New Federal Tax Income Tax Rates 2012 ' What's Your Tax Bracket?

Well, for those who did not know it, the tax rates for 2012 have been carried on for the past couple of years.

The passing of the Tax Relief Act of 2010 has signed in the law the proposed extension of the current tax rate schedule for the previous two years.

This means that the rates will be subject to revision in 2013 unless new legislation is passed to further extend the changes. For those who don't quite grasp the rating system, it might be good to go over them right now.

This will help you understand the value of the Tax Relief Act. Here is a breakdown on the Federal Tax Rates of 2012.

Some Perspective on the Federal Tax Tables 2012

Prior to the official passage of the Tax Relief Act, the schedule of rates would have shifted in 2011. This may be better illustrated in the following breakdown.

Now, the tax rate changed noted above will not tax effect until the beginning of 2013, barring any decisions to introduce further legislation to maintain the rates as is or make other arrangements. It might also be mentioned that any capital gain income may be taxed at different tax rates. In most case, the capital gains are figured separately from other taxes. Having these rates ahead of time can help you plan for tax time early.

Just A Preview of the New Tax Rate Schedule

This brings another point into focus, those rate schedules are just advance previews and do not necessarily reflect the official rate schedules that will eventually be released by the IRS. You may have to wait a little while before you can get the complete numbers or even see the official income brackets that are assigned to each of the aforementioned percentages.

At the same time, it may be good to get a few more details that can help your tax planning strategies. Obviously, there will be differences based on your filing status, meaning whether you are filing single, married jointly, etc.

For instance, the 10% rate for a single filer is for income ranging from $0 to $8,700. Whereas, married joint-filers in the 10% bracket cover an income of $0 and $17,400.

On the high end, those in the 35% rate schedule include those making over $388,350. These examples are, of course, subject to revision. You can examine the rate categories in more detail on your own.

Taxes And Your Financial Planning

What you might already have guessed is that the tax rate schedules can be helpful in making your financial plans more precise. For instance, with these rates in hand, you may be able to estimate the tax you may pay on additional earned income.

Also, you can find out how to reduce how much you will have to pay at tax time but increasing your deductions now. There are benefits to knowing the proposed 2012 federal tax rates. Why not discover some yourself?

Tagged as: 2012 Federal Tax Rates, 2012 Tax Brackets, Federal Tax Bracket

It's Never Too Late to Get the College Degree You Deserve

It's never too late to go back to school. Regardless of your age, you can still earn a college degree.

My father, who had previously been a college drop-out in his teens, went back to school at the ripe age of 55 and finally attained his bachelor's degree.

It was one of the proudest days of his life.

Going to college costs a lot of money but this shouldn't stop you from trying again!

You are also entitled to all the student loans for college students. To help you prepare, here are some things you should consider doing.

Evaluate yourself

You need to determine the course you want to pursue based on your interests and the future job you have in mind. Most adults go back to school because they want to have better jobs after they graduate. Make sure that the program you'll be enrolling in will lead to the job you're aspiring for. Do not veer away from your passions because taking a course that doesn't interest you will wear you down in the long run.

Look for a school

In looking for a school, take into foremost consideration if it offers programs accredited by the U.S. Department of Education. The department does not accredit schools but education programs.

Only accredited programs are eligible for the federal student aid. Compare tuition fees of different schools and look for the school that's more affordable for you. Consider the retention and graduation rates of the schools as well. Ask if they have job placements after graduation, too.

Learn about the costs and aids

There are many financial aids available for incoming college students. You can apply for scholarships and grants which do not require repayment. You can also opt for work-study which is a part-time program so that you can earn money while studying. You can also avail of federal loans or private student loans for your cost of attendance (i.e. tuition fees, room and food expenses, transportation, and other expenses).

Applying for loans

To apply for a federal loan, fill out the Free Application for Federal Student Aid (FAFSA). You also need your social security number and driver's license. The other supporting documents you need are W-2 forms or other proof of income and federal income tax return. If you're married, you can also include your spouse's income documents.

It will also be helpful if you declare records of other untaxed income you received, such as welfare benefits, TANF, veteran's benefits, military or clergy allowances, and social security benefits.

While in college

You need to maintain satisfactory academic progress to remain eligible to your financial aid. To help you in your expenses, you can also apply for part-time jobs that fit your schedule. Consult with financial advisors should you encounter difficulty in paying your loans.

Do not let age hinder you from going to college. There are people who can assist you from the time you enroll up to the time you graduate. It's never too late to achieve your dreams. With a college degree you have greater chances of getting a better job and providing a brighter future for you and your family.

For more information on student loans for adults, visit http://studentaid.ed.gov/PORTALSWebApp/students/english/index.jsp.

4 Ways You Are Screwing Up Your New Job Search and How to Fix It

Let me just say it.  Being on a job search is like being on a big rollercoaster ride in Hell's worst amusement park.

Am I right or am I right?

Yet, you have to get on that coaster, strap yourself in, and hope that when the ride ends you are still in possession of your self-esteem and your wits.

Not to mention, of course, that when the ride ends you must have landed a job that makes good use of your skills and talents, and that pays enough to keep you flush with life's extras, like food.

Yet, because no one has probably taught you how to find a job, let alone the right job, you are likely making mistakes that are screwing up your search.

And by 'screwing up,' I mean either prolonging it unnecessarily, or landing a job that is not a good fit.

If you have ever been in a job that is not a good fit, you know how painful it is and how it impacts every area of your life, from your finances to your personal relationships.

As a reader of the Good Financial Cents blog, I'm betting that you are someone who likes concise, commonsensical, actionable advice.   I see you nodding your head, so let's jump right in.

If you are in a job search, or contemplating one, there are a lot of ways to screw it up. Based on my experience in Human Resources Leadership and Career Coaching, here are the Top 5 ways really smart people (like you, of course) screw up their job searches:

1. You jump right in without any thought or planning. 

How would that approach work with your finances, your retirement, or even your vacation?  And what makes you think it is an effective job search strategy? Our tendency is to want to feel productive, so we take action without thought, wanting to 'accomplish' something.

In my book, Stop Peeing On Your Shoes:  Avoiding the 7 Mistakes That Screw Up Your Job Search, I call it jumping into fire without wearing your fireproof undies.  You will get burned.

Do this:  Lay out your search plan just like you would any other plan.  Determine your desired outcome, then track backwards to how you will get it. Consider: how will you structure your time, what events will you attend, who will you connect with and when, how will you answer key questions from your contacts, and how will you stay productive?  The job fairy will not just show up on your doorstep.

2. You have no idea what your value is to an employer.

Why should an employer hire you?  What will you bring to the party?  What have you done with great success in the past?  What have past employers valued about you? When have you failed, and what did you learn from it? Tell me about yourself.  Cat got your tongue?

Yes, these are questions that require thought, preparation, and practice. People tend to think they can wing their answers to these questions. Winging it is not a winning plan. If you can't answer all of these ' and other ' questions in a focused, compelling way, stay out of the job search until you can.

Do this: Draft your answers to these questions, review them with someone who knows you well professionally, then practice with someone who will be ruthlessly honest with you.

3. You rely on technology and avoid face-to-face contact.

Read my ink. People hire people, not Word document attachments. If I can't see you, hear you, sense you, or get a feel for you, it is very hard to really imagine you in my workplace. It is easy to dismiss someone on paper, or by email.

And if your resume is in a pile of 300 I received in response to an ad, think of how easy it is to skip right over yours in my overwhelmed and overworked state.

Do this: Schedule your networking to include both one-on-one conversations and a few group events. Plan your week so that you are having four to six such meetings a week. Two-thirds (or more) of people find their jobs through someone they know or someone they meet in their search. These people will most likely not coming looking for you.

4. You do not consider the employer's wants and needs.

When you really want a job, it is all too easy to think solely from your own perspective. You consider how you will answer certain questions, what you will wear, what you will focus on. In general, job seekers do way too much talking and not enough listening.

Do this: Think from the other side of the desk. The core purpose of the interview is to find the right person to meet the needs that having this job unfilled has created. Read that again. What can you infer from the job description, from the questions you are asked, and from what you have been able to discover through your network about the opportunity, and about the organization's needs and challenges? And how are you a fit to address them? If you are not ready to answer that, stay home.

If you can accept the fact that there are actually skills and proven techniques to an effective job search, it is not a leap to assume that if you actually learn those skills, you will be more effective at it. Kinda like, well, everything else in life.

And as a rider on the roller coaster that is a job search, you may find that your ride has been smoother than ever before.  And without those annoying bugs in your teeth.

Julie Bauke is the President of The Bauke Group, a career consulting firm that is focused on Career Happiness. She is the author of 'Stop Peeing on your Shoes: Avoiding The 7 Mistakes That Screw Up Your Job Search'. You can learn more at www.thebaukegroup.com or at www.facebook.com/thebaukegroup.

Tagged as: best careers, how to find a new job, New career search, New job search

Supporting Financial Literacy Month

In support of Financial Literacy Month I was asked to film two short videos. Today's video is to support Steve Stewart from Money Plan SOS.

Somehow Steve was able to solicit 30 individuals to film a short video for each day of the month to help support financial literacy. That's quite an undertaking and I want to give Steve Kudos for pulling it off.

My video below briefly explains what a mutual fund is using a can of Campbell's Chunky Vegetable Soup.

Yes, that's right.   It's not as good as my Mutual Funds Explained video where I use my steak chili recipe, but I still think you'll enjoy.

Warning: Do not watch if you are hungry. It will only make you raid your refrigerator immediately afterwards. You have been warned.

5 Ways You Are Screwing Up Your New Job Search and How to Fix It

Let me just say it.  Being on a job search is like being on a big rollercoaster ride in Hell's worst amusement park.

Am I right or am I right?

Yet, you have to get on that coaster, strap yourself in, and hope that when the ride ends you are still in possession of your self-esteem and your wits.

Not to mention, of course, that when the ride ends you must have landed a job that makes good use of your skills and talents, and that pays enough to keep you flush with life's extras, like food.

Yet, because no one has probably taught you how to find a job, let alone the right job, you are likely making mistakes that are screwing up your search.

And by 'screwing up,' I mean either prolonging it unnecessarily, or landing a job that is not a good fit.

If you have ever been in a job that is not a good fit, you know how painful it is and how it impacts every area of your life, from your finances to your personal relationships.

As a reader of the Good Financial Cents blog, I'm betting that you are someone who likes concise, commonsensical, actionable advice.   I see you nodding your head, so let's jump right in.

If you are in a job search, or contemplating one, there are a lot of ways to screw it up. Based on my experience in Human Resources Leadership and Career Coaching, here are the Top 5 ways really smart people (like you, of course) screw up their job searches:

1. You jump right in without any thought or planning. 

How would that approach work with your finances, your retirement, or even your vacation?  And what makes you think it is an effective job search strategy? Our tendency is to want to feel productive, so we take action without thought, wanting to 'accomplish' something.

In my book, Stop Peeing On Your Shoes:  Avoiding the 7 Mistakes That Screw Up Your Job Search, I call it jumping into fire without wearing your fireproof undies.  You will get burned.

Do this:  Lay out your search plan just like you would any other plan.  Determine your desired outcome, then track backwards to how you will get it. Consider: how will you structure your time, what events will you attend, who will you connect with and when, how will you answer key questions from your contacts, and how will you stay productive?  The job fairy will not just show up on your doorstep.

2. You have no idea what your value is to an employer.

Why should an employer hire you?  What will you bring to the party?  What have you done with great success in the past?  What have past employers valued about you? When have you failed, and what did you learn from it? Tell me about yourself.  Cat got your tongue?

Yes, these are questions that require thought, preparation, and practice. People tend to think they can wing their answers to these questions. Winging it is not a winning plan. If you can't answer all of these ' and other ' questions in a focused, compelling way, stay out of the job search until you can.

Do this: Draft your answers to these questions, review them with someone who knows you well professionally, then practice with someone who will be ruthlessly honest with you.

3. You rely on technology and avoid face-to-face contact.

Read my ink. People hire people, not Word document attachments. If I can't see you, hear you, sense you, or get a feel for you, it is very hard to really imagine you in my workplace. It is easy to dismiss someone on paper, or by email.

And if your resume is in a pile of 300 I received in response to an ad, think of how easy it is to skip right over yours in my overwhelmed and overworked state.

Do this: Schedule your networking to include both one-on-one conversations and a few group events. Plan your week so that you are having four to six such meetings a week. Two-thirds (or more) of people find their jobs through someone they know or someone they meet in their search. These people will most likely not coming looking for you.

4. You do not consider the employer's wants and needs.

When you really want a job, it is all too easy to think solely from your own perspective. You consider how you will answer certain questions, what you will wear, what you will focus on. In general, job seekers do way too much talking and not enough listening.

Do this: Think from the other side of the desk. The core purpose of the interview is to find the right person to meet the needs that having this job unfilled has created. Read that again. What can you infer from the job description, from the questions you are asked, and from what you have been able to discover through your network about the opportunity, and about the organization's needs and challenges? And how are you a fit to address them? If you are not ready to answer that, stay home.

If you can accept the fact that there are actually skills and proven techniques to an effective job search, it is not a leap to assume that if you actually learn those skills, you will be more effective at it. Kinda like, well, everything else in life.

And as a rider on the roller coaster that is a job search, you may find that your ride has been smoother than ever before.  And without those annoying bugs in your teeth.

Julie Bauke is the President of The Bauke Group, a career consulting firm that is focused on Career Happiness. She is the author of 'Stop Peeing on your Shoes: Avoiding The 7 Mistakes That Screw Up Your Job Search'. You can learn more at www.thebaukegroup.com or at www.facebook.com/thebaukegroup.

Tagged as: best careers, how to find a new job, New career search, New job search

Can You Really Fly to Europe for Free with Credit Card Airline Miles?

When is the last time you dreamt of flying to Europe?

You've always wanted to tip toe around the Tower of London and peruse the purses of Paris.

There's only one problem.

It's at least a 7 hour flight from your current location. An expensive flight crammed into the back of the plane on the cheapest seat possible isn't exactly my idea of the best way to start off an international vacation. So you put it off because the cost of just getting there is so high ' not to mention actually staying long enough to get something out of it!

Thankfully you now have the opportunity to earn up to 100,000 airline miles with British Airways. Those miles can be converted into either five one-way flights between New York City and London or one round-trip flight with 20,000 points leftover (which could then buy you an economy seat one-way between the two cities).

In other words, it's a heck of a lot of miles.

Want 100,000 British Airways miles? (Actually, a few more than that')

Sign up for the British Airways Visa Signature Card today.

How to Earn 100,000 Airline Miles with the British Airways Visa Signature Card

There are three ways to earn airline miles with British Airways (they call them Avios points).

Sign Up Bonus

To start, you'll receive 50,000 Avios points just by being approved for the credit card and using it once. With an economy seat rewards flight costing just 20,000 points one way, that's enough Avios to fly to London from JFK Airport in New York and still have points left over.

Two Spending Bonuses

On top of the bonus you get for simply using the British Airways Visa Signature card, you also can earn bonus points for hitting certain spending limits:

• 25,000 bonus Avios for spending $10,000 on the card in the first year
• 25,000 bonus Avios for spending an additional $10,000 on the card in the first year

Spending Rewards

As with most other airline or travel rewards credit cards, the British Airways Visa Signature credit card also generates Avios points for the spending you put on the card. For any British Airways specific spending you earn 2.5 Avios points per dollar spent. For all other spending you earn 1.25 points per dollar. (This is equivalent to 2.5% and 1.25% cash back.)

That means you could actually end up with 125,000 Avios reward points if you received both spending bonuses and only used the card for non-British Airways purchases. That's 50,000 points for signing up and using the card once, 50,000 points for spending $20,000 on the card in the first year, and 25,000 points for that $20,000 in spending to earn the bonuses.

If you can meet all of those requirements you'll have points coming out your ears! And 125,000 points can be redeemed for a round-trip ticket sitting in first class. Now that's the way to get to Europe in style!

Want to fly in first class from New York to London and not pay for the ticket?

Sign up for the British Airways Visa Signature Card today.

Can I Really Get a Free Round Trip Ticket on British Airways?

You will see all kinds of advertisements for this card touting the benefit of 'a free round trip business class ticket' on British Airways. However, even with 100,000 to 125,000 worth of Avios points, you won't have a 100% absolutely free flight. Even if you downgrade to an economy ticket the flight still won't be free.

How can this be possible? I thought you said I could redeem my points for 5 one-way economy flights or a round-trip business flight? What's the catch?

Where the card isn't 100% clear is that the points can be used to buy tickets, but those tickets also have taxes, fees, charges, and surcharges added onto them. You'll pay airport tax, a fuel surcharge, and other items that add to the airline's bottom line. This can make your 'free' trip to Europe actually cost several hundred dollars. That can come as quite a shock when you signed up for the card with the understanding that you could fly for free.

How Much Will I Pay in Taxes and Surcharges?

This is a partial mystery because to completely book a rewards trip flight you must be a member of the British Airways Executive Club that uses the Avios point system. If you are considering getting the British Airways Visa Signature Card and want to see what the bottom line cost might be to get you to Europe, you can't simply log on to the website and do a complete analysis.

You can, however, make some educated guesses as to the overall cost. The Avios points calculator will show you what the point cost is to get you a one-way ticket. I did some analysis from JFK in New York City to London's Heathrow Airport:

• Economy one-way ticket: 20,000 points
• Premium economy one-way ticket: 30,000 points
• Business/Club one-way ticket: 40,000 points
• First class one-way ticket: 60,000 points

The points are the same coming back from London, too.

Where it gets confusing is using the calculator it says all of these point totals '+ $0.00 in taxes, fees, charges, and surcharges'. In other words, you don't have to pay anything else, just use the points. (There are also options to use less points and pay part of the difference. For example, you could book an economy ticket for 16,000 points and pay $55 to make up the difference in the points.)

However, angry travelers are discovering this isn't the case when they actually go to book the flight. How much are the taxes and surcharges? There's no way to know until you book, but we can still compare to what you would pay out of pocket if you didn't use the reward points to book the flight.

I picked two dates well into the future (thanks to the 2012 Olympics being in London) and said I would depart New York City on September 3 and return on September 16th. The total one-way cost of the ticket calculated to be $1,821. So I would pay $3,642 for a round-trip flight. At the bottom of the page it lists out estimates for the taxes and surcharges you would have to pay:

So for one person, the out of pocket costs (if your ticket was free due to airline miles) is $318.30 round-trip. If the total cost is $1,821 and the included surcharge is $318, that means the actual fare is $1,503 for the Business/Club seat. If you used miles instead of paying for it, you're still getting a $1,500 discount on the trip and having to pay $318.30 in costs to the airline.

Can you Find a Seat?

The only other problem I can foresee for Americans trying to use their British Airway flight miles is with the 2012 Olympics coming up it may be impossible to find a rewards seat on any flight to London for quite some time. Those routes are going to be packed full of teams, coaches, and fans trying to get to the Olympics which will squeeze out the availability of reward seats on the flights. You might be able to pay to upgrade your seat, but if everything is sold out that might not even be an option.

However, your points aren't going to expire and the Olympics air traffic will slow down in the fall. You could take a nice fall vacation to England using all of the free miles you earned with this credit card.

Interested in a free flight to start your European vacation?

Apply now for the British Airways Visa Signature Card.

Tagged as: Avios Miles, British Airways, Chase British Airways Visa Signature Credit Card, Free airline miles, Free flight to Europe, Free round-trip flight, Sign up bonus, Spending bonus, Taxes and surcharges, travel rewards credit card

Are You Ready for Day One of Retirement?

10,000 American are retiring each and every day. It's estimated that over the next 20 years, 74 million baby boomers will retire in the U.S. alone. Yowzers!!

Most in what I do as a financial planner is to help people conquer their retirement fears and help them retire successfully.

While that sounds easy to some people, the reality is that it's not.

What makes it the most challenging is that everyone is a different situation. All boomers have different amounts saved, different pension amounts, different income needs, different medical concerns, etc.

Retiring is not always about the numbers, though. It's a big psychological shift going from having a job duty each day to now trying to figure out how you're going to spend your day.

Prudential is doing a very neat video series highlighting boomers all over the country who are facing the realities and fears of their first day of retirement.    If you are a boomer facing retirement, see if you can relate to this boomer's Day One.

6 Audit Red Flags to Avoid the IRS

When I think about experiences that I would want to avoid the most a few thoughts come to mind.

Being caught in the middle of a tornado. Being attacked by a grizzly bear. And being audited by the IRS. (Sorry IRS. I know you're probably not that bad, but for now I would like to keep you at arms distance. )

Luckily, I have a good CPA that keeps me in check so *fingers crossed* we'll never get audited.

I read a surprising statistic that only 1.6 million taxpayers were actually audited last year. That's just 1% of tax filers who are earning less than $200,000. The same report showed that no more than 12% of millionaires had their filings checked out either.

So why am I freaking out? Well, for starters, I am considered to be self-employed.

From a business standpoint, that's a great thing!  From a 'potential to be audited' standpoint, not so much.

Needless to say, I have this cold-chilling feeling that it's only a matter of time.

Should you worry about being audited?  To hopefully prevent the unwanted call, here are 6 audit red flags to avoid.

1. Get Your Schedule C in Check.

Schedule Cs get a close look annually as the IRS seeks to remedy the tax gap (the difference between federal taxes owed and federal taxes paid). As Schedule Cs are often filled out by solopreneurs and small business owners themselves, the chances increase for claiming substantial deductions that may be hard to substantiate.

2. Don't Make a Million Dollars.

Millionaires work with accountants for a reason ' generally speaking, returns prepared by tax professionals raise far fewer red flags than DIY ones. If you will make around $1 million this year, look back at the first paragraph of this article and consider whether or not it might be wise to defer some potentially taxable income into 2013.

3. Double Check Your Math

Calculators are readily available and they can be as crucial as software when it comes to filing your federal return. The IRS does spot mediocre mathematics in returns. It has even recalculated taxes to save people money in years when special tax credits were available, such as the Making Work Pay credit.

However, it also finds unreported and underreported taxable income through the same scrutiny. In fact, the IRS found 4.2 million math errors last year on tax returns for 2010.

4. Take Too Many Tax Deductions

Is your money-losing small business venture truthfully just a hobby? Did you really donate $4,000 worth of office supplies to a charity, and do you have the receipts to back that up? The IRS routinely checks returns for deductions that seem outlandish.

My CPA suggested that if you donate a lot to charities such as Goodwill, you can't do too much to keep records.  Keep receipts from your donations as well as taking pictures of what you donate will fully support your case.

5. Living it Up

Does the IRS peruse social media? Yes it does, just as many people do. The IRS has done good detective work for years; its investigators know to check out DMV and employment records to get a better picture of an errant taxpayer.

Today, photos and posts on Facebook and MySpace and Twitter can telegraph potentially valuable nuggets of information, particularly about young taxpayers who have come into wealth that their returns don't seem to show.

6. Know Your Tax Situation and Don't Procrastinate

A staggering number of Americans pay little to no attention to their federal taxes. According to the 2012 Taxes and Savings Survey from Capital One Bank, 11% of American taxpayers choose to file at the last minute. For that matter, about 5% of Americans (that's 7 million people) don't file federal returns at all ' and in some cases, it isn't just because they don't earn enough taxable income.

P.S.: you or someone you know might be eligible for some money. The IRS has more than $1 billion in unclaimed refunds just waiting for U.S. taxpayers who didn't send in federal tax returns for the year 2008. The IRS estimates that the median such refund is $637. Are you or someone you know eligible? Visit this webpage for more information.

If you are eligible, you must file a 2008 federal return (and put it in the mail) ASAP ' the deadline is Tuesday, April 17, 2012.

Tagged as: audit red flags, tax filing

How to Pay Federal Taxes Online With Your Credit Card

It's time again to ante up to Ol' Uncle Sam.

Taxes are due again and while you hoped to get a refund this year, it looks you're going to have to pay again ' Boo!

Last year you found out how easy it was to pay your federal taxes with a credit card, but now you're wondering whether it's a good idea to do it again'.or not.

Let's look at some of the pros and cons of paying your tax bill with a credit card.

It's Sooooo'.Convenient

Swipe it! It's so easy to do, right?

You login, enter your 16 digit credit card and expiration date, then presto! Your tax bill is taken care of.

What about those that have to file a federal tax extension? It doesn't matter. You just have have to pay your estimated and you're in the clear. Can you swipe that with your card? You betcha!

Just because it's so easy, does it really mean you should? I guess it depends on who you ask.

If you do use a credit card to pay your tax, consider Chase Freedom® Visa ' $200 Bonus Cash Back

Benefits of Paying Your Taxes With Your Credit Card

• Simple as Pie. We already addressed one benefit: It's easy. If you eFile and use service provider Official Payments Corporation or File Your Taxes, it's really as simple as paying for your groceries.
• Don't forget the points. Frequent flier miles, gift cards, free cash: we all have the perks that we get by using our cards. You pay everything else on your card, why not use your cash reward credit cards to pay your taxes?
• Time is on your side. Did April 17th come too soon again? If you don't have the cash to pay your taxes, you can always put in on your card and buy you some time.

Update: I recently just spoke to someone that tried to pay their taxes online, but had a field day trying to get registered. Maybe it's not as easy or convenient as they say.

Disadvantages of Paying Your Taxes With Your Credit Card

• Convenience comes with a price. While yes it is convenient to use your credit card, as noted above. You do have to pay for that convenience. Below is a screen shot from the IRS web page showing that OfficialPayments.com charges a 2.35% while FileYourTaxes.com charges you 3.93%. 2-3% might not sound like a lot, but that adds up pretty quick especially if you happen to owe Uncle Sam a lot of money. Remember'.this isn't even counting merchant fees or interest.

Beware of Convenience Charge

• You have to pay the credit card company interest. One of my pet peeves is having to pay any interest, especially to a credit card company. If you takes you a while to pay your bill, you've just became the credit card company's best friend. If you have to use a credit card to pay make sure your using a low-interest rate credit card like Discover® More Card ' 18 Month Promotional Balance Transfer. At least that way you get a low interest card and you get cash back!
• Bankruptcy not allowed. If times get tough and bankruptcy seems evident, remember that even if you do file for bankruptcy, you are still on the hook for your income tax. That doesn't matter if you use your credit card or not.

Other Tax Payment Options Other Than Your Card

If you know that you HAVE to put your tax bill on your credit card because you have no other funds, you still might have some other options. You could always approach your local bank and see if they have some sort of low interest loan you can take advantage of. You could always bite the bullet and talk a closer family member. If none of those ideas work, you can talk to the man himself-call the IRS directly.

Payment Plan to the IRS Through Installments

If you call the IRS, you can talk to them about setting up an installment-payment plan. If so, this may be the best way to go. You have to have a tax bill less than $25,000 to even begin discussions. Initially, you'll be charged a $52 setup fee and then a monthly interest rate on the outstanding balance. Currently, that interest rate is 0.583% per month, which is around 7% annually. This rate is not locked until you pay it off. It's subject to change on a quarterly basis. Head to the IRS website and download IRS Form 9465 to get that ball rolling.

Here's some info from IRS.gov on the installment plan:

The IRS charges a user fee to set up your installment agreement. The user fee for new installment agreements entered into after January 1, 2007 is $105 and $52 for agreements where payments are deducted directly from your bank account. Taxpayers with income at or below established levels, based on the Department of Health and Human Services poverty guidelines, can apply and be qualified to pay a reduced user fee of $43 for establishing new agreements including agreements where payments are deducted directly from your bank account. Information about requesting the reduced user fee will be included in installment agreement acceptance letter sent to individuals.

Assessing the risks

If you are used to putting everything on your credit card, this might be a simple decision for you. As you see, there are other factors at play. Even if you do get points for using your card, they might be negated by the convenience fees that you have to pay.

Obviously, if your situation deems it a necessity to use your card, then you gotta do what you gotta do. It's better than filing late or incurring late payments on your card. Late payments will negatively affect your credit score and start a downward spiraling affect on all things credit.

If you are unsure about your credit report, you can always double check it at CreditReport.com.

Tagged as: pay taxes online, pay taxes quickly, pay taxes with credit card

Stop Getting Bullied by Bad Mutual Funds

Remember that kid in grade school that was always in trouble for beating people up?

He was always in detention and always got written up for roughing up other kids, and as they got older not much changed.

These are the bullies that you wanted to stay away from, because if you got too close you would probably get beat up to.  Not fun.

In the investment world, there are mutual funds that fit this description to a 'T'.

They have had a horrible track record and if you get too close by putting your money into them you get your butt kicked.

Recently I had a meeting with a potential new client, and I was floored at what investment options he had.

His financial advisor had put him into six different mutual funds and was not well diversified at all.

What made matters worse was four of the six mutual funds he owned were flat out horrible.

When I say horrible, I am being generous.  They were just flat out bad mutual funds.

Today I want to show you a quick way on how I can look at a mutual fund and instantly know if it is one of those bad kids that you need to stay away from.

Identifying the Bad Eggs

I have various tools that I can use to do a quick screen on a mutual fund. One of the ones I like to use because it is really easy to pull up is Thomson Reuters. Thomson Reuters has a product called Investment Tool that has a database of almost every single mutual fund that exists out there.

If you have a mutual fund and you want to know more information about it, I can either pull it up by name or symbol and have awesome data at my fingertips within literally seconds. Below you will see some screen shots on some of the data I found on one of the mutual funds.

As far as which one of the six picked, it definitely was the worst of the worst that this guy had in his portfolio. But the other ones weren't that much better.

Let's look at the first chart. The first chart shows a growth of $10,000 over the course of the last ten years and then is comparing it to an index of the Russell 3000 Growth Index.

There's bad and then there's this mutual fund

When you look at the graph, the royal blue line represents the mutual fund and the greenish teal line represents the index. You notice how far the blue line is below the teal line?  What that basically means is that this mutual fund sucks. This thing has continuously been below its index over the last ten years.

Why in the heck would you ever pay a mutual fund manager to manage your money that they can't even keep up with the index?  The simple answer is: You shouldn't. 

This mutual funds needs to be sent to the minors

For all you sports enthusiasts out there, a little analogy I like to use is using baseball. Let's say that the average major league batting average is .250.

If the index (Russel 3000 index in this case) is batting .275, then this mutual fund is batting about a .180. Yikes!

If you are a major league baseball player batting .190 then most likely you won't be in the major leagues that much longer. Just by looking at this quick graph one would wonder why any financial advisor would recommend this to their clients? Frankly, I asked myself the exact same question and I couldn't come up with a good answer.

Comparing Mutual Funds

The last chart shows how this mutual fund has compared to other funds in its index. According to Lipper which is just another tracking type company on investments including mutual funds, it ranks this mutual fund in the multi-cap growth fund category.

Constantly a bottom dweller

If you look at the chart, you will see that we have going back 15, 5, 3 and 1 years. So if we look at this mutual fund over the last 15 years, you will see that there are 200 funds in its category.

Of those 200 funds, this mutual fund placed #180. What that means is that there are 179 other funds in this category that have done better than this mutual fund placing it in the bottom 25%.

Once again, what does that mean? That means that this mutual fund sucks.

Going forward to the 10 year, there are now 336 mutual funds in this category with this fund placing 254th, meaning that once again there are 253 mutual funds better than this one.

I think you get the gist, but let me go ahead and say it; that means that this mutual fund sucks. Although we did see some improvement over the five, three and one year outlook having it moved into the third quartile, it is still well below a lot of other mutual funds in this category.

Beware: Avoid Bad Mutual Funds

Unfortunately, I see these types of mutual funds in many different client portfolios and I can almost argue that this is criminal. As mentioned previously, it literally took me just a few minutes to take a quick look at this mutual fund to see how horrible it really was. I can't imagine how any other financial advisor could honorably recommend this to anyone.

The client that had actually bought the mutual fund roughly about five years ago and has owned it ever since; that was actually the same case for every other mutual fund in his portfolio.

When is the last time you reviewed your mutual funds and made sure you don't have any bad kids in your portfolio? It might be a good idea to double check.

Tax Planning Goals ' Get Your Tax Schwag On

When arranging your financial affairs, you will want to plan to minimize your taxes as much as you can.

Unless of course you enjoy paying taxes?   Didn't think so.

There are three simple strategies to reduce your taxes, all with multiple variations but those methods are increasing your deductions, minimizing your income and taking advantage of tax credits.

It's not rocket science, but emphasizes the importance of having tax planning goals when you approach your entire money situation.

Minimizing Your Income

The Adjusted Gross Income (AGI) is an important measure of your finances.

Many things are dependent upon your AGI such as your tax rate and what tax credits you are eligible for.

Your AGI affects your involvement with banks, applications for mortgages and financial aid for colleges. Your AGI is determined by subtracting any adjustments from your income from your total income from all sources. The higher your total income is, the higher your AGI will be.

Similarly, the more money you earn, the more taxes will be deducted from your income. Alternately, the less money you earn, the less taxes will be deducted from your income. To reduce the amount of taxes that are deducted from your income, you have to make less.

One good way to do that is to invest money in your 401k or some sort of retirement plan through your employer. The investment will lower your wages and therefore lower your tax bill.

Another method is to set up a Flexible Spending Account (FSA) at work or sign up for Dependent Care Reimbursement (DCR) if you have children that attend daycare. The FSA allows you to deduct part of your income tax-free in order to pay for qualified medical care expenses such as co-pays, medical equipment and deductibles.

The DCR works in the same manner. You request an amount of your income be taken out pre-tax and are reimbursed for daycare expenses.

Don't Forget the IRA

Another good way to lower your tax bill is to invest in a traditional IRA.  I know what you're thinking.  But Jeff, your so in love with the Roth IRA, why would you suggest the traditional?

In some cases, for higher wage earners, it actually makes more sense to get the immediate tax deduction vs. the potential tax-free growth.  If you're not sure, definitely talk with your tax professional to find out.

Maximize Your Tax Deductions

Taxable income is another way to lower your tax bill. Taxable income is what remains after you have lowered your AGI with exemptions and deductions. Most people get standard deductions but most people are also eligible for itemized deductions such as:

• Fees to prepare taxes either with a tax preparer or the computer programs
• Mortgage interest
• Student expenses
• Car registration fees
• Health care expenses
• Charity gifts
• Expenses related to job
• Investment related expenses

Making Good Use Of Tax Credits

Tax credits are a good way to reduce taxes that you owe. Examples of tax credits are savings for retirement, college fees and expenses incurred for the adoption of a child.

Ways to avoid additional taxes being charged to you is to refrain from withdrawing from an IRA or retirement fund early. Any amount that you withdraw becomes part of your taxable income and you will be required to pay additional taxes on the early withdrawal.

Raise Your Withholding Amount

You can request from your employer to increase your number of withholding. The less withholding you claim, the more taxes will be taken out with zero being the least amount claimed. Since the most amount eligible will be taken out with claiming zero, the larger your tax return will be.

Lessening the tax headache requires spending some time analyzing your overall situation.   You cannot do your tax planning goals on April 14th ' it doesn't work that way.

My wife and I meet with your CPA at minimum 3 time per year to make sure that we keep ourselves organized and to make sure that our goals haven't changed.

How about you?  How much time do you strategically plan your tax goals?

 

Tagged as: goals for tax planning, minimize taxes, minimizing income, tax credits, tax planning