Category Archives: Taxes

3 Reasons Your Tax Refund Might Not Be As Big As You’re Expecting

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09ba4dd1-bbe3-4f1f-9400-940dc6df347fEveryone tells you not to plan on having a tax refund. If you’re living paycheck-to-paycheck, though, you know where every dollar is going. You might be counting on that money to give you the breathing space you need.

Even if you’re a little further ahead than that, you may still have made plans for your tax refund. You might be planning to pay off a credit card from the holidays or hoping to put a down payment on a car. You might just be hoping to take a little vacation over spring break!

Whatever your plans for the money, it’s a good idea to temper your expectations. Unfortunately, you can’t count on the same tax refund you got last year. Here’s why.

1. Student loan garnishments. 

If you’re behind on your student loans, you might not see much of your refund. If you don’t have much of an income, it’s easy to get behind and it’s hard to catch up. Student loan companies know that, for people with minimal income, tax refunds are a source of a big chunk of money. Also, since it’s not a regular source of income, the rules regarding garnishment are more lenient. Ordinarily, creditors are only allowed to take 15% of your discretionary income if you have one loan, or 25% if you have multiple loans. For a tax refund, the Department of Education can instruct the IRS to apply the full amount of any tax refund you’re due to the balance of your loan.

Even if you’re paid off in full, it might be wise to check with your spouse. This process can also apply to your refund for his or her defaulted student loans. As far as the IRS is concerned, you’re one taxpayer with one set of obligations.

This process can apply to federal student loans, federally subsidized loans and some private loans. You’ll receive a notice of proposed offset from the IRS. You have 65 days from receipt of the notice to object to the offset. Deferments can be provided for up to 3 years for economic hardship and unemployment. They may be provided indefinitely for individuals seeking an advanced degree or for people with disabilities.

It’s also possible the “loan” may just be a paperwork error. If you’ve unenrolled from classes but haven’t yet received a repayment from the school, for instance, you might get your refund back with a short letter. The notice of referral will provide you instructions to request a review.

2. You made more money.

Usually, getting a raise is something to celebrate. If you got one this year, that’s good news for your career future. It’s less good news for your refund. The refund is the difference between what you paid in taxes and what you ended up owing. Your taxes are withheld from your paychecks assuming they stay the same all year. If you got a raise in June, then you were effectively under-withholding for the first half of the year.

Beyond the difference in payment, you may find your raise puts you just above the threshold for credit programs. Credits like the Earned Income Tax Credit (EITC) have income eligibility requirements. If you made more money this year than you did last year, you may not qualify. The same is true for subsidized insurance premiums through the Affordable Care Act (Obamacare). If your income changed after you obtained coverage, you may have to hand back a part of that subsidy.

The EITC is fairly significant, particularly if you have kids. It may be worth your time to look for other deductions you can take to get your gross income under the threshold. Consider working with a professional tax preparer, too.

3. You were the victim of identity theft.

The past few years have seen an increase in tax returns filed fraudulently on behalf of victims of identity theft. A crook uses your Social Security Number and fabricates financial information to get a hefty tax refund, then cashes the check. You’re not only out your tax refund, but also may be facing criminal charges for the phony info on “your” return.

With cuts to the IRS budget this year, its enforcement and investigation of these crimes has dropped. You should contact the IRS immediately if you receive notice that more than one tax return was filed using your Social Security number or if you are issued a W-2 (an income statement report from your employer) by an employer you don’t recognize. These are red flags that someone is fraudulently using your identity.

The FTC recommends you contact the IRS’s Specialized Protection Unit at 1-800-908-4490. You should also prepare proof of your identity, like a copy of your drivers’ license, Social Security card, or passport. The IRS has a form, IRS ID Theft Affidavit Form 14039, that will start the investigative process. Recovering from this crime will take time, but you will get the refund you’re due.

IRS Warning About Phone Scams

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scamThe Internal Revenue Service and the Treasury Inspector General for Tax Administration (TIGTA) often hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.

“There are clear warning signs about these scams, which continue at high levels throughout the nation,” said the IRS Commissioner. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS.”

Additionally, it is important for taxpayers to know that the IRS:

  • Never asks for credit card, debit card, or prepaid card information over the telephone.
  • Never insists that taxpayers use a specific payment method to pay tax obligations
  • Never requests immediate payment over the telephone and will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior notification of IRS enforcement action involving IRS tax liens or levies.

Potential phone scam victims may be told that they owe money that must be paid immediately to the IRS or they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of these scams include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue, if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to TIGTA at 1.800.366.4484.
  • You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief), that also fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the email to phishing@irs.gov.

For more information or to report a scam, go to www.irs.gov and type “scam” in the search box. More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.

7 Smart Ways to Take Advantage of Your Tax Refund

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taxes08Tax season is often a time of stress for many, but it can be a joyful time for the roughly 75 percent of Americans who do receive income tax refunds.

While the refund really means you’re getting back money you loaned to the government at no interest, in practical terms it often means an unexpected infusion of cash into your wallet or bank account. It’s a great problem to have, but what should you do with your windfall?

The best choice for one person may not be the best choice for another. But experts agree on one thing – if you have debt, apply your refund to paying it off, whether it’s credit card debt, student loan debt, or other consumer debt.

If you’re getting a big refund ­– a check in the ballpark of $1,000 or more for taxpayers who don’t have a side business – consider adjusting your withholding so that you’ll have that money available to you during the year.

Here are the seven smartest things you can do with your refund:

Pay down debt. If you have any consumer debt – student loans, credit card balances or installment loans – pay those off before using your refund for any other purpose. Car payments and mortgages aren’t in this category, but you can also consider paying extra on your principal.

Add to your savings. Can you really ever save enough? You can use the money to build up your emergency savings, your kids’ college fund, or put it toward a specific goal, such as buying a house or a car, or financing a big vacation you’ve been dreaming about taking.

Add to your retirement accounts. If you put $2,500 from this year’s tax refund into an IRA, it would grow to $8,500 in 25 years, even at a modest 5 percent rate of return, TurboTax calculates. If you saved $2,500 every year for 25 years, you’d end up with more than $130,000 at that same 5 percent rate of return!

Invest in yourself. This could mean taking a class in investing, studying something that interests you, or even taking a big trip. Think about doing something that might add value to your life, such as taking a photography class or purchasing a special camera that could become a new hobby and potentially a side business in the future.

Improve your home. Consider putting your refund to good use by adding insulation, replacing old windows and doors, or other improvements that are more energy efficient. Or perhaps it’s time to remodel your bathroom or kitchen. You’re adding value to your home, and at the same time you’re improving your living experience too.

Apply your refund toward next year’s taxes. This is common among self-employed taxpayers, who are required to pay quarterly taxes since they don’t have taxes withheld. By applying any overpayment toward upcoming tax payments, you can free up other cash.

Splurge on something you’ve always wanted to do. If you’re out of debt and have substantial savings, this may be the time to take the cruise to Europe or trip to Thailand that you’ve always dreamed of taking. Such an experience can be life-changing, and you never know what impact it will have on your future until you actually do it.

Article Source: Teresa Mears for US News, http://money.usnews.com/money/personal-finance/articles/2014/03/28/7-smart-ways-to-take-advantage-of-your-tax-refund

4 Ways Scammers Can Steal Your Tax Refund

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48d9f43eab68404d0dc0def19d14ba6dIdentity thieves LOVE tax season.

Any thief who has your personal information can easily file a tax return, collect the fraudulent refund and leave you waiting months to get your own refund back and clear up the issue. Unfortunately, it’s only getting worse – as the IRS launches hundreds of investigations into tax-related identity theft, where criminals use stolen personal information like Social Security Numbers to claim fraudulent refunds.

Here are some of the ways scammers use to steal your identity and how to avoid becoming a victim.

1. Fake calls from the IRS. As part of the scheme, callers impersonating IRS agents told victims that they owed taxes and needed to pay by wire transfer or a prepaid card. Other scams are carried out through email, and ask for personal information like a Social Security Number or birthdate — which can later be used to claim tax refunds.

To protect yourself, be wary of any correspondence from someone claiming to be from the IRS. The agency says it usually reaches out by mail, and it will never ask for personal information via email or phone. If you receive something questionable, reach out to the agency yourself and verify that it’s legitimate.

2. Rogue employees. Be careful about giving out your personal information. Don’t ever give away more personal information than you need to and don’t be hesitate to ask someone why they need any of your personal information.

Some tax preparers could potentially be a scam artist. To avoid being fooled, be wary of any preparers who charge fees based on the size of your refund and never let a preparer ask for the refund to be deposited into an account in their control rather than sent straight to you. To help you detect if you’ve been scammed, be sure to regularly monitor your bank accounts and credit card statements for any suspicious charges.

3. Data breaches. Data breaches occur when hackers break through a company’s privacy walls and access private customer information and scarily enough, it’s becoming increasingly common. Once that information is in a fraudster’s hands, it’s easy for them to file a tax return in your name. If you know or suspect that your information was compromised during a data breach, consider signing up for identity theft protection (see below) or start regularly monitoring your accounts on your own. Be sure to investigate any charges you don’t recognize, no matter how small they are.

Most of the time if someone has a stolen card, the thief will often test it with a small transaction first in order to see if the card is activated, to make a bigger purchase. And because there’s a good chance you will be more susceptible to identity theft after a data breach, make sure to strengthen your passwords utilizing at least 8 characters, including upper- and lower-case letters as well as numbers and special characters (!@#$%).

4. Snail mail. It’s not as common as online identity theft these days, but many fraudsters still use the old-school strategy of stealing mail from mailboxes to piece together the information they need to file a tax return in someone else’s name. Other times, thieves will go as extreme as dumpster diving – it’s a low-tech way to easily retrieve your information, so make sure you ALWAYS shred any personal documents.

Another easy way to protect yourself is to file early. Many scammers are able to get fraudulent refunds because they file before the victim does. If you file first, the IRS will be forced to investigate when a second return from the same person arrives.

LifeSizePennyClick here to view the article source by Blake Ellis of CNN Money.

4 Wise Ways to Spend Your Tax Refund

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A vacation would be fun, but you’ll get more bang for your buck if you invest in energy-saving improvements or maybe even a new car.

Americans often wrestle with competing desires to spend, save or invest the cash from their tax refund checks.

Many people say they are being responsible with their refunds: 42% plan to use the money to pay down debt and cover bills and 25% plan to save it, according to a survey by TurboTax.

Others are splurging: 15% of taxpayers plan to treat themselves to a vacation or shopping. But advisors say that even if you’ve done everything right — you have an emergency fund, no debt and are maxing out your retirement account contributions — you might want to reconsider spending the refund on a 70-inch TV or a cruise. Here are some of their suggestions below.

1.       Rebalance your portfolio.

With the stock market hovering near five-year highs, advisors normally would recommend investors rebalance their portfolios by selling stocks and using the proceeds to buy bonds or whatever assets they need to get back to their target allocations. But some investors might be able to rebalance without selling their stocks.

Have questions about investing?  Set-up an appointment with the Financial Advisor located at First Financial Federal Credit Union.* Appointments can be made at any branch location, or by calling 732.312.1500.

2.       Prepay your bills.

Even if you’re not living paycheck to paycheck and can afford to spend your refund on a new iPad without falling behind on your bills, there may be better uses for the cash. Though it’s not nearly as exciting, one can use the money to pay off future bills. Why not use this money to put yourself ahead of the game?

Prepay your car insurance bills or car loan payments. Write the phone company a check, or save the money for the home insurance bill you know is coming up in a few months. But don’t forget to check monthly statements to be sure you aren’t paying for something you didn’t request, experts say.

3.       Make home improvements.    Yellow helmet full of dollars

If you’re going to spend it, take a look at your house.  If your furnace is on its last leg, now may be your chance to replace it. Have you wanted to install new windows? Using the money on your home could lift your property value and prevent future damage, advisors say.  People who make energy-efficient improvements might also qualify for a residential energy tax credits expiring at the end of this year. To get the maximum credit of $500, taxpayers need to make $5,000 in qualifying improvements to their stoves, heating or air conditioning systems, insulation, roofs, water heaters and windows and doors. Learn more here.

Did you know First Financial has a home improvement loan?** This loan is perfect for those who don’t think they have enough equity in their home.  Or maybe you’ve been itching to put in a new deck or pool for the nicer weather.  Stop into any branch to ask us how you can get started with a home improvement loan or give us a call at 732.312.1500, Option 4.

isolated red car back view 014.       Buy a car.

If the list of needed car repairs is piling up, some advisors say it might be best to put your check toward a new ride. A $3,000 refund can cover the typical 10% down payment needed on a $30,000 loan for a new car, or the 20% down payment needed on a $15,000 used car.  Don’t forget that First Financial’s auto loan rates are the same whether you buy new or used!***

Those with existing car loans may also have a greater shot at refinancing to get a lower rate (some saving hundreds of dollars a month) if they use some of their refund cash to reduce the size of their loan.

Article Source: http://money.msn.com/tax-tips/post.aspx?post=9a813b25-fba7-4882-b37b-778710cfa8f1

*Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

**Available on primary residence only, subject to underwriting guidelines. Subject to credit approval. A First Financial membership is required to obtain a home improvement loan and is available to anyone who lives, works, worships or attends school in Monmouth or Ocean Counties, NJ.

***APR = Annual Percentage Rate. Not all applicants will qualify, subject to credit approval. Additional terms and conditions may apply. Actual rate may vary based on credit worthiness and term. First Financial FCU maintains the right to not extend credit, after you respond, if we determine you do not meet our guidelines for creditworthiness. A First Financial membership is required to obtain an Auto Loan and is available to anyone who lives, works, worships, volunteers or attends school in Monmouth or Ocean Counties.

What Are You Going To Do With Your Tax Refund?

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For many people, good financial news usually comes around April 15, when they will discover that they have a tax refund on the way.  It might be the start of even more good news, as there are some signs that the economy is also turning around.

If you get a refund check from the IRS, great. And if it’s the start of better economic developments for you and your family, even better.

But with positive developments, comes the need to make good decisions. If your financial situation improves – whether on a one-time basis or more permanently – what are you going to do, not only with the money, but with the way you operate financially?

One thing to consider is that your tax refund is not a gift from the federal government. The money belongs to you – it always did – and the government essentially borrowed it from you for the better part of the year without paying you interest. You might want to consider adjusting your withholding so less will be taken out of your check. We understand that people love their tax refund checks, but you could have been earning interest on that money all year long. Assuming you saved it and didn’t spend it, you would end up with more money that way than waiting for a refund check.

But that save-not-spend part of the equation is important. When you start earning a little more money, it’s a good time to reassess how you budget, how you save and how you plan.

On the one hand, you want to pay off any high-interest debt as quickly as you can. On the other hand, you want to put something away for your future – especially retirement. And it’s a good idea to have some money in a rainy-day fund – with easy access to the cash – in case of something unforeseen.

The best idea is to develop a plan that incorporates all of these priorities. Develop a budget that takes into account all of your regular expenses, then allocates portions of what’s leftover for debt payments, savings and a rainy-day fund.

Having developed that plan, treat your tax refund like a paycheck and use the money accordingly. Then treat all your subsequent paychecks in the same way.

There’s plenty you can do. In addition to paying off debt and saving, if there is something you’ve been needing (not wanting) to buy, it’s wise to pay cash for it if you can, so you don’t add credit card debt. Beyond that, priorities might include:

  • Home improvements
  • Investing in a tax-sheltered account, like a 529 or Roth IRA, depending on your income and goals
  • Investing in a taxable account like a Brokerage Account
  • Giving to charity
  • And if you still have money left over, buying something you just simply want isn’t such a bad thing to do

Our experts located at First Financial, can walk you through the process. It’s worth remembering: The economy tends to go in cycles, and when you save and eliminate debt today, you put yourself in a stronger position for when times are tougher. Make a plan, stick to the plan, and watch as your situation continues to improve. Maybe that tax refund check will be the start of something pretty special. Give us a call at 732.312.1500 to set up a no-cost consultation or visit our website for more information!

*Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are: