Thursday, February 23, 2012

Tax Tips from MoTax 2012

Interest in last week’s tip was high, so expect something in the future talking about comparing cars and when to buy new or used. This week I wanted to share a few short thoughts on taxes from my client experiences this tax season.

A great question to ask before you prepare your taxes: Do I have all my paperwork?

·         Before you prepare your taxes, make sure that you have all your paperwork. This may seem like a simplistic tip, but reporting a forgotten form after filing is the main reason I help people file amended returns.

·         Do you have a W2 from EVERY location worked in the prior year? Even if you worked somewhere for a day, you will get a W2 (I have seen 1 day W2s).

·         You may have relationships with several financial institutions. Someone services your mortgage, another pays interest on your checking/savings, and maybe you have an investment account with a brokerage firm. While firms are supposed to have the tax paperwork sent to you by certain deadlines, some firms do get extensions. Make a list of all the firms you interact with and determine if you have something from each.

·         If you think a form or action you took during the tax year might be remotely related to taxes, bring the form or other documentation to your tax preparer. It is extremely easy to look at a form and determine that it will not affect your taxes. Without the form, may end up making an unnecessary second trip.

Don’t use last year’s last paystub as a substitute for a W2

·         W2s have important information that may not be on your paystub, or you may not know how to relate that information to the appropriate place on your tax return.

If something was not reported to the IRS, you should still report it.

·         Many clients will ask me, “if this income was not reported to the IRS, do I have to claim it?” When I usually respond in the affirmative, some clients stare at me in disbelief. I then explain my reasoning: this tiny bit of income was not reported because it was so small. It is likely cheaper to report this small slice of income than to take a chance that the IRS will never catch the omission. Plus, you will sleep better at night; I will too.

If you do not have taxes taken out of your paycheck, you may be considered an independent contractor.

·         Independent contracting happens when an employer gives a contractor a task, but the employer allows more latitude in how the task is performed than what is normally given to a regular employee. The IRS has detailed examples about who is an independent contractor, but the easiest way to determine if you’re being treated as a contractor is if taxes are being withheld from your paycheck; if they are not being withheld, than you are likely an independent contractor. Also, if your employer does not require you to fill out a W4 to determine your withholding, then you are likely an independent contractor.

·         Being an independent contractor means that you are operating your own small business as employer and employee. For this reason, you have to pay both the employer and employee’s share of the Social Security and Medicare taxes (13.3% (lowered by the payroll tax cut extension; 15.3 normally)) on your net profits. This can be a benefit because you determine your net profit by deducting your expenses from your revenue. However, if you haven’t kept track of your expenses or had most of your expenses reimbursed, then the taxes can be substantial. See the IRS for more information about being self employed vs an employee.

Mo allows for a public pension exemption and a military pension exemption.

·         Make sure that you are taking advantage of the exemption for public pensions or military pensions if you are eligible. The public pension exemption applies to any federal, state, or local government pension. These exemptions are being phased in over time. In 2011, the military exemption was 30% and is slated to rise to 100% by 2016. Public pensions are 100% exempt for 2012 onward. Note that there are income phaseouts for these exemptions. See MO Department of Revenue’s helpful website for more info.

Finally, think about using a VITA site if you qualify.

·         Volunteer Income Tax Assistance sites are a great way to prepare your taxes. Volunteers are knowledgeable about tax law, can efile your tax return, provide both direct deposit/direct debit, and the services are free! There are income restrictions and limits on the complexity of a return, so make sure that they can help you before you show up at the site. Some sites also require appointments. To find a VITA site near you, call 1-800-906-9887 or visit the IRS website.

We would like to hear from you! If you have a tax tip to share or would like to comment on this post, please visit our blog at or send us an email.


-       Andrew Zumwalt ( )



Thursday, February 16, 2012

Is Miles Per Gallon Everything?

By Andrew Zumwalt


Truth can get lost in hype. The media has recently reported energy analyst price predictions of $4-$5 per gallon of gasoline for this summer. With such a high price for gasoline, consumer’s thoughts again start turning toward the efficiency of their vehicles. Higher MPGs provide better fuel economy, but is Miles Per Gallon the only consideration?


Miles per gallon (MPG) may not be providing you with the best measure of the fuel efficiency of your car — especially when you are buying a new car and trading in your old one. If you are looking to compare the efficiency of your old car with a new one, consider using gallons of gasoline used per mile (or per 1,000 or 10,000 miles).


In a past issue of Science magazine, consumers ranked the most efficient replacement strategy for their cars. In the study, about 60 percent of people rated replacing a 34 MPG car with a 50 MPG more efficient than replacing a 18 MPG car with a 28 MPG car. People also rated the pair of cars with the highest increase in MPG as the most fuel efficient, and the pair with the lowest increase in MPG as least efficient.


However, increases in MPG can be misleading. In the example above, replacing the 18 MPG with the 28 MPG car actually saves more gasoline than replacing a 34 MPG car with one that gets 50 MPG. The table below helps illustrate:


Table 1: Car comparison

Original car

Gallons of gasoline consumed per 10,000 miles

New car

Gallons of gasoline consumed per 10,000 miles

Gallons of gasoline saved

34 MPG


50 MPG



18 MPG


28 MPG




Instead of comparing miles per gallon, the measurement used is gallons of gasoline per 10,000 miles. Replacing the least efficient car (18 MPG) with one slightly more efficient (28 MPG) saved 199 gallons of gasoline per 10,000 miles. Only 94 gallons of gas was saved by replacing the more efficient car (34 MPG) with one that is most efficient (50 MPG). MPG is misleading because the relationship between miles and gallons is not straight. As the MPG of a car increases, the amount of gallons for gasoline used decreases, but the savings gets smaller with each unit increase in MPG. Table 2 helps illustrate the point:


Table 2: Savings in gasoline from 10 MPG increments



Gallons of gasoline consumed per 10,000 miles




















In Table 2, the 10 MPG increase between car 1 and car 2 saves 500 gallons of gasoline. The 10 MPG increase between car 5 and car 6 only results in a savings of 34 gallons.


When you are shopping for a car, be sure to compare cars by the gallons of fuel consumed over 10,000 miles instead of miles per gallon. Replacing an average fuel efficient car with a very efficient car may not save you as much as replacing a very inefficient car with a car that is slightly more efficient.



Andrew Zumwalt, M.S.

Director of the MoTax Education Initiative

162 Stanley Hall

University of Missouri

Columbia MO 65211

Google Phone #: 573-234-4268

Fax: 573-884-5768

Click to Call Me



Thursday, February 9, 2012

Assessing the American Dream

This semester I am teaching a course that is new to me.  The title of the course is “Assessing the American Dream”, to which I have added the timely subtitle of “Occupy Wall Street”.  In the interest of providing some insights into today’s college students – the leaders of our tomorrow – I am using new technology which allows me to ask questions and receive anonymous feedback on students’ opinions.  In preparation for this work, we’re also trying to append socio-demographic data to their responses to see how students from different backgrounds might reply to key questions.  Thus, I hope to provide a series of “Financial Tips” on the experience.  I believe it will provide readers with some food for thought, throughout the remainder of spring semester.  Today, we will begin with the demographics of the class, followed with their response to a couple of questions connected to our collective futures.


The majority of the students (56%) are from the suburbs, with 16% claiming a rural upbringing and only 13% from an urban core.  Only 62% were born in Missouri, with the remainder of the class being born outside of Missouri.  Surprisingly, none of the class is from overseas.  In their family, 45% are the eldest child with only four of those being the only child in their family.


With respect to their family background, 55% report that their family household income is greater than $100,000.  Including that highest category, 89% of the students reported household income of $50,000 or greater.  (A much greater level of income than what exists in the general population, indicating their parents’ greater ability to pay, or plan for, college expenses, or the greater the motivation of students from these backgrounds to work their way through school.  Twenty-three percent indicate that they receive some form of scholarship to attend MIZZOU, while 70% are full-time students working part-time jobs to help pay for their college years.)  Seventy-nine percent of their mothers and 73% of their fathers attained an associate’s degree or higher, compared to the national average of 49.10% (Wikipedia).  This allows us to conclude that the average University of Missouri student, at least those in this class, come from better educated and greater income households than the country as a whole.


Fifty-seven percent of the students report belonging to one, or fewer, campus organization.  Only 21% belong to a campus Greek social fraternity or sorority.  When asked how often they exercise, 53% reported that they exercise daily, while another 30% exercise weekly.  This is not because they are in church, as fully 64% report going to church once a year or not at all.  The remaining students are split relatively evenly between attending religious services once a week or once a month.  A 2007 Gallup poll indicated that, for all Americans, 55% attend church once per month, or more often.  (I’ve always felt a pull toward church becoming greater, as the final exam comes closer.  I pretty much attend once per week.  I’m cramming.)


It is of interest to note that 25% reported being Democrats, 27% replied that they are Republicans, 23% are Independents, 23% do not vote, and 1% are Libertarians (sorry, Ron Paul).  Analogously, 27% identified themselves as liberal or very liberal and 27% as conservative, with the modal category (46%) reporting being moderate.


The same day we asked them about their confidence in the standing of America in the world and, sadly, 77% reported that it has diminished or that they have lost confidence in our country.  Yet, at the family level, 75% believe that family values are important to the American Dream and 73% continue to believe that the American Dream, as defined by those values, is within their reach, while only 8% believe it to be out of reach. 


One set of questions focused on attitudes toward the tenants of an article by Charles Murray which appeared in the Wall Street Journal.  (See the article here.)  His argument is that the upper class and the lower class are becoming increasingly divided.  He demonstrates support for this gulf in the following areas; marriage, single parenthood, industriousness, crime, and religiosity.   The majority of my students believe we should care about each of these divides, except for religiosity.  Crime was found to be the one where the most students perceive the greatest cultural divide and religiosity the least wide gulf.   Seventy percent of them agree that the cultural divide is real when they are interacting with those of a different social class.  The plurality of the class believes that the best resource available to help bridge the cultural divide is public education (49%), while only 3% see taxing the wealthy as providing the necessary resources to the lower class as an answer.  The preceding assures that debates on government expenditures to be both loud and long.


As we continue to move through the semester, I will try to keep you up to date on interesting findings.  This is not meant to be a “final-say-set” of conclusions about American college students.  It is, simply, a class - a class designed to help our students better know themselves to help them truly find financial success.  It is also imperative, moreover, that they know those who are different from them, as they may have similar clients and, frankly, the mosaic of our country requires each strand to be woven with other strands to create the finished fabric which we call America. 


-          Rob Weagley

Thursday, February 2, 2012

Is Your Religion Your Financial Destiny?

by Ryan Law, M.S., AFC


Last year the New York Times[1] published an article titled “Is Your Religion Your Financial Destiny?”. I have come back to this article and discussed it with several people and finally decided to write about it. The graph about speaks for itself, but I have a few comments about it.


First, the graph:



If you have a hard time reading the graph in your e-mail, you can pull up a copy online here:


A couple of notes – the y-axis shows the percentage of households with an annual income above $75,000 in each religion listed. The x-axis shows the percentage of college graduates from each religion listed. For example, among Anglicans/Episcopalians, approximately 52% have an income above $75,000, and about 52% are also college graduates. The national average of all households in America that make over $75,000 is about 30%, while about 27% of all households in America have graduated from college.


On the low end of the graph we have Jehovah’s Witnesses, with less than 20% of households making over $75,000 and less than 10% college graduates, while at the other end about 65% of Hindus make over $75,000 and about 74% have a college education.


As you look at the graph, do you notice a trend? Does it almost look like you could draw a line that would slant up and to the right and hit almost every point? With the exception of a few in the middle, and a slight dip at the end, you almost could draw a straight line. What does this mean?


First, and this is definitely worth noting, religion does seem to have a factor in how much money people make. The study, conducted by the Pew Research Group, shows that religion plays a greater role in predicting your income than the differences among states or even racial groups.


Second, college education and wealth go hand-in-hand, and some religions place a high emphasis on education.


I would be interested to seeing where atheists fit on the graph. We have one titled “unaffiliated religions” but nothing for atheists.


I would be interested to hear your thoughts about the graph. You can comment at


Ryan H. Law, M.S., AFC


Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director


239E Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)