Tag Archives: Taxes

roth-IRAs-1

Who is Ira Roth, And What Does He Have To Do With My Retirement?

Saving for retirement is a must, but what type of account should you open? There are many options from 401(k)’s to IRA’s and the Roth IRA. Let’s discuss the difference between different accounts, and hopefully we can make a logical decision together.

Traditional IRA

With a Traditional IRA, you make contributions with money you may be able to deduct on your tax return. Any earnings potentially grow tax-deferred until you withdraw them in retirement.

Roth IRA

With a Roth IRA, you make contributions with money on which you’ve already paid taxes. Your money can then potentially grow tax-free, with tax-free withdrawals in retirement, provided that certain conditions are met.

Rollover IRA

A Rollover IRA is a Traditional IRA that is often used by those who have changed jobs or retired and have assets accumulated in their employer-sponsored retirement plan, such as a 401(k).

Eligible distributions from such plans can be rolled over directly into a Rollover IRA without incurring any tax penalties and assets remain invested tax-deferred. Consolidating multiple employer-sponsored retirement plan accounts into a single Rollover IRA can make it easier to allocate and monitor your retirement assets.

Seemingly, while saving for retirement the Roth IRA nay be the best choice for those making under $150,000 a year. Since you tax bracket is from the lowest level’s your taxes that are paid up front will be less then when you withdraw the funds from your retirement account.

Read these other hot topics!

3BM and App-O-Rama, How To Do It Properly

Application Status: How to Check If You Got Approved

View our home buying series here: Mortgages, Home Loans, Refinance, and Interest

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

With a Roth IRA you pay the taxes up front and your money grows tax free.

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Credit Cards Can Be Used to Pay Taxes?

TRUE! The IRS allows you to pay taxes with a credit card but you must use a 3rd party payment processor.  The government does NOT accept credit card payments directly.

These payment processors charge a percent of your total tax bill.


The least expensive is Pay 1040, which charges 1.87% for credit card payments, (and a flat fee of $2.59 for debit card payments).

A $5,000 tax bill would total:

  • $5,093.50 with a credit card ($5,000 x 1.87% = $93.50)
  • $5,002.59 with a debit card ($5,000 + $2.59 flat fee)

Note:  You will NOT be charged cash advance fees when you pay with a credit card.  The FAQ’s for all payment processors say:

Your tax payment will be treated like a retail purchase and not a cash advance. 

Some other companies:

 

Credit Card Joint thinks this is a great idea if 2 things are kept in mind.

1) You have a credit card that gets you more then 1.87%. Namely a Citi Double Cash, Fidelity 2% credit card among others.

2) You have no other way of Meeting the Spending Threshold.

Meeting Minimum Spending Requirements

We spoke about that in a Three part series HERE, HERE, and HERE. Paying taxes with a credit card can make sense if you have a minimum spending requirement to meet on a card within a certain time period. Although you may be losing out some money on the 1.87% charge, in the long term you will gain the 50k or 35k in bonus points worth more then the charge.

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

Paying Taxes with a credit card can be a great option for some.

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Santander

Santander Extra20: Get $20 Bonus Every Month (And What They Didn’t Tell You)

Santander Bank has a program called “Extra $20“. This program gives you an extra $20 every month that you complete 2 requirements. It is simple to complete the 2 things and by doing these two things they will deposit $20 in your “savings” account. Watch the money grow at the end of the year you will have amassed $240 (plus interest).

$20 Free For Having A Santander Bank Account

What Are The 2 Things You Need To Do?

  1. Have a Direct Deposit of $1,500 or more
  2. Make 2 bill payments from your checking account

That’s it!

Signup Here

Are you ready to signup?

Here is a little more information. Before you can start you need a to:

  • Open an extra20® Checking and extra20SM Savings account. You can open one up easily online here.
  • You will need $35, $25 for the checking account and $10 for the savings account
  • Then you will need to Have a Direct Deposit of $1500 or more (within service fee period)
  • Pay 2 bills with BillPay through the Online Banking (within service fee period)
  • Then you will e rewarded with the $20 bonus into your extra20SM Savings account.

No catch

Get $10 when you have $1,500 or more direct deposited into your extra20® checking account each monthly service fee period.1

No kidding

Get another $10 when you schedule two or more bills to be paid during the same monthly service fee period through the Online Banking BillPay tab.

Yes $20

There’s no cap on how long you can collect your $20 as long as the product is offered. The money goes directly into your extra20SMsavings account.1

 

So what is the scary part?

Actually there is a few things that people may overlook.

  • There is a service fee if you do not have the Direct Deposit.

Only open this account if you can have a Direct Deposit. It is not worth the fees if you do not have a way of receiving a Direct Deposit. (An ACH would work).

There is a tiny fine print way down on the bottom that you can’t even read with reading glasses. I blew up the letters for all the old folks to read.

  • Your bonuses will be reported as interest on Form 1099-INT in the year received.

In short, you will be taxed on this as earnings, there goes 15% of your earnings. Maybe it isn’t as worthwhile as you thought. Credit card signup bonuses are not considered earnings or income, so they (currently) are ot taxable. As my accountant explained it to me it is a rebate. Here is a cut out from an IRS letter.

The IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flyer miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel.

The next paragraph can be a concern:

This relief does not apply to travel or other promotional benefits that are converted to cash, to compensation that is paid in the form of travel or other promotional benefits, or in other circumstances where these benefits are used for tax avoidance purposes.

1099 INT Form

It also pays to keep in mind that Citi does consider the Citi Checking account with the AA bonus taxable. Other banks have added a clause in their Terms and conditions indicating that they may tax you for your miles like this Bank of America one.

The value of this reward may constitute taxable income to you. You may be issued an Internal Revenue Service Form 1099 (or other appropriate form) to you that reflects the value of such reward. Please consult your tax adviser, as neither Bank of America, its affiliates, nor their employees provide tax advice.

Wow, I got off on a tangent over here. Enough said.

Do I have an Extra20 account?

Yes.

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary:

Signup for the Santander Extra20 to Get $20 Bonus Every Month that you make two Bill payments and have a Direct Deposit.

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Mortgage Payments

Pay Off Your Mortgage – Fast: Use Your Tax Refund Money

Mortgage payments are a nightmare there is no denying it, but we have a trick that can help you make your payments. You will shave year’s of payments from your 30 year term, and save $10,000’s of dollars in interest. Did we get your interest yet? It’s not going to be easy, and you will need to be disciplined but it will work. Here we go!

Tax Refunds

Yes it is tempting to use that money to buy that new leather sectional couch your wife was eyeing, or to redo the bathroom. But remember by being disciplined you will pay your mortgage faster and then you can go on that fancy vacation you wanted.According to the IRS, the average refund for 2014 is a $3,000. (Now the IRS knows everything, so let’s assume this number is pretty accurate.)

What can $3,000 do for your mortgage? Let’s run those numbers. According to Jon from Money Smart Guides (we just started following him on Twitter) you can save 7 years of payments on a $200,000 mortgage. Here is his calculations:

Let’s say you just bought a house and took out a loan for $200,000 at 5% interest for 30 years. You pay the balance due every month except for May, when you make an additional one-time extra payment of $3,000 which is your tax refund. What effect does this have?

If you do this for just 5 years, you will shave off 4 years off your mortgage and save almost $38,000 in interest! Do this for 10 years and you knock off close to 7 years and save $58,000 in interest!

You can file your taxes for free with TurboTax. Read this post for more information on getting added bonus for filing.

TurboTax: Southwest 1,000 Miles or $20 Fidelity Bonus for 2014 Taxes Filing Software

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

Use your Tax refunds towards your mortgage and save a lot of money!

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TurboTax: Southwest 1,000 Miles or $20 Fidelity Bonus for 2014 Taxes Filing Software

Turbo Tax is a program that you can use online to file your taxes. Everyone needs to file taxes to the state as well as federal, Turbo Tax makes the process simple and easy. TurboTax is a leader in filing taxes, and for simple returns there is no reason why you should not use them. TurboTax offers a $0 cost for filing a 1040 A/EZ unlike your accountant that will charge you $75.

But the offer is even better, TurboTax has partnered up with some companies to offer you added incentives to file with them. The two offers we so far found, (there may be more, we will post if we find) was Southwest Airlines and Fidelity.

          

Reasons to use TurboTax

  • All you need to know is yourself: TurboTax translates taxes into simple questions about your life and puts everything on the right forms for you.
  • You won’t miss a thing: TurboTax searches over 350 deductions and credits, so you can be confident you’re getting the biggest refund you deserve.
  • TurboTax double checks your return as you go: TurboTax runs error checks and a final review of your return to help make sure your taxes are done right.

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary

Use TurboTax for a free and easy way to file taxes. Plus earn bonuses from Fidelity or Southwest airlines of $20 or 1,000 points.

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tsa_logo

TSA Tax Fee Hike: 9/11 Security Is Going Up 7/21/2014!

Every ticket booked has taxes and fees. If you take a look at the breakdown of fees you will notice there is a $2.50 or $5 fee that is labeled 9/11 security fee.

What is this fee?

As directed by the Aviation and Transportation Security Act, the major responsibilities of airline passenger and baggage screening is now handled by the TSA. To assist in paying for the increased aviation security, Congress provided TSA with the authority to charge airlines a fee equal to their costs of passenger and baggage screening. Officially the $2.50 charge doesn’t cover the fees so the are hiking up the prices.

Here is a chart of the increases, HT: to DansDeals.com

Flight Example Old Fee New Fee
One-way nonstop flight $2.50 $5.60
One-way flight with a connection or more under 4 hours each $5 $5.60
One-way flight with one connection over 4 hours $5 $11.20
One-way flight with two connections over 4 hours each $5 $16.80
One-way flight with three connections over 4 hours each $5 $22.40
Round-trip nonstop flight $5 $11.20
Round-trip flight with one connection or more under 4 hours each $10 $11.20
Round-trip flight with one connection over 4 hours in each direction $10 $22.40
Round-trip flight with two connections over 4 hours each in each direction $10 $33.60
Round-trip flight with three connections over 4 hours each in each direction $10 $44.80

What else is there to know about this fee?

  • British Airways allows one to cancel Avios tickets for a full refund of the mileage. The do not refund the taxes. This 9/11 security fare raise affects BA award travel.
  • The fare is going up on Monday 7/21/2014
  • This fee affects the 48 US States
  • Changes made after 7/21 will be charged the new fare difference unless the change was involuntary.

Is there a way around this fee?

No, TSA requires this fee on every ticket type. Even award tickets have these fee.

And don’t forget to follow us on Twitter to be entered into our $50 Giveaway!

In Summary:

The TSA 9/11 Security fee is going up 7/21/2014.

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