Five Great Banking Tips

Bank

Banks are a necessary tool to navigate our daily financial lives. Unfortunately, there are aggravating practices at many banks that drive us crazy or cost us money.

Here are five tips to get more out of your bank and pay less.

Bullet Point Remove cash from the right place. Never use an ATM machine that is not in your bank’s network. In-network cash withdrawals cost nothing at most banks, but withdrawals from someone else’s machine may come with a $3 to $5 fee.

Action: Turn over your ATM or debit card and note the networks on the back of the card; or ask your bank about their network coverage. Only use ATMs within the network. Test a transaction to ensure no fee is included on your statement.

Bullet Point Notify your credit card issuer when traveling. Most credit card-issuing banks now automatically freeze your cards when a suspicious transaction occurs out of state. This freeze often includes foreign website transactions.

Action: Call your credit card issuer when you are going to be traveling. Also notify them if you wish to order an item from a foreign website. This can alleviate numerous headaches. While some banks may not block out-of-state transactions, you do not want to to have a transaction rejected while purchasing something on a trip.

Bullet Point Know your bank’s overdraft rules. Non-sufficient funds (NSF) checks are not only embarrassing, they are expensive. Banks make millions on their overdraft fees and automatic loan features when you overdraw your account. Understand your bank’s fees and how they apply your payments.

Action: Look for a bank that will allow you to link another account to your checking account without charging a fee. For instance, as a courtesy many credit unions allow you to link a savings account to your core checking account. Funds from your savings account are used should you inadvertently overdraw your checking account.

Bullet Point Always negotiate fees. If you are a long-standing customer with your bank or credit card company, call them to reduce or waive fees. Good examples of this are over-the-limit credit card fees or late payment fees. If you have multiple checking overdraft fees, negotiate to eliminate as many as possible.

Action: If you are late in paying your credit card or have an overdraft, fix the problem as soon as possible. Only after fixing the problem should you call to negotiate the fees. The bank customer service representative will see your quick action and be more likely to help reduce the fees.

Bullet Point Be willing to shop. Banks understand the power of inertia: They know it’s a pain to change banks. But if you are willing to do so, you might be surprised to find better alternatives for less.

Action: Even interest on savings accounts varies widely from bank to bank. Use the internet to quickly see who is paying what in interest. Do the same for any loans, especially car loans, which vary widely.

Year-End Tax Checklist

Year-End Tax Checklist

Now is a good time to review your year-end tax situation while there is still time to act. Here’s a handy checklist to help you do that. There are details on “must-dos” to get the most out of your charitable donations. As the year draws to a close, there are several tax-saving ideas you should consider. Use this checklist to make sure you don’t miss an opportunity before the year is out.

Bullet Point Retirement distributions and contributions. Make final contributions to your qualified retirement plan, and take any required minimum distributions from your retirement accounts. The penalty for not taking minimum distributions can be high.
Bullet Point Investment management. Rebalance your investment portfolio, and take any final investment gains and losses. Capital losses can be used to net against your capital gains. You can also take up to $3,000 of capital losses in excess of capital gains each year and use it to lower your taxable ordinary income.
Bullet Point Last-minute charitable giving. Make a late-year charitable donation. Even better, make the donation with appreciated stock you’ve owned more than a year. You often can make a larger donation and get a larger deduction without paying capital gains taxes.
Bullet Point Noncash donation opportunity. Gather up noncash items for donation, document the items, and give those in good condition to your favorite charity. Make sure you get a receipt from the charity, and take a photo of the items donated.
Bullet Point Gifts to dependents and others. You may provide gifts to an individual of up to $14,000 per year in total. Remember that all gifts given (birthdays, holidays, etc.) count toward the annual total.
Bullet Point Organize records now. Start collecting and organizing your end-of-year tax records. Estimate your tax liability and make any required estimated tax payments.

 

 

The Equifax Breach and You

Security

 Be Proactive

Earlier this year, hackers were able to breach the security of Equifax, one of the three national credit reporting agencies. More than 143 million Americans — nearly half the country — were exposed to the attack, and may have had their personal information stolen, including names, birthdates, and Social Security and driver’s license numbers.
Equifax is still determining exactly whose data has been exposed. While you wait to find out, it’s worth taking a few proactive steps to make sure your info isn’t misused by hackers.
Bullet Point Start checking. Visit Equifax’s website at www.equifaxsecurity2017.com and enter your last name and last six digits of your Social Security number. The site will tell you whether it’s likely or not your data has been exposed, and put you on a list to get more information. You can also sign up for a year’s worth of free credit monitoring.
Bullet Point Watch your statements. Start checking your credit card statements, and pay special attention to cards you don’t use often. The initial reports from the breach were that hackers may have been making charges on underused cards.
Bullet Point Check your credit reports. You can look for suspicious items on your reports, such as new accounts being opened in your name, at all three credit report agencies: Equifax, Experian and TransUnion. Free annual reports are available at www.annualcreditreport.com.
Bullet Point Freeze your credit. If you suspect you may become a victim of identity theft, you can place a credit freeze on your profile at each of the three credit reporting agencies. This stops new accounts from being opened in your name. Note that you’ll have to unfreeze your accounts if you want to apply for new loans or make your credit accessible for things such as job applications.
Bullet Point File your taxes early. One of the most common ways identity thieves use your information is to try to claim a tax refund with your data. This was the most common scam in 2016, according to the Better Business Bureau. If you file your tax return as early as possible, you shut down this opportunity for any would-be thieves.

Fix Your Overfunded Accounts

Home office deductions

Is socking away large sums in a tax-deferred retirement account ever a bad idea? It is when you exceed the annual IRS limits. Whether intentional or not, the penalties can be painful. Here’s how overfunding occurs and what steps to take to fix the problem.

How overfunding happens

Overfunding retirement accounts happens more than you may realize. It can be the result of a job change that causes you to participate in two different employer retirement plans. Sometimes people forget they made IRA contributions early in the year and do it again later. Others forget that the IRA limit is the total of all accounts, not per account. The rules are complicated. Traditional IRAs can’t be contributed to after age 70½, while Roth IRA contributions are subject to income limits. Plus all contributions are predicated on having earned income.

IRAs

The annual Roth and Traditional IRA contribution limit is $5,500 ($6,500 if age 50 or older). If you surpass this amount, you pay a 6 percent penalty on the overpayment every year until it’s corrected, plus a potential 10 percent penalty on the investment income attributed to the overfunded amount.

The fix: If the overfunding is discovered before the filing deadline (plus extensions), you can withdraw the excess and any income earned on the contribution to avoid the 6 percent penalty. You will potentially owe a 10 percent penalty in addition to ordinary income tax on the earnings of the excess contributions if you’re under age 59½. Often you can apply the contribution to the next year. If your issue is due to age (70½ or older for a Traditional IRA) or income limit (for a Roth IRA), consider recharacterizing your contribution from one IRA type to another.

401(k)s

The rules for correcting an overfunded 401(k) are a little more rigid. You have until April 15 to return the funds, period. The nature of the penalty is also different. The excess amount is taxable in the year of the overfunding, plus taxable again when withdrawn. So, you could pay the penalty multiple times on the same amount. And, in certain cases, overfunding a 401(k) could cause it to lose its qualified status.

The fix: If you suspect an overpayment situation, contact your employer as soon as possible. Adjust your contribution amount before the end of the year and try to get the problem resolved that way.

Dos and Don’ts of Business Expensing

Home office deductions

Knowing whether you can or can’t expense a purchase for business purposes can be complicated. However, there are a few hard-and-fast rules to help you.

According to the IRS, business expenses must be ordinary and necessary to be deductible. That means they are common and accepted in your business, as well as helpful and appropriate. You’ll need to maintain records (such as statements and ledgers) and supporting documents (receipts and invoices) to substantiate your deductions. Certain expenses are subject to extra requirements, as described below.

Travel expenses pertain to business trips and can include transportation to and from airports, your hotel and business meeting places. They also generally include lodging, meals, tips and other related incidentals.

Do: + Maintain trip logs describing your business expenses and the purpose of each. If your trip is mostly for business but includes personal components, separate them in your log. These nondeductible personal items could include extending your stay for a vacation or taking personal side trips.
+ Deduct travel-related meal costs, but only up to the 50 percent limit allowed by the IRS.
Don’t: Rely on estimates to determine the business vs. personal components of your expenses.
Deduct any of your travel expenses if your trip is primarily for personal purposes.
Deduct any of your meal costs if they could be considered unreasonably extravagant.

Entertainment expenses need to be either directly related to or associated with the conduct of your business. That means that business is the main purpose of the activities and it’s highly likely you’ll get income or future business benefits. Expenses from entertainment that aren’t considered directly related may still be deductible if they are associated with your business and happen right before or after an important business discussion.

Do: + Keep records of entertainment expenses, including who was present and clear descriptions of the nature, dates and times of the pertinent business discussions.
+ Deduct up to 50 percent of entertainment expenses, as allowed by the IRS.
Don’t: Claim the costs of pleasure boat outings or entertainment facilities (e.g., hunting lodges) that are not related to business activity.

Business use of your personal car is calculated according to your actual business-related expenses, or by multiplying your business mileage by the prescribed IRS rate (53.5 cents per mile in 2017).

Do: + Log odometer readings for each business trip and record your business purpose.
+ Claim actual business deductions by applying the ratio of your business-miles-to-total mileage.
Don’t: Claim mileage or expenses pertaining to commuting to and from work.

If you have any questions about how to handle your business expenses, reach out for further guidance.

Avoid FAFSA mistakes

Don’t forgo federal student aid by making one of the following common filing mistakes:

Bullet Point Mistake: Not reading the instructions or questions

Tip: Answer all the questions, even if the answer is zero. If left blank, a question will be considered unanswered. Here are some quick tips:

  • Write dollar amounts without cents.
  • “You” and “your” refer to the student, not the parents.
  • Provide parent information if you or your child is considered a dependent of someone else.
  • Understand the definitions of key FAFSA language including: legal guardianship, parent and household size.
  • Use the available FAQs and FAFSA Information Center.
Bullet Point Mistake: Incorrect, incomplete or nonmatching data

Tip: Complete the FAFSA online. Although you can complete the FAFSA on paper, it takes only three to five days to process when submitted electronically. The online version has built-in safeguards that identify and prevent many errors. Plus, the IRS Data Retrieval Tool can import information directly from your tax return. Logging in with a Federal Student Aid (FSA) ID will automatically load basic information (e.g., name, birthdate, and Social Security number), reducing the likelihood of typos. You’ll even receive confirmation of receipt once you submit your online application.

Bullet Point Mistake: Not filing on time

Tip: Note the new October FAFSA filing start date and get the application submitted as soon as possible. The sooner you or your child gets started, the higher the likelihood of being awarded funds, since many are distributed on a first-come, first-served basis.

Remember, students need to complete a FAFSA each year because eligibility does not carry over and can vary based on circumstances. Students can use the FAFSA Web Worksheet now to gather and organize the data needed for their application, available at www.fafsa.gov.

Contractor or Employee?

Company benefits

Knowing the difference is important

Is a worker an independent contractor or an employee? This seemingly simple question is often the contentious subject of IRS audits. As an employer, getting this wrong could cost you plenty in the way of Social Security, Medicare, and other employment-related taxes. Here is what you need to know.

 The basics…

 

As the worker. If you are a contractor and not considered an employee you must:

Bullet Point Employee Pay self-employment taxes (Social Security and Medicare-related taxes)
Bullet Point Employee Make estimated federal and state tax payments.
Bullet Point Employee Handle your own benefits, insurance and bookkeeping.

As the employer. You must ensure your employee versus independent contractor determination is correct. Getting this wrong in the eyes of the IRS can lead to:

Bullet Point Employer Payment and penalties related to Social Security and Medicare taxes.
Bullet Point Employer Payment of possible overtime including penalties for a contractor reclassified as an employee.
Bullet Point Employer Legal obligation to pay for benefits.

Things to consider

When the IRS recharacterizes an independent contractor as an employee they look at the business relationship between the employer and the worker. The IRS focuses on the degree of control exercised by the employer over the work done and they assess the worker’s independence. Here are some guidelines:

Bullet Point Consider The more the employer has the right to control the work (when, how and where the work is done), the more likely the worker is an employee.
Bullet Point Consider The more the financial relationship is controlled by the employer the more likely the relationship will be seen as an employee and not an independent contractor. To clarify this, an independent contractor should have a contract, have multiple customers, invoice the company for work done, and handle financial matters in a professional manner.
Bullet Point Consider The more businesslike the arrangement the more likely you have an independent contractor relationship.

While there are no hard-set rules, the more reasonable your basis for classification and the more consistently it is applied, the more likely an independent contractor classification will not be challenged.

Ace the FAFSA

Home office deductions

The Free Application for Federal Student Aid (FAFSA) is a tool students use to apply for more than $120 billion in federal funds. Unfortunately, each year many students miss out. A report from NerdWallet estimates that $1,861 per eligible high school graduate of free federal grant money went unused during 2014 because they did not complete a FAFSA.

 

 

Even if you don’t think you or your child qualify for federal aid, filling out a FAFSA is important because it could be used to determine eligibility for nonfederal aid and private funds.

FAFSA available Oct. 1

Previously, the FAFSA was not available until January. A recent change now makes the application available Oct. 1. This is because the 2018-19 FAFSA can be completed with your 2016 tax information.

Know Your Rights When Debt Collectors Call

Past due noticeAt some point you may be on the receiving end of a debt collection phone call. It could happen any time you are behind on paying your bills, or if there is an error in billing. In the U.S. there are strict rules in place that forbid any kind of harassment. If you know your rights, you can deal with debt collection with minimum hassle. Here are some suggestions.

 

Bullet Point Phone Ask for non-threatening transparency. When a debt collector calls, they must be transparent about who they are. The magic words they must utter are: “This is an attempt to collect a debt, and any information obtained will be used for that purpose.” In addition, debt collectors cannot use abusive or threatening language, or threaten you with fines or jail time. The most a debt collector can truthfully threaten you with is that failure to pay will harm your credit rating, or that they may sue you in a civil court to extract payment.
Bullet Point Rules Know the contact rules. Debt collectors may not contact you outside of “normal” hours, which are between 8 a.m. and 9 p.m. local time. They may try to call you at work, but they must stop if you tell them that you cannot receive calls there. Debt collectors may not talk to anyone else about your debt (other than your attorney, if you have one). They may try contacting other people, such as relatives, neighbors or employers, but it must be solely for the purpose of trying to find out your phone number, address or where you work.
Bullet Point Action Take action. If you believe the debt is in error in whole or in part, you can send a dispute letter to the collection agency within 30 days of first contact. Ask the collector for their mailing address and let them know you are filing a dispute. They will have to cease all collection activities until they send you legal documentation verifying the debt.
Bullet Point Stop Tell them to stop. And, whether you dispute the debt or not, at any time you can send a “cease letter” to the collection agency telling them to stop making contact. You don’t need to provide a specific reason. They will have to stop contact after this point, though they may still decide to pursue legal options in civil court.

If a debt collection agency is not following these rules, report them. Start with your state’s attorney general office, and consider filing a complaint with the U.S. Federal Trade Commission and the Consumer Financial Protection Bureau as well.

Save on Insurance By Raising Deductibles

Having insurance for your home and vehicle is essential to ward off financial disaster should accidents occur. Unfortunately, insurance policies continue to become more expensive. One of the things you can do to lower your insurance cost is to consider increasing your coverage deductibles.

Car key and insurance form

Higher deductible, lower insurance cost

Deductibles are the out-of-pocket cost you must pay before your insurance company steps in with their coverage. If you are willing to increase your deductibles, your insurance company will lower your monthly insurance premium.

By increasing car insurance deductibles from $500 to $2,000, the average American would save 16 percent a year, according to the online insurance broker InsuranceQuotes.com. The actual amount you would save on either car or home insurance depends on the state you live in, your demographic profile and claims history.

Do the math

Before you decide whether upping your deductibles is right for you, find out how much you would save. Suppose you would save $200 a year by increasing your car insurance collision and comprehensive deductibles to $2,000 from $500. After 7½ years, you would accumulate enough savings to make up the extra $1,500 out-of-pocket cost should you have an accident.

Now consider how likely you are to have an accident. About six in every 100 U.S. motorists file a collision claim every year and 3 in 100 file a comprehensive claim, according to the Insurance Information Institute. If those claims were spread out evenly, that means every motorist would go 16½ years before filing a collision claim and more than 33 years before filing a comprehensive claim.

Of course, claims are not spread out evenly and no one person’s experience is “average.” Your actual risk will depend greatly on how safe a driver you are, how many miles you drive a year, and where you drive. You have to make a similar estimate of your likelihood of filing a claim on your homeowners insurance.

Avoid the rate-hike game

Insurance companies are renowned for raising your premium after you file a claim. A higher deductible reduces this risk as fewer claims need to be filed.

A word of caution

Remember that increasing your deductibles can create a financial hardship. In our example, you’ll now have to have $2,000 on hand to cover the cost of an insurance claim. Before you change your policy you need to be prepared by having enough cash in a savings account to cover your higher deductible.