Scott Alving

When it comes to planning for your child’s or grandchild’s education, the earlier you start, the better. Fortunately, there are several types of Education Savings Accounts (ESAs) designed to help you grow your money tax-efficiently while preparing for future expenses. Here’s a quick look at five common education savings options to help you make informed decisions:

1. 529 College Savings Plans

These are among the most popular education savings tools. Funds grow tax-free and can be withdrawn tax-free when used for qualified education expenses, including tuition, books, and room & board.

✅ Can be used for college and K–12 tuition (up to $10,000/year for K–12)

✅ High contribution limits

✅ Some states offer tax deductions or credits for contributions

2. Coverdell Education Savings Accounts (ESA)

Coverdell ESAs allow you to save up to $2,000 per year per child with tax-free growth and withdrawals for educational expenses.

✅ Can be used for K–12 and higher education

✅ Includes costs like computers, tutoring, and other supplies

⚠️ Income limits apply, and contributions must stop when the child turns 18

3. Custodial Accounts (UGMA/UTMA)

These accounts aren’t education-specific but can be used for education if desired. They are taxable, and funds are considered the child’s once they reach adulthood.

✅ Flexibility: use for any purpose that benefits the child

⚠️ No tax advantages for education-specific use

⚠️ Assets count against the student for financial aid purposes

4. Roth IRAs (for Education Purposes)

Although designed for retirement, Roth IRAs allow for penalty-free withdrawals of contributions (not earnings) for qualified education expenses.

✅ Ideal for parents who may need flexibility between retirement and education

✅ No early withdrawal penalty if used for college

⚠️ May reduce retirement savings if used for education

5. Prepaid Tuition Plans

These allow you to lock in today’s tuition rates at eligible public colleges and universities.

✅ Hedge against tuition inflation

✅ Usually state-sponsored and limited to in-state schools

⚠️ Less flexible than 529 plans; restrictions apply if student attends a different school

💡 Final Thought: Choose What Fits Best

Each account has its own advantages, limitations, and tax implications. Consider your goals, your child’s age, your income, and how much control you want over the funds. Many families use a combination of these strategies to stay flexible while maximizing savings.

Want help deciding which plan is right for your family? Let’s talk — we’re here to guide you through the options!

You may be getting (or have already received) a tax refund this year- roughly two out of three filers get a refund, according to the IRS.  Whether it is a small or large amount, you may be wondering how you can get the most out of it.

Spending it is an option; you’ve certainly been waiting for an influx of cash and it’s nice to enjoy a little something for yourself. You could, however, treat yourself with part of the refund amount, and put the remainder to work for you to have a more solid financial standing in case of an emergency or to save for a goal.

Here are a few things to consider:

1)     An emergency fund should be a top priority for all. Having money set aside that you can access to cover a surprise expense or loss of income is huge for your peace of mind. It is recommended that you have three to six months of your total monthly expenses saved, just in case you need it. Even a small amount of your refund is a great way to get started, then add a few dollars a month and you’ll see your fund grow more quickly than you thought possible.

2)     Pay off (or pay down) debt. Credit cards and other high-interest debt eats away at your lifestyle. By using a portion of your tax refund to pay off that debt you take away the monthly pressure of meeting the deadline for the bill; and save yourself a lot of money in interest you no longer owe.

3)     If you know you will owe for the next tax year and/or you have to pay estimated taxes, you can always roll over your refund and apply it to next year taxes.

4)     Save for retirement.  There is no time like the present to be putting money aside for your retirement. A guideline is 10% of your gross income for retirement, and this tax refund is a great way to get started.

5)     Goals.   A vacation, education for children, some other large purchase- all are great things to put your tax refund towards, once you have the emergency fund, debt reduction, and retirement savings under control.

Obviously, you’ve earned your tax refund, so you should enjoy it. With these few little hints, you can enjoy it and also set yourself up for future success and stability at that same time.

You know how most people have taxes automatically withheld from their paychecks? Well, if you’re self-employed or making good money from investments, you’ve got to handle this yourself through estimated tax payments.

Here’s the deal for 2025 – you’ll need to make four payments throughout the year:

• First payment: April 15, 2025 (for January through March)
• Second payment: June 16, 2025 (for April and May)
• Third payment: September 15, 2025 (for June through August)
• Fourth payment: January 15, 2026 (for September through December)

Expecting income from sale of stock or other sources? You should pay estimated tax instead of waiting until the end of the tax year. By doing so you will not incur a penalty for not paying estimated taxes.

Now, here’s the trick to avoiding penalties – you’ve got to pay either 90% of what you’ll owe this year, or 100% of what you paid last year. Oh, and if you made over $150,000 last year (or $75,000 if you’re married filing separately), that jumps to 110% of last year’s tax. Also, if you owe less than $1,000 the IRS will not charge penalties. Or, if you had no tax liability in the prior year (for a full 12-month period).

Making payments is super easy these days. You can:

• Pay online through the IRS website https://www.irs.gov/
• Use EFTPS (it’s like online banking but for taxes)
• Use the IRS2Go app on your phone
• Mail a check with Form 1040-ES (old-school, but it still works!)
• Direct debit- we can set this up through our tax program

Here’s a pro tip: If you’re itemizing deductions, pay your fourth quarter state estimated taxes by December 31 instead of waiting until January 15. This way, you can deduct them in the current year rather than having to wait.

And hey, if your income is all over the place throughout the year, don’t worry – there’s something called the annualized income installment method that might help you avoid penalties. We can also make a tax plan too, especially if you have a business. Our package plans include this service.

We’re here to help you, so if you have questions about estimated taxes or any other tax topics reach out!

Profit and cash flow are both critical financial metrics, but they measure different aspects of a business’s financial health. Here’s a breakdown of their differences:

 

Profit

 

• Definition: Profit is the financial gain a business makes after deducting all expenses, including costs of goods sold, operating expenses, loan interest, and taxes, from its revenue.

 

• Types of Profit:

 

Gross Profit: Gross Revenue (Gross Sales) minus the cost of goods sold (COGS).
Operating Profit: Gross profit minus operating expenses.
Net Profit: Total revenue minus all expenses, including operating expenses, interest, and taxes.
Purpose: Indicates whether a company is generating more revenue than its expenses and this is what you pay tax on.
__________________________

Cash Flow

 

• Definition: Cash flow refers to the net amount of cash being transferred in and out of a business over a specific period.

 

• Types of Cash Flow:

 

Operating Cash Flow: Cash generated or used in the company’s core business operations.
Investing Cash Flow: Cash used for or generated from investments in assets or other businesses.
Financing Cash Flow: Cash received from or paid out for borrowing, repaying debts, issuing stock, or paying dividends.
Purpose: Indicates a company’s liquidity A/K/A How much money is in the bank.
____________________________

Example Scenario

 

• A company sells $10,000 worth of products but offers customers 30-day credit terms. In the same period, it pays $7,000 in cash for supplies and other expenses.

 

Profit: $10,000 (revenue) – $7,000 (expenses) = $3,000
Cash Flow: -$7,000 (as the company hasn’t received the $10,000 yet).

Understanding both metrics together provides a fuller picture of financial health. Profit shows long-term viability, while cash flow ensures day-to-day operations can continue.

So, I spend all this time talking about the IRS, what about Massachusetts!!

Massachusetts DOR (MADOR) many years ago had a very old computer system and then added a second operating system so the DOR employees had to look at two systems to get answers. Then they did what a lot of businesses, gov’t agencies and people do: they CHANGED and UPGRADED their computer systems!!

In 2009 MADOR instituted the “Web file for Income” system and replaced it with the Mass Tax Connect System (MTC) in 2017. This system also allowed for lower income taxpayers to e-file their tax returns for free with more security against ID theft. MTC is designed for both individuals and businesses

Some of things you can do with MTC is pay estimated, income and meals/sales tax. There are plenty of other taxes that can be paid through MTC as well. You can also file the necessary tax returns for these taxes as well as view them at a later date. You also get a email box that you can communicate with DOR on various issues. You can get a Power of Attorney (POA) on here and apply for a payment agreement if you owe taxes.

Here are some other taxes that can be filed and paid: Cigarette, tobacco vaping excise tax, estate tax, Health Insurance responsibility disclosures (HIRD), marijuana retail sales, Paid family medical leave (PFML), income tax, sales/meals tax, room occupancy tax, payroll taxes and MORE!

Some other things you can do through MTC is grant a Power of Attorney (POA) get a certificate of good standing, file the above-mentioned returns, get an appeal, enter into an installment agreement, bulk filing and MORE!

If you haven’t done so already, signing up is easy and can save you a lot of time when living life or running your business.

DON’T FORGET: Several years ago, we offered an IRS Transcript Monitoring Plan (TMP), and I spent last year revamping it and now I am offering it again, but much more comprehensive than in the past. With a signed Power of Attorney (POA), we can access your transcripts at the IRS and see what they see on a daily basis. The beauty of the TMP is that we will be immediately notified of any change to your IRS account, often before a notice arrives in the mail. If you have any questions about the program, feel free to reach out. This is a good program if you have current issues with the IRS or just want peace of mind

Ancient taxes from around the world
Taxes from England:
• In 1696 England imposed a window tax, taxing houses based on the number of windows a house had. That led to many houses having very few windows in order to avoid paying the tax. Eventually this became a health problem and ultimately led to the taxes repeal in 1851.

• In the 1700’s England placed a tax on bricks. Builders soon realized that they could use bigger bricks (and thus fewer bricks) to pay less tax. Soon after the government caught on and placed a larger tax on bigger bricks. Brick taxes were finally repealed in 1850.

It’s the beginning of the year and the IRS is already sending out 3 types of notices.

In January, the IRS is sending taxpayers three letters, known as letters 4869C, 6419 & 6475.

• Letter 4869C is the taxpayer IP PIN (Identity Protection PIN) to be used for all e-filed returns in 2022.
• Letter 6419 identifies the Advanced Child Tax Payments that were distributed in 2021.
• Letter 6475 identifies the third stimulus amount that was distributed as the 2021 Recovery Rebate Credit.

You will get one or more of these letters depending on your situation. Reporting the correct amounts is essential to the IRS processing your 2021 tax returns so please retain the letters for your tax professional. If you have not received any letters, but some of the situations above apply to you, the IRS has put an app on its homepage so you can see what amount was distributed to you in Advance Child Tax Credits and for the 3^rd round of stimulus payments. If you put down the wrong amounts, this will delay the processing of your tax return with the IRS and it will delay your refund if you are due one.

Part of what I do is to know what the IRS letters are for and why you received one and how to deal with them. If you receive one, please don’t put it in your underwear drawer and hope that thew IRS will forget about you. They won’t. If you receive a notice, please call me so we can see how to best deal with the situation

DON’T FORGET:  Several years ago, we offered an IRS Transcript Monitoring Plan (TMP), and I spent last year revamping it and now I am offering it again, but much more comprehensive than in the past. With a signed Power of Attorney (POA), we can access your transcripts at the IRS and see what they see on a daily basis. The beauty of the TMP is that we will be immediately notified of any change to your IRS account, often before a notice arrives in the mail. If you have any questions about the program, feel free to reach out. This is a good program if you have current issues with the IRS or just want peace of mind

Ancient taxes from around the world

Taxes from England:

• Playing cards were taxed as early as the 16^th century, but in 1710, the English government dramatically raised taxes on cards and dice. This led to widespread forgeries of cards to avoid paying the tax. The tax wasn’t removed until 1960.
• In 1660, England placed a tax on fireplaces. The tax led people to brick up their fireplaces to conceal them and avoid paying the tax. It was repealed in 1689.