Money Management Tips For Couples

Having to manage personal finances is one of the stressful realities that makes up a part of normal daily living. As a single person managing his or her finances, he or she doesn’t have to be concerned with coordinating financial management efforts with anyone else. However, if the scenario involves a couple, such as a husband and wife, an entirely new dynamic is introduced. In theory, at least, there should be some sense of coordination between both members of the couple. What affects one member of the couple affects the other member of the couple, right?

If you and your partner are like most couples, chances are, you fight about money. Numerous studies have shown that money is the No. 1 reason why couples argue — and many of the recently divorced say those battles were the main reason why they untied the knot.

We’ll begin with the following quick points, as noted by Key, that address a number of financial mistakes that partners can make that create serious angst in their relationship:

1 - Merging The Finances

The Wrong Approach: United we stand, divided we bank (i.e. separate bank accounts).

The Right Approach: It's yours, mine and ours (i.e. share the bank account).

2 - Dealing With Debt

The Wrong Approach: Your debt will ruin us; you must find a way to pay it off.

The Right Approach: It's our debt: Let's decide how to pay it off together.

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3 - Keeping Spending In Check

The Wrong Approach: I'm a saver and you're a spender. That's the problem.

The Right Approach: We both spend, but on different things. Let's budget.

4 - Investing Wisely

The Wrong Approach: You're a risk-taker, I'm risk-averse. Hands off our retirement savings.

The Right Approach: Let's think in time frames and take as much risk as our goals allow.

5 - Keeping Money Secrets

The Wrong Approach: What my spouse doesn't know will never hurt him/her.

The Right Approach: Big financial secrets can ruin a marriage.

6 - Emergency Planning

The Wrong Approach: We're fine. We don't need to worry about money.

The Right Approach: Anything could happen. Let's plan for emergencies.

Examples of Financial Fights All Couples Have

In a piece by CNBC on the topic, the following examples of conflicts provide more insight about problems to avoid:

1 - Risk Taker vs Risk Avoider

One of you is more comfortable with the ups and downs of the stock market. If your spouse is intent on taking more risk than you're comfortable with - by putting more money into stocks, or investing in start-ups or buying Bitcoin - agree on a small percentage of your money that can be used in that way (no more than 5 to 10 percent) and a similar amount that you can save or invest as you wish. Then stick to your plan with the rest.

2 - Lending or Giving Money to Family and Friends

Forget about loaning money to friends and family in the majority of cases. If you can't afford to do it as a gift, don't do it at all - it won't end well. If you've already done it and you want to preserve the relationship, tell the recipient you're forgiving the debt, but that you don't want to be asked for more in the future.

In conclusion, the above points make it clear that good communication and teamwork is the real key to conflict-free financial partnership in marriage. A health dose of humility, patience, and selflessness will go a long way too because, after all, no one is perfect.

To know more visit: https://www.compasspointcpa.com

Common Tax Time Mistakes to Avoid

“And they’re off!” If you’ve ever been to a horse race, the phrase should sound familiar. Those words apply now: the rush to file a complete and accurate tax return on time has begun.

But, as The Muse warns, the more you rush, tax pros say, the more you’re likely to make mistakes that can cost you in the form of penalties, a delay in getting your refund, and even a higher risk of an audit. Avoiding the following seven mistakes will contribute to keeping your return error free.

1. Math Miscalculations

As BankRate notes, the most common error on tax returns, year after year, is bad math. Mistakes in arithmetic or in transferring figures from one schedule to another will get you an immediate correction notice. Math mistakes also can reduce your tax refund or result in you owing more than you thought.

Using a tax-software program to file your return can help reduce math errors. But you still have to make sure your initial numbers are correct.

In addition, The Muse notes the following three points about overlooking income, forgetting to double-check information, and failing to itemize deductions.

2. Overlooking Income

The IRS requires you to claim all income, regardless of whether or not you received a W-2 or 1099 from an employer. Failing to disclose income is a common issue for last-minute filers—and an oversight the IRS is keen to uncover. And once the IRS realizes you owe more, you’ll be on the hook for the extra tax, plus penalties and interest. So even if you only worked a side job for a day, the income you received is still taxable, and you must claim it on your return.

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3. Forgetting to Double-Check Numbers and Signatures

One of the most common tax mistakes, according to the IRS, is an incorrect Social Security number, so make it a point to check that you haven’t accidentally transposed the digits. And if you’ve opted for a direct deposit refund, you should also make sure that your bank account information is accurate.

4. Failing to Itemize Deductions

Taking the standard deduction may seem like the simplest and easiest route when doing taxes, especially if they’re pressed for time. But itemizing your deductions can sometimes save you a bundle.

5. Inaccurate Account Numbers

As this expert notes, you should always double-check your bank account and routing numbers if you want your refund direct deposited or if you’re making an electronic tax payment. Entering incorrect information can delay your refund or result in penalties and interest on late payments.

6. Changes in Your Filing Status

In addition, as Accounting Today observes, If the taxpayer was married or divorced or their household situation otherwise changed, it may need to be reflected in their official filing status.

7. Tax Deductible Charitable Contributions

The taxpayer may be able to deduct the value of their contributions when itemizing their return. Make sure to list all charitable contributions and check the math to see if the overall value is correct.

According to The Muse's interview with Koreen Jervis, an enrolled tax agent with Korjé Tax Professionals in New York City, when in doubt, “find a good preparer.” Ask for an extension, and then seek assistance from a skilled tax preparer because there are situations in which even the best tax software will not help.

To know more visit: https://www.compasspointcpa.com

Ten Things You Need to Know About Passport Restrictions on Delinquent Taxpayers

Since 2015, when the Fixing American’s Surface Transportation Act was passed by Congress, world travelers who owe the IRS money have found that it’s no fun to owe a tax debt. In fact, it can ground any and all international travel plans indefinitely.

As noted by Jim Buttonow of Accounting Today:

…FAST Act is Section 7345 of the Internal Revenue Code, which requires the IRS to provide information to the U.S. State Department about people who owe “seriously delinquent tax debt.” Then, the State Department can deny, revoke or limit the ability of these individuals to use their passports – until they are back in good standing with the IRS.

The following 10 Q & A points about the FAST Act, also from Buttonow’s report linked above, are quoted and summarized in a more abbreviated form so that you can quickly digest the main points of how the FAST Act could affect you if you owe taxes:

1. What is the new passport-restriction program (IRC Section 7345)?

IRC Section 7345 requires the IRS to identify and “certify” individuals who have “seriously delinquent tax debt,” and provide this certification to the State Department. In turn, the State Department can essentially limit or completely stop the individual’s travel plans outside the US until the would-be traveler gets into good standing with the IRS.

2. Why did Congress create passport restrictions?

In 2011, the Government Accountability Office issued a report that examined the potential for using passports to increase tax-debt collection. The report found that 224,000 people who owed collectively more $5.8 billion in unpaid federal taxes received passports in 2008.

The report recommended that Congress enable a more coordinated effort between the IRS and State Department to go after these unpaid taxes, using passports as leverage. The report received a lot of national press, and the link between federal tax debt collection and passports became law in 2015.

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3. Who is Affected?

The passport restriction will affect people who travel internationally and owe seriously delinquent tax debt. This includes people with passports and those applying for or renewing passports.

Who is an individual with seriously delinquent tax debt? Section 7345 defines this person as owing a legally enforceable tax liability of more than $50,000 (unpaid taxes, penalties and interest combined), with:

• A lien filed, and all administrative remedies for lien relief have lapsed or been denied;
• or, a levy issued.

There are certain exceptions. The IRS won’t consider people in the following situations to be individuals with seriously delinquent tax debt, because these people are in good standing with the IRS:

• People who are in an IRS installment agreement to pay their taxes.
• People who have settled their debt through an offer in compromise or Justice Department agreement. 
• People who appeal a levy through an IRS collection due process hearing. 
• People who request innocent spouse relief (Form 8857). 

Based on this list of exceptions, the way to avoid being certified by the IRS as an individual with seriously delinquent tax debt is to get into an agreement with the IRS to pay the balance.

4. What will happen to the person who owes seriously delinquent tax debt?

Before the State Department revokes a passport, the State Department may limit the passport so that the individual can only travel back to the United States. It’s unclear how the State Department will use its discretion on limiting and revoking passports.

5. How can taxpayers get their passport restrictions lifted?

To get out of the passport restriction, individuals must get back into good standing with the IRS. For most taxpayers, that will mean paying the entire tax bill or, more likely, setting up an installment agreement with the IRS.

6. Can taxpayers just pay the balance to under $50,000 to remove the certification and passport restrictions?

The short answer from the IRS is no. Just reducing the amount under $50,000 will not decertify the taxpayer. 

7. Can taxpayers appeal their seriously delinquent tax debt certification?

Under Section 7345(e), taxpayers can appeal their status in federal district court or U.S. Tax Court. But the taxpayers’ passports will remain restricted while they appeal. For taxpayers who are surprised by their passport restrictions when they try to travel, the best way to expedite travel is to obtain a quick installment agreement.

8. What if taxpayers don’t think they owe the tax?

To get immediate relief, the only quick option is for taxpayers to pay the balance, or more likely, set up an installment agreement, and contest the tax later with the IRS.

9. Is there an expedited process to remove passport restrictions?

Right now, there’s no provision to expedite removal of passport restrictions after a taxpayer gets in good standing with the IRS. As the law is implemented, look for the IRS and the State Department to develop expedited procedures to relieve taxpayer burden.

10. What can a seriously delinquent tax debtor do to avoid passport restrictions?

Basically, taxpayers can avoid passport restrictions by meeting an exception outlined above – all of which mean getting into good standing with the IRS.

As Buttonow makes clear in his report: don’t assume it’s safe to make travel plans if you owe taxes. There are problematic ramifications of not being in good standing with the IRS when you intend to use your passport to travel outside the country.

For this reason, we highly recommend you meet with your CPA as part of your pre-trip planning process to put in place payment arrangements with the IRS sufficiently in advance of taking your trip.

To know more visit: https://www.compasspointcpa.com

Non-Dischargeable Debts In Bankruptcy

Last month we featured an article that provided a general overview of the types of bankruptcy available to debtors who have hit hard financial times. We addressed the fact that despite the purpose of bankruptcy, that it is supposed to be a mechanism for giving the debtor a chance for a “fresh start,” the ramifications of declaring bankruptcy are far reaching and drastic, to say the least.

The article made the following points:

Debtors facing foreclosure and/or excessive debts are too often under the misconception that declaring bankruptcy is the perfect solution to these problems. Bankruptcy stays put on your credit record for quite a long time making advancing in life incredibly difficult. In addition, the updated bankruptcy law, passed in 2005, includes severe restrictions that make it more complicated to file for bankruptcy.

What this follow-up article hopes to achieve is to shed some light on the types of debts that are not eligible to be discharged in bankruptcy. As noted by The Simple Dollar, it’s important to understand that bankruptcy is not the cure-all to your financial problems, and that not all debts are eligible to be discharged in bankruptcy. For example, If you owe back taxes or child support, bankruptcy will not be able to help you.

Simply put: non-dischargeable debts are debts that don’t go away when you file for bankruptcy.

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As The Bankruptcy Site notes, neither Chapter 7 nor Chapter 13 gives you a perfectly clean slate. Yes, many kinds of debts can be wiped clean, but in both scenarios, some debts cannot be eliminated.

Lawyers.com gives the following list of debts that will not magically disappear when you declare bankruptcy:

Debts Incurred After You File Bankruptcy

Any debt you have before you file for bankruptcy will go away (get wiped out) as long as it’s dischargeable. But, after you file—even while the bankruptcy case is still pending—debts you incur remain yours.

Secured Loans

A common question potential bankruptcy filers ask is whether it’s possible to keep a house or car after filing. The answer is yes—as long as you continue to make the payments. Mortgages and car payments are common examples of what are called “secured” debts. Any time you promise to give back the purchased property if you don’t make your payments, you have a secured loan. Secured loans are non-dischargeable in bankruptcy (unless you give the property back).

Unsecured Priority Debts

Bankruptcy wipes out most unsecured debt, but it doesn’t eliminate “priority” unsecured debt. There’s almost no way to get rid of priority debts. They also get paid before other unsecured debts if money is available to pay creditors. Here are some examples of unsecured priority debts.

• Domestic Support Obligations

Your spousal support or child support payments aren’t dischargeable in bankruptcy. Child and spousal support generally encompass amounts necessary for the child or former spouse to meet basic living requirements. Money owed as a result of a marital property division is different than this kind of support—in some states it’s dischargeable.

• Income Taxes

Bankruptcy crosses lots of minds when the tax man cometh. While it isn’t impossible to discharge unpaid income tax debt, it’s tough to meet the requirements.

• Other Government Debts

Like taxes, many debts owed to the government (such as fines and penalties) are going to stay with you till the grave. But not all. If you aren’t sure how a given government debt will be treated, a bankruptcy attorney can assist you.

• Student Loans

Even though student loans aren’t “priority” unsecured debts, you can’t get rid of them in bankruptcy—that is, unless you can demonstrate that you have an “undue hardship.” A disability that prevents you from working can qualify as an undue hardship.

Debt From Fraud, False Pretenses, and False Representation

Trying to work the system can come at a steep price. One consequence might be your debt not being discharged. The trick here is that debts resulting from fraud, false pretenses, or false representation are dischargeable unless your creditor files a lawsuit in the bankruptcy case, called an “adversary proceeding.”

Debts You Didn’t List in Your Asset Case

Contrary to common belief, “not including a debt in bankruptcy” isn’t an option. You’re required to list all of your debts when you file for bankruptcy. If your case is an asset case (one where there is money to distribute to creditors), and you fail to list a debt, the omitted debt is non-dischargeable.

Examples of Other Debts That Are Never Discharged

• Child support and alimony
• Fines, penalties, and restitution you owe for breaking the law
• Debts arising out of someone's death or injury as a result of your intoxicated driving.

Between the discussion in last month’s and the current month’s articles on bankruptcy, it should be obvious that we are dealing with subject matter that is highly complex.

The bottom-line action point, however, is simple: If you happen to be entertaining the idea of filing bankruptcy, we recommend you engage the counsel of on attorney who specializes in bankruptcy matters.

To know more visit: https://www.compasspointcpa.com

Why Sell or Buy a Home in Winter?

Why would any article discuss how to sell a home in winter? Besides some surprising strategic rationale (which we’ll discuss in a moment), the reasons are simple:

• Your home is likely the most significant piece of your investment portfolio
• You will eventually purchase and sell your home several times
• You should be knowledgeable about selling your home at any time of year

But believe it or not, research shows that listing your home during the winter season might be the smart thing to do for both the seller and buyer.

Conventional “wisdom” would argue that the winter season is the absolute worst time to list and house hunt. Spring may still be peak home-shopping season, since most families want to move when the kids are out of school, but it actually pays to list in the winter, when buyers tend to have more urgency.

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A study by online brokerage Redfin found that average sellers net more above asking price during the months of December, January, February, and March than they do from June through November, even in cold-weather cities like Boston and Chicago. And homes listed in winter sold faster than those posted in spring.

In other words, according to the Redfin study, if you’re waiting until spring to put your home on the market, you’re going to want to take a look at the numbers. Redfin analyzed homes listed from March 22, 2011 through March 21, 2013. The study discovered that those listed in winter have a “9 percentage point greater likelihood of selling, sell a week faster, and sell for 1.2 percentage points more relative to list price than homes listed in any other season.”

Buyers, too, can benefit from house hunting in winter, as this Yahoo writer notes. The pace and competition for a home tends to be less during this time period. In addition, it's easier in the winter months to assess the quality of insulation and heating, or to tell if the basement gets wet or if the home doesn't get enough light. And, of course, the buyer could well find the perfect home in winter even if there are fewer homes on the market.

In addition, a buyer can benefit from a winter search because, more often than not, the seller is eager to make a deal, as noted by Debbie DiMaggio, a Realtor and author in Piedmont, California, whom Yahoo interviewed: "Typically, when homes are listed between Thanksgiving and the New Year, it signals that the seller needs to sell, and thus the buyer may have more leverage.”

Sam Heskel, the president of an appraisal firm in Brooklyn, Nadlan Valuation, notes that buyers tend to be more serious in the winter: "Sellers typically find that off-season buyers may be more focused and ready to buy a home," he says.

In conclusion, research and market studies seem to support the observation that there are many opportunities in the real estate market throughout the year including the winter months.

To know more visit: https://www.compasspointcpa.com