Friday Financial Five – April 3, 2015

Friday, April 03, 2015

Dan Forbes, GoLocalWorcester MINDSETTER™

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Retirement plan tax deadlines approach

Tax payers have less than two weeks to make the appropriate contributions to IRA accounts in an effort to save some tax dollars and help their retirement picture. Traditional and Roth IRAs must be created and funded by April 15th for the 2014 tax year. Both allow $5,500 contributions for those that qualify, with an extra $1,000 possible for those 50 and over. A SEP IRA can be established and funded by the employer’s tax filing dates, including extensions and allows for a contribution up to $53,000. Qualified plans and SIMPLE IRAs need to have been created in 2014 to qualify for funding in that tax year.

April is a big month for tax prosecutions

Bloomberg cites a TRAC Research Center study out of Syracuse which details the increase in tax prosecutions that take place in April. This is no coincidence, as the IRS would like to influence those filing returns that are not entirely accurate. The number one classification of IRS criminal charges filed is “fraud and false statements." Getting audited is still improbable, as less than two percent of Americans get audited and most are in the higher income category. However, the government would like to use this month to remind taxpayers of their “responsibility under tax law”.

The most financially literate states

Everyone loves lists, and Wallethub is great at creating metrics that allow us to compare different areas of the country. Their latest analysis examines financial literacy in a country that’s racked up more than $133 billion in credit card debt in the last few years. The analysts divide literacy into two groups: Knowledge/Education and Planning/Daily Habits. The runaway winner for financial literacy was New Hampshire, while Massachusetts was very strong in third place. Rhode Island placed weakly in thirty-ninth, while Nevada and Mississippi occupy the bottom two slots of the chart.

Obamacare takes a hit in New York

For states that created exchanges instead of using healthcare.gov, there has always been a question about how the program gets funded once the federal grant money runs out. New York provided a not so promising precedent, as the legislature voted down a proposal to tax health policies to fund the state exchange. According to the legislature, the added tax drives the premiums up to a point that defeats the purpose of having the exchange in the first place. This may prove problematic for other state exchanges looking for ways to generate revenue in the face of state legislatures looking to reduce spending.

Colleges claiming to cover demonstrated financial need

Decision time approaches for those entering college in the fall. The qualitative factors of the different schools are important, but the final choice may simply come down to money and the perceived “bang for the buck." A list compiled by Lynn O’Shaughnessey from the College Board’s Common Data Set presents all 63 universities that claim they meet 100 percent of students’ need. These are many of the top universities in the country. Those that have received the financial package from one of these top schools may not necessarily feel like they’re meeting each family’s financial need, but according to this list and the school’s data, they are.

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

Related Slideshow: Massachusetts Business Rankings

See how Massachusetts stacked up.

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WalletHub

Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.

Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.

Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.

Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.

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WalletHub

Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.

Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.

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The Economist

Small Business Friendliness Grade: D+

The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.

Overbearing bureaucracy and excessive licensing is stifling small business in America.

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CNBC

#25 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

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Forbes

#13 Forbes

Forbes ranks each state in business costs, economic climate, and growth prospects.

The most damning in the commentary:

Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.

ChiefExecutive.net

#47 ChiefExecutive.net

ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.

The most damning in the commentary:

Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.

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Tax Foundation

#25 Tax Foundation

Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.

Massachusetts ranked #49 in unemployment insurance tax.

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Wallet Hub

#10 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Massachusetts ranked #49 in worst roads and bridges, but ranked #7 in overall government services.

ALEC

#41 ALEC

ALEC ranks each state in economic performance and outlook.

Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Kauffman Foundation

#29 Kauffman Foundation

Kauffman Foundation ranks each state in entrepreneurship.

Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.

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Free Enterprise

#18 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.