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Financial Tax Services

5 New Tax Changes You Should Know About

5 New Tax Changes You Should Know About

While most of us are happy to leave 2020 behind, there’s still one more loose end to tie up. Filing taxes. With the global pandemic, there have been some significant changes to the tax code. So, you need to be up to date on what those changes are.

1.   Tax Bracket Changes

Tax brackets have changed a bit, so depending on your income, your household tax bracket may change. The rates themselves haven’t changed, but the brackets have increased by a marginal amount to cover annual inflation.

As an example, if you are single and made $86,100 in taxable income last year you would be in the 22% bracket. That doesn’t mean that you’re paying 22% on your entire income, just that you are taxed up to that amount. You’re taxed 10% on the first part up to about $14k, then 12% on the next part up to nearly $54k, and 22% on the last approximately $24k.

2.   Boost To Charitable Contributions Allowance

Owing to the Coronavirus Aid, Relief, and Economic Security Act, also known as CARES Act, you will no longer have to itemize the deductions in order to claim charitable contributions. So even if you don’t itemize and simply take the standard deduction for the 2020 tax year, you can still deduct $300 in donations to charity. Additionally, if you do itemize, you can deduct up to your full remaining adjusted gross income, based on your donations to charity.

3.   Stimulus Checks

One of the more widely-known benefits of the CARES Act, was the aid payments of $1,200 and $600. These were sent to millions of Americans. These payments were aimed at giving people some cash relief during the initial and continuing economic shutdowns. While they are not counted as taxable income, they are going to be treated as our old friend the “refundable tax credit” that is basically an advance on next year’s refund.

4.   Unemployment Benefits

This year was hard for a lot of people. Many of them needed to turn to unemployment benefits to try to stay afloat. If you were one of those people, you may have had the option to have income taxes automatically withheld. If so, hopefully, you used that option, otherwise, you will need to pay up come tax time. However, if you do owe, you can pay all at once. You can also split the amount into 4 payments that you would pay as quarterly payments.

5.   No-Penalty Retirement Withdrawals

If you needed it, the CARE Act allowed workers under 59 and a half to pull up to $100k from their 401(k) plan or IRA without any penalty. This does have the negative of counting as income and is then taxed as such. However, if you put it back into your IRA or 401(k) plan inside of three years, that tax can be refunded back.

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Financial Tax Services

5 Tips That Will Make Tax Season So Much Easier

tax season

With the yearly tax deadline rapidly approaching many people are gearing up to try to make the process as painless as possible. This year was hard on a lot of people, so many of them want to at least make the unpleasant business of taxes as easy as they can. Here are 5 great tips to make sure you’re ready to file on time.

1.   Get Organized

This is one of the most significant and powerful things you can do to be prepared for the annual chore. Most times, you can get a lot of pertinent info from last year’s return paperwork. However, if you’ve moved, bought a house, gotten married, or had a baby, then there are additional deductions you may be able to claim. Keep all that paperwork together in a folder for tax time, and file important emails in their own folder to be printed ahead of time if needed.

2.   Get Help

If you need some in-person, face-to-face help, you may be able to get IRS-endorsed help through a program called VITA, the Volunteer Income Tax Assistance program. Low-income taxpayers who earn $57k or less annually, or are disabled, can get help from the tax preparers in VITA. Those in active-duty capacities in the military even have their own tax channels like TurboTax Military or TaxSlayer Military to help them get the most out of filing.

3.   Don’t Forget Your Retirement And Charity Contributions

Make sure that you are aware of your IRA and 401(k) contributions, limits, and overages. You have until the tax deadline to make any IRA contributions that you need to make to catch up, and if you’ve contributed excess, make sure to withdrawal to avoid penalties.

Charity contributions have also changed this year. If you are taking the standard deduction you can automatically claim $300 in charitable donations without needing to itemize. If you itemize you can claim up to your entire adjusted income.

4.   File For Free

The IRS allows any individuals or families with an income below $72k to use the Free File software to both prepare and file their federal taxes. It will also allow the free filing of state taxes in some states. Even those with incomes over the threshold can use the IRS’ Free File Fillable Forms, though they do generally need someone familiar with paper filing.

5.   File For An Extension If You Need It

There’s no sugar-coating it, tax season is stressful. Not only is there a nationwide rush to file in the final few weeks, but that is also when millions of Americans file an extension. A tax filing extension needs to be filed by April 15th. However, it does allow until October 15 to finish filing your return.

There is a catch, however, and any estimated owed taxes by the original tax deadline. If not, they will accrue penalties and interest. If you aren’t sure how much you’ll owe, start by paying what you paid the previous year.

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Financial Insurance

8 Questions To Ask Before Buying Car Insurance

car insurance

Car insurance is one of those things that everyone has to have, but now and then you probably see an ad that makes you wonder if you might be overpaying. So you inevitably shop around, but when you’re getting quotes from various agencies, there are some important questions to ask before you cut a check for those first premiums.

1.   What Coverage Options Do You Have

You will want to know if there is coverage for any other drivers. Often this will be needed in situations where a roommate or family member borrows your vehicle. You want to make sure that anyone else driving your car is covered should an accident happen. Another good option is underinsured or uninsured motorist insurance.

2.   Will My Job Alter My Coverage

You’ll be asked certain questions about your driving, how far you drive on average, how far you drive for work, and so on. If your job is in delivery, transportation, sales, or similar lines of work, be sure your vehicle will have coverage if an accident happens while you’re working.

3.   Why Is My Premium So High

This is a great question for your current insurance agent if you feel you’re paying too much. Ask them what factors are driving up your costs. You may be able to address them.

4.   How Significantly Does Raising My Deductible Lower My Premium

Frequently, insurers will offer lower premiums for drivers choosing a higher deductible. This can be good to keep your premiums low, but it can also work against you if you are no good at saving. While you can get lower rates with a higher deductible, if you don’t generally keep that much in savings for an emergency, you may find you can’t pay.

5.   What Discounts Are Available Through The Agency

This is a great question for any insurer, current or potential. There are often insurance discounts for everything from airbags, to theft-deterrent devices, to good students, and even jobs that are known for having safer drivers.

6.   Is Gap Coverage Available

This is a crucial question to ask if you still owe on your vehicle. Gap insurance will make sure that you aren’t paying off a car that’s been totaled by covering the amount remaining on your loan.

7.   Are There Fees Or Discounts For Certain Payment Options

Some insurance companies charge a fee to take a debit or credit card. Some offer discounts for setting up a direct debit through a bank account, as well as discounts for paying 6 months or a year at a time.

8.   Is A 24/7 Roadside Assistance Option Available

If you have a mechanical breakdown or an accident while you’re on the road, it will be when you least expect it. 24/7 roadside assistance is important for things like breakdowns, flat tires, dead batteries, things like that. While they are often available from just about any towing company, they are usually quite expensive, and having your insurance pick up the tab is always nice.

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Financial Tax Services

COVID-19 and Taxes: Will Your Refund be Impacted?

COVID-19 and your taxes

COVID-19 has severely impacted individuals and businesses. From the shutdowns, quarantines, and economic situation that affected people from different economic situations. These changes will also affect your taxes and tax returns.

While people are filing taxes and accounting for any economic changes that 2020 brought to their personal or business finances, there are also more things to think about. 2020 also brought in new economic stimuli and potentially unemployment that will also need to be accounted for when filing taxes. So, here are some tips to keep in mind to get the most out of your taxes and tax return.

Individuals and Families

Many individuals have been affected by COVID-19. With record unemployment and stimulus checks, families and individuals are in different economic situations than they were in 2019. These changes may impact how much money you file and how much money you can expect back.

Two stimulus checks went out in 2020 to many people. In regards to your taxes, these stimulus checks are tax-free and do not need to be noted. The IRS should already have on record that you received these payments and accounted for. These payments will not impact your tax return at all.

Unemployment rates also went up during 2020, with almost 15% of people declaring unemployment at one time. To compensate for the economic downturn that many felt, unemployment checks increased by $600 a week. Unemployment payments are taxed as income. Up to $10,200 in unemployment is tax-free.

Six states do not tax unemployment at all. If you live in one of these states then you can expect to pay less in taxes. Seven states do not tax income at all, since unemployment is taxed as income this can also result in how your taxes are filed if you live in one of those states.

Businesses and Other Entities

Businesses and other places that employ people were severely impacted by COVID-19 and the subsequent economic downturn. The government passed different stimuli and credits to help businesses stay in business and continue to employ people.

The Employee Retention Credit is refundable. Immediate access to credit is available by reducing the employment tax deposits you are required to make. If your employment tax deposits are not sufficient to cover the credit, then you can get an advanced payment.

Small businesses with 500 or fewer employees were also eligible for Coronavirus-related paid leave. Employers can receive 100% reimbursement for paid leave related to the act. This includes leave for expanded paid childcare leave and paid sick pay leave.

Conclusion

While, COVID-19 changed finances for many people and businesses, these changes in finances also affect taxes and tax returns. For many people who received credits or stimuli, those credits are refundable or not taxed. This means that many people who relied on these services to stay afloat will continue to experience assistance when filing for taxes.

Filing taxes for 2020 will be just as different as the rest of 2020, there will be many changes that will be COVID-19 specific. For many of these changes, individuals and businesses can benefit from receiving credits.     

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Financial Tax Services

How Much of a Tax Deduction Can You Claim For Charitable Donations

charitable gifts donations tax

Gifts to charitable and non-profit organizations help in so many ways. They benefit the charity itself, often by providing funds that are used in research, operations, and more. They are also one of the best ways to minimize your tax obligations. Charitable gifts are deducted in part or in whole on yearly tax return filing. This ultimately reduces your taxable income.

There are new provisions in place for the 2020 tax season that will apply to your returns filed in 2021. You need to know about them in order to take advantage of them properly when you file.

Charitable Contribution Basics

Charitable gifts are treated differently for tax purposes for a number of reasons. It can vary depending on the type of assets that were donated. For example, cash, clothing, household items, or even vehicles and boats. The rules also vary based on who the contribution is made by. Whether that is an individual, a business, or a corporate entity.

The amount of the deduction is particularly important, and usually subject to limits and ceilings. The changes to the 2020 charitable gifts deduction put in place special rules for the 2020 tax year only, which increase the deductions significantly. These changes, therefore, increase the amounts of tax benefits for donations made specifically in cash.

Some Donations Do Not Qualify

While the limits of contributions went up, you will want to ensure that your donations to charity were made to allowable organizations. The law states that the deductions are only to be used to contributions that serve a charitable purpose. This means that the recipient must have already qualified for and been granted tax-exempt status by the IRS.

These organizations most commonly include religious entities, charities operated for scientific, educational, or literary goals, and organizations that strive to prevent cruelty to animals or children. Other eligible parties may include nonprofit veteran organizations, amateur sports development entities, fraternal groups or lodge orders, and burial or cremation companies.

What Is The Maximum Deduction Amount You Can Claim For Your Donation

For the 2020 tax year, taxpayers who choose to claim the standard deduction can claim up to $300 in charitable gifts made in cash, used in the determination of the taxpayer’s adjusted gross income, or AGI. It is worth noting specifically, that noncash property like securities are not eligible. Neither are donations to dormant or non-operating organizations, or contributions to veterans fraternal societies, or carryforwards from previous tax years. This “above the line” deduction will generally benefit taxpayers that do not itemize.

The donation ceiling was raised for 2020 from the previous limit of 60% of any individual’s contribution base (commonly their AGI). This limit was raised to allow the contributions of non-cash donations up to the entire amount of their AGI. In some situations, individual taxpayers may be able to completely eliminate their taxable income. In many cases, this means the tax obligation would also drop to zero, meaning a refund of all taxes.

 

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Financial Savings Tax Services

How Saving for Retirement Can Reduce Your Taxes

saving for your retirement can reduce taxes

It is definitely no secret that saving for retirement is important. It is so important that the government even offers a tax credit for those that choose to save for the future. Worth up to $1,000 for an individual tax-payer, or $2,000 if filing jointly, many independent adults can qualify for the saver’s credit.

Who is Eligible for the Saver’s Credit?

To receive this credit, you must be 18 years old, not enrolled in school full-time, and not be claimed as a dependent. You also must make a contribution to an IRA or other eligible retirement plan and fall within specific income thresholds.

As far as your contributions go, you can only claim contributions of new money. Any money that was a rollover from an existing account does not count towards your eligible contributions.

Your income must be underneath the following thresholds to get the credit:

  • Head of Household: $48,750 in 2020; $49,500 in 2021
  • Married, Filing Jointly: $65,000 in 2020; $66,000 in 2021
  • Other Filing Statuses: $32,500 in 2020; $33,000 in 2021

How Your Saver’s Credit Value is Determined

Those that qualify for the saver’s credit can receive up to $1,000 ($2,000 for married couples that file jointly). The value of your credit is based upon how much you contributed to your 401(k), Roth IRA, SARSEP, SIMPLE IRA, 403(b), or 457(b) plan. You may be eligible for 10%, 20%, or 50% of the maximum contribution amount, depending on your adjusted gross income and your filing status.

Saver’s Credit Rates

Married Filing Jointly

  • 50% of contribution: $39,000 or less in 2020; $39,500 or less in 2021
  • 20% of contribution: $39,001 – $42,500 in 2020; $39,501 – $43,000 in 2021
  • 10% of contribution: $42,501 – $65,000 in 2020; $43,001-$66,000 in 2021

Head of Household

  • 50% of contribution: $29,250 or less in 2020; $29,625 or less in 2021
  • 20% of contribution: $29,250 – $31,875 in 2020; $29,626 – $32,250 in 2021
  • 10% of contribution: $31,876 – $48,750 in 2020; $32,251 – $49,500 in 2021

Other Filers

  • 50% of contribution: $19,500 or less in 2020; $19,750 or less in 2021
  • 20% of contribution: $19,501 – $21,250 in 2020; $19,751 – $21,500 in 2021
  • 10% of contribution: $21,251 – $32,500 in 2020; $21,501 – $33,000 in 2021

With many credits, the math to figure out how much you are getting can be a bit tricky, but not with this one. Based on your income, your credit is worth 10%, 20%, or 50% of a cap on the amount contributed of $2,000 for an individual filer, or $4,000 for married couples who are filing together. If you are a single filer with an income of $18,000 and you contributed $1,000 to your Roth IRA, your saver’s credit would be $500.

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Financial Savings

How to Become Financially Independent

financially independent

Becoming financially independent is a hot topic these days. The days where earners could expect to work until retirement age then retire with a pension are long gone. Pensions have all but dried up, and now it is often left up to the worker to manage and plan for their own retirement.

But financial independence doesn’t require being of retirement age. More and more people are beginning to take action at a younger age in order to become financially independent. This means becoming financially secure, no matter your employment status, and having the time and resources to do what you want to do.

There are some simple techniques to becoming financially independent. Most of them are easily actionable by most people, however, some will force you to start changing your mindset about money.

Don’t Save, Invest

This is one of the biggest shifts in your financial mentality that you will need to make. In order to become financially independent, your assets will need to appreciate. If you stick all your extra money in savings, inflation will eventually reduce the value of that money, quicker than interest can replace it.

By putting your money into a mix of stocks and bonds, usually at around a 3-to-1 ratio, you will be able to pull out 4% annually. This means you’ll need about 25 times your yearly income to retire comfortably. Talk about financially independence! While this sounds simple enough, if your annual spending is $50k, you will need roughly $1.25m invested.

Start As Early As Possible

Knowing how much you will need to invest over time, it is far easier to begin at a younger age, in your 20s or 30s for example, than to try to catch up in your 40s. Depending on your calculations, starting in your 30s may only require a monthly investment of $800 or so, while trying to reach that same goal at 40 would require nearly two and a half times as much. This way you are closer to becoming financially independent

Pay Yourself First

Here’s another thing that requires a huge shift in willpower but will severely help you to become financially independent. Most people say that after their expenses there isn’t enough left to save. The wealthiest people in the world got there by being disciplined, and not by saving what’s left after spending, but by learning how to live on what’s left after saving.

Set a goal, whether it’s 10%, 20%, or even 5%, and stick to it. Once you’re paid, move that money into your investments. Then you can evaluate what is left, pay bills, and see if there is any discretionary spending money left.

Leverage Tax Benefits

Many people only contribute what they think “they can afford” to their 401(k) or IRA. But these can help you save twice and become financially independent sooner. If you contribute up to, or close to, the limits for your tax-advantaged retirement account you not only save valuable pre-tax dollars, but you reduce your taxable income. This means at worst, you pay fewer taxes, and at best, a bigger refund once you file your return!

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Career Career & Education

How to Diversify Your Income With a 9-5 Job

9-5 job opportunities outside side-gig

Many people dream of making more money than what their 9-5 job makes them. Whether it’s to get to a goal faster or as a way to move away from making money on the 9-5 schedule entirely, there are several ways to make money on the side that won’t take away from your regular work schedule.

The gig economy and side hustles have exploded in recent years. All you need is the drive to extend your money-making efforts outside of normal working hours. Some jobs require creativity but others just require your time. Here are some ways to diversify your income, regardless of your extra abilities.

Take Surveys

There are several places where you can get paid to take surveys. Marketing companies want to ensure that their campaigns are effective. Many survey places give out points that you can convert to money. All you have to do is watch a video and take a survey to get the points.

The money taking surveys doesn’t net a huge amount, typically you can make about $100 a month, but that can go a long way to meeting a financial goal. It also only requires your time and ability to be honest about your opinions on what you just watched.

Driving Services

With ride services like Uber and Lyft, it’s very easy to make extra money as long as you know how to drive and have your own car. You can drive as often as you want for as long as you want. Everything is done through the mobile app so you don’t need anything extra.

The amount that you make depends on how often you’re willing to drive. You can work whenever though, driving people to and from the airport or home after a night out. This way of making money offers a lot of flexibility.

Get Creative

If you have a creative streak, you can use that to make extra money. Whether you are a photographer, drawer, painter, or jeweler, you can put those skills to good use and make money. You can sell your creations online through Etsy and operate a business.

The money you make here depends heavily on how much people are willing to pay for your art. It will also depend on how much time you devote to new creations. If you create a lot of unique pieces that people are willing to pay for, you can have a successful side business quickly.

Conclusion

Making more money through side businesses can be a great way to work towards a specific goal or to have more money to budget with regularly. No matter what additional skills you have, as long as you have time you can make extra money outside of your regular 9-5 work schedule.

These side-hustles can lead to something bigger or simply contribute to some extra household income for a bit. Either way, you can work on additional skills and money without t    

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Financial Tax Services

Taxes Made Simple: 3 Tips for Quick and Easy Filing

taxes made simple

Many people think that filing their taxes is a complicated process. The IRS is known for collecting your money and auditing if something is wrong, and you don’t want to be audited. If it’s your first time filing taxes, it is easy to be intimidated by all of the forms and situations that are available to file for.

Filing taxes does not have to be needlessly complicated though. For many people, taxes do not have to be difficult. By following some simple steps, you can file your taxes simply and without worry.

Gather All of Your Tax Documents

Having your tax documents prepared will help your filing go by faster. As your tax information comes in, store them in the same spot that you can access easily when you’re ready to file. This will also simplify what kind of taxes you need to file and how you will file them.

Some of the documents you will want to have are

  • W-2s
  • 1099s
  • Tax forms that report incomes
  • Tax deductions
  • Receipts

This information being readily available will help you streamline your taxes. When you have all of your information in front of you, it will be much easier to know where you need to go and what you qualify for. 

Don’t Forget About Gig Economy Income

More people are relying on making money through the gig economy. Whether you make money driving or delivering food, freelancing, or working as a consultant it is important to remember to declare that income. Some gig economy jobs also have deductions that you can note.

Some jobs have a 1099-MISC for the work done. Even if there is not a form attached, you will still need to report your income. Keeping track of your income if you make money freelancing or another gig job is crucial. You will also want to keep track of any miles you drove, supplies, and advertising costs because these costs can be deducted.  

File Electronically

Almost anything can be done online today, including filing taxes. Software exists to help make sure that you file them correctly and will tell you how much more you owe or will receive. Filing electronically will also save you postage and time.

People who file electronically also get their returns quicker. It is also easier to note your banking information so that your returns can go directly into your bank account. 

Conclusion

Filing taxes can seem daunting, especially when it’s your first time. These tips can help it go smoothly so you don’t have to worry about your them being filed correctly. With some thinking ahead, documents, and software you can file your taxes quickly and easily.

When you’re able to file them quickly, you will also receive any refunds that you’re owed quickly. Filing taxes does not have to be a scary process to go through. For many adults, it can be completed and filed in a day, that’s how quick and easy it can be.   

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Financial Savings

The Smartest Way to Use Unemployment Benefits

unemployment benefits

This year has not been kind to a lot of people. Many of those people have had to leverage unemployment insurance in order to make ends meet. But even with expanded benefits from the various stimulus packages passed by Congress and signed into law by the President, those benefits can still leave bills unpaid and stress piling up.

There are no universal solutions to the problem of trying to survive on meager unemployment benefits. Even for those experienced with budgeting and juggling bills, there can be some strategies that are being missed. We’re going to talk about a few of the smarter ways you can use unemployment to help you get by.

1.   Don’t Forget Taxes

While unemployment benefits aren’t much, they are still considered by the federal government as taxable income. This means not only do you need to report it, but you also need to pay taxes on it. There are often provisions with your state unemployment office to have estimated taxes withheld. But if not, make sure you put enough aside for the taxman. The unfortunate part is that often you can only choose to have 10% withheld, which may or may not be enough to satisfy your tax obligation.

There are also exceptions to having the estimated tax withheld. If you can have it held back and still pay your bills, then absolutely do it. But on the other hand, if you are in dire circumstances and keeping your benefits untaxed means the difference between having to get a predatory loan or being able to get by on your unemployment, then you may want to deal with the taxes later.

2.   Quickly Adjust

Many people who receive unemployment benefits often fail to make the needed lifestyle changes that are needed to get by on the reduced income. This means that they are still spending money as if they were employed. This is a fast way to get underwater.

By adjusting quickly to your new budget, you can prevent any unexpected shortcomings in your spending, and make sure that you have enough for what you need. Cut out the least important spending habits, and make sure you focus on your most immediate needs.

3.   Make Sure The Basics Are Covered

Firstly, make sure that you and your family have a place to live and food to eat. While evictions have a moratorium placed on them through the end of the first quarter of 2021 when it’s over, landlords will begin requiring back rent or tenants will face eviction. Depending on your state landlord-tenant laws, that back rent may also be accruing fees and interest during the moratorium.

Also, make sure that if you have vehicle payment, that you try to keep up with that. Transportation will be needed to obtain employment once that is available. It is also needed to make sure that you and your family can still run basic errands without incurring additional expenses from rideshares or other hired transportation.