You probably never thought about opening a HSA as a way to diversify your savings accounts, however, it’s great for this. When you’re considering different kinds of savings accounts, you might want to look at the HSA, along with IRAs, CDs, and even foreign currency savings account. Each have their own advantages. The HSA offers a variety of tax advantages, and can help you put aside funds for medical expenses too. Ultimately, however, the HSA account is tied to your health insurance, even though it is not itself health insurance. You have to buy that separately. It’s a way for business owners and other self-employed professionals to save away for potential medical bills, before they happen. If that never happens, you can still withdraw the money upon retirement without penalty, making it a potential retirement savings account too.
(more…)

Instant gratification is a hallmark of American culture, but it’s sometimes best to wait, especially when getting a tax refund. Refund anticipation loans prey on people who think they can’t wait another minute after being done with their taxes to get their refund check. Instead of getting their money directly from the government, a tax preparer offers an immediate loan and access to cash right away, secured by the tax refund that is coming. Refund anticipation loans come at a very high cost, with interest rates that average 115%. Instead of educating consumers on the real options they have for getting a quick refund, tax prepares will promote a refund anticipation loan so that they can make a quick buck too.

(more…)

Tax time is here and for some lucky folks, that means a nice tax return! What can you do with a bit of extra cash? Here are the top 5 ways to use your tax refund and have some fun too!

1. Become an Angel Investor

You may not have huge loads of cash, like famous angel investors, but what you do have can help someone start a business. There are numerous sites that will help you fund social or business projects worldwide. Some sites, like Prosper.com, will allow you to lend your money to others for a specific purpose and then gain interest on that money. Other places, like Kiva.org, aren’t commercially oriented to provide a large return in interest, but they will make you feel good for helping a worthy cause.

(more…)

There’s been a lot of talk of “strategic defaults” on home loans. These are loans where the buyer may have the money to continue paying the mortgage, but their home’s value has plummeted so much that they’ll never recoup their losses. Average house prices in 2009 decreased, and in some foreclosure prone areas a home may have lost from 30 to 50% in value. Thus, homeowners faced with that bad news opt to walk out of the mortgage, default on the loan, and start over – making the bank take the financial hit for the loss is home values. Is this really smart? Before you consider taking such drastic measures, there are some things you may want to consider first.

What Will It Do To Your Credit?

In a society that increasingly relies on a good credit score to determine your trustworthiness, a strategic default may still leave a blight on your credit record. You may have difficulty obtaining loans for cars, a new home, and even getting a job as some employers now check your credit scores. Unless you’re independently wealthy, a strategic default is going to have a dire impact on your ability to get future financing on many things.

Will You Owe Taxes?

Maybe the lender will stop coming after you for a monthly payment, but the IRS may start to hound you for the difference in what you owe and what the bank paid at auction for your home. If you borrowed $250,000 and the house was valued at $200,000 and sold at auction, even if it was to the bank that issued the mortgage, you may have a deficit of $50,000 that can be viewed as income by the IRS in some states.

Watch Out for Deficiency Judgments

In addition, the banks or other collectors may try to seek deficiency judgments in court, causing you to not only undergo a foreclosure, and later a bankruptcy, to keep from losing everything. Even if you agree to let the bank keep the home, you must get it in writing that the account is settled in full. Otherwise, if the deficiency amount is sold to collectors you will continue to be hounded until that amount is either paid up or written off in bankruptcy.

Seek Legal Counsel

Even a decision that seems right can have vast implications going forward. If you’re considering foreclosure, always seek legal advice first to keep from being surprised later on. Make sure you understand the tax and debt ramifications of such a move, before opting to just simply walk out on your mortgage. It could be that it’s a better idea to hold onto the property five to ten more years and then sell it, once the market improves in your area, versus waiting seven years for a blot on your credit score to clear. Once you understand all the impact this decision will have on your future financial security, you will be more confident that the decision you make is the best for you and your family, and not just an easy out of a tough, and somewhat temporary, situation.

Many millions of Americans are out of work, and many are claiming unemployment insurance. While it’s a wonderful benefit to have when times are tough, it may not be clear to those receiving it that it is taxable income. Unlike current salaries that automatically deduct your owed taxes from your paycheck, unemployment insurance often requires that you make estimated tax payments to cover any shortfall in owed taxes the following year. This can be a difficult concept for people who have never had to file an estimated tax in their entire lives. Many simply fail to do so and then they get hit with a large tax bill the following year.
Be aware that you will owe taxes on unemployment insurance. How much you owe is what you really need to determine right off the bat. If you are married, and filing a joint return, try to estimate what your total income is and what deductions you’re allowed, to determine ahead of time how much you might owe. You can either choose to pay estimated taxes if you think you will owe at the end of the year, or decrease the withholdings on your spouse’s paycheck to help you at year’s end. File an estimated tax form 1040-ES or have them withdrawn automatically from your unemployment checks, by requesting that to your local unemployment office.

(more…)

Tax law is very complicated and every year Americans make errors that are in no way malicious and can be easily avoided. These errors are often a result of silly goofs that we miss when we are overwhelmed with the many laws and rules put into place to guide this process. When we decide to do our taxes on our own, these mistakes can lead to inquiries about our filing, often easily resolved, but a pain nonetheless.

We must choose the correct status when filing. If we are married by the end of the year, we must file as a married couple, whether jointly or separately. Just because we were single at the beginning of December does not mean that we are to file that way. Claiming the wrong status can exempt us from the earned-income credit and many other great deductions to lower our tax burden.

When we have completed the forms, we must always double-check to make sure we have written or inputted our Social Security number correctly. The wrong number can result in your credits and deductions being taken from you, so make sure that the numbers you put for dependents matches what is on the Social Security card as well. Also, make sure you use the correct form for reporting as the computer will red-flag your return if you have done it wrong. For instance, if you are trying to claim business miles on a Schedule A, make sure you have also filed Form 2106 to make sure you are qualified to do so.

Simple mistakes such as forgetting to sign and date your return can also lead to a slowing of the process. All income must be reported and any domestic workers under your employ must be accounted for as you will have to pay both Social Security and Medicare matches if you have paid them over $1,700 or more in 2009. Make sure you double and triple check your work to make sure everything is in order before hitting the Send key and having it all fall apart on you and result in more bureaucracy.

With taxes  due date just around the corner, it is important to be prepared and not wait until the last minute to get organized to complete the forms for your taxes. Organization can make the process a bit easier and help you save time. Time is something that we just can’t afford to waste, so you should follow a few steps in order to make the process a bit easier on yourself.

Focus on the task at hand. Set aside a block of time to really sort out your forms such as W-2’s and 1099’s if you have had any income from self-employment. Account for all incoming money that would be considered as such and organize them in separate piles. Once you are ready, start filling out the forms with a pencil as will have to erase your figures many times. Make sure you have a calculator handy for calculations as the IRS will red-flag forms with arithmetical errors. This may lead to an audit, possibly face-to-face, but more likely just a quick inquiry and a correction.

Review all the new tax laws. Make sure you are not overpaying and take all the deductions and credits you are entitled to. Although the tax code is a nightmare, you should read through the basics to make sure you are not missing anything that may result in paying less tax overall. Get help by calling the IRS directly. You may have to wait on hold for a bit, but there are many agents available during this time to help taxpayers sort through the mess.

Check for any above-the-line deductions including student loan interested and qualified expenses as well as self-employment taxes that can be deducted. These deductions reduce your AGI, or adjusted gross income, leading to less tax paid. Also, remember to compare your tax savings between standard deductions and itemized deductions to lower your tax as well. Itemized deductions can be greater that standard deductions if you own a home and have many hospital and doctor expenses, so comparing is a must.

As tax season approaches, many citizens are apprehensive and due to the slowing of the economy have decided to attempt to do their taxes on their own. The important thing to remember is that the IRS is not out to get you, but the rules and laws are so complicated that many just do not understand them and end up paying more than their fair share to the government. Using a professional tax preparer such as a CPA, who is well-versed in the tax code may be the best way to get the right amount of money back and avoid any mistakes that may result in the need for a cash advance, but you can study the laws as best as possible and handle your own tax burdens to save money.

There are many deductions and credits that we are not aware of that can lower our overall tax burden, resulting in more money back in our tax refund check. There are many common deductions that are applicable to us that we miss. If we itemize our deductions it is important to remember to take the state sales tax deduction. This will allow us to take either a state and local income tax deduction or a state and local sales tax deduction, which is preferred for those who have no state tax. You can add larger purchases to the standard table amount or use your actual taxes paid if you keep accurate records.

Out-of-pocket charitable contributions are also a deduction that many miss. If you have made food or soup for the homeless, you can deduct the cost of the ingredients as well as deduct the mileage costs to get to and from the destination. If your parents have paid some of your student loans back, you can deduct the interest as the IRS treats that type of payment as if your parents gave you the money to pay the loan down. Refinancing points are also deductible on your taxable income. If you have refinanced your home recently, you can deduct 1/30 of the points you paid in 2009 on a 30-year mortgage.

Check with a tax professional or take a look at the IRS website for tips on how to maximize your return and pay less tax overall. Otherwise, pay to have your tax return completed by a professional to get the most out of your deductions and possible credits.

http:

Paying your taxes is something you must do every year. The unfortunate thing is that the tax rules keep changing, so it may become necessary to hire a tax professional to help you out to pay the right amount. Overpaying or underpaying can result in some problems. Overpaying can result in budget problems as many are living paycheck-to-paycheck and every penny really does count. Underpaying can result in penalties assessed by the IRS as you should pay the correct amount or save an amount that you have estimated for your tax burden to avoid any undo penalties. Payday loans can cover the difference, but they can be expensive and cost quite a bit as well.

(more…)

The IRS is about to take it, if you let them. No it isn’t some federal plot to take more taxes out of your paycheck, it’s actually about tax refunds you may have failed to pick up. The IRS has to hold any monies it owes the general public in refunds for three years after return was due, and after that, they get to keep it. That means that if you didn’t file a 2006 tax return (due April 15th, 2007), and you were owed a refund, then the IRS will have the right to keep it after April 15th, 2010.

There Are Some Exceptions

You won’t be able to claim your refund for 2006 if you haven’t filed your taxes in 2007 and 2008 as well. If you owe the Federal government monies, as in defaulted student loans or child support, it will be automatically deducted from any refund you are due when you file. Other than that, there are very few exceptions for obtaining your refund for a 2006 return that you might have missed filing.

You Could Be Missing Out

Even if you didn’t have any employment withholdings, it doesn’t mean you aren’t due a refund for that year. The Earned Income Tax Credit (EITC) is a way to reward people who worked, but didn’t make very much. You had to make less than 38,348 and have two or more children, have no children and make less than $14,120, or have one child and make no more than $34,001. If you’re not certain if you claimed the EITC, and you were eligible in that year, check with a tax professional or the irs.gov website. You might want to go back and amend your return to get the refund due. Otherwise, if you did not file, you should include it if you are eligible.

How Much Money Are We Talking About?

For 2006, the IRS estimates that 1.3 billion is still left unclaimed. That’s because $1.4 million Americans who could have claimed a refund didn’t. The average unclaimed refund, according to the IRS, is $604. About one-third of the refunds are from people who didn’t file in the states of California, Texas, and Florida.

If you’re one of the people who may have failed to file, you should take the time to do so. Once April 15th, 2010 hits you won’t be able to claim it after that. There is no penalty for filing taxes late if you are due a refund, so there’s no reason not to file, if that’s the case. If you find that you missed the EITC on 2006, go check further on your 2007 and 2008 and see if you were eligible those years, also. If you were, you can file an amendment to those returns and score three year’s worth of tax refunds. As always, check with your local tax expert, or the IRS.gov site to find out more about your taxes, what credits you are eligible for, and how to claim your refund.