Month: April 2021

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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.

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Legal Personal Injury

What is Motor Vehicle Accident Law?

motor vehicle law

Motor vehicle law is an area of law that is often seen as a blend of personal injury law and traffic law. While the personal injury component is important, it often relies heavily on the traffic law component to show fault and determine liability.

After an accident, the police officer on the scene will take statements from the drivers and passengers involved. They will also take pictures, speak with anyone who may have witnessed the incident. After all of this, they will create the official accident report. This will show how they believe the accident happened, and who the officer believes is at fault.

The accident report is frequently not the “last word” in liability for an accident. However, it does go a long way toward showing who may have acted with a higher degree of negligence. This negligence will ultimately be the primary factor that determines which driver is considered at fault for the accident.

If the injuries and damages that result from the accident are serious enough, the plaintiff, may file a personal injury lawsuit against the driver considered to be at fault, the defendant. In most cases, the defendant’s insurer will shoulder the cost of the defense and any awarded damages.

Motor Vehicle Accident Terminology

  • Negligence – Either the action or inaction that caused the accident initially.
  • Comparative Negligence – This is a fault determination method used in some areas that will decrease a personal injury award by the degree to which the plaintiff’s negligence contributed.
  • Comprehensive Coverage – This is car insurance that even provides coverage for damages that don’t happen in an accident.
  • Collision Coverage – Insurance that covers damages that happen in an auto collision.
  • Uninsured/Underinsured Driver Coverage – This is an insurance product that helps those who are in an accident with another driver who lacks insurance, or whose insurance cannot cover the full damages.
  • No-Fault State – Some states are “no-fault” states. This means that any driver injured in an accident needs only to see compensation for their damages from their own insurer and do not rely on proof of negligence. This cuts down on costly litigation as most claims are settled quickly.

Why Working With A Lawyer Is Important

The insurance companies are fully staffed with attorneys retained for the specific purpose of defending against insurance claims. This means that filing a personal injury claim puts a victim against vicious defense lawyers. These lawyers will try everything to minimize or deny their claim for fair compensation.

Accident victims, however, can leverage legal assistance of their own. They can hire attorneys that are specially trained in motor vehicle law. These attorneys will help to fight the insurer in order to get compensation for their damages. Lawyers who practice motor vehicle law are also known as car accident attorneys or personal injury lawyers. If you think you may have a claim under motor vehicle accident law, speak to a lawyer today.

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Financial Savings

Organize Your ‘Paying Your Bills’ Process

organize paying your bills process

Paying bills is a necessary evil, there’s no way around it and it can be painful at times. Despite this, it’s vital to organize your bills and pay them on or before any due dates. Being negligent with paying your bills can lead to fees and penalties, but it can be the beginning of deep debt and bad credit.

Sometimes it can feel like you’re just hanging on, month to month, and keeping up on your bills can be overwhelming. If that describes you sometimes, or if you just need a few ideas on how to organize a little more consistently, here are some guidelines for helping you to organize your bill-paying process.

You’ll want to grab some basic supplies first. Get a nice notebook, envelopes, stamps, a red pen, and a trash can with a paper shredder nearby. Then decide where you will be paying your bills, if it’s a desk in your office, the kitchen table, wherever, and set your supplies up there.

Organize Paper And Online Bills

Most creditors, lenders, and billers have the faculties to accept online billing. If so, take advantage of them. This way you only need to retain confirmation numbers in your records, making for a cleaner and easier notetaking.

If you are still using paper billing for any reason, make sure you open them as soon as they arrive. Using your red pen, mark the amount owed and the due date on the envelope. Note any issues to be addressed later.

Schedule It

Make a point to pick at least 30 minutes per week to review and pay your bills. Schedule it like any other appointment that you should not cancel. While reviewing your bills, make it a point to check your bank accounts for accuracy.

Make It A Routine

You’ll need to be attentive to your weekly bill payment appointment, and be sure you stay accountable for it. By incorporating it as another part of your weekly routine, you make it easier for yourself to stay up to date with your finances.

Pay Your Bills

During your weekly bill-paying appointment, make sure you give proper attention to each of the bill payment types, both online and paper. Be sure to pay your paper bills far enough ahead of time that they do not arrive after their potential due date. Online bills are generally much quicker and will reflect payments made within a business day or two, sometimes they will even post the same day they are paid.

Automate It

If you still feel you need some help, there are a number of personal finance apps, like Mint, or Prism. You connect your bank account, billers, and lenders, and the apps monitor for bill due dates and facilitate payments. They have arrangements for automatic online payments, as well as automatically mailed checks. Apps like these offer you a deeper look into your spending and budgets, often helping you to better your finances and pay down debt.

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Financial Insurance

Life Insurance Policies You Need to Know

life insurance policies

When you start shopping for life insurance, you’ll quickly notice that policies fall under one of the two main categories: whole life insurance or term life insurance. However, there are many other subcategories that stem from those two. As a result, there are several different options from which you can choose.

In our article on the basics of life insurance, we touched on some of the different types. This guide goes deeper into explaining the different types of policies, which include:

  • Term
  • Whole
  • Universal
  • Variable
  • Variable Universal
  • Indexed Universal
  • Final Expense
  • Group

Term Life Insurance

A term policy provides you with death benefits for a set number of years. Death benefits are only payed to your beneficiaries if you die within the term. For that reason, this policy type is often the most affordable and simplest policy to get. However, you’ll have to shop for a new policy every time the term expires, so it can create more work in the long run. It can also leave you with higher premiums as you age.

Whole Life Insurance

If you want to stick with one life insurance policy, then a whole policy is the best option for you. It never expires, so you can keep it for as long as necessary. Though it can be up to 15 times more expensive than its term counterparts, whole policies build a cash value that you can withdraw, invest, or borrow against.

Universal Life Insurance

Universal policies also have a cash value. Your premiums contribute to both the cash value and death benefits, but unlike whole, you can change your policy without having to cancel and get a new one. In fact, you can change the premium and death benefit amounts as long as you maintain the minimum premium. Many policies allow you to use your cash value to pay the premium, so you could someday find yourself in a position where you won’t have to pay premiums out of pocket.

Indexed Universal

Indexed universal plans are a variant of the standard universal plan. With an indexed universal policy, your cash value interest rates are based on the performance of a specific group of investments, also known as an index. You never have to worry about losing money, though. IUL policies have a minimum guaranteed interest rate.

Variable Life Insurance

A variable life insurance policy is very similar to an IUL, but instead of having an indexed interest rate, it is variable. That means there is more risk involved, but you could also see a lot of growth. It’s easier to understand how these policies work if you view its cash value as an investment option.

Variable Universal Life Insurance

If you choose variable universal life insurance, you’ll see that it’s very similar to both a universal policy and a variable policy. Variable allows you to adjust your premium and death benefit amounts while also investing its cash value. It’s the best of both worlds, but it is one of the more complex policies to understand.

Final Expense Insurance

Older people without life insurance may find final expense insurance to be a good fit. This policy is designed to cover any end of life expenses, such as a funeral, cremation, or medical care costs. It’s very expensive compared to the coverage it provides, so it should only be considered by people who don’t have enough savings to cover these costs.

Group Life Insurance

Some employers offer group life insurance at no cost to you. In these cases, it’s a great benefit, but keep in mind that it may not provide you with enough coverage for your family.

Find Out More

Now that you know more about the different types of life insurance, you should be better prepared to make a decision about your policy. However, we still encourage you to speak with an agent to find out which policy type is the best option for you and your needs.

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Financial Tax Services

Want To Buy Stocks? How It Affects Taxes

investing in stock market and affect taxes

Stocks are hot these days and in some respects, the market is doing better than it’s ever done. Additionally, investing is easier than ever with the explosion of retail trading apps. But many people are hesitant to begin investing until they know how it’s going to impact their taxes. Here are the tax basics of investing in stocks.

Realized And Unrealized

If you open a standard brokerage account with any of the popular companies, you then deposit money and invest that money. You typically invest in a number of different stocks or funds, often referred to as “diversification”.  A few months go by, and all of your investments are up a bit.

You now have “unrealized” gains. Once you sell those investments or any part of them that has appreciated, you then have “realized” your gains. This is the same for losses. If your investments are down and you then sell them to stop your losses, you have turned your “paper” losses into “realized” capital losses.

Capital Gains

Once you invest through your brokerage of choice, and you have invested in a number of stocks. One of your stocks shoots to the moon, and you suddenly find yourself selling those stocks for a healthy sum. You now have realized your capital gains, and you will now have to eventually pay taxes on them. They’ll be listed on your upcoming 1099-B form that your brokerage will provide at the end of the tax season.

There is more, and it might be good news, it might be bad news, depending on your particular investments and gains. You’ve now got capital gains, and you need to pay taxes, but the tax rate is going to depend on how long you held that investment.

Investments that are sold less than a year after purchase are classified as short-term capital gains. These can be taxed up to 35%. However, if you keep your investments for a minimum of a year before selling, you can cut that down to 15% or less.

Capital Losses

It happened. Your investment tanked, and you lost big time. If you are still on paper, your losses are unrealized, but if you sold to stop the bleeding, then you can leverage those realized capital losses. Your capital losses can be claimed against your capital gains, to offset them and pay a lower tax rate. Additionally, if your losses cancel out your gains, you can claim up to $3k in additional losses against your income.

Dividends And Interest

Not only will you be taxed on capital gains, but you will also be taxed on dividends. These are periodic payments made to shareholders of certain stocks by the company they are invested in. You are taxed on dividends even if you do not sell any investments. The interest you can be taxed on is interest from bonds and will vary depending on the type of bond and interest that has been earned.

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Financial Savings

5 Financial Professionals and How They Can Help

financial professionals

1.   Financial Planner

A financial planner will help you create a roadmap for reaching your long-term goals. They often work with you to first discover what your goals are. Once you have figured out what your overall goals are, they will help develop the plan of action that will get you there.

Financial planners are also adept at things like retirement plan diversification, and even financial planning for a growing family. But not all of them run their business, or their billing, the same. You will want a fee-only fiduciary, meaning they are paid by you directly. Bonus if they are trained as a CFP or PFS.

2.   Financial Coach

A financial coach is a must if you struggle with keeping to a budget. They are also great if you need some help decoding some of the short-term financial options available to you. Financial coaching is still somewhat new and was created as a way to fill the short-term market where financial planners often do not operate.

3.   Tax Accountant

This is the person who will help you file your taxes, and depending on their skill set they may also help you build tax-saving behaviors that can benefit you for years to come. These are the people that help you figure out all of your deductions so that you can reduce your taxable income as much as possible.

Popular tax credentialing includes EAs, or Enrolled Agents, and CPAs, or Certified Public Accountants. EAs are licensed by the IRS after taking a test made up of 3 parts. CPAs are professionals that have been licensed by the state they operate in, after taking a 4 part test.

Tax accountants can be an important part of your overall financial health. They will help you be more mindful of how your income and other finances affect your taxes and any subsequent refund. This can put you in a better and better position each year.

4.   Credit Counselor

One of the most valuable financial professionals is credit counselors. They can help you if you are dealing with high-interest debt or debt management struggles. Many times you will find that your credit counselor will be a non-profit and will have the specific training needed to help you get the most out of your credit. They can often help with building credit, as well as fixing bad credit.

5.   Investment Advisor

Managing investments can be difficult with all the other things on our plate. An investment advisor will help you understand the process of investing, and will be able to give advice on various investment strategies. This will include things like stocks, bonds, mutual funds, and even cryptocurrency and NFTs.

Before you get to the stage of hiring an investment advisor, you will need to make sure the rest of your financial plan is in order. Investment advisors will often not provide any guidance on anything directly related to your long term financial goals, such as children, home buying, or retirement financials.