Friday, May 10, 2013

QuickBooks Online Simple Start 2013 / QuickBooks Enhanced Payroll 2013 FREE!.....Really, Free!

When you buy QuickBooks Online Simple Start 2013 for $89.99 at Office Depot, send in the $90 manufacturer’s rebate to get it free. Also get QuickBooks Enhanced Payroll 2013 free when you pay $279.99 in the store and send in the $280 mail-in rebate.

Click Here for the Office Depot Page with the items to order and forms to download.


Or you can download the mail in rebate forms here:

Here's the Mail-In Rebate form for QuickBooks Online Simple Start 2013.

Here's the Mail-In Rebate form for QuickBooks Enhanced Payroll 2013.
Posted on 6:42 AM | Categories:

Cloud Accounting with QuickBooks Online–The Details

Charlie Russell for Sleeter Group writes: I introduced you to QuickBooks Online (QBO) in our prior article (QuickBooks Online Overview), now let’s dig in a big deeper.  In our attempt to come up with a standard for comparing online accounting systems, we (Doug Sleeter, MB Raimondi and myself) came up with a list of features that we would like to see in a good business accounting system. It is hard to compare products when they offer such different features, but we have to start someplace. When it comes to managing accounting there are many features that a small business just cannot do without, and we are trying to focus on those.


As we review various online accounting products we will point out things that we like and things that we feel are missing. If a product has a whiz-bang exciting feature but it doesn’t cover the basics, there is a problem. So, we have our list of features that we will be using to compare any cloud (online) based accounting product that we look at.
I certainly don’t consider our list to be all-inclusive, and I’m open to suggestions as to what could be added. One of the dangers of making a list like this is that we tend to think of the features that we have in the product that we are the most familiar with (in my case, QuickBooks for Windows), without recognizing that an online accounting product is different than a desktop accounting product. Another consideration is that every business will have a business process that is critical, but not all businesses will have the same requirements. That makes evaluations complicated!
It is the nature of Online software products that they evolve constantly, so as time goes on some of the feature we say are NOT there may be added. If I miss something, please feel free to point it out.

Product Details/Capacity

OK, let’s start with some basic information.
Number of transactionsNo Limit
Number of records in a listNo Limit
Database size limitNo Limit
Maximum number of users25
Underlying databaseOracle
Web browser supportAll major browsers although there are some functions (conversion from QuickBooks Desktop, for example) that might require a specific browser.
Is there an app for mobile devices?Mobile access w/BlackBerry, iPhone or Android. Features via mobile are limited; currently you can edit, create and view customers, estimates, invoices, sales receipts and payments using QuickBooks Mobile. This list of features here continues to expand.There is a special iPad app also, which has a different set of features. See our review at:
http://www.sleeter.com/blog/2013/03/quickbooks-online-for-ipad/
Is there an API that developers can use to create add-on modules?Yes, although it does not currently support access to all data. The “QuickBooks IPP API” is evolving – some data is accessible, some isn’t yet but will be later.
Can you have more than one company file on one subscription?No
Multiple companiesYes, with separate subscriptions.
Posted on 6:41 AM | Categories:

Plan Now To Take Advantage Of ATRA On Your 2013 Return

The American Taxpayer Relief Act of 2012 brings good news for businesses in many areas. Work with your CPA to determine what steps you should take this year to make the most of the act’s tax breaks. Here are a few key questions to consider in your ongoing 2013 tax planning:

Should you purchase property? American Taxpayer Relief Act restores the Section 179 $500,000 expensing limit and $2 million phaseout threshold through 2013. Sec. 179 allows your dealership to expense (rather than depreciate over a period of years) the cost of qualified new and used property placed in service during the year, up to the limit but phased out dollar-for-dollar above the threshold. The new law also extends the ability to use up to $250,000 of the $500,000 limit to expense the cost of qualified leasehold improvement property and retail improvement property. 

Additionally, American Taxpayer Relief Act extends 50% bonus depreciation through 2013 (2014 for certain property). It can be claimed for qualified new property, such as computers, hoists and other equipment, placed in service this year. For maximum benefit, apply 50% bonus depreciation to assets in excess of what qualifies for the Sec. 179 deduction. 

Should you make leasehold improvements? American Taxpayer Relief Act extends the quicker 15-year (vs. the standard 39-year) cost recovery period for qualified leasehold and retail improvements such as ceilings, nonstructural internal walls or security systems, using the straight-line accounting method, through 2013. 

Are you open to new hires? Your dealership can claim the Work Opportunity tax credit if you hire someone from one of several economically disadvantaged groups in 2013. The credit is usually equal to 40% of the first $6,000 in wages paid to a new hire. Enhanced credits are available for hiring certain veterans.

Are you ready for a new market? The New Markets Tax Credit Program promotes private investment in dealerships and other businesses in low-income communities in 2013. A taxpayer may obtain a 39% tax credit, spread out over seven years, under this program. Consult with your tax advisor to see if your area qualifies.

Should you go green — or greener? A number of provisions relating to energy-saving improvements adopted by businesses, including dealerships, are extended for varying time periods under American Taxpayer Relief Act. The most common credit for dealerships is the production tax credit for facilities that produce energy from wind facilities, which is extended through 2013. This is typically done by installing a windmill.
Posted on 6:40 AM | Categories:

The answer to the question I’ve heard one hundred times / the differences between a Roth Individual Retirement Account (IRA) and a Traditional IRA.

Jerry Coon for The Rockford Squire writes: I have answered this question about one hundred times this last tax season and promised to write an article about it soon after April 15. The question concerned the differences between a Roth Individual Retirement Account (IRA) and a Traditional IRA. There has been much discussion about tax rates going up. My personal opinion is that unless our federal government figures out a way to stop spending over a trillion dollars more than it takes in every year, the rates inevitably will go up. Whether you are a Republican, a Democrat, a Libertarian, a Tea Party member, a Socialist, a Communist, or a non-partisan who belongs to none of the above, you have to agree that something is wrong in Washington DC. The federal government continues to grow while the rest of the economy either shrinks or barely grows in an overall sense. When reality ultimately sets in, and that may happen when interest rates are allowed to rise, those tax rates may also jump up. That’s when the differences between the Roth and the Traditional IRA will become important. Let’s go over those differences.
First, contributions to a Traditional IRA may be tax deductible. If deductible, the contributions will lower adjusted gross income (AGI) and that can be a distinct advantage. Most phase-outs of deductions and credits are based on AGI. By lowering AGI, more of a deduction may be allowed or more of a credit may be allowed. That can be a major factor in lowering a taxpayer’s final tax bill. Adversely, contributions to a Roth are never tax deductible. The amounts contributed to a Roth come from after-tax money while the amounts going in to the Traditional basically become pre-tax because they are deductible. The Traditional therefore gets its tax advantage up-front. Putting $5,000 into a Traditional today may get a deduction for $5,000 today. Putting $5,000 into a Roth today does not affect the tax return at all.
Second, the Roth gets its tax advantage later when withdrawals take place because withdrawals from a Roth generally are not taxable. Non-taxable withdrawals include the original $5,000 as well as earnings as long as the rules are followed. For example, the original $5,000 grows to $20,000 in the Roth. The entire $20,000 can be withdrawn on a non-taxable basis. Let’s see, $5,000 of the Traditional is not taxable up-front but the full $20,000 of the Roth is not taxable at the back-end when it comes out.
Third, at age 70 1/2, taxpayers must begin to take Required Minimum Distribution (RMD) withdrawals from the Traditional based on the taxpayer’s life expectancy. Currently, a person age 70 ½ is expected to live 27.4 more years. That translates to an RMD amount of 3.65%. If a taxpayer has $20,000 in his Traditional, he must take out 3.65% of the $20,000 or $730. At age 80, the taxpayer’s life expectancy is now 18.7 years so his RMD percentage has grown to 5.35%. If the IRA value is still $20,000, he would have to take out $1,070 to satisfy his RMD requirement. At age 99, life expectancy is still 6.7 and the percentage is 14.93%. The longer a person lives, the larger the percentage of the RMD becomes. That means, potentially, the higher the tax bill will be or may become. Conversely, the Roth has no such RMD provision. The taxpayer is not forced to take withdrawals. They would not be taxable even if taken but the taxpayer doesn’t have that RMD rule forcing withdrawals.
Fourth, Traditional IRAs can be passed on to beneficiaries but the beneficiary stands, tax-wise, in the place of the original owner. All distributions are taxable to the beneficiary just as they would have been taxable to the original owner. The beneficiary has some fairly stringent rules that must be followed when determining the length of time the beneficiary can take to get the money removed from the IRA. In the most lenient of cases, the beneficiary could take withdrawals over his/her lifetime. In the least beneficial of circumstances, 100% must be withdrawn by the end of five years after the date of death of the original owner. Which set of rules applies depends upon the relationship the beneficiary has to the original owner. A spouse usually is granted the most lenient distribution rules. A non-spouse person, such as a niece or nephew, may be able to take advantage of the lenient rules. A non-spouse, non-person such as an estate or trust, has the least beneficial rules applied to the distributions. Saying the rules are complex is an understatement.
There are some well-known IRA experts, such as Ed Slott, who make a very good living advising beneficiaries as to which set of rules must be applied to a certain set of beneficiaries. Beneficiaries of Roth IRAs have an easier go of it. The rules may force the beneficiary to take withdrawals but since the distributions are not taxable, it’s not as much of a factor. Roth IRAs are definitely worth looking at. This is Jerry Coon signing off.
Posted on 6:40 AM | Categories:

Divorced Parents with Children Face Complex Tax Choices

Roger Russell for Accounting Today writes: There is sometimes a disconnect in the handling of dependency exemptions and related tax credits between what courts advise a taxpayer to do and what the Tax Code actually permits.
This can be a source of inequity to taxpayers, particularly in the case of divorced parents. These problems commonly surface when determining who is entitled to take the dependency exemption, the child and dependent care credit, the child tax credit, the earned income credit, and head-of-household filing status, noted Robbin Weiner, CPA, of Dayton, N.J.-based E. Martin Davidoff & Associates.
“It’s important that tax advisors tell their clients what language they need to include in their divorce settlement,” she observed. “They need to specify that the custodial parent is required to sign and provide the necessary Form 8332 to the non-custodial parent, which allows them to take the dependency deduction and the child tax credit.”

Weiner cited an instance in which a recently divorced client came into her office. “The mother was the custodial parent, and to enable her to work, she incurred additional aftercare expenses. The divorce court decreed that the parents of the child were to split the expenses 40/60,” she said. “The court instructed the father that he must pay the wife the full 60 percent and get his reimbursement for the tax credit by filing the dependent care credit on his own tax return. However, the Tax Code specifically does not permit a non-custodial parent to utilize this tax credit.”
The taxpayer’s former accountant had prepared his return and advised him to put the credit on the return, in addition to filing as a head of household. “But you’re not allowed to do that if you’re not the custodial parent,” explained Weiner.
The custodial parent is generally the parent with whom the child lived for the greater number of nights during the year. Form 8332 can be used by the custodial parent to release the claim for a dependency exemption to the noncustodial parent. It allows the noncustodial parent to claim the exemption and also the child tax credit.
However, Form 8332 does not allow the noncustodial parent to claim the child as a qualifying child in determining head-of-household filing status, the earned income credit, and the child and dependent care credit or the exclusion from income for dependent care assistance, Weiner indicated. Only the custodial parent may claim these, even if the Form 8332 waiver is provided to the noncustodial parent.
“The problem we had with the child care credit was that only the custodial parent can take it on the return,” said Weiner. “So when you write the divorce document, you also have to specify that if the custodial parent receives the credit, the noncustodial parent needs to be reimbursed for his or her share of the credit.”
A Tax Court decision earlier this week (Shenk, 140 T.C. No. 10, decided May 6, 2013) further illustrates the predicament a taxpayer may find himself in when trying to merge a state court order with the reality of the tax law, Weiner noted.
Michael Shenk’s judgment of divorce provided that his ex-wife would have primary residential custody of their three minor children, and that the dependency exemption would be divided according to various conditions. But it did not provide that the ex-wife should execute a Form 8332 for any year. For 2009, both Mr. Shenk and his ex-wife claimed the same child on their returns, and the husband also filed as head of household.
The Tax Court held that since Form 8332 was not executed by the wife nor attached to the husband’s return, he was not entitled to claim the dependency exemption deduction or the child tax credit. Moreover, since all three of his children resided with their mother for more than half the year, the court held he was not entitled to head of household status.
Posted on 6:40 AM | Categories:

Trending Now: Giving Up U.S. Citizenship / With over 670 U.S. citizens taking the ultimate Tax Strategy in the first 90 days of 2013, it’s shaping up to be the year of the expat.

Robert W Wood for Forbes writes: When CNN reports U.S. Citizens Ditching Passports in Record Numbers, it must be true. Like CNN’s election night coverage, the stats don’t lie. With over 670 U.S. citizens saying sayonara in the first 90 days of 2013, it’s shaping up to be the year of the expat. See also Q1 2013 – Highest Quarterly Number of Expatriates Ever (But . . . )
Want to see if your neighbor is on the list? Check out this federal data. Notables include Mahmood Karzai, brother of Afghanistan’s President Karzai, Isabel Getty, daughter of Getty oil heir Christopher Getty and wife Pia. Maybe there’s someone from your own neighborhood.
Last year the list included Facebook co-founder Eduardo Saverin and wealthy socialite Denise Rich, whose husband Marc was pardoned by President Clinton. See Why Denise Rich Followed Eduardo Saverin’s Expat Lead. Then there was music icon Tina Turner. See Swiss Tina Turner Giving Up U.S. Passport.
Although last year it looked like the departed were falling–see Forget Taxes And Saverin; Actually, Expatriations Are Falling–this year is going the other direction in a big way. In fact, for a period of only three months, it’s the highest number ever. The last 3 months of 2012 numbered only 45, so there may be some spillover effect.
Where they go varies, but many countries are an easier sell in both tax rates and tax systems. America’s controversial worldwide income tax–inflexible and unforgiving–seems to invite greener pastures. See Expats Lobby For Tax on Residence, Not Worldwide Income. But despite grumblings, it is unlikely to change.
So citizens seem to be embracing change themselves. And not just Americans. Previously French and now Russian actor Gérard Depardieu has a low 13% flat rate, even better than Eduardo Saverin’s 18% in Singapore. France’s bloated 75% makes Russia’s 13% seem svelte. In Britain, the number of £1 million a year taxpayers fell by over 60%.
Still, leaving America has a special tax cost. You generally must prove five years of tax compliance in the U.S. Plus, if you have a net worth greater than $2 million or have average annual income for the five previous years of $155,000 or more, you pay anexit tax. You generally pay 15% on any gain, as if you sold your property when you left. There’s an exemption of approximately $668,000.
Citizens aren’t the only ones to suffer. Giving up aGreen Card can cost you too. See High Cost To Go Green: Giving Up A Green Card. And it could get worse. Saverin’s post-Facebook fly-away prompted such outrage that Senators Chuck Schumer and Bob Casey introduced a bill to double that tax to 30% for anyone leaving the U.S. for tax reasons. SeeSenators Go After Eduardo Saverin, Facebook Co-Founder, For Dumping U.S. Passport, Avoiding Taxes.
In recent years, the IRS crackdown on foreign accounts and income has been unprecedented. See FBAR Penalties Just Got Even Worse. Could it get worse? Maybe, and that could make this trend go viral.

Posted on 6:39 AM | Categories:

Reducing Taxes for Self-Employed (Roth IRA discussion)

Ed Slott for Financial Planning writes: We are looking to convert an IRA to a Roth IRA.  I took a loss on a variable life policy that was converted to an annuity.  Can we use that loss to offset the tax due on a Roth conversion?   The conversion to the Roth IRA is taxed as ordinary income. Please talk to a tax advisor or insurance professional with respect to whether or not you can deduct a loss on a variable life policy. 

 I have been self-employed for over three decades and have made yearly maximum contributions to my 401(k) plan. I am now required to take yearly distributions, and in addition to continuing full-time employment, the taxes are killing me. It is my understanding that I am "over qualified" income wise and unable to set up or roll over into a Roth IRA.

What can I do to reduce my taxes? Everyone is now eligible to convert funds to a Roth IRA. There are no longer income limits to do a conversion. You should consider rolling over (converting) your 401(k) funds to a Roth IRA. All funds, except any 401(k) minimum distributions, are eligible to go into the Roth IRA. While the conversion will be taxable, the future withdrawals from the Roth IRA won’t be, if certain rules are met. Also, there are no required minimum distributions from a Roth IRA.

I am unclear on the President's proposal to `cap IRAs.' I see no reference to Roth IRAs where taxpayers have already paid full Federal and State Income Taxes. Is he proposing to reverse or `go back' on earlier promises of tax-free withdrawals from Roth IRAs? 

As part of the President’s fiscal year budget, he proposed limiting IRAs and employer retirement plans to a certain level based on a formula. That level is approximately $3 million. It is too early in the process to clarify any budget proposals. Also Congress has different ideas that will compete with the President’s proposals.
Posted on 6:39 AM | Categories:

Retirement planning is more than numbers

Henry Hebeler for MarketWatch writes: Many people think that retirement planning is simply inserting some assumptions into an Internet planning program and hoping that they have planned for a long enough life.
It's really a much broader subject than that because you also have to be prepared for other challenges as you age.
Whether planning for retirement or already in retirement, here are a number of issues that require more than numbers, they need considered judgment.
Do you have a real retirement savings plan?
Consider how much you might need, the allocation of your investments, automatic savings plans, pre- and post-retirement budgets, getting out of debt, growing health care costs, means of coping with a disability, high inflation or low investment returns, reduction of pension or medical benefits, the need for professional help from a certified financial planner.
Do you have an alternative skill that might provide extra income?
Consider means to keep current, marketability, competitors, investment required, physical capability required, legal and tax matters. 
Do you have savings for emergencies and large purchases that are in addition to your retirement savings?
Consider job loss, uninsured medical or dental expenses, necessary support of a relative, replacing an automobile, major home repairs such as replacing a roof or furnace or even remodeling. See: Retirement reserves: Fund the unexpected
Have you done estate planning?
Consider wills, trusts, taxes, executors, distribution of personal items.
Have you left adequate instructions for those that will survive you?
Consider your will, health care directive, trusts, executor, beneficiary designations, distribution of personal items, list of locations of important documents or possessions, home maintenance contacts, important people to inform of death, dependent and pet care, immediate financial needs, tax documents and data, travel point credits, instructions for activities that have to be continued or closed. Keep heirs informed.
Are you properly insured?
Consider your house, automobiles, support after a spouse dies, liability, disability, long-term-care and especially health insurance alternatives.
Are your important papers and photos in a secure place?
Consider fire proof file boxes, a safe deposit box, cloud backup of your computer files, duplicate list of passwords.
Is your home safe?
Consider security systems, fire hazards, extinguishers, smoke and gas detectors, slippery floors, bathroom grip bars, neighborhood watch program, guns secured, first aid kits and knowledge of CPR or what to do if severely burned or poisoned.
Are you prepared for an earthquake, flood or storm damage?
Consider plans to take cover, means of communications, electricity loss, tools that might help, water tank supports, secured large wall pictures, secured furniture on wheels, etc.
Do you have a 72-hour kit?
Consider food, water, sanitary needs, light, emergency radio, shelter, means to keep warm, medicines, communications.
Do you have adequate food storage for times when you might not be able to buy food?
Consider number of days that might be needed, storage life and rotation, and sources of essential vitamins, minerals, proteins, a home vegetable garden.
Are you managing your time well?
Consider time allocations for work, recreation, study, charitable activities, and exercise.
Do you know what activities you plan to pursue during retirement?
Consider part-time work, enlarging a hobby, volunteering for charity work, sports for all seasons, teaching, travel, becoming a chef, starting a small service business.
Are you doing the things necessary to stay healthy and reduce your health-care costs?
Consider your diet and both mental and physical exercise. See: Good health means more retirement money
Retirement can be exciting and fulfilling or boring and empty. It’s all up to you. Your success will take more thought than simply running a few financial projections. 

Posted on 6:39 AM | Categories:

An Introduction To The Keogh Retirement Plan

Investopedia writes: Self-employed individuals who want to set up retirement plans for their businesses may choose an IRA-based retirement plan such as SEP IRA or choose a Keogh plan. In this article, we focus on the Keogh plan and provide a high-level overview.

Keogh Defined
A Keogh, also known as an H.R.10 plan, is a qualified retirement plan that can be adopted and maintained by a self-employed individual (a sole proprietor, a partner in a partnership or certain fishermen). The term "Keogh" is rarely used by financial institutions and financial professionals these days. As such, self-employed individuals who want to establish such a plan would ask about adefined benefit plan or a defined contribution plan for the self-employed. The options for defined contribution plans include money purchase pension plans, profit sharing plans and 401(k) plans.

Features and Benefits Determine Suitability
A self-employed individual who wants to adopt a Keogh should consider the features and benefits of each option, and choose the one that is most suitable.The contribution rules and the cost of maintaining the plan are often the most important features. The following are highlights of the contribution rules.

Defined BenefitDefined Contribution
Money Purchase PensionProfit Sharing401(k)
Contribution amountUsually the amount required to provide an annual benefit that is no more than the smaller of $205,000 or 100% of the individual’s average compensation for his or her highest three consecutive calendar years.The lesser of 100% of eligible compensation or $51,000.The lesser of 100% of eligible compensation or $51,000.Salary deferral 100% of compensation up to $17,500, plus an additional $5,500 for individuals who are at least age 50 by the end of the year.
A profit sharing and a 401(k) can be combined. In such cases, the contribution is limited to the lesser of 100% of eligible compensation or $51,000, plus an additional $5,500 for individuals who are at least age 50 by the end of the year. The salary deferral limit applies.
Are contributions mandatory or discretionary?MandatoryMandatoryUsually discretionaryDiscretionary (can choose whether to defer each year)
Deduction amountAmount based on actuarial calculations and assumptions.25% of eligible compensation25% of eligible compensation25% of eligible compensation
Contributions for a self-employed individual are based on the individual’s modified net business income. The IRS provides a special worksheet that can be used to calculate contributions for self-employed individuals. This worksheet is available in IRS Publication 560 at www.irs.gov.


Roth 401(k) Feature
If allowed under the plan, a Roth 401(k) feature can be added if the plan is a 401(k) plan. Salary deferral contributions can be made to the traditional and Roth 401(k) accounts, or split between both. The aggregate salary deferral contributions must not exceed $17,500, plus an additional $5,500 for individuals who are at least age 50 by the end of the year. Roth 401(k) salary deferral contributions and rollovers from other Roth 401(k) or Roth 403(b) accounts are the only types of contributions that can be made to Roth 401(k) accounts.

Administrative Requirements

Establishing the Plan
A self-employed individual establishes a qualified plan by completing the adoption agreement by the end of the year. Once the adoption agreement is completed, it covers the plan for as long as it is maintained. Amendments to the adoption agreement may be required if the self-employed individual wants to make changes to the elective features, and/or if amendments are needed to adopt regulatory and other mandatory changes.

Contributions Contributions are usually required to be made by the individual's tax filing due date, plus extensions, unless an exception applies. For instance, contributions to defined benefit plans may need to be made on a quarterly basis, within 15 days after the end of each quarter.
Posted on 6:38 AM | Categories:

4 Financial Myths That Can Hurt You

Richard Barrington for the Huffington Post writes: From the Loch Ness monster to the latest urban legend, some myths persist even when people ought to know they aren't true. These falsehoods can be fun, unless they are about money -- in which case they can do a great deal of harm.
Here are four financial "facts" you should always take with a grain of salt.
1. You should string out your mortgage to maximize the interest deduction
You may have heard someone advise you not to prepay your mortgage because you'd lose the interest deduction. That's true, but you'd also be saving on interest by paying off your mortgage over a shorter period of time. Given that the interest deduction only represents a portion of the interest itself, you'd save more money by getting rid of the interest, even at the cost of losing the deduction. It is true that the mortgage deduction helps make mortgages cheaper than most other forms of debt, so it makes sense to pay off other debts first. However, if you don't have other debts,prepaying your mortgage may be a good option.
2. You should always minimize your tax withholding
The theory behind this is sound -- why should the government be earning interest on your money until it pays your refund? However, the value of that theory is seriously diminished when interest rates are near zero, as they are now. The simple fact is that many people will simply whittle away a few extra dollars in their weekly paychecks, whereas they might accumulate a nice amount of savings in the form of a tax refund. The optimal strategy would be to minimize your tax withholding but use automated deposits into a high-interest savings account to achieve the same result while beginning to earn interest earlier. As a practical matter though, letting your withholding build up to a refund is a crude but effective savings method that won't cost you much in a low-interest-rate environment.
3. Deferring taxes saves you money
Even though deferring taxes can mean earning money tax-free in a retirement account, it all evens out in the end when you pay taxes upon withdrawing from the account -- unless your tax rate changes. This can make deferring taxes a good deal if you are making a high income and expect to be in a lower tax bracket when you retire, but it can make more sense to pay your taxes upfront if you are young and expect to be in a higher tax bracket by the time you retire.
4. It's easy to minimize credit card costs with 0 percent offers
One problem with this strategy is that opening and closing credit accounts can hurt your credit score. Another potential problem is that even while there is no interest for an introductory period, you may run into balance transfer charges. Focus on paying off your credit card balances rather than simply shuffling them around.
The best myths often have some basis in truth, and all of the above ideas may work in certain situations. But when they get passed along as absolute rules, they enter the realm of myth and start to become dangerous.
Posted on 6:37 AM | Categories:

6 ways to shop for a refinance

NASDAQ writes: While the essential elements of shopping for a mortgage are the same for a purchase or refinance , the refinancing process usually starts with a decision to either improve your cash flow or change your debt profile, says Russ Anderson, a centralized sales executive with Bank of America in Los Angeles. He says you should determine your goal for refinancing before you meet with a mortgage professional.

Once you've decided whether you want to reduce your mortgage payments or pay off your loan faster, you can begin shopping for a lender and a loan.
"The average consumer shops for a refinance like they're shopping for a flat-screen TV," says Barry Habib, chief market strategist for Residential Finance Corp. in Columbus, Ohio. Everyone's price conscious, he says, but not everyone does their homework to determine which product best suits their short and long-term goals.

6 steps to refinance shopping


No. 1: Start online . Deborah Ames Naylor, executive vice president of Pentagon Federal Credit Union in Alexandria, Va., recommends starting with a mortgage payment calculator that estimates your monthly payments at various loan terms.
"A shorter term loan will have a lower interest rate than a 30-year fixed-rate loan, but the payment will be higher because you're paying it off faster," says Naylor. "It's important to decide what payment you're comfortable making before you see a lender, because that payment could be much less than the payment you qualify for."

No. 2: Loan term. Habib says the loan term you choose needs to be made in the context of your other financial obligations and plans.
"If you have $30,000 in credit card debt and no savings for college, you may want to go for a 30-year loan to keep the payments as low as possible," says Habib. "Someone else may want a shorter term to build equity faster while another borrower might want a longer loan so they can keep their tax deduction as long as possible."

No. 3: Talk to multiple lenders . Research loan products available from a credit union, a regional or community bank, a direct lender and a national bank to find out what special programs they offer, says Naylor.
"Many lenders offer 'portfolio loans,' ones they keep in-house instead of selling on the secondary market," she says. "They can be more flexible with those loans and offer special promotions."
Instead of choosing a lender solely based on current mortgage rates , Anderson says you need to find a lender you can trust. "People get too wrapped up in the rate rather than finding someone who will communicate with them," he says. "You need to find someone you trust, who will be engaged in your family's financial situation."

No. 4: Loan options. Discuss various loan products when interviewing lenders.
"There's a broad product mix of conventional financing, government-backed programs like FHA loans and special refinancing programs through the Making Home Affordable program," says Anderson. "A good lender can present the pros and cons of each of these programs in the context of your individual finances."

No. 5: Decide how you'll finance your refinance . Closing costs and lender fees can be paid at closing, wrapped into your loan balance or you can opt for a "no-cost" refinance.
"A no-cost refinance means that your lender will pay the fees and you'll pay a slightly higher interest rate of one-eighth to one-fourth percent," says Habib.
HSH.com's mortgage refinance calculator can help you decide the best way to finance your refinance.

No. 6: Compare mortgage rates and fees. Advertised mortgage rates are sometimes based on paying points, so you need to make sure you compare loans with zero points or the same number of points.
"It's important to compare all three things that factor into what your loan will actually cost: the interest rate, points and the loan origination fee," says Naylor.
According HSH.com, average mortgage rates for the week ending May 3, 2013 were :
  • 30-year fixed-rate loan: 3.49 percent
  • 30-year FHA-backed fixed-rate loan: 3.26 percent
  • 15-year fixed-rate loan: 2.74 percent
  • 5/1 ARM: 2.55 percent
Mortgage rates vary daily and sometimes hourly, so it's best to compare rates on the same day.
While shopping for a refinance may take a little longer than refinancing with your current lender, the rewards can last as long as your loan.

Posted on 6:37 AM | Categories: