Sales Tax

thumb_tacksWhile standing in line at the grocery store behind a mother and her son, I was reminded of an instance with my sons many years ago. I thought it would be a good financial lesson to give my sons some money to purchase various grocery items. They made some wise choices and counted the money they would need to pay for their groceries including tax. After they paid for the items, I noticed my youngest son waiting for the clerk with an outstretched hand. “Honey, what are you waiting for?”, I asked.  He replied, …. “my tacks (tax)!”

Clearly my son was a bit confused about sales tax …. but then again many of us might not have a clear idea of what these funds are for. Given the current election climate and general discussions of taxation, now may be a good time to review sales tax and how is collected and distributed.  According to the dictionary, “sales tax is a consumption tax assessed when individuals and businesses purchase goods or services”.

Sales taxes are usually added to the cost of a product or service and are generally paid by the customer and can vary by state. Most states and taxing authorities impose a sales tax on goods and service and businesses are responsible for collecting sales taxes and remitting them to appropriate taxing authority. Taxes are (usually) paid by the retail consumer – whereas goods that are sold to wholesalers or manufactures are exempt from taxes.

In Iowa the state sales tax rate is 6. 0% but some communities add additional sales tax known as local options sales tax. In the U.S. sales taxes can play an important part in the growth and advancement of local communities and is often used for; community development, public services, and protective services.

For more information  * Tax rates in your area, https://www.idr.iowa.gov/salestaxlookup/index.asp.

* Business tax information contact: Iowa Department of Revenue and Finance, PO Box 10465, Des Moines, IA 50306-0465, or fax it to (515) 281-3906, or go on their website at www.state.ia.us/tax or  : http://smallbusiness.findlaw.com/business-taxes/sales-and-use-tax.html#sthash.svM2KMqG.dpuf

mary w kayakMary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money. Mary likes to save for rainy days but carries an inflatable kayak the trunk of her car for the sunny ones!

 

Guest Blogger, Mary Weinand

 

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Planning is Key to Sales Tax Holiday

salestaxholiday-smIowa’s Sales Tax Holiday is coming up August 5 & 6: that’s 48 hours when you’ll pay no sales tax on clothing and footwear priced under $100.  This is a nice opportunity for us all to save a few dollars – but are you prepared?

Just like always, a smart shopper wants to buy the important items and skip the unimportant items. The more people you have in your family, the more you’ll benefit from having a plan!  Here are some ideas:

  • Budget. Figure out what you can afford to spend. Staying within your limits will prevent you from spending extra money on credit card interest.
  • Inventory. Go through your existing clothing to see what fits and is worth keeping, and eliminate items that are worn out, out-grown, or simply no longer useful. If you have several children in your family, this may take some time!
  • Big picture plan. After inventorying the clothing you’ll keep, the next step is to make a big-picture plan for what items you’ll need or want to purchase this fall. If you like to have at least 5 pairs of dress slacks to wear to work, and you only have three, then you might put 2 pairs of dress slacks on your list – you might even identify colors needed or preferred.  If you already have 3 pairs of jeans, and really two is enough, then you will know you can bypass the racks of jeans in the store.
  • Prioritize. Sometimes (or often!) we can’t have everything we want.  Sort your list into two groups: items that are essential, and items that would be nice, but not essential (okay, you can make 3 groups if you want: high, middle, and low-priority).  In addition, since you made your big picture plan with the whole season in mind, even your “essential” list may add up to more money than you want to spend in one weekend.  So think about timing – which items will be needed in the next month, versus those that can wait, because you won’t need them till it gets colder?
  • Strategize. When you see the store ads for the weekend, that will help you make a plan of attack.  If two stores have dress slacks on sale, you might plan to check both stores before making a purchase.  If your favorite athletic shoes are on sale, that item may move to the top of your list for the weekend, while you decide some other item can wait.  Really ambitious shoppers might make a scouting trip through the stores they are likely to shop at, to pre-select the items they like.

A little planning can go a long way in stretching your clothing and footwear dollar.  If you want to come away from the holiday weekend feeling like a super-consumer, the steps above are a great way to start!

One last tip: If you buy something during the tax holiday, then discover you purchased the wrong size, or that the color isn’t right, you can do an even exchange (tax free) for the same item in another color or size.  

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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The Benefit$ of Returning to Iowa

vetsMy daughter, her husband and two kids have lived with my husband and me since her husband retired from the Air Force in late April. Last week their belongings arrived from Japan, filling our two-car garage. We are excited to have them living close now, after 6 years of living so far away. We are doubly blessed now that her husband has found employment 20 minutes from our home. Soon, they will purchase and move into their first home. In May of 2014, Governor Branstad signed the Home Base Iowa bill, making this all possible.

The Home Base Iowa bill was designed to support veterans already living in Iowa and to provide  financial and employment incentives to attract those leaving the military. My daughter and her family are the recipients of some of these benefits.

My son-in-law received preferential treatment as he began his job search.  His current employer was not actively seeking new employees when he willingly interviewed and hired him. His employer said he always tries to find a place for any vet wanting to stay in the state.

The Military Homeownership Assistance Program provides $5000 in down payment and closing cost assistance. At tax time, the assessed value of their home will be reduced for property tax purposes, by $1850, reducing their tax obligation.

When he is ready to retire, his retirement benefits will be exempt from state income taxes.

My daughter and family are excited about this new phase of life and look forward to moving into their new home. The VA Loan process is now in the third month and moves agonizingly slow, but the savings will be well worth wait.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Where to Turn for Help

alice

When I was young adult I longed for the days when I wouldn’t have to count every penny. I envisioned a future where my college education would pay off and I would not have to worry about money anymore.

Well, I am well past college age but I have yet to reach the worry-free future I envisioned. What I have come to realize over the years is that managing money is often complicated and stressful and a recent report published by the Iowa United Way confirms that one third of Iowans struggle financially.

Last month the Iowa United Way published a report on Asset Limited, Income Constrained, Employed (ALICE). The report shows that ALICE families work hard and earn above the Federal Poverty Level (FPL), but still struggle to afford a basic household budget of housing, child care, food, transportation, and health care. Hopefully, when people read the report they will recognize they are not alone.

Many people don’t know where to turn when they have questions about money. As Human Sciences specialists in Family Finance we offer many classes on finances that can help people feel a bit more prepared. Our classes provide a safe environment to ask questions and learn from each other.

One example is the SMART CHOICE health insurance education class. Studies show that the cost of healthcare has become a significant portion of our family budget yet many of us don’t know how to choose a plan. Health MWeinandinsurance coverage and terms can be complicated and there are many decisions about types of care, service providers, out of pocket expenses, etc.

Like many financial decisions, it is important to begin with an understanding of what you need – like your family’s typical usage and healthcare priorities. The SMART CHOICE Health Insurance is designed to help people gain a set of skills so that they can choose a plan that best fits their family’s needs and then use that plan efficiently once enrolled. The course provides core information about health insurance, tools to use to make appropriate decisions, and a chance to compare hypothetical policies.

For more information about our resource list or to contact your local Family Finance specialist visit:

Family Finance Programs  http://www.extension.iastate.edu/humansciences/family-finances-families .

Family Finance Specialists  http://www.extension.iastate.edu/humansciences/staff-family-finance

Related Content Links

Download a copy of the United Way ALICE Report  http://unitedwayalice.org/Iowa/

Smart Choice Health Insurance  http://www.extension.iastate.edu/humansciences/health-insurance

Mary M. Weinand is a Human Sciences Family Finance specialist who works with individuals to help strengthen their ability to make informed judgments and make effective decisions regarding the use and management of money.

Brenda Schmitt

Brenda Schmitt

A Iowa State University Extension and Outreach Family Finance Field Specialist helping North Central Iowans make the most of their money.

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Is There A Proper Way To Cancel A Credit Card?

cut cardToday a consumer told me how she had canceled a few credit cards by shredding them. My next question: had she contacted the credit card companies via a letter indicating her desire to cancel the credit cards? Her answer was “no – but why would I need to write a letter?”

Here’s why:  the credit card company does not know you have shredded their card – so they think you are still doing business with them.   Closing your account(s) the right way can take time, patience and organization. Here is the process to cancel your credit card(s):

Know who to contact – look up your customer service phone number and mailing address, found on your monthly statement.

Remember to redeem rewards. If possible, check your rewards balances and redemption procedures on the issuer’s website. Cash-back cards generally have easy redemption features. Check the language.

Pay down your balance in full. Pay off your credit card in full or, if you can find a balance transfer card with better terms, transfer the balance.  You can’t close an account until the balance is paid. You will need to wait two months in a row to wipe out the balance, if you normally carry a balance.

Deliver the news – Check with the card issuer’s customer service representative to confirm that the balance on the account is zero.  You may think the balance is zero but there may be interest that needs to be paid. Once you are at balance of zero, inform them that you are cancelling the card.  Ask them to please make sure the account record reflects that it was closed at your request.  Ask for a name and address you can write to with a written confirmation of your card cancellation, and write down the details of the phone call: date, time and a way to identify the representative you spoke to.

Send a letter. Write a short cancellation letter to the card issuer.  Request written confirmation of the account’s closure.  Include: your name, address, phone number and account number and indicate that you want your credit report to reflect that the account was “closed at the consumer’s request.”  You may want to include details of the final transaction that paid off your balance – perhaps a copy of the check you wrote, or specific details of an electronic transaction.  Send the letter via certified mail or return receipt to prove that that the company received your letter.

Be patient – Getting a card canceled may take 1-2 months.  After that time, look at a copy of your credit report to see if the credit account is marked as “closed”.  Free copy of your credit report can be found at: http://www.annualcreditreport.com

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Everyone Can Save Money – You Can Too!

financial-fitness

Millennials are known for having huge student debt as they leave college. They have proven they can save money too.

According to a recent survey by Bankrate.com – 62 percent of those ages 18-29 are saving more than 5 percent of their income. Establishing the habit of saving is how this process gets started.  Gwen Cunningham from CFPB shared recently, “Don’t underestimate the power of savings.”

Reasons for saving include: rising health care costs, longer lifespans, and the uncertain future of Social Security.

Pay Yourself First just as if it is a bill you must pay; save money each pay period.  Direct deposit into a separate account is the easiest way to make that happen.  While you are doing that, establish your emergency fund and then build upon it.

Once the savings habit is established, you can start working on your retirement fund. Some experts suggest you save up to 18% of your income for retirement.  Over time, with compounding returns and employer matches you can accumulate substantial retirement savings.  In addition to employer plans, consider using other tax-advantaged options for retirement savings such as the individual retirement account IRA or Roth IRA to build your fund.  If you don’t have a retirement plan at work and don’t know where to start, a MyRA (offered through the U.S. Treasury Department) may be an option.  See our earlier post on the MyRA.

Keep up the saving to stay on the upside of your financial future.

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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New Payday Loan Rule Proposed

Neon sign "payday loans"

Neon sign “payday loans”

Last month, the Consumer Financial Protection Bureau proposed a new rule designed to prevent consumers from falling into a debt spiral caused by repeated use of payday loans.  The CFPB is seeking input about the proposed rule – individuals and groups can submit comments through September 14, 2016.  What rules do you think should be in place?

Payday loans are short-term, high-cost loans – check out my “Easy Money” post if you’re not familiar with how they work, and view a short CFPB video to learn more about the repeat borrowing trap that can result.  Technically they do not charge interest, but the fees involved end up being the equivalent of extremely high interest rates – averaging over 300% nationwide.  Fourteen states have essentially outlawed payday loans by capping interest rates and equivalent fees — typically at 36%.  On the other hand, some folks say that these loans are important to consumers, who often have no other place to turn for a quick short-term loan to deal with an urgent situation.

The rule proposed by the CFPB does not cap interest rates; instead it creates requirements designed to make sure the borrower will be able to repay the loan when it is due (without repeat borrowing).  In addition the proposed rule limits certain actions by payday lenders which cause consumers to incur repeated penalty fees imposed by their bank.

The “Ability to Repay” standard is complicated in many ways: complicated to define, complicated for lenders to apply, and complicated to enforce.  In addition the proposed rule includes a number of exceptions, or loopholes — situations in which the lender is not required to determine ability to repay.  As a result, reactions to the proposed rule have been mixed.  It’s not my role to express an opinion about the rule, but if you’d like to read a variety of opinions, you can search the internet; this search phrase brought me a large number of results: payday loan rules proposed by consumer protection agency.

The payday lending industry has many lobbyists in place to provide reaction to the proposed rules, but the CFPB also wants to hear the voice of the consumer.  Now, during the comment period which ends September 14, is your chance to make your voice heard.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Raspberries!

raspberries

raspberries

For over a week now I have been enjoying raspberries from my back yard – one of my favorite parts of summer!  They’re black raspberries – more seedy than the red raspberries available in the store, but very flavorful.  And free to me!

My raspberries were sort of an inheritance.  They were already in place at a house I lived in 25 years ago, and we enjoyed them so much that when we moved, we dug up a couple plants to take with us.  One of those plants died, but the other survived and spread, and is now about a 30-foot row along my fence.  I’m so grateful that many plants can be shared in that way; I have other plants, too, that I didn’t buy – they were simply “gifted” to me by friends who divided the perennials in their yards.

While I really enjoy having the raspberries in June-July, I have too many to make good use of while they’re fresh, so this past weekend I froze a couple of packages for use in the winter (they’ll be great in a mixed berry pie!).  Freezing raspberries is really easy, and a great way to save money — if I wanted to buy them in the winter, I would pay dearly.

Preserving summer fruits and vegetables – through freezing, canning, or even drying – can be a health boost if it increases the amount and variety of fruits and vegetables you eat throughout the year.  And of course it can also save money.  However, food preservation must be done properly in order to prevent food-borne illness.  This is especially true if you are canning fruits, vegetables, jams or jellies.  In addition, using recommended methods helps improve the quality (flavor, texture, and overall freshness) of your product.

To learn more about food preservation, check out Iowa State University Extension’s food preservation resources or contact our AnswerLine at 800-262-3804.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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Cutting Food Waste

42-16568416If I manage to do a better job of using the food I buy, on average I should be reducing my food costs 20% or approximately $25 a week. That’s based on USDA average costs for feeding my family and data that measures waste.

Some of the steps that will help me reach this goal might be planning menus that recycle left-overs and limit adding extra items to the grocery cart. Taking an honest look at portion sizes and adjusting the amount that I prepare wouldn’t hurt the waistline.  I can also step up watching freshness labels and put food in the freezer to use later.

If you don’t know how long you can store foods or what a freshness label means there are two sources that can help. Smart phone users can download the FoodKeeper App. The USDA, Cornell University and the Food Marketing Institute released the application in 2015. The tool can help you understand how different storing methods affect a product’s shelf life. In addition, the application can remind you to use items before they are likely to spoil.

If you want to visit with a live person, call Answerline. Iowa State University Extension & Outreach’s staff members have the resources to tell you if a food is safe to eat or how to extend its shelf life.

Saving $25 a week at the grocery store sounds like a nice challenge and a way to reallocate funds to other purposes.

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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Food Waste

CheeseburgerI threw away my lunch yesterday. It wasn’t because it was too hot out to eat, or because of concern over the changes in my retirement account because of British political decisions.  It was because I, like many Americans, didn’t manage my food supply very well.

The average American wastes 209 to 254 lbs. of edible food each year. The main reasons are: lack of planning, not understanding food labels that give expiration dates, eating habits, and the ready supply of food.  USDA data shows that 45 per cent of the overall food supply in 2012 was never consumed. Some of the unconsumed food resulted from food loss during processing, but economic impact is pushing companies to repurpose that loss into animal feeds, fertilizer, biofuels, and other uses. By contrast, my lunch ended up in the trash bin.

Financially, the out of pocket cost for throwing away my lunch would have resulted in a $5.00 savings at the grocery store. My brain is compounding that figure and I’m a little ashamed at an obvious place I could be spending less money.

The U.S. Food Waste Challenge has set a goal to reduce food waste 50 percent by 2030. It’s a joint effort of the USDA and EPA.  To learn how organizations, companies, and individuals can achieve that goal, visit the USDA Food Waste page. It’s time I stopped being lazy about managing my food supply. How about you?

Joyce

Joyce Lash

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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