediately at the beginning of the year, even though your periodic contributions will actually be made later.
5. FSA’s are well, flexible - they can be used to pay for a wide array of health care related expenses including dental, vision, over the counter drugs like painkillers and allergy medicine, and even elective medical procedures like Lasik laser vision correction surgery. FSA’s also cover health care related costs like insurance co-pays, deductibles, and other related out-of-pocket expenses.

The FSA “Use It Or Lose It” Rule - Two Way Street Between Employer and Employee

It’s important to properly and accurately estimate how much you are likely to need in your FSA for the plan’s coverage year. The biggest drawback of the FSA is that it is a use it or lose it account. If by the start of the new year there is still money left on your previous year’s FSA not spent, the amount is forfeited back to the employer, where it is used to cover administrative costs. Don’t let this happen because you’re just giving away your own money back to the employer!

However, this use it or lose it policy also works in reverse as well. As I mentioned earlier, one benefit of the FSA is that the entire allotted amount is available immediately at the start of the year. If you leave your job before the end of the FSA coverage plan year and have already used up the entire year’s amount, you do not need to refund or return the amount back to the employer. Some employers may attempt to recoup the loss by informally asking you reimburse them for the amount since you’re leaving the employment, however officially, employers are not permitted to see seek repayment of FSA monies so long as the original distribution was properly substantiated.

Is your stock portfolio making you sad? Are you bummed out about your disappointing returns and contemplating selling your positions to stem the losses? If so, fear not, Uncle Sam has a tax system in place to help lessen the financial pain and make your situation more bearable.

If you’ve lost confidence in your stock positions, maybe it’s time you cut your losses to take advantage of tax breaks that can help you avoid having to pay taxes on other realized gains for the year. Perhaps you owned stocks that were hit particularly hard, like Countrywide Financial or even ETrade, both with grim and uneasy future prospects. Holders of such dubious positions might want to contemplate selling their shares now to lock in their losses by the impending January 1 deadline for tax purposes.

It’s Best To Push Tax Bills Into The Future And Accelerate Deductions Into The Current Year

Generally, the Internal Revenue Service (IRS) allows you to deduct capital losses from capital gains and other income. Since we are so close to the end of 2007, it’s best to postpone any further gains that could be treated as taxable income a few days more, at least until January 1. If you have loser stocks that you can sell without any regret, now is the time to do so before the start of the new year. If you can unload enough of these losing positions, you might be able to completely wipe out all of your other realized capital gains for the year. Even if you don’t have enough realized gains to offset, you can still deduct up to another $3,000 towards your regular earned income.

Excess Capital Losses Can Be Carried Over and Applied Towards Future Tax Returns

If you dumped too many losing stock positions during the year and the extra $3,000 isn’t enough to offset for tax purposes, you are allowed to carry the excess losses into future tax years to reduce future capital gains. The amount can be carried over indefinitely without limit until the losses have been used up. The IRS will likely keep a running tally of the amount you have left to deduct, but if you consistently use the same online tax program such as Turbo Tax or H&R Block’s Tax Cut from year to year, the program can help you keep track of your tally based on your past tax returns. I really recommend using an online tax program to help make your record-keeping life easier.

Let’s use my past situation to illustrate the carryover loss. In 2000 as a college student, I lost a lot of money in the stock market after the dot com bubble collapsed. Since I had no earned income for several years as a student, I continued to carry over the excess losses until I finally entered the workforce and started generating income. Only recently did I finally use up the remaining carried over losses.

Be Aware of the Tax Loss Wash Sale Rule

With the ability to offset capital gains using capital losses, there are also limits and rules on when and how much you may deduct. The wash sale rule occurs when substantially identical security (stocks) is sold at a loss and repurchased back within 30 days. When this happens, the tax loss will not be allowed to be used to offset any other capital gains for tax deduction purposes because the stockholder ends up in the same economic position before and after the sale - essentially a wash.

If you own a stock that you eventually sold at a loss and you want to use the capital loss for tax reporting purposes, you will need to wait 31 days before buying the same or a substantially similar position. But frankly, if you planned on buying back the stock so soon, perhaps you shouldn’t have sold it in the first place. Remember, it’s always best to invest for the long term and not get too caught up in short term, emotionally driven market fluctuations.

I was routinely checking my Citibank balance online the other day when I noticed a little warning box above my account balance mentioning something about a savings account transfer limit of 6 per statement cycle imposed by a federal rule called Regulation D. I had heard about it before but never previously paid it much attention. Examining the reminder message, it was clear to me that this was something that might easily be overlooked by the average savings account holder. It’s the type of important information that should be, but isn’t readily advertised enough by banks.

Banks Place A Limit On The Number of ACH Transactions You May Execute Per Month

Bank savings and money market accounts are regulated by the Federal Reserve Board’s Regulation D, which governs deposit accounts and their reserve requirements. The reserve percentage is the amount mandated by federal law that banks must retain in house and not loan out to customers. For savings and money market deposit accounts, Regulation D limits the number of electronic ACH transfers that one can make to 6 per statement cycle, which is about a month. While the regulation doesn’t impose a reserve requirement for savings and money market accounts, it does impose about a 10% reserve requirement for checking accounts. Because checking accounts are utilized more frequently, the reserve requirement is to ensure that banks can meet demand and not run out of money. Because savings accounts are not subject to the reserve, the transaction limit helps to keep deposit withdrawals to a minimum.

In the past, before the popularity of online banks such as Emigrant Direct and ING Direct, this was less of a problem since bank customers usually visited their local brick and mortar branch to request bank transfers. Now, with the growing popularity of online banks and the emergence of interest rate chasers, customers are starting to hit or exceed their ACH limit with greater regularity. Every bank enforces Regulation D requirements differently. One time violations of the monthly limit will usually result in finance charges or refusals to process the excess request, but frequent violations may cause your bank savings account to be closed and terminated, with the balance transferred to your checking account or sent to you in the form of a check.

Transactions That Count Towards the 6 ACH Transaction Limit Include:

1. Online transfers from savings to a linked account (such as checking)
2. Outgoing online transfers made to another bank through ACH or via online wire transfers
3. Transfers made via phone banking
4. Pre-authorized deductions by a third party
5. Checks written from a money market account

However, Transactions That DO NOT Affect Your Limit Include:

1. Transfers and deposits into a savings or money market account
2. Withdrawals and transfers made at an ATM machine
3. Withdrawals and transfers made in a bank branch via a teller

A Few Possible Solutions To Get Around The Limit

Because banks don’t usually track and display your remaining limit for you on their websites, other than manually doing it yourself, another solution is to forgo the FDIC insurance benefits of savings accounts altogether and deposit your savings into a money market fund through a brokerage firm instead. There are usually no caps on the number of transactions you can make with money market funds, although some funds do impose minimum limits on the amount you can withdrawal at one time, as well as waiting periods for withdrawals. While money market funds are more akin to stock investments and theoretically involve a bit more risk, the interest yields are usually much higher than that offered by ordinary savings accounts. But if you want complete flexibility and liquid access to your money, perhaps you should just stick with plain old checking accounts. There are no restrictions with checking accounts, although the interest yields are usually low to none.

How was your Christmas? Did you spend it all day with family and friends? Or did you manage to sneak out to watch Aliens vs. Predator like I did. Yes, I was one of those that ducked into the theaters on Christmas afternoon to watch this winter’s biggest sci-fi blockbuster movie on opening day. Only this time, I was sorely disappointed. It wasn’t even the movie itself either (although I thought it could have been better). It was my realization that I was paying way too much money for the opportunity to be crammed into a stuffy hot room with a crowd of noisy, obnoxious people, to watch a movie on a blurry movie screen operating on technology that probably hadn’t been updated in several decades. Watching the latest movie release at the local cinema simply isn’t what it used to be anymore. Why are movie tickets so expensive nowadays? Times have changed and I wonder if it’s time I did so too.

Movie Theater Tickets and Concession Stand Snacks Are Outrageously Overpriced

Christmas day afternoon I went to see the new Aliens movie with my brother. Going with the Christmas spirit, I decided to pay for everything. For two expensive movie theater tickets I shelled out a total of $18 at about $9 each. Two popcorns and two small sodas tacked on another $16 for a grand total of $34 for two people. Now, if I was a father with a wife and 2 kids, and assuming everyone bought the same customary number of snacks and sodas, the approximate cost for the movie watching experience would have been a whopping $68! For what you’re getting in return, can we say - much too expensive?

Movie Theater Projectors Can’t Compare to New Home Television Technology

With new viewing technology coming out every day and with flat screen, LCD, and plasma television prices dropping constantly, it really doesn’t make sense to spend such high sums to watch new releases on blurry movie theater projector screens anymore. I’m just starting to finally notice it, but the resolution quality of movie projector displays are terrible. Watching a dimly lit movie like Aliens vs. Predator in the theater was a major challenge as I had a hard time making out the figures and distinguishing the fight scene details that frequently moved too fast for the projection technology to keep up. It used to be that movie theaters offered the biggest and clearest screens, with the best picture quality and booming surround sound, but now this type of technology is becoming easier and cheaper to acquire for your own home entertainment system. Of course there’s nothing quite like watching new releases on a super large screen, but is it really worth the inconveniences, cost, and hassles of going to the movie theater anymore? I’m starting to think not.

Other Benefits Of Watching Movies At Home and Alternatives

At the movie theater, it was my misfortune to be squished next to several obnoxious viewers, including one fellow who kept making deep burping sounds. Another girl kept flipping open her cell phone light to check her text messages and another kept walking in front of me to use the bathroom. If I was watching the movie in the privacy and comfort of my home, I wouldn’t have this problem. I could go to the bathroom whenever I wanted, eat whatever snacks I fancied, and I could even watch it in my pajamas if I wanted to. Plus I wouldn’t have to pay so much money for such a disappointing viewing experience.

With services like streaming movies, Comcast On Demand, Blockbuster, Netflix, and other online rental programs, it makes me wonder what will ultimately become of the movie theater viewing experience? I suppose so long as boys and girls need to date, they will need movie theaters as a public social outlet. But I think unless movie theaters start shaping up by improving their screen technology, providing more spacious seats, and lowering costs, they will eventually be usurped by cheaper and more convenient alternatives, the same way video game arcades were eventually replaced by home Nintendo’s and Playstations.

I personally don’t think it’s the quality of the movie releases that’s the biggest problem. It’s the degrading viewing experience and lack of needed amenities that is leading me down the path of avoiding movie theaters altogether in the future. Why not provide extra amenities like earphone jacks and allowing viewers to bring their own headphone sets? Also, bigger is not always better - make the screen resolution higher and sharper! Why not improve the screen quality by transitioning into some type of high resolution LCD technology. Home entertainment systems can now be equipped with huge flat screen HDTV’s with Blu-Ray or HD-DVD storage technology. Perhaps the cost is currently too prohibitive for them, but for the movie theater industry’s sake, I hope such upgrade plans are in the works because they are likely to start losing customers like myself in the near future as we start beefing up our home television entertainment systems and stop going to the movie theater for our movie enjoyment needs.