Monday, February 27, 2012
It’s tax season again. Many people dread tax season. I dread having to gather all of my receipts and enter the information in the automated tax software I purchased. However, I must admit it is much easier than having to fill out paper forms. This year the deadline for filing your taxes is April 17, 2012. Tax season is even better if you don’t owe taxes. However, if you owe taxes there are several options available.
To make sure you are not violating any tax laws consult a tax lawyer, CPA or certified tax accountant to review your taxes and supporting documentation to make sure that the amount of taxes you owe is correct. Here are 10 ways to pay your taxes.
1. You can setup an installment agreement and pay the amount owed in 3 years.
2. Request an extension and request the maximum extension time of 6 months.
3. Pay by credit card. Pay by credit card if you don’t have the money when the bill is due.
4. Bank Loan. Apply for a bank loan to cover the entire amount of taxes owed. The interest rate is much cheaper than setting up a payment plan with the IRS or a state taxing authority.
5. Use savings. Using savings accounts, savings bonds, stocks, etc. to pay the taxes.
6. Life Insurance. Take out a loan from your life insurance policy to pay the taxes.
7. Borrow. Borrow money from family or friends.
8. Earn extra money. Consider getting a part-time job or work overtime at your existing job to earn money to pay back your taxes.
9. Request an Offer in Compromise. An offer in compromise allows you to settle your for less than the full amount in you meet certain requirements.
10. If you owe taxes from a previous year get caught up on all back taxes first then address any taxes owed for the current year.
The IRS has ten years to collect on back taxes so it is best to work with them to setup a payment plan to back the amount owed. For more information visit the IRS website at irs.gov.
Friday, February 24, 2012
The IRS provides hundreds of deductions that taxpayers can claim but many taxpayers are not aware of them. No one has the time or wants to read through all of the tax forms and instructions to find out what they are. A good resource to find hidden tax deductions is the book, Lower Your Taxes by Sandy Botkin.
There are tons of hidden tax deductions that can be claimed. One hidden tax deduction that tax payers can claim is free services. Here are 9 ways to deduct free services and other expenses on your taxes.
1. Pro Bono. Pro bono is when you donate your time and services for free or at cost. If you donate time and services for an event but ask for payment to cover traveling expenses - the time and services are considered donated and can be deducted. However, the services must benefit the general public.
2. Free Services. If you provide free services to a charity you may have to claim the income for the value of the job as if you got paid even though you didn’t. For example if you are a speaker and provide a seminar to a charity and would normally get paid $1,000, you may have to report $1,000 on your taxes. Talk to an accountant to or contact the IRS tax help line to get specific tax information about the services provided. The services must benefit the general public.
3. Volunteer Work. If you volunteer your time and services to help a charity you can deduct: costs for hosting a party or fundraiser for an organization, supplies purchases which are required to perform volunteer work, cost of a uniform or clothing required to perform volunteer work, telephone expenses, and travel expenses such as parking, tools, gas, miles traveled, etc. Keep receipts of all expenses.
4. Food. You can deduct food and tips as long as you have the receipts as proof of payment.
5. Entertainment. You can deduct entertainment expenses except for alcoholic beverages.
6. Expenses. You can deduct “ordinary” and “necessary” expenses associated with or necessary for your job especially for a trade. Ordinary expenses are common expenses for your trade or profession. Necessary expenses are those that are helpful for you to perform your job and apply to full-time or self-employed employees.
7. Travel Expenses. Some travel expenses can be deducted if they were incurred to benefit a charity. Travel expenses that can be deducted include: hotel costs, rental car and airline tickets.
8. Business Meetings. If you attend conferences or business meetings for your job you can deduct travel expenses includig the cost to drive to the event if you are not reimbursed by your job.
9. Car Mileage. If you use your car for your job or business and use it for that reason only, you can deduct the entire operation costs. If your car is used for your job and business you can only deduct the cost for business use. You can deduct mileage usage using one of two methods: the standard mileage rate or the actual expense method.
The deductions are only allowed if you itemize your deductions. Visit the irs.gov website to get more information.
Tuesday, February 21, 2012
Many people may not realize that the Social Security benefits they receive may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. Taxing of your social security benefits depends on your income. If your only income is from social security benefits you will not be taxed.
However, if you have supplementary income sources your social security benefits may be taxed. If your social security benefits are taxed the taxable portion cannot exceed 85% of your total benefits. As your income rises and passes certain thresholds, the proportion of social security benefits that becomes taxable also increases.
The good news is that only 34% of recipients pay taxes on their social security benefits. Unfortunately, some states tax social security benefits. Verify the laws in your state to see if you are required to pay taxes on your benefits. The IRS provides 7 tips to help you determine if your social security benefits are taxable.
1. How much. To determine if any of your social security benefits are taxable depends on your total income and your marital status. Use the worksheet in the Form 1040A or Form 1040 Instruction booklet to determine if you will be taxed.
2. Taxable. If Social Security benefits were your only income for 2011 your benefits are not taxable.
3. Additional Income. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
4. AGI. Your taxable benefits and modified adjusted gross income (AGI) are figured on the worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software can also compute it for you.
5. Calculate. You can do the following quick computation to determine whether some of your benefits may be taxable:
• Add one-half of the total social security benefits you received to all your other income, including any tax-exempt interest and other exclusions from income.
• Compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.
6. The 2011 base amounts for benefits are:
• $32,000 for married couples filing jointly.
• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year.
• $0 for married persons filing separately who lived together during the year.
7. For additional information on taxing of social security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits on the IRS website or by calling 800-829-3676.
Saturday, February 18, 2012
Filing taxes can be a burden for most people. If you don’t have accurate records it can be a nightmare. The best way to file your taxes is to stay organized. File all receipts, paperwork or possible paperwork related to personal and business expenses and tax deduction in one folder.
The main expenses to keep track of are: all business income and spending, home office expenses, retirement contributions, student loan interest, energy efficient upgrades, real estate purchases or sales, charitable donations, contributions to college savings plan, and capital gains.
Some taxpayers are eligible to file their taxes for free. Here are 4 ways to file your taxes for free.
1. Free Software. If your adjusted gross income is $57,000 or less you can use free tax software such as: Turbo Tax, Free TaxAct, Tax Slayer or H&R Block’s Free File.
2. Use Free Forms. Anyone can use free file fillable forms from freefilefillableforms.com. The site provides online versions of paper federal tax forms.
3. File Electronically. Efile (electronically) your tax return for free by using direct deposit or pay your taxes online for free.
4. Paper forms. Use paper tax forms to file your taxes and mail them to the IRS. The only cost is postage.
You can get your taxes prepared for free using the IRS Volunteer Income Tax Assistance (VITA) program or the Tax Counseling for the Elderly (TCE) programs that. VITA prepares taxes for people who make $50,000 or less. Call 1-800-906-9887 to get more information.
TCE offers tax help for people 60 years old or older at 1-888-227-7669. You can also visit an IRS volunteer at a self-assistance service site to get free tax preparation. Visit the IRS website to find a facilitated self-assistance site.
Wednesday, February 15, 2012
This week marked a huge settlement in the mortgage industry totaling $25 billion dollars that will be paid by 5 top banks who participated in the mortgage crisis from 2009 through 2011 for privately owned mortgages. This is the biggest settlement since the tobacco deal in 1998.
The 5 banks include: Bank of America which will pay $8.6 billion, Wells Fargo will pay $4.3 billion, JPMorgan Chase will pay $4.2 billion, Citigroup will pay $1.8 billion and Ally Financial will pay $200 million.
Forty-nine states joined the settlement. Oklahoma created their own deal with the banks. The government will negotiate with 14 additional lenders to join the settlement. Seventy-five percent of the settlement money will go towards California and Florida homeowners who were hit the hardest during the mortgage crisis.
The settlement deal will reduce loans for some Americans who are upside down on their homes (owe more money than the home is worth). The deal will require banks to send checks for $2,000 to approximately 750,000 homeowners whose homes were illegally foreclosed from 2008 to 2011.
Approximately 11 million homeowners are upside down on their homes or at risk of foreclosure. The deal would help approximately 1 million of those through loan assistance. The banks will be required to provide $17 billion in principal reduction and loan modifications for delinquent borrowers who are facing foreclosure. The banks will also provide $3 billion to help borrowers who are current on their mortgage payments but unable to refinance because they owe more than their homes are worth.
The banks are also required to pay a combined total of $5.5 billion to state and federal governments. Bank of America will pay an additional $1 billion to resolve a separate investigation into fraudulent conduct by the bank and the Countrywide Financial unit it acquired in 2008. The Federal Reserve is imposing an additional $766.5 million in penalties on the banks as part of the settlement.
The banks have 3 years to fulfill the terms of the deal. Homeowners are still able to sue their mortgage lenders on their own. State and federal authorities can still pursue criminal charges against the banks.
The settlement releases the banks from civic government claims over improper foreclosures and mishandling of requests for loan modifications. The deal requires the banks to make foreclosure a last resort for homeowners and the banks cannot foreclose on a homeowner that is being considered for a mortgage loan modification. As part of the settlement banks must adhere to new servicing standards, including stricter oversight of foreclosure processing and provide a single-point-of-contact for borrowers.
If you have a mortgage with any of these banks now is a good time to request a refinance or do a loan modification. Take a look at your credit report and setup payment plans for old debt and pay off any small accounts to help increase your credit score and chances for approval.
Sunday, February 12, 2012
Valentine’s Day is catered towards couples and buying gifts for your significant other. However, for singles you can catch some good sales if you plan on shopping. Visit online sites such as Best Buy, Target, Wal-Mart and Amazon for deals or follow your favorite stores on twitter to learn about coupons and offers. Here are 15 ways to get great deals during Valentine’s Day sales.
1. Electronics and smartphones. You may have to get a shade of red, pink or white for your electronics but you can save a bundle.
2. Books. Purchase your favorite books including romance novels and autobiographies.
3. Accessories. Buy accessories including jewelry and handbags for a good deal.
4. Clothing. Get shoes and clothing and save up to 20% off the regular price.
5. Home. Buy home accessories, furniture and furnishings such as carpet, window treatments and draperies. You can save up to 40% off the regular price.
6. Sports equipment. If you like playing winter sports you can save up to 45% off the regular price on equipment, clothing and shoes.
7. Sports memorabilia. Since football season has ended you can purchase your favorite team jersey or other team merchandise for a cheaper price.
8. Swimsuits and summer clothes. If you plan on going to the beach during the spring or summer now is a good time to buy a swimsuit. You can save up to 25% off the regular price.
9. Jewelry. You can get good deals on jewelry.
10. Plants and flowers. You can get great deals on plants and flowers the day after Valentine’s Day.
11. Air conditioners. If you need a new air conditioners or cooling unit now is a good time to purchase one while demand is low.
12. Bicycles. You can find great deals on bicycles and motorcycles while demand is low.
13. Gas grills. If you plan on cooking out this summer get your gas grill now while prices are low.
14. Linens and beddings. Stores have lots of sales starting in January up until spring.
15. Wedding services. If you plan on getting married winter and the beginning of spring are great times to plan a honeymoon and book wedding services.
Thursday, February 09, 2012
A tax refund is the amount of money you over pay in taxes in each year. A tax refund is just another way to help the government make money. The money each taxpayer pay during the year is put into a high interest bearing account and the government keeps the interest. The money given in tax refund is small compared to the money earned each year from the millions of taxpayers in the U.S.
There are only a few instances when you should overpay: if you are trying to pay down debt or want to pay off your mortgage or car loan off faster. You are forced to pay taxes and there is no way around that. If you work hard all year long why do you make yourself wait to get back money you earned? Get your money upfront by adjusting your tax withholdings. Consult a tax professional to make sure don’t end up owning money at the end of the year.
Unfortunately, many Americans get excited when they find out they are getting a tax refund. However, for many Americans getting a tax refund means it will be spent as soon it is received. If you are struggling to pay bills or need to get out of debt your tax refund can be a lifesaver.
But, it is up to you to determine how to spend it. If you do get a tax refund this year here are 8 smart ways to spend it but start now by adjusting your tax withholdings so you can get more money in your paycheck this year.
1. Get current. If you are behind on any bills, use the money to catch up. Make sure you get current on all utility bills and car payments and your mortgage.
2. Pay down debt. Pay off collection accounts, judgments, and liens first, and then pay down current debt.
3. Create an emergency fund. Create a savings account to cover your monthly expenses for 9-12 months.
4. Invest it. Start a retirement account. If you don’t have a retirement account with your employer sign up tomorrow. You can also start you own individual retirement if your employer does not offer one.
5. Save for your children's college education. If you haven't already done so start saving for your children's college education. College tuition increases at 3 times the rate of inflation. Put the money in a 529 plan or comparable college savings plan.
6. Purchase a home. Now is a great time to buy a home because interest rates are low. Use the money to put towards down payment and closing costs.
7. Increase job skills. Take an inexpensive class to boost your skills at work. This can help you find a job or increase your chances of staying employed.
8. Donate. Make a tax deductible donation which you can write off on your taxes next year.
Monday, February 06, 2012
The Blackberry company Research in Motion began in 1999 and earned over $15 billion in the last 8 years. Many businesses fail after great success because they forget that maintaining success requires continual creation of new products and services. Keep your existing products but frequently improve on them and provide additional products that compliment your existing products.
I have a blackberry curve 3G but hate seeing that timer stall sometimes for 30 minutes trying to display a web page. Blackberry is great for accessing email but the world is constantly changing and users require more features all the time but it seems that blackberry hasn’t been able to keep up. The iPhone has forced companies to step up their technology advances but blackberry hasn’t kept up. Many blackberry owners are switching over to the Droid or iPhone to get additional features and faster download times.
We live in a time when innovation is the key to obtaining and maintaining company success. If you have an older blackberry in some cases are unable to read common attachments such as PowerPoint, Adobe and flash files. The operating systems are not comparable to Microsoft or Unix operating systems and in some cases users get an error message stating that a feature, program or file is unsupported.
Due to the continued effects of the recession and company and government budget cuts many companies are phasing out or reducing the use of company issued smartphones. Employees that are issued phone are choosing models other than blackberry.
Users are more mobile than ever and need devices that can meet their needs anytime anywhere. Users need smartphones that can access their email quickly, download common file types quickly and allow them to view reports and presentations for meetings. Blackberry does not provide those features which makes it seem like the dinosaur of smartphones.
Blackberry needs a complete product overhaul, needs to survey existing customers about new features they would like to see, ensure fiascos like the outage incident in October 2011 doesn’t happen again, hire a new sales and marketing team and hire the brightest information technology college graduates to bring fresh new ideas and implement some of them.
I will begin my search for a new smartphone that will allow me send text messages, be able to download files in less than 60 seconds, watch videos, view common file types such as Word, Excel, .pdf and PowerPoint and view reports and that weighs a few ounces. Will you keep your blackberry or switch to another smartphone company?
Friday, February 03, 2012
Many people know they should track their spending and create a budget or spending plan but don’t want to. The thought of knowing how much money you actually owe, how much money you earn and how much money you actually spend each month is terrifying. If you create a budget you will quickly see how you spend your money. You won’t be able to hide it or run from it any longer. If you know, other people may know too, yes those other people are your creditors who continue to call asking for a payment.
Many people are fearful of creating a budget and have good intentions by creating one but don’t stick to it. To stick to creating a budget you have to view a budget as a tool to help you. You are the only one who has to see your budget. Many people today live paycheck to paycheck and are in mounds of debt, in some cases because they didn’t create a budget or didn’t stick to it.
If you know how much you earn, how much money you owe and how much money you spend you can change the direction of your life. A budget helps you if you have an unexpected expense. Since 2008 many people have had unexpected expenses. In 2010 the country experienced several fires, floods and earthquakes some in areas that were not expected. If you did not have homeowner’s insurance to cover the damages that is example of unexpected expense.
Create a budget by writing down everything you spend money on each week or during each month and subtract your income. If the result is less than 10% of your monthly income you need to make some adjustments to your spending. A balanced budget consists of: 15% transportation, 15% debt, 10% savings, 35% housing and 25% other expenses.
Create an emergency fund to cover your total monthly expenses for 9-12 months. Creating a budget will help you to reduce spending and prevent you from using credit cards to pay for purchases. Use credit cards for emergencies only.
Develop financial goals when creating your budget. Financial goals provide motivation for you to work towards reaching that goal and provides a sense of accomplishment when the goal is met. Some examples of financial goals are: pay off a credit card, buy a home, start a business, take a vacation, etc. Here are 6 ways to create a budget and stick to it.
1. Take accountability. Take accountability for your actions, don’t blame others for your current situation. Learn how to be flexible and adjust to changes in your life.
2. Use pen and paper, use a software tool like Quicken or Microsoft Money or use the envelope method. Once you visually see where you are spending your money it will make it easier to reduce spending.
3. Create goals. Write down a list of at least 5 financial goals. If you cannot achieve any or can only achieve 1 or 2 of your financial goals you need to make some changes in your spending habits. Write down a list of all of your debts. Develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.
4. Pay off small bills first. Pay down any small bills and debt first. Once all your small bills have been paid off start tackling the larger bills. Setup payment plans for bills you cannot pay off in full. Be sure the account balances are updated on your credit report.
5. Support network. Surround yourself with at least three people who are doing better financially and gain financial advice from them.
6. Seek professional help. Consult a financial coach, financial planner or advisor to help you create a budget or spending plan and provide recommendations to help you stay on track.