by Jean Miller | Accounting News, Fraud, News, Professional Services, Resources, Tax, Tax Consulting, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual, Technology
Although Equifax has yet to reveal specifics about the individuals who were affected by their data breach, as many as 143 million Americans may have been impacted. With that in mind, anyone with credit should consider taking measures to protect their identity and funds. Many experts are suggesting individuals freeze their credit, but this may not be the most effective method. While freezing your credit is not a bad decision, it only protects you from new accounts being opened in your name, a form of identity theft that is actually quite rare.
While many taxpayers are now deeply concerned about their lives being destroyed from identity theft, there are many other ways to guard your identity and your money that may be more beneficial than freezing your credit:
- Use two-step verification and secure passwords
Most identity theft occurs on existing accounts, so making it difficult for hackers to access your accounts with financial information is one step you can take to safeguard your personal data.
- Choose ID-verification questions and answers cautiously
Consider choosing questions whose answers cannot be easily found online. Questions such as “Where were you born?” or “What was your high school mascot?” could be easily discovered by checking your social media accounts, so be wise when creating those protective measures.
- Monitor current accounts as often as possible
Ideally, you should check your bank accounts daily to ensure all posted charges were made by you or whoever has access to the account. Since most financial institutions today have an app for accessing account information, monitoring your credit can be as simple as a quick log on from your phone. If you notice suspicious activity, you can then notify your bank immediately to avoid racking up more false charges.
- Set up alerts for new credit activity
Although you can set up a fraud alert or credit freeze, there are other free services that monitor your credit and any new account openings or activity.
- Check credit reports regularly
Every individual is allowed one free credit report annually from each of the three major credit bureaus through AnnualCreditReport.com, a site sponsored by the government. You can receive all three reports at once, or request one every 4 months to space out your monitoring tactics.
- File taxes early
One form of fraudulent behavior that is becoming more common is filing for taxes under someone else’s SSN. But, organizing your tax information quickly and filing as early as possible could lower the chances that someone will file in your name. Plus, if you are owed a refund, you will likely get it sooner than April if you file early.
While none of these methods are entirely foolproof, taking precautionary steps to protect your credit are always advised. If you do fall victim to identity theft, check out the Federal Trade Commission’s step-by-step recovery guide for helpful information.
by Jean Miller | Accounting News, Business Consulting, News, Professional Services, Tax Consulting, Tax Planning
Considering joining the “startup” world but unsure how to find funding? Whether you’re simply in the research phase or you’ve developed a full blown business plan and have some capital, below are the most common ways new startups, who aren’t yet ready for venture capital, fund their business.
- Personal Savings
Personal capital is the most relied on source by entrepreneurs, according to the Small Business Administration. Many entrepreneurs dedicate a good chunk (or occasionally the whole lot) of their personal savings to their new venture, often relying on family or friends for a little help paying the bills or a place to crash if they find themselves in a bind. However, consider speaking with family and friends before you start to ensure they will be there to pick you up if needed, and always leave yourself a small nest egg in case the venture goes awry.
- Credit Cards
Credit cards are certainly the easiest, but most dangerous, form of funding. They provide easy and quick access to a significant cash flow before founders can give themselves a full salary, but they can also put founders in the hole by losing money to late fees or damaging their personal credit. Be careful about how much you rely on credit cards now, as it could prove to be a major hang-up in your future.
- Personal Wages
Many entrepreneurs take it slow, or develop their business or product on the side, while continuing to work a day job and receive income. This avenue may be the most exhausting, or time consuming, by essentially working two jobs, but may be the most financially viable and more common than many realize. The founder of YouTube, Steve Chen, was still employed at Facebook when he began his video platform venture.
- Crowdfunding
The age of the internet has provided entrepreneurs with a wealth of new resources when it comes to funding. Sites like Indiegogo or Kickstarter allow individuals to raise money by “soliciting” online funders for their product, game or other business. Backers take the risk that they may not be repaid in the anticipated time frame, while founders must be aware that not delivering risks ruining their reputation and their chance for future ventures.
- Loans
Founders can go the traditional route of seeking out a bank or other loan service, or they can consider the newer concept of peer-to-peer online loan platforms like Upstart or LendingClub. Entrepreneurs have many lines of credit or business loans at their disposal, but should take into account the payback of such options, which often include interest.
New business venturers have a bevy of funding possibilities to consider, even if they are not established enough for venture capital funding, but proper planning and multiple financing avenues are always advisable. Talk to family, friends, and trusted financial advisors before jumping into the unknown of owning your own business, and find a funding plan that places you on the path to success.
by Jean Miller | Estate Planning - Individual, News, Retirement, Tax, Tax Consulting, Tax Planning, Tax Planning - Individual
Many older generations believe millennials to be poor budgeters and decision makers who don’t consider, or care to consider, their financial futures beyond tomorrow’s trip to get Thai food. While that may be the case for a select number of those under 35, millennials do not have to ascribe to this stereotype and, even on a limited budget, can begin saving for their futures. Below are some helpful tips for getting your money organized and putting some away for your future, even on the tightest of budgets.
- Budget, budget, budget – One thing is for certain, while all millennials may not be financially incompetent, they are almost all technologically adept. And in today’s world, it’s simple to track your spending and stop living paycheck to paycheck, right from your smartphone. Whether you track your funds and spending on your bank’s app, or use an outside app as a budgeting tool, it’s vital to consider what’s coming in, what’s going out, and what habits you can change to have more to set aside.
- Pay yourself first – Unfortunately, this doesn’t mean every payday you get to go buy a new shirt or gadget. Rather, every paycheck, set aside a small percentage (5%) for an emergency fund and another 10% for a retirement fund. If your company offers a retirement fund and matching contributions, it is absolutely vital to contribute, even if the funds only amount to 3% of your annual salary. If you don’t have a 401(k) option, consider opening a Roth IRA and begin saving on your own. Even setting aside an amount as small as $25 a month can mean thousands for your future, if you stay diligent.
- Talk about your finances – Whether you’re married or single, find someone you trust to discuss your finances with who can keep you accountable. This could mean you and your spouse regularly keep track of your spending and cash flow, reminding each other when slips occur, or it could look like sitting down with a parent, friend or outside source whose financial acumen you admire, asking for help/accountability. Having someone to remind you of your goals, pushing you to stay on track, will always prove beneficial.
- Steer clear of the “lifestyle” shift – For many, a new job or a raise might make them think they’ve “earned” a bigger apartment, or can put more in their vacation or entertainment funds. While rewarding yourself is healthy now and again, rather than sending that extra cash straight out the door, consider creating a S.M.A.R.T financial goal (specific, measurable, achievable, relevant and time bound), and begin putting funds aside to save for that goal. So whether it’s saving for your first house, buying a new car or just adding more to your retirement fund, don’t jump right in when finances increase, plan and save with clear goals in mind.
Budgeting well and saving is process that takes commitment and continuity, but with proper tracking and monitoring, and some strong accountability, anyone can achieve their financial goals and begin putting money away for the future.
by Jean Miller | Accounting News, IRS, News, Tax, Tax Planning, Tax Planning - Individual
What, or who, is a “Millennial”? Numerous individuals who find themselves in this generation do not like the connotations the word ascribes, but if you were born in the 80s or 90s, then you fit into what most researchers would call the Millennial generation. Many at this stage of life think that they’ve just barely entered adulthood, but it’s never too early to start considering “adult” things like investing for your future. And for those at this age and stage of life, a Roth IRA may be just the investment to consider.
What exactly is a Roth IRA?
A Roth IRA is an Individual Retirement Account where you set aside after-tax income up to a set amount each year.
How is it different from a traditional IRA?
One major difference is that funds put into the account are after-tax income, meaning, when you withdraw money from a Roth, taxes have already been paid. In a traditional IRA, you are taxed when money is withdrawn from the account, however, funds placed in the account may be fully or partially deducted at the time of placement. Therefore, a traditional IRA may seem enticing to Millennials initially because of the deductions, but a Roth is more financially viable since you do not pay taxes later in life. And, more likely than not, you will be paying less taxes earlier in your career (due to lower income). Eventually, you could even reach a point where you make more than allowed to invest in a Roth (eligibility phases out at $118,00 for individuals and $186,000 for a household).
Another big reason why Millennials should consider a Roth, is that you are not taxed or penalized on money withdraw at any time, even if you haven’t retired yet. So, for example, if you have been trying to establish an emergency fund (as many advisors suggest you do), but your monthly bill and loan payments make it nearly unattainable to save three months worth of expenses and maintain it only for emergencies. Having a Roth, however, could essentially serve as both a retirement and emergency fund because, in a Roth IRA, you can withdraw money in an emergency without penalization. Can is the operative word here because while it is possible, removing funds from a Roth is certainly not advised if you are really trying to save for retirement. Nevertheless, the funds are more accessible if needed.
While investing in your future is advised no matter what sort of account, for a generation who leans toward early retirement, but is less likely to have a 401(k) (due to being self-employed or working for a start-up/small business that does not offer one), a Roth IRA may be the best long-term alternative.
by Jean Miller | Accounting News, Healthcare, News, Resources, Tax, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
The Trump administration has wasted little time taking action on many of the promises that were made throughout the campaign. One major proposition made by President Trump was the immediate repeal and replacement of Obamacare. While the replacement of our current healthcare system seems to be pending, the repealing of the current system is certainly at the top of the administration’s list. Although the insurance aspect of the current system would seemingly stick around until the GOP and the Trump administration develop a suitable alternative, the tax aspects of Obamacare could be subject to immediate repeal. Thus, the insurance industry may have until 2018 or 2019 before they saw changes, but the tax industry (and therefore taxpayers) could see effects as early as this year.
How exactly the current administration chooses to repeal the tax aspects of Obamacare could be positive or negative for most taxpayers though. Under current law, there is an individual insurance mandate that penalizes monthly those who do not have insurance coverage, as well as an employer mandate penalizing employers (with more than 50 full-time employees) who do not offer affordable health care. However, if individuals obtain coverage through the state marketplaces and their income is between 100% and 400% of the federal poverty level, they receive a tax credit to assist in paying for their insurance premiums. Additionally, Obamacare levies a 0.9% Medicare tax and a 3.8% net investment income tax on certain high wage earners, or the wealthiest 2% of Americans.
Where repealing taxes associated with Obamacare could be positive for Americans is if Congress removed all taxes while maintaining the premium tax credit (until a replacement system is established). This would mean employers are no longer charged for not providing insurance coverage, taxpayers are not penalized for not having insurance and high wage earners will not be levied the additional taxes discussed above. If Congress chose this route, tax experts estimate that low to middle income wage earners could receive a tax break in the hundreds of dollars, whereas high end wage earners could receive a break in the thousands of dollars.
However, if Congress chose to repeal all tax aspects, including the premium credit, certain tax brackets would most certainly see negative effects. Without the credit, lower income brackets could see their taxes rise by an average of $4,000, middle income brackets could see their taxes rise by an average of $6,000, but higher income brackets would still see their taxes lowered by the thousands of dollars. But, these negative changes would only exist for lower or middle income brackets who currently claim the premium tax credit. Fortunately, at this point, Congress nor the Trump administration has made any claims about what they will do in terms of repealing Obamacare-related taxes, so Americans will simply have to wait and see what direction our nation’s leaders choose and how their wallets will be affected.
