Category: Debt Management
Debt – most of us carry some debt. We use our credit cards and we have full intent of making the payments. However, sometimes things don’t go according to plan. Something happens in our lives that make it impossible for us to keep our commitment to pay. If you are in debt and you can’t make your payments, don’t panic, and don’t ignore it!
Ignoring your creditors may seem like the smart thing to do, after all you can’t pay them, but actually, it’s not a good choice. That’s because your creditors could report you to the credit bureau and that could affect many areas of your life. It might mean you are turned down for a job that you applied for. It might mean you have to pay more for insurance or you are refused insurance. It might mean you are turned down for a rental property. Bottom line – doing nothing is not looking out for you.
Instead, sit down and start to put a list together of your creditors that includes both secured and unsecured debts. You can begin by talking to them if you like and explaining your situation and why you can’t pay. Some of them may work with you, while others may not.
You’ll need to prioritize your debts so that you can decide which ones you will try to pay with your limited funds. For example, paying your mortgage and utilities would be more important than paying your credit cards, because you could become homeless and without power or gas. Then again, if your situation is dire you may walk away from your home. In that case, you would still want to keep the utility companies happy, as you’ll always need utilities.
The Debt Collection Agency Comes Calling
It won’t take too long before you hear from the debt collection agency, which is a third party agency that purchases other companies unpaid debts, and then tries to recover part of the amount. They can really wreak chaos in your life if you do not know what steps to take to prevent it.
How You Should Deal With Debt Collection Agencies
They are going to phone you morning, noon and night and at every number they think you might be reached at. Instruct them not phone and to only contact you in writing. Know your rights under the ‘Fair Debt Collection Agency Act,’ and make sure you understand the statute of limitations. The problem with dealing directly with debt agencies to determine a settlement leaves you with no one protecting your rights and looking out for you. It’s not a wise move.
What are Your Options?
The best option would be to contact a professional organization who has the ability to challenge, dispute and remove damage caused by a debt collection agency. Or, you could try to repair you credit on you own if you have the time and know how. Honestly, you are better off leaving something as important as your credit score in the hands of the professionals.
Article Source: http://EzineArticles.com/8322587
Posted in Bankcruptcy Medical, Credit Counseling, Debt Management, Uncategorized
Not paying your taxes on time entails various consequences. If you are having trouble paying your taxes in full, don’t let it hinder you in filing your tax return timely. Consider paying as large a percentage of the amount owed or borrow money from others in order to settle your tax liability in full. Filing a return and not including full payment can save you large amounts of penalties and fees. Moreover, payment plans are available and being on a current payment plans avoids IRS collection process which may include, property seizures, garnishments etc. Most CPA firms can advise you on these matters.
These are the ordinary penalties:
· “Filing Failure” penalty
5% per month on the amount of tax due on the return to a maximum of 25%
· “Payment Failure” penalty
.5% per month on the amount of your tax due on the return to a maximum of 25%
· Both “Filing Failure” penalty and “Payment Failure” penalty apply
The “Filing Failure” penalty lowers to 4.5% per month and “Payment Failure” penalty is
.5% per month. The combined penalty stays at 5%. The maximum penalty for both is 25%. Then, the “Payment Failure” penalty continues at.5% per month another 45 more months. Both penalties can go to a maximum of 47.5%.
Besides the penalties above, interest is charged on late payments. Also when you are self-employed, you take full responsibility for paying the taxes as money is earned through the year.
Payment extensions are provided when it can be proven that unwarranted hardship exists. Inconvenience caused by paying the tax isn’t enough grounds for unwarranted hardship. The taxpayer must show that paying the tax would cause significant difficulty and/or expense. For example, a fire sale, selling property at an extremely discounted price, since the person faces the difficulty of paying taxes.
When a payment extension is granted, interest is still charged but the “Payment Failure” penalty is waived. The payment extension is usually good for six months from the due date of the return. The IRS will lengthen time allowed for a payment extension due to some circumstances..
To apply for a payment extension use Form 1127. Form 1127 requires a taxpayer to provide detailed statements of; assets and liabilities, statement income for each of the 3 months prior to the due date of the tax return and statement expenses for each of the 3 months prior to the due date of the tax return.
Paying Income Taxes With Borrowed Funds
Borrowing money to settle tax obligations is an option. Here are some various scenarios:
· Loan From Individuals
Borrow from relatives or friends. Interest rates are probably lower.
· Loans From Banks Or Other Commercial Institutions
Interest on this type of loan is usually considered a non-deductible personal interest expense. Typically a financially troubled taxpayer has a hard time to qualify for this type of loan.
· Home Equity Loan
Interest rates may be lower than with other types of loans. The interest payments may be tax-deductible. This is usually the cheapest option.
· Credit Card
There are a number of companies approved to accept credit cards or debit cards to pay income tax. Note, interest charges may be high and is usually considered a non-deductible personal interest expense. On top of this interest, the companies approved to accept credit cards or debit cards to pay income tax charge a service fee.
Monthly Payment Agreement Request
File form 9465 to apply for a monthly payment agreement with IRS, this can be done online at WWW.IRS.GOV. This process can be done after a hardship extension expires. Form 9465 requires less information than Form 1127 regarding the hardship extension. No financial statements are required if tax due is under $50,000.
When the amount owed is more than $50,000 Form 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals is required. This form helps the IRS obtain detailed, information about you. Consider consulting a CPA Firm about allowable expenses and national living standards that correspond to Form 433-A.
There is a fee for the monthly payment agreement and it is deducted from the first payment if the request is approved. When the payment agreement request is approved, interest on any tax due date is still imposed. However the “Payment Failure” penalty is reduced to.25 % instead of.5% if the return is timely filed.
The monthly payment agreement has a fee of $120. The fee is reduced to $52 when a person permits the IRS auto debit from their account. In the event the taxpayer qualifies as a low-income the fee is reduced to $43.
Monthly Payment Agreements may be terminated if IRS thinks the probability of obtaining payments are at risk. The IRS will also terminate a monthly payment agreement if the financial information supplied was not accurate or complete.
Other reasons for terminating the agreement are the following:
• Failing to make a monthly payment.
• Failing to pay another tax liability when it’s due.
• Failing to provide updated financial information.
• IRS finds out that your financial condition has improved.
A written notice will be sent by the IRS 30 days prior to changing or terminating a monthly payment agreement. IRS will also provide the grounds for changing or terminating a monthly payment agreement. The requirement for written notice does not apply when the IRS believes the collection of tax owed is at risk.
Thus, it is very important that tax returns are filed properly even if full payment cannot be made. Options like hardships extensions or monthly payment agreements may be availed to prevent further charges, penalties and other serious consequences
Article Source: http://EzineArticles.com/9059857
Posted in Bankcruptcy Medical, Credit Counseling, Debt Management, Uncategorized
The TFSA or Tax Free Savings Account is designed for people to obtain tax free income and withdraw funds if they want to. The intention behind this vehicle is to get people to save money – which is why it is called a “savings account”. The incentive to save comes in the form of tax relief on the income generated, and the flexibility of withdrawal which the RRSP and RESP do not have. If you are already a disciplined saver, you may not need this type of account, but you may want to use it if the tax savings are worthwhile in your current financial situation.
One key word to remember is “income”. The money deposited into the account is not tax free, and will not generate a refund like the RRSP contribution will. Only after you made some income will you see the effect of not paying taxes on this money earned. The flip side of this is that if you lose money that you invested in the TFSA account, you cannot claim the losses.
Another thing that can arise among TFSA account holders is the redeposit of money back into the account after withdrawal. If you take out money from the account, you would have to wait until the following calendar year before you can replenish the amount of money you withdrew. If you do it beforehand, you may trigger taxes owing to the government, which you would have to pay by June 30th of the following year in question. Check the CRA web site for details.
What about fees? Due to the small amount of money that is eligible for a TFSA account, you have to watch the effect of fees. There are three types of accounts available: the savings account, the mutual fund account and the self-directed brokerage account. These accounts will have differing fees. Every fee that you pay will reduce the income generated in the account, and because the maximum amounts are relatively small (up to $20,000 in 2012), the fees can cancel out the gains made on the income generated.
If a TFSA is being considered simply for saving money, and investing in cash or short term bonds, this account may not be worthwhile. It would likely be just as lucrative for you to have an ordinary high interest savings account, and treat that as a “savings reservoir”. You can withdraw money whenever you want to, and as often as you want to. There is no tax advantage in doing this, but the government does not make it mandatory to issue T5 tax receipts if income is under $50. If you have a $10,000 TFSA account and you earn 1% for a year, this would amount to $100. If you have a $50 fee on the account, you would have $100 – $50 = $50 worth of income. In this scenario, you may not even have to declare the $50 as income since a receipt may not be issued. The time and effort to register the account and keep track of the contributions may not justify having the TFSA account. If you make a net income of $200 instead of the $50 as per the above, and if your tax rate is 30%, the tax savings is: $150 multiplied by 30% = $45 per year. Of course, as the dollar amounts invested go up and the returns go up, the tax savings will be more worthwhile.
If you are going to open as TFSA account, you should invest the money in something that generates good return, at least 3% or more per year on a $10,000 account size, while minimizing the losses you may receive. This way, the tax benefit is maximized, and the money is available relatively quickly if needed. You would need to be able to generate this return consistently, so if your investing record is poor, it may not be tax efficient. In terms of comparing to other options, paying down debt or using your RRSP instead of using the TFSA may be more useful in terms of a long term overall plan. If you have uneven cash flow and want to save money for short term use, the TFSA would be helpful.
The TFSA Compared to the RRSP
How does the TFSA differ from the RRSP? There are a number of differences. The RRSP is intended for people to save for their retirement, so it is assumed to be money you don’t intend to withdraw for a long time. The TFSA is designed more for saving, and possible frequent withdrawals. Take note that many institutions charge fees for withdrawals, and this should be accounted for if your account balance is small, your rate or return generated within the account is low, and your withdrawals are frequent.
The RRSP will give you a tax deferral on all of the money you put into the account. Take note that tax deferral does not mean you do not pay taxes on this money – you pay taxes later on the money deposited and all of the money it generates upon withdrawal. Once money is withdrawn, you cannot redeposit the money back into the RRSP account unless you have new contribution room that you would have generated with more taxable income. The taxes you pay depends on your marginal (or highest) tax rate in the year that you deposit the money. The taxes paid on withdrawal will depend on the marginal (or highest) tax rate in the year you make the withdrawal. With the TFSA, the money deposited is not affected by taxes. Only the income generated is tax exempt, and you can replenish the amount as often as you like (within CRA tax rules).
The RRSP will depend on your income situation, whereas the TFSA does not. The maximum TFSA amounts are determined by the government, and anyone can put the stated amounts into an account regardless of their income situation. The maximum has been increasing each year by $5000 since the beginning of the program, and is currently $20,000 for all of your TFSA accounts. Like the RRSP, the unused portion of this amount can be carried forward and used in later years, or not used at all – the choice is yours.
The Tax Free Savings Account is a useful tool to be aware of, but it is not for everyone. Knowing the best time to use this account and its limitations would go a long way to understanding what is best for your situation.
Posted in Credit Counseling, Debt Management, Uncategorized
Financial freedom is an end state that many people hope to achieve. Some do it by sheer hard work. Some do it by leveraging on others. Others use a variety of different ways to do so. The truth is, out of the many who aspire to achieve financial freedom, only a special few actually achieve real financial freedom doing what they do.
We live in a generation of globalization. The many influences through media and internet about the lifestyles that people adopt globally do impact how we regard money. The pictures on print media, images on advertisements and videos in movies do impact the way we perceive the norm of money habits. Saving money is definitely not one of the strong messages that appear anytime often in these media.
We live in a generation of consumerism. Shopping is becoming more convenient. We can do it at the brick and mortar shops or simply buy online with the simple clicks of our mouse. Our perception of money is porous to the influence from global trends of lifestyle. This encourages easier spending and more dilute concept of saving money.
Without conscious effort, it is easy to give in to these larger forces of influence and sideline your financial future.
What if the start to achieving financial freedom is something basic and doable for everyone? What if it is something simple enough that can be done immediately if you put your heart to it?
This simple start is saving money.
As simple and no-brainer as it may sound, saving money is not the easiest thing to do for everyone.
Setting aside money is the basic first step to gathering enough capital to move on to grow your wealth. It is really important to learn to cultivate a good and disciplined way of saving money so that there is enough pool of funds to keep for rainy days, invest or use for furthering our financial goals.
One simple way to do so is to adopt the “save first, spend the rest” mentality whereby a fixed amount is always set aside for savings first when you receive your income. Whatever is left after you save can then be used for expenditures. This ensures that you can save regularly.
An alternative way is to have an arrangement with the bank, which you credit your income into, to transfer a fixed sum of money from your account into a savings account on a monthly basis. This is a hassle free and enforced savings method.
There are many ways to get started with saving money. The important thing is to get started. Saving money alone is definitely not going to make you rich. However, saving money does give you the basic building blocks on which you can move on to larger goals like growing your wealth and reaching financial freedom.
Thank you for reading! I am Zach Chen, a writer, infopreneur & self-help mentor. My vision is to inspire & impact the world to live a happy & fulfilling life. I live life passionately and would love to help as many people do the same too. I share tips, write e-books, produce downloadable courses to help people around the world live a happier life through realizing financial freedom, emotional freedom, action freedom and time freedom.
Article Source: http://EzineArticles.com/9172826
Posted in Credit Counseling, Debt Management, finance
There are ‘do’s and don’ts’ with creating wealth. With many of the basic principles of wealth creation time-tested, the laws of wealth will teach you how to create and attract wealth using specific strategies and systems that bring results.
Some people have made wealth and lost it, right? These 3 laws will exhort you to continue working hard, to give part of your money to help others and to share your knowledge about wealth creation.
How do you Keep and Share Your Wealth?
It is not difficult. Just read on and you will see why.
Law 1: Remember how you got here: Through hard work so continue that way.
Certain behaviours, mindsets and strategies enable you to be rich, successful and wealthy. It was not easy getting here so don’t ever undo all the years of hard work and growth by breaking these Laws of wealth.
When you become wealthy remember those people who helped you so much and the others who received great value from you. Shun selfishness and arrogance. Don’t become over protective, possessive or paranoid about your wealth; continue in the same way using the same principles that have got you where you are.
It is very easy to get carried away with it all and end up with nothing, or even worse than that. Do not flaunt your wealth; you will lose it faster than saying hey!
Be therefore wise, consistent, thoughtful, gracious and understated.
Law 2: Give back: pass the money on to others you feel would benefit from it.
You really can’t take your money with you so think of giving it back: to children and grandchildren to educate and benefit them for their future businesses and careers and to foundations that would use it wisely for the benefit of less fortunate people. You got here adding value to other people’s lives, so do the same when you go. That will add a huge amount to your life.
The many ways to give money to others that save tax and don’t make them feel guilty or indebted are gifts and education and funds to set up businesses and property and investments and all such things. If undecided, contact a qualified financial advisor for advice.
Law 3: Pass on your knowledge: help others become wealthy too and feel good.
If it feels good to be wealthy and successful, it feels even better to pass on your knowledge to help others become rich too and happy.
Passing on your knowledge is a must. Not only are there so many people out there who could use it, but also you would be assuring everyone this inalienable right.
In any case you have achieved this height through adding value to other people’s lives, so why not continue? Your life will become so much more abundant.
This strategy is not really about giving money as it is about education. You remember, teaching somebody to fish is far better than giving them fish?
You can’t imagine what fun it is to teach your kids, friends, family, and thousands others using the internet about the Laws of wealth and success. Doing so can even make you increase your wealth substantially.
It is Stephen Covey who said that once we have learned, we should all be teaching. So think how you can help other people be wealthy, successful and happy. This may be your way of giving. And in the present world, nothing pleases a lot of people more than wealth. So, put joy into somebody’s life.
Posted in Budgeting, Credit Counseling, Debt Management, finance, Wealth Building
Debt freedom is only 4 simple steps away. Now I said simple not easy. I know that Guru just told you to pull out your credit card and buy the next big shiny object. He just told you to believe in yourself and spend $995. The super-duper business kit and $150 auto-ship is the key to millions. Just charge it.
That new flat screen is calling. 0% interest for 18 months. It looks good 70 inch and it curves. How about a new car. You just paid this one-off but it’s 5 years old and the new car has more lights. The payments are about the same… what is another 5 years paying off another car. You look good in a depreciating asset.
Cash is King
The tough thing about debt freedom is you want to use cash. When you use cash you feel it more. Your brain registers cash leaving your hand. You don’t feel it when you use your debit or credit cards. Just try it and see. Dropping $995 cash on a business opportunity, $4000 on a flat screen, or $25000 cash for a new car will have you investigating your purchases more.
Paying cash will have you work that new business more diligently. Being stuck with business debt and all the crappy products that comes with it is a pain. I am not going to get in a debate about good debt vs. bad debt. I rather you boot strap your way to success. If you knew how to use debt you wouldn’t be reading this article.
Investing cash into your business and purchases makes you more cautious. It produces delayed gratification and in the end you get better deals because you brought cash to the table. I have bought furniture, electronics, cars with cash, and saved hundreds even thousands of dollars. Cash Is King.
Debts can kill your business, destroy your marriage, and cause friendships to disappear. You don’t need the stress and frustrations that come with owing credit cards, banks, and personal loans. Here are 4 Simple Debt Freedom Solutions.
4 Simple Debt Freedom Solutions
Pay More Than The Minimum
Stop the habit of only paying the minimum. Your statements shows you how long it will take you to pay off your credit cards or loans when you pay the minimum. This only prolongs the agony and you are spending more money. Interest payments equals cash flow for your lenders. That’s how they make money.
Bite the bullet and pay more. If your minimum payment is $50 pay $100. If it is $100 pay $200. Get rid of it. The money is there. Stop eating out, tell 7-eleven you are on vacation, stop all the bad habits of smoking, drinking, or gambling. Smokers can save on average $35 per week if they stopped smoking.
Sacrifice is the key word here. If you have more month at the end of your money you need a cashflow plan. Financial Peace University teaches you how to create a monthly budget. A budget will help you know where your money is going.
The increased payments will save you more money, time, and frustration. Better to live below your means now than fearing living hand to mouth in the future.
I got this from FPU. List all of your debts in order from the smallest debt to the largest debt. The next to each debt list the monthly payments.
Don’t worry about who has the highest interest rate. We want something simple. You want quick victories to build momentum. Paying off the smallest debt first will create energy and motivation for you. Seeing progress is the only way you will keep going.
The second part of the snowball effect is to come up with an extra $100 to $200 per month to add to your debt payments. Cut back on expenses, get a second job, sell all that stuff you don’t use. Sell so much stuff the kids think they are next. You will find the money hidden in your credit card and bank statements. Go through them and cut expense you don’t need.
Apply your extra money to the first debt listed. When that debt is paid off, apply that money to the second debt. For example you came up with $200 extra. Plus the monthly payment of the first debt of $15. That is a total payment of $215. Now you apply $215 to the monthly payment of the second debt which is $25. Your total payments are now $240. Keep up this process until all your debts are paid. Hence the snowball effect.
Cash Out Your Savings
Cash out your savings. It doesn’t make since to save at 1% interest and have debt at 18% interest. You will never win that battle. Cash out all of your savings. Leave $1000 in an emergency fund and use that cash to help your debt freedom plan. Trust me on this when you are debt free you will have enough money to fund your savings plan.
Get A Second Job
The goal is debt freedom right? Then get a second job or find another income source. Imagine putting an extra $1000-$1500 per month to your debt snow ball. How fast could you pay off your car loan, student loan, and those darn credit cards. Have a long-term perspective. It could take 3 to 5 years to become debt free.
Notice I didn’t say file bankruptcy, take out a home equity loan, or borrow against your 401(k). Getting into more debt to pay of debt is stupid and just a marketing ploy. It took me 28 months to become debt free and now I put my debt payments into what I call my Debt Freedom Fund. My total debt payments were $1100.
Change Your Behavior
These solutions are simple not easy. Combine all four. That’s what I did. But before you start realize that your current behavior has you in this situation. Keeping this same behavior will only have you pay off your debts and then going back into bondage. There are plenty of books and courses on how to handle your money.
Getting into debt did not happen over night. Neither will becoming debt free. Start now and remain consistent.
Charles Fitzgerald Butler, is an entrepreneur and expert in internet marketing. Charles has a passion for helping people start and run successful home businesses. You can partner with Charles and start building multiply income streams from your home. Charles’ goal is to help all who partner with him achieve cash flow and profits from their business.
Article Source: http://EzineArticles.com/9003104
Posted in Budgeting, Debt Management, Uncategorized
The hardest thing in the world to understand is the income tax.”- Albert Einstein
Albert was right: The U.S. tax code is difficult. In 1913, it was 400 pages long. Since then it’s exploded to 73,954 pages of complex language designed to extract as much money as possible from your wallet.
Who reads all of that? No one. The code is so complex that U.S. tax preparation is one of the major growth industries… not just in America, but globally.
But while you must pay the tax man his due, there are some important escape hatches for Americans. It may be too late for 2014’s tax year, but there’s plenty of time to prepare for next year… if you start now.
The Golden Rule: Reduce Your Taxable Income
The fundamental element of any short-term tax strategy is to reduce your taxable income for the calendar year. There are three basic ways to do this.
Property acquired by gift or inheritance isn’t included in the taxable gross income of the beneficiary. That makes gifting an ideal way for a family to save tax.
For 2015, you can make tax-free lifetime gifts and bequests of up to $5.43 million. (For gifts or bequests to U.S. citizen spouses, the lifetime limits don’t apply.) Due to the concept known as “portability,” a surviving spouse can use a deceased spouse’s unused gift/estate tax exclusion. You could allocate some of your estate to your heirs, perhaps by creating a tax-deferred offshore private insurance policy.
Bear in mind that the first $14,000 (or $28,000 per married couple) that you gift in 2015 is tax-fee, and doesn’t apply towards your lifetime limit.
Payments made on behalf of another person to an educational institution for tuition, or to a medical provider for medical costs (including insurance), are also excluded from the gift tax, and don’t affect your lifetime cap. You might pay the tuition of a friend’s child, or the medical expenses of an employee. You can also still contribute to Section 529 education savings plans up to the annual exclusion amount. Money in these accounts grows and can be withdrawn tax-free, provided it is used to pay for college and related expenses.
Keep in mind that if you make a gift of anything other than cash or marketable securities, you need to get a professional appraisal, especially if it’s a hard-to-value asset, such as real estate or a share in the family business.
2. Maxing out your retirement contributions
One of the best ways to reduce before-tax income is to max out your retirement contributions. Here’s a summary of the maximum contributions for 2015:
401(k) and 403(b) Plans: Max = $18,000. Persons 50 and older can contribute an additional $6,000, for a total of $24,000.
SIMPLE IRA: Max = $5,500. This jumps to $6,500 if you are age 50 or older. If you have an employer retirement plan, however, the deduction for IRA contributions is being phased out for modified adjusted gross incomes between $61,000 and $71,000 in 2015 (double that for couples). Unlike 401(k) contributions, which generally need to be made by the end of the year, IRA contributions can be made up until the tax filing deadline.
SEP-IRA: Max = 25% of compensation up to $53,000. If you’re self-employed and have a SEP-IRA plan, the maximum contribution has increased by $1,000. The amount is limited to the lesser of 25% of your income or $53,000.
Roth IRA Max = $5,500: You can make Roth IRA contributions until your income is between $116,000 and $131,000 in 2015 ($183,000 to $193,000 for couples). If you’re over age 50, there’s a $1,000 catch-up contribution.
3. Juggling money
An oft-overlooked way to reduce your taxable income is to shift earnings into the following year or next year’s expenses into the current year. This reduces your adjusted gross (i.e., taxable) income.
For example, if possible, defer some 2015 income until 2016. There are many items for which you may be able to control timing: consulting income, self-employment income, real estate sales, gain on stock sales, other property sales and retirement plan distributions. On the expense side, you can prepay 2016 state and local income taxes, take losses on stock sales (up to $3,000 in net losses) and prepay 2016 real estate taxes, anticipated mortgage interest, margin interest and charitable contributions.
So there you have the three steps to reduce your taxable income… plan now for tax savings this time next year.
Posted in bussiness, Credit Counseling, Debt Management