A few weeks ago, someone pulled out a gun and shot four people in a Detroit tax preparer’s office over a late income tax refund. Though such outrageous reactions are rare, thankfully, there is a surprisingly emotional division among people on the issue of whether it is best to aim (no pun intended) for a tax refund or not:
- The “Yes” camp believe it is best to shoot for a refund
- The “No” camp don’t even think about it
Which camp do you think is bigger? The answer might surprise you. In 2011 (the latest available — I know, the IRS isn’t too fast when it comes to updating their stats), a full 78 percent of all individual tax returns received a refund. Clearly the “yes camp” is the greater. The average refund? $2,872.
The “no camp” seems to make up for their lack of number with venom. There’s no shortage of self-proclaimed experts who wag their self-righteous fingers at the nearly 80 percent of individual taxpayers who got refunds. When you comb the Internet for opinions, there are far more “No camp” posts and articles, many of which are surprisingly venomous and insulting. The word stupid (and worse) appears more often than you would expect in an otherwise rational kind of debate.
Okay, so to which camp do you belong — the one with numbers or the one with self-righteous venom? More importantly, why? Let’s take a look at the arguments for both camps:
The naysayers proclaim refunds a bad idea because:
- You forego precious interest on your money by forking it over before it’s necessary.
- In addition, inflation kills you — you give Uncle Sam precious money, but it’s worth much less when you get the refund.
- You never know when an emergency will strike. When it does, you can’t get that overpayment back from Uncle Sam. It’s much better to have the money sitting in an emergency fund which you can replenish before April 15.
- It shows you’re too lazy or incompetent to do proper tax planning (no warm-and-fuzzy crowd, this).
They add more reasons, which amount to simply rehashing the list. Funny, but true. This post lists Reason #4 and Reason #5 as the same thing, only with different (shrill) verbiage to justify it.
They jump for joy at their annual refund bonanza because:
- The amount of interest you can earn in a savings account is trivial. Assuming the average refund of $2,872 is earned evenly throughout the year, how much would that cost you in terms of lost interest? We reviewed online banks a while ago and found Ally Bank to have the highest online (i.e., national) interest rates on savings accounts, which at the time of writing was 0.87 percent per year. If that rate remained the same throughout the year, the total loss of interest would be … $12.49! The guilt-ladling experts proclaim that a folly so great you’ll never recover.
- The IRS will slap you with penalties way, way higher than $12.49 if you sail too close to the wind and end up needing to pay in more than 10 percent of your tax liability. Again, going to the averages, the average tax bill for 2011 was $9,377. If, trying to save $12 in interest, you underestimate your tax by even a dollar, the IRS will slap you with a $938 fine. A dollar a month is cheap insurance against a nasty surprise.
- The tax code is complicated, and only gets more complicated each year. For example, next year you need to add extensive paperwork simply to avoid the new health care fine/tax. That’s just the latest in a long string of added burdens put on ordinary taxpayers. Therefore, it has become next to impossible for an ordinary person to estimate their tax liability accurately a year in advance. If you want to do the kind of tax planning those experts insist you should, you are going to have to hire an expert. Can you do that for less than $12.49?
- What inflation? In the ’70s, this was a valid argument, but inflation running of less than 1.5 percent per year now has pretty much wiped out the strength of this argument. In fact, the reverse may be true: By waiting to buy that HD TV with my refund, I actually saved a couple hundred dollars one year. (Inflation doesn’t apply to everything evenly.)
- Human nature: Getting a $1,000 refund beats having to pay $1,000 after Christmas shopping season any day. Why be a sourpuss for a buck a month?
- More human nature: We tend to prefer lump sums to regular payments. (More than 90 percent of lottery winners pick the lump sum.) Getting a single refund check for $2,400 just feels better on many levels than $200 per month. And, given the small cost of a buck a month, why not?
- Everyone loves a mystery. The tax code has become so complicated, and our lives unpredictable enough, that planning your taxes accurately has become next to impossible. So, you suspect you’re getting a refund, but you don’t know how big. Now you have the anticipation of waiting to see how big. For the same $12, you have another cheap thrill.
- If you know you have a refund coming but you don’t know how big, you have a terrific incentive to file early and beat the rush. Admit it: It feels really good when you get something done ahead of time. So now you have a triple shot of joy: you’re done early, you know you’re getting money (even if it’s your own) AND you’ve got the cheap thrill of guessing how much. All for just a buck a month.
Can you tell? I’m firmly in the “yes” camp. Those who know me know it’s not often I side with the majority — there are too many times people simply follow the loudest voice out there, right or not. In this case, though, the logic is so overwhelmingly in favor of shooting for a refund, it’s easy to see why most people do it.
Are you still in the same camp?
Which do you think is better: receiving a $2,000 refund or having to pay Uncle Sam $2,000 right after the holiday shopping season? Especially if the price tag for that simple joy is a buck a month, while the penalty for guessing wrong can approach a thousand dollars … on top of what you have to pay in taxes alone?
Let the hysterical guilt-mongers shrill all they want. Shooting for a refund is a no-brainer in my book. Ordinary people are sometimes smarter than their critics. This would be one of those times.
Come on, what else can you do for $12 that adds that many smiles to your life? What do you do? What do you think you should do? (Not always the same thing, is it?)
It’s a common dilemma: When you are young, say just getting out of college, you tend to have plenty of free time but little money. Later, as your career takes off, you start to have more money but less time.
It would be nice to have both time and money at the same stage of your life. But if you had to choose, which would you pick? This post will look at a few ways that time-or-money choice is a fundamental characteristic of the job market.
First, let’s start by acknowledging that, for many Americans, the choice of more money has been taken off the table. Adjusted for inflation, the total value of the compensation received by Americans grew by just 11.3 percent in the 20 years from 1992 to 2012, or less than 1 percent a year.
This inching forward in compensation is not the vision people typically have of getting ahead in the workplace, especially since America has an aging workforce, with the bulk of Baby Boomers in their late-career, peak earning years. One would have thought those peak earning years would have seen a stronger rise in compensation.
If compensation growth has been sluggish, is it possible Americans have at least been rewarded with more time? Think about what a difference the Internet has made over the past 20 years. Perhaps its greatest attribute has been the way it has allowed people to use their time more efficiently. Here are some examples:
- Online shopping. A great deal gets written about online shopping around the holidays, and rightfully so; but the broader truth is that online shopping has become routine for people throughout the year. This doesn’t just save you the time driving to and from the mall. Think about all the time you save finding the right product with a couple quick searches, rather than schlepping from store to store.
- Telecommuting. The Internet has given more people the option to accomplish at least some of their work from home. This saves commuting time — and rush hours are usually the least efficient times to be traveling — plus the extra time people who work from home don’t have to spend making themselves look presentable every day.
- Home entertainment options. Twenty years ago, if you wanted to see a reasonably current movie, it meant a trip to the movie theater, or at least a trip to Blockbuster for a DVD (or was it still videotapes back then?) Now, between on-demand channels and streaming video services, premium content is available without leaving home. Not only that, but large, flat-screen TVs have made the home viewing experience much more impressive than it was on the CRT-based TVs of the early 1990s.
Think of all this time-saving as a form of deflation. With monetary deflation, you can do more with the same amount of money because prices go down. In this case, it’s time deflation. You might not have more free time, but you can do more with it because the time it takes to do certain things has been slashed thanks to technology.
Paid leave becomes more common
Another way that many Americans have gained in time rather than money over the past 20 years is through increased access to paid leave from work. The percentage of Americans who get paid sick leave has increased from 58 to 75 percent; access to paid personal leave has increased from 16 to 44 percent; access to paid family leave has increased from two to 13 percent.
For some, paid leave has become even more useful because it has become more flexible. Employers in some industries are starting to offer consolidated leave, which can be used for any purpose.
Career and retirement choices
Naturally, careers often make people choose between time or money — do I pick the high-pressure career with great financial rewards, or do I settle for less money in exchange for a more laid-back occupation? In a different way, people face a time-or-money choice in retirement. Much has been written about Americans being forced to work longer because of low savings, but supplementing your income is not the best reason for working longer because you can’t always count on being able to do so. On the other hand, simply having an occupation — something to fill your time productively — can be an important reason to keep working past normal retirement age. Once a person reaches retirement, it often seems that free time becomes too much of a good thing.
The choice between time and money is a recurring theme throughout our careers and even into retirement. Over the past 20 years, the option of more money has become scarce, but in many cases free time has become more widely available. Even if picking time over money would not have been your first choice, enjoy it while you have it.
This article comes from Nate Segall from the Quicken Loans Zing! blog.
With spring around the corner and warm weather (hopefully) on its way, it’s about time to start thinking about getting back onto the golf course. If you’re not a regular Golden Bear, or if you don’t know who the Golden Bear is, then it’s time for you to start playing the great game of golf. Now, golf is not a cheap sport. It’s not like basketball where you can play with just a ball and a hoop; there’s a lot of necessary equipment needed to even begin to play golf. So if you’re tired of playing virtual golf on your Xbox, or if your boss invited you to play a round and you don’t want to embarrass yourself, the Zing Blog is here to advise you and offer you the best tips and advice for stepping into the world of golf.
BUY USED EQUIPMENT
The first thing to understand about being a beginner at golf is that buying the best equipment will not automatically make you a good golfer. So don’t go out and spend thousands of dollars on clubs, shoes, balls and other accessories. Utilize eBay, used club sections at golf stores and even garage sales to find your first set of clubs. And by set, we don’t mean you need to go out and buy all fourteen necessary clubs. Here are the clubs you should have in your very first golf bag:
- Driver: The driver is used to “drive” the ball a great distance down the fairway and is used when the ball is set up on a tee.
- Irons 5-9: Irons are typically used when you’re fewer than 200 feet away from the pin. Middle irons (5-6) are less lofted and are used for longer shot, while short irons (7-9) have more loft and get the ball in the air quickly for shorter approach shots.
- Wedge: Wedges are used for shots 100 yards or shorter. They have the highest loft of any club, which makes them the best option when your ball is in tall grass or in a sand bunker. There are different types of wedges, each varying in loft degree.
- Putter: This is the only club you may have previously used (probably at your 10th birthday party) but this time around there won’t be a windmill to putt the ball through.
Now is the time to go and look for your inaugural set of golf clubs before prices begin to rise for the upcoming golf season.
DON’T PAY FOR A PERSONAL INSTRUCTOR
There are too many “free” ways to gain knowledge on the sport of golf to spend money on a Professional Golf Association (PGA) instructor. Have any golfing family members or friends? Ask them to give you a few pointers at the driving range. I guarantee that they’ll be flattered and more than willing to lend a hand. Another great option for a quick lesson is YouTube videos. After you’re finished reading this blog, do a quick YouTube search of “golf instruction videos,” and I guarantee you’ll find an answer to your question. Another great option is the PGA website. Head to their instruction section for tips, lessons and more!
DON’T BE AFRAID TO GET OUT ON THE COURSE
Now I’m not suggesting that you take your first swing on a tee box, but some people refuse to go to an actual golf course because they aren’t good enough but there are just some things you get on a golf course that you can’t experience at the driving range. And there are golf courses that are more suited for beginners. GolfNow.com is a great place to book a tee time at a local course near you. Each golf course has a review section where you can find the course difficulty, the average pace of play and the type of golfer that it’s suited for.
Your first few times swinging a club should most certainly be at a driving range. A majority of driving ranges use mats with fake grass to imitate real fairways and roughs, but it really isn’t a good substitute. Try your best to find a driving range that uses grass because it will give you a better feel of what it’s like to be out on a real golf course.
Golf is one of the greatest sports in the world because virtually anyone can play it. It’s truly the best way to spend a sunny, summer Sunday morning. It can even be a great platform for making business deals. Take the time to get to know the game and I guarantee you’ll fall in love.
Do you have any tips or tricks for getting started in golf? Share in the comments section below!
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If you’re a baseball fan like me, it’s a good bet you read the Michael Lewis book “Moneyball” well before it spawned a Brad Pitt movie. The tome is a laugh-out-loud chronicle of how free-thinking general manager Billy Beane brought some respectability to his woebegone, small-market, tiny-budgeted Oakland Athletics.
But linking money and baseball is nothing new, as Lewis would likely be among the first to tell you. Throughout its history, the grand old game has been just as much about greenbacks as it has been about hits, runs and errors. No wonder the cash-rich New York Yankees, summering within a few miles of America’s financial epicenter and traditionally profiting from the game’s fattest television contract, have captured more World Series crowns than any other team.
This baseball season represents the 50th anniversary of my becoming a fan of the American Pastime, way back in that long-ago, star-crossed summer of 1964. And with the 2014 campaign getting underway this week, I thought I’d mark the golden anniversary of my fanaticism in a novel way.
I’m going to swing for the fences and suggest that baseball can teach a lot about personal finance to those of us who’d like to become better money managers. Then I’m going to ask some of you fans out catching some rays in the bleachers to step into the cage and take a few swings yourself at linking money lessons and baseball.
Whether a fan of the Los Angeles Dodgers or the Pawtucket Red Sox, or any major or minor team in between, consider these connections between personal finance and the action on the diamond as you root, root, root for the home team this summer.
Come to play every day
Unlike other professional sports that serve up a contest or three a week, baseball is a day-in, day-out affair that begins in February and isn’t over until the jack-o-lanterns are glowing. When your team crosses the lines on Opening Day, every player knows they’re in for a long grind. It’s the same thing with accumulating financial resources. To land some loot over your lifetime, you have to be in it for the long haul and come to play every day, conserving and banking money along the way.
Get off to a good start
The best center fielders get a good jump on every fly ball, and teams that win pennants often enjoy highly triumphant Aprils. An early start on success is key in baseball — and in growing nest eggs. If you start early, you don’t have to struggle late at putting together funds for a college education or retirement. In other words, you’re not losing the ball in the lights at the crack of the bat only to blow out a hammy trying to make a last-second, miraculous, diving catch.
Hit to all fields
Ask the fans who followed Ishiro Suzuki this century, or Rod Carew and Pete Rose in Bowie Kuhn’s day. Some of the most valuable hitters on any team are those who spray the ball in all directions. They don’t rely solely on pulling the ball but build their batting averages hitting to the opposite field and up the middle as well.
The parallel in money management is diversification. Those great at stockpiling soaring stacks of simoleons don’t place all their money in one asset class. They spread it around between large-, mid- and small-cap stocks, domestic and international equities and funds, bonds and real estate. Sometimes they even drop a bunt down into a certificate of deposit or a money market mutual fund.
Keep ice water in your veins
For years, it’s been acknowledged that baseball’s greatest relief pitchers have a special emotional makeup. They forget the bad games, stay calm, and embrace a cold-blooded detachment. Then they go out and mow down the side for the save.
It’s likely that those who profit as stock market investors are a little like great relief pitchers. It doesn’t matter if the market’s been on a tear or is losing ground faster than the ‘72 Philadelphia Phillies. These investors avoid letting daily events get them too high or too low and they dispassionately focus attention on long-term goals.
Be smart on the bases
How often have we all been part of a 30,000-fan collective groan touched off when a promising rally was nipped in the bud?
And why? Because after lining a frozen rope into the right field corner, our guy got thrown out trying to stretch a double into a triple. You don’t have to look far to spot analogies in the world of consumer finance. Just think of the folks who got burned in the tech wreck of year 2000, thinking they’d greedily load up on dot.com stocks or the over-reachers who around 2007 were convinced that home prices had nowhere to go but up — straight up, and forever.
Unlike our overambitious base runner, a lot of these people weren’t just called “Out!” They were called out of money.
Get ‘em on, over and in
The walk-off home run that sends a stadium full of fans home with ear-to-ear grins is among the most thrilling events in all sports. But let’s face it. If a team is going to mount a late-inning, come-from-behind uprising, it’s more likely going to do it by means of a couple walks, a seeing-eye single or two, an error and a double. In baseball parlance, the team will get ‘em on, get ‘em over, and get ‘em in.
By now, you probably see where I’m going. The walk-off is like the lottery ticket that pays big one time in a hundred thousand. Most people who get rich don’t do it in one giant blast. They do it over time, with discipline and tenacity, by seeking out the best savings account and best credit cards, getting money into investments, enjoying the gains, letting gains compound, reaping additional gains on principal and past gains, and eventually cashing in.
But they enjoy their largess just as much as someone whose scheme paid off big. Kind of like the team that forsakes the long ball for a grind-it-out win.
So here’s the takeaway: I know it’s out of left field, but if you want to enjoy wealth someday, look beyond currency and coins, and glimpse the wisdom in diamonds as well. Ready to take your cuts?
Tax season is in full swing. Thanks to tax preparation software, a lot of the common mistakes (i.e., missing social security numbers) are now automatically detected. Still, they are only capable of checking for math accuracy and missing fields. They can’t optimize a tax return to get the maximum amount possible or compensate for our misunderstanding of the complicated tax code. I have been using tax software and/or tax professionals ever since I started filing in 2003. In these ten years, I have learned that no matter what software or tax professional I use, the onus is on me to know what is best for me and what mistakes to avoid. Here is a list of dos and don’ts based on the mistakes that I have personally made or have come across in recent years. Use this as a checklist to make sure you avoid them too.
- Don’t assume you can’t itemize: When I started filing taxes as a student, I spent a total of 10 minutes filing my taxes. I didn’t know anything about itemized deductions. I just assumed it is for people who have a lot of expenses like a mortgage or kids. When I started working, I continued with my belief that the standard deduction is the best for a single-filer without a home. When I got my first job, I decided to use one of the “professionals” at a big tax preparation chain. After a few nightmarish meetings with so many mistakes that I could spot, I decided to spend a weekend doing my taxes by hand. That is probably the best thing I did for my finances. It was an eye-opening experience to actually read all the IRS publications to see what I qualify for and don’t. The professional never asked if I ever donated to charity; she just assumed I don’t. That weekend I understood there is much more to itemized deductions than just a mortgage. Just because you are single, don’t assume you can’t itemize. Read up on the itemized-deduction publication and start collecting the relevant supporting documents throughout the year. You might be surprised to see a lot of small things adding up to a total of more than the standard deduction.
- Don’t assume a deduction is not worth the effort: This mistake almost cost me over $500 last year. I knew the medical deduction had a floor of 7.5 percent. (This year it is 10 percent.) I mentally calculated 7.5 percent of our income (our gross income) and assumed our expenses wouldn’t cross that limit. In a desperate moment I decided to collect all the medical receipts and calculate the amount just to make sure. I earned over $500 in those few hours of effort. First, it is 7.5 percent of our AGI, not gross income; second, all the doctor co-payments, prescription drugs, eyeglasses, parking and travel costs added up to an amount I didn’t think we had spent. So never assume you can’t take a deduction. Always make sure.
- Don’t choose a tax preparer based on his/her promises to get the maximum refund: I know a certain tax preparer in the area where I used to live who claims regular groceries and a whole range of regular living expenses as deductions for his clients. (Yes, I have reported him to the IRS, but nothing seems to have happened and he is still in business.) His business is booming because he promises the maximum return and charges a percentage of the return as his fee. It is an audit waiting to happen for the clients.
- Don’t overestimate the value of your donations: Keep the receipts and use a standard guide for the value of your donations.
- Don’t forget to claim all the deductions for which you are eligible: You don’t have to fear an audit to claim the deductions for which you are legally entitled. Many audits are in the form of a mail requesting supporting documentation; so if you have your paperwork in order and fulfill the eligibility criteria, the fear of an audit shouldn’t prevent you from taking a deduction.
- Don’t wait too long to file your taxes: If you wait too long, you might be in a hurry to file before the deadline and forget to claim all your deductions. If you file with an accountant, he might not have time for a thorough review. Do your tax preparation throughout the year by organizing your receipts, and start your return as soon as the new software hits the market with the latest changes.
- Check auto-import numbers: Most major tax preparation software now have a feature to auto-import your W2 and/or investment tax forms. It is a very handy feature, but it is not always perfect — especially if you have a complicated W2 or 1099 forms. Check to make sure the numbers are in the right place and you are not double-paying your taxes.
- Check different filing status to see which will be best for your situation: If you had a major life change in the year like getting married or divorced, do the taxes using different filing status. One status might be better than another. For example, if you became a single parent, it might be beneficial to file as head of household instead of single.
- Keep all your supporting documents in order: We should be taking every single deduction if eligible, but that doesn’t mean the IRS can’t question the deduction. Make sure to collect all the supporting documents and file them. It might be best to scan them and store them in cloud storage to avoid losing the documentation.
- Report all your income, even if you didn’t receive the documentation: I had one of my contractors ask that I not issue her a 1099 so that she doesn’t have to pay taxes on it. It does not work like that. If you received income, you should report it no matter what documentation you receive. Make sure you keep the receipts for all the expenses you incurred for the job so that you don’t have to overpay taxes.
- Check all your tax forms and income reports for errors: With ever-changing tax laws, sometimes companies make errors too. Make sure the numbers you receive in the tax forms tally with what you have on record.
- Start your tax planning for next year right now: Many tax deductions will work only if you take advantage of it in the calendar year. By the time you are ready to file your taxes, it will be too late.
Have you made any mistakes in your taxes that cost you money? How do you make sure you have the maximum return that you can legally get? Do you use software, an accountant, or do it by hand?
This article comes from Christine Bilger from the Quicken Loans Zing! blog.
You know what’s expensive? Wedding photography. You know what’s even more expensive? Videography.
I’m not going to deny that I had more than a little sticker shock when I started looking for a wedding photographer. Unfortunately, I also really want a videographer – which isn’t in the budget. Unless I win the lottery or locate a long-lost wealthy relative between now and July, I’m definitely not having a videographer at my wedding.
So what’s a bride (or groom) to do? Luckily, the popularity of camera phones and the availability of other technology makes it super easy for you to get hundreds of pictures and videos from your wedding without hiring multiple photographers or a full-on camera crew. I’m not suggesting you forgo hiring a professional photographer (you will, after all, have these pictures forever), but there’s some seriously cool technology that can help you capture every little moment for a relatively low cost. Ready to get started? Here’s some wedding-related technology you should know about!
What it is
Have you heard of Wedit? From the rehearsal dinner to the reception, it’s an affordable way to capture videos of all the little moments you’re likely to miss while you’re busy greeting guests and dancing the night away. With Wedit, you receive five HD cameras (they currently use iPod Touches) in the mail. Hand them out to five of your most reliable guests, and they can capture hours and hours of high-definition footage. After your wedding, simply mail the cameras back to WedIt. They’ll upload the footage to their website so you can download it and share it with your guests!
What it costs
The basic wedding package (which includes the cameras and video hosting on Wedit’s site) costs $500. For an additional fee, you’ll get a beautifully-edited wedding reel. The Highlights Package, which includes a three-to-five minute highlight reel, is an additional $199. If you want a full-length wedding video (30–60 minutes) the package is $349 in addition to the initial $500. This might not sound like a low-cost option, but when you consider that videography often costs upwards a $2,000, this is a great money-saving alternative.
What it is
WedPics is an app that lets wedding guests take, upload and share photos and videos in one easy place. Rather than begging people to email you their photos after the wedding, you can use WedPics to ensure that you have access to all of the photos from your big day. It’s super easy to set up. Simply download the app, make a profile and create a wedding password. Once you share your password with guests, they’ll be able to view all your pictures and add their own! You can even purchase WedPics cards – invitation inserts that tell your guests how to use WedPics – right from the app, for about $25 per 100 cards.
What it costs
FREE! Why not give it a try?
What it is
Similar to WedPics, Eversnap is an app that collects all your wedding photos and videos. Guests without smartphones can even upload pictures via Facebook or email. While WedPics is free, Eversnap costs money – although their packages have a few extras. With the Essentials Package, you’ll get unlimited photos and videos, as well as 200 custom instruction cards. The Unforgettable Package offers all that, plus photo retouching by a professional photographer. Their most expensive package, the Luxury Package, offers everything in the other two packages, but includes a live, moderated slideshow – a pretty cool feature if you ask me. Professional moderators will track the photos as they’re uploaded, and choose (based on appropriateness) what gets played during your wedding.
What it costs
Here’s what Eversnap’s packages cost.
- Essentials: $99
- Unforgettable: $199
- Luxury: $249
Well Zing readers, what do you think? Have you tried any of these apps or services? Would you recommend them? Share with us in the comments section!
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Tick, tick, tick – March 31 is the new deadline to get health insurance coverage. This time, the government is digging in its heels. There will be no extension. Some say the government will cave in (again) and move the deadline, but that’s by no means a certainty. The April Fool’s joke might be on you if you don’t have a qualified health insurance plan locked up the night before, and the deadline ends up staying in place.
For about 80 percent of you, that’s a non-event, because you’re covered already either through work, Medicare, or with private policies you bought. For the rest, Obamacare is something you will need to come to grips with, like it or not. This is the first of a two-part look at the new medical insurance landscape, and your best options.
Obamacare’s main goal is to force medical coverage on the roughly 60 million uninsured out there. Why the government wants to do that is a question that has been debated in the press ad nauseum. The reality you face is that if you were one of the 60 million, you no longer have that option. By March 31, you have to have a qualifying insurance policy. If not, well, we’ll get to that below.
Why the deadline? Why not allow people to get medical insurance in their own time? Health insurers fear that people will only get a policy when a medical catastrophe hits them. As one insurance spokesman put it, that would be like buying a fire policy when the house is on fire — bad business for insurers. That’s why there’s a hard deadline of March 31.
If you want to obtain qualifying coverage after March 31, you will not be able to. There will be another open enrollment period starting November 2014, but those policies will not take effect before 2015.
The media is filled with chatter over whether the government will be forced to extend the deadline yet again. Time will tell whether it happens, but why gamble? The question no longer is whether, but when.
Not everyone will be penalized if they’re not enrolled by March 31. You’ll be given grace to enroll later only in the following situations:
- Glitches: The government has indicated that if you can prove that you started the process but were unable to complete it (hello, website), you will not be penalized for a late enrollment.
- Any change in employment status
- You have a baby (or adopt one)
- Kids leave home
- You move out of state
- There was a change in coverage in a spouse’s employer plan
- Entitlement to Medicare or Medicaid
Anyone with one of those “qualifying events” will be given sixty days after that event to get qualifying coverage.
Given the high level of resistance from the people who elected it, the government pretty much had to put some severe penalties in place to ensure compliance. Any insurance plan only works if those with low risk participate to spread the risk.
If you don’t have qualifying health insurance coverage, the IRS will levy a fine on your tax return. For most people, it will be 1 percent of their household income. But that’s only this year. In only two years’ time, it will be 2.5 percent. For a couple earning $90,000 a year, that amounts to just over $2,000. For a $45,000 combined income, the fine would be just over $1,000. (You would still have to pay for all medical costs on top of that.)
- Every taxpayer now will have to bring a certificate from insurers to prove coverage. (Just what the people who want to simplify the tax process want.)
- If one spouse has qualifying coverage (through his or her job, for instance) and only one doesn’t have coverage, the full fine will be levied on both incomes.
- If you have coverage for part of the year, you’ll owe a prorated penalty. It’s calculated based on the number of months you didn’t have coverage, with each month costing you 1/12 of the full-year penalty. So if you’re uninsured for six months, you’d owe half of 1 percent of your income.
- If you’re uninsured for fewer than three consecutive months, you won’t have to pay a penalty.
Enforcement of the penalty is withholding of refunds, nothing more. People who decline to buy coverage would have the penalties deducted from their tax refund, not an insignificant enforcement tool, considering three out of four families qualify for a refund.
It’s not clear what would happen to those who don’t get a tax refund. The IRS can’t put people in jail or garnish wages to get the money. Underestimating the creativity of the IRS to get money, however, has never paid off.
However, the government’s main agenda is not making criminals out of ordinary citizens, but getting people covered.
There are two classes of exemptions — the first simply based on status and the second based on hardship. Some of these exemptions are:
- Affordability — the cheapest option available would cost more than 8 percent of your household income
- Your income is low enough that you’re not required to file a tax return
- You belong to a federally recognized tribe
- You’re a member of a recognized healthcare-sharing ministry (more about that next time)
- You’re a member of a recognized religious sect with religious objections to insurance
- You’re incarcerated
- You’re not in the country legally
(As laws change, does jail look like a better option? It may just give new meaning to “freedom has a price.”)
Some hardships will allow you to claim temporary exemptions while those conditions persist:
- Being homeless
- Being evicted in the past six months or facing eviction or foreclosure
- Receiving a shutoff notice from a utility company
- Recently experiencing domestic violence
- Recently experiencing the death of a close family member
- Experiencing a fire, flood or other disaster that caused substantial damage to the person’s property
- For six months after filing for bankruptcy
- Having medical expenses you couldn’t pay in the past two years
- Having unexpected additional expenses as a result of caring for an ill, disabled or aging family member
All eyes are on the enrollment numbers, which to date have been much lower than the government had set as a target. However, this is a nation that proves every year at tax time that there’s nothing like a deadline to get things done. That means we can expect a flurry of sign-ups in the next week or two.
Unlike your income taxes, though, you will be given grace if you can prove that you tried to get your insurance in place but couldn’t get it done.
Next time we’ll take a look at some options and strategies that have opened up recently, which could turn the new dispensation to your advantage in ways nobody foresaw.
Bankers are not easy to love. In fact, from the mean old man in “It’s a Wonderful Life” to the bonus-baby CEOs who put the world through the financial crisis a few years ago, bankers have become a class of citizen that people love to hate. Like a lot of hatred, though, that sentiment might come back to haunt the hater — specifically, bank customers.
Bankers almost seem to be the inspiration for the concept of schadenfreude: the feeling of enjoyment that comes from the misfortunes of others. For example, I recently read two stories about bankers that most people would react to with something between an indifferent shrug and a satisfied chuckle:
- JP Morgan Chase, the nation’s second largest mortgage originator, forecast that its mortgage operations will lose money this year.
- Banking consultant Strunk, LLC, reported that, over the past decade or so, bank losses on the average free checking account have risen from $50 a year to $200.
Bad luck for the banks, you say. Yes, but also bad luck for banking customers. Here are some reasons why bad news for banks often becomes bad news for their customers:
- Today’s defaults are tomorrow’s loan refusals. During the mortgage crisis, it became a popular notion that it was somewhat honorable for people to walk away from their houses rather than continue to pay for a property that had declined sharply in value. You can rightly criticize bankers for predatory lending practices that included deceptive loan terms, but it is a completely different thing when people blame the banks because the market went against them. When people walk away from their loan obligations, chances are they are denying someone in the future the chance to get a mortgage, as loan capital is reduced and banks tighten lending standards.
- Everyone loses when a market goes sour. You may not feel sorry for JP Morgan Chase because its mortgage operations are losing money, but here’s how it will affect you or someone you know: Chase is laying off 6,000 mortgage employees in response, on top of 11,000 laid off last year. Constricting supply just means it is going to be tougher to get a mortgage in the future.
- Their losses become your fees. If product losses don’t restrict the future availability of those products, they are likely to increase the cost of them. When companies do not cut products altogether or reduce service for those products, the only rational solution to losing money is to raise fees. So, the fact that losses on free checking accounts have quadrupled over the past decade helps explain why free checking accounts are getting harder to find.
- Regulation raises costs — to customers. The right level of regulation is a delicate balance. I believe that repealing the Glass-Steagall Act in the late 1990s was a huge mistake. It didn’t cause the financial crisis, but it greatly contributed to the severity of it. Glass-Steagall worked for decades because it was broad in scope. When regulations start micro-managing how banks operate, it costs much more money to implement and to enforce — and those costs get passed along to customers and taxpayers.
- Taxing the banks means taxing their customers. Here again, costs get passed along. During good times, banks are popular targets for extra taxes and fees because they seem like fat cats, but raising the cost of doing business usually raises the cost of that business’s products.
Ultimately, the reason things that hurt banks end up hurting consumers is that we need banks. They keep our money safe, lend us money, and provide technological innovations from ATMs to smartphone apps that have made access to our accounts more convenient.
The problem is not that all banks are bad, but that some banks are much better than others. For example, some get the idea of customer service while others treat customers as a nuisance. Also, big banks use their name recognition and distribution to routinely get away with charging higher checking account fees, and paying lower interest rates, than smaller banks.
The solutions to these problems are informed and active consumers. The Internet gives you access to easy information on hundreds of banking options — including Internet-based accounts, which routinely offer lower fees and higher interest rates. So, the next time you are tempted to say something negative about banks, keep in mind that it may not be in your interest to tar all banks with the same brush. It is more constructive to blame specific banks rather than all banks.
There is an old, idealistic saying: “If you don’t like the world, change it.” That’s a nice sentiment, but not often easy to do. However, if you don’t like your bank, you can change it. That’s much more easily done, and it won’t just benefit you; but if consumers reward the best banks with their business, it will slowly but surely change banking for the better.
This post comes from Victoria Araj from the Quicken Loans Zing! blog.
It’s tax season, and that means it’s time to sort through your shoebox of receipts, those envelopes of stock statements and that drawer of paperwork that hasn’t been touched in 12 months.
Depending on your income, assets, marital status and a host of other life factors, making sure you have all of the necessary documents needed to file for your specific situation can seem daunting.
Here’s a quick checklist of items you may need to gather before meeting with your tax professional.
- Your W-2 form from your employer, or if you changed jobs, you’ll need one from each employer.
- If you receive income from interest, dividends, self-employment, pensions or payments from the government, you will need to have a 1099 form.
- If you own a business or are in the farming industry, you’ll have to provide records of your income and business expenses.
- If you’re a beneficiary of a trust or an estate, or if you receive income because you’re a stockholder in an S Corporation or a member of a business partnership, a Schedule K-1 may be required.
- Any sale of real estate, such as for your primary residence, second home or investment property, will require documentation.
- If you own a home, bring the property tax bill and mortgage statement to your appointment. Mortgage interest on first and second homes is generally deductible for taxpayers who itemize their deductions. If you have a home equity loan and want to deduct the interest, you may need additional documentation aside from Form 1098.
- If you relocated because of your job, you should bring documentation that shows expenses for your job-related move that were not covered by your company or organization.
- If you are reporting sales of stock, you’ll need to bring a year-end statement that shows the original cost of the stock and information about the sale.
- If you made contributions to a Health Savings Account or Medical Savings Account, or need to report distributions made from them, you’ll need these forms. Certain medical expenses may be deductible if they exceed a specific percentage of your adjusted gross income. Check with your tax professional regarding the paperwork necessary to obtain these deductions.
- If you made charitable contributions, you should collect your receipts showing those donations. If a single contribution exceeds $250, the charitable organization should/will provide you with a statement you can use to file.
- If you have kids in daycare, bring documentation that shows the cost as well as the name, address and ID of the provider.
- If you were divorced within the last year or filed for divorce, your tax preparer will let you know the forms needed based on how you will file your taxes. If you have children and are the noncustodial parent and want to claim a dependent, you’ll need Form 8332.
While many Americans dread tax season (at least prior to any refunds), it’s always smart to have a good idea of the documents necessary to make your filing efficient and painless. A wealth of resources can be found by visiting www.IRS.gov.
If you’re in doubt, simply contact your tax professional who can help you get a handle on what you should assemble for your appointment.
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According to a new survey from Insure.com, the most expensive 2014 car to insure in the United States is the $110,000 Nissan GT-R Track Edition, which requires a few bucks less than $3,200 in premiums to cover for 12 months.
The super car is better known in some quarters as “Godzilla,” for it is a monster that emigrates from Japan. Sporting a twin turbocharged V6 engine that boasts 545 horsepower, the lighting quick GT-R Track Edition rockets from zero to 60 in a scant three seconds, and touches speeds of 190 to 200 miles per hour.
So what kind of person buys and drives Godzilla? A well-heeled one no doubt. But also a guy, for it is inevitably a male buyer, who just adores aggression.
We’re not talking just about aggressiveness on the track, either. GT-R buyers don’t shell out that many simoleons to dawdle in the slow lane when running for a quart of milk at the local convenience store.
And therein lies the reason for the high cost of insurance. It’s not just the GT-R’s many carbon components, which if damaged in a wreck can only be replaced, never repaired, that propels its premiums into the auto insurance cosmos.
“It’s flat-out brilliant to drive,” Santa Barbara, Calif.-based John Pearley Huffman, who writes for Car & Driver, told me recently. “It’s driven by people who like to drive fast, and it’s expensive . . . It’s a fantastic car, and I believe it to be an easy-to-handle car. But the consequences of screwing up at 150 miles per hour are radically different than screwing up at 50 miles per hour.”
In the working class neighborhood I call home, I can’t recall ever seeing a GT-R. People here are a bit too concerned about making their next mortgage note and funding Friday’s family dinner at Red Lobster to shell out for a six-figure super car. But I glimpse drivers on a daily basis who’d be right at home behind the wheel of one. These motorists, male and female, are in such hurry to get where they’re going that speed limit signs might just as well read “Any Speed You Like.”
The hallmarks of these domineering drivers are known to us all. They’re laying rubber at the sight of a red light turning green. They’re throttling to a stop sign or red light so they can stomp the brakes and skid 250 feet to a halt. They’re the ones — on dry pavement or black ice — who tailgate so near your rear bumper you can count their inflamed facial pores in your rear view mirror.
You’ll see them abruptly sliding across multiple lanes to reach three car-lengths of open road, turning right from the left lane, cutting off other motorists without so much as a turn signal, and appearing intent on making your stretch of asphalt into an open-road triage center bathed in the flashing lights of first-responders.
And, as I noted, speed limits don’t apply when they’re in the driver’s seat. When I hear yet another traffic report about an eight-car pileup, featuring overturned vehicles, rolled-over buses and jackknifed semis, I inevitably say to myself, “Well, at least no one was driving above the speed limit.”
High aggression, high costs
Watch the countless aggressive drivers on the byways, and you begin to sense how little saving money means to so many American motorists. These clearly aren’t people carefully searching for a high-yield savings account, the best credit cards or strategies to better save for retirement.
Let us count just some of the ways aggressive driving can put the raging road warrior into the poor house.
Insurance costs. You may recoil at the notion of spending an average of $3,167 a year on auto insurance, as GT-R owners do. But your insurance will bolt northward with every speeding ticket and reckless driving ticket — which are expensive in and of themselves — and accident you rack up. Studies show a reckless driving ticket sends car insurance rates up by 22 percent. Wouldn’t punching a speed bag be a less expensive way to get out your aggression?
Gasoline costs. According to a recent article by Laura Mauney in Renewable Energy World Magazine, tailgating requires hard-braking and re-acceleration, both of which unnecessarily burn fuel. If these maneuvers waste 10 percent of gas in a tank, that will add up to $9 for every gasoline fill-up of a 25-gallon tank at today’s gasoline prices. If a tailgating motorist fills up every week, that brings the unnecessary cost to $460 per year, or eight additional 25-gallon fill-ups yearly.
All in all, jackrabbit starts and hard-braking can increase fuel consumption by up to 40 percent, Mauney states.
Wear and tear. Hard-braking is associated with earlier demise of brake pads and drums. On the whole, aggressive driving just wears down a vehicle more quickly, resulting in more frequent visits with the mechanic for costly repairs.
And don’t forget to throw in the cost to society — meaning all of us — of thousands of needless motorist and pedestrian injuries and deaths each year, and the impact on the environment of unnecessary auto emissions.
When you do, it’s evident that about the only thing more frightening than the high cost of aggressive driving is a surprise visit by Godzilla.
The original one.
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