Month 4 Taxes And Investments

Save on taxes and invest conservatively in month 4. Learn how to make your money work for you


Continuing with our seriesSix Months to Financial Fitness, we’ve moved to month 4 where we will take a look at taxes and investments. This is a simple task for month 4 but is very necessary. This month, I want you to review every item on last year’s return to see how you can cut your taxes.


Keep track of deductions, especially those for cash expenditures, such as mileage, faxes, photocopies and charity. It all adds up and every little bit is a big help.

Contribute the maximum to tax-deferred retirement plans.


Consider your investment strategy. If you’re intimidated by the market, start with an index mutual fund. One that conservatively invests in stocks in the S&P 500. You can move on to other kinds of mutual funds later.

Be sure to come back tomorrow for month 5 where we will talk about insuring your future.




THE 5 Largest Tax Credits You May Qualify For

Identifying which tax credits apply to you can be a big help as you prepare to file your income tax return.  Here are the 5 largest tax credits you might qualify for.

Identifying which tax credits apply to you can be a big help as you prepare to file your income tax return.  Here are the 5 largest tax credits you might qualify for.

 Most people cringe when it’s time to file taxes, I know I used to. They rush through their returns or hire accountants to do the work only to feel that the tax code has eaten most of their hard-earned income. A number of federal tax credits exist to help taxpayers retain more of their earnings. Identifying which credits apply to you will reduce your pain as you prepare to file your income tax return.

Earned Income Tax Credit

One of the most substantial credits for taxpayers is the Earned Income Tax Credit. Established in 1975 — in part to offset the burden of Social Security taxes and to provide an incentive to work — the EITC is determined by income and is phased in according to filing status: single, married filing jointly or either of those with children. Eligibility and the amount of the credit are based on adjusted gross income, earned income and investment income.

A person must be at least 25 years old and younger than 65 to qualify. If married, both spouses must have valid Social Security numbers and must have lived in the country for more than six months. If you may be claimed as a dependent on another filer’s tax return, you do not qualify. Those “married filing separately” do not qualify for the EITC.

One fact often misunderstood about the EITC is that self-employed taxpayers may qualify for it. Many self-employed people have to amend their returns, because they missed out on the credit, simply because they didn’t think they were eligible. The reverse happens as well, many people had to amend their returns because they filed for the credit but did not qualify, typically because of investment income.

The Earned Income Credit is set up for a service-sector person or blue-collar worker … essentially, someone not earning a lot of money.

American Opportunity Tax Credit

For years, the Hope Credit helped families pay the costs of higher education. Since 2009, that credit has been rebranded and expanded as the American Opportunity Tax Credit.

Under the Hope Credit, taxpayers received a credit for only two years of undergraduate tuition. The AOTC covers four years of post-secondary education. It also broadens the range of taxpayers who may receive the AOTC by increasing the maximum income level.

The full credit is available to people whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing jointly. These income limits are higher than those for another education credit, the Lifetime Learning Credit.

Depending on your income (the credit drops as income increases), you may receive up to $2,500 of the cost of qualified tuition and course materials paid during the taxable year. The student must be enrolled at least half-time for at least one academic period. This credit is available on a per-student basis.

If you opt to include tuition costs and other college-related fees as one of your deductions, you may not claim the American Opportunity Tax Credit in the same tax year. The IRS recommends that taxpayers calculate the effect of both options on their tax returns to see which is most beneficial – the deduction or the tax credit. Tax software will automatically compare the two.

Lifetime Learning Credit

The Lifetime Learning Credit, also established to offset the costs of post-secondary education, differs from the American Opportunity Tax Credit in that it is available for any years of post-secondary education, not just the first four. Also, the credit is available for people not pursuing a degree.

The Lifetime Learning Credit may be as high as $2,000 per eligible student. For 2016 the full credit is available to eligible individual taxpayers who make $55,000 or less, or married couples filing jointly who make $110,000 or less. The credit phases out as income surpasses these amounts.

Child and Dependent Care Credit

The Child and Dependent Care Credit is there to help defray costs of babysitting or daycare. It’s available to people who must pay for childcare for dependents under age 13 in order to work or look for work.

The credit is also available for the cost of caring for a spouse or a dependent of any age who is physically or mentally incapable of self-care.

Filing status must be single, married filing jointly, head of household or qualifying widow or widower with a dependent child. The credit provides up to 35 percent of qualifying expenses, depending on adjusted gross income.

Savers Tax Credit

The Savers Tax Credit, formerly the Retirement Savings Contributions Credit, is for eligible contributions to retirement plans such as qualified investment retirement accounts, 401(k)s and certain other retirement plans. Taxpayers with the least income qualify for the greatest credit. That credit is up to $1,000 for those filing as single, or $2,000 if filing jointly.

For 2016 the maximum income for the Savers Tax Credit is $30,750 for single filers.  $46,125 for heads of household with income, and $61,500 for those married and filing jointly. Filers must be at least 18 years old and may not have been a full-time student during the calendar year or claimed as a dependent on another person’s return.

Whom the Credits Benefit

Credits are primarily for low-to-moderate-income earners. At an income of $30,000 to $50,000 a year, an individual’s chances of qualifying for credits can drop significantly.  Think of that as the bridge range: $30,000 to $50,000. In there, you’re moved up to a new tax bracket. People go crazy because their credits are going away and it’s scary.

Unless such filers’ itemized deductions exceed the standard deduction, they may find themselves in an uncomfortable gray zone of the tax code. In many cases, ineligibility for tax credits could mean the loss of $3,000 to $4,000 at tax season.

Now it’s your turn. What tax credits did I miss? If you know of any please share with the rest of us.


Tax Deductions For Bloggers

Blogging is a relatively new profession, but it's covered by the same tax laws that apply to many other occupations. Here are a few scenarios for tax deductions for bloggers

While sharing my content about income tax deductions, I had another blogger ask me about tax deductions for food bloggers. I decided I would answer his question with a post for my fellow bloggers. I will start with blogging in general and then move to his specific niche, food blogging.

At first glance, it may not seem that you are spending a great deal on your blogging endeavors. However, the fact is that blogging does cost money.  And, if you are making income from your blogging, you might want to offset some of that with the help of tax breaks for your costs. Before you go claiming tax breaks, though, it is a good idea to double check to make sure that the items you claim truly are related to your blogging efforts.

Blogging is a relatively new profession, but it’s covered by the same tax laws that apply to many other occupations. The main danger from a tax perspective is that, as a self-employed blogger, your taxes may or may not be automatically withheld from your earnings, as is typical with traditional employees. Additionally, you’ll owe self-employment taxes that most employees don’t pay. However, you may be able to take advantage of certain deductions to reduce your tax bill.

Estimated taxes

Be aware that as a blogger, you’re likely to face estimated taxes, something most traditional employees don’t have to worry about.

The United States tax system operates on a “pay-as-you-go” basis. Since you don’t have any taxes deducted from your blogging income, you must pay estimated taxes to the IRS every quarter. The due dates for estimated taxes are April 15, June 15, September 15 and January 15 (with some exceptions for holidays, etc.). If you don’t pay your estimated taxes in a timely fashion, you may owe an additional tax penalty. If you didn’t have any tax liability in the prior year, or if you don’t expect to earn at least $1,000 in blogging income, you may be able to avoid paying estimated taxes.

Self-employment tax

When saving for your estimated income taxes, don’t forget to set aside additional money for self-employment tax. From the perspective of the IRS, working as a blogger means you run your own business.

Even if you only work part-time as a blogger and full-time as a salaried employee somewhere else, the blogging part of your income qualifies as self-employment income. As a result, you must pay self-employment tax on that income. Self-employment tax is the combined Social Security and Medicare taxes paid by an employee and an employer. Since you run your own business, you must pay both the employee and the employer portions. Self-employment tax must be paid whether or not you owe any federal income tax.

 Deductible expenses for bloggers

The good news about running a business as a blogger is that you are allowed to deduct expenses that are considered reasonable and necessary to your profession. If you pay for advertising, supplies, office furniture, electronics, insurance or other goods and services that directly relate to your business, you can take those expenses off the income you earn as a blogger. If your office is in your home, you may be able to deduct some of your household expenses as well, including rent and utilities.

Business as hobby

The IRS will disallow your tax deductions if your blogging business is categorized as a hobby. To claim your deductions, you must demonstrate to the IRS that you are running a bona fide business. The most obvious way to prove this is to earn a profit. If you have a profit in at least three of the most recent five tax years, you can usually qualify your business as legitimate.

Other things the IRS may consider are the time and activity you put into the business, whether or not you depend on income from it and if you can reasonably expect to make a profit in future years.

 Blogging Deductions

Home Office SuppliesIf you are blogging from a home office, you can deduct a lot of the supplies that you use.  (Just make sure you are using them only for your blogging efforts.)

This can include equipment depreciation for computers, as well as the chair you sit in, the desk you use and things like calendars, pens, headsets, external hard drives, and telephones.

You can also deduct supplies that go with a specific type of blogging that you do.

If you have a photo blog, you can deduct the cost of the camera you use.  Did you need to buy a web cam to make videos you post on your blog? If so, that can be deductible as well.  If you have a dedicated cell phone used specifically in connection with your business as a blogger, some of those expenses are tax deductible.

Online ExpensesYou’re a blogger, so most of your expenses are likely to be related to your online activities.  Luckily, these are tax deductible.

The cost of WordPress plug-ins, web hosting, online advertising that you do, premium WordPress themes (like Bluchic), and domain name expenses are all tax deductible.  Web design, graphics and logos, maintenance and even Internet access can be deducted.

Even if you don’t have separate access for your blogging business, you can take a percentage of your total bill.

My internet bill is $39.99 a month, and about 80% of our Internet usage is accounted for by my professional blogging and financial coaching business.  As a result, $31.99 of our bill is eligible for a tax break.

On top of that, if you get SEO services or pay for social media consulting to help you improve your blog’s traffic, you can also get a tax break for those costs.

You can also get a tax break for access to subscriptions sites that you use for researching your blog posts and the costs of access stock image sites.

Use of Your HomeIf you have a dedicated home office space, you can get a tax break for the business use of your home related to your blogging activities.  Figure the square footage of your office space, and then use that to figure what percentage of the total square footage of your home you are using for your blogging activities.

My home office takes up about 2% of the square footage in my home.  This means that I can get a tax break for 2% of the utilities I pay, my mortgage payment and my homeowner’s insurance premium.  All of that adds up to close to a $400 tax break.

Not something to sneeze at.

Other Blogger Tax BreaksThere are a number of other tax breaks that bloggers might be eligible for.  These include:


  • Tax preparation costs for your business.
  • Business incorporation costs if you decide to move beyond a sole proprietorship (e.g. LLC or S-Corp).
  • Business license renewal.
  • Salary and contract fees you pay to those who do work for you.
  • Travel expenses related to your blogging. (I deduct costs related to BlogWorld attendance.)
  • Trade show fees.
  • Offline advertising costs, including business promotion like letterhead and business cards.
  • Annual fees for business credit cards.
  • Mailing materials.

Food Bloggers 

For an expense related to your business to be deductible, it needs to be both “ordinary” and “necessary”. No matter what the industry, that is the standard that the IRS will use. So, any time that you question whether something is deductible, as a first step, ask yourself is this “ordinary” and “necessary”?

An ordinary expense is one that is common and accepted in your industry. It’s the one time that you care about what your competitors are doing. No matter what your mother says, it does matter whether everyone else is doing it, too.

A necessary expense is one that is helpful and appropriate for your trade or business. You don’t have to prove that you couldn’t be in business without the expense – more or less, it needs to make good business sense.

Again, for an expense to be deductible, it needs to be both.

Deductible expenses also need to be distinguished from the cost of goods sold; capital expenses; and personal expenses. The cost of goods sold generally includes items like inventory for resale or the cost of raw materials to make goods for sale. Capital expenses encompass money used for start-up costs or improving your business (and must be amortized rather than deducted). Personal expenses are exactly what they sound like: expenses for personal or family use; expenses used for personal and for business purposes must be divided appropriately for purposes of expenses.

So, with all of this info, take a peek at your expenses and start thinking:

1, Is it “ordinary” and “necessary”? If no, not deductible. If yes, then move on:

2, Is it related to the cost of goods sold? If yes, then it’s more properly deducted in the cost of goods sold. If no, or if you haven’t included it in the cost of goods sold, then move on:

3, Is it related to capital? If yes, then you may need to amortize. If no, then move on:

4, Is the expense for an item for your personal or family use? If not, then IT’S DEDUCTIBLE! If yes, then you have a second part of the question: Can the personal use be separated from business use? You answered yes, then you can deduct the part attributable to business use as a business expense. If no, then no part of it is deductible.

    Some examples:

It’s ordinary and necessary to buy ingredients for the purpose of making food to review. No, it’s not related to the cost of goods sold. No, it’s not related to capital. But is it for personal use? This is what you’re going to have to sort out in order to figure your deduction.

Food that you eat at home is generally not deductible as a business expense. You have to have food to live, which makes it a personal expense. But to the extent that the food that you’re making and trying is for business use, it would be deductible, so long as you can distinguish the personal and business pieces. This means that it will depend on the individual facts and circumstances involved. Here are some examples:

      • Your blog is a baking blog and you make a full course meal, soup to nuts. Is it deductible? Perhaps the cost of the sourdough bread is … but not the rest of the meal.
      • Your blog is a baking blog and you make three loaves of sourdough bread. Is is deductible? Probably the cost of one loaf – that’s the part you needed for your review, right? But not three. The other two are likely to be eaten for personal use and are not deductible.
      • Your blog is a general food blog and you make a lasagne for your entire family. Is it deductible? Maybe. If your blog is a “family food blog”, then perhaps the family-sized portion is deductible. If your blog focuses solely on a niche, like healthy eating or cooking with noodles, then only the portion attributable to you, for the purposes of testing, is deductible.

So, separate, separate, separate.

The same general rules apply to restaurant reviews. To the extent that you order dishes solely for review, then it should be deductible (but only to you, not to your companions) but add-ons like wine and bread may not be.

A couple more caveats: It’s important to remember the hobby loss rules. If you’re blogging as a business, you may have deductions in a year that exceed your blogging-related income; you don’t want to make this a habit or IRS will believe that your blog is a hobby, not a business. If you’re blogging for a hobby, then your deductions may not exceed your blogging-related income.

Also, keep in mind that this area is very dependent on fact and circumstances.  Consider your own situation carefully and not attempt to make something fit that doesn’t. Don’t be greedy: think through your potential deductions carefully and honestly. Remember: pigs get fat, hogs get slaughtered.

You’ll need to retain excellent records with annotations about the expenses. Don’t expect the IRS to allow you to write off your grocery list. Keep your personal expenses distinct from your business expenses. Shop separately for your blog, where possible, and try to buy specifically for your business purpose. Don’t buy a dozen eggs, use one and try to write off the other eleven. Keep a good database of which items you used for which recipe (and, if you’re freelancing, for which publication or blog). If you can, it’s best to write directly on the receipt what it was for and how you used it: “lemon curd for holiday meal piece, Gourmet magazine, 12-24-16.”

Blogging and internet-related activities are relatively new to the tax scene. I’m not sure how the IRS is going to treat some of these specific areas. But the law is the law and the rules about “ordinary” and “necessary”, as well as distinctions between personal and business use, haven’t changed. Don’t get caught up in the “particulars” of it all, just follow the rules. If your situation is particularly tricky, you should definitely consult with a tax pro (it’s deductible!) before making any significant tax-related decisions.

Before you take a deduction, it is a good idea to check with a tax professional, and make sure that you are truly eligible for the tax breaks you want.

If any of my blogger friends have any other deductions that I may have overlooked, please comment below and help the rest of the class.

Disease Called Debt

9 Tax Deductions You May Not Have Known Were Tax Deductions Plus A Special Cheat Sheet

Few realizations are more painful than realizing that you forgot to include a tax deduction that would have lowered your tax bill or increased your tax refund on your tax return. You may be overlooking taxes that you pay that can be deducted. Take a look at these 9 tax deductions that you may not have known were tax deductions.

“It’s not what you earn that matters, it’s what you keep!” – Tony Robbins

Few realizations are more painful than realizing that you forgot to include a tax deduction that would have lowered your tax bill or increased your tax refund on your tax return. You may be overlooking taxes that you pay that can be deducted. Take a look at these 9 tax deductions that you may not have known were tax deductions.

1. Sales Taxes

You have the option of deducting sales taxes or state income taxes off your federal income tax. In a state that doesn’t have its own income tax, this can be a big money saver. Even if you paid state taxes, the sales tax break might be a better deal if you made a big purchase like an engagement ring or a car. You have to itemize to take the deduction, but the IRS provides tables to use as a guide.

2. Health Insurance Premiums

Medical expenses can blow any budget, and the IRS is sympathetic to the cost of insurance premiums – at least in some cases. For most taxpayers, deductible medical expenses have to exceed 10 percent of your adjusted gross income to be deducted. However, if you’re self-employed and responsible for your own health insurance coverage, you might be able to deduct 100 percent of your premium cost. That gets taken off your adjusted gross income rather than as an itemized deduction.

3. Tax Savings for Teacher

It’s the rare teacher who doesn’t have to reach into her own pocket every now and then to purchase items needed for the classroom. While it may sometimes seem like nobody appreciates that largesse, the IRS does. It allows qualified K-12 educators to deduct up to $250 for materials. That gets subtracted from your income, so you can take advantage of it even if you don’t itemize.

4. Charitable Gifts

Most taxpayers know they can deduct money or goods given to charitable organizations – but are you making the most of this benefit? Out-of-pocket expenses for charitable work also qualify. For example, if you make cupcakes for a charity fundraiser, you can deduct the cost of the ingredients you used to bake them. It helps to save the receipts or itemize the costs in case of an audit.

5. Paying the Babysitter

You might be able to deduct the cost of a babysitter if you’re paying her to watch the kids while you volunteer to work for no pay for a recognized charity. The federal Tax Court has ruled that it’s OK to list the cost of a babysitter as a charitable contribution on your return. You must be able to document that while she was performing her duties, you were volunteering.


6. Lifetime Learning

The tax code offers a number of deductions geared toward college students, but that doesn’t mean those who have already graduated don’t get a tax break as well. The Lifetime Learning credit can provide up to $2,000 per year, taking off 20 percent of the first $10,000 you spend for education after high school in an effort to increase your education. This phases out at higher income levels, but doesn’t discriminate based on age.

7. Unusual Business Expenses

If something is used to benefit your business and you can document the reasons or how your business benefited. You generally can deduct it from your business income. A junkyard owner, for example, might be able to deduct the cost of cat food that encourages stray cats to hang around and keep the mice and rats away. A bodybuilder got approved to deduct the body oil he used in competition.

8. Looking for Work

Losing your job is traumatic, and the cost of finding a new one can be high. If you’re looking for a job in the same field, you can itemize your deductions. If these expenses exceed 2 percent of your gross income, any qualifying expenses over that threshold can be deducted. It may seem like a high bar, but those costs add up quickly. Consider deducting the mileage you put on your car driving to interviews and the cost of printing resumes.

9. Self-employed Social Security

The bad news about being self-employed: You have to pay 15.3 percent of your income for social security and medicare taxes, the portions ordinarily paid by both employee and employer. But there’s one small consolation – you do get to deduct the 7.65 percent employer portion from your income taxes.

If these aren’t enough deductions for you then download my 33 Most Overlooked Tax Deductions You Need to Know cheat sheet with a special bonus Most Often Overlooked Tax Credits You Need To Know

Fun Money Mom

Tax Deduction Cheat Sheet

33 overlooked tax deductions

In this cheat sheet you will discover tax deductions that you may not have known were deductions. Plus a special bonus, often overlooked tax credits

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How The Savvy Woman Stretches Her Tax Dollars

When it comes to our finances, I know all women consider themselves to be savvy. And because we are women, we are absolutely correct! We are savvy!. Women can take fifteen cents and turn it into a million bucks if we put our mind to it. I love being a woman! I love being a financially savvy woman!


When it comes to our finances, I know all women consider themselves to be savvy. And because we are women, we are absolutely correct! We are savvy!. Women can take fifteen cents and turn it into a million bucks if we put our mind to it. I love being a woman! Do you know what I love more than being a woman? I love being a FINANCIALLY SAVVY woman.

It’s all well and good to stretch that paycheck, but what I want us to do, as women, is stretch those tax dollars. Once upon a time, I was that woman that took her tax refund and went shopping. My children and I were what was called hood rich. That was until I learned better. I learned how to stretch my tax dollars and maximize my refund. I learned how to build wealth. Now that is what you call savvy.  In honor of Women’s History Month, and in keeping with this month’s theme, reader request tax series. I’m going to show you just how I used smart tax strategies to stretch my tax dollars.

Smart tax strategies will stand the test of time. As tax season bears down upon us, here are some reliable and long-term tax strategies that will help you obtain as many tax breaks as possible. It may be too late to use these strategies for this year’s taxes, but certainly, you can start applying them now to enjoy the benefits next year.

Do me a favor. Click to tweet below please.

Max Out Your Retirement Account Contributions

According to the US Department of Labor, 39% of female workers are covered by private pension plans, compared with 46% of male workers. When retirement time comes, 32% of female retirees get pension benefits, compared with 55% of men. Add to that the sad fact that a woman still earns only 79 cents for every dollar a man earns, and the conclusion is obvious. As with everything else, if we want it done right, we’re just going to have to handle this ourselves. How? Contribute, contribute, contribute!

Fortunately, the IRS has made it easier to build a successful retirement stash. Each year the deductible amount you can contribute to a retirement account is increased for inflation, and there are catch-up contributions for those 50 or over. Do the best you can to contribute the maximum deductible amount so that this money can grow tax-free until you reach retirement. The IRS can’t save for you — the rest is up to you.

Start Saving for College Costs

Women face a double whammy when saving for our children’s education. How can you pay for the $100 sneakers now and still set aside enough money to pay the staggering cost for college later? The fact of the matter is, unless you are as rich as Beyonce, you can’t.
Section 529 plans allow taxpayers to set aside money to grow tax-deferred, which can be taken out tax-free to pay educational expenses. This means that your money grows without taxation every year, and you don’t pay taxes when it comes out either. How’s that for being savvy?

Parents, grandparents, or anyone else who meets the applicable income restrictions may also contribute up to $2,000 per child per year to a Coverdell Education Savings Account (ESA). Children can also contribute to their own accounts. These accounts can be used to pay for private elementary and secondary school expenses as well as college expenses.

There’s hope — the Hope Credit, now renamed the American Opportunity Tax Credit. It amounts to 100% of the first $2,000 of a college student’s annual tuition and fees (no room and board costs) plus 25% of the next $2,000. So the maximum credit is $2,500 per qualifying student per year. The American Opportunity Tax Credit can be claimed for four years for any one student and it is allowed only when the student carries at least half of a full-time load for at least one academic period during the year.

The Lifetime Learning Credit is less restrictive. This credit is available for an unlimited number of years and without any requirement to carry a certain course load. You can also get credit for graduate courses and non-degree courses, such as professional training seminars and courses to update your computer skills. The credit is up to $2,000 per student for all qualified education expenses.

Eligible taxpayers can also deduct up to $4,000 in education expenses “above the line” (meaning you need not itemize to get the break), subject to income limitations. By the way, if you are considering going back to school yourself, keep in mind that your employer can reimburse your tuition up to $5,250 tax-free. Graduate school courses can be covered in addition to undergraduate courses.

Take All the Deductions You Can for Your Children

From diapers to piano lessons to all the extra food you need to stock for growing bodies, children are expensive! Fortunately, the government gives you a few financial tax breaks for being a parent. Make sure you take advantage of all of them! First, there’s the $1,000 tax credit for each qualifying child, in addition to each dependent’s personal exemption. Don’t forget to take this credit. It’s like receiving $1000 tax-free in your pocket, as long as your income doesn’t exceed the limitations.


Do you pay a babysitter or daycare center so you can work or go to school? The child and dependent care credit will cover up to $3,000 of qualifying expenses. If you have two or more qualifying dependents, you can claim the credit for up to $6,000 of expenses. For all but very low-income taxpayers, the new rules translate into a maximum $1,050 annual credit for one qualifying dependent or $2,100 for two or more dependents.

If you have your own business, employ your children at a fair-market wage and deduct your payments to them. That sure beats an allowance!  Help them get started with their own savings by setting up IRAs for them for $5,500 per year or up to their earned income, whichever is less.

We women are savvy and resourceful. Using the tax strategies above can help next year’s April be a little bit sweeter than this year. Before I go, let me ask you one question. What will you do to stretch your tax dollars and make them work for you?

If you have found this article helpful, please share this with other savvy women. It can be your gift to them for Women’s History Month.




Disease Called Debt

Maximize Your Tax Refund


Does your preparation for tax day start with a trip to the liquor store, or perhaps a one-way ticket to Costa Rica? Taxes are unpleasant, but drinking or fleeing the country is not the answer. Tackle your taxes head-on with solid preparation, and the experience may turn out to be more pleasant than you thought it would be. Here are a few tips to help you with your tax preparation and to maximize your tax refund.Does your preparation for tax day start with a trip to the liquor store, or perhaps a one-way ticket to Costa Rica? Taxes are unpleasant, but drinking or fleeing the country is not the answer. Tackle your taxes head-on with solid preparation, and the experience may turn out to be more pleasant than you thought it would be. Here are a few tips to help you with your tax preparation and to maximize your tax refund.

1. Start Immediately – Procrastination is just going to make things worse. Pressure will increase as tax-filing day draws nearer, and it is more likely that you will have problems finding vital paperwork or will make mistakes filling out your form. Get started on your taxes as early as you can and gather some positive momentum.

2. Organize Your Paperwork – Hopefully, you have been storing and organizing important tax documents and necessary receipts throughout the year — but if so, you probably would not be reading an article about how to prepare for tax day.

Start by gathering the basic tax documents. Last year’s tax return, W-2 forms, 1099-MISC forms for any independent contracting work, other 1099s forms for things like bank accounts and brokerage statements, and 1095 forms to prove health insurance status. After securing all the basic documents, move on to receipts for all itemized deductions. Speaking of deductions….

3. Explore Deductions – You may not even realize how many itemized tax deductions that you have, and simply assume the standard deduction is the best choice. Review the instructions for Schedule A and IRS Publication 529, “Miscellaneous Deductions” to see all the options available to you.

Do not forget about “above-the-line” deductions like educator expenses and health savings account (HSA) deductions. You can take those deductions whether you itemize or not.

4. Max Out Your Retirement Contributions – Even though it is now 2017, you can still make contributions to your IRA until the tax-filing deadline in April and credit those contributions to your 2016 taxes — as long as your contributions for the year stay within the $5,500 limit ($6,500 if you are over fifty years old). Schedule your retirement contributions in a way that brings you the greatest tax advantage.

5. Consider Tax-Preparation Software – Do you prefer to file your own taxes? You may want to consider tax preparation software. It can help you avoid potential errors and identify other sources of deductions. Software is available in a wide range of capacities that can match the complexity of your tax situation. Prices are generally reasonable. If you made below $64,000 last year, you can prepare your taxes for free using the Free File tax preparation software available on the IRS website.

6. Seek Professional Assistance – Complex tax situations are best left to the professionals. You may be able to do your own taxes adequately, but that does not mean you should. A competent tax professional may be able to find you enough refunds to pay for their services and then some. Even if they cannot, you can enjoy greater peace of mind by not having to struggle through the tax forms yourself.

Research a tax professional carefully! Do not just choose one based on advertising (certainly not on promises of the highest refunds). Check their certifications, experience, and online reviews of their services. Note that lawyers and accountants may be qualified to sign tax returns without having any experience in doing so.



What Can I Do With My Tax Refund Check?

In this post I share what you can do to flip your tax refund and make it grow
Tax Time Is Here



We are in full-fledged tax season. I had a reader request a series on how you can invest your tax refund and make it grow. About a year ago, I hosted a webinar called Flip My Refund. To start this series off, you can view that webinar here. Don’t forget, if you have a personal finance question that you would like answered, you can send me an email at Your question may be answered on the blog, but you will remain anonymous.

If you haven’t already, be sure to subscribe to my you tube channel!



6 December Moves To Save On 2016 Taxes

Tax time is drawing nigh. Learn the 6 moves you can make in December to save on 2016 taxes

It’s Not Too Late to Take Money-Saving Steps

The holiday season is full of plans and activities that make December incredibly hectic. If you are the average American, tax considerations and financial adjustments are pretty low on your holiday to-do list. However, you are not the average American — you enjoy saving money, are diligent in seeking ways to save, and excellent at following through with your plans. Here are 6 potential money-saving moves to take before the calendar rolls over into 2017.

  • Make Maximum Retirement Contributions – If you can afford to do so, max out your contributions to tax-deferred savings plans. For the 2016 tax year, maximum annual Individual Retirement Account (IRA) contributions are $5,500 with an additional $1,000 allowed as a “catch-up” contribution for taxpayers who are at least fifty years old. 401(k) plan annual contribution limits are $18,000 with an extra $6,000 catch-up allowed if you are over fifty years old.
  • Don’t Forget Charitable Contributions – Make any charitable contributions before the end of the year to claim them on your 2016 tax bill — but make sure you retain your records and get appropriate receipts or notifications from the charity. Gifts of $250 or more require an acknowledgement from the receiving group.
  •  Adjust Withholding – If your chosen withholding level is not taking the right amount of your salary out of your paycheck to equal your taxes, adjust it as soon as possible. You cannot overcome eleven months of over- or under-withholding, but correct what you can.While it is enjoyable to get a big refund, it is not economically smart. Your annual withholding should equal or be slightly below your tax bill. Are you have extra money withheld in order to get a refund? If so, you are just giving the government the interest on your money when you could be collecting it instead. However, make sure you are withholding enough to avoid an underpayment penalty.
  • Accelerate/Delay Deductions and Income – Is your income likely to change next year? Assuming you itemize, you may want to adjust income or expenses as possible to make the greater level of deductions match the greater level of income. For example, if your income will drop next year, you can pay expenses such as your January mortgage and property taxes in December — any deductible expense that will increase your deductions for the year — and claim those deductions for 2016. If your income will increase, consider delaying charitable expenses or accelerating income (such as bonuses) ahead whenever possible.
  • Spend Down “Use or Lose” Accounts – Do you have an employer-sponsored Flexible Spending Account (FSA) to cover medical expenses, or some other account that has a “use it or lose it” approach? If so, make sure that you use those expenses wisely. Wait too long and you may not be able to get an appointment before the end of the year, forfeiting your benefits. Remember, others are probably trying to fit appointments in to use up their FSAs as well.
  • Review Your Portfolio – You may have some losing stocks in your portfolio and capital gains to claim. You can sell the losing stocks and use the net losses to neutralize some of the capital gains taxes. Just be aware that the “wash rule” keeps you from buying those stocks back or purchasing “substantially identical” ones within a 30-day period. Make sure the losing stocks are not ones that you will be interested in over the short term.

Most of these tips involve doing a quick trial run of your taxes to evaluate the proper path to take. Who wants to do a tax form in December? You do!  It will save you money on 2016 taxes and time in April 2017 when you file your actual return. If you like, think of it as an investment that will finance an extra present or two next year.


What Is The Difference Between The Earned Income Credit And The Child Tax Credit

What Is The Difference Between The Earned Income Credit And The Child Tax Credit
Tax Credits


The Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) are not mutually exclusive. If you meet the requirements for dependent children and income, you can claim both on your tax return. If you are unable to claim the full amount of the CTC, you can claim the Additional Child Tax Credit (ACTC) to receive a portion of the remaining credit amount. The EITC is also available to individuals without children.

The Dependent Child Test

Both the CTC and EITC use a six prong test to determine if a child is a dependent. Failure to satisfy one of the criteria results in disqualification from eligibility to claim the credit.

  1. Age: The CTC requires that the child be age 16 or younger. The EITC allows the credit to be claimed for dependents no more than 19 years old, or 25 if the child is a full-time student.
  2. Relationship: The child must be the claimant’s biological or adopted son or daughter, stepchild, foster child or their biological brother, sister, stepbrother or stepsister. Descendants of relatives are included in the criteria, meaning that grandchildren, nieces or nephews can also qualify.
  3. Support: The child must not provide more than one-half of their own support.
  4. Dependent: The claimant must state that the child is a dependent on their tax return. This means that the child cannot file a tax return in which they claim that they are not a dependent of someone else.
  5. Citizenship: The child must be a U.S. citizen, national or resident alien.
  6. Residence: With a few exceptions for deceased or kidnapped children, the child must live with the claimant for more than six months of the year.

The only difference between the dependent tests for the two credits is the age requirement. Additionally, the EITC is available to individuals without dependents.

The Earned Income Tax Credit Explained

The EITC is a tax credit offered to low-income individuals. To qualify for the credit, the taxpayer must not make more than the maximum allowed amount. They do not need to have a dependent child, but the amount of the credit increases if they do. The specific amount of the credit depends on the claimant’s earnings. Each year the IRS sets new income limits and credit amounts. The claimant themselves must be employed, but they may be self-employed. If the credit amount reduces the taxpayer’s total tax liability below zero they are entitled to a refund of the remaining amount.

The Child Tax Credit Explained

The CTC provides taxpayers with dependent children with as much as $1,000 tax credit per child. The credit is only claimable on forms 1040, 1040A or 1040NR. The total amount of credit depends on the taxpayer’s income, reducing after the taxpayer exceeds the allowable maximum income:

  • Married Filing Jointly: $110,000
  • Married Filing Separately: $55,000
  • All Other Taxpayer Statuses: $75,000

The credit for taxpayers earning more than the maximum is reduced by 5 percent of their excess earnings. For example, to determine the credit for a married taxpayer filing separately with an income of $60,000, multiply the $5,000 of excess income by 5 percent (.05). The result is $250.00. Next, subtract the $250 from the maximum $1,000 credit allowed. The result, $750.00, is what the taxpayer can claim for a dependent child.

Unlike the EITC, however, the CTC is not a refundable credit. This means that any amount of the credit remaining after the taxpayer eliminates their tax liability altogether is not returned to them. Instead, the taxpayer can claim the Additional Child Tax Credit on Form 8812. The ACTC refunds 15 percent of the excess amount of the CTC to the taxpayer.

Claiming the EITC, CTC and ACTC

The EITC and CTC are not mutually exclusive. This means that you can claim both on your tax return, provided that you meet the six prong criteria test for each credit. Remember that each carries a different dependent age maximum. Additionally, if you do not receive a refund for the CTC, you can claim the ACTC.

Some experts state that you should never receive a refund. This advice, however, rests on the fact that financial experts see any refund as an overpayment to the government. Because overpayments mean that you did not have control over your money for the last year because it was in IRS hands, they view refunds as an indication that the taxpayer did not properly calculate their tax liability.

Experts do not state that you should not claim tax credits or request refunds when you are entitled to them. Therefore, if you qualify for the EITC, CTC or ACTC, complete the proper forms to claim them on your return.



New Tax Laws For This Season

New tax laws for 2015
Tax Time


Perhaps nothing confuses you more than the ever changing tax laws. Tax laws are always changing even if it is just to keep up with inflation adjustments.

Some tax laws are tweaked every year, with few people, outside the tax profession, ever noticing. Provisions of tax laws that have been in place in past years are still being phased in, and there can be uncertainty about which tax breaks will be extended.

Here are some of the changes for 2015 that may affect you.

The health insurance penalty is ramping up significantly.

If you didn’t have health insurance in 2014, and you didn’t qualify for an exception to the penalty, the consequences weren’t so bad. You may have paid $95 per person or 1 percent of your household income, whichever was greater.

In 2015, you’ll pay $325 per person, or 2 percent of your household income, whichever is greater. That’s a steep increase.

Even if you qualify for one of the many exclusions, you may not know that some exceptions require you to apply for a certificate from the state or federal marketplace. You should do this in plenty of time so you have the required exemption certificate number when you prepare your return.

The IRS is cracking down on IRA rollovers.

It was an easy way to “borrow” retirement money for up to 60 days. Taxpayers could withdraw money from one IRA and wait up to 60 days before they moved it into another IRA. As of 2015, you can only do that once from an IRA in a 12-month period. If you want to move IRA funds using “trustee-to-trustee” transfers, you can still do that as often as you want.

Health Flexible Spending Accounts (FSAs) are subject to new rules.

The good news for people who don’t use all their FSA amounts by the end of the year was that as of 2013, they could roll over $500 from an FSA into the next plan year. Starting in 2015, the bad news is that as a result, they will be ineligible to participate in a Health Savings Account (HSA) for the year into which they rolled over an amount from a general purpose FSA.

While this is just a few of the changes, be sure to check with a tax professional regarding your unique situation.


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