Need to withdraw from a 529? If you don’t calculate correctly, you may owe taxes on your distribution. To make sure the total distribution is actually tax-free…

Time It Right

Make the withdrawal in the same calendar year that the educational expenses are paid

Crunch The Numbers

Calculate using this formula:
+ Tuition and related fees + room and board + books and supplies + computer and internet costs
– Pell Grants – tax free scholarships – fellowships – tuition discounts – any costs used to claim the American Opportunity or Lifetime Learning tax credit
= distribution amount

If your withdrawal is in excess of the above calculation, part of the earnings will be subject to tax and possibly a penalty.

Don’t Forget…

• You may have the withdrawal check made out to either the account beneficiary or the account owner.
• You may roll over the account tax free to another Qualified Tuition Program for the benefit of the same beneficiary or for the benefit of a family member of the beneficiary (including spouse).

If you’re a client, please feel free contact us for assistance with your 529 distribution calculation or your 1099-Q (Payments from Qualified Education Programs).

Interested in setting up a 529 Plan? Remember the beneficiary must be enrolled in an eligible educational institution at least half time. (Find out which schools are eligible here.)

Content derived from information provided by the IRS and “4 Things to Know About 529 Plan Withdrawals” by Bill Bischoff. SmartMoney. June 8, 2010.

• An IRS notice will specify an issue related to your account or tax return. The notice may request payment of taxes, notify you of a change to your account, or simply request additional information.
• The notice provides instructions to satisfy the inquiry. Usually, the best place to start is comparison of your return with the details provided in the notice.
• If you agree with the notice, (ask your tax advisor to confirm) send in your payment with the payment portion of the notice by the required date to avoid further penalties. Write your social security number and the tax period in the memo section of your check and keep a copy of everything for your records.
• If you do not agree with the notice, act fast. Gather your documents and write a detailed explanation to the IRS. Mail your response (the address is on top of the notice) with a copy of the notice before the due date to allow time for processing. The IRS aims to respond within 30 days but will more likely get back to you within 45 to 60 days.
• You can always call the IRS directly, but be aware, the wait times are often long and the music on hold can be annoying. When you call, have the notice and your tax return on hand.
• If we prepared the return for which you received an IRS notice, we will be happy to assist you in sufficing the IRS requirements and/or attempting to resolve any inconsistencies.

For further information on IRS notices, see Publication 594 – The IRS Collection Process. For information about penalties and interest, see Publication 17 .

Information provided by the IRS.

Check the status of your tax refund

Whether you chose direct deposit or asked the IRS to mail you a check, you can check the status of your refund by clicking Where’s My Refund?

Find out how to make payments electronically

You can authorize an electronic funds withdrawal, use a credit or debit card, or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System to pay your federal taxes. Electronic payment options are a convenient, safe and secure way to pay taxes.

Find out if you qualify for the Earned Income Tax Credit

EITC is a tax credit for many people who earned less than $49,000. Find out if you are eligible by answering some questions and providing basic income information using the EITC Assistant.

Get tax forms and publications

You can view and download tax forms and publications at any time.

Calculate the right amount of withholding on your W-4

The IRS Withholding Calculator will help you ensure that you don’t have too much or too little income tax withheld from your pay.

Request a payment agreement

Paying your taxes in full and on time avoids unnecessary penalties and interest. However, if you cannot pay your balance in full, you may be eligible to use the Online Payment Agreement Application to request an installment agreement.

Get information about the latest tax law changes

Learn about tax law changes that may affect your tax return. Special sections of the website highlight changes that affect individual or business taxpayers.

Remember the address of the official IRS website is http://www.irs.gov. Beware of IRS sites that end in .com, .net, .org. And, as always, consult your Cook Wealth financial advisor if you have any questions.

You may be looking for help from a wealth advisor for a number of reasons – you’re buying a new home, you’re planning for retirement or your children’s education, or you simply don’t have the time or expertise to get your finances in order. We recommend asking any potential advisor the following questions. We’ve provided our answers; does our style and approach fit your needs?

1. What experience do you have?

Experience is one of our core strengths. Founded in 1984, and serving successful executives, business owners, retirees, and their heirs, Cook Wealth Management Group has extensive experience in financial planning, accounting and taxation, corporate finance, private banking, investments, private equity, insurance, and even counseling. With over 100 years of combined experience in the financial planning industry, we know what questions to ask and how to customize a plan to help you achieve your unique goals.

2. Who do you typically help?

In order to ensure the highest level of service for all our clients, we do have guidelines for accepting new clients. We work with people whom we believe we can effectively help to succeed over time. We look at each new client relationship as an opportunity to build a long-term partnership.

Our diverse client base includes many small to mid-size business owners, entrepreneurs, and corporate executives. Clients come to us initially for a variety of needs, including:

• Preparing for retirement
• Planning for taxes
• Managing investments
• Preserving an inheritance
• Transitioning to a new job
• Dealing with a death in the family or a divorce
• Handling an IRS audit
• Planning for a parent’s long term care
• Saving for a child’s college education
• Starting a new business

3. Is your investment approach cautious or aggressive?

Neither. Our approach is client-specific, based on individual risk tolerance and individual goals.

4. What are your qualifications?

Our team members are recognized as CERTIFIED FINANCIAL PLANNER™ professionals and/or Certified Public Accountants (CPA). We also have experience in insurance, tax planning, investment management, estate planning, retirement planning, debt management, charitable giving, and more. For more details, please review our bios.

5. How do you stay current with changes and developments in the financial planning field?

Maintaining our licenses and certifications through ongoing ethics, continuing education, and professional development courses and seminars is a minimum requirement at Cook Wealth, as is staying up to date on the latest tax codes, market issues, estate law, healthcare benefits, retirement savings strategies, and more. Our entire team is committed to lifelong learning, continually attending leading edge professional training and actively taking part in several professional organizations, including the American Institute of Certified Public Accountants and the Financial Planning Association.

6. What services do you offer?

Our holistic approach to financial planning includes the following suite of services:

• Financial Planning (including Estate Planning, & Asset Protection)
• Asset Management (Customized Portfolio Design & Monitoring)
• Tax Planning (Optimization, Estimates, & Preparation)
• Life Planning (Blueprinting & Coaching)

We are licensed to offer securities and insurance products (life, disability, and long term care) in 28 states and are registered with the #1 independent broker/dealer in the nation, LPL Financial, a Registered Investment Advisor.

7. Will I work exclusively with one advisor?

Cook Wealth is proud to offer the help of a team of professionals, each member aptly suited to assist you in his/her area of expertise. Cook Wealth’s team approach means each team member will be aware of your needs and preferences. Your lead advisor will work with our tax professionals, client services managers, and additional wealth advisors to provide world-class service based on your customized plan.

In addition, we offer the services of our select partners. While the majority of our services are provided in-house, we also coordinate with estate attorneys, property & casualty agents, bankers, and more to give you service you deserve.

8. How much do you typically charge?

The amount we charge will depend on your particular needs and the way in which you choose to take advantage of our services. Whether you pay for our suite of services, or choose just one or two services, we can provide you with an estimate of possible costs based on the work to be performed. While you may pay separately for one service, we can add the most value by providing a comprehensive, long term, holistic approach to your finances – working on your entire financial picture, each piece of the puzzle – just as we do for a majority of our clients.

Cook Wealth is 95% fee based.

We charge an initial wealth planning fee and an ongoing maintenance fee. For unique, extenuating circumstances, an hourly fee may apply.

Being a primarily fee-based business means we are on your side of the fence – we only succeed if you succeed.

Fee for each: Asset Management, Wealth Planning, Life Planning

Commission: Life, Disability, and Long Term Care Insurance, College Savings Accounts (529 Plans)

Varied: Tax Planning (dependent upon each client situation)

9. Do you benefit from recommending outside contacts?

We receive no monetary compensation for our recommendations. We selectively choose professionals that we believe will provide you the same world-class level of service you receive from us. We recommend our select partners only to help you succeed.

10. Have you ever been publicly disciplined for any unlawful or unethical actions in your professional career?

No. FINRA, state insurance and securities departments, and the CFP and CPA Boards keep records on the disciplinary history of financial planners and advisors. Having assisted clients for decades, our company and its history are sound and reputable.

11. Can I have it in writing?

We want to be fully aware of your expectations, and we want you to be fully aware of ours. No mystery, no surprises. In order to provide full transparency of the way we work for you, we supply you with hard copies of all relevant disclosure statements and client agreements. Here are descriptions of just a few:

• After you become a client, we present you with an Investment Policy Statement, which we both sign. The IPS is a written agreement that details the customized way in which we’ll approach your investments; it outlines our expectations and yours.
• We also provide you with a disclosure document called the Investment Advisor Form ADV Part II which explains the investment platform and the services provided by LPL Financial, our broker/dealer.
• After each wealth plan update meeting, we send you a Meeting Summary which lists the items we discussed and reiterates any pending actions – our responsibilities and yours – to ensure we are taking the right steps to help you make your ideal life your real life.

We’ll be happy to answer any other questions. Please call us at 1-888-852-8529 or email one of our team members.

Questions derived from the Certified Financial Planner Board of Standards, Inc. www.cfp.net.

The House hosts up to 30 families, with 22 family bedrooms, 7 long-term bone marrow transplant suites and an offsite apartment close to Duke University Medical Center. Tenants of the House receive the comforts of home – private bedrooms, inviting community spaces, daily home-cooked meals and a stocked kitchen, a play room, computer room and laundry facilities – as well as a network of support through interactions with other families, staff, and volunteers. Families may also participate in activities like weekly game nights, outings to local sporting events, tutor programs, and pet therapy. The Ronald McDonald House of Durham even provides volunteer transportation services to help families get to the pharmacy or run other errands.

In 2010, the Ronald McDonald House of Durham served over 1,200 families.

In addition to the House, The Ronald McDonald Family Room,  just steps away from the pediatric and neo-natal intensive care units on the pediatric floor of Duke University Medical Center, is available to families of hospitalized children who live in the local area, as well as families who have traveled long distances.  Accessible 365 days a year, these Family Rooms offer parents a comfortable living room, stocked kitchenette, showers and bathrooms, laundry services and computers to stay in touch with family, friends and the workplace. In November 2010, an additional Family Room was opened at WakeMed Children’s Hospital.

Bill Donovan, Executive Director of Ronald McDonald House of Durham since January 2010, graciously agreed to answer a few questions:

How is Ronald McDonald House of Durham funded?

McDonald’s and RMH Charities of NC provide 15% of our annual budget; 85% comes from individual donations, grants, and our special events

How do you see families benefit the most from what Ronald McDonald House of Durham offers?

Families staying at the Ronald McDonald House of Durham often say that the emotional support they receive from other families and our staff is the most appreciated gifts of the House. In addition, our families could not afford to stay in hotels or other alternate housing while their children are undergoing treatment at the Hospital. Without the Ronald McDonald House, most families would be staying in the hospital lobby, their child’s hospital room or even their cars. The House provides children with access to world-renowned medicine that they would otherwise be unable to receive.

The mission statement states that you “allow families to focus on the health and wellbeing of their critically ill children by keeping families together who are in need of a community of hope, comfort and empathy.” How have you seen “keeping families together” accomplish the mission?

The Ronald McDonald House of Durham strives to improve patient success by enabling families to be active in their child’s medical care. The importance of keeping families together in the face of a critical illness has been supported by a variety of research. In a study of 586 patients, researchers found that children accompanied by parents had a hospital stay 31% shorter than patients with non-resident parents.¹ Additionally, a 2007 study at Emory University found that family presence in the ICU reduced patient stays by 50% and medical errors by 54%.² Studies have also shown that parents benefit from speaking with other parents of children having the same or other critical illness.³

Are there any plans for expansion?

We will be expanding on our current property in late 2011. The expansion will add an additional 28 suites and nearly double our capacity. The expansion will cost $6.7M, and we will launch a capital campaign in February 2011. We hope to break ground late 2011.

More information about tRonald McDonald House of Durham

1 O’Connor, P. & Taylor, M. R. “Resident Parents and Shorter Hospital Stay.” Archives of Disease in Childhood, 62.2 (1989): 274-6.

2 Landro, Laura. “ICUs’ new message: Welcome, families.” Wall Street Journal. 12 July 2007.

3 Kirschbaum, M. S. “Needs of parents of critically ill children.” Dimensions of Critical Care Nursing, 9.6 (1990): 344-352.

The Affordable Care Act, enacted on March 23, 2010, contains a number of tax provisions, some of which are not yet in effect. Below are some of the provisions that are in effect now.

Excise Tax on Indoor Tanning Services

A 10 percent excise tax on indoor UV tanning services went into effect on July 1, 2010.

Exceptions:

• phototherapy services performed by a licensed medical professional on his or her premises
• certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee

Employer-Provided Health Coverage Not Taxable — Reporting Optional in 2011

Starting in tax year 2011, the Affordable Care Act asks that employers report the value of the health insurance coverage they provide employees on each employee’s annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems, the IRS will defer the reporting requirement for 2011, making it optional in 2011 but required in 2012. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.

Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply.

Changes to Flexible Spending Arrangements

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

Health Coverage for Older Children

Health coverage for an employee’s children under 27 is now generally tax-free to the employee. This expanded health care tax benefit applies to various workplace and retiree health plans. These changes immediately allow employers with plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. More information is available from the Department of Health and Human Services and Department of Labor. Medicare Part D Coverage Gap “donut hole” Rebate The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. In 2011, if you reach the coverage gap, you will receive a 50% discount when buying Part D covered brand-name prescription drugs. More information can be found at www.medicare.gov.

Small Business Health Care Tax Credit

Included in the Patient Protection and Affordable Care Act approved by Congress and signed into law by President Obama, this credit is one of the first health care reform provisions to go into effect. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low- and moderate-income workers. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers — those with 10 or fewer full-time equivalent (FTE) employees — paying annual average wages of $25,000 or less. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more.

Information provided by the IRS.

• Federal tax rates will remain at 10%, 15%, 25%, 28%, 33%, and 35%.
• The Personal Exemption Phase Out has been repealed.
• Capital gain and dividend rates will remain at a 0% for taxpayers below the 25% tax bracket and at 15% for taxpayers in the 25% bracket and above.
• The Child Tax Credit is extended, meaning qualifying taxpayers may still claim a $1,000 credit for each qualifying child.
• The Limitation on Itemized Deductions has been repealed.
• The Alternative Minimum Tax exemption has been increased for 2010 to $47,450 for individuals ($48,450 for 2011) and $72,450 for married filing jointly ($74,450 for 2011.)
• Through 2010, the estate tax exemption has been increased to $5 million per person and $10 million per couple, with a top tax rate of 35% for the estate, gift, and generation-skipping transfer taxes.

To find out more about the new legislation on Tax Relief, Unemployment Insurance Reauthorization, and Job Creation, read more here.

It’s a good idea to monitor your credit score at least annually to promptly note any errors (or possible identity theft.) If you don’t know your credit score, you can request your credit report from one or each of the three main credit bureaus* once per year, free of charge.

If you’re looking for a loan in the next year, it’s especially important to stay informed about your credit situation and, if needed, improve your score to get the best possible rate.

Currently, the best rates are offered to those with a score of 760+ (on a scale of 300-850.) FICO, the Missouri-based credit company, discloses five key factors used to determine your score, shown in the pie graph below.

Want to improve your score?

Aim for best available rate, not best possible score

If you’re over 760, simply maintain good credit practices. Anywhere from 760-850 qualifies you for the best rates available; any tweaks risk the possibility of lowering your score temporarily.

Pick a card

Use one credit card most of time, and make small charges to other cards every few months. The longer you have an active card, the longer your “length of credit history” – a score booster. Additionally, most card issuers now close accounts (which lowers your score) after twelve months of inactivity, so it’s important to use them once in a while.

Pay up

Set reminders on your phone or email account or enroll in automatic bill pay to ensure you don’t miss a payment. While it may help your score to have a credit card, it hurts your score to not pay it off each month.

Curious about your score now? Credit.com is a secure site that provides an estimated credit score within a 50 point range. Type in a few details about yourself to see how you fare. (Remember, NEVER enter your personal information on a site without verifying it is secure. Make sure the web address begins with https and the site has an SSL certificate indicating encryption, such as a “VeriSign Trusted” logo.)

*Equifax, Experian, and TransUnion

Content derived from: The Quest for the Perfect Credit Score. Ismat Sarah Mangla. MONEY. Sept. 2010.

However, we have performed extensive research to determine what caused a significant decrease in municipal bond values and spent much time pondering what it means to us as investors in these bonds. The decrease in value of municipal bonds can, in part, be attributed to the spike in interest rates, as well as the fear and panic brought on by many derogatory articles, written by those who merely want to sell publications, not by experts in the muni market field of investing.

Between 80-94% of the muni investments we hold are revenue bonds backed up by projects and facilities that generate revenue as the source of debt principal and interest payments – not the “full faith and credit” or “taxing authority” of the municipality that issued the bonds. In addition, much of the negative press related to municipal bonds has been aimed at state governments, which are, in general, running annual budget deficits. Since most of our bonds are not subject to or related to these deficits, we are not concerned about the ability of the bond issuers to continue to make payments.

Our primary reason for investing your money in these types of bonds is to generate quality, tax-favored income over long periods of time. Over the last 26 years, our selected bonds have met that goal and it is our assessment that this will continue for a long time into the future. We also acknowledge that during this same period, the values of such bonds have fluctuated, and again, we are not concerned. (In the fall of 2008, the entire mechanics of the fixed income markets fell apart; no one was investing in anything. Banks wouldn’t even lend to each other! Bond values dropped dramatically, but recovered rapidly when the market normalized.)

Contrary to what you may read elsewhere, the recent circumstances of the muni market have created a very good buying opportunity. We will continue to invest in these bonds and even add to these positions when the situation warrants.

During your next meeting with us, we will review your investment performance. In the meantime, if you have any questions, please contact your Cook Wealth financial advisor.

Very Truly Yours,

Jon K. Cook, CPA, CFP

Founding Partner and Wealth Advisor

*Municipal bonds are subject to availability and change in price. Market and interest rate risk exists if sold prior to maturity, may make the actual yield differ from their advertised yield and may involve a loss or gain. Bond values will decline as interest rates rise. Federally tax-free interest income may be subject to the alternative tax as other state and local taxes may apply.

Energy bills can be quite costly in the winter months. Here are a few ways to keep your home’s temperature up and your monthly costs down.

$ Free

• How long have you had your heating system? You may be entitled to a free inspection. Find out if your system is working overtime (and you’re paying more than you should) to heat your home. Contact your system’s manufacturer to see what they offer, or ask a local fuel or electric company if they do complimentary inspections.
• Clean your furnace/air filters every two months and increase efficiency by up to 50%.
• Open curtains during the warmest hours of the day to let the sun heat your home, and switch the ceiling fan to the reverse setting to push warm air back down.
• Wear a sweater and save. According to GreenLivingOnline, lowering your thermostat temperature by two degrees could cut $180 from your bills this winter.
• Also consider lowering your water tank thermostat two degrees. The recommended energy-efficient range is 60 – 65 degrees Celsius – which is quite warm. (If your water tank thermostat doesn’t have numbers, this range is typically equivalent to the middle setting of “warm normal.”)
• A dishwasher uses less water – and thus less water heating - than hand washing. Make sure you fill it; a dishwasher is made to perform best and most energy-efficiently when filled to capacity.

$$ Moderate Expense

• Ever considered replacing your showerhead? Newer models use less water and thus, need less heat to warm the water.
• A high electric or gas bill is usually an indication that heat is escaping. To prevent escape, caulk cracks, buy materials from a home improvement store to seal off doorways, and install new attic insulation (the latest innovative insulation is made of recycled materials and is not harmful to your lungs like the old, pink kind.)
• If you still think your heating bill is too high, buy a thermal leak detector for around $50 and find the areas in the house where heat is escaping. Then caulk or insulate the trouble spots.
• Do you need a new thermostat? The latest thermostats range from $200 – $300 and allow you to not only schedule the temperature on a weekly basis, but also adjust the temperature remotely if plans change. If you’re working late, you can lower your thermostat from your office computer or smartphone. This purchase will likely pay for itself within two years, since anytime your heater is not running, you’re saving.

$$$ Long Term Investment

• If you’re not planning to move soon, replace your old windows. Energy-efficient, double-paned windows will keep more of your heated air indoors. If double panes are out of your price range, interior storm windows may work better for you – they reportedly reduce heat loss by 25-50% and are available for as little as $75 each. Some models spring-load to fit into your window, making installation a cinch.

It’s wise to determine your home’s heating efficiency – so you can determine your spending efficiency. In most cases, you’ll need to pay upfront to save on energy costs later. In the meantime, practice money-saving strategies to keep your heated air indoors.

Stay warm!

Content derived from: “New Ways to Cut Winter Energy Bills.” Kate Ashford. MONY. Oct. 2010.

“10 Easy Ways to Cut Your Energy Bill This Winter.” Lee Schnaiberg. GreenLivingOnline.

“How to Cut Your Winter Energy Bills.” Kelli Grant. SmartMoney. Oct. 15, 2007.