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7 Smart Ways To Spend Your Tax Refund

Posted on March 3, 2014 at 1:31 PM Comments comments (19)
An income tax refund can never come at a bad time! The only hard thing about getting "free" money is deciding how to spend it. You could always blow it on some gadget you'll forget about in a month. Or, you can spend your tax refund on something that will benefit you in the long run - like, your finances. If you're due a refund, here are some smart ways to spend it that will improve your credit and reduce your debt.

Putting your refund away for a rainy day is a wise decision. It keeps you from having to use your credit card when you face a financial emergency. Since so many debt situations stem from unexpected expenses, starting an emergency fund will give you some of the protection you need to ward off debt. Without a lump sum to jumpstart your emergency fund, it could take you months to set aside enough money for your emergency fund.

Tired of late notices and debt collector phone calls? Avoiding them doesn't make them go away; it simply prolongs the collection process and damages your credit in the process. Use your tax refund to take care of those late bills. Your credit score will thank you and you'll thank yourself for finally getting rid of annoying collectors.

What do you do when you have an emergency fund and you're current on all your bills? Bring your debt level down by paying off your credit cards. You'll likely see an increase in your credit score and relief in your wallet.

4. Pay off a cash advance or payday loan.
Many people who borrow payday loans can't afford to repay the loan from their regular bi-weekly or monthly pay. Instead of rolling the loan over and paying more fees, get rid of it once and for all with your tax refund. If there's money leftover, start that emergency fund so you don't have to borrow a payday loan again.

5. Make an extra loan payment.
If you have a mortgage or auto loan, each extra payment you make reduces the life of the loan and the amount you pay in interest. Overall, you'll end up paying less than if you hadn't made any extra payments. Make sure you indicate that the extra payment is for the principle on the loan. Otherwise, the payment would be applied to your future payment, reducing both the principle and interest and accelerating your payment due date.

6.Take care of a collection account.Unpaid collections are one of the worst things for your credit score. As long as your collection remains unpaid, you'll have a hard time getting approved for new credit cards and loans. A paid collection won't necessarily boost your credit score, but it will make it easier to get new applications approved.

7. Treat yourself, but don't overdo it.
How fun would life be if you only spent your money on bills? It's ok to spend money leisurely, but remember, there's a balance. The key is to take care of your responsibilities first, then enjoy your money second. Before you spend a dime of your tax refund, make a plan for how you're going to spend the money. For example, you might put 80% of it toward your debt and other finances and spend 20% on yourself.

Why you need to check your credit report

Posted on March 1, 2014 at 3:38 PM Comments comments (21)
Ed note: Your credit score may just seem like another ordinary number, but there is actually quite a lot to learn from your credit report. Meg Favreau of Wise Bread looks at some of the most revealing things you’ll find....

Your credit report is one of the most powerful financial tools you have access to, and checking your report regularly can help you do everything from buy a house to catch a criminal. If you’ve never checked your credit report before, you might wonder why you need to now — after all, you’ve gotten along fine without it. But read on for reasons why you need to check your credit report, plus information on how to do it and how to resolve errors.

You Need to Know How You Look to Others

Your credit report is more than just a glimpse of your financial health– it’s a way to see how other people see you. Financially speaking, do you look like someone a landlord would want to rent an apartment to? Someone who banks would want to give a loan to? If not, it’s time to make some financial changes, including paying all your bills and debts on time and in full every month. It’s difficult to give an exact number to shoot for, since different lenders can use different scoring systems. But credit rating agency Experian notes that “a score above 700 usually suggests good credit management.”

You Need to Make Sure Your Identity Hasn’t Been Stolen

Often, when we think of identity theft, we think of someone stealing our credit card numbers. But people can also open new credit cards in your name, which might be more difficult to find out about. When you look at your report, make note of any accounts you don’t remember opening.

You Need to Check If You Missed Any Loan Payments

If you missed a payment on a loan and didn’t realize it, this will show up on your credit report – alerting you that you need to start paying again.

You Need to Look for Errors

Occasionally, you may have an error on your credit report — it does happen, and you want to catch errors before they seriously damage your credit. Make sure all of your information is correct and up to date, that your payment history is accurate, and that any accounts you’ve closed aren’t still marked as open.

How to Get Your Credit Report

You can get your credit report for free once a year from the three federally authorized credit reporting agencies. If you want to really keep an eye on your financial health throughout the year, get your report from one of the agencies now, the next one in four months and the third four months after that.

What to Do If There’s a Problem With Your Credit Report

If something seems wrong, contact both the agency that you got your credit report from and the creditor in question. If you run into problems, you can also file a credit reporting complaint with the Consumer Federal Protection Bureau.

Starting a Business?

Posted on November 22, 2013 at 12:53 PM Comments comments (27)
Starting a new business on your own can be both intimidating and rewarding at the same time. Hopefully; with a solid business plan and proper guidance those stepping-out on their own will be successful. To make this process a little easier, here are some basic tax considerations a new business owner should take into account.
Choosing Your Type of Business Entity
One of the first decisions that you will have to make is to choose the type of entity that you wish your business to operate as. Your choice plays a factor in your personal liability for the business’ activities and how taxes are imposed on the business and yourself as the owner. The most common forms of business are the
  • Sole Proprietorship – subject to income tax at the individual level, subject to the self-employment tax
  • Partnership – subject to income tax at the individual level, subject to the self-employment tax
  • Corporation – income earned by a corporation that has not elected to be an S corporation is taxed at the corporate level; with shareholders of the corporation being treated as employees subject to payroll taxes on their wages.
  • S corporation- subject to income tax at the individual level, shareholders treated as employees subject to payroll taxes
Each form of business has its own advantages and drawbacks; so consulting a tax professional as to which is best for you is always advisable.
Many individuals choose to operate their businesses as a limited liability company (LLC). The IRS will by default treat an LLC as either a sole-proprietorship or partnership, depending upon the number owners of the business. Alternatively, an LLC can elect to be taxed as a corporation or S corporation.
Obtain an EIN
If you form a partnership or corporation, or plan on having employees, you will be required to obtain an employer identification number (EIN) from the IRS. Applying for an EIN is free and easily done via the IRS website. The IRS also provides an interactive tool that can help you determine whether your business will be required to obtain an EIN. Even if you are not required to have an EIN, getting one may be advantageous for your business if you would prefer to not give out your personal social security number to customers or vendors.
Keep Good Records
One of the most important steps in starting a business is to establish a solid recordkeeping policy. Not only is good record keeping required in order to prove items of income and expense reported on your business’ tax return, but they also are crucial for monitoring the progress of your business.
Quality records can show whether your business is improving, which items are selling, or what changes you need to make.  With any business, quality records can increase the likelihood of business success.
Deductible Costs of Starting Your Business
With most new businesses the old saying “you gotta spend money, to make money” will apply, and how expenses you incur before bringing in revenue is treated depends upon the type of expense.
  • Currently, the IRS allows businesses to deduct up to $5,000 of certain start-up expenses in the year the business begins (subject to limitations), even if the expenses were incurred in a prior year.
  • Expenses that qualify are those that would be deductible if they were paid after the business actually began.
  • Amounts paid to acquire capital and intangible assets, such as equipment or franchise fees that a business would have to depreciate over a period of years, do not qualify for this deduction.
  • If your eligible start-up costs exceed the amount allowed for deduction, you will have to “capitalize” the excess expenses and will recover those costs via an amortization deduction ratable over a period of 15-years.
In addition to eligible start-up costs, corporations and partnerships are allowed to deduct up to $5,000 of organizational costs in their first year of activity. These include legal fees, filing fees, and other costs directly related to the formation of partnership or corporation business entity.

How Will the Government Shutdown Affect Taxes

Posted on October 14, 2013 at 10:34 AM Comments comments (18)
What does the government shutdown mean for those who are finishing up their taxes?
  • For the 12 million taxpayers who filed an extension the deadline remains October 15. E-filing the return is the best way to ensure timely processing in the event there is a prolonged time before the government is fully operational. Write your post here.
Will there be delays for e-filed returns? Or for direct deposit?
  • For taxpayers who recently filed, including the millions of expatriates who live or work abroad, the IRS has started processing their return.
  • Tax refunds will not be issued until normal government operations resume.
  • Since Professional Freedom Tax Service office clients e-file their returns, a shutdown should not impact the processing of their returns.
What if you mail your returns or request a paper check refund?
  • Some returns must be mailed in: for example those with the adoption credit, some foreign filing forms etc.
  • If you have to mail in your return or requested a paper check you could experience delays in processing. The IRS has not issued guidance on how long the wait could be. The Postal Service will remain open.
Will there be anyone from the IRS to answer my question?
  • Approximately 10% of the IRS workforce will still be working so it could be difficult to get answers from them. They have stated there will be longer wait times for the IRS’s 1-800-829-1040

Top 10 most taxed U.S cities

Posted on August 22, 2013 at 3:47 PM Comments comments (15)
While federal tax rates stay the same regardless of where the taxpayer lives, the same is not true for state and local taxes. The tax burden of taxpayers living in different parts of the United States varies due to differences in state and local income taxes, property taxes, sales taxes and automobile taxes. So how does your city stack up?
Drumroll please…
The top ten cities* with the highest tax burden for a hypothetical family of three making $50,000 in 2011:
#10 Boston, MA
Paul Revere made his famous midnight ride on horseback here — but today, trading in the horse for a car of your own would cost $303 in taxes per year. The total tax burden for our hypothetical family in Boston sits at 12.2%, or about $6,125 annually.
#9 Burlington, VT
Vermont’s largest city, home to the very first Ben & Jerry’s, was ranked by Forbes as one of the prettiest towns in America — and we’re sure its 42,500 residents agree. But at a 12.3% tax burden ($6,150 per year), it’s #9 on our list of the most taxed cities in America.
#8 Providence, RI
The city of Providence is known for its historic and cultural attractions; it was first settled in 1636 by Roger Williams and was one of the original Thirteen Colonies. As of the 2010 census, 178,042 people lived within the city of Providence — and our hypothetical family paid $6,034 in taxes in 2011. $3,876 was property tax alone.
#7 Louisville, KY
There’s much more to Louisville than just the Kentucky Derby, but while River City’s 741,096 residents enjoy the biggest party in the South, they’re probably not as keen on the 12.7% tax burden ($6,346).
#6 Chicago, IL
The 3rd most populous city in the US is the sixth most taxed. Whether they’re Cubs or Sox fans, our hypothetical family of three forks over $6,412 (12.8%) in taxes every year. That’s a lot of ballpark hot dogs.
#5 Los Angeles, CA
Though inhabitants of the City of Angels owe no income tax, sky-high property tax rates are responsible for the city’s #5 spot. Over $5,100 of our average family’s $6,634 tax bill is property tax.
#4 Columbus, OH
The capital of Ohio was named by BusinessWeek as the best place to raise a family in 2009 — and it’s home to five Fortune 500 companies, including the Limited Brands and Nationwide Mutual Insurance. 787,033 people lived here in 2010. In 2011, our average family of three paid more than $7,200 in state and local taxes.
#3 Philadelphia, PA
This former temporary U.S. capital was home to over 1.5 million people in 2010.
In addition to its rich history and excellent cheesesteaks, Philadelphia also boasts one of the highest tax burdens in the nation. In 2010, a typical family of three would have paid $8,327, or nearly 17% of their income in various state and local taxes.
#2 Newark, NJ
New Jersey’s largest city sits 8 miles west of Manhattan (#14 on the list of most-taxed cities). Our $50K family of three would pay $8,327 per year in taxes, a whopping 18.3% of their household income.
#1 Bridgeport, CT
Connecticut’s largest city is one of NYC’s outlying suburbs, and an average family of three forks over a staggering 24.5% of their income to state & local taxes. That works out to about $12,250, over $10,000 of which is property tax alone.
Okay, so the Northeast is expensive. And for the record, the least-taxed cities on the list were Billings, MT (6.4%), New Orleans, LA (5.7%) and Cheyenne, WY (4.3%).

10 Ways Getting Married Affects Your Taxes

Posted on August 16, 2013 at 2:16 PM Comments comments (176)
1. Filing status. Once you get married, the only filing statuses that can be used on your tax return are married filing jointly (MFJ) or married filing separately (MFS). Your filing status is determined on December 31 of each year, so even though you were not married the entire tax year, you do not have the option of filing as single. Generally, married filing jointly provides the most beneficial tax outcome for most couples. One reason for this is that some deductions and credits are reduced or not available to married couples filing separate returns.
2. Tax brackets. Tax brackets are different for each filing status, so your income may no longer be taxed at the same rate as when you were single. When you’re married and file a joint return, your income is combined — which, in turn, may bump one or both of you into a higher tax bracket.
3. Additional exemption and increased standard deduction. Married couples filing a joint return get to claim two personal exemptions (one for each of you) on the tax return instead of one as when you filed as a single individual. Additionally, the standard deduction allowed on the tax return is highest for married couples filing a joint return. For 2012, single taxpayers are allowed a standard deduction of $5,950 while married couples filing a joint return are allowed a deduction of $11,900.
4. Changing your W-4. Because of the additional exemption and higher standard deduction you are allowed to claim on a joint tax return, it may be wise to change your Form W-4 with your employer to reflect these changes.  Claiming an additional allowance and/or changing withholding to the “married” rate on your Form W-4 means that less taxes are withheld from your pay.
5. Buying your first home or selling one. Once you get married, your combined incomes may allow you to purchase your first home or you may choose to sell individual homes owned before the marriage. When you own a home, interest you pay on your mortgage is deductible on your tax return as an itemized deduction. If you’re selling a home, the amount of gain that can be excluded from income doubles from $250,000 to $500,000. Be cautious, though: if only one of you owned the home before the marriage, the $500,000 exclusion applies only if you both live in the home at least two years.
6. Itemizing vs. claiming the standard deduction. When you file your return each year, you have to determine if it is more beneficial for you to itemize versus claim the standard deduction. Once you are married and own a home, many people find that it is more advantageous to itemize their deductions — typically because deductions such as mortgage interest result in a higher total deductible amount than the standard deduction.
7. Children. A dependent standard deduction is allowed for each child claimed as a dependent on the tax return. This amount is generally $3,800 per child (for 2012).
8. Gift taxes and estate planning. Spouses are allowed to give unlimited gifts of cash or other property to one another free of gift taxes. This provision has important implications for estate planning purposes, so be sure to get your estate plan redone once you get married.
9. Name change with Social Security. Because your return is filed under your Social Security number (SSN), it is important to ensure that the Social Security Administration has been notified of any name changes that take place. The SSA must process the change in the system and relay that information to the IRS before filing your return. You should wait to file your return until after the name change process has been completed to avoid any complications that could arise if the name on the return does not match the SSN on file with SSA.
10. Marriage penalty. A marriage penalty exists when two individuals filing a joint return pay more tax than the sum of their individual tax liabilities calculated as if they were filing as single taxpayers. One reason this occurs is when the MFJ income tax brackets and standard deduction are not equal to twice the single income tax bracket and standard deduction. Under current law, the marriage penalty is partly alleviated because the lower income tax brackets (10% and 15%) and standard deduction for MFJ are exactly double that of single individuals. However, that may not be the case after 2012 as the provision providing for relief from the marriage penalty is set to expire. At this time, it’s unclear if Congress will extend the relief.

Affordable Beach Getaways

Posted on August 13, 2013 at 4:11 PM Comments comments (48)
Here is a list of the top 3 cheapest beach destinations in the U.S.
 #1 Myrtle Beach, SC
Situated along the Grand Strand, Myrtle Beach tops the list with its affordable lodging and restaurant options. With so many beachside condos and timeshares, there are plenty of great deals for those looking for a beach vacation. For as low as $120 per night in high season, guests can book a 2-bedroom condo at the Ocean Creek Resort. Many timeshare resorts also offer summer specials like complimentary breakfast, free nights and other savings.
Myrtle Beach also offers plenty of dining options for the budget conscious. The Boathouse Waterway Bar & Grill has a great menu, with items ranging from $3-14. Patrons can grab a bite by the deck while enjoying live music, courtesy of the free concert series that runs through September.
#2 Naples, FL
With many of the Gulf states still recovering economically from the 2010 Deepwater Horizon oil spill, the area offers great travel deals during the summer months. While Naples has a reputation as a ritzy town, hotels are incredibly affordable. Only in Naples can you stay at an upscale Waldorf Astoria property for under $129 per night in the summer. The quaint Bayfront Inn on 5th Ave. can be booked for under $100 per night.
In terms of restaurants, First Watch gets rave reviews for its breakfast selection, moderately priced at under $10. For a great burger, head to Brook’s Gourmet Burgers and Dogs, which has a vast selection of All-American fare for under $10.
#3 Morro Bay, CA
This waterfront city is as no-frills as it gets, but it more than makes up for it with stunning scenery. With beachfront hotels like the Bayfront Inn starting as low as $110 per night, this is a great little getaway for those looking to keep it low key.
Local eateries like Frankie and Lola’s get high marks for low prices and delicious food. For a great atmosphere and moderately priced dining experience, STAX Wine Bar & Bistro is also an excellent choice.

True Cost of Being Single

Posted on August 13, 2013 at 4:00 PM Comments comments (128)
Ed Note: We don’t often think this way, but our relationship status is more than just a detail on our Facebook profile – it’s also an important part of our tax forms. Whether you’re single or married can make an impact on the financial benefits you are entitled to, and being single doesn’t always prove to be the most finances-friendly option.  Kristina of DINKS Finance, blogger and former financial planner extraordinaire, helps out with some financial tips for singles.
When you first meet someone, do you look at their left hand to see if they are wearing a wedding ring? I know that I do. For some unknown reason, we are fascinated with people’s relationship status. But we’re not alone – even Uncle Sam wants to know whether we’re single or married. And if you’re single, you might be paying more than you would in a relationship.
Benefits for married couples
In the eyes of an employer, single people have a higher turnover risk than a married couple with kids. If someone has no commitment to a family, they don’t need to provide for anyone but themselves.  They can decide to leave their job at any time, and this makes employers nervous because it costs thousands of dollars to hire and train an employee. Being married, on the other hand, implies stability, which is then rewarded by tax breaks and fiscal benefits.
This isn’t the best situation for single people as they have only one income and don’t get to enjoy the fiscal benefits and tax deductions that married people receive.
If you are a married couple in a dual income household and you file joint taxes, you have the benefit of investing in a spousal IRA subject to certain limitations. This allows the higher earning spouse to contribute into a retirement account in their spouse’s name and receive the individual $5000 tax deduction twice. That’s a quick $10,000 reduction of taxable income for married couples who file joint taxes and max out their retirement accounts each year.
Another tax benefit of being married is the option to transfer your entire estate to your spouse completely tax-free. If an estate is being transferred to anyone other than a spouse, it may be subject to estate taxes at death.
Save money on your single expenses
Singles don’t necessarily enjoy all the benefits that married people do, but don’t worry; there are ways to save money in your singlehood by following these simple tips:
Max out your retirement accounts. Contributing to a 401(k) plan provided by your employer allows you to reduce your taxable income while also adding to retirement savings.  Some employers may also offer a Roth 401(k) plan.  This type of plan does not give you a tax deduction when you put money into the account, but all money coming out of a Roth 401(k) during retirement will be tax-free.  In other words, your earnings in the Roth 401(k) plan will grow tax-free.
Give full disclosure to your tax preparer. Your tax preparer knows all the personal loop holes and available deductions for singles. When you go and visit your preparer in April, tell them everything about your past year; even if you don’t think it’s relevant to your taxes they may be able to find a deduction.
Keep track of all your expenses throughout the year from your cell phone bill and medical receipts to the cost of your public transportation and tuition. Your tax preparer may be able to find tax deductions in the most unusual places, so tell them everything.  If you are in school – even part time – you are allowed to deduct up to $4000 of all undergraduate expenses including the cost of tuition, books and other scholastic materials or may be able to claim an education credit of up to $2,500.
You should also keep a record of all your medical expenses throughout the year because if you have expenses that were not refunded by your insurance company, then you can deduct them if the total amount is generally more than 10% of your Adjusted Gross Income (AGI Line 38 on Form 1040).

Changes in Technology in Business

Posted on July 30, 2013 at 12:08 PM Comments comments (37)
The changes in computer, information and communication technology are influencing all aspects of the business world, from marketing and networking to research and development. Understanding and utilizing the advancements in the technology industry are vital for any business owner, worker, or investor if they want to continue growing their business and attracting new customers and clients.
  • Advancements in mobile technology allow employers and employees to communicate in newer, faster ways. Laptops, tablet computers and mobile devices like PDAs keep workers constantly connected, raising networking to another level. Companies have access to their clients and customers on-line and vice versa, increasing the frequency and speed of communication, and making companies more available to their customers.
  • By utilizing the connectivity offered by changes in technology, businesses can easily keep customers and clients up-to-date with the latest information and news. They can also use this access to conduct faster research on what clients are looking for, leading to more rapid business development. Many businesses are already using social networking tools like Facebook, Twitter and LinkedIn to stay in constant contact with their customers and learn more about how they can better their company.
  • Speed is key in both the world of business and technology. Companies are constantly developing their products and services in the hopes of reaching their desired audience first. The changes in all forms of technology today allow workers to communicate with one another and customers from all around the world quickly and easily. Advancements in communication technology in particular opens up more job opportunities, as many companies are allowing their workers to be more mobile, and a potential employee may not need to live in a certain place in order to qualify for a job. It also allows smaller businesses to compete with big business, helping them find customers outside of their neighborhood.
  • Technological advancements are already having a large impact on business marketing, as most companies have recognized the value of having an updated website and other on-line resources. As changes in technology allow the Internet to become more interactive, businesses will have the opportunity to interact more directly with their fellow employees, their competition and their customers. This change could help the business world become more transparent, leading to growth and development that will benefit workers and anyone who needs the services they provide.
Expert Insight
  • Changes in technology and their effect on the business world can be viewed from a few different perspectives. According to a study conducted by the Center for Information Systems Research at the Massachusetts Institute of Technology, three distinct perspectives include trying to improve a business or company, trying to surpass the success of competitive companies and trying to decide whether or not to join a specific business or industry.

Steps to form a 501 C3 Organization

Posted on July 11, 2013 at 11:28 AM Comments comments (17)
First, does the Organization have an Appropriate Legal Form? The organization must be organized as a trust, a corporation, or an association.
When you incorporate the organization’s articles it must contain certain provisions.  In addition, an organization's assets must be permanently dedicated to an exempt purpose.  This means that if an organization dissolves, its assets must be distributed for an exempt purpose described in section 501(c)(3), to the federal government, to a state or the local government for a public purpose.  To establish that an organization's assets will be permanently dedicated to an exempt purpose, the organizing document should contain a provision insuring their distribution for an exempt purpose if the organization dissolves.
Second, the organization must apply for a EIN (Employer Identification Number) You can apply for an EIN online at or by completing Form SS-4. You may also obtain an EIN via telephone, by calling 1-800-829-4933.
Next, The organization must have an exempt purpose, it must be charitable, religious, scientific, literary, and/or nonprofit organizations.
Has the organization existed for at least three tax years?
If not, then new organizations must give financial statements for the current year and proposed budgets for the next two years, including a detailed breakdown of revenue and expenses. A section 501(c)(3) organization provides this information on Part IX, Form 1023 which will be discussed below.
Once the above three are complete, now you must complete and sign the correct application and attached exact copies of the organization's organizing documents .
To be recognized as exempt, an organization must submit a completed, signed, and dated application. If an organization is seeking recognition of exemption under section 501(c)(3) of the Code, it must complete and file Form 1023, Application for Recognition of Exemption.
Please note. Organizations described in section 501(c)(3) are commonly referred to as charitable organizations.
The organization must not be organized or operated for the benefit of private interests, and no part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual.
Please note. A user fee is required for applications. User fees are discussed in part XI on Form 1023.
If you have completed everything above, then you are now ready to submit the organization's completed application to the following address:
Internal Revenue Service
P.O. Box 12192
Covington, KY 41012-0192
Applications shipped by express mail or delivery service should be sent to:
Internal Revenue Service
201 W. River center Blvd.
Attn: Extracting Stop 312
Covington, Ky. 41011