What taxpayers don’t know about filing season can cost them big bucks

February 17, 2017

Dallas, Texas, USA, November 2015 - Close up of US Individual Income Tax for 1040The personal finance website, NerdWallet, quizzed 2,223 adults in January on their taxation know-how.

Filers’ lack of knowledge could cost them big bucks in penalties and missed savings opportunities. For instance, 58 percent of surveyed individuals think that if they file for a tax extension beyond this year’s April 18 deadline, they can hold off on paying any levies owed.


You’re supposed to estimate the amount you owe and send the IRS a check by April 18. Anything Uncle Sam receives after that deadline will be subject to interest and penalties.

Here are a few other common taxpayer misunderstandings, according to the survey.

Withholding conundrum

Close to 60 percent of taxpayers have no idea what a W-4 is.

Here’s a hint: It’s a document you fill out so that your employer knows how much federal income tax to withhold from your paycheck.

Take a close look at this key form, because your input will determine whether you end up with a refund or a tax bill at the end of filing season. A major life change, such as a new job or marriage, will warrant a review of your W-4, but consider giving it a look every year.

“You should always look at your W-4 during open enrollment because you’ll have the complete attention of your HR department,” said Cari Weston, director of tax practice and ethics at the American Institute of Certified Public Accountants.

“Do it after you file your return,” she said. “If you find yourself saying, ‘Wow, I got way too much money back’ or ‘How will I pay this tax bill?’ then it’s a good time to revisit.”

Bracket confusion

Many filers don’t understand their income tax brackets, which are key to effective tax planning.

Four in 10 of the surveyed participants didn’t know which bracket they fell into.

“For many people, brackets are theoretical,” said Liz Weston, a certified financial planner and columnist with NerdWallet. “But if you’re doing something for a tax break, you’ll want to know how big that tax break is.”

The correct bracket — or marginal tax rate — is especially important for individuals who itemize deductions, including charitable donations and mortgage interest. A deduction will lower your taxable income based on the bracket you are in.

You should know your bracket because it will give you a sense of the true value of a deduction.

For instance, a mortgage interest deduction is a lot less attractive if you’re in a low bracket.

“If you’re in the 10 to 15 percent income tax bracket, then the deduction isn’t really helping you out,” said Weston. “At best you may get back 10 to 15 cents on the dollar for a dollar of mortgage interest paid.”

Let’s say that you’re in the 25 percent federal income tax bracket and you’re in the 8 percent tax bracket for your state.

If you took out a 30-year mortgage for $200,000 at an interest rate of 4 percent, the mortgage interest tax deduction could save you about $3,000 in the first year of your homeownership, according to Bankrate’s mortgage tax deduction calculator.

Points, the prepaid interest you pay to your lender at closing, and state tax rates also affect the amount you’ll save.

Here’s another example of how brackets can work: If your marginal tax rate is 15 percent or below, your qualified dividends are tax free.

Tax prep due diligence

Finally, more than half of the participants were either unsure or incorrectly believed that someone paid to prepare tax returns doesn’t need a valid preparer tax identification number.

This number, which is issued by the IRS, is the bare minimum for tax pros, said Weston.

Applicants must provide their personal identification information, plus explanations for any felony convictions and details on any tax problem.

Other preparer qualifications include the Enrolled Agent and CPA. Enrolled Agents must pass a three-part IRS exam or have experience as an employee at the federal agency.

Meanwhile, CPAs must meet requirements for education and accounting experience, sit for a four-part exam and keep up with continuing education requirements.

“The preparer tax identification number is the most basic thing that you want,” Weston said. “I want a professional to be at least an Enrolled Agent. If I have a more complicated return, a CPA might be the best.”


Source: CNBC

How to Help Your Kid Build Their First Budget

girl with piggybankHelping your teenage child create a budget does not have to be overwhelming or time consuming. The important thing is to be proactive and consistent as you teach your teen how to handle money in the real world.

Offer a Monthly Allowance

Providing a monthly allowance will help your child recognize the importance of long-term money planning. If they blow the entire month’s worth of allowance in the first weekend, they’ll learn an important lesson in delaying gratification. The most important thing you can do is be consistent about paying the allowance each month, and refuse to bail your child out of a problem if they use up their money before the month is over.

If your teenager also decides to take a job, consider that a supplement to their allowance, rather than a substitute. Just as you would hate to see your initiative at work penalized by a reduction in pay, your child would hate to see their allowance docked just because they’re showing initiative in getting a job.

Require Them to Take Over Some Necessary Spending

Many parents allow their teens to use their allowance and salary as pocket money. While there’s nothing wrong with letting your kid have fun money, a big part of budgeting is making sure you have enough money to cover fixed bills. You can help your teenager learn to do this by asking them to take over a necessary bill.

For example, you could ask them to cover a portion of the family cell phone plan, or their portion of the automobile insurance. Learning to pay these bills on time will give your teen an important first taste of what it will be like to pay their own way as an adult.

Create Targeted Savings Accounts

It’s likely that your child has some big goals for the future, whether that’s going to a private college or buying a car. You can show them that they can achieve these financial goals through targeted savings accounts.

Many banks allow you to create several targeted accounts, each with its own nickname. You can help your teen set up a few of these targeted savings accounts and encourage them to transfer some of their allowance or salary into the accounts when they get paid. They’ll learn the importance of paying themselves first, and that consistent savings adds up. (See also: Build Savings Faster With a Multiple Account Strategy)

Help Them Track Their Spending

Financial tracking is a necessary part of creating a healthy budget. They should know where their money is going each month, and whether those expenses were worthwhile. If they discover they’re spending a good portion of their allowance on going to the movies, introduce options to them, like discounted movie passes or skipping the popcorn, soda, and snacks while there. Remind them to spend their money consciously.

Have Regular Budget Meetings

Plan on checking in at least once every two or three months to see how their finances are faring. They should get into the habit of reviewing how they’ve spent their money and whether those expenditures align with their goals. This will set your teen up to regularly review their budget on their own, and one day have regular budget meetings with their spouse.

Teach Your Children Well

Budgeting is the cornerstone of financial health, but knowing how to budget is hardly intuitive. Spending can easily become automatic and savings be pushed to the back burner. By getting your teen used to reviewing their finances and planning for their future, you’re creating a powerful habit that will guide them wisely for the rest of their lives.


Source: WiseBread

Clean up your financial act in 2017 with these 4 steps

February 13, 2017

Portrait of interracial couple sitting together on sofa calculating monthly expenses -  The pictures on the dresser or window or side board belong to the photographerWhile many Americans start out the year with good financial goals, a third of them expect those resolutions to slip through the cracks.

Those were the findings from a recent survey by LearnVest, an online provider of financial planning services. The New York City-based firm polled 1,000 U.S. adults between Dec. 1 and Dec. 6.

In all, 56 percent of survey participants said they plan on making at least one financial resolution for 2017. The top three goals are to save more, reduce spending and pay down debt.

On average, individuals give up on their financial resolutions just six weeks into the new year, according to the survey.

“When we want to accomplish something, we’re good at setting goals,” said Alexa von Tobel, founder of LearnVest. “But we don’t do that with money.”

Here are four steps to help you stick with your money resolutions through the whole year.

  1. Set your goals

Saying you want to make a budget doesn’t cut it.

In order to meet your financial plans, you’ll need to identify a goal that you can work toward.

If you want to save a particular amount or pay down some debt, identify exactly how much it is. From there, you can figure out the next steps you’ll need to take.

“Specific is ‘I want to pay off $9,000 of credit card debt, and that means I need to pay $800 a month,'” said von Tobel.

  1. Make a plan

“Not having a plan is a plan — it’s a bad plan,” von Tobel said.

Don’t work off-the-cuff to meet your goals. Instead, think about how you’ll have to adjust your spending every week and every month so that you’re making steady progress.

When you build a financial plan, you’re figuring out where your cash goes in a month.

For instance, how much of your after-tax income is paying for essentials, including rent and utilities? How much of your monthly income can you apply toward reaching your goals without depriving your household?

Don’t forget your basic needs, von Tobel said. Things you shouldn’t shortchange include health-care coverage, homeowner’s or renter’s insurance, and life insurance, particularly if you have a mortgage or dependents.

Another essential would be to set aside emergency savings.

To that point, von Tobel estimates that a single household could get by on savings that can cover three months of expenses. You’ll need to save up for nine months of expenses if you’re a high earner and 12 months if you have a family, she said.

  1. Maximize your future

After you’ve determined what you need to do each month to meet your financial resolutions and you’ve shored up your basic security needs, start thinking about larger goals: What can you do to accumulate wealth?

This can include investing, paying off student loans so that you can put that money to work elsewhere, or buying a home, said von Tobel.

  1. Have the talk

Three quarters of people polled by LearnVest said that talking to someone about a New Year’s resolution would make them more likely to stick to it.

The best way to put your plan into action is to sit down and talk about your goals with someone who will hold you responsible. That can be a friend, your partner or if you’re ready — a financial planner.

“Those money talks are complicated because they aren’t really about the money,” said von Tobel. “This is about what you want your life to look like.”

Give yourself reminders to stick to your resolutions.

“If you write down your goal, you’re more likely to achieve it,” said von Tobel. “Write it on a Post-it note and stick it on the mirror so you see it when you brush your teeth every morning.”


Help with your financial goals >> 


Source: CNBC Personal Finance

9 Easy Ways Retirees Can Earn Extra Income

Grandpa with granddaughter enjoy  at grandpa's carpentry workshopWhether you want to boost your retirement savings before you hit the magical age of 65, or you need some side income as a retiree, you are in luck. The Internet has made it easier than ever to earn money without committing to a 9-to-5.

Here are nine websites that can help you boost retirement income.


  1. Shutterstock

Enjoy taking photos? Your photographs could earn money if they are approved and purchased by others. The photos that sell the best are high-quality images that can be used as stock photos for websites and eBooks. Shutterstock pays contributors $0.25 per photo download, which doesn’t seem like a lot. However, if your collection of photographs gets downloaded 2,000 times over the year, that is an extra $500. You’ll need a current form of government-issued ID to join Shutterstock, and you’ll also need to submit up to 10 images for their initial review. Once their review team approves your first image, you can start selling.

  1. Airbnb

When the busyness of raising a family starts slowing down, many couples discover a passion for travel. You can pursue travel while still paying the mortgage with Airbnb. You can even rent out an extra room or guesthouse with the site. Simply sign up, create your listing (make sure you include lots of photos), and set your rate. What you charge is up to you, but you’ll want to factor in the location and the space you’re renting.

  1. Teachers Pay Teachers

Are you retired from education, or perhaps just love creating fun teaching materials? Teachers Pay Teachers is a website that allows users to upload their lesson plans and resources for others to purchase. The site boasts that they have helped teacher authors makes $330 million since the creation of the site.

  1. TaskRabbit

TaskRabbit is not just for Millennials or college students; it is for anyone who wants to earn money doing odd jobs, from putting together Ikea furniture to writing a retirement speech. You never know what someone will post. Experts and nonexperienced individuals alike can earn extra cash through this site if they live in a popular area.

  1. Care.com

Care.com is a site that connects individuals who need services with local help. You can apply for local job listings in child care, adult and senior care, pet care, and home care. The best part is that you can find work that fits in with your schedule. Some parents just need a trusted adult to pick up or drop off their children at school, while others just want a weekend baby sitter. Don’t automatically assume that your tight schedule won’t be a good fit for this site. Another thing I love about Care.com is that the site includes background checks, so more people feel confident with whom they hire.

  1. Tutor.com

If you are knowledgeable in a certain academic subject, then why not tutor in it? Tutor.com hires experts in all fields and connects you to their large database of students in need. Potential tutors need to pass an exam and the application process to qualify. Tutors in finance and computer science are in especially high demand.

  1. Rover

More pet parents are shying away from kennels and going for personalized overnight pet care. Pet lovers want to know that their favorite pooch is being snuggled or walked when they are gone, not just kept in a cage. Rover is one site that allows you to upload your profile and choose what type of pet care you offer. You can choose to watch dogs at your own place or the owner’s, or just tailor your profile to be a dog walker.

  1. Skillshare

Most of us are an expert at something, whether that be hand lettering or building computers. Utilize your passion and know-how by turning it into a class on Skillshare. With Skillshare, you earn money every time someone signs up for your course. The site says that their highest-earning teachers make $40,000 a year.

  1. Fiverr

On Fiverr, you can make a quick buck (well, at least five) for simple tasks, such as voice-overs, quick articles, or whatever you would like your gig to be. I profiled one of Fiverr’s top-sellers who writes resumes. She has been using Fiverr for years and has funded two adoptions with her earnings. Of course, her resumes cost much more than $5.

Before You Start Making Money Online

There are many websites available to individuals looking to boost their retirement income. However, before diving in head first, take these three tips to heart:

Don’t Pay for Jobs

There are too many good and free resources available. If a site asks you to pay money for a “secret guide” or “guaranteed moneymaking business,” it might not be legitimate.

Your Time Is Valuable

The reason why I didn’t list survey websites or websites that pay you pennies to open emails is because I strongly believe your time is valuable. Even if you are single and retired, there is something better for you than making a few dollars per hour clicking through spam or websites. Set an hourly desired rate for yourself and don’t be tempted by sites that pay less.

If It Sounds Too Good to Be True…

You have probably said this line to your kids, and I am repeating it to you. If the offer sounds too good to be true, it probably is. There is no such thing as making thousands of dollars for minimal work, so don’t believe the websites, email messages, or forum posters that say so.

And Don’t Forget About Your Social Security

Your Social Security benefit may be reduced if you earn wage or self-employment income and begin receiving Social Security early, before your official retirement age. Your benefit will not be reduced if you continue to earn beyond your retirement age. To learn more about earnings caps and other details that may affect your decision to work in retirement, see the SSA’s FAQ on earning and retirement benefits.


Source: Wisebread

15 Frugal Date Night Ideas

Although my wife and I have been married for almost 14 years (and we dated for six-plus years before that), we still put effort into keeping romance alive in our life. We box out time to spend together without our kids. We do things that we both enjoy and sometimes we each do things that the other one primarily enjoys.

We call these our “date nights.” Once or twice a week, we’ll pencil off an evening just to do something together, as soon as the kids are in bed. Usually, we’ll try to do it on a day when we can sleep in so that we can stay up late without crashing, giving us a few hours together.

The key here is that we intentionally wall off periods of time to spend just with each other. What we actually do is less important than the fact that we have this time saved just to spend together. That is the key to making a frugal date night work and the key to making it worthwhile. It’s the time spent together that keeps our marriage strong.

Our “date nights” are usually pretty cheap. We’ve come to realize over the years that the fun in a date night comes from being together, not in doing something expensive. While it’s fun to go to an expensive restaurant every once in a while, most of our best date nights are found doing simpler things together.

Many of our “date nights” are date nights at home. This is because of the constraint of having children. Going out means finding a babysitter for the children (most of the time), which adds an additional cost, plus many activities outside of the home bear a cost as well.

Over the last few years, I’ve kept a list of our “date nights.” What follows are the distinctly different dates that we’ve had over that period. Obviously, we’ve repeated many of these, and many others are just slight variations on these ideas.

These “date nights” keep the magic of our marriage alive and strong. It’s not because each idea is amazing and brilliant and infinitely memorable, but because we spend the time together, focusing on each other.

I hope you’ll find some value from trying the ideas on this list.

  1. We pop a bunch of popcorn and watch a movie or binge-watch a Netflix series under a big blanket together. This is our most common “date night,” simply because it’s so convenient after a long day. One of us will put the kids to bed while the other one finds something to watch and pops a bunch of popcorn and flavors it all up a little bit and gets a blanket or two out so that the other can just run down to the family room, hop on the couch, and we’re cuddled up watching a movie together or a series together.
  1. We go for a long walk under the stars. On nights when the kids are sleeping over at the houses of friends (we usually try to stack such events together), we’ll go on a walk together around the neighborhood and out into the country under the moonlight, just talking about our lives and whatever else comes to mind.
  1. We make some kind of special yummy treat together. We’ll bake cookies together, or we’ll bake bread together, or we’ll make scones together for breakfast the next morning. We’ll get the ingredients out, talk together as we’re assembling the item, bake them in the oven, and perhaps split a portion of it when it comes out of the oven. It’s an excuse to talk and to do something with our hands together and, in the end, we’ve produced something tasty to eat.
  1. We pack a lunch, go to a state park, and hike to a secluded spot for a picnic. This is our “default” date when we don’t have our children in tow. We’ll pack a meal in a backpack in the morning, go to a state park within an hour or so of our home, and head out on a trail. Usually, we’ve done a bit of research to find out if there’s a reasonable spot for a picnic at a nice vantage point, with a table or at least a bench or, at the very least, some open area to spread out on a blanket. We’ll leisurely hike the trail, talking about life and enjoying the scenery, then we’ll reach our destination and share that meal together, and then eventually stroll back.
  1. We work on a big art project together. Not too long ago, we spent an evening together talking about life and drawing a giant city map for a game we’re playing with our kids. We alternated between discussing buildings and locations and layouts with discussion of what was going on in our lives. It was one of the best evenings we’ve spent together in a very long time. We’ve had similar evenings where we painted miniatures and drew pictures, too.
  1. We go to a free concert in the park. Occasionally, there’s a free concert in our town or in a neighboring town. If the opportunity presents itself, we’ll pack up an evening picnic and a blanket in our picnic basket and go to the concert. We’ll eat a picnic dinner together on the blanket and watch the sun go down and the stars come out while musicians play their songs.
  1. We play a board game together, usually while splitting a bottle of wine. If we have a bottle of wine in our wine rack, we’ll often pull out a board game or two and play them while slowly sharing that bottle of wine. We’ll make moves on the board, play cards to the table, talk about life, and get a little goofy together.
  1. We curl up under a blanket together, each of us with a good book in hand. We’re both avid readers, so sometimes a date night just consists of getting out a giant blanket, cuddling up on the couch, and reading our respective books. We’ll get all warm and cozy under the blanket and lose ourselves in our books as we’re cuddled together.
  1. We sit on the back porch with some music playing quietly with a bottle of wine between us. This is akin to our board game night, except with soft music and the stars over our heads instead of a game between us on the table. We talk about life and love and everything else and simply enjoy each other’s company.
  1. We work on a home improvement or repair project together. Sometimes, we’ll identify a small home repair task or other task, like repairing a drywall hole or fixing a child’s toy, and we’ll do it together. This involves us figuring out how to do it, then one of us taking the lead and the other acting as an assistant. We’ve replaced faucets, repaired toys, patched drywall, cleaned up marker disasters, and many other things over the years.
  1. We do something active together, like play tennis. We live fairly close to a very nice park with a tennis court, so more than once we’ve gone over there and played several games of fairly low key tennis, batting the ball back and forth and laughing at each other’s miscues. It’s a friendly game that gets our blood pumping; it’s often connected with a walk under the stars.
  1. We tour expensive homes when they’re having an open house. More than once, we’ve dressed up fairly nicely and went on a tour of a house during an open house, just to see what the nice house was like. Often, it was an excuse for us to end up talking about what aspects of home layouts and designs that we liked, because we’ll eventually end up buying or building a different home.
  1. We go geocaching. This is a “date night” that we end up falling back on if the weather is nice and we wind up having our children along, but sometimes we do it by ourselves. We simply go to Geocaching.com, find a list of a few local geocaches, and then go find them and see what’s there. It’s a great way to go on a little journey together to see a familiar area from a new angle or explore somewhere new.
  1. We build a fire in the backyard and roast marshmallows. We have a fire pit in our backyard, so if we happen to have some extra wood to burn, we’ll start a small fire in the fire pit and roast some marshmallows. We both get involved in getting the fire going, and then we’ll get chairs out and sit side by side, watching the fire crackle and keep us warm in the evening when there’s a touch of chill in the air, and we’ll make a marshmallow or two and eat them together.
  1. We build a giant blanket fort. This sounds absolutely ludicrous, but it’s incredibly fun. We just gathered up every blanket in the house and turned two rooms in our house into a gigantic blanket fort. We hid in there with flashlights, fixed up inevitable repairs, and giggled like little children again.

A “date night” isn’t about spending money, it’s about spending time together. A good relationship thrives on togetherness, not money or stuff. Put each other first, and not only will you have a strong connection, you’ll also have strong finances, too.


Source: The Simple Dollar