Year-End Tax Moves That Could Save You Money


The end of the year is approaching and between visiting friends and family and celebrating the holidays, your taxes may be the last thing on your mind. However, putting off tax preparation until later could be a costly mistake. While tax season doesn’t start until mid-January, if you want to affect the return you file in 2017, you’ll need to make some tax moves before the end of 2016.

You might make this a yearly tradition – while there may be slight alterations in the rules or numbers from one year to the next, many of the fundamentals behind tax-saving advice remain the same.

Sell losing investments and offset capital gains or income. Do you have property, stocks or other investments that have dropped in value and you’re considering offloading? If you sell the investments before the end of the year, you can use the lost value to offset capital gains (profits from capital assets). Excess losses can offset up to $3,000 from ordinary taxable income and be rolled over to following years.

Optimize your charitable contributions. Many people make an annual tradition of donating their time and money to support charitable causes. It’s a noble thing to do and could come with a tax benefit. The value of your donation to a qualified charitable organization, minus the value of anything you receive in return, could offset your taxable income.

Charitable contributions are deductible if you itemize deductions. However, most taxpayers find it best to take the standard deduction – $12,600 for married people filing jointly, $9,300 for heads of households and $6,300 for single or married people filing separately for the 2016 tax year. If it’s best for you to take the standard deduction for 2016 but you think you may itemize your deductions next year, consider holding off until the new year to make the donations.

Defer your income to next year. You might be able to lower your taxable income for 2016 by delaying some of your pay until after the New Year. Employees could ask their employer to send a holiday bonus or December’s commission in January. It could be easier for contractors and the self-employed to defer their income since for them, it’s as simple as waiting to send an invoice.

Don’t let FSA savings go to waste. Employer-sponsored Flexible Spending Accounts (FSA) let employees contribute pre-tax money into their FSA accounts, meaning you don’t have to pay income tax on the money. FSA funds can be spent on qualified medical and dental procedures, such as prescription medications, bandages or crutches and deductible or copays.

FSA funds that you don’t use by the end of the year could get forfeited. However, employers can give employees a two-and-a-half month grace period or allow employees to roll over up to $500 per year. Check with your employer to see if it offers one of these exemptions, and make a plan to use your remaining FSA funds before they disappear.

What can wait until after January 1? Procrastinators will be pleased to hear that there are tax moves you can make after the start of the new year.

You have until the tax return filing deadline, April 18 in 2017, to make 2016-tax-year contributions to a traditional IRA. The money you add could offset your income, and you’ll be saving for retirement – a double win.

The maximum contribution you can make is $5,500 ($6,500 if you’re 50 or older) for the 2016 tax year. However, the deductible amount depends on your income and eligibility for an employer-sponsored retirement plan.

Bottom line. Don’t wait for the tax season to start to take stock of your situation and get your finances in order. While there are a few tax moves that can wait, what you do between now and the end of the year could have a significant impact on your return.

By Nathaniel Sillin

Crock-Pot® Serves Dinner to Hackers


Internet of things icon flat design. Network and iot technology, web and smart home, mobile digital, wireless connect, communication equipment illustration. Internet of things. Smart house

In case you are annoyed that you cannot control your slow cooker after you have set it and left it for the day, your savior has arrived. WeMo now makes it possible for you to control that needy Crock-Pot® device with an app on your smartphone. Yes, it’s true. Now you can adjust your thermostat without getting out of bed, can flush your toilet from another room, can turn your lights off if you forget and leave the house, and thanks to WeMo technology, you can adjust your slow cooker temperature from your desk chair.

While all of this is great, having smart devices like these on your wireless network comes with risks. Those include opening up yet another way for hackers to get inside your home. Remember that with every entry point, it makes it just that much more likely that someone will make themselves at home in your home and on your computer where you probably store a lot of sensitive and confidential information. This doesn’t mean it will happen. It just means it’s another way for them to get inside and get right to your information or perhaps use your computer as a bot or to perform distributed denial of service attacks (DDoS) as happened recently on several websites including Twitter, Amazon, and Netflix as well as many other large and small companies. They could also plant ransomware and try to extort money from you before they will give you a key to decrypt the files.

Make sure you really want or need those smart devices before hooking up items in your home to wireless. Take some time to think about how much risk you want to take. Do you really need to your refrigerator to tell you that you’re out of milk or can you open the door and look yourself? Do you need to be able to spy on your dog when you’re at work all day? Do you need to be able to control your Crock-Pot® after you’ve left it to cook up dinner for you? What benefit will it give you to have all of these devices and entry points opened up to the Internet? If the answer is little or none, perhaps you should skip them. It’s not so hard to push the “on” button on the Crock-Pot® after all. Those are meant to set and forget anyway. You probably already have enough to remember throughout the day anyway. At least you can forget your dinner.

© Copyright 2016 Stickley on Security

Stop! Can you REALLY Afford That?


Don’t buy what you can’t afford. Simple, right? Well, sort of. While restricting spending to the finite boundary of a paycheck is the foundation of sound money management, actually doing it can be extremely difficult. The reasons are manifold, but primary among them is the popular idea that living in debt is not only unavoidable, it is acceptable. However, this is a very dangerous way to view your finances.

The widespread availability of credit has made not having cash to pay for both necessary and discretionary items inconsequential. Currently about 227 million Americans hold at least one credit card, each card equipped with a typical $3,000 limit. Having immediate access to such a sum inspires many to quickly charge their way into impenetrable arrears. Though the average per-household consumer debt currently exceeds $7,300, balances in the six-figure range are not unheard of. Credit cards have morphed from their true purpose as a convenient payment tool to instant emergency account, holiday bonus, vacation fund, and salary increase all rolled into one.

It’s not just plastic that makes descending into debt so easy. Payday loan institutions have exploded onto our landscape. We can now tap into our future earnings just by writing a check. Many who use these businesses become enmeshed in a never-ending balance cycle, complete with interest rates that would make a loan shark gasp.

Having consumer debt is generally not fun. It causes stress and worry. It may also undermine your ability to save for such things as retirement and higher education.

How do we reverse the trend? Here are some ways:

  • Refute the idea that maintaining debt is inevitable and just another way of managing money.
  • Redefine yourself as a “saver” rather than a “consumer.”
  • Relish the feeling of living within, rather than beyond, your income parameters.
  • Accept that you may not be able to have everything you want (or even need) today, and that a quick cash fix won’t really bail you out of a bad situation; it will just make the following month more difficult.
  • Borrow only when you are absolutely certain you can repay the entire balance when the bill comes in.
  • Reject the idea that it is your responsibility to keep the economy rolling. It is not. You need to save for (rather than borrow from) tomorrow, so you and your family can be financially independent, prepared and secure.

If you are unable to cover your expenses, don’t get a loan—get help. We at BALANCE offer free, high-quality assistance. If you are contemplating a purchase that is outside of your means (and if you don’t know what your “means” is, you are not alone, but once again, contact us. We can work with you to develop a spending plan.), stop and think hard before you borrow for it.

Don’t buy what you can’t afford. Sometimes it really is that simple.

BALANCE, Revised January 2016

Lowering Your Property Taxes: How Falling Home Prices Can Save you Money


There is one upside to the bleak housing market. You may be able to lower your property taxes. Chances are, your property taxes are calculated as a percentage of your home’s value. However, your home’s tax-assessed value is not necessarily the same as its current market value, i.e., what you could actually sell it for.

How are the taxing authorities coming up with a value for your home, if they are not taking the current market value? That varies from place to place. Some just take the purchase price of the home. Some reassess the value every few years, either by sending out an assessor, looking at recent home sales, or plugging information into a computer program. So, it is possible that your home’s tax value is, for example, its market value in 2010, not its market value in 2016.

Paying taxes on an amount that is greater than your home’s current market value does not seem to make much sense. After all, you don’t pay income taxes on money you don’t earn. In fact, many taxing authorities recognize this and will allow you to have the tax value of your house reassessed, reducing your property taxes if the value is lowered. For example, if your property tax rate is 1.5% and a reassessment lowers your house’s tax value from $300,000 to $250,000, you will save $750 a year!

The city or county usually collects property taxes and each taxing authority has a different procedure. Some will let you apply for a reassessment year-round, while others may only allow it a few months out of the year or not at all. Likewise, in some places, you may have to prove that your home value’s is lower than the current tax assessed value by having a private assessment done or providing the recent sales of comparable homes (which can usually be obtained from a real estate agent or public records office). In other places, your city or county may do a new assessment for you. Contacting your local property tax agency is the best way to know what you need to do. Many agencies provide the paperwork that you need to fill out right on their websites.

Doing a little bit of work could save you hundreds or thousands of dollars a year in taxes, but keep in mind that the reduction is usually temporary. Most taxing authorities will raise your property taxes once the value of your house goes up. Furthermore, even if there are declines in home values, not everyone is eligible for lower property taxes. If your home’s market value is still above the tax value, you may be stuck with your current taxes. Still, for those that are eligible, the rewards are worth the effort, even if the reductions are temporary.

BALANCE, Revised January 2016

Five Steps to Smart Tax Management


What is “smart tax management”? It’s a combination of timely filing and taking advantage of everything that can reduce the amount of money you pay in taxes. While tax management does take a bit of planning, organization, and know-how, the overall financial benefit is strong.

Maximize retirement savings plans
If you have an employer-sponsored retirement savings plan (such as a 401(k), 403(b), or 457) available to you, it makes sense to use it. Since you make contributions with pre-tax dollars, your taxable income and possibly your tax rate will be lowered. Investments grow on a tax-deferred basis, so when you retire and take the money out the earnings will be taxed on your new, and usually lower, tax rate.

IRAs are part of good tax management too. Contributions to a traditional IRA are tax-deductible, and account earnings aren’t taxed until you withdraw that money at age 59.5. There are income restrictions, though, and if you’re an active participant in an employer-sponsored retirement savings plan you can’t deduct your contributions. While contributions to a Roth IRA are always non-deductible, the earnings are tax-free.

Use your employee benefits
If you are an employee, your company may offer benefits that can reduce your taxable income and therefore your tax liability (the amount you owe):

Flexible Spending Accounts (FSAs). Medical FSAs allow you to set aside money for common health-related costs, and dependent care accounts let you to save for work-related child or dependent care expenses. For both, the money is taken out through payroll deductions on a pretax basis.
Transportation plans. These plans allow you to use pretax dollars (and reduce your taxable income) to pay for public transit, vanpooling, or parking.

Pay the right amount
You know you are paying the correct amount of taxes if you neither owe taxes nor receive a large tax refund. While a refund may seem positive, it is really not making the most of your income during the year. For example, a $2,000 tax refund translates into $166 that you don’t have in your pocket every month. On the other hand, if you owe and can’t pay the entire sum, you’ll have to pay interest and possibly penalties, which will only add to your tax debt.

Make the most of your adjustments, deductions and credits
Tax adjustments and deduction are expenses that you can subtract from your income, resulting in a lower taxable income. Common examples of these are:

  • An exemption amount for you, your spouse, each child, and any other qualified dependents, and certain disabilities
  • Mortgage interest paid on your primary residence
  • Equity loan or line of credit interest
  • Charitable contributions to eligible organizations
  • Certain business expenses
  • Union and professional dues
  • Some medical expenses
  • The cost of tax advice, software, and books
  • Depreciation of business assets
  • Some work uniforms and clothing
  • Moving expenses, in some cases
  • Some educational expenses

A tax credit is a dollar-for-dollar reduction in what you would owe for taxes. For example, if you qualify for a tax credit of $1000, you would be able to subtract that amount from your total tax liability. Common examples of tax credits are:

  • Earned income credit. This credit reduces the tax burden for lower-income taxpayers.
  • Education-related credits. The American Opportunity credit can be used for the expenses that you incur in the first four years of higher education. The Lifetime Learning credit applies to tuition costs for undergraduates, graduates, and those improving job skills through a training program.
  • Child-related credits. These include credit for child and dependent care expenses, the child tax credit, and the adoption credit.

File on time – whether you have the money or not
Filing your tax return by April 15 (or August 15 if you file an extension) is important. The drawbacks of not filing include:

  • Your tax bill could increase by 25%, due to penalties, or interest charges on balances owed.
  • Additional penalties and/or criminal prosecution if you continue to not file (considered tax evasion).
  • Losing the refund, if there’s one due (typically after 3 years).

Even if you don’t have the money to pay, file anyway. Programs are available to help you avoid many of the harsher penalties.

Properly managing your taxes can greatly reduce the amount of money you pay in taxes and put more money into your pocket. After all, why pay more if you don’t have to?


BALANCE, Revised January 2016

Changes to the FAFSA Make It Easier to Apply for Student Aid


Do you have a high school senior who is knee deep in the college admissions process? Writing essays and filling out forms can be a stressful process for students, just as covering the cost of college can be for parents. This year, the Free Application for Federal Student Aid (FAFSA) submission period opened on October 1 – three months earlier than in previous years.

That extra time to get financial information in order could be a big benefit to many families. Don’t put off completing the application, sending the FAFSA in early could increase your financial aid package and give you more time to compare aid offers from different schools.

Understanding this form of student aid. The FAFSA determines your family’s expected contribution to the cost of higher education and serves as an application for federal financial aid, such as student loans, work study and the Pell Grant. It’s also used by some state agencies and schools to determine aid, including merit-based awards, and some scholarships require applicants fill out the FAFSA.

Current and prospective college students must complete a new FAFSA each year. Dependent children will need their parents’ financial information to complete the form, and parents may want to work on the application alongside their child.

Most students complete the FAFSA online at While it can be complicated, once you have all the paperwork in order, the application could take less than 30 minutes.

New changes in tax requirements make filling out the FAFSA easier. The earlier submission period isn’t the only difference for the FAFSA this year, there’s also a change in the tax information you need to submit. You’ll now report your income based on the student’s and parents’ tax return from two years before the school term begins. Your 2015 tax return for the 2017-2018 FAFSA for example.

You might be able to electronically transfer your tax return information to your FAFSA using the Internal Revenue Service’s Data Retrieval Tool. If you’re unable or don’t want to use the tool and don’t have a copy of your 2015 tax return, you can order a free tax transcript of your return online, by mail or by calling 1-800-908-9946.

The 2017-2018 FAFSA requires that applicants use their 2015 tax return information even if there have been significant changes in your financial situation since then. After submitting, applicants can contact schools’ financial aid offices to make adjustments.

Pay close attention when filling out the FAFSA because some of the questions, such as those pertaining to current assets, are based on when you fill out the form, not your tax return.

Submitting your application early offers several advantages. The federal deadline for the 2017-2018 FAFSA is June 30, 2018, but don’t wait that long to complete your application. States and colleges have deadlines of their own, and your eligibility for aid can depend on meeting these deadlines.

Some states and schools also distribute aid on a first come, first served basis. Submitting your application early can help ensure you’ll receive the aid you’re eligible for before the funds run out.

Prospective students who submit the FAFSA early might receive estimated financial aid offers from schools earlier as a result. This gives families more time to compare the offers before making the big decision on which school to attend.

You can list up to 10 schools on the FAFSA, including schools you’re considering but haven’t applied to yet. Submitting your info holds your place in line for aid, and you can switch out schools later if you want. You’ll also receive a Student Aid Report (SAR) after submitting the FAFSA that you can send to additional schools.

Many states require you send your FAFSA to at least one in-state school to be eligible for state grants, and some states require you list a state school in the first or second position to be eligible. The Department of Education has a list of each state’s requirements.

Bottom line. The FAFSA’s submission period opens up three months earlier than in previous years. Sending your FAFSA in early could increase your eligibility for financial aid and give you more time to compare aid offers from schools.

By Nathaniel Sillin