Mark Kennedy/AP
NEW YORK -- Burger chain Shake Shack, which got its start as a hot dog cart in New York City, plans to raise up to $80 million from an initial public offering of its common stock.
The company said Tuesday that it anticipates its IPO of 5 million shares pricing between $14 and $16 a share.
Last month Shake Shack disclosed in a regulatory filing that it was hoping to raise up to $100 million from its IPO, but it didn't say how many shares it planned to offer or at what price, so the figure was subject to change.
Shake Shack said that it plans to give the underwriters the option to buy up to 750,000 additional shares of its stock.
The origins of the restaurant date to 2001, when privately held Union Square Hospitality Group, a company owned by restaurateur Danny Meyer, opened a hot dog cart in Manhattan's Madison Square Park. Three years later a more permanent kiosk opened in the same park. It now has 63 locations in nine countries, according to regulatory filing Tuesday.
Shake Shack said that after the offering it will be a separate company from Union Square Hospitality Group.
In 2013, Shake Shack had revenue of $84.5 million, up 45 percent from the year before. It posted a profit of $5.4 million in 2013, up 31 percent from 2012.
Shake Shack cooks its burgers to order and promotes its use of natural ingredients, including hormone- and antibiotic-free beef. It's known for its long lines and its vibrating pagers that signal when an order is ready. The chain calls its restaurants "shacks," and uses the word to describe its menu items. The ShackBurger, for example, is topped with ShackSauce and a hot dog is named the Shack-cago Dog.
Other fast-casual restaurant operators have fared well after their IPOs, including chicken chain El Pollo Loco Holdings (LOCO) and Mediterranean-style restaurant chain Zoe's Kitchen (ZOES).
Shake Shack expects to list on the New York Stock Exchange under the "SHAK" ticker symbol.
Eric Risberg/APA Google self-driving car goes on a test drive in Mountain View, Calif.
Feel like taking a trip, or even heading to the store? Not in the move to drive? Good news: Driverless cars are getting closer to production and now there's a miniature test city that is part of the effort to bring them to market.
The University of Michigan has built a 32-acre city to test self-driving cars as well as connected vehicles that communicate with the infrastructure and other autos. Called M City, the area will include various types of roads and intersections, traffic signs and road markings, sidewalks, bus facilities, parked cars, pedestrians and construction barriers, according to a press release from the school.
Although driverless vehicles have already been tested extensively -- Google (GOOGL) (GOOG) claims more than 700,000 autonomous miles in its cars -- it will take intensive examination under many conditions, situations and environments for designers, manufacturers, governments and the public to all feel comfortable with the biggest change in transportation in many decades.
From a curiosity, driverless car development has continued to advance and now the nascent industry is moving toward commercial availability. Nissan CEO Carlos Ghosn recently said driverless cars will hit showrooms by 2020, according to Forbes.com. The Detroit Free Press reported that Google Director of Self-Driving Cars Chris Urmson claimed the tech company's own units to be available within the same timeframe. Google is currently having Detroit companies build a test fleet of prototypes.
Of course, hitting showrooms isn't enough for success. Companies must convince regulators and the public that driverless cars are safe in general traffic conditions. Then again, given how many people drive, maybe automatic cars won't seem that dangerous after all.
WASHINGTON -- The Supreme Court on Tuesday rejected a challenge from retailers who claim the Federal Reserve allows banks to charge businesses too much for handling debit card transactions.
The justices let stand a federal appeals court ruling that upheld the Fed's cap of about 24 cents a transaction on so-called "swipe fees." That ruling was a setback for merchants who pay the fees to banks every time a customer uses a debit card to make a payment.
The case was a battle between two powerful and politically influential industries with billions of dollars at stake.
Retailers pay the fees to banks every time a customer uses a debit card to make a payment. Swipe fees are supposed to cover the banks' costs for providing the service.
The fee cap set by the Fed in 2011 currently averages about 24 cents each transaction. Before the cap was imposed, fees averaged 44 cents a swipe.
A federal judge struck down the cap last year, agreeing with merchants that the Fed improperly including data that made the cap too high. But the U.S. Appeals Court for the District of Columbia overturned that decision in a win for the banks. That decision will stand now that the high court declined to intervene.
Congress mandated a ceiling on debit-card swipe fees as part of 2010 legislation passed in response to the financial crisis. The Fed had initially proposed a 12-cent fee limit, but retailers argued that the Fed was influenced to double that level under pressure from bank lobbyists.
Retailers said the Fed deviated from the 2010 law's intent by having the cap include bank expenses that the law doesn't allow. The appeals court rejected that argument, deferring to the Fed's "reasonable interpretation" of the law.
The Fed rule doesn't apply to credit cards, government-issued debit cards, prepaid cards or cards issued by banks and credit unions with assets under $10 billion.
Richard Hunt, president and CEO of the Consumer Bankers Association, praised the high court for refusing to hear the case and said consumers should come first, "not the bottom line of retailers."
But Mallory Duncan, senior vice president and general counsel of the National Retail Federation, said retailers would continue to press the issue in the courts over the "anti-consumer and anti-competitive practices of the card industry."
Shutterstock
A powdered drink mix that, when hydrated, turns into an alcoholic cocktail has legislators across the country talking about banning it before you have a chance to try it.
Concerns about the powdered alcohol mixes, which would be sold under the brand name Palcohol, have states scrambling to ban the powder packets prior to it coming to market Food Safety News reported Tuesday.
The company that manufactures the powdered mixes said it hopes to have it available for sale by spring. Plans call for four flavors -- margarita, cosmopolitan, lemon drop and mojito -- and a choice of vodka or rum.
Banning powdered alcohol is the most irresponsible action a legislature can take.
When the packets are hydrated with either water or a mixer they would then be turned into a cocktail, according to the manufacturer. Food Safety News reported that the federal government approved the powdered cocktail mixes last year before withdrew the approval over concerns about the labeling.
With the company working to address the issues, at least nine states are reportedly trying to block the product including Wisconsin, Colorado, Nebraska and Utah.
And the company isn't happy.
"People say that banning powdered alcohol is the responsible thing to do," Palcohol manufacturer Lipsmark said in a statement on its website. "It's just the opposite. Banning powdered alcohol is the most irresponsible action a legislature can take. By banning a product that's in demand, it creates a black market which means the state loses all control over it. Then underage people can get a hold of it much easier. We know from experience that Prohibition doesn't work."
The company cites as a potential market, those who go hiking or camping and don't want to carry with them heavy bottles of alcohol.
Food Safety News quoted one legislator as saying the risks aren't worth allowing the powdered drink mixes.
"The potential for abuse outweighs quite heavily the need for that type of product," Wisconsin state Sen. Tim Carpenter said. "It would just make life a lot less complicated if we just didn't go there."
Patrick T. Fallon/Bloomberg via Getty ImagesBy ANNE D'INNOCENZIO
NEW YORK -- Walmart Stores (WMT) is introducing a service allowing customers to pick up their tax refunds in cash at about 3,000 stores nationwide.
It's the discounter's latest move offer more financial services, which is seen as a path to bringing more shoppers to its stores.
The world's largest retailer, based in Bentonville, Arkansas, says the process will take the same time as if customers were to file their returns electronically and then get direct deposit, which could take just a week, says Daniel Eckert, senior vice president of services for Walmart's U.S. division.
... the last thing [customers] want is to wait for a refund check to arrive and then spend money on unnecessary fees.
The service could help people without bank accounts get their refunds more quickly and avoid high check-cashing fees. Walmart also says it could prove convenient for others.
"We know tax refunds can be one of the largest financial payouts of the year for many of our customers and the last thing they want is to wait for a refund check to arrive and then spend money on unnecessary fees," Eckert said.
Eckert also acknowledged Walmart's business could get a boost by providing an extra "jingle" to their wallets at a time of sluggish sales and customer traffic declines.
The offering marks the latest example of how Walmart is expanding its financial services. Last April Walmart introduced a new money transfer service that it says will cut fees for its low-income customers by up to 40 percent compared with similar services elsewhere.
Last fall, Walmart teamed up with Green Dot (GDOT), a company known for reloadable prepaid cards, to bring mobile checking accounts to its shoppers. Also, last fall, Walmart teamed up with an online health insurance comparison site and agency that lets shoppers compare the cost of health care coverage options at its stores.
As part of this new cash refund service, Walmart is aligning with a Green Dot business called Tax Products Group and Republic Bank & Trust, two providers of tax-related financial products. These companies have more than 25,000 tax-preparation locations, both in Walmart stores and elsewhere, for the service.
Walmart already offered tax-preparation services at its stores and shoppers could cash refund checks at the stores.
Faster Than IRS
Walmart doesn't charge a fee for the cash pickup. Tax preparers can charge a maximum of $7 for the service at the time of filing. Walmart stores charges a flat $3 to cash paper checks under $1,000 and $6 up to $7,500, but the new service is faster than waiting for a paper check from the IRS.
The service isn't available for people who electronically file their own taxes.
It works like this: When customers use any one of these tax preparation locations, they can choose the option called "Walmart Direct2Cash."
They will then receive a confirmation code for their federal and or state tax returns through an email from TPG or Republic Bank as soon as their refund is ready to be picked up.
Customers will then go to the Walmart MoneyCenter or customer service desk at their local stores show their confirmation code, confirm their identity and then receive their refund. Cash refunds up to $7,500 are eligible for this program.
Is your utility bill still high after having tried every energy-savings trick in the book? Bringing in a professional auditor to detect energy leaks can help, but it can also cost you hundreds. Here are some simple tips to help you tackle the some of the inspections yourself.
One easy way to pinpoint common energy leaks is to either use a candle or a stick of incense.
All you have to do is light it up, and carefully hold it near any areas that heat can escape, like the fireplace. Up to 20 percent of warm air can leak though here. If you start to see the flame flicker or the smoke drift, you know you've found a draft that needs fixing.
Other common culprits for leakage include attic and basement openings, electrical outlets and switches and doors and windows. To seal up cracks and crevices less than a quarter-inch, a little silicone caulk will do the trick. For larger gaps up to 1-inch wide, an expanding polyurethane foam insulation would work best.
Next, check your heating and cooling units. These account for over 40 percent of your home's energy use. Make sure your filters are replaced regularly and get an inspection to make sure everything is in proper working condition.
Lastly, inspect your lighting, appliances and home electronics, which make up nearly 30 percent of your home's energy use. If your device has an indicator light, a charger, or an AC power adapter, it's likely using phantom power, which means that it continues to sap energy even when it's supposedly turned off. To keep these devices from draining your budget, try using a power strip for your chargers, TVs and computers so that you can easily switch it off before going to bed.
These are just a few ways you can get started with your own energy audit. A little research and elbow grease can help decrease your utility bill and potentially save you hundreds of dollars each year.
The factory floor of Globe Manufacturing may seem like your average textile manufacturing space -- from its daylight yellow walls, to the Technicolor knickknacks dotting individual workstations. But the work being done here is anything but ordinary.
Each button affixed, every buckle checked is done with purpose and comes with the communal feeling that every part is gravely important, that it better be right if it's going to help bring someone home safe tonight.
What Globe produces is, in fact, very important to people across the country and the world. Located in Pittsfield, New Hampshire, the company is a fourth generation manufacturer of firefighter turnout gear. They literally invented the stuff over a century ago, and over the years have continued to grow and change their product to reflect the needs of the firefighters and emergency medical service workers they serve in more than 80 countries. Their biggest success has been the ability to create fire suits that, with each new iteration, get more flexible, durable and comfortable.
The suits are also customizable, which means that every piece of gear that leaves the factory is custom made for a real person with a name and a job working in emergency services.
"What we make, it doesn't go in a machine and come out the other side," says Gef Freese, great-grandson of the founder and senior vice president for operations at Globe. "It's people who are doing it and they are really proud of what they do -- they want the firefighters to come home alive."
Chapter 1: 'A Call to Service'
In 1901, Courtland F. H. Freese was becoming the best horse harnesser in an increasingly automobile world. Then, his brother-in-law, JD Wentworth died, leaving his business, Globe Manufacturing Co., up for grabs. At the time, Wentworth's company, located in Lynn, Massachusetts, manufactured custom leather coats for workmen, farmers, pharmacists and the like. Freese bought Globe, and moved operations from Lynn to a one-room shop above his horse harness business in Pittsfield.
Credit: Bryant Naro
Among his new clientele were firefighters who would wear the coats as turnout gear -- so named because these volunteers turned out in the middle of the night to fight fires -- and did so in the dead of winter. New Hampshire winters are cold ... extremely cold. And these bucket brigade firefighters were out in the thick of it, sloshing water as much on themselves as the fires they were fighting.
Freese wanted to keep them warm, and so, came up with a three-layer system comprised of an outer shell, a moisture barrier and a thermal liner. He marketed as the only waterproof turnout gear in the U.S. and tripled his business in three years. With this innovation, Globe's mission and the company's success was born.
Soon, Globe became a fertile testing ground for new technology. According to company officials, they were the first to use 3M reflective trim, which allowed firefighters to be seen in dark and smoky conditions. Until Globe started using flame-resistant fabric, turnout gear was entirely flammable. They also were the first to use Gore-Tex, a still waterproof but more breathable fabric.
The spirit of innovation is still strong in the fourth-generation owners -- Gef and his brother Rob Freese along with cousin-in-law Don Welch. Only, these days instead of waiting for innovation to come to them, they seek it out. In the 2000s, Globe started collaborating with universities, government researchers, technical textile developers and designers to evolve their products.
One huge leap forward came from a partnership with the Federal Emergency Management Agency. Together, Globe and FEMA designed a suit that helped protect emergency crews working in hazardous situations. These new suits were water and windproof and helped protect crews from skin exposure to blood, body fluids and chemicals. The outer layer was also flame resistant, which protected against flash fires. This proved itself very useful when the Pentagon came calling Globe for help with gear three days after 9/11.
... it's why we do it. When you've got a vision, a passion -- that's what drives this business.
Another partnership with the U.S. Army produced the "Wearable Advanced Sensor Platform," which allows an incident commander at a fire scene to track the location of firefighters inside a burning structure as well as monitor the physiology of the firefighter.
The company also occasionally takes special requests, including one from a California firefighter who, after being burned over 80 percent of his body, wanted a lightweight breathable suit that would allow him to return to service.
"That's the sort of stuff we do, it's a call to service," says Rob, Globe's current senior vice president of marketing. "To be able to have customers like this and to be able to protect these folks who are running into burning buildings. It's not about what we do; it's why we do it. When you've got a vision, a passion -- that's what drives this business."
Chapter 2: Brothers in Business
Gef started working for Globe Manufacturing when he was 6-years-old, only he didn't know it.
"I never thought of it as work or an expectation, it was just a place that I would come to be with the family and I wanted to be with my family," he says, now in his 54th year with the company.
Credit: Bryant Naro
All five of the Freese kids cut their teeth in the business. While their uncle Courtland Freese II, ran the firefighter division, and their parents Florence and George headed up the Skiwear division their grandfather started in the 1920s, the kids were busy sweeping floors, cleaning toilets, cutting swatches and whatever else needed to be done.
Despite this, when it came time to work -- actually work -- for the company, they had to earn it. Anyone related to the Freese's, and that includes the owners, who wanted a job with the company had to interview for it, do an internship and work his or her way through each department. When it came time for the business to switch hands in 1993 from the third generation to the fourth, even that wasn't a sure thing.
"Nothing was ever handed to us," Rob says. "You weren't guaranteed the business. You needed to show some enthusiasm, passion, desire and ability to fulfill that role before you could earn that role, and only then were we given the opportunity to buy it from them."
Most family businesses don't make it to the third generation, let alone the fourth. Globe is working on the fifth. Part of the reason they've made it this far, says Rob, is the owners have made a conscious effort to learn from the previous generations' shortcomings.
Credit: Bryant NaroFrom left, Don Welch, Rob Freese and Gef Freese.
Back in the day, there was palpable tension between Courtland and George Freese, as well as tremendous internal competition. The current owners refuse to follow that example. They each have their roles and focus their attention accordingly. When there's a dispute, they take it behind closed doors, hash it out, make up and move on.
In fact, squabbles are few and far between these days. The current owners attribute that to the way they personally do business -- which is all about the customer demand and not individual preferences. At Globe, they ask the firefighters what they like, what they don't and what would help. That steers the ship. And in that way, decisions aren't personal, just a strict adherence to giving the customers what they want.
What's more, the business works because they genuinely like each other. They hang out outside of work, go on vacations together and even live in the same neighborhood. And every Tuesday night without fail, Rob and Gef still take their 90-year-old mother out to dinner to catch up and talk about the business.
"I've never asked her," Gef Freese says with a chuckle. "But I think she's pretty proud of us."
Chapter 3: The Historian
Doug Towle grew up on a farm in Pittsfield, one of 13 children. His sister, Shirley, married Courtland H.F. Freese II, one of the third generation Globe owners. At 13, he started working at Globe after school doing odd jobs for the company. Throughout high school, he was working 40 hours of nights and weekends a week making 50 cents an hour.
"By the time I graduated high school, I had saved $10,000," Towle says. His work at Globe put him through college and graduate school.
Credit: Bryant Naro
A lot has changed since Towle first came to work at the company. When he started, a Globe-manufactured coat sold for $16.75. Today it's not unusual for them to be closer to $1,600. Back then, they were making 10 or 15 suits a week and had only 20 workers, whereas today they are about 500 employees between their operations. The company itself employs about 10 percent of Pittsfield.
"It's a true success story," Towle says. "There are a million firefighters out there today and we are the largest in the world at making [firefighter] clothing, in this little town, in this little factory, in little New Hampshire, and so I think we're really proud of that."
He says "we," because over 58 years later, Towle is still with Globe. But that doesn't mean his life didn't take some twists and turns along the way. After graduating from Boston College at the top of his class with an MBA, Towle dreamt of making the best mens' suits on the market. At the time, that meant going to Chicago to work for Hart Schaffner Marx where he landed a spot in the company's new management trainee program. Three years later, Towle was living the glamorous city life from high atop his 30th floor apartment in downtown Chicago, making a handsome living. That's when Courtland Freese called him back home to work for him.
Credit: Bryant Naro
"I'm living in a 30th floor high-rise in downtown Chicago, I had a Rolls Royce," Towle says. "I said, 'Boy you know, the air quality here is not that good, and I have to fight traffic to get downtown and I feel like an idiot parking my Rolls Royce.' So I decided I might like to come back to Globe at that time. I thought why wait until I'm 50 or 60 years old to come back to this beautiful place."
He kept the Rolls, but took a 50 percent pay cut, came back and has been at Globe ever since.
Towle, who at one time was head of sales and marketing, has evolved into what he calls a goodwill ambassador. He's worked like family next to two generations of Freeses and today still lunches with a third. That is, when he's not traveling to trade shows extolling the virtues of a line of products he believes in.
"So you'll ask why at 72 aren't you retired," Towle says. "Basically I had the opportunity of a lifetime here. This is a really an American Dream what I've gone through. This job allows me all the joys in life. This isn't work to me. And I've gotten to a point and I don't take it for granted, that this is really where I need to be. That is my family. I'm not an owner, I'm just a paid employee like everyone else. But this is part of my life."
WASHINGTON -- Construction of new homes rebounded in December, helping to push activity for the entire year to the highest level since the peak of the housing boom nine years ago.
Builders started construction at a seasonally adjusted annual rate of 1.09 million in December, an increase of 4.4 percent from November when unusually severe weather pushed activity down a revised 4.5 percent, the Commerce Department reported Wednesday.
For all of 2014, builders started construction on 1.01 million new homes and apartments, an increase of 8.8 percent from 2013. It was the first time construction has topped 1 million since the height of the housing boom in 2005, when builders started work on 2.07 million homes. Construction activity plunged to 587,000 in 2010 and has been making a slow recovery since then.
Housing construction topping the 1-million mark for the first time since 2005 adds to signs that the world's largest economy is on solid footing. The economy created nearly 3 million new jobs last year, the best showing since 1999. Economists believe the reviving labor market will drive further gains in housing this year.
President Barack Obama highlighted the improving economy in his State of the Union speech to Congress Tuesday night, describing 2014 a "breakthrough year for America."
Jennifer Lee, senior economist at BMO Capital Markets, called the housing report good news. While building permits fell for a second straight month, she said all the weakness in permits occurred in the apartment sector.
"The housing system has some good support systems in place," she said, noting that many banks have relaxed some requirements for home buyers. The unemployment rate for 25- to 34-year-olds, the biggest sector for first-time home buyers, has also dropped to a six-year low.
For December, construction of single-family homes rose 7.2 percent while the smaller apartment sector, which can be volatile from month to month, fell 0.8 percent.
Applications for building permits dropped 1.9 percent in December to 1.03 million after a 3.7 percent decline in November.
Gains In Most Regions
By region, housing construction rose 12.5 percent in the Northeast and was up 8.8 percent in the South and 5.8 percent in the West. The Midwest was the only region to record a decline in December, falling 13.3 percent.
Despite the recent weakness in building permits, economists are forecasting continued gains in home construction in 2015. That optimism stems from rising employment and favorable demographics that are expected to drive future construction as more young people decide to purchase a home.
The National Association of Home Builders/Wells Fargo builder sentiment index stood at 57 in January, down slightly from a revised reading of 58 in December. Readings above 50 indicate that more builders view sales conditions as good rather than poor.
Broader economic trends point favorably for future sales. The unemployment rate fell in December to 5.6 percent in December. Nearly 3 million jobs were created last year in the best performance since 1999.
And mortgage interest rates remain near historic lows. The 30-year fixed rate mortgage just dropped for a third consecutive week, falling to 3.66 percent, its lowest level since May 2013.
Though new homes represent only a fraction of the housing market, they have an outsized impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data compiled by the home builders.
Nam Y. Huh/PShoppers at a Best Buy last November.
Two of last week's bigger losers were Best Buy (BBY) and RadioShack (RSH). Best Buy stock declined 8 percent on the week, held back by an uninspiring financial update. RadioShack surrendered 32 percent of its value after The Wall Street Journal reported that the battered chain was preparing to file for bankruptcy next month.
It's not just them. Investors have seen hhgregg (HGG) drop by 59 percent since the end of 2013. It could be worse: Conn's (CONN) has plummeted 78 percent since the beginning of last year, and RadioShack stock has given up 90 percent of its value.
Best Buy could be considered the lucky one in comparison. It's only down slightly over the past year. However, it's pretty clear that this is not a good time for folks buying into these chains. It may have made sense in theory. The housing market's revival is -- or at least was -- creating a spike in appliance sales. The mobile revolution is sending consumers scrambling to buy the latest smartphones and tablets to make the computing experience portable.
Unfortunately for the chains, a perfect storm of cheaper online retailers, wireless service providers reaching out directly to customers, and a general lack of interest in TVs and high-margin services find traditional brick-and-mortar retailers in a funk. It was bad before, and it's not getting better.
Best Buy Is Better, but Not the Best
Retail industry tracker NPD Group reported that consumer electronics suffered a 3.7 percent hit in sales during the telltale holiday shopping period. It's not a surprise given sluggish tablet and TV sales. However, Best Buy is holding up better than its peers. It reported a welcome 2.6 percent uptick in sales during the nine-week holiday shopping period.
Best Buy's stock retreated despite the upbeat domestic news because the superstore chain warned that margins will be pressured in the near term as it invests in growth initiatives. Best Buy needs to navigate through an iffy operating climate, and that won't come cheap.
Best Buy blames external pressures that are disrupting the industry, including deflationary pricing, weak industry demand in many categories, and diminishing demand for the extended warranties that used to be big moneymakers for the store.
Attacking the industry's shortcomings is the right thing to do, but investors have to be worried that Best Buy may be fighting for something that is no longer there. Physical retailers selling big-ticket consumer electronics could be a model of the past.
RadioShack Is No Love Shack
As bad as things may be at Best Buy, they're far worse at RadioShack. Sales continue to fall. Losses continue to mount. With pesky debt levels and little reason for creditors to think that RadioShack can turn things around, it isn't a surprise to see it resorting to bankruptcy reorganization.
Closing underperforming stores hasn't been enough. Remodeling stores hasn't been enough. One big tweak to the model -- emphasizing wireless products and services over its flagship consumer electronics gadgetry -- has backfired.
This isn't necessarily the end of RadioShack. Chapter 11 bankruptcy will help improve its balance sheet from its current sorry mess that's light on cash and held back by $841.5 million in long-term debt. However, there's also a good chance that common-stock shareholders will get wiped out. It's also hard to fathom any incarnation of RadioShack that would break back into profitability since slipping into the red in 2011. Yes, it's hard to be a publicly traded retailer of consumer electronics these days.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. Want to make 2015your best investing year ever? Check out The Motley Fool's free report on one great stock to buy for 2015 and beyond.
Alamy
If you're like the more than half of individuals, according to the GAO, a professional will prepare your tax return. Unfortunately, as the Consumerist blog noted, there's a significant chance that the preparer won't be competent and could leave you paying more taxes than you should or -- the bigger problem -- paying less and running the risk of penalties.
"Tens of millions of consumers will use paid tax preparers to fill out their most important financial document of the year, yet most of these preparers are not subject to any minimum educational, training or competency standards," National Consumer Law Center staff attorney Chi Chi Wu told Consumerist.
According to the center, over the years, nonprofits and government agencies have performed mystery shopper tests that have revealed "frequent examples of this incompetency and outright fraud." That becomes more disturbing when you realize the tests are usually small scale and, if done randomly, shouldn't consistently catch a significant number of people who don't know what they're doing -- unless the percentage that don't is uncomfortably high.
Undercover Investigation
For example, last year the General Accounting Office reported to Congress that undercover site visits to 19 randomly selected preparers showed that only two calculated the correct refund amount. Among the others, one said the return was $52 less than it should have been. Others calculated too much of a refund, with the amount varying from $1 to $3,718. Three preparers were at the high end, suggesting that there was something fundamental misunderstood or ignored. Some of the common errors:
Not reporting cash tips on W-2 income.
Claiming an ineligible child for the Earned Income Tax Credit.
Not asking required eligibility questions for the American Opportunity Tax Credit.
Not providing the correct preparer tax identification number.
A previous GAO analysis of IRS data from 2006 through 2009 showed that 50 percent of self-prepared returns had errors, but 60 percent of those from paid preparers did.
Other groups have found major errors in their own mystery shopping tours, including, according to the center:
Intentional omission of income.
Falsifying information to make taxpayers eligible for various credits and deductions.
Inability to properly deal with education-related credits and income.
Misclassifying filing status.
Data entry errors.
But, surely there's some regulatory body overseeing the quality of tax preparation, right? Not really. As the center noted, there are "no minimum educational, training, competency or other standards" to be a paid tax preparer. Forty-six states have greater requirements for hairdressers than tax preparers.
Where Are the Standards?
There are no federal standards, either. The IRS wanted to implement regulations to cover tax preparers, separate from the testing it administers to qualify so-called enrolled agents, who can represent taxpayers before the IRS, but a federal court blocked the rules, and the D.C. Court of Appeals upheld that ruling last year. The states don't seem to be in a rush to do anything, which leaves Congress, and the chance of something happening there seems report.
In the meantime, it's a case of caveat emptor -- let the buyer beware, because if there is a problem, you're the one who will be talking to the IRS or a state revenue agency. Asking some serious questions about someone's training or relying on a certified public accountant -- they are regulated by the states -- might be a good idea.
It's time. Your W-2s and 1099s are likely making their way to your mailbox or inbox right now, assuming they haven't already arrived.
As you start filling in your tax forms, be aware that a mistake can cost you valuable time or money. Money Talks News finance expert Stacy Johnson spoke with Tom Sawyer, a CPA with Sawyer & Latimer in Fort Lauderdale, Florida, to uncover some of the most common tax-time mistakes.
Mistake No. 1: Paying for tax preparation when you could get it for free. The first mistake some people make is paying someone else to do their taxes. Depending on your income level, you may have more than one option when it comes to getting free tax prep services.
Volunteer Income Tax Assistance: Sponsored by the IRS, VITA offers free tax preparation by trained volunteers. You may be eligible for the VITA program if your income is $53,000 or less, you have a disability, are elderly or have limited English-speaking ability.
Tax Counseling for the Elderly: Also sponsored by the IRS, the TCE program is intended for people age 60 and older.
Free File: If your income is less than $60,000, you can use an online software program to prepare and file your federal income tax return for free.
For a list of software providers, head to the Free File website. If you'd rather have face-to-face assistance, you can find a list of VITA and TCE sites on this IRS Web page.
Mistake No. 2: Getting your Social Security numbers wrong.On its list of common tax mistakes, the IRS puts wrong and missing Social Security numbers at the top.
Long gone are the days in which you could claim dependents without a Social Security number. Today, every member of your household listed on your return needs to have one. Make sure to double check all the numbers before submitting your return to ensure there aren't any transposed or missing digits.
Mistake No. 3: Spelling your name wrong. Sure, you know what your name is, but maybe you're typing too quickly and hit a wrong key. Or you could be interrupted while filling out the form and pick back up at the wrong spot. There are plenty of scenarios in which people can, and do, misspell their names on their income tax forms. Those simple errors can lead to rejected returns and delayed refunds.
In addition, if you recently married or divorced and haven't registered a name change with the Social Security Administration, be sure to use your old name. You need the name on your forms to match the name listed in Social Security records.
Mistake No. 4: Making math errors. Fortunately, this becomes less of a problem if you use software to prepare and file your taxes. The computer program will do all the calculations on your behalf, which virtually guarantees you'll get it right.
However, the computer program can't know whether the numbers you've entered are correct. Double check everything to be sure your return is completely accurate. It should also go without saying that if you're doing a paper return, use a calculator and do the math twice to confirm the results.
Mistake No. 5: Forgetting your John Hancock. There are two places this mistake can trip you up.
This first is by failing to sign a paper return before mailing it. The second is failing to sign your check if you're sending in a payment. Either one can result in lengthy delays in processing your return.
You can avoid this mistake by filing and signing your return electronically and having tax payments directly withdrawn from your bank account. Saves on postage, too.
Mistake No. 6: Using the wrong tax form. Most of the mistakes above have the potential to affect how quickly the IRS processes your return and issues your refund. However, they don't necessarily affect your bottom line. But using the wrong tax form could mean lost dollars.
If you use the 1040EZ form, you get the standard deduction. For most people, in 2014, that amount is $6,200 for singles and $12,400 for couples filing jointly. These deductions are subtracted from your income so you don't have to pay taxes on those amounts.
However, if you have a mortgage, home office, significant health care expenses or charitable contributions, you may be better off using a regular 1040 form so you can itemize and get a bigger deduction.
Mistake No. 7: Selecting the wrong filing status. Another costly mistake can be selecting the wrong filing status. This mistake may be most common for single parents.
For example, unmarried parents who have a qualifying dependent and pay more than half the cost of keeping a home may be able to file as a head of household, a status that boosts their standard deduction by $2,900. In addition, you can be considered "unmarried" so long as your spouse did not live with you for the last six months of the year.
Meanwhile, widows and widowers can still use the "married filing jointly" status for the year in which their spouse died. Then, if they have dependent children, they may be able to file as a "qualifying widow9er) with dependent child" for two more years, a status that allows the same standard deduction as those who are married and filing jointly.
Mistake No. 8: Missing deductions or credits. It's not enough to simply use the right form and the right filing status. If you want to maximize your refund, you also need to take advantage of every tax deduction and credit available to you. Fortunately, there are plenty of credits and deductions that have the potential to reduce your taxable liability by thousands.
Here are a few of the bigger credits and deductions you don't want to miss. You may want to consult with a tax professional to learn more about whether you qualify.
American Opportunity Credit: Available to college students of all ages, this credit is based upon college expenses and can provide up to a $2,500 tax reduction per year for four years.
Earned Income Tax Credit: Offered to low income families, this credit is refundable, and that means the government will send you cash even if you don't owe any taxes. Sometimes this is overlooked when eligible families have incomes so low they aren't required to file returns, so they miss out on claiming the credit. That can be a costly mistake because the credit can be up to $6,044 for some families.
Child Care Credit: If you pay someone else to watch your children while you work, you may be able to claim a credit on up to $1,000 of your expenses. Most eligible taxpayers will get a credit worth 20 percent of that amount, for a total credit of $200.
State Income or Sales Tax: You can deduct any state income tax you pay from your federal return. If your state doesn't charge an income tax, you can use the amount you paid in state sales tax instead.
IRA Contributions: While contributions to Roth IRAs aren't deductible, you can deduct up to $5,500 if you put that money in a traditional IRA. If you're age 50 or older, the limit is increased to $6,500.
Mistake No. 9: Failing to claim all your income. You might also make the mistake of thinking you don't need to claim income unless you receive a W-2 or 1099 form for your work. In reality, you need to claim all income for the year regardless of whether someone paid you $20 or $2,000 for a side job.
While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don't realize that they must also report most other income, such as:
Cash earned from side jobs
Barter exchanges of goods or services
Awards, prizes, contest winnings
Gambling proceeds.
Cheating the IRS may seem like a victimless crime, but you could be hurting yourself if you ever are audited.
Mistake No. 10: Sending your return through the mail. If you insist on being old school and send your return through the mail, you're making the last mistake on our list.
Filing through the mail is a mistake for oh, so many reasons. First up, you greatly increase your chances of making one of the other mistakes listed above. There is less chance of missing Social Security numbers, forgetting to sign and making math errors. In addition, a good software program will help you root out all of those deductions and credits you may otherwise miss. It should also guide you to the right filing status.
But more importantly, filing electronically means you could have your refund cash in hand in only a few weeks. In 2014, the IRS processed returns from 27 million taxpayers and deposited $146.3 billion in refunds through direct deposit. If you're not already e-filing, it's time to get on this bandwagon. Trust us, it will make tax time a relative breeze.
Damian Dovarganes/APNetflix starts exclusive streaming of "The Interview" on Saturday.
Well played, Netflix (NFLX). The premium video service moved nicely higher after posting better-than-expected quarterly results on Tuesday night. You've seen the headlines. You're read the reports. Let's dive a bit deeper into the information that Netflix put out to find things that may surprise you.
1. Netflix Is Gaining More New Members Internationally
The most noteworthy nugget in Netflix's report is that it closed out the year with 57.39 million streaming subscribers worldwide. That's 4.33 million more digital subscribers than it had just three months earlier, and that's important because Netflix was only forecasting 4 million net additions. After falling short of its guidance during the third quarter -- a move that sent the stock sharply lower in October -- it's refreshing to see it get back on track.
That's the headline number, but the interesting meat here is that most of that growth came from Netflix's expanding business outside of the United States. Its domestic base of streaming accounts moved 1.89 million higher during the final three months of 2014, but internationally we saw Netflix's base soar by 2.44 million. That's a pretty big deal, especially since Netflix's international user base is just half as large as its stateside audience.
2. Netflix Didn't Spend a Penny on Marketing its DVD Plans
Netflix still mails out DVDs in red envelopes. People sometimes forget that. It's a fading legacy business, with the number of customers receiving DVDs and Blu-rays from Netflix diminishing with every passing quarter. We're down to just 5.8 million homes, far removed from its peak of nearly 20 million five years ago.
An interesting line item in Netflix's financial statements is that it didn't spend any money to market its DVD rentals in 2014. It only invested $292,000 to promote the platform in 2013. It seems as if it has resigned to let its physical rentals fade to black quietly.
3. Original Content Is a Good Value for Netflix
Netflix is spending a lot of money on exclusive content, and the biggest shocker may be how successful it is when compared to existing shows and movies that make up the lion's share of its growing digital catalog.
"Our originals cost us less money, relative to our viewing metrics, than most of our licensed content, much of which is well known and created by the top studios," reads Netflix's letter to shareholders.
It may cost a lot of money to put out "House of Cards" or "Orange Is the New Black," but when you divide that investment by the amount of times the content gets viewed, it's cheaper than the theater-released movies and network-aired TV shows that Netflix licenses for its subscribers. It's no wonder Netflix and rival Amazon.com (AMZN) are ramping up the money that they are earmarking for proprietary content.
4. It's a Small World After All
Netflix has been expanding into foreign markets, and it hasn't come cheap. Netflix's international division has been posting losses that drag down its overall performance on the bottom line. Investors wondering when it will finally start to pay off in terms of profitability received some encouraging news on Tuesday.
Netflix now believes that it will complete its global expansion by the end of next year, paving the way for it to start generating material international profits starting in 2017. Just in case you weren't keeping up to date with Netflix's pushpins on the global map, it will roll out its service in Australia and New Zealand later this quarter.
5. "The Interview" Is Coming
Remember that Seth Rogen movie that nobody wanted to see until it seemed as if nobody would be able to see it? Sony's (SNE) "The Interview" will stream exclusively on Netflix starting on Saturday.
The movie that was shunned by most multiplex operators after threats of violence began to trickle in last month will stream on Netflix just 30 days after its limited theatrical release. It's an unusually fast turnaround time, especially for a controversial flick that would seem to have more staying power at the retail level than in local theaters. The movie will only be available in the U.S. and Canada. It probably goes without saying that North Korea isn't on Netflix's list of markets that it plans to enter in the next two years.
Motley Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. Check out our free report on high-yielding dividend stocks.
SEATTLE -- Microsoft (MSFT) will give away its upcoming Windows 10 operating system as a free upgrade to users of the most recent versions of Windows and Windows Phone, as the world's largest software company tries to retain customers in the mobile era.
The action is a marked change for the company, which has always charged for new versions of Windows, one of its main profit drivers.
It's a necessary evil as CEO Satya Nadella and Microsoft have recognized the 'golden goose' and major revenue opportunities will happen after the upgrades have taken place.
The "free" strategy is designed to put Windows in as many devices as possible. The company would then make up for any lost revenue by selling services such as Office over the Internet, or cloud.
"It's a necessary evil as CEO Satya Nadella and Microsoft have recognized the 'golden goose' and major revenue opportunities will happen after the upgrades have taken place," said Daniel Ives, an analyst at FBR Capital Markets.
"Microsoft needs to lay seeds for its cloud-centric strategy and Windows 10 is the epicenter of that strategy. It's all about making it attractive for the ecosystem to upgrade onto this next-generation platform."
Investors were not impressed. Microsoft shares fell 1.5 percent to $45.67 on Nasdaq at mid-afternoon.
Windows 10, expected on the market this fall, will be available for one year as a free upgrade to users of Windows 7, Windows 8.1 and Windows Phone 8.1, Myerson said.
The move was "inevitable," Forrester (FORR) analyst Frank Gillett noted.
Windows only features on roughly 15 percent of computing devices including phones and tablets, and is largely irrelevant for many consumers. It lags Apple (AAPL) and Google (GOOGL), which regularly update their software systems free for customers.
Motivating Customers
"The way to motivate consumers is to make upgrades transparent and painless -- meaning free and low-to-no effort," Gillett said. "Microsoft had to match the expectation set by the mobile and Web leaders."
At an event at its headquarters near Seattle, Microsoft also tried to burnish its flagging reputation for innovation.
Unexpectedly, it unveiled a holographic lens device that allows users to see three-dimensional renderings of computer-generated images. Microsoft HoloLens, which looks like a wireless visor, raises the stakes in the emerging market for virtual reality, being targeted by Facebook's (FB) Oculus.
The device will be available around the same time as Windows 10 this autumn, a Microsoft executive said.
Executives also showed off an Xbox app for games on Windows 10 and a new version of its browser code named "Spartan," which lets users make notes on Web pages and share them.
Microsoft announced its new Windows 10 operating system in September, billing it as a move to unify all kinds of device users. It skipped Windows 9 altogether, to put some distance between the new system and Windows 8, which confused many users by ditching the start button menu and using a new layout.
CHICAGO -- Melvin Gordon, who led Tootsie Roll Industries Inc. (TR) for more than five decades, has died at age 95.
Gordon, the company's chairman and CEO, died Tuesday in Boston after a brief illness, said Brooke Vane, a spokeswoman for the company's public relations firm. Gordon ran the Chicago-based confectioner for 53 years, overseeing the manufacture of 64 million Tootsie Rolls a day and other favorites including Junior Mints, Charleston Chews and Tootsie Pops.
Gordon worked a full schedule until last month, the company said.
Nuccio DiNuzzo/Chicago Tribune via APMelvin Gordon led Chicago-based Tootsie Roll Industries for 53 years.
He celebrated the Tootsie Roll's 100th anniversary in 1996 by touring the Chicago factory with an Associated Press reporter. He scooped up one of the warm, gooey candies from the assembly line and tasted it, saying: "There's nothing like a hot Tootsie Roll."
He boasted that Tootsie Rolls were almost indestructible.
"Nothing can happen to a Tootsie Roll. We have some that were made in 1938 that we still eat," Gordon told the AP in 1996. "If you can't bite it when it's that old, you certainly can lick it."
Tootsie Rolls were invented in 1896 by New York City candy maker Leo Hirshfield, who named it for his 5-year-old daughter, Clara, his little Tootsie.
Tootsie Pops, which are lollipops with Tootsie Roll centers, have been around for more than 80 years. A 1970 TV commercial posed the question: "How many licks does it take to get to the center of a Tootsie Pop?" The company says on its website that it's received 20,000 letters from children claiming to have solved the mystery, and the gimmick has migrated to social media, where a bespectacled character named Mr. Owl tweets the question.
Tootsie Roll has been listed on the New York Stock Exchange since 1922. Gordon married into the business in 1950 when he wed Ellen Rubin, whose father, William Rubin, was president of Sweets Co. Of America. Gordon changed the company's name to Tootsie Roll in 1966.
Gordon's wife of 65 years, Ellen Gordon, has been named chairman and CEO by its board, the company said Wednesday. She has been company president and chief operating officer.
"Melvin's life represented the very highest values in business, wisdom, generosity, and integrity. Tootsie Roll has seen great growth and success during his time as Chairman," Ellen Gordon said in a statement.
NEW YORK -- U.S. stocks edged up in a choppy Wednesday session as traders digested reports that new stimulus would be announced by the European Central Bank at its Thursday meeting, while declines in IBM limited gains.
Market participants have been looking for more aggressive measures from central banks, specifically the ECB, to combat the risk of deflation and a weakening eurozone economy.
A source told Reuters the ECB's Executive Board has proposed a program that would enable the bank to buy 50 billion euros ($58 billion) in bonds a month starting in March. ECB President Mario Draghi will speak to the media Thursday.
"The ECB rumor was very important. The market's perception was that Draghi was going to disappoint tomorrow in the magnitude" of the program, said Phil Orlando, chief equity market strategist at Federated Investors in New York.
He said that regardless of the size of the expected purchase program, there are many details to be decided in terms of the assets available for purchase and how those will affect individual members of the bloc.
"The rules of the game may not be as fortuitous as investors and Draghi might like to be able to get the most bang for the buck."
U.S. stocks would benefit from a program to support the eurozone economy because Europe is one of the United States' most important trade partners.
The Dow Jones industrial average (^DJI) rose 39.05 points, or 0.22 percent, to 17,554.28, the Standard & Poor's 500 index (^GPSC) gained 9.57 points, or 0.47 percent, to 2,032.12 and the Nasdaq composite (^IXIC) added 12.58 points, or 0.27 percent, to 4,667.42.
The S&P closed 2.8 percent below its record closing high set in late December.
S&P 500 energy shares were the day's best performers, up 1.8 percent alongside a 2.8 percent gain in the price of U.S. crude futures. The S&P 500 oil and gas exploration and production index rose 2.8 percent.
Despite the advance, crude futures remain on track to post their 15th negative week in the last 17.
IBM (IBM) shares fell 3.1 percent to $152.09 the day after reporting lower-than-expected revenues and giving a 2015 profit target that was below estimates. The stock was the biggest points decliner on the S&P 500 and weighed the most on the price-weighted Dow industrials.
The blue-chip index, however, got a boost from UnitedHealth Group (UNH), which rose 3.5 percent to $109.32 after its fourth-quarter earnings topped expectations.
Netflix (NFLX) jumped 17.3 percent to $409.28 a day after the streaming and rental video company posted earnings above expectations and said it was growing faster overseas than previously expected.
Advancing issues outnumbered declining ones on the NYSE by 1,956 to 1,113, for a 1.76-to-1 ratio; on the Nasdaq, 1,586 issues fell and 1,156 advanced for a 1.37-to-1 ratio favoring decliners.
The S&P 500 posted 37 new 52-week highs and 9 new lows; the Nasdaq composite posted 41 new highs and 95 new lows.
About 6.9 billion shares traded on U.S. exchanges, below the 7.3 billion average so far this month, according to BATS Global Markets.
-With additional reporting by Lucas Iberico Lozada.
What to watch Thursday:
The Labor Department reports weekly jobless claims at 8:30 a.m. Eastern time.
The Energy Information Administration reports weekly petroleum stockpiles at 11 a.m.
These selected companies are schedule to release quarterly financial results:
Americans' reliance on credit cards has been declining steadily since the Great Recession, according to an April 2014 Gallup poll. In fact, respondents reported that they are carrying less credit card debt overall and are more likely than to pay their balance in full and on time compared to the early 2000s.
The survey results, based on interviews with over 1,000 adults ages 18 and older nationwide, may notate a positive trend in the financial affairs of Americans who have been increasingly bombarded with bad news about the economy in recent years. And less reliance on credit should be a good thing, right?
Well, it is and it isn't. According to personal finance experts, being debt-free is always a good thing, but there are disadvantages to living without any sort of credit card at all. This begs the question, "Does everyone need a credit card?"
A Matter of Convenience
Whether everyone does or doesn't need a credit card, people who go without one (or several) will certainly face some inconveniences in their lifetime, especially when it comes to travel. Why? Because hotels and rental car agencies almost always require a credit card to secure a reservation, and some even require that you put a card on file in order to cover incidentals. Without a credit card, you may not get the reservation you want, or you may have to jump through additional hoops that are not all that pleasant.
Of course, using a debit card is possible, but doing so might result in several hundred dollars of your actual money being put on hold in your account. If you're flush with cash, this may not be an issue for you. But if money is tight? You may have a problem.
No Credit, No History
While being wary of credit card debt is a good reason to avoid credit cards altogether, that decision could come back to bite those who wind up needing credit at any point in their lives. Opting not to build any kind of credit history could make it difficult to take out a loan for a house or car in the future, especially if your current credit report is virtually blank. How can lenders loan you money when they have no way of knowing if you've ever repaid anyone back?
According to the credit bureau Experian, "having no credit history is almost as bad as having a negative credit history," and everyone should strive to have some credit history to point to.
Credit Card Perks
But having credit isn't just about avoiding hassle and earning the ability to borrow more money. There are some legitimate perks that come with having a few good credit cards as well. For example, many credit cards offer fraud protection, meaning that they will cover your losses if your card is stolen and used for purchases. Once you report that a credit card has been stolen, the Federal Trade Commission states that the maximum amount of money you could be on the hook for is $50 per card.
That may still sound like a lot, but compare it to what might happen if someone stole your debit card and managed to bleed your account dry. According to the FTC, if you report your debit card stolen more than two days after the loss or theft has taken place, the most you can lose is $500. However, if you report the loss later than 60 days after it occurred -- perhaps because you didn't notice a fraudulent charge -- your bank is not required to help you recover your losses in any way, shape or form.
Other credit card perks include credit card rewards such as cash-back and airline miles, travel protection, price protection for large purchases and even rental car insurance.
These are just a few of the reasons why most people genuinely need a credit card, whether they choose to use it frequently or not. Just remember, having a credit card doesn't mean you have to go into credit card debt. You have the power to live a debt-free life; you just need to commit to it and learn to use your cards in a way that benefits you.
Shutterstock
Environmentally conscious Americans routinely look for ways to reduce their carbon footprint. They carry water bottles to avoid buying one-time plastic receptacles. Some bike or take public transit to reduce emissions from a car (or simply to save money). Others compost. And some make the more radical decision to protest fracking or drilling for oil.
Those who prefer a slightly more passive approach to being environmentally friendly now can reduce their carbon footprints with credit card rewards.
Rewarded with Carbon Offsets
Sustain:Green, the rewards program creator, launched a biodegradable MasterCard (MA) offering carbon reduction rewards; the credit card is issued by Missouri-based Commerce Bank (CBSH).
Carbon offset programs allow environmentally conscious individuals to fund the planting of trees, building renewable energy alternatives or other sustainability projects. Carbon offsets through Sustain:Green will go towards Mata no Peito, an initiative to protect and replant forests in Brazil and combat deforestation, which accounts for 60 percent of the nation's greenhouse gas emissions.
The Value of Carbon Offsets in Cash-Back Terms
While it's a positive to see a unique way for everyday consumers to offset carbon emissions by simply using a credit card, a consumer would be better off getting a regular cash back card and purchasing carbon offsets.
Sustain:Green's MasterCard offers two pounds offset per dollar spent, plus a 5,000-pound bonus after the first purchase. In year one, if a customer made $5,000 worth of purchases, she would earn 15,000 pounds of carbon offsets.
Those 15,000 pounds equates to approximately 6.8 metric tons. According to Sustain:Green's Carbon Store, cardholders can purchase one metric ton (approximately 2,200 pounds) for $10 or 10 tons worth of carbon offset credits for $100.
A customer is essentially purchasing $68 worth of carbon offsets with $5,000 of spending, which equates to a 1.37 percent cash back value. However, carbon offsets need to be purchased in increments of $10, which means $5,000 would only buy six metric tons, a cash back rate of 1.2 percent.
In year two, without the bonus, $5,000 worth of purchases only equals 10,000 pounds (approximately 4.5 metric tons) of carbon offsets. This would decrease the cash back value to less than 1 percent - $40 credit for $5,000 because offsets must be purchased in $10 increments. The cash back value reduces from 1.2 percent to 0.8 percent.
However, if depending on how pounds from year one roll over, there is likely a surplus of 0.8 metric tons rolling over to equal 5.3 metric tons of carbon offsets or $50 credit in year two. This changes the cash back value to 1 percent.
At the time of writing, Sustain:Green's website made purchase of one metric ton at $10 available to anyone, but CEO Arthur Newman stated the company would only be offering this rate to cardholders, while non-cardholders will pay a market rate of $15 per metric ton.
A More Effective Way to Give Back and Keep the Change
From a purely mathematical perspective, credit card users interested in reducing their carbon footprints would be better served by opting for a credit card with a higher cash back rate. The Double Cash card from Citibank (C) offers 2 percent back on all spending. So $5,000 of spending means $100 in cash back, which can purchase six carbon offsets from Sustain:Green at the non-cardholder rate of $15 per metric ton -- the same amount first year cardholders receive for $5,000 of spend plus a 5,000 pounds bonus.
Non-cardholders get to pocket the $10 change leftover and will retain the same rate in year two, or roll over the $10 and buy six carbon offsets. Second=year cardholders would only get 4 metric tons for $5,000 of spend, or at best five with a rollover from year one.
However, ecologically friendly consumers may prefer to hold a card from a company that they feel supports their values instead of a card from one of the biggest banks in America -- even if the latter offers better cash back.
Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. She is also the brand and content manager of MagnifyMoney.
WASHINGTON -- You've downsized to an apartment, the kids are long gone, and you're no longer eligible for some of the deductions and exemptions that had helped you lower your tax bill. But for those 65 years or older, there are other tax breaks that might benefit you come tax time.
For one, not all your Social Security benefits are subject to federal taxes. How much depends on your other income and filing status. "No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service rules," the Social Security Administration says on its website.
To determine what percent of your benefits might be taxable, add half your benefits to your other income, including nontaxable interest. If your combined income is between $25,000 and $34,000 and your filing status is single, up to 50 percent of your benefits might be taxable, according to the IRS. For married couples filing jointly, the 50 percent taxable figure applies if your combined income is between $32,000 and $44,000. Combined income lower than the threshold? Social Security benefits aren't taxable. If the combined income is above these income ranges, up to 85 percent is subject to income taxes.
Be sure to check your state tax laws. In many states, you won't have to pay state tax on all or some of your Social Security benefits. The IRS offers free tax help for people 60 and older, working through nonprofit groups like AARP Foundation.
Standard Deduction or Itemize?
People 65 and over also should consider whether it's more beneficial for them to claim the standard deduction or to itemize. The standard deduction is higher for seniors -- $7,750 if your filing status is single, $14,800 if you're married filing jointly and you and your spouse are both at least 65. That compares to $6,200 for single filers under 65 and $12,400 for married taxpayers under 65 who are filing jointly.
"Seniors very often have already paid up their mortgage and they very often don't itemize anymore," said Jackie Perlman, principal tax research analyst at the Tax Institute at H&R Block (HRB). But it's important to do the math -- or let your tax preparer or tax software do it for you -- to see whether it still makes sense to itemize even with the higher standard deduction.
Even if you don't have mortgage interest to deduct, you can still deduct any property taxes you paid. State income taxes also are deductible, or alternatively, you can choose to deduct state sales taxes, an attractive option if you live in a state that doesn't have an income tax.
Medical Expenses and Charities
For seniors, medical expenses have to exceed 7.5 percent of adjusted gross income to be deductible. That threshold applies even if only one spouse has reached 65 and you file jointly. For those under 65, medical expenses are deductible only if they exceed 10 percent of your adjusted gross income.
And medical bills can be hefty for seniors. Covered medical expenses include the portion of doctor, dentist and hospital bills and the cost of prescription drugs not covered by insurance, as well as premiums for Medicare or other insurance coverage. Prescription eyeglasses are deductible, as are the cost of false teeth, hearing aids and wheelchairs. So is the cost of transportation to medical appointments.
Charitable donations also are deductible. However, seniors who are at least 70½ had another option for charitable donations. At that age, you're required to take a minimum distribution for your individual retirement accounts. If you rolled that distribution over directly to a charity -- instead of taking the money and then donating it -- the distribution is not counted as income and therefore is not taxable.
"The difference is you're lowering not only your taxable income but also your adjusted gross income," Perlman said. And that can affect such things as whether Social Security benefits are taxable and whether you can deduct your medical expenses. But there's no double-dipping. If you itemize, you can't also deduct a charitable donation that was made through a direct rollover from an IRA.
There is also a small tax credit for low-income seniors, which Perlman says is not widely used. "It might be helpful for someone who neither contributed to the Social Security system nor ever married."
Ablestock.com
I recently met with an Indian couple to review their investment portfolio. They are in their 30s and work as engineers in the U.S. They had just returned from visiting their families in India with $20,000 worth of ornamental gold and showed me pictures of the beautiful jewelry.
We then turned to their investment portfolio, which also contained gold -- but in the form of the SPDR Gold Shares exchange-traded fund (GLD). It was launched in 2004 to lower many of the barriers -- such as access, custody and transaction costs -- of investing in gold. Let's use my clients' visit to consider three key three questions about gold:
1. Why Would I Invest in Gold?
Diversification is the key to successful long-term investing. Let's say you have always invested your money solely in large-cap U.S. stocks. While in 2013 and 2014 you would have enjoyed excellent annual returns, in 2008 you would have been yelling at your financial adviser (or yourself). You could have avoided a total meltdown in your portfolio in 2008 had gold comprised part of your portfolio. The price of gold and stocks are not directly correlated, which means you can own something that is going up in value while the other is going down in value. This chart compares that gold ETF with the SPDR S&P 500 ETF that tracks the S&P 500 Index (^GPSC). It shows that during most years between 2005 and 2011, gold returned a much higher percentage than stocks. And in 2013, when U.S. stocks had their best year since the mid-'90s, the price of gold plummeted.
Laurie Itkin, using Morningstar data
Currently the U.S. dollar is very strong relative to other currencies, such as the euro and the yen. As the dollar has strengthened, the price of gold has fallen. Should the dollar reverse course or even collapse due to domestic or global turmoil and instability, many investors would likely flee to gold, which would increase the demand and subsequently the price. Gold has historically been perceived as a safe-haven asset as it is held by central banks around the world.
2. Is Now a Good Time to Buy Gold?
Each investor has a different time horizon and risk tolerance, and no one can consistently call the bottom of a market. Only you or your financial adviser can decide if now if the time to add gold to your portfolio. Some traders wait to buy an asset until the price trend shifts from flat or negative to positive. That happened last week in large part due to the surprise move by the Swiss central bank to end its cap on the Swiss franc's value against the euro, which led some investors who had valued the franc for its stability to shift over to gold. Gold prices went up on the news.
3. Why Should I Buy an ETF Instead of Physical Gold?
Sure, you could keep gold bars or coins at home or bury them in your yard. Any other option will cost you money for storing the gold -- such as buying a safe or renting a safety deposit account at a bank. I prefer to invest in gold using ETFs, which have fairly low annual expense ratios and give me the ability to sell immediately, as they trade like a stock rather than finding someone to buy my gold.
Two of the most heavily traded gold-oriented ETFs are SPDR Gold Shares and Market Vectors Gold Miners (GDX), although there are many from which to choose. The share price of GLD closely matches changes in the price of spot gold, while GDX invests in shares of the largest gold mining companies from around the world. Some investors prefer investing in a fund that is directly impacted by changes in the price of gold but also generates dividend income from the companies within the fund.
A benefit of choosing heavily traded ETFs is that options are traded on them, which enable investors to reduce risk when investing in gold. For example, let's assume an ETF called XYZ is trading at $23 per share. I'd like to put an order in to buy 100 shares only if it falls to $22 per share. Most people would use a limit order to accomplish that. But if you sold a put option instead, you could be credited with immediate income in your account in exchange for agreeing to buy 100 shares at $22 sometime in the future. It is less risky than buying XYZ outright because if XYZ falls in value after you purchased it, you received income from the sale of the put option which would offset some of your loss. I call this strategy, "Getting paid to wait to buy stock on sale," and I explain the benefits of this strategy and how you can execute it yourself in chapter 7 of my book, "Every Woman Should Know Her Options."
Most employer-provided retirement plans offer mutual funds that don't include exposure to gold, but you can easily (and inexpensively) purchase shares of an ETF within a brokerage account or self-directed individual retirement account.
The information contained herein is strictly for educational and illustrative purposes, providing commentary, analysis, opinions and recommendations, and should not be considered investment advice for any specific subscriber or portfolio or an offer to sell or a solicitation to buy any security.
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As a life insurance agent, I hear from a lot of people who try to take advantage of their connection to a family member by purchasing a life insurance policy on them.
I remember a woman looking to purchase $1 million of coverage on her mother. Upon questioning, I discovered her mother was in hospice care with no more than one or two days to live. It was clear that she was simply looking to profit from her mother's death.
While the intentions of this daughter may be in question, many people ask me about insuring their parents, children or siblings to avoid getting saddled with their loved ones' debts. Even thought many unscrupulous agents will be happy to sell you a policy, that's not necessarily a valid concern.
Very Few Get Stuck with Their Parents' or Children's Debt
Generally speaking, the only debt you need to worry about is that of your spouse. As for the debts of your parents, children, siblings, aunts, uncles, cousins, next of kin, etc., you typically need not worry about it coming back to you.
Let's say your parents were to pass away with $10,000 in a bank savings account and $6,000 in credit debt. Their estate would first gather up any assets they had (such as the $10,000 in the bank) and would be obligated to pay the debt out of those assets. After all debts are settled, any remaining assets can then be distributed to their heirs.
However, if your parents had no assets available to pay the debt, it does not transfer to you. As Rebecca Lack, a San Diego attorney from Lack Law Group, explained:
"If a loved one dies, only that person's estate is responsible for the debts of the decedent. Debts do not transfer to spouses, parents or kids, but whatever assets the decedent leaves behind will be used to pay the debts of that person."
Important Exceptions
There are a few exceptions. The first is if you are a co-borrower or guarantor on a debt with your loved one. One common example is parents who co-sign for their children's student loans. In the event of that child's death, the parents would become responsible for the balance, like these parents who are now responsible for their daughter's $100,000 student loan debt after she died in a tragic accident.
Another exception is spousal debt -- in some states.
Community property states. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, plus the territory of Puerto Rico. Alaska also allows married couples the choice of opting in to community-property status. If you live in these states (although laws vary slightly), your finances automatically become entwined as soon as you marry. In these cases, you will become responsible for the debts of your spouse when they die, even if you were not named as a co-borrower or joint account owner on your spouse's debt. You are not, however, responsible for debts that they incur before the marriage. The only way you may be able to avoid your spouse's debts in these states is if you sign an agreement with your spouse to specify that their individual debts are not your responsibility.
Common law states. If you are married and live in a common law state, you are not responsible for the individual debts of your spouse unless it is a debt which you have both signed. This also includes joint accounts, joint credit cards or if you are a co-signer or guarantor on any loans.
Caution: Lack of Legal Responsibility May Not Deter the Creditors
Don't assume just because you're not responsible to pay for your loved one's debts that their creditors will tell you the same thing because they will call.
Chris Huntley, director of marketing at JRC Insurance Group, recounted the how he was hassled by creditors after his father's passing.
"After my dad passed, mostly I just received calls or letters from his creditors wanting to know if he had an estate. But one of his credit card companies called me and told me that I had to pay this off right now. I told him that he should be talking to the estate representative and provided the contact information. I told him he should know better and not bother me again. He knew he was in the wrong and didn't call back."
It's a frequent practice of creditors or their agents to contact a surviving family member to collect money on outstanding debts. The best thing to do is to advise them of the name of the executor if they have a will. If the deceased didn't have a will, a probate court would appoint an administrator, personal representative or universal successor, and that's the person the creditor needs to contact.
Creditors and their representatives cannot repeatedly call you or harass you to collect on the debts of family members, the Fair Debt Collection Protection Act says. You may have to send the creditor a certified letter to advise the creditor to cease calling you. You can even do this if you are the executor of the will.
However, creditors can call you once only to ask you for contact information on the executor or administrator -- but don't give them any other personal or financial information about the deceased.
A Vital Life Insurance Loophole You Should Know About
If all debts must be paid first to creditors before assets can be distributed to the beneficiaries, it stands to reason that someone with few assets and a lot of debt wouldn't be able to leave his or her family with an inheritance, right? There is a way around that.
Life insurance bypasses probate because life insurance death benefits proceeds are paid directly to the named beneficiary(ies). It's generally not considered part of the estate, so creditors and their representatives cannot lay claim to this money.
And beneficiaries of life insurance benefits are not obligated to use any of this money to cover the outstanding debts of family members, unless they are also financially and therefore legally bound to the debt.
When You Need to Buy Life Insurance to Cover a Family Member's Debts
You should only have to buy life insurance to cover the debts of other members of your family in the following situations:
Co-sign or be a guarantor of a loan. Any loan that you co-sign with another family member or are a guarantor should also be covered with at least an equivalent amount of life insurance because you will be liable for the outstanding balance should that person die before the loan is paid.
Live in a community property state. If you live in a community property state, you and your spouse should discuss your joint debts and should consider buying life insurance to ensure the debts are covered by life insurance.
Have joint accounts or debts. If you are married and have a joint account, creditors can attach this account to cover all the outstanding debts on your spouse. Similarly, any debts that you have signed together then you, as the surviving spouse, will be responsible to pay off the debts regardless of where you live, and it would be very prudent to have a life insurance policy to cover these situations.
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