Tips on How to Teach Your Children About Money

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DARRIN T. MISH: This is the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. You are all fired up. We’re going to have to get you in here an hour earlier every week.

DARRIN T. MISH: We just did an hour show that we prerecorded for some of the times when we can’t be here in the studio. It’s nice to get warmed up in the morning.

KATRINA MADEWELL: Ready to go.

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DARRIN T. MISH: It is challenging to pull right out of traffic and go right into the show.

KATRINA MADEWELL: Which is what I did almost.

DARRIN T. MISH: And to be happy go lucky attorney guy offering IRS Help to anyone who needs it or who will listen..

KATRINA MADEWELL: Are you ready to do another hour after this one?

DARRIN T. MISH: I don’t know about that.

KATRINA MADEWELL: You were like, wait a minute! This hour, not another hour.

DARRIN T. MISH: Hold on, you tricked me a little bit. Today’s show is cool; it’s a little bit different. We’re not going to talk all that much about taxes. Maybe not even talk about taxes at all today. But we are going to talk about tips on how to teach your children about money.

KATRINA MADEWELL: This is right on time, it’s summertime.

DARRIN T. MISH: I’m not sure what qualifies me to talk about this, other than the fact that I do have children. One of my children is in the studio today. That’s Ryan P. Mish who is standing by. Ryan is 15 years old, and he is giving me that teenage death stare.

KATRINA MADEWELL: Like, I’m not talking.

DARRIN T. MISH: He is not mic’ed up, he does not have headphones on, but he can hear me talking.

KATRINA MADEWELL: He’s shaking his head. I’m going to have to swing the Facebook cam over there.

DARRIN T. MISH: Is it a shake or is it a nod? If it were a nod, that would be positive, if it’s a shake, not so much.

KATRINA MADEWELL: He’s covering his face so it must be a no.

DARRIN T. MISH: Most parents probably feel like I do. Their kids are their reason for existing. That’s how I feel at least.

KATRINA MADEWELL: Agreed. Don’t take that to heart; you’re a teenager.

DARRIN T. MISH: One of our God-given jobs is to teach our kids and to help make them into better people than we are. There’s no doubt that teaching them about money is important if you want them to be successful. I’m not even talking about being rich.

KATRINA MADEWELL: At least be self-sufficient.

DARRIN T. MISH: I’m not even so much as talking about money but teach them about money, so they don’t make some of the mistakes that perhaps we did. I’ve made plenty of mistakes about money and my goal…and this isn’t going to work 100% of the time…but my goal is to help my kids not make the same mistakes I did. Hopefully, they’ll make different mistakes.

KATRINA MADEWELL: We try to do the same thing too. At the end of the day, you can teach them how to fly, but it’s going to be up to them.

DARRIN T. MISH: They have to spread their wings at some point. The basis of today’s article is written by a guy named Jim Wang. He writes about personal finance at wallethacks.com. He’s been featured in the New York Times business week and many other publications. You can follow him on Twitter @wallethacks. When I read the article, doing show prep, what struck me is how common sense this stuff is. He laid it out for how to teach these kids from the beginning of their life, to the time they get into college.

Start Teaching Your Children About Money at Elementary School Age

KATRINA MADEWELL: At what age does Jim Wang stress you should start teaching kids about money?

DARRIN T. MISH: He starts talking about it in Kindergarten. You should start teaching them about saving money. They’re not going to get a lot of money at elementary school age; although my kids did. It’s because people give them money for gifts. We’ve never been a family if you get a gift from Grandma or Grandpa that you get to spend it immediately on whatever.

KATRINA MADEWELL: What did you do? Have them save it?

DARRIN T. MISH: I’d have to look to Ryan, and he’s nodding. We made them save a substantial portion of it. They both have quite a lot of money in the bank.

KATRINA MADEWELL: I have to ask, how much were you able to save for them? We did the same thing. Any idea?

DARRIN T. MISH: It’s in the thousands.

KATRINA MADEWELL: Ours was over a thousand.

DARRIN T. MISH: It’s in the thousands, and it’s not all gifts. Some of it was raising hogs for the fair and stuff like that.

KATRINA MADEWELL: They made money too.

Continue to Teach Your Children About Money When They are Teenagers

DARRIN T. MISH: Now they’re high school age, or one is high school age is one is middle school age, in raising the hogs and selling them at the fair, they’ve made around $1,000 profit a year. They’ve saved the vast majority of that. I think that’s good. Not necessarily how I was taught. I’m not talking ill of my folks; it was a different time.

KATRINA MADEWELL: They had different thoughts about money.

DARRIN T. MISH: There were different financial circumstances. We didn’t have much money. There wasn’t a whole lot of teaching going on about money because there wasn’t a lot of knowledge about it. At that time.

KATRINA MADEWELL: We have more racehorses now than our parents ever did.

DARRIN T. MISH: What I’m saying is my folks have learned a lot more about money since then. Also, I’m older having children than my folks were. I think it’s normal. I didn’t have kids until I was in my 30’s. My parents had me when they were in their early 20’s. What are they going to teach me about money? They didn’t know anything.

KATRINA MADEWELL: They were trying just to get to work so they could pay their bills and that was the best they could do.

DARRIN T. MISH: You have to be careful about what you try to teach your kids at different times in their lives. They’re going to evolve, and they’re going to absorb more when they’re older than when they’re younger.

KATRINA MADEWELL: We have tried to teach. It does revert to Dave Ramsey. We try to teach to save, spend, give. It doesn’t always have to be to a church. We want our kids to say if you got $100, could you take $10 of that money and give it to someone that needed it more than you. Or buy something for someone that needed it more than you did.

DARRIN T. MISH: There’s the saying that givers get. There are lots of different interpretations of that saying. What you’re saying is givers get a lot of satisfaction.

KATRINA MADEWELL: Right.

DARRIN T. MISH: Probably more than what the money cost them.

KATRINA MADEWELL: One year there was a birthday party, and there was a single mom raising her son. We knew them from baseball. He had put on the invitation, instead of bringing gifts, bring gifts for the homeless shelter. They took all these presents they got and they could donate and take to the homeless shelter. I think our kids got a big dose of reality watching that. Instead of opening birthday presents, they got all the stuff they donated. It would have been great if they invited everyone from the birthday party to also see that experience. I think it would have taken the kids to an even deeper level.

DARRIN T. MISH: It’s natural for kids to not understand how good they have it. They only have the one existence. and haven’t had enough life experiences to see how other people live. As parents in our generation, we’re all about our kids and giving them the best. I think it’s useful for them to get out and see how the other half lives. I don’t say that in a derogatory way but I think it would help to see that not everybody has what you have.

KATRINA MADEWELL: This is not normal for everyone.

DARRIN T. MISH: Help them to exercise that gratitude.

KATRINA MADEWELL: Teaching them the value of the dollar, you can do this as early as elementary age. If you buy it for them, they don’t realize that stuff costs money. They don’t know the difference between $1 and $5 and $10. If they had to save and earn and spend it, they would feel that.

DARRIN T. MISH: That’s for sure. I don’t say this to embarrass my son, but the things he’s bought with his money, I’m sure he appreciates more than the things that have been given to him. That’s natural, normal, and good.

KATRINA MADEWELL: Ryan, you don’t want to chime in? What’s one thing you bought for yourself that you’re proud of?

DARRIN T. MISH: I just checked with him. I think he bought his own Go Pro. He uses it a lot. He produces really cool videos with it. I know he really cherishes that. He has lots of similarly priced things and I think that’s one of his favorite things. He’s going to walk out of the studio if we keep picking on him.

KATRINA MADEWELL: I won’t ask him anything else.

DARRIN T. MISH: I think it’s important. That’s the kind of thing you teach them early on. I think another point would be when your kids are elementary age and you go to the grocery store, because they go along with you, right? And they ask for stuff. I still don’t think I can go to the grocery store without a kid asking me for something. When they’re really little, they ask for a lot. I think you can teach them then. That costs a lot more than something else we might need.

KATRINA MADEWELL: You can give them a budget.

DARRIN T. MISH: That’s an interesting idea.

KATRINA MADEWELL: This is our grocery budget, this is how much you get to spend on cereal or other items. No toys, but grocery items. What’s your favorite stuff? And I’ll have the final say.

DARRIN T. MISH: I can remember my daughter much more vividly. Every time we would go to the grocery store, we would stop at the toy department. There’s nothing worth buying there. We had to stop at that every time. She still has the largest stuffed animal collection of anyone I know.

KATRINA MADEWELL: Madeline, who is going to be 17 this year, has been making her to-do lists of what they’re doing. We’ve been redoing the kid’s rooms for summer. On her list, she said she’s getting rid of stuffed animals.

DARRIN T. MISH: My daughter might be interested. She’s never seen a stuffed animal she didn’t like. Unless it was dirty.

KATRINA MADEWELL: She’s going to adopt all the pets.

DARRIN T. MISH: Rachel’s going to have a Noah’s Ark of stuffed animals. What’s interesting about Rachel, I’m going to pick on her even though she’s not here, with her money, she will buy stuffed animals, but she’s price sensitive.

KATRINA MADEWELL: That’s the whole point.

DARRIN T. MISH: That’s what we’re trying to teach them to understand the value of a dollar.

KATRINA MADEWELL: Madeline has her first job now. She works at Sonic; she doesn’t make a lot. They rely on tips. They pay them like a waitstaff.

DARRIN T. MISH: Does she rollerskate?

KATRINA MADEWELL: She rollerskates.

DARRIN T. MISH: Does she ever fall?

KATRINA MADEWELL: She has.

DARRIN T. MISH: With food?

KATRINA MADEWELL: She has, one time. Yes. She was so embarrassed. She’s a lot like my husband. We joke she’s like him in a female body.

DARRIN T. MISH: Soft-spoken?

KATRINA MADEWELL: Yeah. She can do it because she’s half mine.

DARRIN T. MISH: Wasn’t she in the studio? She was far from soft-spoken.

KATRINA MADEWELL: My kids grew up with me on the radio. I have audio; I think Pat might have it back there somewhere, of Adelisa probably when she was about four years old in the studio saying “Love where you live.”

DARRIN T. MISH: I take it back, it was Adelisa that was here.

KATRINA MADEWELL: That was who you were thinking of? She’s not soft spoken at all. She would take over the whole show if we let her.

DARRIN T. MISH: The whole building.

KATRINA MADEWELL: She would.

DARRIN T. MISH: Every show.

KATRINA MADEWELL: Adelisa is my child. You’re listening to the IRS Solution Attorney Show. Today we’re talking about Tips on How to Teach Your Kids About Money. We hope to give you some value in this show. If you have a question or want to chime in or have a tip that’s worked well with your kids, we would love to hear about it. Our Studio call in number is 888-404-1010. We’ll be back in a minute.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show. I’m the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. Thanks for sticking with us through the break. Today’s show has been fun; we’re not talking about any IRS stuff. It’s tips on how to teach your kids about money. You ran across a guy named Jim Wang. He writes about personal finance at wallethacks.com. He’s also on Twitter @wallethacks.

DARRIN T. MISH: I thought the article was really good. A lot of the shows we do are based on other people’s work because as I’m doing show prep and trying to think of new and unique topics for the show, then I borrow their work, give them credit. That’s what we did in this show.

KATRINA MADEWELL: You always see stuff, and it sparks ideas. Sometimes it goes in a different direction, but it’s fun.

DARRIN T. MISH: It can get pretty boring to talk about IRS tax liens and owing tax debt and how to solve those over and over. I could do that in my sleep, but who would want to listen to that? The hopes were that we could do some shows that were a little bit different.

KATRINA MADEWELL: Rest assured, anything we’re talking about that’s IRS related will be plugged in there. Like if you’re a kid and you have an IRS Problem like Darrin did when he was 12.

DARRIN T. MISH: I had one when I was 18. I had one of those jobs where I was putting up real estate signs for developments. It would go up on Friday and come down on Sunday because code enforcement didn’t care. They would look the other way on weekends. But if you left that sign up there on Monday morning, and I did sometimes, somebody would get a call and there would be hell to pay.

KATRINA MADEWELL: They yank them down, we leave them up.

PAT GEORGE: I don’t think they look the other way, they just don’t work on the weekends.

DARRIN T. MISH: That could be. This was many centuries ago in a land far far away. I got a 1099, and that was my first exposure to taxes and a tax problem. I needed my stepfather to call the IRS for me and get me into my very first installment agreement at age 18.

KATRINA MADEWELL: Little did you know, that would be your career path!

DARRIN T. MISH: Subsequently, coincidentally and bizarrely, my next job was working at a printing company that printed tax forms. It was called Tax Form Printing.

KATRINA MADEWELL: All the arrows were pointing in that direction.

DARRIN T. MISH: Kind of bizarre. At Tax Forms Printing, I was a customer service rep. I helped customers decide and purchase their W-2’s, their 941’s, their 1099’s, W-3’s, all those tax forms. I’ve had this exposure to the IRS and taxes and what forms to use from an early age.

KATRINA MADEWELL: Back when they used to do that. They would print them at Office Depot and Staples. It’s all online now.

DARRIN T. MISH: Most of it’s online. I think the W-2’s and a few of the forms, you still have to buy from a printer because they have the special ink that makes it so the IRS’s antiquated computers can read them better. Now you could use an iPhone or any smartphone and it can read any piece of paper basically. I don’t know it can do the OCR perfectly.

KATRINA MADEWELL: What’s the OCR?

DARRIN T. MISH: Optical Character Recognition. I don’t know how important that is anymore. You would think the IRS would have good enough computers.

KATRINA MADEWELL: Little bit better technology. Haven’t they gone to iPad yet?

DARRIN T. MISH: I might have seen a revenue officer with an iPad. I can’t remember. I don’t see them in person all that often.

KATRINA MADEWELL: We might have to pop over there after the show and see.

DARRIN T. MISH: The list of things that I would like to do this morning after the show, going over to the IRS and hanging out is not super high.

KATRINA MADEWELL: Going back to Mr. Jim Wang at wallethacks.com, we were talking about ways to teach your kids about money. We talked about elementary school, all the way up to preteen and teenagers.

DARRIN T. MISH: We talked about helping them save money from gifts from their parents and put that money in a piggy bank. I think I was in my 40’s before I filled a piggy bank. I kid you not. One time I got this really cool piggy bank when I was about 40 and I decided to fill it up. It was big. It took years, but it was kind of fun. When I emptied the piggy bank, there were a couple hundred dollars.

KATRINA MADEWELL: I’m sure. Did you open accounts for your kids? We opened kids saving accounts.

DARRIN T. MISH: The kids have accounts, they have debit cards.

KATRINA MADEWELL: What age did you do the debit cards?

DARRIN T. MISH: Ryan’s saying 13. Rachel just turned 13, and she just got hers. Now we’re in the land of debit cards. It’s kind of scary.

KATRINA MADEWELL: Adelisa’s been asking. We’re like no, you’re 11 and you’re not ready yet. I stuck her money in a CD. She’s not going to spend it, we’re not going to let her do it. The interest is not much, but she’ll earn more than if it’s sitting in a kid’s savings.

DARRIN T. MISH: She can get 1% or something.

KATRINA MADEWELL: I forget, it’s a little higher, but not much. It’s more than a savings account.

DARRIN T. MISH: She can’t access the CD until she’s 47.

KATRINA MADEWELL: No.

PAT GEORGE: You just doubled your chance of identity fraud, you know that?

DARRIN T. MISH: Yeah.

KATRINA MADEWELL: What? By having a CD?

DARRIN T. MISH: Because you said the age of the kids.

PAT GEORGE: Not only that, you have more debit cards floating around in your family.

DARRIN T. MISH: That’s true, but we know how to deal with that. It’s not that bad. On a debit card, you’re only responsible up to $50.

PAT GEORGE: I thought it was $500.

DARRIN T. MISH: Any fraudulent transaction, it’s like $50.

PAT GEORGE: That’s good.

KATRINA MADEWELL: I asked you what age because Nick’s 14 and I still won’t give him a debit card because he’s not ready.

DARRIN T. MISH: You have to go by the maturity and responsibility level of each kid. By no means are we saying 13 is the right age.

KATRINA MADEWELL: I was curious what your age was.

DARRIN T. MISH: That’s what we did in our family, we’re trying to teach them about money.

Teach Your Kids About Money and Credit Cards

KATRINA MADEWELL: It’s probably a good time to talk about credit cards. I told you we bought a car last week, Madeline is always asking how to do things. We said we’re going to go buy a car, if you want to see how it’s done, let’s go. But food got in the way, she had to go to dinner.

DARRIN T. MISH: Jim Wang talks about how to teach your teenagers. Around this age, they might have an allowance or do odd jobs and you can open a bank account for them. It would have to be a joint account. You go through the process of going physically down to the bank. You can get better interest rates from an online bank account, but the process of going to the branch is a teachable moment. Something that won’t stick nearly as well if you open the account online.

I wish Ryan were willing to talk. Because I know that the family went down to the bank with Rachel last week. They were there for hours at the bank doing all the paperwork. I’m really glad they did it because it was a teachable moment for her.

KATRINA MADEWELL: He mentions periodically going online to check the balance. I have my kids linked where I can see their account online. So when I log in, I can check to see their balance. If they get overdrawn, I get a notification. It hasn’t happened, but that safeguard is there.

DARRIN T. MISH: Pat was talking about i.d. theft. It’s important to check the balance at least once a week.

PAT GEORGE: My wife does it daily.

DARRIN T. MISH: I don’t quite hit it daily, but pretty close. Every day or two. I don’t think a kid needs to do it every day or two. At least once a week they should check it. I think it’s also part of the psychological gain that your money is there.

KATRINA MADEWELL: Whatever makes them go, “Oh my gosh, my money was there, and now it’s not there.” Can you see kids freaking out about that?

DARRIN T. MISH: If it really happened, if there was an i.d. theft issue where there was an unauthorized withdrawal. It would be negative but you can use it as a teachable moment. Ok, well, this is not good, but this is how we handle it. Call the bank, go through all that, then get your money back because that’s the way the system works.

KATRINA MADEWELL: The other thing we tried to teach our kids, with the debit cards to buy prepaid debit cards. That way when you’re buying stuff online, you’re using the prepaid gift card and not your actual debit card.

DARRIN T. MISH: There’s even some credit cards will give you temporary throw away numbers to use online.

KATRINA MADEWELL: I don’t know why they haven’t done that more. You could just trigger an intelligent action to get a one-time use number, that’s fabulous.

DARRIN T. MISH: That makes a whole lot of sense, that’s why they don’t do it.

KATRINA MADEWELL: When we come back, we’ll talk a little more about how you can continue to teach your kids about money even as they enter the college age. Neither one of us are there yet, Darrin, but we will be before you know it.

DARRIN T. MISH: It’s right around the corner for me.

KATRINA MADEWELL: You are listening to the IRS solution attorney show with Mr. Darrin T. Mish. Today’s topic is about how to teach kids about money. Special thanks to Jim Wang for the idea. We’ll be back in a minute.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show. I’m the IRS Solution Attorney Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell, thanks for sticking with us through the break. Today’s been a fun show.

DARRIN T. MISH: Kind of a fun show, personal. It’s a little bit different than what we normally do. It’s about how to teach your kids about money.

KATRINA MADEWELL: Totally running live. If you listen to this show often and you expect commercials at a certain time, things are a little different this morning.

DARRIN T. MISH: We have the human error factor going on right now.

KATRINA MADEWELL: Pat’s got this train.

DARRIN T. MISH: He’s a trained professional and has been doing this for a long time.

KATRINA MADEWELL: It’s interesting today’s topic is about how to teach your kids about money and my daughter called. We stream live usually on our phones when we’re in the studio. I called her back and she’s here with us on the air.

DARRIN T. MISH: Oh, she is? Go ahead, Madeline.

KATRINA MADEWELL: We were talking about your job at Sonic, saving money. What’s the one thing you had to save your money for and buy on your own that you appreciate?

(background noise)

MADELINE: My four wheeler.

DARRIN T. MISH: You love that four wheeler, don’t you?

MADELINE: Oh, yes.

DARRIN T. MISH: It’s because you bought it with your money.

KATRINA MADEWELL: Darrin was asking me if you fell when skating, and he asked if you ever spilled food, and I said, yes.

MADELINE: I spilled the first day. I had four 44oz drinks which are the biggest size cup we have. And then four meals. I tripped over a piece of mulch and I only dropped the medium thing of french fries. I was dancing on the skates on an open road. The mom ran across and made sure I was ok. She said she didn’t care about the food and wanted to know I was ok.

DARRIN T. MISH: At least she had her priorities right.

MADELINE: A grandma was sitting on the patio and said, “I saw you fall and was going to give you a hug.

DARRIN T. MISH: So there are some nice people out there.

KATRINA MADEWELL: Thank you for being awesome, people. That’s somebody’s kid.

DARRIN T. MISH: Yeah, your kid.

KATRINA MADEWELL: If you have an interaction at a McDonald’s drive-thru or wherever, that’s somebody’s kid.

DARRIN T. MISH: Yeah, that’s for sure.

KATRINA MADEWELL: We’re going to teach your kids how to save money. Feel free to chime in.

DARRIN T. MISH: Let me back up real quick. I wanted to talk about teenagers. That’s the time to have that conversation when we talk about credit card debt. I wish somebody had talked to me about this. They probably did I was just headstrong. I knew everything. That was my thought process. I certainly didn’t, but I felt like I knew everything and didn’t take advice well. I wish someone had talked to me about the downfalls of credit card debt and how compound interest works and how it might feel good to get that free tank of gas. My first credit card was a Mobile gas card. I thought it was the coolest thing ever because you didn’t have to have the green money in your wallet to put gas in your tank.

KATRINA MADEWELL: Just use this little piece of plastic.

DARRIN T. MISH: I swear it wasn’t two months before I had more money on that card than I could afford to pay back. I was in the same position where I still needed to buy gas, but I couldn’t do it on the card because now it’s maxed out and now I have to pay the minimum payment on the card. I wish somebody had been a little bit clearer with me on the evils of credit card debt. it took me awhile to figure it out.

KATRINA MADEWELL: I know they sign these kids up in college and hand them to them like free candy. I think instead of giving it to them, they should be required to take a class about credit card debt.

DARRIN T. MISH: I got a gold American Express credit card in college without a job.

KATRINA MADEWELL: How do they do that?

DARRIN T. MISH: No credit limit. What do they expect? You’re a kid; you’re going to be irresponsible. That’s what kids do.’

KATRINA MADEWELL: I guess they figure you have a parent that’s willing to help you make the minimum payment because that’s all they want.

DARRIN T. MISH: I think it’s crack cocaine myself. I think they’re trying to get you hooked. They’re trying to get you addicted. They’re trying to establish that lifestyle early. Spend, spend, spend. Pay us huge interest with minimum payments and never get out of debt and always owe the bank.

KATRINA MADEWELL: There are some kids that may have more then they’ll see somebody else and think, “Oh, I want that.”

DARRIN T. MISH: Yeah, for sure. When we’re younger we have much more trouble with impulse control than we do when we’re older. That’s hopefully what happens. As you gain some age, you gain some wisdom and you have more control.

KATRINA MADEWELL: It’s a hard thing to teach kids. I think about how do you teach your kids about credit cards. The only way I can think of is if you have a credit card and you pull it out and show, look, I carried a balance, here’s the interest I have to pay because I borrowed this money.

DARRIN T. MISH: That could work, but it’s still kind of conceptual. One way could be if they want something, they just have to have that thing, whatever it is. Then maybe you buy it for them, and then charge them interest.

KATRINA MADEWELL: Yeah, I love that.

DARRIN T. MISH: Ok, we can do this, but…

KATRINA MADEWELL: Then do almost like a P&L, the truth in lending, show them how much they’ll repay with interest.

DARRIN T. MISH: That thing was $100, but you paid me back $200 because it took you a year.

KATRINA MADEWELL: That’s a great idea, Darrin.

DARRIN T. MISH: That might work. You have to make it negative. If you don’t want to encourage that behavior, it has to have some negativity associated with it.

Quick chicken story. We have a barn, and it’s part of it has walls and part of it is just open. There’s a whole bunch of chicken feed on the dirt in the open area. We’re not putting any more chicken feed out because there’s plenty. The crows are coming in and eating it, that’s fine, whatever. We have three sandhill cranes that are coming in underneath the covered area nad eating the chicken feed. I’m still ok with that. Except for, they chase and try to hurt the chickens. That’s when the gloves come off. That’s not good.

KATRINA MADEWELL: That’s my chicken you’re chasing.

DARRIN T. MISH: So we went out and chased them around on the buggy. We were loud and obnoxious, just trying to cause a negative imprint. We’re not going to hurt them. By no means would we ever hurt a sandhill crane. We’re trying to cause a negative imprint so everytime they’re near the barn, something negative happens so they won’t come back. I don’t mind them on the property, I just don’t want them hurting the chickens.

KATRINA MADEWELL: Maybe put some feed somewhere e4lse for them.

DARRIN T. MISH: I think that even might be bad. They’re wild animals, there’s plenty of food out there, they’re just lazy. They’re like bears. Like Yogi bear just wanted to eat picnic baskets. If you’re teaching your kids about money and you’re going to do the credit card experiment I’m talking about, you want to make it negative enough so they get it. So they get over the rush you get when you buy something. My kid has a $100 toy and they play with it for like a day and it’s over, it’s done. It causes me to be real hesitant about $100 toys.

KATRINA MADEWELL: Exactly, let them buy the $100 toys.

DARRIN T. MISH:  That’s why we don’t open all of our Christmas gifts on Christmas day. We’re weird like that. We ration them out. Otherwise, it’s open everything and it’s over and nothing really gets played with.

KATRINA MADEWELL: That’s cool, just open one present a day.

DARRIN T. MISH: We spread it out for a week, sometimes longer. It drives the kids crazy, but I think it’s good.

KATRINA MADEWELL: He’s not listening. He checked out and went in the other room with Pat.

DARRIN T. MISH: He went into the other room where he’s not going to be put on the spot.

KATRINA MADEWELL: He’s waving, I don’t even think he can hear me talking.

DARRIN T. MISH: Pat can make that mic that’s next to his head live if he wanted to.

Keep Teaching Your Children About Money Even When They are College Aged

KATRINA MADEWELL: College age is the trickiest time to teach your kids about money because kids think they’re adults, and they are.

DARRIN T. MISH: I’m making a face, like ok. Legally, you’re right.

KATRINA MADEWELL: If they shoot somebody, they’re going to jail.

DARRIN T. MISH: Newsflash, if you’re 14 and you shoot someone, you’re going to jail.

KATRINA MADEWELL: Here comes the lawyer term. If you wreck the car and you’re 14 and you’re 18 and you wreck the car on your own insurance, there’s a difference.

DARRIN T. MISH: Let me say it like a lawyer would say. The age of majority is 18 years of age.

KATRINA MADEWELL: What does that mean?

DARRIN T. MISH: It’s when you’re an adult. You can enter into contracts.

KATRINA MADEWELL: Why do they call it the age of majority?

DARRIN T. MISH: I don’t know. I don’t remember. But it’s called the age of majority. At 18, you’re technically an adult, but you’re not because you’re not psychologically or emotionally developed enough to make some of these decisions so you should be teaching your college-aged kids about money too.

KATRINA MADEWELL: If they don’t live at home, it’s even harder because how you don’t have your thumb on everything they’re doing, it’s kind of hard to teach those kids lessons. That’s what Jim is saying. If they’re living out of the house, it’s even more important to help them avoid credit card debt.

DARRIN T. MISH: When I was in college, my folks had a real (inaudible) approach, and that was my fault. It was because I was such a headstrong person. I’m still kind of a headstrong person. I didn’t want any advice or help. I wanted money, but I didn’t want any help in deciding how to spend the money. There were a lot of lessons I had to learn on my own just from the school of hard knocks. I remember calling them and complaining that I didn’t have much food and them just kind of going, yep, you probably ought to spend your money better. That’s true, I wasn’t spending it wisely.

KATRINA MADEWELL: Is that what they told you?

DARRIN T. MISH: Yeah. For my personality, that was perfect.

KATRINA MADEWELL: Think about it. If they tell you you’re not spending your money wisely and they know they gave you enough money for the month, you’re going to make a different decision the next month if you want to eat.

DARRIN T. MISH: Right. You really should go through that mini suffering. I’m not talking about starving to death.

KATRINA MADEWELL: If you’re in college, you’re not going to die, and you’re not going to starve.

DARRIN T. MISH: I did eat of lettuce because lettuce was cheap and tuna, macaroni. Not really because that’s all I could afford it’s because that’s all I could afford with the lifestyle I was choosing to try to live. That make sense? I wasn’t spending most of my money on food, let’s just put it that way.

KATRINA MADEWELL: There are things you want to buy when you’re in college.

DARRIN T. MISH: There’s a lot of beverages that I was really interested in, back then.

KATRINA MADEWELL: And that took the priority over food.

DARRIN T. MISH: It did. Looking back, for me, it worked out ok. But the time to teach your college-aged kids about money and finances and how to handle their budget is that should continue on through college years so you can help them make better decisions when they get out of college.

KATRINA MADEWELL: Jim also mentions about kids.usa.gov. It’s a website that provides money sections for kids where they can learn about saving, spending, and earning money.

DARRIN T. MISH: Kids.gov is a really cool site. If you have kids and you’re interested in what we’re talking about today, you should check it out.

KATRINA MADEWELL: There’s also some more things on kids.ogv. We can talk about when we get back after the break since the music is rolling. I can just keep talking because it is a live show and it won’t cut me off. But Pat would at some point. I’m just teasing. Hopefully, it’s a fun show. Pat, are you having fun today?

PAT GEORGE: I’m having a great time.

KATRINA MADEWELL: Our call in number is 888-404-1010. We’ll be back in just a minute.

(commercial break)
DARRIN T. MISH: Welcome back to the IRS Solution Attorney show. I am the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. Pat George back there is on his toes this morning. he is on fire. He’s rolling this show.

PAT GEORGE: I’m on fire so I don’t get fired.

DARRIN T. MISH: He’s using ancient technology to make sure we come out to you live and clearly.

KATRINA MADEWELL: There’s always little things. When called Madeline, I thought it would just plug in if I do it normally. He has to do it to the board, but I didn’t know that. He’s paying attention.

DARRIN T. MISH: One of our biggest fans sent me a message on Facebook and what he did, which is cool. He Googled, what does the age of majority mean?

KATRINA MADEWELL: Thank you.

DARRIN T. MISH: Although I said what it meant on the air, live, like a real lawyer, he’s going to give me the Wikipedia answer, which is the threshold of adulthood as recognized or declared in the law. It’s a bunch more stuff too. It’s the moment minors cease to be considered children and they can assume an adult activity. The ability to enter into contracts is probably one of the biggest things. We don’t think about that that often, but a 16-year-old can’t really even go get his car fixed without his parent. I pulled that one on somebody one time when I wasn’t 18.

KATRINA MADEWELL: Did you really when you were 16?

DARRIN T. MISH: The guy was trying to rip me off so I made him put it all back. She’s looking at me like you’re crazy.

KATRINA MADEWELL: I have nothing to say.

DARRIN T. MISH: He was trying to rip me off. I didn’t want to get ripped off.

KATRINA MADEWELL: Shall we go bAck to some things on kids.gov, will we have time? No?

DARRIN T. MISH: This question is from Mar, as a full-time student, am I exempt from federal taxes? I get this question a lot. You shouldn’t have to pay taxes, or it would be awesome if you didn’t. But sorry, the answer is your student status has zero impact on your tax bill.

KATRINA MADEWELL: What about Madeline making money at her job?

DARRIN T. MISH: She’s paying taxes.

When Do Your Children Have to File a Tax Return?

KATRINA MADEWELL: At what point does she have to file a return? And at what point do we include it in ours?

DARRIN T. MISH: She’s going to have to file a return next year.

KATRINA MADEWELL: Isn’t that a minimum amount you have to make?

DARRIN T. MISH: There’s a threshold. But she’s already made more than that, hasn’t she?

KATRINA MADEWELL: I’m going to be calling Darrin because my daughter is going to have a tax problem. This is lovely.

DARRIN T. MISH: No she’s not. She’s going to end up getting a refund most likely.

KATRINA MADEWELL: What about if we claim her, does that matter?

DARRIN T. MISH: You’ll go ahead and claim her because you’re going to be providing more than 51% of her support. Where it comes into play is some parents are providing 51% of their college-aged kids support, but the college-aged kid also has a good job. At some point in every kid’s life, you have to make that decision. When does a kid start claiming himself?

KATRINA MADEWELL: There are no clear rules?

DARRIN T. MISH: It’s math. it just turns out to be a simple math equation.

KATRINA MADEWELL: What amount of income do you think it makes sense for them to file their own return? And at that point, you can’t claim them?

DARRIN T. MISH: Yeah, they don’t just claim themselves. There’s a way to do it where you don’t claim the personal exemption.

KATRINA MADEWELL: This is what happens when your oldest starts to work.

DARRIN T. MISH: Another thing that’s kind of bad is we lose the child tax credit at age 17. What’s up with that? They’re expensive between 17 and 18.

KATRINA MADEWELL: The most expensive.

DARRIN T. MISH: That’s what I’m thinking. I don’t know why Congress is going to give away the child tax credit for every kid but stop it at 17.

KATRINA MADEWELL: Madeline’s 17 at this month, what does that mean?

DARRIN T. MISH: I don’t think you get it. I’ll have to look it up for you.

KATRINA MADEWELL: I’m asking you all of these right on the fence questions.

DARRIN T. MISH: She’s trying to put me on the spot and succeeding.

KATRINA MADEWELL: You know what, you’ve gotten really good at it. Had we done this a couple years back, you would have clammed up like a muscle in a shell.

Train Wreck of the Week

DARRIN T. MISH: It’s about time for the IRS Train Wreck of the Week. This is the segment of the show where we talk about somebody that came in and their IRS situation was an absolute train wreck. Today’s story is kind of cool. It went well. This gentleman came in, he’s retirement age. he owed $172,556. That’s a lot of money. $172 grand.

KATRINA MADEWELL: At retirement age? I would say.

DARRIN T. MISH: We were going over his finances and we were trying to find a solution for his finances. He had a problem. he owned his condo that he lives in free and clear. This is a problem.

KATRINA MADEWELL: How? Why?

DARRIN T. MISH: I think the condo is worth about $75 grand. Something like that. It wasn’t 100’s, but he owned it free and clear. Because the IRS normally is going to want you to liquidate the value of your assets and pay them. Remember, when we calculate an offer in compromise, which is a program where you can make a deal to settle for less, the calculation is monthly disposable income X 12 + assets. He didn’t have any disposable income. He was living on around $1700/month. When we put the math in, we got this big asset.

KATRINA MADEWELL: You had to add in $75 grand.

DARRIN T. MISH: Well, 80% of 75 grand. It’s a big fat number. It was more than he could afford to pay. Or at least comfortable paying. We never talk about this on the show, but we filed a special kind of offer in compromise called effective tax administration. Kind of a dumb name. What it really means is it would be unfair to force the taxpayer to liquidate the assets to pay the tax bill.

KATRINA MADEWELL: Because he would be homeless.

DARRIN T. MISH: We made the argument. We knew it was a long shot. We knew he had less than 50% chance of it working. So we tried it and I’ll never forget, the offer examiner was giving me a hard time throughout this whole case. She was being rude and nasty. Finally one day she says, “I’m just going to recommend it for acceptance. I don’t think management will do it, but I’m going to recommend it.”

KATRINA MADEWELL: That’s half the battle.

DARRIN T. MISH: We ended up settling that case for $7,066. So $172 grand, settled for $7066 and he gets to keep the condo. Didn’t have to refi or do anything. Worked really well. What I like about that is when he passes away in 20 or 30 years, that condo will get to pass to his heirs instead of the Treasury of the United States so they can waste the money.

KATRINA MADEWELL: We should invite some of your past clients on the show. I would love to hear what they’re doing now that they couldn’t do before when they had a tax liability. I would love to have one of your customers answer that question. It could be Jane Doe or whoever they want to be, but I’m curious to know.

DARRIN T. MISH: I’ve asked a lot of clients to come on the show. I’ve had one taker. One guy that was willing to do it.

KATRINA MADEWELL: Let me ask him.

DARRIN T. MISH: In this gentleman’s case, I don’t think his life is going to change all that much, other than I bet you he sleeps better and the quality of his life, now that he doesn’t have to worry about the IRS, is enhanced tremendously. That’s good enough for me.

KATRINA MADEWELL: I guarantee there’s something they’re doing, whether it’s a small side business, there’s something they’ll do that they didn’t do.

DARRIN T. MISH: That’s something that can happen is once the IRS is resolved, they have avenues of opportunity available to them.

KATRINA MADEWELL: You’re listening to the IRS Solution Attorney Show, trying to teach your kids about money. If you want to reach Darrin, he’s at 888-GET-MISH. The website is getirshelp.com. And, we’re out.

 

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