Just discovered you’ll be getting a tax refund? Don’t let your enthusiasm for spending that unexpected money get the better of you.
Some taxpayers, upset at the delay until Jan. 31 of the start of the federal tax-filing season, might consider offers to get their refund money sooner via private programs. In recent years, attorneys general have filed suits against refund anticipation loan, or RAL, operations for failure to disclose full costs of the products to consumers. Consequently, RALs are effectively unavailable. But alternatives, such as refund anticipation checks, remain and, say consumer advocates, can be just as costly.
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Thanks to today’s technology, there’s really no need to pay extra just to get your hands on your tax money a tiny bit sooner. If instant cash is more a desire than a need when considering a quick refund, consider these alternatives:
Go electronic. Abandon the traditional paper return sent via the U.S. mail and file from your computer. You’ll get the money almost as fast as you would with a refund anticipation loan and get it without paying any loan fees or interest. In fact, you may not need to pay for anything. An Internal Revenue Service partnership with tax preparers and software companies offers free online tax preparation and e-filing to some taxpayers. For the 2013 filing season, the Free File program kicks off Jan. 31. Last year, the income cutoff was $57,000, regardless of filing status. An inflation adjustment of $1,000 increases that amount slightly to $58,000.
For the past few years, the IRS has also expanded the online program to include taxpayers who make more money. Via the Free File Fillable Tax Form option, anyone, regardless of income, can enter their tax data onto online forms and then file them for free directly with the IRS. This is not a tax software program, but simply blank forms you can use via computer, and file directly, rather than filling them out by hand.
The IRS says that any e-filing option you use will get you your tax refund much more quickly than mailing a paper return. Whereas paper filers could wait up to eight weeks for their refunds, most electronic filers can expect their tax checks to show up in their mailboxes in half that time or less. The agency also points out that the error rate is less than 1 percent for electronic filers.
Direct deposit. Electronic filers who opt for a refund via direct deposit do even better. The IRS says the money generally shows up in taxpayer bank accounts in 10 to 14 days. Even if you file the old-fashioned paper way, having your refund deposited directly into a bank account cuts the time you have to wait for your tax cash. Plus, it’s added protection against lost or stolen refund checks sent via the mail.
Use store financing. If you want your refund to finance a must-have new appliance, store interest rates usually will be better than a refund anticipation loan. Many stores offer free financing for limited time periods. By then, the refund should have arrived and you can use it to pay off the store credit — and pay no interest at all.
Impatience usually wins. “Theoretically, with electronic filing and quicker turnaround on refunds, the need for tax anticipation loans has become obsolete,” says John L. Stancil, CPA and professor of accounting at Florida Southern College in Lakeland.
But ultimately, a refund anticipation product is a personal preference, not a fiscal issue for taxpayers. The prospect of cash a few days earlier appeals to those who value speed over cost, such as the person who stands impatiently in front of the microwave complaining that it’s taking too long for dinner to be ready.
Companies that offer quick refund options are well aware of such impatience, and that’s why some opportunities survive even as electronic filing increases, especially in the past two years when official filing was delayed.
But if you can squelch your refund appetite for just a few days, then you — and your bank account — will be better off.
Related Links:The skinny on paying estimated taxes7 ways to get organized for the tax yearFree File 2014 opens Jan. 17Related Articles:Picking the proper 1040Tapping a Roth for 60 days10 must-know IRA [...]
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When your uncle loans you $10,000 to tide you over, is it taxable income? Nope. What about when the bank loans you $100,000? No again. That’s provided it’s a real loan and not income. That’s a key distinction that lands lots of taxpayers in trouble.
But if it’s a real loan and is forgiven, it is income then. That’s cancellation of debt income, often shortened to COD income. You got cash when you borrowed the money. Then when you don’t have to repay it, that cash is no longer loan proceeds.
The tax code generally taxes you when you are relieved of paying back a debt, treating it like cash paid to you. See 10 Things About COD Income. This unpleasant rule might seem easy to ignore, except that when a loan is forgiven, you’ll generally receive a Form 1099-C reporting income to you—and telling the IRS. If you receive one and disagree with the amount shown, write the lender requesting a corrected Form 1099-C showing the proper amount of cancelled debt.
Don’t ignore Forms 1099. In some cases COD income isn’t taxed. If you believe the cancelled debt isn’t income because you’re insolvent or for any other reason, you’ll need to address this on your return.
If you receive a loan, can the IRS claim the “loan” you received—that is still outstanding and hasn’t been forgiven—isn’t a loan and was actually a sale? In other words, can the IRS claim that “loan” proceeds are really sales proceeds and therefore taxable?
Sometimes, yes. That’s exactly what happened to Jonathan Landow. Landow took out a 90% loan against securities he put up as collateral. The loan was non-recourse—meaning that Landow could not be sued personally if he defaulted. Yet the securities were pledged as collateral.
In fact, the lender had the ability to sell the securities in ways that were unusual for garden-variety loans. And that’s just what the lender did, even though Landow later claimed he had no idea his securities would be sold. Landow didn’t pay off any of the $13.5 million principal amount of the loan.
He also didn’t report the “loan proceeds” as income. The IRS claimed the loan transaction wasn’t a loan at all and instead was a sale. The Tax Court agreed with the IRS, treating the putative loan as a highly orchestrated transaction. They court thought everyone knew the transaction would be documented as a loan but really amounted to a sale.
How real is the danger that will IRS will treat loans as sales? In transactions like Landow’s, very. Landow’s deal was part of a litigated and controversial tax shelter that produced a series of cases. See Shao v. Commissioner and Kurata v. Commissioner. In that sense, the result in Landow’s case was no surprise.
How you structure a transaction is important, as is how the transaction actually plays out. In general, courts look to indicators such as whether legal title passes, how the parties treat the transaction, and the parties’ intent. There can also be danger in simple family transactions.
But there, the question is often whether something is a loan or a gift. Gifts may not trigger income tax, but they can trigger gift tax. Loan vs. income vs. gift? Think about taxes up front, and document what you intend. Everyone will be better off.
You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.
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Most of us will face a cash crunch at some point in our lives. An unexpected bill or loss of income puts us into a position where we need a quick cash infusion.
When you face one of those times, try one or more of these quick cash solutions:
1. The first solution is the obvious one: Sell something.
Think beyond the simple yardsale. Websites such as Craigslist and eBay make it possible to get good prices for quality items. The trick is to find things you own that are worth more than a few dollars. Pretend you’re going to be on the “Antiques Roadshow.” Do a little Internet research on items that you think might have value.
When it’s time to sell, remember that collectibles will do better in a virtual auction, since more buyers will compete for your item. Heavy furniture or other items that are difficult to ship should be sold locally.
And don’t limit yourself to Internet sales. Consider specialty stores for some items. Electronics and tools might do well at a pawn shop. Your local jeweler might be interested in the broach you inherited from Aunt Agatha.
2. Look for money that’s due to you or you can borrow.
You were probably asked for a deposit when you began utility service on your home. If you’ve been consistently on-time with your bills, a company may give your deposit back early. Call the utility to find out.
Also check for unclaimed property. We live fast-paced lives and move often. Because of that we can unintentionally leave behind deposits, small accounts and refunds. The National Association of Unclaimed Property Administrators says 2.5 million claims for more than $2 billion was recently returned in just one year, and the average check was $892. Look for unclaimed funds at usa.gov.
3. Evaluate your tax deductions and 401(k) plan.
If your cash crisis is likely to be short term, consider changing your deductions to reduce income tax withholding. You will have to pay back the loan when your taxes are due in April, but it will increase your take-home pay until then. Ask your human resources department how it works.
If the problem is longer term, you might want to consider borrowing from your 401(k) plan. The law and most plans allow you to take a loan and repay it over time. Interest rates are governed by law but generally aren’t very high. The biggest drawback is that the whole loan must be paid if you leave or lose your job.
4. Add an additional source of income.
If the crisis is big, this may be your only choice. Your best option might be to take on a part-time job. Even if the pay is low, you’ll have a steady, predictable income source.
A less certain option, but one with more upside, is to offer a skill you have to friends and family. Whether it’s sewing or carpentry, letting people know you’re available for hire should generate some work for you. You won’t know from week to week how much you’ll make – and you will need to check with your local government to see what licences are needed – but if you can find enough work, you might make more working for yourself.
5. Offer a room for rent.
This cash source doesn’t require an additional job – just a little sacrifice. Taking in a roommate is a serious step that will change your lifestyle, but it can be a good regular source of income. Depending on where you live and your home, you could score hundreds of dollars each month.
Whatever your cash crunch, try these tips to bring a little extra into your account this month.
Gary Foreman is a former financial planner who founded The Dollar Stretcher website and newsletters. The site features thousands of articles on how to save your valuable time and money, including an article onwhen you’re desperate for [...]
With many pointing to the housing market as the backbone of the economic recovery, investors are flooding the market with all-cash offers and it’s squeezing out many traditional homebuyers.
“People are worried about the returns on alternative investments,” says Karen Dynan, vice president and co-director of economic studies at the Brookings Institute. “There is still a lot of uncertainty about bonds and the stock market, which makes the housing market look good.”
According to the National Association of Realtors May 2013 Confidence Report, all-cash offers account for 33% of home sales, with international buyers taking the lead. In addition, 87% of surveyed realtors say they are expiring constant or increasing home prices.
Homebuyers, particularly first-time homebuyers, are already battling low inventory and rising home prices, but the added pressure from investors creates stiff competition.
William Delwiche, investment strategist at Baird Research & Insights, says cash buys are being bolstered by investor pools snapping up real estate, and less so by individuals looking to live in the home. ;
“These are investment pools paying cash for houses to hopefully get returns,” he says. “It’s not necessarily a trend among individual homeowners because most people going to buy houses don’t have that kind of cash sitting around.”
And for sellers, an all-cash deal is ideal since is cuts down on complications, says Patrick Newport, U.S. economist at IHS Global Insights.
“If you own a home and are selling yourself, it’s probably easier if someone pays you cash—it cuts out the messiness and having the homebuyer get approved for a loan.”
Typical cash buyers are either young people who come into a lot of cash, or international investors, he says.
A Market Turnaround?
Cash buys signal a housing market that people are more willing to invest in, says Delwiche, but the market’s attractiveness may also be due to a lack of other solid investment options.
“The housing market is recovering, but people are also looking to diversify their portfolios,” he says. ; “They don’t’ want to put it all in stocks and bonds.”
It’s a sign that people are under the impression the market is turning around, says Dynan, which may be a self- fulfilling prophecy if enough investors follow.
“A lot of those cash investors are looking for a return,” she says. “If a lot of people think home prices will rise, they will put money into the market, and that increases demand and pushes up prices.”
Economic Benefit or Bust: Long and Short-Term Effects
The cash-buying trend also gives the overall economy a short-term boost, according to Delwiche.
“This helps to bid up asset values for houses, and is good for homeowners who already own houses,” he says. “There is also a benefit to state and local government finances because of the taxes associated with these purchases.”
Dynan says the trend will reinforce the momentum in the housing market, but will impact hopeful first-time homeowners negatively in the future.
“It just makes the housing market less affordable,” she says. “It’s good for the overall economy, but not for every person in the economy.”
Delwiche agrees, and says it may prevent more people from getting in to the market in the future.
“Home prices go up and it affects housing affordability,” Delwiche says. “You can’t have first-time homeowners who are seeds for long-term growth, because they are then crowded out of the market. So short term it’s something of a positive, but is a headwind for first-time homeowners.”
Delwiche says he’d be surprised to see the trend continue, as well.
“It’s just a reflection of poor alternatives for investment dollars,” he says.
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Dear Driving for Dollars, ;
I want to trade in my car for a new one, but I still owe about $11,000. How do I figure out if I have to put down any cash as a down payment on the new one or if I can just use my trade-in as the down payment alone?
Dear Joann, ;
The key to your question isn’t just how much money you owe on your car but how much your current car is worth. For example, if your current car is worth $12,000 and you owe $11,000, you have $1,000 that you could use as a down payment toward a new vehicle. This is the equity you have in your car.
Calculate your car’s value, including its options, mileage and condition, on all of the independent vehicle pricing sites and print out copies of the prices. You should expect the dealer to offer you an amount that is similar to the trade-in values listed for your car. Use the pricing data you’ve gathered to negotiate for a higher amount if the dealer gives you a low offer.
Whether the equity you have in your car is enough for you to avoid putting cash down as well as trading in your car will vary based on the cost of the new car you are buying and your credit score. If you have terrific credit, you may be able to finance almost the entire new-car loan and still get a good interest rate. Even so, you may not want to because financing almost the entire sale price of the car or more is not the smartest financial move. Financing the full price, especially if you roll your taxes and other fees into the car loan, will mean you are immediately “upside-down” on your car loan where you owe more than the car is worth.
Try to put down at least 10 percent of the car’s sale price, plus all the taxes and fees associated with the purchase, to avoid having an upside-down car loan. Putting down as much as you can will reduce your monthly payment and also will save you money on the interest on the car loan.
Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.
Ask the adviser
If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.
Copyright 2013, Bankrate [...]
With tax season in full swing. Many are waiting for their refund money. And for some the wait is just too long.
“When we have the people that are truly desperate for having that tax return every year, we are finding that people don’t have the right budget in line, their withholding is not correct, and we are finding that they jump into to things that they are not getting the best deal in,” said Kate Mielitz with Consumer Credit Counseling Service.
One of those bad deals would be getting a fast cash loan. Mielitz explains how they work:
“These refund anticipation loans, cash immediately for tax refund. Here’s the deal..if you file and you file online whether it is with a reputable tax preparer or you do it yourself. There are a number of ways to do it for free or to do it cheaply online . You would get your money and get it timely,” said Melitz
Mielitz says despites the IRS’s initial delays the longest you have to wait is 2 to 3 weeks with a direct deposit. And waiting could really save you money.
“When you are talking about a refund anticipation loan and getting your money..and your talking about the IRS directly depositing your money.. If you have them do it. By the time the refinance anticipation loan would be paid off in full, it’s about the same time. Except with the refinance anticipation loan you are not getting all your money. You have to pay them a fee,” said Mielitz.
Mielitz says getting the cash fast sounds great but they come at an extra price – interest. Which by the time you pay everything back. Could sometimes double what you actually owed. She also shares that many times companies will work with you if you are upfront and honest with them about your payments.
“99 percent of the time if you tell a creditor that my tax refund is coming, I filed it, it’s going to be directly deposited into my account and I will pay you a week after it comes in. Everybody is watching when those direct deposits come in. So if the money goes into, the account, they can count on the fact as good as your promise is that you will pay them after that goes in. Typically they are going to wait,” said Mielitz.
If you want to file your taxes for free you can always go to the IRS office or go to [...]
Dear Tax Talk,
I want to cash in two insurance policies. One has no tax because the premiums were $20,000 more than the cash value. The second has taxable income of about $14,000 (premiums were paid out as a loan against the policy).
Is each situation separate, or can I combine the excess premiums from the first policy to offset the taxable part of the second policy?
I haven’t come across your unique situation, and after some research, I still don’t have a definitive answer, but maybe an alternative. At the same time, maybe one of my readers can point out an answer that eludes me.
If you cash in both policies during the year, you’ll receive two Internal Revenue Service Forms 1099-R. Each 1099 will show the surrender payment together with your investment in the contract in Box 5. None of the instructions or publications describes how to treat two 1099-R forms. As best as I can tell, each contract would be reported separately, which results in $14,000 in gain with no offset for the loss. There are no provisions for claiming an overall loss on a life insurance contract.
What I suggest as an alternative is to exchange the policies, which would be tax-free. Under the exchange provision, your investment in the insurance contract carries over to the new contract. If you exchange the two policies for one, you’ll end up with a new policy with a slight loss carry-over from your investment in the two contracts. If you later surrender this policy, you will have eliminated your taxable gain and any uncertainty from cashing in the two policies.
Ask the adviser
To ask a question on Tax Talk, go to the “Ask the Experts” page and select “Taxes” as the topic. Read more Tax Talk columns.
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
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Many youngsters, legally not adult, are earning monthly income and paying their taxes but are not eligible for payday loans. However, since vast numbers of these jobs are unstable it becomes difficult on the lenders’ part to offer payday loans to such people. In addition, individuals under 18 do not have a full-fledged adult bank account, which is another prime requirement to qualify for a payday loan. With unstable financial condition, it is risky for both the parties. The lender may not approve loan to a person who cannot repay it on time. Therefore, in order to qualify for a payday loan, an individual must be 18 years or above.
Most of the payday loan companies unanimously offer loans to a person who is legally 18 or above and who has a regular income source to pay back the loan. If a company making a loan to under 18 individual then that is an absolute violation of the law.
State laws govern the minimal age for payday loans as 18, taking into consideration various parameters. Although it seems unfair that youngsters are admitted to work and pay taxes but are deprived of payday loans, the lenders cannot rely on such undefended group with insecure jobs. When you are 18, Law considers you capable enough to carry on your financial responsibilities. Therefore, you become eligible to opt for a cash advance loan in case you need one. It is not mandatory for an individual aged 18 above to go for a payday loan. Necessity for the finance should determine the necessity for the loan and not the age.
The bottom line is individuals aged below 18 neither have a stable job nor a valid bank account, therefore are disqualified for the short-term cash [...]
Payday Loans App: In Android Jelly
September 26th, 2012 by alicia
Android technology is booming in today’s generation. As we are advancing in the new world, the technology is moving forward and creating new gadgets every day. Google has introduced a new operating system known as Android Jelly bean with the version 4.1 which is now carried through number of mobile handsets. It was launched on 27 June 2012.
The previous version of Google was Ice Cream Sandwich version 4.0. In this 4.1 version of jelly bean there are many highlighted features and it‘s a brand new version of Google Android. It gives you the information about time, weather, location, sports and stocks. It has different applications like personal, finance, gaming, stock market and so on. It is very convenient and user friendly. It has a very flat using interface and is more enhanced comparing to the other versions. Many languages are supported by this 4.1 V. accessibility with maps and other basics. Voice search recognition and a camera with great resolution is one among the new features.
It has USB port and android browser which acts as a substitute mobile version of Google chrome. To make the software compatible with the handsets, it has good internet source through which we can update the software’s and applications. The android has many applications to manage the different tasks. Financial apps plays a key role in individual’s life as everyone is in need of money and funds to develop up their business and manage personal needs. If you are out of budget then you can take Payday loan or any other loans suitable for your needs.
There are so many financial apps among which is Payday Loan application. This application tracks your expenses and plans your next pay cheque. It gives you the total details of your expenditure and savings with the percentages, insurance amounts and retirement plans. This is particularly for your savings and spending’s. It will focus on your gross pay, Taxes, Insurance cost and take home pay. It is always essential to search for lower interest rate in Payday Loans.
A Payday loan is used in different scenarios as in Emergency needs, astonishing bills, holiday trips and so on. As you observe people need instant money at times to meet their requirements and can’t wait until the next pay check arrives, hence this application plays a major role at that time as they can see to their monthly income and expenses, and according to that they can take a Short-term or a Payday loan. In this application the period of payday loan starts from 60 minute to one week. As your information and the data will be confidential it provides full time security and it has a fast cash service.
This application can help people in their needs and emergencies.
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Tags: Finance apps, Payday loan
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My name is Alicia. I am a tech writer from UK. I am into Finance. Catch me
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