Taxes http://www.wisebread.com/taxonomy/term/4811/all en-US Don't Get Audited! How Your Side Gig Needs to Handle Taxes http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-get-audited-how-your-side-gig-needs-to-handle-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/going_on_a_family_vacation.jpg" alt="Going on a family vacation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The gig economy is booming. In 2016, a TIME poll found that 45 million Americans offered some kind of good or service through an online platform, whether it was running errands, renting out their homes, or offering rides in their cars. With so many people earning extra income this way, you can bet that Uncle Sam wants its fair share of those earnings. Understanding some basic rules about taxes in the gig economy can help you avoid frustration and penalties.</p> <h2>Renting out your home</h2> <p>At $924 per month, Airbnb hosts command the highest average monthly income out of all others taking part in the sharing economy. Here are some key things to keep in mind if you rent your space. (See also: <a href="http://www.wisebread.com/13-things-i-learned-from-renting-out-my-home-on-airbnb?ref=seealso" target="_blank">13 Things I Learned From Renting Out My Home on Airbnb</a>)</p> <h3>1. The 14-day rule</h3> <p>According to the IRS, if your rental property also serves as your residence, and you rent out the space for no more than 14 days during the year, you don't have to report those earnings as income. Note that you also cannot claim any deductions from rental expenses if you rent for fewer than 14 days per year.</p> <p>Airbnb and similar companies will still report your earnings even if you're under the two-week threshold. But as long as you provide documentation that you meet the 14-day rule, you don't have to include rental income on your federal return. If you do have to report income, use Schedule C or E of Form 1040.</p> <h3>2. Deductible expenses</h3> <p>The IRS allows you to deduct a long list of applicable costs for your rental operation, including advertising, cleaning and maintenance services, utilities, property insurance, and property taxes. Check the rental section on <a href="https://www.irs.gov/publications/p527/ch01.html#en_US_2016_publink1000218979" target="_blank">IRS Publication 527</a> for a full list of eligible expenses.</p> <p>You can deduct 100 percent of direct rental expenses such as fees to Airbnb and rental insurance, and allocate a portion of general expenses such as mortgage interest and utilities. If you only rent out a room that is one-sixth of the size of your home, you can only allocate one-sixth of a general expense.</p> <h3>3. Form 1099-K</h3> <p>When you earn over $20,000 and make over 200 transactions in a calendar year, Airbnb will issue you a Form 1099-K. Airbnb will mail you this form and keep an electronic copy under &quot;Payout Preferences.&quot; This form is an IRS information return used to report certain payment transactions, which improves your voluntary tax compliance.</p> <h3>4. Pay attention to local occupancy taxes</h3> <p>On top of the IRS, you should also keep an eye on state and local government agencies. For example, throughout 2017 the House Finance Committee of Hawaii is evaluating an &quot;Airbnb bill&quot; to collect hotel room and general excise taxes from Hawaii-based short-term and vacation rentals.</p> <h3>5. Report rental losses</h3> <p>In the event that your rental operation goes sour, you can deduct losses up to applicable limits. Let's imagine that you own a $400,000 home and that you spent $400 to get a room ready for rental. However, nobody took you up on your offer. Per the IRS at-risk rule (for property placed in service after 1986), you can write off up to $400,000 in rental losses. So, you can deduct the $400 as a rental loss on your return.</p> <h2>Driving people in your car</h2> <p>Lyft and Uber drivers make an average $377 and $364 per month, respectively. Here are some tax-related pointers to keep in mind when declaring that income. (See also: <a href="http://www.wisebread.com/how-to-make-more-money-as-an-uber-driver?ref=seealso" target="_blank">How to Get a High Rating and Make More Money as an Uber Driver</a>)</p> <h3>1. Keep track of all 1099s</h3> <p>Unlike a full-time employer, Uber and Lyft won't issue you a W-2. Instead, these and other ride-sharing companies issue two types of 1099 forms to most drivers.</p> <ul> <li> <p>Form 1099-K: Includes all payments that you received from customers directly related to driving.</p> </li> <li> <p>Form 1099-MISC: Keeps track of all other non-driving income, such as payments for referrals and other types of bonuses.</p> </li> </ul> <p>While companies aren't required to issue a 1099-K unless you process 200 transactions or more (and make at least $20,000), and they're not required to issue a 1099-MISC unless you make at least $600, Uber and Lyft generally will issue those forms anyway just to remind you to report your income made through ride-sharing.</p> <p>On Uber, access your tax documents by logging in to partners.uber.com and clicking &quot;Tax Information.&quot; On Lyft, look for tax documents in the &quot;Tax Info'&quot; tab of the &quot;Driver Dashboard&quot; of your Lyft app.</p> <h3>2. Deduct applicable expenses</h3> <p>You'll quickly notice in Box 1a of your 1099-K that the reported amount is actually greater than what you received. The reason is that the reported amount in that box includes Uber's commission and other fees. On your Schedule C, Profit or Loss from Business (Form 1040), you can deduct those fees and other applicable expenses. Some examples are:</p> <ul> <li> <p>Bottled water and snacks for your passengers.</p> </li> <li> <p>Business taxes and license costs.</p> </li> <li> <p>Highway tolls.</p> </li> <li> <p>Car cleaning expenses.</p> </li> <li> <p>Car maintenance costs.</p> </li> <li> <p>Gas.</p> </li> </ul> <p>It's a best practice to keep a copy of all receipts so that you can back up your claims. One great way to do so is to open a bank account or credit card and use it solely for driving-related expenses. That way, your monthly statement becomes your monthly expense report. (See also: <a href="http://www.wisebread.com/when-you-should-get-a-business-credit-card-over-a-consumer-card?Ref=seealso" target="_blank">When You Should Get a Business Credit Card Over a Consumer Card</a>)</p> <h3>3. Include mileage in your return</h3> <p>Within your 1099s, you'll also receive a summary for &quot;On-Trip&quot; mileage. For all business miles driven in 2017, you can deduct 53.5 cents per mile. So, if you were to drive 2,000 miles, you would deduct $1,070 (2,000 x $0.535) on your return.</p> <p>You may also deduct additional miles that Uber and Lyft didn't report as long as those miles are directly related to your gig. Some examples are miles that you drove before a ride was canceled or on your way to meet an Uber or Lyft inspector. Keep a detailed log of those miles and include date, time, initial mileage, and final mileage.</p> <h3>4. Consider getting a separate smartphone</h3> <p>An internet-enabled smartphone is a key part of your operation. To make it easier for the IRS to identify what mobile phone expenses are related to your driving, get a new phone and use it exclusively for Uber or Lyft. This way you'll be able to deduct 100 percent of all phone costs, including cost of the phone, monthly charges for voice and data, and any essential accessory (chargers or mounts) from your driving income.</p> <h2>Tips for all side giggers</h2> <p>Whatever your gig, be sure you're keeping up with your taxes.</p> <h3>1. Report all income</h3> <p>From assembling furniture through TaskRabbit to delivering business supplies with Postmates, there are plenty of other ways to make money through the sharing economy. (See also: <a href="http://www.wisebread.com/13-ways-to-make-money-online-that-arent-scams?ref=seealso" target="_blank">13 Ways to Make Money Online That Aren't Scams</a>).</p> <p>All companies have to issue you a 1099-MISC once you make $600. Even when you don't hit that threshold and don't receive a form, report the income on your return. The IRS charges a 25 percent inaccuracy penalty on top of applicable taxes and interest for late payments.</p> <p>If you happen to complete additional tasks or services for a client that aren't tracked on an app or website, it's a good idea to still include them in your income. When you're making the bulk of your income through the gig economy, your federal tax return becomes a key document to prove how much you make per year. This can be useful when applying for a credit card or other form of credit.</p> <h3>2. Make estimated federal and state tax payments</h3> <p>Lessen the tax blow by submitting estimated tax payments throughout the year. Use Form 1040-ES, Estimated Tax for Individuals to submit tax payments up to four times per year. For tax year 2017, you can submit payments on April 18, June 15, September 15, and January 16, 2018.</p> <p>Most states also allow side-giggers and freelancers to submit estimated tax payments. To learn more about your state tax obligations, contact your local <a href="https://www.irs.gov/tax-professionals/government-sites" target="_blank">state tax office</a>.</p> <h3>3. Adjust withholding from your day job</h3> <p>Don't pay more taxes than you have to. If a full-time employer is already withholding taxes from your paycheck, use the <a href="https://apps.irs.gov/app/withholdingcalculator/" target="_blank">IRS Withholding Calculator</a> to adjust how much is taken out. It has been estimated that 75 percent of Americans pay too much in taxes throughout the year. The calculator will provide you suggestions to adjust your withholding so that you meet your tax liability and keep the most out of your day job paychecks.</p> <h3>4. Hire an accountant</h3> <p>Using Schedule C from Form 1040 is a great way to reduce your taxable income, but is also a way to increase your chances of receiving an audit from the IRS. Individuals using Schedule C are more likely than corporations to get an audit. If you're planning to include a very long list of deductions, paying a professional will be worth your while to hedge against a potential audit. You can deduct what your accountant charges you as a business expense, after all.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fdont-get-audited-how-your-side-gig-needs-to-handle-taxes&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FDont%2520Get%2520Audited%2521%2520How%2520Your%2520Side%2520Gig%2520Needs%2520to%2520Handle%2520Taxes.jpg&amp;description=Dont%20Get%20Audited!%20How%20Your%20Side%20Gig%20Needs%20to%20Handle%20Taxes"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Dont%20Get%20Audited%21%20How%20Your%20Side%20Gig%20Needs%20to%20Handle%20Taxes.jpg" alt="Don't Get Audited! How Your Side Gig Needs to Handle Taxes" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/a-simple-plan-for-saving-up-a-2000-fun-fund">A Simple Plan for Saving Up a $2000 Fun Fund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-seasonal-side-hustles-thatll-cover-your-holiday-spending">8 Seasonal Side Hustles That&#039;ll Cover Your Holiday Spending</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-earn-extra-money-with-your-car">7 Ways to Earn Extra Money With Your Car</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income Taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Extra Income Taxes AirBnb audits deductions earnings expenses freelance gig economy income IRS lyft sharing economy side jobs Uber Thu, 26 Oct 2017 09:00:06 +0000 Damian Davila 2038890 at http://www.wisebread.com 6 Moves You Should Make Now for Your 2018 Taxes http://www.wisebread.com/6-moves-you-should-make-now-for-your-2018-taxes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-moves-you-should-make-now-for-your-2018-taxes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/businesswoman_accounting_at_office.jpg" alt="Businesswoman accounting at office" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Fall is full of wonderful things: pumpkin lattes, crisp autumn air, changing leaves, and tax preparation. OK, tax preparation may not hold the same wonder as fall flavors and vibrant foliage, but this is a critical time to get your financial house in order before the end of the year. In particular, here are six easy tax tasks to take care of before we enter 2018.</p> <h2>1. Re-evaluate your withholding</h2> <p>Did the size of your family change this year? If it did, contact your human resources department to update your withholding so that you aren't overpaying or underpaying your taxes throughout the year.</p> <h2>2. Compare your life situation this year versus last year</h2> <p>Get out your 2016 tax return and consider any changes that have happened in your life since you filed your taxes for that year. Did you move to a new county, city, or state? Did your marital status change, and you'll now be filing jointly? Did you switch jobs or take on some freelance work? All of these changes can impact your tax filing, particularly if you itemize your expenses.</p> <p>For example, let's say you moved to a new city this year and now work full-time from home. You'll want to have any job search expenses, home office and work-related expenses, and any moving costs detailed and organized before you visit your accountant or start the preparation and filing process yourself. All of these costs are potentially deductible on your taxes if you have well-organized records of them.</p> <p>If you moved this year, make sure your employer(s) (full-time and freelance) from 2017 have your updated address so that you get your W-2 forms without delay.</p> <h2>3. Max out your retirement contributions</h2> <p>Are you maxing out contributions to your 401(k), 403(b), and/or IRA accounts? If not, could you afford to increase your contributions to meet or get closer to the max for the year? You can contribute up to a maximum of $18,000 (plus an additional $6,000 if over age 50) to your 401(k) or 403(b) for 2017 until December 31. IRAs give you more flexibility with your 2017 contributions &mdash; you can contribute right up until you file your 2017 taxes or Tuesday, April 17, 2018, whichever comes first. You can contribute up to $5,500 per year to an IRA (or $6,500 if over age 50).</p> <h2>4. Make your freelance income work for your retirement</h2> <p>Do you do freelance work? You still have time to set up and contribute to a retirement account that will have tax benefits for the 2017 tax year. In particular, look into opening a Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) account. SEP IRA accounts are specialty retirement accounts that were created for the advantage of business owners and their employees. This applies to you if you're a freelancer.</p> <p>These accounts can be opened and funded independently from any other retirement accounts you have, such as traditional and Roth IRAs as well as 401(k) and 403(b) accounts from employers. Like other IRAs, you have until you file your 2017 taxes or Tuesday, April 17, 2018, whichever comes first, to set up and fund an SEP IRA for 2017. For 2017, contributions to an SEP IRA cannot exceed the lesser of 25 percent of your compensation or $54,000.</p> <h2>5. Prepare your deduction receipts</h2> <p>This is a task I always leave right until the end, but this year I'm trying to get ahead of the game. I itemize my taxes each year and have to keep track of all of my receipts to make sure I itemize properly.</p> <p>Rather than letting my receipts stack up over the year, I've been tracking them in a spreadsheet each month to make my tax filing quicker and easier. Don't forget about any job-hunting expenses, either: Make sure to take special note of those expenses related to job searching, as they will be itemized in their own category.</p> <h2>6. Consider homeownership changes</h2> <p>Did you buy or sell a home in 2017? This change has huge implications on your taxes. Make sure you have all of your home purchase or sale paperwork organized so that you can account for it appropriately in your filing.</p> <p>Fall offers us a slight pause before the rush of the holiday season that ushers us into the new year. Take a little time now to get a head start on tax preparations, and your future self will thank you!</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-moves-you-should-make-now-for-your-2018-taxes&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Moves%2520You%2520Should%2520Make%2520Now%2520for%2520Your%25202018%2520Taxes.jpg&amp;description=6%20Moves%20You%20Should%20Make%20Now%20for%20Your%202018%20Taxes"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Moves%20You%20Should%20Make%20Now%20for%20Your%202018%20Taxes.jpg" alt="6 Moves You Should Make Now for Your 2018 Taxes" width="250" height="374" />&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/6-moves-you-should-make-now-for-your-2018-taxes">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-budget-consistently-without-a-steady-paycheck">How to Budget Consistently Without a Steady Paycheck</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-every-first-year-freelancer-should-make">6 Moves Every First Year Freelancer Should Make</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/self-employed-heres-how-to-get-your-apartment-application-approved">Self-Employed? Here&#039;s How to Get Your Apartment Application Approved</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-its-time-to-close-your-business">5 Signs It&#039;s Time to Close Your Business</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes freelance homeownership itemized deductions organizing paychecks receipts retirement contributions self employment withholding Thu, 19 Oct 2017 08:00:07 +0000 Christa Avampato 2038829 at http://www.wisebread.com 6 Ways the Government Helps Disaster Victims Recover http://www.wisebread.com/6-ways-the-government-helps-disaster-victims-recover <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-the-government-helps-disaster-victims-recover" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/disaster_recovery_center_sign.jpg" alt="Disaster Recovery Center Sign" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Hurricane season has captured big chunks of recent news cycles, with massive storms Irma and Harvey devastating areas in Florida and Texas. The IRS and other U.S. government agencies are working to help people get back on their feet after these terrible natural disasters. Here's what they're doing.</p> <h2>1. Allowing loans and hardship withdrawals from retirement funds</h2> <p>Usually, the IRS levels penalties against early withdrawals from 401(k) and 403(b) retirement accounts. But it recently announced that in the case of Irma and Harvey, victims can take loans and hardship withdrawals against their retirement funds without penalties. All of the specifics for this IRS initiative can be found on the <a href="https://www.irs.gov/newsroom/tax-relief-in-disaster-situations" target="_blank">IRS disaster relief page</a>.</p> <h2>2. Offering tax relief</h2> <p>The IRS provides tax relief to those who are impacted by disasters. This relief takes the form of tax filing and payment extensions, as well as the ability to claim losses on tax returns that may lower the amount of tax owed. Once an area is a federally declared disaster area, the IRS automatically marks all taxpayers in that area as eligible for relief. The details about these tax relief programs are also on the IRS's webpage for disaster relief.</p> <h2>3. Helping victims find shelter</h2> <p>If you need to find short-term shelter after a disaster, the government has services to help you. You can search for open shelters in your area by texting SHELTER and your ZIP code to 4FEMA (43362). For example: SHELTER 12345. You can also visit FEMA's page on <a href="https://www.fema.gov/interim-housing-resources" target="_blank">Interim Housing</a> if you've been displaced by a disaster and you need to find a longer-term rental home.</p> <h2>4. Granting government relief funds</h2> <p><a href="https://www.disasterassistance.gov/" target="_blank">DisasterAssistance.gov</a> makes it possible to find local resources and apply for assistance. There are also relief funds and programs available for<a href="https://www.irs.gov/businesses/small-businesses-self-employed/disaster-assistance-and-emergency-relief-for-individuals-and-businesses-1" target="_blank"> small businesses</a> and those who are self-employed.</p> <h2>5. Hiring temporary recovery workers after a disaster</h2> <p>Both FEMA and the Small Business Administration (SBA) are currently hiring temporary workers in affected areas to speed the recovery efforts. FEMA's website details the <a href="https://careers.fema.gov/hurricane-workforce" target="_blank">opportunities it has available</a> and SBA has set up a special website where you can <a href="https://www.sba.gov/disaster-assistance/hurricane-response-jobs-sba" target="_blank">apply for hurricane response jobs</a>.</p> <h2>6. Cracking down on price gouging</h2> <p>After a natural disaster, it isn't unusual to find crucial necessities like gas and bottled water sold at ridiculously inflated prices &mdash; including reports of water for $99 a case and gas for $10 a gallon following Hurricane Harvey. This is known as price gouging, and it is illegal. People who have spotted or been victimized by this practice are encouraged to report it to their <a href="https://www.usa.gov/state-consumer" target="_blank">state attorney general</a>.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-ways-the-government-helps-disaster-victims-recover&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Ways%2520the%2520Government%2520Helps%2520Disaster%2520Victims%2520Recover.jpg&amp;description=6%20Ways%20the%20Government%20Helps%20Disaster%20Victims%20Recover"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Ways%20the%20Government%20Helps%20Disaster%20Victims%20Recover.jpg" alt="6 Ways the Government Helps Disaster Victims Recover" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/christa-avampato">Christa Avampato</a> of <a href="http://www.wisebread.com/6-ways-the-government-helps-disaster-victims-recover">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-indirect-ways-taxes-to-the-rich-may-hurt-you">6 Indirect Ways Taxes to the Rich May Hurt You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-filing-an-insurance-claim-after-a-natural-disaster">What You Need to Know About Filing an Insurance Claim After a Natural Disaster</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-an-hsa-is-actually-worth-having">10 Reasons an HSA Is Actually Worth Having</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house">What to Do If You Have a Tax Lien On Your House</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Financial News Taxes assistance employment financial aid government harvey hurricanes IRA irma natural disasters shelter tax relief Fri, 22 Sep 2017 09:00:06 +0000 Christa Avampato 2023631 at http://www.wisebread.com 10 Reasons an HSA Is Actually Worth Having http://www.wisebread.com/10-reasons-an-hsa-is-actually-worth-having <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-reasons-an-hsa-is-actually-worth-having" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/male_medicine_doctor_wearing_blue_tie_holding_piggybank.jpg" alt="Male medicine doctor wearing blue tie holding piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I put off signing up for an HSA for years because it was confusing and seemed to have a lot of rules and restrictions. You need to have an HDHP (high deductible health plan) in order to get an HSA. HSA funds can only be spent on qualified medical expenses &mdash; or else you can be hit with a 20 percent penalty and have to pay income tax on the withdrawal. I was hesitant to contribute funds into an account when I was worried it would be complicated to get the money back out.</p> <p>But participating in an HSA turned out to be a lot easier than I expected, and it has saved me a lot of money. If you do not anticipate having a lot of health care expenses, a high deductible health plan plus an HSA may be a good move. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>)</p> <h2>1. Convenient access to HSA funds</h2> <p>You can conveniently access your HSA funds using a credit card tied to the HSA account at the doctor's office or pharmacy. You can also pay medical expenses with a check or credit card, and then withdraw funds from your HSA account to put back into your checking account.</p> <h2>2. Use HSA funds for a variety of medical expenses</h2> <p>HSA spending is not limited to only doctor and hospital bills &mdash; you can also <a href="http://www.wisebread.com/11-surprising-things-your-hsa-will-cover" target="_blank">use HSA funds</a> for medication, eye care, dental care, and other health-related expenses including bandages and prescription sunglasses. The IRS offers a complete list of <a href="https://www.irs.gov/pub/irs-pdf/p502.pdf" target="_blank">qualified medical expenses</a>.</p> <h2>3. HSAs offer plenty of tax advantages</h2> <p>You'll contribute pretax dollars to an HSA from every paycheck, without paying income tax on those contributions. This means you can save around 25 to 30 percent on health care expenses, depending on your tax rate. In addition, you can earn interest on the funds in your HSA account. With some HSA providers, you can even invest your HSA funds for more potential growth. Gains on HSA funds are tax-free.</p> <p>For qualified medical expenses, you can also withdraw funds from your HSA tax-free.</p> <h2>4. HSA funds roll over from one year to the next</h2> <p>One of my concerns with putting money into an HSA was the fear that it was a &quot;use it or lose it&quot; proposition like some flexible spending accounts I have previously used for health expenses. But funds in an HSA roll over from one year to the next, so you never lose your money if you don't spend it.</p> <h2>5. An HSA builds funds for future medical costs</h2> <p>An HSA is not only a way to pay for current medical expenses, it is also an ideal vehicle to build savings for future medical expenses. You can deposit money on a pretax basis, enjoy growth on invested HSA funds without paying taxes, and then withdraw funds years later when medical expenses arise with no tax obligation. No other investment vehicle provides this combination of benefits to grow savings for medical costs.</p> <h2>6. You can use your HSA as an IRA at age 65</h2> <p>When you reach age 65, you can continue to draw funds for qualified medical expenses tax-free. Or, you can use your HSA funds for any purpose you wish, without penalty (but you will pay income taxes if it's for non-health spending). An HSA effectively functions as an individual retirement account (IRA) when you reach 65, with the added benefit of tax-free dollars for medical expenses.</p> <h2>7. Your HSA is portable</h2> <p>When you move from one employer to another, or even opt to pursue freelance work, you get to keep your HSA and all of your funds.</p> <h2>8. Free HSA funding</h2> <p>Some employers contribute funds to employees' HSA accounts as a benefit. If you don't have an HSA, you might be missing out on free money!</p> <h2>9. You don't need an employer to have a HSA</h2> <p>Although the easiest way to take advantage of an HSA is to simply sign up for a program offered by your employer, you can open your own HSA if you are self-employed. You will need to find your own HSA provider such as a bank, credit union, insurance company, or investment broker. Look for an HSA provider with low fees, that provides access to HSA funds via a credit card, and that provides investment options for HSA funds.</p> <h2>10. Significant tax savings</h2> <p>The maximum annual HSA contribution amount is $3,350 for individuals, or $6,750 for families. Let's say your federal plus state income tax rate is 25 percent. Since contributions are tax-free, if you contribute the maximum to your HSA, you would save $837.50 for an individual or $1687.50 for a family on taxes on current or future qualified medical expenses.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F10-reasons-an-hsa-is-actually-worth-having&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F10%2520Reasons%2520an%2520HSA%2520Is%2520Actually%2520Worth%2520Having.jpg&amp;description=10%20Reasons%20an%20HSA%20Is%20Actually%20Worth%20Having"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/10%20Reasons%20an%20HSA%20Is%20Actually%20Worth%20Having.jpg" alt="10 Reasons an HSA Is Actually Worth Having" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/10-reasons-an-hsa-is-actually-worth-having">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/its-so-simple-6-steps-to-a-stable-retirement">It&#039;s So Simple: 6 Steps to a Stable Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-the-self-employed-can-cut-health-care-costs">How the Self Employed Can Cut Health Care Costs</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-ira-mistakes-even-smart-people-make">5 Dumb IRA Mistakes Even Smart People Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-an-hsa-saves-you-money">How an HSA Saves You Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-surprising-things-your-hsa-will-cover">11 Surprising Things Your HSA Will Cover</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Health and Beauty Taxes contributions health care health spending account HSA IRA medical expenses saving money tax advantages tax-free Fri, 30 Jun 2017 08:30:18 +0000 Dr Penny Pincher 1974217 at http://www.wisebread.com Best Money Tips: What to Do if You Get an IRS Notice http://www.wisebread.com/best-money-tips-what-to-do-if-you-get-an-irs-notice <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-what-to-do-if-you-get-an-irs-notice" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_worried_letter_459036917.jpg" alt="Woman wondering what to do when she gets an IRS notice" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found articles on what to do if you get an IRS notice, things that are proven to make you happier, and ways to invest in yourself without spending a lot of money.</p> <h2>Top 5 Articles</h2> <p><a href="https://www.fool.com/taxes/2017/04/26/what-to-do-if-you-get-an-irs-notice.aspx">What to Do if You Get an IRS Notice</a> &mdash; There's no need to panic if you get mail from the IRS. Here are some of the common notices that the agency sends out and how to respond to them. [The Motley Fool]</p> <p><a href="https://www.popsugar.com/smart-living/Things-Make-You-Happy-43456598">10 Things Proven to Make You Happier</a> &mdash; Meditating for as little as a few minutes a day can have a positive impact on your life. [PopSugar Smart Living]</p> <p><a href="https://www.fivecentnickel.com/invest-in-yourself-without-spending-money/">How to Invest in Yourself (Without Spending a Lot of Money)</a> &mdash; Find a creative outlet that can help you balance stress and improve your overall wellbeing. You may even be able use your creative skills for a side hustle. [Five Cent Nickel]</p> <p><a href="https://www.officialcouponcode.com/places-that-offer-senior-discounts/">79 Places that Offer Senior Discounts</a> &mdash; Many restaurants, retailers, and service providers offer discounts to seniors. For example, seniors 62 and over receive a 15 percent discount on Amtrak fares. [Official Coupon Code]</p> <p><a href="http://www.northerncheapskate.com/5-financial-goals-to-strive-for-sooner-the-better/">5 Financial Goals to Strive For (Sooner the Better)</a> &mdash; If you aren't contributing to a retirement account, start now. Give it an extra boost by increasing your contributions each year. [Northern Cheapskate]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.csmonitor.com/Business/Tax-VOX/2017/0419/Americans-think-their-income-tax-share-is-fair-according-to-polls">Americans think their income-tax share is fair, according to polls</a> &mdash; According to a survey by Gallup, 61 percent of Americans think the amount of income tax they're paying is fair. [The Christian Science Monitor]</p> <p><a href="http://www.frugalvillage.com/2017/04/24/save-money-and-energy-by-insulating-your-pipes/">Save Money and Energy by Insulating Your Pipes</a> &mdash; Insulated hot water pipes can minimize heat loss throughout the entire system. [Frugal Village]</p> <p><a href="http://www.thefrugaltoad.com/personalfinance/prioritize-plan-ponder-practical-stop-out-of-control-spending">Prioritize, Plan and Ponder: Practical Ways to Stop Out of Control Spending</a> &mdash; If your spending is out of control, here are a few practical changes you may want to make. [The Frugal Toad]</p> <p><a href="http://www.kiplinger.com/article/retirement/T064-C032-S014-make-charitable-giving-a-wealth-plan-win-win.html">Make Charitable Giving a Win-Win Part Of Your Wealth Plan</a> &mdash; There are ways to give to your favorite charities and still provide for your heirs. [Kiplinger]</p> <p><a href="https://www.i-millennial.com/10-investment-options-young-professionals/">10 Investment Options for Young Professionals</a> &mdash; It's a smart move to invest in building personal and professional relationships. These connections can help you advance your career and improve your personal life. [iMillennial]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-what-to-do-if-you-get-an-irs-notice">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-file-your-taxes-for-free-in-2015">8 Ways to File Your Taxes for Free</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-to-deduct-charitable-donations-on-your-taxes">Here&#039;s How to Deduct Charitable Donations on Your Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/forgiven-debt-isnt-really-forgiven-at-all">Forgiven Debt Isn&#039;t Really Forgiven At All</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes best money tips IRS Thu, 27 Apr 2017 08:30:09 +0000 Amy Lu 1935488 at http://www.wisebread.com 4 Big Business Accounting Tools Every Side Gig Needs http://www.wisebread.com/4-big-business-accounting-tools-every-side-gig-needs <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-big-business-accounting-tools-every-side-gig-needs" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-505095190.jpg" alt="every side business needs these accounting tools" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>While side gigs are becoming an increasingly common way for Americans to bring in extra income, many people do not understand how that additional income can affect their taxes. If you're not prepared, freelancing or working on the side can lead to serious issues with the IRS, costing you thousands in penalties and fees.</p> <p>If you plan on taking business deductions for expenses, you'll need some tools to manage your reporting and minimize your tax headaches. Treat your side hustle like a small business. Below are four business tools you should use to keep your side gig from overwhelming your finances. (See also: <a href="http://www.wisebread.com/6-signs-its-time-to-make-your-side-gig-your-career?ref=seealso" target="_blank">6 Signs It's Time to Make Your Side Gig Your Career</a>)</p> <h2>1. Business bank account</h2> <p>If you have a side business, you should seriously consider opening a dedicated business bank account. It will make tracking your expenses and profits so much simpler, which makes tax time simpler as well.</p> <p>Keeping your business and personal finances separate is not just easier, it's also important. Should the IRS ever take a closer look, you want them to see a clear distinction between personal and business expenses, as well as all of the business income you've earned. Jumbling this together with your personal banking is a recipe for confusion and possible contention.</p> <p>Having a business bank account lends you more professional credibility, too. Asking a client to write a check to your business, for example, feels much more legitimate than having them make it out to your name.</p> <p>All of the business income you earn doesn't have to stay in your business bank account. You can pay yourself the appropriate amount after considering taxes and expenses. Simply transfer that money to your personal account, and leave the rest in your business account.</p> <h2>2. Business credit card</h2> <p>Similarly, it's a good idea to have a separate credit card you use solely for business expenses. (See also: <a href="http://www.wisebread.com/when-you-should-get-a-business-credit-card-over-a-consumer-card?ref=seealso" target="_blank">When You Should Get a Business Credit Card Over a Consumer Card</a>)</p> <p>By having a card solely for your side gig, you will be able to manage your business deductions quickly and accurately. When you do your taxes, or if you work with a tax professional, you just need your credit card statements to get an accurate picture of your expenses and deductions. Some business cards even offer special reporting tools that automatically itemize your spending for you. This can greatly streamline your accounting process and save you some trouble come tax time.</p> <p>Many business credit cards offer other unique benefits, such as <a href="http://www.wisebread.com/how-free-extended-warranties-work-on-credit-cards" target="_blank">extended warranty protection</a> and rewards targeted specifically for business-type purchases. They also tend to come with higher limits than personal credit cards. If you need to make a substantial business expense but don't want to dip into your own savings or take out a business loan, these higher limits can be a huge help. They're also a great way to build credit for your business, should you ever need a loan or other financing down the road. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses?ref=seealso" target="_blank">The 5 Best Credit Cards for Small Businesses</a>)</p> <h2>3. Invoicing system</h2> <p>While you can find free invoice templates online and create your own in Microsoft Word or Google Docs, it's a good idea to use a professional invoicing system. Invoicing software tracks clients, invoice numbers, and your profits. They are more accurate than something you create on your own, and they look more professional than the do-it-yourself approach.</p> <p>And you don't have to spend a lot of money to create polished invoices. There are a number of <a href="http://www.wisebread.com/5-free-accounting-tools-for-freelancers?ref=internal" target="_blank">free and low-cost bookkeeping programs</a> out there that are designed specifically for freelancers and side hustlers. <a href="https://pocketsuite.io/pricing/" target="_blank">PocketSuite</a>, <a href="https://www.freshbooks.com/" target="_blank">Freshbooks</a>, and <a href="https://www.waveapps.com/accounting/" target="_blank">Wave</a> are excellent and no-cost options that can help streamline your business management.</p> <h2>4. Tax professional</h2> <p>While many people opt to do their own taxes, when you add a side business to the mix, a tax professional can be a huge asset. When you're self-employed or freelancing, even on a part-time basis, you owe self-employment taxes, which can be complex and confusing. You'll receive forms 1099-MISC from any clients that have paid you more than $600 during the tax year. If you receive a 1099-MISC, you have to pay self-employment taxes. Not to mention if you add expenses in the mix, you'll want to make sure you are claiming the proper deductions.</p> <p><a href="http://www.wisebread.com/3-reasons-to-hire-a-tax-professional-even-if-you-dont-mind-the-work?ref=internal" target="_blank">Tax professionals</a> can help you navigate paying estimated quarterly taxes, or calculate how much money you need to withhold from your main job's salary to avoid paying quarterly taxes. They can also identify deductions and credits you may be eligible for, such as a home office or education deduction. These are substantial tax breaks that no self-employed individual should overlook. You want to be sure you're claiming any deductions or credits accurately in order to receive the maximum benefit possible. A tax pro can help you do this.</p> <p>By working with a professional, you'll have overall peace of mind and avoid any surprises at tax time.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kat-tretina">Kat Tretina</a> of <a href="http://www.wisebread.com/4-big-business-accounting-tools-every-side-gig-needs">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-freelancers-can-make-sure-they-get-paid-on-time">8 Ways Freelancers Can Make Sure They Get Paid on Time</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-ways-to-make-money-on-thanksgiving">11 Ways to Make Money on Thanksgiving</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-you-can-earn-18-to-25-an-hour-with-amazon-flex">How You Can Earn $18 to $25 an Hour With Amazon Flex</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-earn-extra-money-with-your-car">7 Ways to Earn Extra Money With Your Car</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Taxes accounting audits banking business tools freelancing invoices side gig side hustle tax professional Fri, 21 Apr 2017 08:30:15 +0000 Kat Tretina 1931275 at http://www.wisebread.com 7 Lessons From Tax Day to Remember for Next Year http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-lessons-from-tax-day-to-remember-for-next-year" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-546177866.jpg" alt="Woman learning tax lessons she should&#039;ve learned this week" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Cue the sigh of relief: Another tax season has come and gone. Before you kick back and relax, though, take a little moment of self-reflection. Did Tax Day make your stress levels soar?</p> <p>If the answer is yes, it's time to brush up on a few key lessons to take with you into the 2017 tax year. We guarantee you'll be breathing a little easier come next April.</p> <h2>1. Keep track of all your income</h2> <p>Specifically, don't forget about taxes you'll need to pay on any income you earn during the year outside of a full-time job. This includes money from freelance work or self-employment, dividends on investments, interest payments, and even gambling winnings. Be sure to track all of this income so that you're not surprised by a tax bill later.</p> <h2>2. Save all of your paperwork</h2> <p>Make sure you keep careful track of any forms and paperwork necessary to file your taxes. This includes your W-2 or any 1099s, as well as documents from banks, investment firms, and your mortgage company. These forms are usually sent out in February.</p> <p>More immediately, if you make any contributions to charity, you'll need the documentation. If you own a small business, you'll need receipts for all expenses you plan to deduct. If you plan to seek deductions for any unreimbursed medical expenses, you'll need a bill from your health care provider. All of these are important in order to enter accurate information on your tax return. As you gather them throughout the year, set them aside in a file or box that you keep in a safe place.</p> <h2>3. Deductions and credits are your friends</h2> <p>A credit is a straight reduction in your tax bill. A deduction means you reduce the amount of your income that is taxable. Either way, these tax breaks should not be overlooked.</p> <p>You can get a tax credit for having a kid. You can get a tax deduction if you pay interest on your mortgage. You can get a tax deduction for charitable donations. There are even deductions and credits for using energy-efficient appliances or driving a hybrid car. The list of possible deductions and tax credits is massive, and chances are, you qualify for at least a few. Most tax preparers and tax preparation programs will walk you through these deductions and credits to make sure you're getting the maximum benefit. If you haven't paid much attention to potential tax deductions or credits in the past, however, make sure you start this year. It could save you significant money.</p> <h2>4. Understand how tax-advantaged investment accounts differ</h2> <p>In addition to claiming tax credits and deductions, you can reduce your tax bill in advance simply by saving for retirement. If you use a 401(k), traditional IRA, or Roth IRA to build your nest egg, there are considerable tax advantages, and you need to understand the main differences.</p> <p>With a 401(k) and traditional IRA, any money you contribute to your account throughout the year will be deducted from your taxable income now. In some cases, this could move you into a lower tax bracket and save you considerable money on this year's tax bill. With a Roth IRA, money you contribute is taxed now, but you will not have to pay taxes on any investment gains when you withdraw the money at retirement.</p> <h2>5. If you are getting a big return, that's not a good thing</h2> <p>Getting money back on your taxes is certainly better than owing so much to the IRS that you pay a penalty. But if you are getting a considerable amount back after filing your return, you may have had too much taken out of your paycheck and overpaid taxes throughout the year. So in a sense, the government has been holding onto your money interest-free for no reason when you could have been using it for yourself. To make sure this doesn't happen again, ask your employer for a new W-4 and increase the number of exemptions you claim.</p> <h2>6. If you make a mistake, you can amend your return</h2> <p>Tax time can be nerve wracking because people are petrified of making a mistake and having the IRS come after them. But the actual chances of the government knocking on your door are quite low. The IRS simply does not have the staff to audit many individuals, and when they do, they usually target either very wealthy people or people with very complicated tax returns.</p> <p>If you do discover that you made a mistake, you can file an amended return without much hassle. Simply file Form 1040X, Amended Tax Return, along with the corrected (or missing) documents you did not originally file with your return. This happened to me once when I forgot to report some dividend income, and I never had the taxman knock on my door. (See also: <a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit?ref=seealso" target="_blank">The Easiest Way to Avoid a Tax Audit</a>)</p> <h2>7. Use your taxes as a learning opportunity</h2> <p>Even with all these lessons under your belt, tax time can still be a tedious and stressful time of year. When all else fails, change your perspective. I personally find the process of doing taxes to be fairly educational. You can see a clear picture of how much money you actually took in during the year, and how much the government takes. The process of finding deductions can be a learning experience as well. If you approach doing your taxes with an attitude of curiosity, you may find the whole process to be less painful.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-common-tax-mistakes-we-need-to-stop-making">5 Common Tax Mistakes We Need to Stop Making</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easiest-way-to-avoid-a-tax-audit">The Easiest Way to Avoid a Tax Audit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes advice audits credits deductions forms income investing IRS tax lessons tax returns w-2 Fri, 21 Apr 2017 08:00:10 +0000 Tim Lemke 1931721 at http://www.wisebread.com Best Money Tips: Things You Can Learn From Your Tax Return http://www.wisebread.com/best-money-tips-things-you-can-learn-from-your-tax-return <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-things-you-can-learn-from-your-tax-return" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-517714958.jpg" alt="Woman learning things from her tax return" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found articles on things you can learn from your tax return, planning for financial emergencies, and downsides to DIY financial planning.</p> <h2>Top 5 Articles</h2> <p><a href="http://moneysmartlife.com/learn-from-your-tax-return/">5 Things You Can Learn From Your Tax Return</a>&nbsp;&mdash; Your tax return can teach you about possible deductions and credits for the coming year. [Money Smart Life]</p> <p><a href="http://moneyning.com/budgeting/4-tips-for-planning-for-financial-emergencies/">4 Tips for Planning for Financial Emergencies</a>&nbsp;&mdash; When planning for financial emergencies, make sure to perform an insurance audit. [MoneyNing]</p> <p><a href="http://www.kiplinger.com/article/retirement/T023-C032-S014-5-downsides-to-diy-financial-planning.html">5 Downsides to DIY Financial Planning</a>&nbsp;&mdash; DIY financial planning can take up a lot of time and be really complicated. [Kiplinger]</p> <p><a href="https://www.forbes.com/sites/nextavenue/2017/04/13/how-to-keep-working-into-your-60s-and-beyond/#cebe9d911c28">How To Keep Working Into Your 60s And Beyond</a> &mdash; If you want to keep working into your 60s and beyond, consider continuing to learn and adding new skills. [Forbes]</p> <p><a href="https://www.popsugar.com/smart-living/Packing-Hacks-Using-Household-Items-43440874">6 Packing Hacks Using Items You Can Find in Your House</a> &mdash; Using hairties to keep your clothes rolled tightly can help make packing for your next trip easier! [PopSugar Smart Living]</p> <h2>Other Essential Reading</h2> <p><a href="https://www.moneytalksnews.com/stretching-buy-home-might-mistake/">Stretching to Buy a Home Might Be a Mistake</a>&nbsp;&mdash; It might be a better idea to save enough money for a home as opposed to stretching to make homeownership a reality. [Money Talks News]</p> <p><a href="http://money.usnews.com/money/personal-finance/family-finance/articles/2017-04-18/the-tipping-point-when-should-you-write-your-first-will">The Tipping Point: When Should You Write Your First Will?</a> &mdash; Becoming a parent is a great reason to write your first will. [US News &amp; World Report]</p> <p><a href="http://www.carefulcents.com/book-more-clients/">Book More Clients: 9 Things to Do When Business Clients Are Scarce</a>&nbsp;&mdash; Are you a freelancer looking for new clients? It may be time to switch up your marketing strategy! [Careful Cents]</p> <p><a href="http://www.csmonitor.com/Technology/2017/0321/Will-a-cheaper-iPad-do-much-to-boost-tablet-sales-video">Will a cheaper iPad do much to boost tablet sales?</a>&nbsp;&mdash; Apple recently unveiled a cheaper iPad. Do you plan on purchasing it? [The Christian Science Monitor]</p> <p><a href="http://parentingsquad.com/9-dinnertime-lessons-to-teach-your-kids">9 Dinnertime Lessons to Teach Your Kids</a>&nbsp;&mdash; Have you taught your kids how to set the dinner table yet? [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/best-money-tips-things-you-can-learn-from-your-tax-return">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-5-reasons-you-might-not-get-your-tax-refund">Surprise! 5 Reasons You Might Not Get Your Tax Refund</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-social-security-just-a-grand-ponzi-scheme">Is Social Security Just A Grand Ponzi Scheme?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-moves-you-should-make-now-for-your-2018-taxes">6 Moves You Should Make Now for Your 2018 Taxes</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes best money tips tax return Wed, 19 Apr 2017 08:30:10 +0000 Ashley Jacobs 1930301 at http://www.wisebread.com 11 Fun Tax Facts You Probably Never Knew http://www.wisebread.com/11-fun-tax-facts-you-probably-never-knew <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-fun-tax-facts-you-probably-never-knew" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-180714432.jpg" alt="soap was taxed in the middle ages" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Taxes: Love 'em or hate 'em, you still gotta pay 'em.</p> <p>In fact, taxes are a tale as old as time. Well, almost. The earliest tax, according to the book &quot;A World History of Tax Rebellions,&quot; was on the <em>corvee </em>(by definition, a day's unpaid labor owed by a vassal to his feudal lord) in 594 B.C. China. Peasants paid overlords for the land they farmed in labor if they couldn't pay the land tax in money.</p> <p>That's just one fun fact. Check out this list of tax trivia that's weird, wacky, and sometimes just plain wrong.</p> <h2>1. There was no re-using cooking oil in Ancient Egypt</h2> <p>Ancient Egypt's early taxation system isn't exactly known for being fair, and their cooking oil tax was a perfect example. Not only was cooking oil taxed, but citizens weren't allowed to reuse it. They had to continually buy new oil, thus constantly forking over the associated tax. This was no joke: Scribes (Ancient Egypt's version of tax collectors) would sweep homes in search of recycled cooking oil, forcing people to pony up and buy new.</p> <h2>2. People in the Middle Ages really stunk up the joint<strong> </strong></h2> <p>European governments taxed soap during the Middle Ages, which meant that you probably only bought a bar if you had some extra dough. As for the rest of the folks, well, they weren't making any new friends smelling like King John's sewage pot. The tax lasted for quite a while, too: Britain didn't repeal its soap tax until 1835.</p> <h2>3. Watching TV in the U.K. ain't cheap, you guys<strong> </strong></h2> <p>We all need a license to drive, but a license to watch television? That's the case in the United Kingdom, where each household is taxed on its TVs &mdash; &pound;145.50 a year &mdash; the funds from which primarily support the television, radio, and online services of the BBC. Total income from TV license fees in 2015&ndash;16 was &pound;3.74 billion.</p> <h2>4. The good deed that lingered too long<strong> </strong></h2> <p>To rebuild the town after a devastating flood in 1936, Johnstown, Pennsylvania slapped a tax on alcohol to raise money for the recovery efforts. The town met its fundraising goal in 1942, but the tax remained. Today it brings in around $200 million annually.</p> <h2>5. Eating a bagel in New York could cut you two ways</h2> <p>New York City has a special tax on food <em>and</em> prepared foods. If you have your bagel sliced in the store, you'll pay both taxes. Leave it uncut, you'll only pay the food tax since nobody is &quot;preparing&quot; it for you.</p> <h2>6. Pennsylvania has put a price on fun</h2> <p>Want to go to the movies? Or bowling? Or to a concert? Add 5 percent to your bill thanks to Pennsylvania's amusement tax, which applies to any kind of entertainment.</p> <h2>7. Certain pumpkins get a pass in Iowa, Pennsylvania, and New Jersey<strong> </strong></h2> <p>Pumpkins are exempt from sales tax in these states if they'll be eaten and not carved. Carving pumpkins and cooking pumpkins are separated so customers aren't confused.</p> <h2>8. Leaving out this one ingredient drives candy prices way up in Chicago</h2> <p>It's simple. If the candy is made with flour &mdash; like licorice (who knew?) and KitKat bars &mdash; it receives a 1 percent tax. Leave the flour out for pure sugary goodness, and the tax climbs to 6.25 percent.</p> <h2>9. You have to lose both limbs to qualify for this tax credit in Oregon<strong> </strong></h2> <p>That's right: Double amputees receive a $50 tax credit in the Beaver State. You might think that single amputees would receive half that credit, but no such luck.</p> <h2>10. If you live to age 100, you're home free in New Mexico</h2> <p>They say the only two things that are certain in life are death and taxes. Except in New Mexico. If you can make it to age 100, you become tax-exempt (but only if you're no one's dependent).</p> <h2>11. You can count your pet as a moving expense<strong> </strong></h2> <p>You're allowed to write off moving expenses if you're relocating to begin a new job. You can also deduct the cost of taking your pet with you as the IRS treats your furbaby as personal property. How rude! But also, thank you.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/11-fun-tax-facts-you-probably-never-knew">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/these-6-things-will-make-your-next-flight-more-comfortable">These 6 Things Will Make Your Next Flight More Comfortable</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-social-security-just-a-grand-ponzi-scheme">Is Social Security Just A Grand Ponzi Scheme?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beat-the-heat-with-cool-summer-meals">Beat the heat with cool summer meals</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/patriotism-and-personal-finance-a-brief-walk-through-american-history">Patriotism and Personal Finance - A Brief Walk Through American History</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes alcohol bizarre candy entertainment Food history moving expenses soap tax facts trivia Tue, 18 Apr 2017 08:00:09 +0000 Mikey Rox 1926610 at http://www.wisebread.com What to Do If You Have a Tax Lien On Your House http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-you-have-a-tax-lien-on-your-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-523154492_0.jpg" alt="Woman learning what to do with a tax lien on her house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The government doesn't play around with taxpayers who skip out on what they owe. When you ignore your federal, state, or property tax bills &mdash; and you don't make any attempts to pay the balance &mdash; the government can place a tax lien on your house.</p> <p>A tax lien is a legal claim on property for failure to pay taxes owed. It gives the tax authority (also known as the lienholder) first rights to your property over other creditors.</p> <p>A lien differs from a levy in that the government doesn't seize your house or other property. Keep in mind that a lien can become a levy at some point if you never pay your taxes or never make arrangements to satisfy the debt. The tax authority decides when to impose a levy. You'll receive written notice of the levy at least 30 days before it takes place.</p> <p>A lien is a serious matter because it can negatively affect your credit. Unpaid tax liens can remain on credit reports indefinitely, whereas paid tax liens can remain for up to seven years from the date filed.</p> <p>Of course, the best way to handle a tax lien is to avoid one in the first place. But if the damage is done, here's how to put this ugly mark behind you.</p> <h2>1. Dispute a filing error</h2> <p>It's not uncommon for mistakes to appear on credit reports. In fact, according to recent data from the Consumer Finance Protection Bureau, 76 percent of the 185,700 credit-reporting complaints they've received since 2011 are related to errors &mdash; including state or federal tax liens that mistakenly appeared on credit reports.</p> <p>If you check your credit report and find a lien reported in error, don't ignore this mistake. This can lower your credit score. Contact the IRS or your state tax office to file a dispute. If a review of your account proves that you don't owe the debt, the government withdraws the tax lien (as if it never happened). A withdrawal also removes the lien from your credit report.</p> <p>Thankfully, the number of tax liens reported in error should be dropping. In response to criticisms by the CFPB, the top consumer reporting agencies &mdash; Experian, Equifax, and TransUnion &mdash; issued a new provision. As of July 1, 2017, tax lien and civil judgment data will <a href="http://www.nasdaq.com/article/clearing-misconceptions-about-new-consumer-data-laws-cm772651" target="_blank">only be included on credit reports</a> if they contain three pieces of information: the person's name, address, and Social Security number or date of birth. This information must be current according to court records as of the last 90 days.</p> <p>The association representing the credit bureaus expects half of the consumers with tax liens on their credit reports will see them removed.</p> <h2>2. Pay your tax bill in full</h2> <p>Parting with your hard-earned money isn't easy, but paying your tax bill in full is one of the fastest ways to get the government off your back and move on with your life.</p> <p>Typically, the government releases tax liens within 30 days of full payment of an outstanding debt (including penalties and interest). A release removes the lien from the property.</p> <p>Unfortunately, paid tax liens can still remain on your credit report for up to seven years. However, under the IRS's Fresh Start Program, after paying your balance in full, you can submit a request to have a federal tax lien withdrawn from your credit report before the seven-year mark. Some states also give taxpayers the option of requesting an early withdrawal of a state tax lien from their credit report once they've paid their debt in full.</p> <h2>3. Set up an installment plan</h2> <p>If you can't pay what you owe in full, set up an installment plan with the government. This lets you pay off your tax debt over time. The tax authority releases the lien once you've set up a payment plan.</p> <p>In the case of federal debt, the IRS allows individual taxpayers to set up monthly direct debit payments on debt amounts up to $50,000 for up to six years. Go to IRS.gov and apply for installment payments through the online payment system. If you owe more than $50,000, or require longer repayment terms, request installment payments by completing and mailing Collection Information Statement Form 433-A or Form 433-F.</p> <p>Taxpayers who owe less than $25,000 and who've made at least three consecutive direct debit installment payments also can request to have the lien withdrawn from their credit report. However, defaulting on an installment agreement can trigger a new tax lien.</p> <p>Some states also allow installment plans to repay a tax debt, though the criteria for these plans varies by state.</p> <h2>4. Sell the property</h2> <p>If you don't have money to pay an outstanding tax debt in full, and you can't afford an installment plan, another option is selling the property and satisfying the debt with proceeds from the sale. However, this method only works if the sale price is high enough to pay off the lien and any existing mortgages on the property. If the sale won't generate enough proceeds to pay off attached liens, you can't sell the property. If you're able to sell the home, the company handling your escrow account forwards payment to the lienholder after closing.</p> <p>Keep in mind that you'll need to contact the lienholder before closing to request a lien release. In the case of federal taxes, this involves requesting a Certificate of Discharge from the IRS. If the request is approved, this document releases (or removes) the lien from the asset being sold (though it stays in place in every other way), and allows the property to transfer to the new owner lien-free.</p> <h2>5. Refinance the property</h2> <p>Then again, maybe you don't want to sell your home. There's also the option of refinancing and borrowing cash from your home equity to satisfy a state or federal tax lien on the property. Since refinancing replaces an existing mortgage with a new loan, mortgage lenders will not approve your loan application unless they have first lien position on the title. This puts the lender in priority position to benefit from liquidation if the property goes into default. For this to happen, you'll have to request a lien subordination from the IRS or your state tax office before applying for the loan.</p> <p>Subordination doesn't eliminate a tax lien &mdash; rather, the lien becomes secondary to a lender's lien on the property. And with the lender's security interest first, you're more likely to acquire a new mortgage.</p> <p>Be aware that your ability to refinance depends on how the tax lien impacted your credit. A tax lien will reduce your credit score, and to refinance, you'll have to meet a lender's income and credit score requirements. You need a minimum credit score of 620 for a conventional loan and a minimum credit score between 500 and 580 for an FHA loan.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off">9 Money Moves to Make the Moment Your Credit Cards Are Paid Off</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes">Here&#039;s What Happens If You Don&#039;t Pay Your Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/more-tax-credits-coming-for-homebuyers">More Tax Credits Coming for Homebuyers?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/not-so-fast-5-things-you-must-do-after-filing-taxes">Not So Fast! 5 Things You Must Do After Filing Taxes</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-can-you-do-if-you-cannot-afford-to-pay-your-taxes">What can you do if you cannot afford to pay your taxes</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes credit report credit score federal filing errors government IRS payment plans property refinancing state tax bills tax liens taxpayers Mon, 17 Apr 2017 08:30:08 +0000 Mikey Rox 1928274 at http://www.wisebread.com What to Do When Your Tax Preparer Makes a Mistake http://www.wisebread.com/what-to-do-when-your-tax-preparer-makes-a-mistake <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-when-your-tax-preparer-makes-a-mistake" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-501391448.jpg" alt="Man learning what to do when a tax preparer makes a mistake" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think that hiring a tax preparer to file your income taxes will guarantee a mistake-free return. Unfortunately, you'd be wrong.</p> <p>In 2015, the National Consumer Law Center used mystery shoppers to test the work of 29 tax preparers. The results were surprising: Only two of the returns compiled by these preparers came in error-free. That's bad news for a lot of people. USA Today reported in February that almost <a href="https://www.usatoday.com/story/money/personalfinance/2017/02/06/should-you-do-your-taxes-yourself-hire-tax-preparer/97198816/" target="_blank">79 million e-filed tax returns</a> were completed last year by professional tax preparers.</p> <p>And here's even more bad news: The IRS says that if your tax preparer makes a mistake resulting in you having to pay additional taxes, interest, or penalties, <em>you</em> are responsible for paying these fees &mdash; not your tax preparer.</p> <p>If your tax preparer does make a mistake on your return, what can you do? Here are five suggestions.</p> <h2>1. Contact your preparer</h2> <p>If the IRS sends you a letter claiming that there are mistakes on your taxes, call your tax preparer for an explanation. Tax preparers who do make mistakes might offer to pay any fees, penalties, or interest charges for you. This might not restore your confidence in their abilities, but it will help save your budget.</p> <h2>2. Pay the penalties</h2> <p>If the IRS is charging you a penalty for a tax mistake, even if that mistake was made by your preparer, pay it. You might be battling it out with your tax preparer in the hope of getting this professional to pay the penalty on your behalf, but the IRS doesn't care. If it doesn't receive its payment, you are the one who will face additional financial penalties.</p> <p>If your tax preparer refuses to pay for its mistake, send a check to the IRS. Then continue your fight against the preparer.</p> <h2>3. Know your rights</h2> <p>Check any contract you signed with your tax preparer. There might be language in the contract stating what your tax preparer will do in the event of a mistake. Some tax preparers will pay the interest and penalties that result from a mistake, but not any extra taxes you might owe.</p> <p>Some tax preparation firms, especially the big ones, might offer insurance that you can purchase for an extra fee. If you've bought this insurance, your tax preparer might be obligated to pay any interest, fees, or extra taxes you owe because of their mistakes.</p> <p>Be aware that tax preparers won't pay any penalties on your behalf, even if you've purchased extra insurance, if the mistakes they've made are because you provided them with inaccurate information.</p> <h2>4. Check the statute of limitations</h2> <p>If your tax preparer made a mistake that caused you to overpay on your taxes, you have three years to request a refund from the IRS. You must provide documentation to back up your claim that you overpaid.</p> <p>This statute of limitations works in reverse, too. If you underpaid your taxes because of a preparer mistake, the IRS has three years in which they can come after you for the money you owe. If your tax preparer made a substantial error, however (such as omitting 25 percent or more of your gross income), the IRS can go back up to six years. It's recommended to keep your records for at least this long. Be aware there is no statute of limitations for those who knowingly file fraudulent returns, evade taxes, or fail to file altogether.</p> <h2>5. File a complaint</h2> <p>If you discover that your preparer made an intentional mistake, perhaps to boost your return, make an official complaint with the Office of Responsibility at the IRS. If your preparer is a member of the American Institute of Certified Public Accountants, National Association of Enrolled Agents, or a state law association, you can also file a complaint with these organizations. Such complaints could cause tax preparers to face fines or lose their licenses.</p> <h2>Reduce the odds of a mistake by hiring the right professional</h2> <p>Sometimes you can prevent a future mistake by hiring the right tax professional upfront. The truth is, anyone can work as a tax preparer. Preparers must apply for a Preparer Tax Identification Number from the IRS. But getting this number is easy: It costs $50, and the IRS says that applying takes just 15 minutes.</p> <p>If you're searching for a tax professional, it's best to work with either a certified public accountant with experience completing tax returns, or what is known as an Enrolled Agent. To become an Enrolled Agent, tax preparers must first pass a three-part test given by the IRS that covers the ins and outs of individual and business tax returns. Some certified public accountants will also be Enrolled Agents.</p> <p>Ask any tax preparer for the phone numbers of past clients. Then call these clients to ask about the work the tax preparer turned in. The IRS also recommends that consumers only work with tax preparers who charge a flat fee. Preparers who charge a percentage of your tax refund might be tempted to fudge the numbers to boost your return.</p> <p>Finally, make sure that you provide all the proper documents and numbers. The tax preparer may or may not double check your numbers. Maybe you forgot about the antique you sold on eBay. Maybe you transposed a number when adding up your home office deductions. You can't depend on the tax preparer to notice that something is off or verify your numbers. The best professionals will ask you a lot of questions to ensure you've provided all the information. But others may just take your documents and enter the numbers.</p> <p>The bottom line is if the IRS audits you and discovers that the preparer made mistakes &mdash; intentional or accidental &mdash; you'll have to pay any penalties and fees.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/what-to-do-when-your-tax-preparer-makes-a-mistake">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes">Here&#039;s What Happens If You Don&#039;t Pay Your Taxes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-reasons-you-should-really-fear-an-irs-audit">10 Reasons You Should Really Fear an IRS Audit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-signs-you-probably-need-an-accountant">5 Signs You Probably Need an Accountant</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-ever-pay-your-taxes-with-a-credit-card">Should You Ever Pay Your Taxes With a Credit Card?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-from-tax-day-to-remember-for-next-year">7 Lessons From Tax Day to Remember for Next Year</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes accountants complaints cpa enrollment agents errors fees IRS Mistakes penalties statute of limitations tax filing tax returns Thu, 13 Apr 2017 08:00:10 +0000 Dan Rafter 1925856 at http://www.wisebread.com Here's How Your Taxes Will Change After You Start a Small Business http://www.wisebread.com/heres-how-your-taxes-will-change-after-you-start-a-small-business <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-your-taxes-will-change-after-you-start-a-small-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-525498442.jpg" alt="Man learning how taxes change after starting a small business" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Starting a small business or taking on a side gig can do wonders for your household income. But that entrepreneurial spirit does come with at least one negative: Filing your income taxes will become much more complicated.</p> <p>How will your taxes change after you start a small business or take on a side gig? Here are five key ways. Make sure you understand all of them before you start filing your income taxes.</p> <h2>1. Say hello to estimated payments</h2> <p>Starting a successful small business will introduce you to the world of quarterly estimated tax payments. As the name suggests, you make these payments four times during the tax year. It's a way for the federal and state governments to ensure that you won't owe them big dollars every April 15.</p> <p>Business owners who file as sole proprietors, partners, and S-corporation shareholders must make estimated tax payments if they think they'll owe $1,000 or more for the given tax year. Generally, your estimated tax payments, made to both the federal government and your local state government, are due April 15, June 15, September 15, and January 15 of the following year. (These dates might change if they happen to fall on a weekend or holiday.)</p> <p>How much you pay each quarter depends on how much money your business makes. The IRS says that calculating your estimated tax payments requires you to first determine your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.</p> <p>It's all complicated. And even if you take your time calculating a quarterly figure, there's no guarantee that you'll pay enough each quarter so that you won't owe your state or the federal government tax money at the end of the year.</p> <p>Your best bet is to hire an accountant or tax expert to work with you to determine the right amount of estimated taxes to pay each quarter. (See also: <a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes?ref=seealso" target="_blank">What Freelancers and Side Giggers Need to Know About Income Taxes</a>)</p> <h2>2. Self-employment tax can be a big hit</h2> <p>When you work for an employer, that employer withholds 6.2 percent of your paycheck for Social Security, and 1.65 percent for Medicare. Your employer also matches these amounts, meaning that, in essence, 15.3 percent of your income each year goes into Social Security and Medicare taxes on 92.35 percent of your net earnings (but as an employee, your employer splits the cost with you).</p> <p>If you are running your own business or side gig, you are responsible for paying the entire amount. Make sure that you prepare for this by setting aside 15.3 percent of your net revenue throughout the year. This is money that you don't include in your quarterly estimated payments. Instead, it's due in April when you file your income taxes.</p> <p>If you don't set aside this money, you might be scrambling to come up with thousands of dollars to send to your state government and the federal IRS. (See also: <a href="http://www.wisebread.com/the-5-biggest-mistakes-freelancers-make?ref=seealso" target="_blank">The 5 Biggest Mistakes Freelancers Make</a>)</p> <h2>3. You'll have to become a master at tax deductions</h2> <p>Not all of the tax changes that come with owning a business are bad. Consider tax deductions. In general, you can deduct the cost of anything that you use to run your business. If you buy a new computer for your business, you can deduct the cost of it. You can deduct the cost of office supplies and health insurance. You can even deduct part of the costs of travel and business meals, as long as these trips and dinners really were held for business-related matters.</p> <p>If you run your business out of your home, you can also deduct home office expenses. This means that you can deduct a portion of your utility bills, for instance, depending on the square footage of your home office. Just be careful with home office deductions. You actually have to use your home office <em>only</em> as an office. Don't try to trick the government. If you get caught taking a larger deduction than you actually deserve, you could face heavy fines.</p> <p>Be honest about your business deductions in general. Don't try to write off an expensive meal if you only spent two minutes during it bragging about the success of your business. That doesn't count as a business expense.</p> <p>Remember, too, that deducting something doesn't make it free. It just means you'll be paying a bit less for it. If you spend, say, $1,000 on new office equipment, your deduction &mdash; depending on your tax bracket &mdash; means you might only pay $750 for it. Don't treat tax deductions as an excuse for overspending. (See also: <a href="http://www.wisebread.com/7-surprising-tax-deductions-you-might-miss?ref=seealso" target="_blank">7 Surprising Tax Deductions You Might Miss</a>)</p> <h2>4. Goodbye, 1040EZ</h2> <p>Before starting your own business, you might have filed your income taxes using the 1040EZ or 1040A tax forms. Once you are running your own business or side gig, your tax form will become more complicated.</p> <p>Most people starting new businesses operate these enterprises as a sole proprietorship. When you are filing in this category, you'll have to file your taxes with form 1040 while also including either a Schedule C (Profit or Loss from Business) or Schedule C-EZ (Net Profit from Business).</p> <p>If you are responsible for paying self-employment tax, you'll also have to include a Schedule SE.</p> <h2>5. You'll probably need tax help</h2> <p>Odds are high that you'll need help from an accountant or tax-prep firm when filing your income taxes as a business owner. Taxes simply get more complicated, and making a tax mistake can cost you big in the form of missed deductions or penalties.</p> <p>Hiring an account or tax-preparation firm isn't free. But it's usually an important investment for business owners to make. (See also: <a href="http://www.wisebread.com/14-reasons-why-an-accountant-is-worth-the-money?ref=seealso" target="_blank">14 Reasons Why an Accountant Is Worth the Money</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-how-your-taxes-will-change-after-you-start-a-small-business">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-freelancers-and-side-giggers-need-to-know-about-income-taxes">What Freelancers and Side Giggers Need to Know About Income Taxes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-best-states-to-start-a-new-business-in">4 Best States to Start a New Business In</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-fund-your-new-business-without-borrowing-a-dime">4 Ways to Fund Your New Business Without Borrowing a Dime</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/101-tax-deductions-for-bloggers-and-freelancers">101 Tax deductions for bloggers and freelancers</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Taxes 1049ez deductions estimated payments schedule c self employment side jobs small businesses tax changes Mon, 10 Apr 2017 08:30:17 +0000 Dan Rafter 1922317 at http://www.wisebread.com Most Popular Ways Americans Spend Their Tax Refunds http://www.wisebread.com/most-popular-ways-americans-spend-their-tax-refunds <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/most-popular-ways-americans-spend-their-tax-refunds" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-492675012.jpg" alt="Here are the most popular ways Americans spend their refunds" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to the IRS, the <a href="https://www.irs.gov/uac/newsroom/filing-season-statistics-for-week-ending-feb-26-2016" target="_blank">average tax refund in 2016</a> was $3,053. While we here at Wise Bread generally advise against giving the government a free loan all year, there's no arguing that a tax refund can go to good financial use. But how, exactly do most Americans spend their newfound chunk of change?</p> <h2>What do most people spend on?</h2> <p>Fortunately, the majority of people use their tax refund to pay down debt, save, or invest. In a poll conducted by GoBankingRates, 41 percent of people deposited the money into their savings account and 38 percent used it to pay off debt.</p> <p>More than half of millennials plan to use their refunds for savings and debt repayment. This is a major change from previous years, when the tendency for this age group was to spend on splurge purchases (clothes, video games, new shoes, etc.). Gen Xers are the second group behind millennials most likely to use their refund for debt repayment, and younger Gen Xers (35&ndash;44) are the second most likely behind boomers to fund a vacation. While baby boomers age 65+ are less likely to receive a refund, they are currently more likely to spend it on a vacation or splurge purchase than other generations. Despite more boomers spending on themselves, 42 percent still allocate their refund to savings.</p> <h2>Smart ways to use your refund</h2> <p>If you're getting a tax refund this year, you might be tempted to splurge. While there's nothing wrong with treating yourself once in awhile, your money would be better spent in these smart ways.</p> <h3>Boost your emergency fund</h3> <p>You should have three to six months' worth of expenses saved for a <a href="http://www.wisebread.com/a-step-by-step-guide-to-creating-your-emergency-fund?ref=internal" target="_blank">financial emergency</a>. If your savings account could use some padding, this is the perfect time to save without feeling the burn. Your future self will be grateful for your savviness. (See also: <a href="http://www.wisebread.com/50-smart-things-to-do-with-your-tax-refund?ref=seealso" target="_blank">50 Smart Things to Do With Your Tax Refund</a>)</p> <h3>Pay down debt</h3> <p>According to a GoBankingRates survey, the top source of financial stress for Americans is paying off debt. Fortunately, your tax refund can help ease that stress. Consider using the money to make an extra mortgage or student loan payment, or help tackle your <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=seealso" target="_blank">high-interest credit card debt</a>. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">Fastest Way to Pay off $10K in Credit Card Debt</a>)</p> <h3>Invest it</h3> <p>If you already have an emergency fund to fall back on, then consider using your refund to pad your retirement accounts or other investments. You can also begin diversifying your portfolio to mitigate risk and potentially increase your returns.</p> <h3>Invest in yourself</h3> <p>If you've considered taking classes, focusing on your hobbies, getting in shape, or starting a small business, then it might be worth using your refund to fund these ventures. By investing in yourself, you'll continue benefiting from the refund over time.</p> <h3>Make small home improvements</h3> <p>Have you been putting of small fixes around the house? It's time to tackle them now before they turn into a bigger problem. Simple upgrades are not expensive, and can result in a higher resale value and future tax benefits. (See also: <a href="http://www.wisebread.com/10-cool-diy-home-improvements-for-20-or-less?ref=seealso" target="_blank">10 Cool DIY Home Improvements for $20 or Less</a>)</p> <h3>Donate it</h3> <p>If you're feeling financially secure in your own life, consider paying the funds forward. Donating your refund to a worthwhile charity ensures that the money is going to great use. It can also reduce your taxable income for the next tax season. (See also: <a href="http://www.wisebread.com/can-i-write-it-off-as-charity?ref=seealso" target="_blank">Can I Write It Off as Charity?</a>)</p> <h3>Treat it like a paycheck</h3> <p>Figure out how much of your paycheck you allocate to certain expenses each month (food, mortgage, gas, etc.) and treat your tax refund the same. Don't forget to include any debt payments. Just like a typical paycheck, you might even have a small amount leftover to use for something fun.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/most-popular-ways-americans-spend-their-tax-refunds">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/beware-these-6-phony-irs-calls-and-emails">Beware These 6 Phony IRS Calls and Emails</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-get-audited-how-your-side-gig-needs-to-handle-taxes">Don&#039;t Get Audited! How Your Side Gig Needs to Handle Taxes</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-cutting-your-losses-can-save-you-more-than-money">How Cutting Your Losses Can Save You More Than Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-places-to-get-free-tax-advice">6 Great Places to Get Free Tax Advice</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes debt repayment investments IRS saving money spending habits splurges tax refunds Mon, 03 Apr 2017 08:30:18 +0000 Andrea Cannon 1917304 at http://www.wisebread.com Why Tax Day Is April 15 and Other Weird Financial Deadlines http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-tax-day-is-april-15-and-other-weird-financial-deadlines" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-175261184.jpg" alt="Learning why Tax Day is on April 15" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>April is one of the finest months of the year. The sun breaks through the clouds, the cherry blossoms bloom, and the promise of warm weather beckons.</p> <p>So of course, the IRS, in its infinite wisdom, decided to place Tax Day right smack dab in the middle of all of this riotous spring beauty.</p> <p>Though I have always believed that the placement of Tax Day in mid-April is proof of the federal government's grim sense of humor, there is actually some method to their madness &mdash; both for this, and all other seemingly arbitrary financial dates and deadlines.</p> <p>Here are the reasons behind some of the most head-scratching financial dates in the United States.</p> <h2>Why is Tax Day on April 15?</h2> <p>Paying federal income taxes is actually a relatively new phenomenon in American history. The first time an income tax was levied on Americans was in 1861 in order to help pay for the Civil War. In 1872, the law surrounding the tax was repealed after opponents successfully argued that federal income tax was unconstitutional.</p> <p>Fast forward to February 3, 1913, when Congress adopted the 16th amendment to the constitution, which allows for federal income tax. Congress also determined the first due date for filing 1913 taxes would be March 1, 1914 &mdash; one year and a couple of weeks later. March 1 offered an easy-to-remember due date that gave citizens just over a full year to get used to being taxpayers, gather up their receipts into the early 20th century version of a shoe box, and file their first returns.</p> <p>Then in 1918, the due date was moved to March 15, for reasons that no one in Congress saw fit to explain or write down.</p> <p>Congress again moved the filing due date in 1955, this time to the now-familiar date of April 15. According to the IRS, the date change helped to spread out the tax season workload for IRS employees.</p> <p>However, there may be a slightly more mercenary reason for the date change: According to Ed McCaffery, a University of Southern California law professor and tax guru, by the mid 1950s, the income tax was applying to increasing numbers of middle class workers, which meant the government had to issue more refunds. &quot;Pushing the deadline back gives the government more time to hold on to the money,&quot; McCaffery claimed in Fortune magazine. And the longer the government holds onto taxes that have been withheld but are destined to be refunded, the more interest it earns on the money.</p> <h3>Okay, so why is Tax Day on April 18 this year?</h3> <p>If you look at an April calendar for 2017, you'll see that April 15 falls on a Saturday this year, which means we get a little extension, since Tax Day can't fall on a weekend. However, you might be confused as to why we get an extension to Tuesday, April 18, instead of Monday, April 17.</p> <p>The reason for our extra day is a Washington, D.C. holiday known as Emancipation Day. Though only Washington, D.C. observes this holiday, a federal statute enacted decades ago states that holidays observed in our nation's capital have a nationwide impact.</p> <h2>Why was 65 chosen as full retirement age for Social Security?</h2> <p>When the Social Security Act was officially adopted in 1935, the age of 65 was chosen as the standard retirement age for beneficiaries. Why was that age chosen as the proper time for full retirement? Why not 63 or 67 or 70?</p> <p>There are a couple of persistent myths out there about this choice, but they are nothing more than misconceptions:</p> <h3>Myth #1: People would die before collecting</h3> <p>The age of 65 was chosen so that people would not live long enough to collect benefits. According to life expectancy actuarial tables from 1930, the average life span was 58 for men and 62 for women, which would make it seem as if Social Security was designed to never make a payout to beneficiaries. However, this myth stems from an unfamiliarity with actuarial tables, which offer an average of <em>all </em>life spans, starting from birth. High infant mortality in the 1930s lowered the overall rate of life expectancy, but anyone who made it to adulthood had a much better chance of reaching age 65 and collecting benefits.</p> <h3>Myth #2: Bismarck was 65</h3> <p>The age of 65 was chosen because Otto von Bismarck &mdash; the author of the world's first old-age social insurance program upon which our Social Security program was partially based &mdash; was 65 when Germany adopted his program. This myth is false on several counts. Bismarck was actually 74 when the German system was adopted, and Germany initially set the retirement age at 70. Germany's retirement age was not lowered to 65 until 1916, at which point Bismarck had been dead for nearly two decades.</p> <h3>The truth behind 65</h3> <p>The actual reason why 65 was chosen as the initial full retirement age for Social Security is pretty boring. The Committee on Economic Security, which Franklin D. Roosevelt created to propose Social Security legislation, conducted a comprehensive analysis of actuarial studies, domestic private pension systems in America, and the social insurance experience in other countries. Based upon that research, the committee recommended 65 as the standard retirement age for Social Security.</p> <h2>Why is 59&frac12; the minimum age to take distributions from tax-deferred retirement accounts?</h2> <p>When it comes to tax-deferred accounts like 401(k)s and traditional IRAs, you are not allowed to take distributions until you have reached the magical age of 59&frac12;. Otherwise, you will owe a 10 percent early withdrawal penalty on the amount you withdraw, in addition to the ordinary income tax you'll owe whenever you take a distribution.</p> <p>So why is the IRS asking you to celebrate half-birthdays when you're nearly 60 years old? Congress used the age of 59&frac12; as the earliest withdrawal age because life insurance actuarial tables consider you to be 60 years old once you have reached the age of 59 and six months &mdash; and at the time that the rules were put in place, 60 was a relatively common age for retirement.</p> <h2>Why must you begin taking required minimum distributions from tax-deferred retirement accounts at age 70&frac12;?</h2> <p>Of course, the IRS is not just about picking random minimum ages for when you <em>can </em>take distributions from tax-deferred retirement accounts &mdash; they also have a random age for when you <em>must </em>take distributions from those accounts.</p> <p>Since the money in your tax-deferred account was placed there before you paid taxes on it, Uncle Sam does want you to eventually pull the money out again so he can get his cut of the money in the form of taxes. That means the IRS requires each account holder to begin withdrawing money during the year that they reach age 70&frac12;. This is called the required minimum distribution (RMD).</p> <p>But unlike the 59&frac12; rule, 70&frac12; does not actually mean your half-birthday. The IRS makes a distinction between those individuals born in the first half of the year and those born in the second half. If your birthday falls between January 1 and June 30, you have to take your first RMD during the calendar year you turn 70. But if your birthday falls between July 1 and December 31, then you don't officially have to take your first RMD until the calendar year you turn 71.</p> <p>Describing this year as being when you are 70&frac12; is actually shorthand, since some folks will be taking their first RMD the year they turn 70, and some will be taking their first RMD the year they turn 71.</p> <h2>Why does Social Security think New Year's babies were born in the previous year?</h2> <p>Unless you happen to have a January 1 birthday, you might not know about this odd piece of Social Security dating. But according to the Social Security Administration, individuals born on the first of the year are considered to have birthdays in the previous year. So Social Security will group someone with a January 1, 1954 birthday with beneficiaries who were born in 1953.</p> <p>This can actually make a big difference when it comes to some Social Security benefits, particularly when those benefits are eliminated. For instance, in 2015 Congress ended the restricted application strategy for any beneficiary born after 1953. The restricted application let applicants specify which Social Security benefits they did <em>not</em> want to apply for, even if they were eligible for all of them. So, for example, beneficiaries who reached full retirement age could claim a spousal benefit while continuing to let their own grow. Beneficiaries who were born on January 1, 1954 were grouped with those with 1953 births &mdash; which means anyone born on January 2, 1954 had rotten luck in terms of using the restricted application.</p> <p>Why does Social Security extend a year 24 hours past the time the rest of us do? This odd birth year dating occurs because the Social Security Administration groups beneficiaries who have birthdays on the first of the month with beneficiaries born in the previous month. This grouping allows first-of-the-month babies to have a little more leeway when it comes to deadlines and other requirements. In order to be completely fair with the first-of-the-month grouping, January 1 babies are then considered to have been born in the previous year.</p> <h2>The government is not entirely lacking in sweet rhyme and pure reason</h2> <p>The financial dates that we all must adhere to may seem like ridiculous and arbitrary decisions, but there was some thought put into them. Those thoughts might only make sense to the people that made the decisions, but at least we know they weren't throwing darts at a calendar.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-age-milestones-that-impact-your-retirement">6 Age Milestones That Impact Your Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401(k) ages benefits dates distributions finance facts full retirement age IRA IRS social security tax day trivia Wed, 29 Mar 2017 08:00:22 +0000 Emily Guy Birken 1914689 at http://www.wisebread.com Here's How Your Taxes Will Change After You Have a Kid http://www.wisebread.com/heres-how-your-taxes-will-change-after-you-have-a-kid <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-your-taxes-will-change-after-you-have-a-kid" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-520005424.jpg" alt="Couple finding out how taxes change after having a kid" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>There's no question that having a kid will change your life financially. Introducing a new child to your household adds a slew of new costs, but the good news is that the American tax code is written to help families with some of these expenses.</p> <p>The IRS &mdash; yes, that benevolent organization &mdash; offers a variety of tax credits, deductions, and other incentives that could lead to a smaller tax bill when you have a child. But this also makes your taxes more complicated. So here's a review of what your new baby might mean as you file this year's return.</p> <h2>You get to claim an exemption just for having a kid</h2> <p>When you have a child, you can claim an exemption that will reduce your taxable income by $4,050. And for each child you have, you get to claim another exemption. (So four kids represents $16,200 deducted from your taxable income.)</p> <h2>You can also claim the child tax credit</h2> <p>Yes, you get an additional break on your taxes just by adding a member to your family. You can reduce your tax bill by $1,000 for every dependent in your household. This usually includes any family member 17 or under that lives with you, including adopted children, foster children, and even nieces and nephews if you are their primary caregiver. The benefit is reduced once you hit $110,000 gross income if filing jointly, or $75,000 if filing alone.</p> <h2>You can reduce your taxable income by saving for college</h2> <p>The second you have a child, you can begin saving for college and get some nice tax breaks for doing it. The most popular vehicle is called a 529 college savings plan, and many states allow you to deduct contributions from your taxable income. Gains on the investments in a 529 plan also are not taxed. (See also: <a href="http://www.wisebread.com/the-9-best-state-529-college-savings-plans?ref=seealso" target="_blank">The 9 Best State 529 College Savings Plans</a>)</p> <p>You may save money when you eventually send your child to school. As of 2016, it was possible to get a $2,000 Lifetime Learning Credit each year for qualified education expenses, or a $2,500 American Opportunity Credit. There are <a href="https://www.irs.gov/publications/p970/ar02.html#en_US_2016_publink1000255787" target="_blank">some subtle differences</a> between the two credits, which you can learn more about <a href="https://www.irs.gov/publications/p970/ch03.html" target="_blank">at the IRS website. </a></p> <h2>You might take advantage of a health savings account</h2> <p>You and your partner might not worry about health care expenses, but they become more of an issue when you have kids. Many employers offer health savings accounts (HSAs), which allow you to divert some money into an account to pay for health care expenses you might accrue. Any money placed in an HSA is deducted from your taxable income. You may find it's worth contributing to an HSA if your child has health challenges, or if you have a health insurance plan with a high deductible. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>)</p> <h2>You might save less for retirement &mdash; and thus pay more tax</h2> <p>Are you planning to dial back your retirement savings in order to meet the financial demands of a new child? If so, it's important to know how that impacts your tax bill. Any contributions you place in a 401(k) or traditional IRA are deducted from your taxable income, so if you are putting less aside, your tax bill may be higher. Ideally, you'll be able to save at the same rate as always, but if not, be sure to anticipate paying more in tax.</p> <h2>You may pay less tax if you stop working</h2> <p>Many families find that their gross income goes down after having a kid because one parent stops working full-time or altogether. Lower income means lower taxes, and you may even move into a lower tax bracket. (Moving from $80,000 to $60,000 in earned income, for example, means you pay 15 percent in tax instead of 25 percent when filing jointly.) This lower tax helps take the sting out of having less income overall, and in some cases, you may even end up with more take-home pay.</p> <h2>If you pay for child care, you might get a tax break</h2> <p>The IRS allows parents to save money on their taxes if they pay someone to care for their children. This is a great thing for working parents. The child and dependent tax credit offers up to $1,050 for one person receiving care, or $2,100 for two or more. Poorer families can get 35 percent back of any qualifying child care costs.</p> <p>Many parents may save more on their taxes by instead utilizing a dependent care flexible savings account. If your employer offers such an account, you can set aside as much as $5,000 of your paycheck to cover child care costs. Contributions to this account are deducted from your taxable income, thus reducing your tax liability.</p> <h2>If you employ a nanny, your taxes could get complicated</h2> <p>In most cases like the situations above, there are tax breaks to help offset the cost of child care. But if you directly hire a nanny &mdash; as opposed to hiring one through an agency &mdash; you may be considered an employer in the eyes of the IRS. That means a boatload of paperwork, and you're on the hook for things like Social Security, unemployment, and Medicare taxes. So be sure to take all of this into account when researching child care options.</p> <h2>Expanding your home may have tax advantages</h2> <p>When you have a child, you may realize you need to expand your home with a new family room, bedrooms, or other space. The bad news here is that you can't claim the cost of home improvements on your taxes. But, any home upgrades will be added to the cost basis of your home. Thus, you may be able to reduce or even eliminate capital gains taxes when you sell.</p> <p>If you do make upgrades, you can deduct the cost of things to make the home more energy-efficient, such as Energy Star rated windows and appliances.</p> <h2>Adopting a child comes with a big tax break</h2> <p>If you adopt a child, you get some significant tax breaks in addition to the ones listed above. The Federal Adoption Tax Credit gives families a maximum of $13,460 to offset qualified adoption expenses. This can include adoption fees, court fees, travel costs, and attorney fees, among other costs. Parents who adopt a child may also receive additional tax credits from their state.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/heres-how-your-taxes-will-change-after-you-have-a-kid">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-mistakes-new-parents-make">4 Tax Mistakes New Parents Make</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-your-spouse-be-a-dependent-on-your-taxes">Can Your Spouse be a Dependent on Your Taxes?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-miss-out-on-this-easy-way-to-pay-for-child-care">Don&#039;t Miss Out on This Easy Way to Pay for Child Care</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/save-money-with-a-dependent-care-tax-credit-and-fsa">Save Money with a Dependent Care Tax Credit and FSA</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/teach-your-kids-about-money-with-their-holiday-gift-lists">Teach Your Kids About Money With Their Holiday Gift Lists</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Family Taxes adoption american opportunity credit child care children deductions dependents exemptions kids lifetime learning credit parents tax credits Tue, 28 Mar 2017 09:30:33 +0000 Tim Lemke 1913753 at http://www.wisebread.com