Alternatives to Credit Cards
Are you one of those individuals who only ever got a credit card for the convenience of being able to pay without money, or because you weren't informed of any other simple way to borrow money. Millions of us are, thanks to the inevitable advertising of the credit card industry, and few individuals realise just how many alternatives to credit cards there are. Let's take a look at a few.
Debit Cards.
Debit cards are frequently used in numerous European countries, but are more or less unknown of elsewhere. Basically, they're just like credit cards and are accepted everywhere credit cards are accepted, the single distinction is that they take any cash you pay out straight from your bank account, instead of you getting a invoice at the end of the month. You should be informed, though, that you aren't as well-protected from fraud with a debit card as you would be with a credit card.
Pre-Paid Credit Cards.
These are cards that work similar to credit cards, except that you can't keep a negative balance ' you have to put cash on the card beforehand. That means that you 'top-up' the card, similar to using a cell phone. This is beneficial if you wish to understand how much you're spending, not to mention that you can even pass the cards to children. They're also safer than debit cards, since someone who stole the card could only spend whatever cash was on it at the time.
Bank Overdrafts.
A adequate bank overdraft, used together with a credit card, can be a far superior way of borrowing cash than using a credit card. Your overdraft limit is set by the bank according to how much you gets paid into your account each month, and you are not required to pay it off until you want to.
Basically, it just gives your account the ability to go into minus numbers, if you want it to. Numerous banks charge somewhat high interest rates for overdrafts, but seldom as high as a credit card ' and they will give much superior rates for satisfactory customers.
Real Loans.
When you're buying one big item at a set amount (like a car), or you're going to spend all the cash on one kind of item (home improvements, for example), it's worth budgeting it all out and going to a bank or another loan company. They'll be able to loan you the cash at a much better rate than a credit card would, merely because they understand why you're taking the loan and can set regular monthly payments for you to repay it.
Credit Unions.
Credit unions are similar to banks, just more local. They are co-operative, owned by their members and run by the community, and are a great place to borrow money. This is because there are limits in law on how much interest credit unions can charge, and they are not required to make a profit for owners or shareholders, because they don't have any. It's well worth checking if there's one in your area.
REVERSE MORTGAGE
REVERSE MORTGAGE
Reverse Mortgage involves getting money by converting the home value into a tax-free income without selling the home. This kind of mortgage enables the borrower to still remain the owner of the house just like he was when he had a forward mortgage and get lump sum amount without much of difficulty. When applying for the Reverse Mortgage program its essential to do some research work about the bank’s credibility as not all banks are not safe and sound to apply in! One should always go through the quotations and read the mortgage documents carefully so as to avoid any kind of confusion. When applying for Reverse Mortgage program one needs to fill in the registration form offered by the banks. People need to show documents and papers, and fulfill certain criteria to borrow the money. Not all can apply for such financial program, i.e. people with a poor credit history might not be eligible for this kind of program at all places. One can apply for Reverse Mortgage program for education, home, car and other purposes. Like the Forward Mortgage this loan also needs to be paid back within the grace period. Therefore before applying for such a program it is very important on the part of the borrower to make sure that he can pay back the amount.
Reverse Mortgage involves getting money by converting the home value into a tax-free income without selling the home. This kind of mortgage enables the borrower to still remain the owner of the house just like he was when he had a forward mortgage and get lump sum amount without much of difficulty. When applying for the Reverse Mortgage program its essential to do some research work about the bank’s credibility as not all banks are not safe and sound to apply in! One should always go through the quotations and read the mortgage documents carefully so as to avoid any kind of confusion. When applying for Reverse Mortgage program one needs to fill in the registration form offered by the banks. People need to show documents and papers, and fulfill certain criteria to borrow the money. Not all can apply for such financial program, i.e. people with a poor credit history might not be eligible for this kind of program at all places. One can apply for Reverse Mortgage program for education, home, car and other purposes. Like the Forward Mortgage this loan also needs to be paid back within the grace period. Therefore before applying for such a program it is very important on the part of the borrower to make sure that he can pay back the amount.
credit score
Credit counseling the potential help to repair your credit score
It is a well known fact that the credit score of as person is one of the most important concern of any person. In fact the credit score is the factor on which depends the ability of a person to get loans like a car loan, house loan or any other such loans. It also determines the ability of a person to get credit cards. Therefore it is a very serious problem if your credit score falls down for some reason. Besides that it should also be kept in mind that if such a situation occurs in your life the wisest thing to do is to repair your credit score as soon as possible.
Now the question is on how to repair the credit score. In fact this is not much of a problem these days as there are several means to boost up your credit score and bring your economic status back to stability if you are not already too late. However, taking the necessary precautions is the most essential factor. But it is a fact that there are situations when the downfall of the credit score becomes inevitable. These days there are several credit repair websites available who claim to provide the best credit repair solutions. But in this respect it is essential to note that among the thousands of such sites the choice should be made very carefully so that the best results can be achieved for repairing your credit score.
It should always be kept in mind while making the choice of the credit repair services that most of the sites offering credit repair services are just a waste of your money. Along with that it is also much more helpful to get the help of credit counseling. As it is commonly known that the credit counseling agencies are generally non-profit organizations who provide their services to help the debtors to get out of their debt condition. But in this context too the choice of the credit counseling agency is a very important factor. In fact the point is that among the numerous credit counseling organizations available these days some of them are legitimate organizations while in case of others it is nothing more than just waste of money only worsening your debt condition. Some of the these agencies may even try to cheat your money. Therefore it is essential to stay away from such organizations to remain safe.
As stated earlier the choice of the credit counseling agencies should always be done with proper care and only after you have gathered proper information on every single detail that may crop up in your mind.
First of all the most important thing to note is the services they offer. It is better to choose such an agency that offers the best counseling in all the areas of personal finance that are essentially needed to manage your money and resolve your debts effectively. Another important thing to note while making the choice is to gather proper information on the fees structure. In fact it is important that you enquire about all the fees involved and specifically verify whether the fees quoted cover all the necessary fees required. This is essential to avoid any potential hidden costs charged by the company after you have signed up with the agency.
It is a well known fact that the credit score of as person is one of the most important concern of any person. In fact the credit score is the factor on which depends the ability of a person to get loans like a car loan, house loan or any other such loans. It also determines the ability of a person to get credit cards. Therefore it is a very serious problem if your credit score falls down for some reason. Besides that it should also be kept in mind that if such a situation occurs in your life the wisest thing to do is to repair your credit score as soon as possible.
Now the question is on how to repair the credit score. In fact this is not much of a problem these days as there are several means to boost up your credit score and bring your economic status back to stability if you are not already too late. However, taking the necessary precautions is the most essential factor. But it is a fact that there are situations when the downfall of the credit score becomes inevitable. These days there are several credit repair websites available who claim to provide the best credit repair solutions. But in this respect it is essential to note that among the thousands of such sites the choice should be made very carefully so that the best results can be achieved for repairing your credit score.
It should always be kept in mind while making the choice of the credit repair services that most of the sites offering credit repair services are just a waste of your money. Along with that it is also much more helpful to get the help of credit counseling. As it is commonly known that the credit counseling agencies are generally non-profit organizations who provide their services to help the debtors to get out of their debt condition. But in this context too the choice of the credit counseling agency is a very important factor. In fact the point is that among the numerous credit counseling organizations available these days some of them are legitimate organizations while in case of others it is nothing more than just waste of money only worsening your debt condition. Some of the these agencies may even try to cheat your money. Therefore it is essential to stay away from such organizations to remain safe.
As stated earlier the choice of the credit counseling agencies should always be done with proper care and only after you have gathered proper information on every single detail that may crop up in your mind.
First of all the most important thing to note is the services they offer. It is better to choose such an agency that offers the best counseling in all the areas of personal finance that are essentially needed to manage your money and resolve your debts effectively. Another important thing to note while making the choice is to gather proper information on the fees structure. In fact it is important that you enquire about all the fees involved and specifically verify whether the fees quoted cover all the necessary fees required. This is essential to avoid any potential hidden costs charged by the company after you have signed up with the agency.
Critical Rules
8 Critical Rules For Credit Card Users
8 Critical Rules For Credit Card Users
The temptations presented by credit cards are many and while using different cards to tide over tight situations may provide temporary relief in the long run you will find that most of your available funds go towards paying credit card interests and that too at different rates. Once in the deep waters of debt there are just two options, to swim to safety steadily or to drown. Consider consolidating credit card debt and to stop utilizing your cards until you are out of trouble. You must also consider ways in which to curtail expenses and find ways of increasing your income. Getting out of a debt trap has certain important rules or steps: 1. Once you have worked out a plan carry out credit card balance transfers taking into consideration overlap periods and interest calculation cycles for each card. Avoid paying more interest than you need to by notifying the banks/institutions well in advance so that they have enough time to post or carry out your instructions. 2. Utilize offers like 0 balance credit card plans and apply well before the scheme expires. 3. Once you have chosen a credit card where you intend to transfer all balances, check through their offer carefully. Many cards have hidden charges in fine print which you may overlook. Make sure that the 0 APR is exactly what it is. 4. Choose a card to make a transfer balance with care. Do a comparison shopping for APR. And try and select just one low interest card to consolidate debt. If you are careful you will save a lot of money. 5. Verify the efficacy and dependability of the card. Always check carefully never jump into a commitment without being sure you have made the right choice. 6. Keep track of when the 0% interest period finishes and try and pay back the amount owed within the period. Otherwise scout around for another scheme and transfer balance owed well before the last date. While some cards offer a 0% rate for six months others make the scheme valid for a year after which the interest rate is raised once again to market levels. 7. A balance transfer helps you avoid paying high and varied interest rates. So you must sit down and figure out what the interest rates you are paying are and how much is owed to different cards. The consolidation must benefit you and you must avoid paying out large amounts as transaction fees. 8. Always try and move as much as you can. Ask the low interest or zero interest credit card company what is the maximum amount they will accept. To save money you need to transfer as much debt as possible from a high interest to a low one. The primary focus must be to get out of debt. And if you are clever you will find a credit card that offers you the greatest advantage. Remember if you pay 0 % interest then even the amount you would have otherwise paid as interest can be adjusted against the principal owed. However while you are undertaking debt consolidation you must lock away all cards and not run up additional debt. To turn your life around you need to curtail expenses and live a budgeted life. A few tips: take away credit cards from all family members; cancel as many cards as you can; when you go to a mall or shopping district leave your cards at home and take along a friend who will discourage temptation and impulse buying. When tempted think do I really need x, y, or z? When am I likely to use this. If the answer is not in the near future don’t buy it. Discipline is the only path to living a debt free existence.
8 Critical Rules For Credit Card Users
The temptations presented by credit cards are many and while using different cards to tide over tight situations may provide temporary relief in the long run you will find that most of your available funds go towards paying credit card interests and that too at different rates. Once in the deep waters of debt there are just two options, to swim to safety steadily or to drown. Consider consolidating credit card debt and to stop utilizing your cards until you are out of trouble. You must also consider ways in which to curtail expenses and find ways of increasing your income. Getting out of a debt trap has certain important rules or steps: 1. Once you have worked out a plan carry out credit card balance transfers taking into consideration overlap periods and interest calculation cycles for each card. Avoid paying more interest than you need to by notifying the banks/institutions well in advance so that they have enough time to post or carry out your instructions. 2. Utilize offers like 0 balance credit card plans and apply well before the scheme expires. 3. Once you have chosen a credit card where you intend to transfer all balances, check through their offer carefully. Many cards have hidden charges in fine print which you may overlook. Make sure that the 0 APR is exactly what it is. 4. Choose a card to make a transfer balance with care. Do a comparison shopping for APR. And try and select just one low interest card to consolidate debt. If you are careful you will save a lot of money. 5. Verify the efficacy and dependability of the card. Always check carefully never jump into a commitment without being sure you have made the right choice. 6. Keep track of when the 0% interest period finishes and try and pay back the amount owed within the period. Otherwise scout around for another scheme and transfer balance owed well before the last date. While some cards offer a 0% rate for six months others make the scheme valid for a year after which the interest rate is raised once again to market levels. 7. A balance transfer helps you avoid paying high and varied interest rates. So you must sit down and figure out what the interest rates you are paying are and how much is owed to different cards. The consolidation must benefit you and you must avoid paying out large amounts as transaction fees. 8. Always try and move as much as you can. Ask the low interest or zero interest credit card company what is the maximum amount they will accept. To save money you need to transfer as much debt as possible from a high interest to a low one. The primary focus must be to get out of debt. And if you are clever you will find a credit card that offers you the greatest advantage. Remember if you pay 0 % interest then even the amount you would have otherwise paid as interest can be adjusted against the principal owed. However while you are undertaking debt consolidation you must lock away all cards and not run up additional debt. To turn your life around you need to curtail expenses and live a budgeted life. A few tips: take away credit cards from all family members; cancel as many cards as you can; when you go to a mall or shopping district leave your cards at home and take along a friend who will discourage temptation and impulse buying. When tempted think do I really need x, y, or z? When am I likely to use this. If the answer is not in the near future don’t buy it. Discipline is the only path to living a debt free existence.
1099 tax
Which 1099 Tax Forms concern you?t’s tax time again and you must be sure to receive all the necessary forms. What is a 1099 tax form and who gets one? A Tax Form 1099 is used to report income other than wages, salaries and tips. Here of late, this term is used more and more frequently as many employers are opting to use contract labor versus hiring employees, who can turn out to be quite expensive when you factor in the insurance, payroll taxes, and other possible liability. If you had an independent contractor perform $600 more of services to you or your business, you are required by law to complete and deliver a 1099 form to that person or business. This article will take a look at the different 1099 tax forms, their purpose, who can receive one, and why.
The 1099 tax forms, if you are the recipient, should be furnished to you by January 31, 2006, and must be furnished and filed by the company furnishing the form no later than February 28, 2006. But which 1099 form will you receive?
If you are classified as an independent contractor (i.e. attorney, guest speaker, performer, physician, rent, etc.), or you receive income that is classified as non-employee income, or miscellaneous income (you were paid $600 or more) you will receive what is known as a 1099-Misc.; these are the information returns most often received for contract for-hire work, leased workers, or general contractor payments for which there is not a direct sale as a merchant to a consumer.
The other most often used 1099 tax form would come as a 1099-Int; this is a 1099 received for interest income purposes; whether the income be from a bank or any lending institution, or from the sale of a seller financed mortgage, the recipient of any income from interest will receive a 1099-Int. You would receive a statement that summarizes your interest income for that year. This form is also used to report other tax items related to your interest income such as early withdrawal penalties, federal tax withheld and foreign tax paid. A close relative of the 1009-Int is the 1099-OID. This is an information return provided when you receive an original issue discount, usually from transactions related to mortgages served by the Federal Housing Authority.
The 1099-Div tax form is used often for investors. This tax form is sent to investors by brokers, mutual funds or the investment company. The form is a record of all taxable gains and dividends paid to an investor. The amounts that are stated on the form represent amounts the fund companies are attributing to each investor’s investment return for the year. The amounts on the 1099-Div could contain ordinary dividends, total capital gains, qualified dividends, foreign tax paid, federal income tax withheld and foreign source income.
Another 1099 can come as a 1099-B for barter exchange transactions. What does this mean? It means that instead of monetary payment, you received a bartered form of payment, an exchange of something other than money, with value attached in order to pay for a service.
Other less used 1099’s are 1099-A, 1099-C, 1099-CAP, 1099-LTC, 1099-Q, 1099-R, and 1099-SA; the R, Q and SA are for retirement and social security payments, and are received by many retired individuals. The payments from IRAs, MSAs, Coverdell ESAs, and HSAs are reported on these 1099s. The 1099-A is received is there has been an acquisition of secured property, or an abandonment of secured property.
1099-C is received if there is a cancellation of debt, as from a bankruptcy proceeding, credit card default, or other failure of a maker to make good on a debt that the lender or seller can use as a tax deduction. The 1099-CAP is a 1099 used to report significant changes in corporate control and capital structure. What does this mean in laymen’s terms? If you and several other individuals are in business together, as an incorporated entity, and 3 of you buyout another individual, you will be required to furnish that individual with a 1099CAP so that the individual reports any income or gain from the capital sale of stock.
A 1099 tax form that we’ve not seen very much until recently, but one that I’m sure we’ll see much more of in the not too distant future is the 1099-LTC. Long-term care and accelerated death benefits are filed on this 1099; with a larger segment of our population aging, this segment also known as the “baby boomers†will make more use of long-term care insurance and payouts, and many of them will receive these types of 1099s.
Although these are most often forms of taxable income to the recipient, this is not always a steadfast rule. For many of the older citizens, for individuals receiving the tax returns as part of a discounted program through the government, and for certain other situations, these are only information tax returns that do not result in added income tax liability. For the rest of us, however, a 1099 tax form usually means we have increased our income tax liability.
The 1099 tax forms, if you are the recipient, should be furnished to you by January 31, 2006, and must be furnished and filed by the company furnishing the form no later than February 28, 2006. But which 1099 form will you receive?
If you are classified as an independent contractor (i.e. attorney, guest speaker, performer, physician, rent, etc.), or you receive income that is classified as non-employee income, or miscellaneous income (you were paid $600 or more) you will receive what is known as a 1099-Misc.; these are the information returns most often received for contract for-hire work, leased workers, or general contractor payments for which there is not a direct sale as a merchant to a consumer.
The other most often used 1099 tax form would come as a 1099-Int; this is a 1099 received for interest income purposes; whether the income be from a bank or any lending institution, or from the sale of a seller financed mortgage, the recipient of any income from interest will receive a 1099-Int. You would receive a statement that summarizes your interest income for that year. This form is also used to report other tax items related to your interest income such as early withdrawal penalties, federal tax withheld and foreign tax paid. A close relative of the 1009-Int is the 1099-OID. This is an information return provided when you receive an original issue discount, usually from transactions related to mortgages served by the Federal Housing Authority.
The 1099-Div tax form is used often for investors. This tax form is sent to investors by brokers, mutual funds or the investment company. The form is a record of all taxable gains and dividends paid to an investor. The amounts that are stated on the form represent amounts the fund companies are attributing to each investor’s investment return for the year. The amounts on the 1099-Div could contain ordinary dividends, total capital gains, qualified dividends, foreign tax paid, federal income tax withheld and foreign source income.
Another 1099 can come as a 1099-B for barter exchange transactions. What does this mean? It means that instead of monetary payment, you received a bartered form of payment, an exchange of something other than money, with value attached in order to pay for a service.
Other less used 1099’s are 1099-A, 1099-C, 1099-CAP, 1099-LTC, 1099-Q, 1099-R, and 1099-SA; the R, Q and SA are for retirement and social security payments, and are received by many retired individuals. The payments from IRAs, MSAs, Coverdell ESAs, and HSAs are reported on these 1099s. The 1099-A is received is there has been an acquisition of secured property, or an abandonment of secured property.
1099-C is received if there is a cancellation of debt, as from a bankruptcy proceeding, credit card default, or other failure of a maker to make good on a debt that the lender or seller can use as a tax deduction. The 1099-CAP is a 1099 used to report significant changes in corporate control and capital structure. What does this mean in laymen’s terms? If you and several other individuals are in business together, as an incorporated entity, and 3 of you buyout another individual, you will be required to furnish that individual with a 1099CAP so that the individual reports any income or gain from the capital sale of stock.
A 1099 tax form that we’ve not seen very much until recently, but one that I’m sure we’ll see much more of in the not too distant future is the 1099-LTC. Long-term care and accelerated death benefits are filed on this 1099; with a larger segment of our population aging, this segment also known as the “baby boomers†will make more use of long-term care insurance and payouts, and many of them will receive these types of 1099s.
Although these are most often forms of taxable income to the recipient, this is not always a steadfast rule. For many of the older citizens, for individuals receiving the tax returns as part of a discounted program through the government, and for certain other situations, these are only information tax returns that do not result in added income tax liability. For the rest of us, however, a 1099 tax form usually means we have increased our income tax liability.
investors
Tax trouble for aggressive investors
If you have invested in stocks or IPOs by taking a loan, the tax liability can go up substantially.
Praveen Sharma was very excited when he was allotted 199 shares of Coal India Limited (CIL). The 32-year-old saw it as an opportunity to make some quick buck.
And, he was not disappointed. A day before Diwali, the CIL stock listed at Rs 287, and Sharma gained 17 % or Rs 8,358. Although there will be a tax of Rs 1,253.7 (15 % on short-term capital gains) when he files his income-tax returns, he would still have made a neat Rs 7,000 within ten days.
Enthused with the success, Sharma wants to invest in the upcoming initial public offerings (IPOs) and follow-on public offerings (FPOs). He is even willing to borrow to invest in these. But this excitement can cost him dear.
Classified as business income
Buying and selling equities frequently can bring you on the taxman’s radar. Consequently, the capital gains made from the transactions will be added to your income and taxed, according to the income-tax (I-T) slab.
Income tax experts believe as there are no hard and fast rules on this, and it differs on a case-to-case basis, one runs the risk of paying tax under business income if the amount is reasonably high. For instance, the I-T department will not bother for a gain of Rs 50,000 or Rs 1 lakh. But if the capital gains are substantial, say Rs 10 lakh in a financial year, there is a strong chance that it will be classified under ‘business income’.
The clincher for the taxman: If you borrow regularly to make investments in IPOs and FPOs. Or, if you avail of margin funding to do daily trading in shares or indices.
Homi Mistry, tax partner at Delloite, Haskins and Sells, says, “If these conditions are applicable to you, your profits are re-categorised as business profit, according to the I-T Act.” Interestingly, the Act refers to regular trading in shares as ‘an adventure in the form of trade’.
According to the Act, capital gains are proceeds received from selling capital assets, which were bought to hold and not make immediate profit. “Say you bought and sold shares within six months, the capital gains would be considered passive income and taxed accordingly,” says Kaushik Mukherjee, executive director, PricewaterhouseCoopers.
For a broker, the classification of his/her income under ‘business income’ is fine. But for a salaried individual such as Sharma, it could hurt badly. Say Sharma makes capital gains of Rs 10 lakh. In addition, his taxable salary is Rs 6 lakh. The tax officer can club these two incomes and tax Sharma at the rate of 33 %. That would mean a flat tax of Rs 5.3 lakh.
However, if the two incomes were to be divided – capital gains and taxation – Sharma’s tax liability would be much lesser.
He would have paid Rs 1.5 lakh for capital gains and Rs 1.2 lakh, according to the 20 % slab. His outgo, therefore, increases by Rs 2.6 lakh or almost 50 %.
Even gains from intra-day trade are termed as speculative gains and come under business income, because the shares are not delivered to you on that particular day.
There is respite, though
Those who want to pursue this aggressively may get some tax benefits as well. One can set-off their business income against expenditure you incur to gain the income.
For instance, if you took a personal loan to buy shares and paid interest of 12 %, you can request the officer to take the cost into account and reduce the tax liability accordingly. However, you will not be allowed, if you are earning tax-free income from the expenditure you incur such as dividends from shares.
If you have invested in stocks or IPOs by taking a loan, the tax liability can go up substantially.
Praveen Sharma was very excited when he was allotted 199 shares of Coal India Limited (CIL). The 32-year-old saw it as an opportunity to make some quick buck.
And, he was not disappointed. A day before Diwali, the CIL stock listed at Rs 287, and Sharma gained 17 % or Rs 8,358. Although there will be a tax of Rs 1,253.7 (15 % on short-term capital gains) when he files his income-tax returns, he would still have made a neat Rs 7,000 within ten days.
Enthused with the success, Sharma wants to invest in the upcoming initial public offerings (IPOs) and follow-on public offerings (FPOs). He is even willing to borrow to invest in these. But this excitement can cost him dear.
Classified as business income
Buying and selling equities frequently can bring you on the taxman’s radar. Consequently, the capital gains made from the transactions will be added to your income and taxed, according to the income-tax (I-T) slab.
Income tax experts believe as there are no hard and fast rules on this, and it differs on a case-to-case basis, one runs the risk of paying tax under business income if the amount is reasonably high. For instance, the I-T department will not bother for a gain of Rs 50,000 or Rs 1 lakh. But if the capital gains are substantial, say Rs 10 lakh in a financial year, there is a strong chance that it will be classified under ‘business income’.
The clincher for the taxman: If you borrow regularly to make investments in IPOs and FPOs. Or, if you avail of margin funding to do daily trading in shares or indices.
Homi Mistry, tax partner at Delloite, Haskins and Sells, says, “If these conditions are applicable to you, your profits are re-categorised as business profit, according to the I-T Act.” Interestingly, the Act refers to regular trading in shares as ‘an adventure in the form of trade’.
According to the Act, capital gains are proceeds received from selling capital assets, which were bought to hold and not make immediate profit. “Say you bought and sold shares within six months, the capital gains would be considered passive income and taxed accordingly,” says Kaushik Mukherjee, executive director, PricewaterhouseCoopers.
For a broker, the classification of his/her income under ‘business income’ is fine. But for a salaried individual such as Sharma, it could hurt badly. Say Sharma makes capital gains of Rs 10 lakh. In addition, his taxable salary is Rs 6 lakh. The tax officer can club these two incomes and tax Sharma at the rate of 33 %. That would mean a flat tax of Rs 5.3 lakh.
However, if the two incomes were to be divided – capital gains and taxation – Sharma’s tax liability would be much lesser.
He would have paid Rs 1.5 lakh for capital gains and Rs 1.2 lakh, according to the 20 % slab. His outgo, therefore, increases by Rs 2.6 lakh or almost 50 %.
Even gains from intra-day trade are termed as speculative gains and come under business income, because the shares are not delivered to you on that particular day.
There is respite, though
Those who want to pursue this aggressively may get some tax benefits as well. One can set-off their business income against expenditure you incur to gain the income.
For instance, if you took a personal loan to buy shares and paid interest of 12 %, you can request the officer to take the cost into account and reduce the tax liability accordingly. However, you will not be allowed, if you are earning tax-free income from the expenditure you incur such as dividends from shares.
Tax Refund
Retirement Savings From your Tax Refund
“File your tax online and get refunds fast.”” Use our e-file software to file your 1040 online and get the maximum refunds.” You have probably heard or seen one of these or similar ads online when you were filing your tax return online. And if you believed them and followed them you probably realized that they were mostly right. That is right, you definitely get your refund faster if you e-file your tax, and mostly the refund can be higher also. So you probably have thousands of dollars of your refund money lying with you and do not know what to do with it. One thing that we need to think about is our retirement plans and we can use our refund money to fulfil these plans and have a better post retirement life. Here is what you can do with your refund money.
You have until April 15 to contribute up to $5,000 to an IRA for 2009 (or $6,000 if age 50 or older). If your modified adjusted gross income is $120,000 or less if you're single, or $176,000 or less if you're married filing jointly, then you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement.
If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth.
Take this advice and use your refund money to have a better life after retirement.
Where to Put your Refund Money
Well if you have been smart when you e-file your 1040 you probably got your refund earlier as compared to those who file their 1040 in the orthodox way. And if you have got your refund check and looking at it right now, then chances are that it is of quite some value, probably in thousands. As a matter of fact the average refund for this year is running just above $3000 as per the Internal Revenue Service. Now that is quite a chunk of money. Even though most people know that they are going to get their refunds, and they mostly have an idea about the amount it is going to be, they do not plan on how they should spend it. Another viewpoint is that it would be definitely better if you did not lend Uncle Sam all that money interest free every year. You can use several tax withholding calculators that are available online to give yourself an instant pay raise and have more money available for investment year after year.
That being said, one very good place to use your refund money is in paying your credit card debt. When you use your refund to pay off a balance with an 18% interest rate, it is like earning 18% on your investments. Now I can say that that is a good return on your money and that is an incredible use of your money. And as a plus point if you pay off your balances, you can afford to close some cards that might be charging you high fees now.
“File your tax online and get refunds fast.”” Use our e-file software to file your 1040 online and get the maximum refunds.” You have probably heard or seen one of these or similar ads online when you were filing your tax return online. And if you believed them and followed them you probably realized that they were mostly right. That is right, you definitely get your refund faster if you e-file your tax, and mostly the refund can be higher also. So you probably have thousands of dollars of your refund money lying with you and do not know what to do with it. One thing that we need to think about is our retirement plans and we can use our refund money to fulfil these plans and have a better post retirement life. Here is what you can do with your refund money.
You have until April 15 to contribute up to $5,000 to an IRA for 2009 (or $6,000 if age 50 or older). If your modified adjusted gross income is $120,000 or less if you're single, or $176,000 or less if you're married filing jointly, then you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement.
If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth.
Take this advice and use your refund money to have a better life after retirement.
Where to Put your Refund Money
Well if you have been smart when you e-file your 1040 you probably got your refund earlier as compared to those who file their 1040 in the orthodox way. And if you have got your refund check and looking at it right now, then chances are that it is of quite some value, probably in thousands. As a matter of fact the average refund for this year is running just above $3000 as per the Internal Revenue Service. Now that is quite a chunk of money. Even though most people know that they are going to get their refunds, and they mostly have an idea about the amount it is going to be, they do not plan on how they should spend it. Another viewpoint is that it would be definitely better if you did not lend Uncle Sam all that money interest free every year. You can use several tax withholding calculators that are available online to give yourself an instant pay raise and have more money available for investment year after year.
That being said, one very good place to use your refund money is in paying your credit card debt. When you use your refund to pay off a balance with an 18% interest rate, it is like earning 18% on your investments. Now I can say that that is a good return on your money and that is an incredible use of your money. And as a plus point if you pay off your balances, you can afford to close some cards that might be charging you high fees now.
Tax Updates for 2010
Tax Updates for 2010
There are many laws constantly changing with the IRS. At Online Tax Pros we stay up to date with the latest tax changes so we can relay them to you, The Public. Here are some of the most recent tax updates for 2010:
Earned Income Credit
The maximum amount of the credit has increased. The most you can receive for 2010 is:
$3,050 with one qualifying child
$5,036 with two qualifying children
$5,666 with three or more qualifying children
$457 if you do not have a qualifying child
Earned income amount increased. The maximum amount of income you can ear & still receive the cedit has increased also. You may qualify for this credit if:
You have three or more qualifying children & you earn less than $43,352 ($48,362 if married filing jointly)
You have two qualifying children & earn less than $40,363 ($45,373 if married filing jointly)
You have one qualifying child and you earn less than $35,535 ($40,545 if married filing jointly)
You do not have a qualifying child & you earn less than $13,460 ($18,470 if married filing jointly)
The maximum amount of investment income you can have and still receive the credit remains at $3,100 for 2010. If you get the advance payments of the credit from your employer with you pay, the total advance payments you get during 2010 can be as much as $1,830
Economic Recovery Payment
If you receive any economic recovery payment during 2010 it is not taxable. These $250 payments were made in 2010 to people who:
Received social security benefits, supplements security income (SSI), railroad retirement benefits, or veterans disability compensation or pension benefits in November 2008, December 2008, or January 2009.
Live in the U.S. States, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands
did not receive an economic recovery payment in 2009
If your married an you and your spouse both meet these requirements, each of you may get a $250 payment. If you are entitled to a payment, you will automatically receive it, you do not apply for it. However, any payment you receive will reduce your making work payment credit.
Residential Energy Credits
Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2010. This property can include high-efficiency heat pumps, air conditioners, & water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has expanded to include certain asphalt roofs and stoves that burn biomass fuel.
Limitation. The total amount of credit you can claim is limited to $1,500.
Residential energy efficient property credit. Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, & qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.
Itemized Deductions
The limit on Itemized deductions expired in 2010. However, under current law, the limit on itemized deductions will resume in 2011 at pre-2006 levels.
There are many laws constantly changing with the IRS. At Online Tax Pros we stay up to date with the latest tax changes so we can relay them to you, The Public. Here are some of the most recent tax updates for 2010:
Earned Income Credit
The maximum amount of the credit has increased. The most you can receive for 2010 is:
$3,050 with one qualifying child
$5,036 with two qualifying children
$5,666 with three or more qualifying children
$457 if you do not have a qualifying child
Earned income amount increased. The maximum amount of income you can ear & still receive the cedit has increased also. You may qualify for this credit if:
You have three or more qualifying children & you earn less than $43,352 ($48,362 if married filing jointly)
You have two qualifying children & earn less than $40,363 ($45,373 if married filing jointly)
You have one qualifying child and you earn less than $35,535 ($40,545 if married filing jointly)
You do not have a qualifying child & you earn less than $13,460 ($18,470 if married filing jointly)
The maximum amount of investment income you can have and still receive the credit remains at $3,100 for 2010. If you get the advance payments of the credit from your employer with you pay, the total advance payments you get during 2010 can be as much as $1,830
Economic Recovery Payment
If you receive any economic recovery payment during 2010 it is not taxable. These $250 payments were made in 2010 to people who:
Received social security benefits, supplements security income (SSI), railroad retirement benefits, or veterans disability compensation or pension benefits in November 2008, December 2008, or January 2009.
Live in the U.S. States, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands
did not receive an economic recovery payment in 2009
If your married an you and your spouse both meet these requirements, each of you may get a $250 payment. If you are entitled to a payment, you will automatically receive it, you do not apply for it. However, any payment you receive will reduce your making work payment credit.
Residential Energy Credits
Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2010. This property can include high-efficiency heat pumps, air conditioners, & water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has expanded to include certain asphalt roofs and stoves that burn biomass fuel.
Limitation. The total amount of credit you can claim is limited to $1,500.
Residential energy efficient property credit. Beginning in 2009, there is no limitation on the credit amount for qualified solar electric property costs, qualified solar water heating property costs, qualified small wind energy property costs, & qualified geothermal heat pump property costs. The limitation on the credit amount for qualified fuel cell property costs remains the same.
Itemized Deductions
The limit on Itemized deductions expired in 2010. However, under current law, the limit on itemized deductions will resume in 2011 at pre-2006 levels.
Tax Purposes
What are the qualifying characteristics of a dependent for tax purposes? Following is a general explanation on how to determine dependents, and how it relates to your tax status, liability and the credits you can claim on your tax return.
There are a few assessments that a person must pass in order to qualify as a dependent on a U.S. tax return. For starters, individual must be the taxpayer?s child, stepchild, foster child, sibling or stepsibling, or a relative of one of these, and the individual must live at the taxpayer?s residence for greater than 6 months of the tax year. There are exceptions for children of divorced parents, kidnapped children, and for children who were born or died during the year.
The individual must be under the age of 19, or 24 if a full-time student. Finally, the individual must not have contributed more than one-half toward his or her own support during that year in order to qualify as a dependent. Other qualifying points include, U.S. citizenship and single status or married filing as a single person.
If the individual fulfills all of these requirements, then any of the applicable deductions, exemptions, and credits can be used for them. Some of these include dependent day care expenses, child tax credits, medical expenses, earned income credit, and various itemized deductions. Determining eligibility often means the difference between owing money to the government and receiving a refund from them.
The child and dependent care expenses cover things like daycare, after school programs, private childcare services, etc. Any qualifying children the child and dependent care expenses must be under the age of 13.
The child tax credit is similar to the earned income credit because it is a straight credit. Taxpayers with a qualifying dependent that is under 17 years old may only take the child tax credit.
Determining if you have any dependents that you can claim on your annual tax return might take a little work, but it can be well worth it in the long run. You could be rewarded with a nice tax refund, thanks to the credits, exemptions, and deductions that your dependent(s) will give you the opportunity to claim.
There are a few assessments that a person must pass in order to qualify as a dependent on a U.S. tax return. For starters, individual must be the taxpayer?s child, stepchild, foster child, sibling or stepsibling, or a relative of one of these, and the individual must live at the taxpayer?s residence for greater than 6 months of the tax year. There are exceptions for children of divorced parents, kidnapped children, and for children who were born or died during the year.
The individual must be under the age of 19, or 24 if a full-time student. Finally, the individual must not have contributed more than one-half toward his or her own support during that year in order to qualify as a dependent. Other qualifying points include, U.S. citizenship and single status or married filing as a single person.
If the individual fulfills all of these requirements, then any of the applicable deductions, exemptions, and credits can be used for them. Some of these include dependent day care expenses, child tax credits, medical expenses, earned income credit, and various itemized deductions. Determining eligibility often means the difference between owing money to the government and receiving a refund from them.
The child and dependent care expenses cover things like daycare, after school programs, private childcare services, etc. Any qualifying children the child and dependent care expenses must be under the age of 13.
The child tax credit is similar to the earned income credit because it is a straight credit. Taxpayers with a qualifying dependent that is under 17 years old may only take the child tax credit.
Determining if you have any dependents that you can claim on your annual tax return might take a little work, but it can be well worth it in the long run. You could be rewarded with a nice tax refund, thanks to the credits, exemptions, and deductions that your dependent(s) will give you the opportunity to claim.
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