Tax Tip Tuesday-Exploring the Earned Income Credit!

Enacted in 1975, the Earned Income Credit (EITC or EIC) is a refundable tax credit to working individuals who may have low to moderate income. The amount of EIC depends on income and the number of children a person has. Below is a chart that breakdown the number of children, income and EIC for a family…

Number of children: Single workers with income less than: EITC up to:
3 or more children $47,955 $6,269
2 children $44,648 $5,572
1 child $39,296 $3,373
No children $14,880 $506

Being that EIC is a credit, it’s credited to your refund along with overpayments that you paid the IRS. Keep in mind that certain filing exemptions or filing EXEMPT may cause you to owe the IRS at the end of the year, which will affect the amount of EIC that’s refunded. Be sure to read my blog post “What you should know about your W4” for more information on exemptions.

Contact 4WAYSTOMONEY to find ways to fully maximize the Earned Income Credit.

6783049857|www.4waystomoney.com|

 

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Tax Tip Tuesday-Expense those expenses!

Do you put all of your receipts in a shoe box or plastic bag and give them to your tax preparer? Start organizing your expenses to ensure that won’t miss any deductions. We organize expenses into several categories. Here are 10 categories of expenses that you should effectively track for your business…

  1. Advertising
  2. Professional fees
  3. Insurance
  4. Office expenses
  5. Rent/lease
  6. Repairs
  7. Travel
  8. Wages
  9. Interest
  10. Meals (50%)

Start compiling your receipts in the above categories. Keep them separate and make note of the totals. Your tax advisor will love you!

Email 4waystomoney@gmail.com for the FREE spreadsheet that will allow you to input your revenue and expenses. You will be able to track the monthly and yearly profit/loss for your business.

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Tax Tip Tuesday-The Roth IRA!

This is our final discussion on IRAs. We’ve discussed the SEP and Traditional IRA, now let’s examine the Roth IRA. The Roth is an individual retirement account that may contain such investments such as mutual funds, annuities, bonds, etc. It shares similiar yearly contribution limits as with the Traditional IRA-$5500 for individuals and $6500 for married couples. However, the Roth has a post-tax contribution limit that exceeds that of the Traditional IRA.  These earnings are not tax deductible but they can potentially be withdrawn tax-free at retirement age.

6 Advantages of the Roth IRA…

  1. If you start contributing to an IRA before the age of 59 1/2, you can withdraw it tax and penalty free after 5 years.
  2. You can withdraw tax free money to purchase a residence, this is restricted to a maximum of $10,000.
  3. There is not a 70 1/2 age limit.
  4. Your heirs can inherit assets in your Roth when you die; it will be taxed minimumly.
  5. Roth distributions does not affect the calculation of taxable social security benefits.
  6. The Roth IRA has a higher post-tax contribution limit than the Traditional IRA.

Whether you choose a SEP, ROTH or TRADITIONAL IRA, be sure to invest your money wisely.  I often see many elderly people who have very little money saved. Start now, it’s never too late. Just imagine what your retirement account will look like 20 years from now if you invest $100 a month. In 20 years, you would have accumulated $24,000. That sure is better than $0.

If you haven’t done so already, go to your bank and open an IRA. Your future deserves it!

If you have any questions or need helping filing your IRA deduction, give us a call. 4WAYSTOMONEY|6783049857 |www.4waystomoney.com

 

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Tax Tip Tuesday-Keep it traditional! (Traditional IRA)

This week, we are continuing are conversation on IRAs (Individual Retirement Account). Last week, we discussed the SEP IRA. Now, let’s uncover the Traditional IRA. A traditional IRA is a tax deferred vehicle that will allow your money to make money without paying taxes on it. You will have to pay taxes upon withdrawal of the money.  There are a few differences between this type of IRA and the SEP IRA.

Key Differences 

  • The amount you can contribute is lower. You can only contribute $5500 or $6500 if you’re over the age of 50.
  • Depending on your tax filing status and income, you may or may not be able to take a tax deduction.
  • You may incur a 6% excess contribution tax for contributing more than what’s allowed.
  • Once you reach 70 1/2 years, you can’t make regular contributions (you can with a ROTH IRA).

This IRA will be great for you if…

  • You are new to investing and don’t know which retirement plan to start with.
  • You don’t need huge tax write-offs at the end of the year.
  • You already have a primary retirement plan with your employer and this is secondary.
  • You are not expecting to come into a large sum of money (if so, you should consider a ROTH IRA).

We will discuss the ROTH IRA next week (10/3/2017).

Whether you choose a SEP, ROTH or TRADITIONAL IRA, be sure to invest your money wisely.  I often see many elderly people who have very little money saved. Start now, it’s never too late. Just imagine what your retirement account will look like 20 years from now if you invest $100 a month. In 20 years, you would have accumulated $24,000. That sure is better than $0.

If you haven’t done so already, go to your bank and open an IRA. Your future deserves it!

If you have any questions or need helping filing your IRA deduction, give us a call. 4WAYSTOMONEY|6783049857 |www.4waystomoney.com

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TAX TIP TUESDAY-SAY YAY TO AN IRA!

Over the next few weeks, we will cover various types of IRAs. An IRA is an individual retirement account. The great thing about IRAs is that some of them are tax deductible. This means that they reduce your taxable income. Would you rather be taxed on $75,000 or $60,000? I would rather be taxed at $60,000 to lower my tax liability.

First, we will explore the SEP, which stands for Simplied Employee Pension. The pension plan is excellent for entrepreneurs and private contractors. Often, these individuals don’t have an employer to contribute to their retirement so they must do it themselves. Here are key points on the SEP…

  • It’s tax deductible. Use it as a deduction at tax time.
  • The money itself is not accruing taxes until you withdraw it. This is very similar to a Traditional Ira, which we will discuss on (9/26/2017).
  • You can contribute more money into a SEP IRA than a Traditional IRA. Just last year, business owners were able to contribute up to 25% of their income or $53,000 (whichever is less). For the Tradional IRA, you can contribute $5500 or $6500 (age 50 or over).

 

Whether you choose a SEP, ROTH or TRADITIONAL IRA, be sure to invest your money wisely.  I often see many elderly people who have very little money saved. Start now, it’s never too late. Just imagine what your retirement account would look like 20 years from now if you invest $100 a month. In 20 years, you would have accumulated $24,000. That sure is better than $0.

If you haven’t done so already, go to your bank and open an IRA. Your future deserves it!

If you have any questions or need helping filing your IRA deduction, give us a call. 4WAYSTOMONEY|6783049857 |www.4waystomoney.com

 

 

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TAX TIP TUESDAY-What you should know about your W4!

Form W4  Employee’s Withholding Allowance Certificate…

 

W4

This IRS form is given to you to fill out for your employer. You should accurately complete this form for two reasons….

  1. To ensure that you don’t owe a lot of taxes at the end of year
  2. To ensure that you don’t overpay too many taxes during the year

If you owe the IRS at the end of the year, an insufficient amount of taxes were withheld. Other the other hand,  if there’s an overpayment (the IRS owes you), then you paid extra taxes.  This is money that you could have kept during the year.

ALLOWANCES (LINE 5)

The amount withheld for taxes are based on allowances. Think of allowances as your dependents. If you are single, most people would claim 1 allowance. If you are married, most people would claim 2 allowances.  If you are married with three children, most people would claim 5 allowances.

The problem I often see when preparing tax returns is that people often have too many allowances. I sometimes see where single people may have five allowances, thus they will owe a lot of money at the end of the year . Trust me, you don’t want to play with the IRS.  Play it safe and only claim the allowances you have so that can avoid a big tax bill at the end of year.

EXEMPT (LINE 7)

When you file EXEMPT, this means that ZERO taxes will be withheld. Please UNDERSTAND  that this could spell big trouble at the end of the year. I’ve had several clients who went exempt and owed several thousand dollars at the end of the year. It’s normally not a pretty situation.

In conclusion, analyze the amount of taxes that are being withheld from your paychecks. If it’s a lot, then chances are that you have the correct amount of allowances on your W4. Contrarily, if you don’t have enough taxes being withheld, then chances are that you are claiming too many allowances.

Ask Human Resources for a copy of your W4. If you have any questions, call 4WAYSTOMONEY INC. 6783049857

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You got it “ALL”-Confident Christine

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So often, people want it all. They want a nice car, big house, pretty or handsome spouse and all that life has to offer. In the pursuit of having it all, people often get in debt, lose their family and lose their happiness. Instead of looking to have it all, make “ALL” of what you have.

  • If you don’t have a new car, make the best of your current car
  • If you don’t have a lot of money, make the best of the money that you have
  • If you don’t have nice clothes, take the clothes that you have and make them look nice
  • If you think that you want a better spouse, appreciate and love the spouse that you have
  • If you want a bigger house, clean up/rearrange your current house and make it more spacious

In her book, “Confident Christine”, Christine tells her readers to never compare themselves with others. You have no idea what others are going through. You see the fancy cars and big houses but you don’t know how much debt and pain is present to maintain it.

Instead of wanting it all, make “ALL” of what you have!

 

Confident Christine” is coming soon…..