Personal Finance Blog

Posts Tagged ‘Income’

If you do not have a good credit rating, and do not own a car or house, and above all your income is low, it has been near impossible to borrow from a mainstream lender like a bank. But now it is sheer possible for you. People take out the resplendent benefits of low income loans. With the loan, you can obtain a denomination of £200 to £1,200. You can apply these loans online and offline as per your convenience. However, processing online though is gaining ground nowadays.

A variety of loan applying tools is available out there. However, you need to fill out an online application form. In support of this, you can fax a complete application form by mentioning your code of your bank account, personal information and employment-ability, and sometimes you have to give your Social Security Numbers also to your creditor. Usually, lenders can also ask you to fax the copies of countersigned documentation, a current bank statement, and a cheque. Creditors keep a minimum standard of income parameter of borrowers. This can go below £1000 or so.

Low income loans help you with cash to tide you over until the next pay day. It could involve enormous rate of interest. Reason is of short-term in nature and unsecured in form for the loan make them a bit competitive. Quarter of lenders is after providing low income loans. You can locate them even online. Online method is an easy can convenient applying tool. It saves a good amount of your time and energy.

In the meantime, individuals having adverse credit too can apply for the loan. They are not given a special execution for the loan. They avail the fund for a period of two weeks. But if any unexpected wrong happens to you, a repayment concession can be taken. As a result, you can be given one month more for your reimbursement tenure.

Are you getting ready to prepare your 2008 small business income tax returns? Here are three important changes you don’t want to miss. Two of them put more money in your pocket; the third gives more money to Uncle Sam. Mileage Rate Increase. Here’s a good one. If you use the Mileage Method to calculate your vehicle deduction, the IRS has done you a favor by increasing the mileage rate. In 2007, the rate was 48.5 cents per mile. Effective January 1, 2008, the rate was increased to 50.5 cents per mile. On July 1, 2008, the rate was increased again, to 58.5 cents per mile. Because there are two rates for 2008, the most accurate way to calculate your mileage deduction is to do two calculations: January-June miles TIMES .505 PLUS July-December miles TIMES .585. If you did a good job of tracking your mileage during the year, this calculation should be no problem. You just add up your mileage for the first six months; then do the same for your mileage for the last six months. Section 179 Increase. More good news. When it comes to deducting business equipment (aka “fixed assets” or “capital assets”), Section 179 is the small business owner’s best friend. It allows you to forget about all those complicated depreciation rules and simply deduct 100% of the asset’s cost in the year of purchase, just like your other operating expenses like office supplies, utilities, wages, etc. There have always been several critical limitations and restrictions to the Section 179 expense deduction, so be sure to consult with your accountant or read up on it yourself (IRS Publication 946, “How To Depreciate Property”, is a good place to start for free information on the topic). For example, there has always been a limit on the amount of the Section 179 deduction. The limit has been gradually increasing over the past several years, from $100,000 in 2003 to $125,000 in 2007. The 2008 limit is a whopping $250,000, so there’s a pretty good chance you don’t have to do depreciation on your return again this year. Self-Employment Tax Increase. This item is not so good. If your business is a sole proprietorship (i.e. you file Schedule C) and your profit is at least $400, you must pay the dreaded self-employment tax of 15.3% on that profit. This 15.3% tax is made up of two parts: social security tax of 12.4% and Medicare tax of 2.9%. You must pay the Medicare tax on all your profit, regardless of the amount. But there is a limit to the profit amount subject to the social security tax. In 2007, that limit was $97,500. In 2008, that limit increased to $102,000. (And just so you know, the 2009 limit has already been increased to $106,800). These rules about the social security tax portion of the self-employment tax also apply to employee wages and salaries. If your business is a corporation and you are paid as an employee of the corporation, the amount of compensation subject to social security tax has also increased from $97,500 in 2007 to $102,000 in 2008 (and to $106,800 in 2009). So all business owners, regardless of entity type, are affected by this change, which in effect, is a tax increase.

House Rent Allowance (HRA) is an allowance given by an employer to an employee. The sole purpose of which is to meet the cost of renting a home. Here, we hope to clear the concepts of HRA and how the income tax exemption on HRA is calculated.
You can claim HRA if you fulfil the following three conditions:

1. HRA allowance should be a part of your salary package.

2. You are staying in a rented accommodation and paying rent for it.

3. The rent exceeds 10 per cent of your salary (basic + DA).

Tax treatment of HRA is a bit complicated and there are three figures that need to be computed:

* Actual HRA received
* Amount by which rent paid exceeds 1/10th of salary (basic + DA)
* 50% of the salary (basic + DA) if located in Metros like Mumbai, Delhi, Kolkata or Chennai and 40% of salary if located elsewhere.

The lowest of the above three amounts is allowed as a deduction from the HRA received and the rest is considered taxable. Let’s try and understand this through the following example:
Ram lived in Mumbai and paid a rent of Rs 10,000 p.m. His basic salary was Rs 25,000 and daily allowance Rs 3,000 p.m. He received an HRA from his employer of Rs 8,000 p.m. The 3 figures that need to compute his HRA tax liability are:

1. Actual HRA received = Rs 8,000

2. Amount by which rent paid exceeds 1/10th of salary = Rs 10,000 – (10% of Rs 25,000+ Rs 3,000) = Rs 7,200

3. 50% of his salary (Rs 25,000 + Rs 3,000) = Rs 14,000

The lowest among the 3 figures (Rs 7,200) will be allowed as a deduction and the rest (Rs. 800) will be taxable.

April 15 is fast approaching but there’s no way you can get your personal income tax return done by then. What’s a procrastinator to do? File an extension, of course.

But perhaps you are wondering whether this is the best option for you. Read on to find out.

You can automatically extend the April 15 due date to October 15 by filing Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.” So now you have six more months to file your personal income tax return.

The nice thing about Form 4868 is that simply filing this form grants an automatic, no-questions-asked 6-month extension. You don’t have to have a reason. Just sending this form to the IRS on or before April 15 gets you the extra six months.

But here’s another important point about Form 4868: This 6-month extension is NOT an extension to pay any tax you may owe on the tax return. Form 4868 only grants an extension of time to file the tax return.

So, if you usually get a refund on your personal tax return, you are OK. But, if you think you might have a balance due, or if you are not sure, then you should go ahead and prepare the return to the best of your ability, do the calculations, and see where you stand.

If you are getting a refund, great. If you’re not in a hurry to get the refund, then file the extension form and wait until October 15 to send in the return. But if you have a balance due on the return, then you should send in your balance due with Form 4868. That way you avoid any penalty and interest for late payment of tax.

When October 15 rolls around, you send in the return, showing the Form 4868 payment as a credit. The end result is this: you paid your tax on time (April 15), and you filed your tax return legally late (October 15) because you filed the extension form on time.

Obviously, the key here is whether or not you have a balance due on your return. If you have a balance due, but don’t send in the payment with Form 4868, then you will have penalty and interest charges for paying the tax after April 15.

Bottom line: Do not overlook the fact that Form 4868 does not grant you an extension of time to pay the tax. It only gives you an extension of time to file the return.

Try Online Tax Filing This Year

If you’ve never filed your Federal and state income taxes online, you have probably waited too long for your refund and/or missed the opportunity to be certain that you have taken advantage of every available reduction in the amount of taxes you have to pay. That said, I know this firsthand because I’ve done my own taxes online for the last three years. The results have been very beneficial to me and my family.

First of all, it is a very inexpensive way to get the best information possible about reducing your tax payment. Online Tax Filling can cost you as little as half of what it would cost to go to a tax preparer. In addition, online tax filing programs walk you through the process step-by-step so that you don’t miss any opportunities to save money. Last, but not least, you will get your refund check much faster if you do your filing online.

Concerned About Privacy?

Your personal financial information is as private when you file online as it would be if you go to a tax preparer or do it yourself at home and then mail it. Most online tax filing companies offer you details about how they protect your privacy, even to the extent of offering to replace ANY funds taken from your tax account while you are using their service. This means that they will accept liability even if a hacker accesses your account!

Be sure to look for a company that offers this level of security or more. No one can totally guarantee that any transaction you make on the Internet will be completely private. If a company is so committed to serving you that they will replace any funds that are affected, you can pretty much count on them carefully monitoring and working to keep their site as secure as possible.

Worried You Won’t Be Able to Do It Right

If you’ve done your own taxes on paper and know a little about following directions, you will find that it is easier to do your taxes online. As I said above, you will be guided through each step with both questions, options, and detailed instructions. As you make your entries, some companies even question data that looks like it might be unusual. When you finish the process, you will be able to have the company review it for correctness a second time.

The program will do ALL of the math for you, too. This means that there won’t be any errors in the dollar amounts you enter. I’ve found that this is very helpful because when I did my taxes on paper, I always had to recheck the math two or three times before I felt comfortable with it.

Wondering What You Have to Do?

Getting all the information together is always the hardest part for most of us. If you’ve kept all your bills and information together, however, you will be pleased to discover that online tax programs will tell you exactly what you need to have in front of you when you begin the process. You don’t have to rush either. If you are moving along through the process and have to stop, you can come back later to continue.

Basically, what you have to do to make online tax filing work for you is to gather your tax information. Have your W2s handy and any tax documents you have received from work, from your bank, from your student loan company, and from any other source that has provided you with information about what you have paid in taxes. Gather your medical receipts, household improvement expenses, and, if you are an independent contractor, gather information about the cost of doing business. You will also need a credit card or checking account number when it comes time to pay for the tax service.

The Good News

If you’ve followed the instructions carefully, you will find that the process is fairly simple to complete. Once you’ve used an online tax preparation program, you will have established an account with them that you will be able to access again the following year. That means saving even more time the second time around. You should know that your refund can be direct deposited into your bank account and that it will most likely be deposited within a few days rather than a few weeks!

You don’t need to be concerned about how to sign your tax forms. While you will have the choice to print them out and mail them (which may be advantageous in some circumstances), you will get your refund much faster if you use an electronic signature. In some cases, that signature is based on a very specific question about a line from your tax return from the previous year. If you know the correct amount from that line, the IRS will accept the information as evidence that you are the right person submitting the return.

I have had a lot of success and saved time and money by filing my own taxes online, and I wanted to share information about this option with you. One final note: some sites allow you to go all the way through the process before you make your payment. This gives you the opportunity to decide how happy you are with what they offer. I strongly recommend that you give online filing a try. It just makes sense.

Have you heard about a “stretch IRA” and wondered if it was some special kind of IRA? Well, it isn’t. In the simplest terms, a stretch IRA is an IRA that has a beneficiary designation that provides for the possibility of maintaining the tax deferred status of the IRA after the death of the IRA owner. You might be thinking, “I wish I had a stretch IRA. I only named my spouse as my primary beneficiary and my kids as my successor or contingent beneficiary.” Well, guess what? You have a stretch IRA. After your death, your spouse and/or your children could continue to defer income taxes for many years after your death, as long as they are prudent and only take the annual minimum required distributions mandated by law.

While the “stretch” concept applies to some retirement plans, many heirs of 401k owners could be in for a rude awakening if their parents fail to plan properly.

With proper planning you can put in place the mechanisms to stretch taxable distributions from an inherited IRA and certain retirement plans for decades, sometimes as long as 80 years after the original owner dies. If, however, the employer’s retirement plan document stipulates the wrong provisions, the stretch may be replaced by a screaming income tax disaster. The heirs could be in for a tax nightmare if Dad never transferred his retirement plan into an IRA.

Many investors fail to realize that the specific plan rules that govern their individual 401k or other retirement plan take precedence over the IRS distribution rules for inherited IRAs or retirement plans.

The distribution rules that come into play at the death of the retirement plan owner are usually found in a plan document that few employees or advisors ever read. Many, if not most plan documents say that in the event of death, a non-spouse beneficiary must receive (and pay tax on) the entire balance of the retirement plan the year after the death of the retirement plan owner. These retirement plans don’t allow a non-spouse beneficiary to stretch distributions. For example, if there is a $1 million balance, the non-spouse heir or heirs will have to pay income taxes on $1 million. Then, the remaining balance, roughly $650,000 ($1 million minus the $350,000 immediate income tax hit) would be outside of the tax-deferred protection of an inherited IRA.

Had the 401k participants taken that money and transferred it into an IRA before he died, the non-spouse beneficiary would have been able to stretch the distributions based on his or her life expectancy. Failing to make the IRA transfer will result in an unnecessary massive income tax burden for the non-spouse beneficiary.

They say nothing is certain in life other than death and taxes. While I can’t do anything to help you with the death thing, I can tell you how online income tax preparation software packages can help you save some money when it comes time to do your taxes. When you are done reading, check the link at the bottom for a review site that has links to free tax preparation software.

Paying taxes is something that everybody must do and most people fear. We look at that April 15th deadline like it was the end of the world and usually try to avoid it at all costs. I am here to tell you that with all the online income tax preparation software packages out there, you need not fear the IRS any longer. All you need to do is get your stuff together then go to the program of your choice and you will be walked through the process of filing your tax return.

Here is a basic list of things you will need to do your taxes. This is the same whether you are doing them yourself, at the local tax professional, or with online income tax preparation software. If you have all of these documents handy, you will zip right through your tax return.

The first thing you need is your income documents. You will need your W-2 from your employer as well as statements for any interest you received from your bank, earnings from investments, and your state tax refund from last year.

The second thing you need is your deductible expenses. If you are paying a mortgage, you will get a statement from your bank telling how much interest you paid. If you donated to charity, your church for example, you should get a statement from them documenting how much you donated. If you are paying off a student loan which has interest on it, again, you should get a statement. You may also have other deductions that you may not have a receipt for. One example I can think of is Good Will donations which are deductible, but you won’t get a statement from them. You should have gotten a receipt of sorts when you donated, but you will have to estimate the value of what you donated.

The last information you will need is information on your dependants. You will have to enter social security numbers and information for your spouse and kids in order to claim them and get the appropriate deductions. If you choose a good online tax preparation site, you will be able create an account that will save your information for next year so you won’t have to re-enter this information.

Once you have all of these documents, just go to the online tax software program you choose and start entering the information. The program you choose should walk you through filling out the information and e-file for you so you won’t even have to mail in your return. Easy as 1,2 3 as long as you have all your documents together.

Filing your own taxes can be a stressful activity sometimes. It can get you bogged down for no simpler reason than its jaw breaking calculations. However, it is best to calculate your own taxes rather than depending on someone else.

Most often the individual feels tentative to pay his own income taxes mainly because of the fear of going wrong mars the whole process. The individual feels he might go wrong somewhere and end up paying more to the government. So there is always this apprehension in people when they set out to fill their tax forms.

The best possible way to reduce the fear and stress in this tax filing process is by possessing all the necessary paperwork. Paperwork proves to be really handy when it comes to stressful calculations. Being organized about the tax works can reduce half the tension while filing the taxes for the income tax department. Having everything that you might need beforehand can help you in a great way while filing the forms. W-2 forms are the most important of them all when it comes to filing taxes. These forms are got from the employees and checked. So it becomes easy to the individual or the professional who files the taxes.

While you fill out your taxes, you will come to know about the various tax exemptions available to the people. But the exemptions differ from state to state. Not all states give these kinds of exemptions too. For example, the state of Ohio gives a good $1400 per individual as an exemption. First up, you should be qualified enough to get an exemption.

However, if you still have a problem filing your tax papers, then you should consider what other people resort to otherwise. Take the help of a family friend or buy a book which can help you do the calculations. The best possible solution is to take it to a professional in the H&R block and get it all done perfectly. That way, you will have fewer burdens on your shoulders when it comes to filing up tax forms.
While filing your tax papers, it is totally up to you on how to fill your tax papers. There are many ways with which these papers are filed. People more often go with E-file taxing. This is done through the internet and is regarded as the safest way. People, who do not trust the internet that well, get their tax papers filled by themselves and mailed to the department safely. Both the above methods are equally safe. The mail system can sometimes be dangerous because the chances of losing your mail in the bunch of mails are pretty high.