Financial Advice

Are You Doing Everything You Can to Save Tax?

It’s said that the only two certainties in life are death and taxes. Although it’s true that everyone can expect to pay taxes in some form or another during their lifetimes, within the framework of our tax system, there still are a lot of uncertainties. For example, depending on how you crunch the numbers, the average federal tax paid by an American household is either about $9,600 or about $14,600. There’s a lot of variance among tax filings. Yours may be significantly different, depending on the steps you take when filing. Many Americans file their taxes without taking all of the deductions and credits to which they are entitled. As a result, they may pay much more in taxes than necessary.

Everyone’s situation is unique. With the recent tax reform bill that was just signed into law, the tax structure is much different today than it was a year ago. That means, it’s extremely important for individuals filing taxes to seek expert advice from experienced and knowledgeable tax professionals in their area. In general, however, there are many details that the average taxpayer may not remember to do when filing his or her taxes that may result in lower tax bills or larger refunds.

For example, most American taxpayers don’t claim all possible exemptions and credits. These may include child-related tax credits. Other actions that could have a positive impact on your tax bill include participating in a flex spending account, planning for retirement savings or participating in education savings plans. Simply by remembering to look for these items and including them in your tax return filing, you could save yourself a significant amount of money. When preparing your tax return for 2018, remember these and other tips and strategies for reducing your tax burden found in the checklist below. Combined with expert advice from seasoned tax professionals, your next tax return may be much less painful than last year’s. Paying taxes may be unavoidable, but that doesn’t mean you shouldn’t do all you can to save the most money the next time you pay.

SOURCES

https://www.fool.com/taxes/2017/03/14/how-much-does-the-average-american-pay-in-taxes.aspx


Tax Savings Guide by Mowery and Schoenfeld

This article by Jeff Mowery first appeared on Mowery and Schoenfeld and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Learning From Financial Mistakes

Have you ever noticed how incredibly hard it is to pull the plug on a bad investment? While this may be true for most people, I think we tightwads of the world may have an extra tough time letting go. Given our aversion to wasting anything, it can be extremely difficult to admit when we’ve done it.

My first insight into how tightly I could chain myself to a bad investment came when I was still just a kid. My parents had insisted I play an instrument. I’d chosen the clarinet, and I had to practice for 30 minutes a day. After years of this daily torture, it was clear to everyone involved that I would never be a clarinet virtuoso. Even the family dog howled in agony when I played. My parents finally relented and told me I could quit. I, on the other hand, gritted my teeth and kept going for another three years. Not because I liked it (I hated it, actually) but because I had already put in so much time that I couldn’t bear to stop.

Behavioral economists will tell you that this is a known and extremely common tendency. (Too bad for my dog that nobody explained this to me in junior high.) For example, Gary Belsky and Thomas Gilovich address this mental pitfall, among many others, in their wonderfully insightful book Why Smart People Make Big Money Mistakes. They refer to it as the “sunk cost fallacy.”

According to Belsky and Gilovich, “This tendency is harmful for the simple reason that past mistakes shouldn’t lead you to make future ones. The past is past, and what matters is what is likely to happen from now on. So a person who turns down an offer for a house because the bid is lower than the original purchase price may be following one blunder (paying too much in the first place) with another (not getting out while the getting is good).”

Below are some places where you may be falling prey to the sunk cost fallacy.

  • Retaining assets that have lost their value – Hanging onto an unsuccessful business, a car that frequently breaks down, or a stock that’s plummeting in value? Reassess that asset’s true value now (both financially and emotionally) to help you determine whether to hold tight or jump ship.
  • Sticking with bad financial choices – For years, I failed to participate in a plan at my company that would have allowed me to buy stock at a discounted price. Although this meant turning down a virtually guaranteed profit, failing to put the necessary money aside in the first year I worked there made it easier to justify skipping this during each subsequent year. It took me a decade to acknowledge the money I’d already wasted and take action to reverse my decision.
  • Holding on to clutter – Got closets full of dated clothes, old toiletries, mismatched Tupperware, or other stuff you don’t use? Make a decision to use it now or donate, recycle, or sell it. Clutter may apply to your investments or financial records as well. If you’ve got a bunch of different little 401k funds from past employers, for example, it may behoove you to consolidate.
  • Shooting your happiness in the foot – Busting your butt for an apartment, nice clothes, or other material goals may have seemed like a reasonable idea when you were younger, for instance, but remember to regularly examine how much satisfaction your priorities are bringing you today. Continuing to climb the corporate ladder only makes sense if the top is still where you actually want to be.

If after taking stock of your investments in both time and money you discover lots of places where you’re throwing good resources after bad, don’t be too hard on yourself. If your old dog died years ago, your new one will still thank you for ceasing to play the clarinet. And as Belsky and Gilovich point out, sometimes the sunk cost fallacy actually works for us. One example they cite is gym memberships. If your aversion to losing your original investment provides the motivation you need to pry yourself off the couch, then that’s a good thing. At the end of the day, the more we can learn about our own spending biases, the more skillfully we can use them to help us prosper.

This article originally appeared on The Dollar Stretcher.com.

This article by Helen Young first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.

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Financial Advice

Why am I Stuck With the Spousal Consolidation Loan When My Ex-Spouse Went Missing?

Question:

Dear Steve,

Spouse consolidation student loan. We divorced and I look into my credit I found this amazing surprise. What are my options as for repayment, loan forgiveness? I currently can’t afford to make any payments due to my income and I don’t qualify for deferment since ex-spouse is missing in action.

Marie

Answer:

Dear Marie,

Federal spousal consolidation loan are the worst. This must be a pretty old loan though. The Department of Education has not generated new spousal consolidation loans in many years. I believe they went away in 2006

If this truly is a spousal consolidation loan then you are 100 percent for the entire loan balance if your former spouse fails to pay. You can divorce your spouse but not this particular type of loan.

Deferment is only available if your former spouse participates. The Department of Education says “In order to qualify for a deferment both borrowers must individually and simultaneously qualify for the same type of deferment.” – Source

Even the Department of Education’s own working group meeting in 2003 thought Spousal Consolidation Loans sucked. They said, “Spousal consolidation loans, as they exist today, are not in the best interest of borrowers as both individuals are held jointly and severally liable for the debt regardless of their future marital status.” – Source

Your first stop should be at the National Student Loan Data System to confirm what you have is actually a true spousal consolidation loan.

Let me know what date it says your loan was originated. Post an update in the comment section below.

Steve Rhode
Get Out of Debt GuyTwitter, G+, Facebook

If you have a credit or debt question you’d like to ask, just click here and ask away.

This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.

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Financial Advice

What you need to know if you were a MOBE customer

We recently wrote about steps that the FTC took to stop MOBE, an internet business-coaching scheme that was promoting a bogus online business opportunity to retirees and veterans. We’ve gotten a lot of questions from MOBE customers on our consumer blog and business blog. Here’s what you need to know if you were a MOBE customer.

Status of the FTC Lawsuit against MOBE

The FTC filed its lawsuit against MOBE in June 2018 and the case is ongoing. At the FTC’s request, the Court has temporarily suspended MOBE’s business operations.

The FTC’s primary goals in these types of cases are to stop companies from breaking the law, and to recover money that the company should not be allowed to keep. The Court will decide what we can do in MOBE.

Status of Refunds

It could take several months, if not longer, to resolve the case against MOBE. If the lawsuit results in refunds, we will tell you in the FTC’s consumer blog. We’ll use information from MOBE’s database to identify customers who lost money and are eligible for a refund. At that time, you might need to give information to verify your claim. But not right now.

What to Do Now to Get a Refund

Nothing. You don’t have to do anything right now to request a refund. If you hear that you have to send a request to get a refund, it’s not true. That could be scammers trying to steal your personal or financial information. If there are refunds, the FTC will tell you if you need to do anything. But right now, there’s nothing for you to do.

Amount of Refunds

If there are refunds for MOBE customers, each person’s refund may depend on several things, including: how much the defendants are able to pay; how much the court orders for refunds; how many people lost money; and how much each person lost.

Timing of Refunds

If the Court orders refunds for MOBE customers, we will send out checks as soon as we can. There are several steps, including getting the money and information from the company, getting the checks ready, and mailing them. Those steps often take several months.

What to Do If You Were a MOBE Customer

  • Report your MOBE experience to the FTC: ftc.gov/complaint. This information may help the FTC in its case against MOBE. Your report also makes sure the FTC can contact you, if necessary.
  • If you were a MOBE customer outside the United States, you also may want to report to the consumer protection agency in your country. For more information about reporting international scams, go to econsumer.gov.
  • Save your documentation. Save any emails, documents or receipts relating to MOBE. If the case results in refunds for MOBE customers, your records could help you prove how much you paid. That could be a factor in how much money you could get back.

More Information about the FTC Lawsuit

Find out more about the FTC’s lawsuit against MOBE:

The FTC’s action against MOBE is not a class action. A class action is a private lawsuit brought by multiple victims working with a private attorney. At this time, we are not aware of any class actions against MOBE.

This article by the FTC was distributed by the Personal Finance Syndication Network.

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Financial Advice

Back to school: Protect your child’s information

Many school forms require personal and sensitive information. Here are some tips for keeping your child’s personal information safe — from pre-school through college.

  • Safeguard your child’s Social Security number (SSN). Don’t carry your child’s Social Security card with you, and don’t share it unless you know and trust the other party. Ask why it’s necessary and how it will be protected. Ask if you can use a different identifier, or use only the last four digits.
  • Know your rights under FERPA. The Federal Educational Rights and Privacy Act (FERPA) protects the privacy of student records. FERPA requires schools to notify parents and guardians about their school directory policy. It also gives you the right to opt out of sharing contact or other directory information with third parties, including other families.
  • Limit what kids share online. Teach kids not to post their name, address or full date of birth on social media. For more tips, check out the FTC publication, Net Cetera: Chatting with Kids About Being Online. It offers practical tips and ideas for getting the conversation started about social networking, privacy, mobile devices, computer security, and dealing with cyberbullying.
  • Use strong passwords on smartphones, tablets or laptops. Teach the importance of changing passwords – and not sharing them. This is especially important for college students in a dorm or other shared living space.
  • Use a shredder. Shred all documents with your child’s personal information before throwing them away.
  • Check whether your child has a credit report close to the child’s 16th birthday. If there is one — and it has errors due to fraud or misuse — you’ll have time to correct it before your child applies for a job, seeks a loan for tuition or a car, or needs to rent an apartment. Contact Equifax at 1-800-525-6285; Experian at 1-888-397-3742; and TransUnion at childidtheft@transunion.com.

If someone misuses your child’s information, go to IdentityTheft.gov to find out what steps to take.

Are you wondering what to keep and what to shred? We looked at experts’ advice and compiled this summary of how long they recommend keeping certain documents.

This article by the FTC was distributed by the Personal Finance Syndication Network.

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Financial Advice

WARNO: New security clearance guidelines make it more important than ever for servicemembers to monitor their credit

Situation: New security clearance rules

The federal government recently implemented new security clearance guidelines that make it more important than ever for servicemembers to stay on top of their bills and monitor their credit histories. 

Mission: Continuous monitoring

The Department of Defense (DoD) will now “continuously” monitor the financial status of servicemembers with security clearances. This means that a past-due bill or an error on your credit report could jeopardize your clearance status. 

General instructions: Changes to background investigation 

Military personnel are subject to a full background investigation. Many servicemembers, including all officers, are required to have national security clearance checks that include detailed reviews of their credit history and ability to meet their financial obligations. Prior to this change in policy, the federal government performed an initial credit check when servicemembers applied for their security clearances and performed follow-up checks every five to 10 years, depending on clearance level. 

Following a number of publicized security breaches, the President of the United States issued a directive that all federal employees (including servicemembers) in national security positions shall be subject to continuous evaluation. This means that a person who is able to access classified information can have their background reviewed at any time, including an automated review of their credit file, to see if they have a history of failing to meet their financial obligations, being in excessive debt, or having a high debt-to-income ratio

This new process might impact your DoD security clearance and prevent you from being deemed “deployable,” which could greatly impact your military career unless you can prove to DoD that you were the victim of identity theft, fraud or a mistake, and that you’re currently living within your means and are making a good-faith effort to resolve your unpaid debts. Two of the most reported issues to the Bureau from servicemembers, veterans, and their families are issues with credit reporting and debt collection.

Special instructions: How to make sure your credit doesn’t harm your security clearance

To safeguard your credit record and prevent problems with your security clearance, follow these tips.

1. Check your credit report

You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian, and TransUnion), which you can access at AnnualCreditReport.com . This is the only authorized source under federal law that provides free credit reports from the three major national credit reporting companies. You can dispute any item on your credit report you know to be inaccurate, and the companies are required to conduct a reasonable investigation upon notice of a dispute. Other websites that promise free credit reports may require you to sign up for “free trials” that eventually charge you or try to sell you other products or services you may not need.  

2. Consider setting up a fraud alert or security freeze

Recent legal changes will provide servicemembers with free credit monitoring in the future to help better protect their credit record. This law takes effect in May 2019, and in the meantime, you can still contact Equifax, Experian, and TransUnion and ask them to put a freeze on your credit reports. A freeze prevents prospective lenders from accessing your credit file unless you lift the freeze for that lender or for a specified period of time. There is also a special “active-duty alert” available to servicemembers on active duty who are assigned to service away from their usual duty station. The alert notifies credit reporting companies of your military status and limits new credit offers while you’re away. 

3. Monitor your credit score 

There are numerous credit-reporting services that provide free credit scores, but servicemembers and their spouses can get a free credit score courtesy of the Financial Industry Regulatory Authority (FINRA) investor education foundation. This free credit score is intended to help you understand how your decisions alter your score in a positive or negative way. Get your free credit score by contacting a personal financial manager at your closest military installation .

4. Call in reinforcements

If you believe that your credit record is inaccurate, you can try to clear it up with the company that reported that information and the major credit reporting companies. You can also submit a complaint to the Bureau online or by calling (855) 411-2372. 

The Office of Servicemember Affairs is dedicated to aiding servicemembers, veterans, and their families with their financial challenges throughout their military financial lifecycle. It’s part of our mission and we are honored to help those who answered the call of service on behalf of a grateful nation. To stay connected to our work, sign up for updates on our website

This article by was distributed by the Personal Finance Syndication Network.

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Financial Advice

More than 1-in-5 consumers had telecommunications-related collections on their consumer report in the past 5 years

Today the Bureau of Consumer Financial Protection (Bureau) released its latest quarterly consumer credit trends report, which focuses on telecommunications-debt collection items.

This report explores reporting of telecommunications-debt collections (telecom collections) to nationwide consumer reporting agencies. It documents the prevalence and dollar value of telecom collections and, in doing so, illustrates industry practices in collection and reporting of telecommunications debts.

Key findings include:

  • About 22 percent of consumer reports contained a telecom-related item at some point between mid-2013 and early 2018. Although consumers often pay for their telecom services on a monthly basis, most telecommunications providers do not report to credit reporting agencies unless an account is in collections. Nearly 95 percent of the telecom-related items were telecom collections items.
  • The median telecom collection balance is $408, and 17 percent of telecom collection balances exceed $1,000.
  • Telecommunications providers often hire collection agencies or sell telecom debt to debt buyers. Collection agencies are typically contracted to collect a telecom debt for several months. After the collection contract ends, the debt is returned to the telecommunications provider and the collection item is removed from the credit record. The debt may be sold or sent again to a collector and reported as a new item in the credit file.
  • The presence of a telecom collections item on a consumer’s credit record is associated with having a lower credit score, but the change in score before and after the item appears on the credit record is often small and therefore unlikely to affect creditors’ decisions for many consumers.

The data used in this report are from the Bureau’s Consumer Credit Panel, a longitudinal, nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting companies.

This article by was distributed by the Personal Finance Syndication Network.

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