Don’t Pay Your Tax Bill with a Credit Card

Don't Pay Taxes by Credit Card

A big tax bill is like hay fever. You don’t want it, you try to avoid it — and then April rolls around and it hits you hard. Now you have to figure out how to take care of it. Taxes have to be paid, and putting them on your credit card might seem a good option. Maybe you need more time to come up with the money, or you’re imagining the rewards you could rack up by putting a big expense on your card. But paying the IRS with plastic probably isn’t a good idea, and here’s why.

Downsides When You Pay Taxes by Credit Card

You’ll Pay Processing Fees

When you buy something with a credit card, the merchant pays processing fees to the financial institutions that handle the transaction. But when you put a tax payment on a credit card, the IRS doesn’t pay those processing fees. You do.

To pay federal taxes with a credit card, you have to use one of the IRS’ third-party credit card processors, which charge fees of 1.87 percent to 2 percent of the amount you put on the card. If you use software such as TurboTax to file returns and pay taxes online, the fees may be higher.

These fees could eat up your credit card rewards. Most cards offer only a 1 percent to 1.5 percent rewards rate for this type of transaction.

The exception: If you put your tax payment on a card with a 2 percent rewards rate or higher and then pay it off in full on your next statement, your rewards might exceed the fees — but just by a hair.

You Could Incur Interest Charges

“Depending on the interest rates on your credit card, you could end up paying a lot,” says Trish Evenstad, president of the Wisconsin Society of Enrolled Agents, a group of tax experts. Her advice to people who can’t pay in full: “Pay as much as you can by the April 18th due date. Then you can set up an installment agreement with the IRS to pay the remaining balance.”

For 2017, it costs $31 for qualified taxpayers to set up an installment agreement online and pay via direct debit from a checking account, according to the IRS website. That’s in addition to 4 percent annual interest on unpaid federal taxes and a penalty of 0.25 percent of the outstanding balance for each month the agreement is in effect. That works out to an annual percentage rate of about 7 percent.

It’s a much better deal than 13.61 percent, the average APR for all U.S. credit card accounts that were assessed interest in the last quarter of 2016, according to the Federal Reserve.

The exception: Paying with a 0 percent APR credit card could be more cost-effective than setting up an installment agreement, if you can pay off your balance before the promotional period ends.

You Could Hit Your Credit Limit

Charging a big tax bill on your card could put you within spitting distance of your credit limit, making it easy to max out the account and incur penalties. Your credit score could also suffer.

“I’d look at ‘What is my financial situation?’” says Cari Weston, director of tax practice and ethics for the American Institute of Certified Public Accountants. “If I need to have my credit card available for emergencies to pay for expenses because I might not have a rainy-day fund set aside, [I’m] better off not adding that credit card debt.”

The exception: If your card has a limit well in excess of your tax bill, charging it might not hamper your purchasing power or hurt your credit score much.

Better Ways to Pay

If you have the money to pay your tax bill, pay by check or direct debit to avoid fees. If you need more time, an installment arrangement with the IRS likely is your best option. Here’s what to do:

  • Calculate how much time you will need. If you can pay in full within 120 days, you won’t incur a setup fee.
  • Go online. An online installment agreement with direct debit is the cheapest option, with a setup fee of $31. If you set it up offline without automatic payments, it costs $225. (For state taxes, you’ll have to set up a separate payment plan with your state, which may have different rates.)
  • Choose a long repayment period. To avoid falling behind on payments, Weston recommends taking the longest repayment period the IRS offers. “Commit to what you know you can pay,” she says. “You can always pay more.” Then the faster you pay it down, the more you’ll save on interest and penalties.

Credit Card Payment Photo via Shutterstock

This article, “Don’t Pay Your Tax Bill with a Credit Card” was first published on Small Business Trends

12 Super Simple Money Management Tips for Your Personal Finances

12 Super Simple Personal Money Management Tips

The best financial advice tends to apply to pretty much everyone. You don’t need a spreadsheet of pros and cons and complex scenarios. What you need is a rule of thumb.

There’s no shame in using one-size-fits-all advice. A study of West Point cadets, for example, found teaching rules of thumb was at least as effective as standard personal finance training in increasing students’ knowledge and confidence as well as their willingness to take financial risks. Researchers found money rules of thumb were more effective than teaching accounting principles to small business owners in the Dominican Republic.

Here are a dozen shamelessly simple money rules of thumb I’ve collected over the years. (These address how you borrow and save. If you just want to know how you’re doing with money, we’ve got a quick way to score your financial health, too.)

Personal Money Management Tips

1. Build Up Emergency Savings

You need to be able to get your hands on cash or credit equal to three months’ worth of expenses. The classic emergency fund advice — that you need three to six months of expenses saved — is great, but it can take years to save that much and you have other more important priorities (see “retirement,” below). While you build up your cash stash, make sure you have a Plan B for a true emergency. That could be money in a Roth IRA (you can pull out your contributions at any time without paying taxes or penalties), space on your credit cards or an unused home equity line of credit.

2. Save 15 Percent for Retirement

If you got a late start or want to retire early, you may need to save more. Run the numbers on your retirement plan. For most people, 15 percent including any company match is a good place to start. Even if you can’t save as much as you should, start somewhere and kick up your savings rate regularly. Retirement should be your top financial priority. You can’t get back lost company matches, lost tax breaks and the lost years when your money isn’t earning tax-deferred returns.

3. And Don’t Touch that Money

Leave retirement money for retirement. When your retirement fund is small, you may feel like spending it doesn’t really matter. It does. Taxes and penalties will cost you at least 25 percent and likely more of what you withdraw. Plus, every $1 you take out costs you $10 to $20 in lost future retirement income. Once your retirement fund is larger, it may be easy to convince yourself there are good reasons to borrow or withdraw the money. There really aren’t. Leave the money alone so it’s there when you need it.

4. Save for College

Get in the habit of putting at least $25 a month aside for college as soon as your child is born. Even small contributions to a 529 college savings plan can add up over time — perhaps the difference between choosing the best school and choosing a school based on its financial aid package. (But if you have to choose, retirement saving is more important. Your kids can always get student loans, but as you’ve probably heard, no one will lend you money for retirement.)

5. Plan and Manage Your Student Loans

Your total borrowing shouldn’t exceed what you expect to make your first year out of school. At today’s interest rates, this will ensure that you can pay off what you owe within 10 years while keeping payments below 10 percent of your income, which is considered an affordable repayment rate. What if you didn’t limit your borrowing and are now struggling? You have options.

6. Cars: Buy Used and Drive It for 10 Years

New cars are lovely, but they’re expensive and lose an astonishing amount of value in their first two years. Let someone else pay for that depreciation and take advantage of the fact that today’s better-built cars can run well for at least a decade if properly maintained. You can save hundreds of thousands of dollars over your driving lifetime this way.

7. Car Loans: Use the 20/4/10 Rule

Ideally, you wouldn’t borrow money to buy an asset that loses value, but you may not always be able to pay cash for a car. If you can’t, protect yourself from overspending by putting 20 percent down, limit the loan to four years and cap your monthly payment at no more than 10 percent of your gross income. A big down payment keeps you from being “underwater,” or owing more on the car than it’s worth, as soon as you drive off the lot. Limiting the length of the loan helps you build equity faster and reduces the overall interest you pay. Finally, capping the size of the payments prevents your car from eating your budget.

8. Make Credit Cards Work for You

If you carry a balance, look for a low-rate card so you can pay off your debt faster and don’t mess with rewards cards right now. If you pay in full each month (as you should), find a rewards card that returns at least 1.5 percent of what you spend. You should regularly review your rewards programs to make sure you’re getting enough value from them. The programs can change, as can your spending and the way you use rewards. (For a “lazy optimizer” approach, check out “Sean Talks Credit: How I Maximize My Rewards with Only a Few Credit Cards.”)

9. Square Away Your Insurance

Cover yourself for catastrophic expenses, not the stuff you can pay out of pocket. Insurance should protect you against the big things — unexpected expenses that could wipe you out financially, such as your home burning down or a car accident that triggers a lawsuit. You want high limits on your policies — and high deductibles, too. Small claims don’t make financial sense in the long run. You may gain some small insurance payments, but you risk a rate increase that could more than cancel out your gains.

10. Choose a Reasonable Mortgage Amount

If you can’t afford the payment on a 30-year, fixed-rate mortgage, you can’t afford the house. You may be able to save money by using another kind of mortgage, such as a hybrid loan that offers a lower initial rate. But if you’re using an alternative loan because that’s the only way you can buy the home you want, you may have set your sights too high. A budget-busting mortgage puts you at risk of spiraling into ever-deeper debt, especially when you add in all the other costs of home ownership.

11. Choose the Right Mortgage Rate

Fix the rate for at least as long as you plan to be in the home. Plans can change, obviously, but you don’t want a big payment jump to force you out of a home you hoped to live in for years to come. If you’re pretty sure you’ll be moving in five years, a five-year hybrid could be a good option. If you think you may stay for 10 years or more, though, consider opting for the certainty of a 30-year fixed rate. (Compare rates on different types of mortgages.)

12. Back-burner Those Mortgage Prepayments

You have better things to do with your money than prepay a low-rate, potentially tax-deductible mortgage. Shaving years off your mortgage and saving money on interest sounds great. But before you consider making extra payments to reduce your mortgage principal, make sure more important priorities are covered. You should be saving enough for retirement. You should have paid off all other debt, since most other loans have higher rates and the interest isn’t deductible. It would be smart to have that emergency fund built up as well and to be adequately insured. If you’ve covered all of those bases and still want to pay down your mortgage, have at it.

Financial Burden Illustration via Shutterstock

This article, “12 Super Simple Money Management Tips for Your Personal Finances” was first published on Small Business Trends

To Be or Not to Be: Pros and Cons of the Small Business LLC

Small Business LLC Pros and Cons

The limited liability company was first offered as an option for structuring businesses 40 years ago in Wyoming. By the late 1990s, all states had laws authorizing the organizing of businesses under the hybrid structure. Today, LLCs are growing faster than any other business type, according to the IRS.

What is an LLC?

An LLC is a business structure that combines the simplicity, flexibility and tax advantages of a partnership with the liability protection of a corporation. An LLC can have one or many “members,” the official term for its owners. Members can be individuals or other businesses, and there is no limit to the number of members an LLC can have.

About 2.4 million U.S. businesses identified as LLCs in 2014, according to the latest figures available from the IRS. Take a look at these advantages and disadvantages to help you decide whether an LLC is the right structure for your business.

Small Business LLC Pros and Cons

LLC: The Pros

Choosing to structure your business as an LLC offers a number of advantages:

Limited Liability

Members aren’t personally liable for actions of the company. This means that the members’ personal assets — homes, cars, bank accounts, investments — are protected from creditors seeking to collect from the business. This protection remains in place so long as you run your business on the up-and-up and keep business and personal financials separate.

Pass-Through Federal Taxation On Profits

Unless it opts otherwise, an LLC is a pass-through entity, meaning its profits go directly to its members without being taxed by the government on the company level. Instead, they’re taxed on members’ federal income tax returns. This makes filing taxes easier than if your business were taxed on the corporate level. And if your business loses money, you and other members can shoulder the hit on your returns and lower your tax burdens.

Management Flexibility

An LLC can opt to be managed by its members, which allows all owners to share in the business’s day-to-day decision-making, or by managers, who can be either members or outsiders. This is helpful if members aren’t experienced in running a business and want to hire people who are. In many states, an LLC is member-managed by default unless explicitly stated otherwise in filings with the secretary of state or the equivalent agency.

Easy Startup and Upkeep

Initial paperwork and fees for an LLC are relatively light, though there is wide variation in what states charge in fees and taxes. For example, Arizona’s filing fee for articles of organization is $50, while the fee in Illinois is $500. These variations aside, the process is simple enough for owners to handle without special expertise, though it’s a good idea to consult a lawyer or an accountant for help. Ongoing requirements usually come on an annual basis.

LLC: The cons

Before registering your business as an LLC, consider these possible drawbacks:

Limited Liability has Limits

In a court proceeding, a judge can rule that your LLC structure doesn’t protect your personal assets. The action is called “piercing the corporate veil,” and you can be at risk for it if, for example, you don’t clearly separate business transactions from personal, or if you’ve been shown to have run the business fraudulently in ways that resulted in losses for others.

Self-Employment Tax

By default, the IRS considers LLCs the same as partnerships for tax purposes, unless members opt to be taxed as a corporation. If your LLC is taxed as a partnership, the government considers members who work for the business to be self-employed. This means those members are personally responsible for paying Social Security and Medicare taxes, which are collectively known as self-employment tax and based on the business’s total net earnings.

On the other hand, if your LLC files forms with the IRS to be taxed as an S corporation, you and other owners who work for the company pay Social Security and Medicare taxes only on actual compensation, not the whole of the company’s pretax profits.

Consequence of Member Turnover

In many states, if a member leaves the company, goes bankrupt or dies, the LLC must be dissolved and the remaining members are responsible for all remaining legal and financial obligations necessary to terminate the business. These members can still do business, of course; they’ll just have to start a whole new LLC from scratch.

How to Start Your LLC

  • Choose a name: Register a unique name in the state where you plan to do business. To make sure someone else doesn’t have your business name, do a thorough search of online directories, county clerks’ offices and the secretary of state’s website in your state — and any others in which you plan to do business. For a fee, many states let applicants reserve an LLC name for a set period of time before filing articles of organization.
  • Choose a registered agent: The registered agent is the person you designate to receive all official correspondence for the LLC. It’s crucial that you nail down who this person will be before filing articles of organization, because states generally require you to list a registered agent’s name and address on the form. Though people within the company are usually allowed to serve in this role, states maintain lists of third-party companies that perform registered-agent services.
  • File articles of organization: This is the step that essentially brings your LLC into existence. States request basic pieces of information about your business, which, if you’ve thought through your business plan and structure, should not be hard to provide. You’ll be asked to supply details like name, principal place of business and management type.
  • Get an employer identification number: The IRS requires any business that has employees or operates as a corporation or partnership to have an EIN, a nine-digit number assigned to businesses for tax purposes. The rule applies to LLCs because, as creations of state laws, they’re classified for federal tax purposes as either a corporation or a partnership.
  • Draw up an operating agreement: Your operating agreement should include specific information about your management structure, including an ownership breakdown, member voting rights, powers and duties of members and managers, and how profits and losses are distributed. Depending on the state, you can have either a written or oral agreement. Many states don’t require one, but they’re a useful thing to have.
  • Establish a business checking account: It’s generally good housekeeping to keep business and personal affairs separate. Having a separate checking account draws a bright line between the two. This is critical if you want to mitigate any potential risk to your personal assets if a lawsuit calls into question your business practices.

LLC Photo via Shutterstock

This article, “To Be or Not to Be: Pros and Cons of the Small Business LLC” was first published on Small Business Trends

4 Broadband Alternatives for Your Small Business – And Yes, One of Them is Dial-up

4 Broadband Alternatives for Small Businesses -- And Yes, One of Them is Dial-up

For most consumers, a wired broadband connection (whether via cable, DSL or fiber optic, if you can find it) offers the fastest and most reliable internet service. However, these aren’t available to some households and may be too expensive for others. There are a few feasible alternatives, but they often demand inconvenient trade-offs.

We’ve collected four of these internet delivery alternatives below, along with some tips to help determine whether you can live with the arrangement.

Broadband Alternatives for Small Businesses

1. Mobile Broadband

With average U.S. cellular LTE data download speeds clocking in at almost 14 megabits per second, a mobile internet connection can function as a serviceable replacement for traditional broadband. Just grab a mobile WiFi hot spot device with a data-only plan for a relatively low-cost, high-speed internet connection. Also, you likely already have a mobile broadband connection in your pocket: your cell phone. If you’re brave, just use it as a hot spot and ditch having a dedicated home internet device entirely.

As with many of these alternatives, mobile broadband is best for light internet activities like web browsing, email and social media. Since you’ll likely be dealing with the usual data caps that come along with a cell plan, data-intensive activities like streaming video will quickly eat up your data allotment or run up your bill. You’ll also need to make sure you get good, reliable LTE service where you use the internet most.

2. Satellite

Satellite internet is widely available, even in the most remote locations, but that’s about the only pro for this delivery method. Otherwise, there are high startup costs to lease or buy the necessary equipment, like your rooftop satellite dish, and then you generally get slower speeds for relatively higher monthly costs. Plus, you’ll have to deal with ungenerous monthly data download caps and high latency. Latency is the time it takes for your computer to talk to a server and receive a response. Since your signal has to travel 22,000 miles up to a satellite and then back down, this takes a long time relative to other methods.

3. Fixed Wireless

Fixed wireless delivers internet to your home via radio waves. Unlike satellite internet, fixed wireless uses an antenna on your house to talk to a nearby tower, which then sends your data onto a wired network. The costs are generally higher than a purely wired connection, and you might run into problems if you can’t get a line-of-sight on the tower near you. You also might have to pay for equipment and installation.

However, fixed wireless usually won’t cap your data and doesn’t have as severe a problem with high latency as satellite does. Deployment of fixed wireless is limited, since it’s generally only available in remote places where building out a wired network to individual homes isn’t cost-effective.

4. Dial-up

That’s right: dial-up. Close your eyes and hear the screech. If you’ve got a phone line, you likely have access to dial-up internet. With a maximum bandwidth of 56 kilobits per second, dial-up is far, far slower than any other common internet delivery mechanism. It takes more than 14 minutes to download a 6MB MP3 file over a dial-up connection, compared with a handful of seconds over most broadband connections.

We recommend at least a 1 megabit per second connection for most basic internet activities — that’s 1,000 kilobits per second. But if you have no other option, dial-up at least lets you check your email and load basic web pages. Remember, though: It ties up your phone line for the duration of your internet session.

Phone Line Photo via Shutterstock

This article, “4 Broadband Alternatives for Your Small Business – And Yes, One of Them is Dial-up” was first published on Small Business Trends

3 Good Reasons to Use Your Mobile Wallet

3 Good Reasons to Use Your Mobile Wallet

Smartphones have replaced lots of other accessories: cameras, flashlights, calculators. But many people are still reluctant to swap the wallets in their pockets for their digital counterparts.

A key reason consumers are hesitant to adopt mobile payments like Apple Pay and Android Pay, surveys say, is fear over security: High-profile retailer data breaches have made buyers wary of sharing credit card information. But while there’s cause not to rely 100 percent on your mobile wallet just yet — lack of widespread acceptance by merchants, for one thing — security concerns shouldn’t be holding shoppers back, experts say.

“I think some people get nervous about this idea of ‘This thing is sending telepathic waves to that machine to say that I’m paying,’” says Mark Ranta, head of digital banking solutions at ACI Worldwide, a payment systems company.

But your mobile wallet is arguably the safest way to pay, and it offers a few benefits to boot. Here’s why this payment method is worth considering.

Reasons to Use Your Mobile Wallet

It’s Safer Than You Think

Contactless payment services can offer more security than cash or traditional card usage.

“You never have to take out your credit card or debit card, so there’s a lot less chance of someone seeing it,” says Jason Chaikin, president of biometrics security company Vkansee. “For every transaction, [mobile wallets] create a random, one-time number — a transaction token — and even if someone was able to know that number, it’s not valid later.”

Samsung Pay, Android Pay and Apple Pay each use this process, called tokenization. Although you load your card into the payment app, the actual card number is not shared with the merchant when you pay. Rather, a temporary code is issued in its place, similar to the way EMV chip cards work. EMV credit and debit cards have chips that create a unique code, or cryptogram, when inserted into a merchant’s payment terminal. However, the card is in view while the terminal reads the chip.

Mobile payments provide security measures on top of existing bank protections that chip cards can’t match. Full card numbers are not displayed in mobile wallet apps, and users are able to authorize payments with their fingerprints, which can protect your card information in the event your phone is stolen.

It’s Convenient — When Available

Services like Apple Pay let users add multiple cards to their phones or smartwatches, theoretically giving them the option to leave overstuffed wallets and purses at home.

But consumers don’t entirely trust mobile wallets partly because availability is limited, says Ranta. Not all cards and loyalty programs are compatible with the payment services, and some stores are not equipped to take mobile payments. Establishments such as bars and restaurants may accept only cash or plastic. Apple Pay has the highest retailer acceptance rate among the mobile payment services, at 36 percent, according to survey data from the retail consulting firm Boston Retail Partners.

“We’re still very much in the early stages of this,” Ranta says. “At the end of the day, you’re still kind of stuck in this merchant acceptance problem of a two-sided equation. It’s still that awkward, ‘Do you accept it?’ and if [not], then you’ve got to find an alternative way to pay or just walk out of the store.”

But when shoppers can use their mobile wallets, it can mean saving precious time at the register. A common complaint among dissatisfied chip-card users is the slow transaction process, as shoppers wait for the EMV terminal to complete the transaction. Mobile payments can be a quicker alternative. Users open a payment app and hold their device over a terminal; a fingerprint or PIN verifies the purchase.

Shopping online can be faster, too. For example, Apple Pay and Android Pay are accepted on certain websites and in apps like Airbnb, allowing shoppers to make purchases without entering card information — or keeping card numbers on file, which may assuage data-breach fears.

And like some bank apps, a mobile wallet saves your recent transaction history for reference, with the added benefit of allowing you to see all activity in one place even if your cards are from various banks.

You Won’t Miss Out on Rewards

Mobile credit card payments function just like regular credit cards. As long as your card is compatible with the service, you’ll continue to earn your usual rewards, like travel points or cash back.

Mobile users can add certain retailer loyalty cards to Android Pay and Apple Pay wallets to seamlessly earn store-specific points. Samsung Pay accepts most membership cards.

Samsung also has its own loyalty program, Samsung Rewards. In addition to credit card rewards, members earn points for Samsung Pay purchases; the points are redeemable for rewards like gift cards and fitness trackers.

Mobile payment still has far to go before shoppers begin leaving their old wallets at home. As technology advances, Chaikin says, innovations and improvements in security will likely make the process more comfortable and accessible for consumers and retailers alike. “Our mobile phone revolution is really just at the tipping point.”

Mobile Wallet Photo via Shutterstock

This article, “3 Good Reasons to Use Your Mobile Wallet” was first published on Small Business Trends

Should You Invest in the Snapchat IPO? Read This First

Understand the Risks Before Deciding if You Should Buy Snapchat Stock

Whether you’re obsessed with keeping your Snapstreaks going or have no idea what that means, you may be itching to invest in this week’s initial public offering of Snap Inc., parent company of the popular Snapchat app.

The appeal is understandable. For users of the app, owning shares of a company you use every day (or hour) can seem like a good investment. For nonusers, the urban legends of get-rich-quick IPOs are exciting enough on their own.

Of course, not every IPO is a success. And even if Snap gets off to a good start, its stock may still not be the best choice for you. Here are some tips on deciding whether Snap — or any highly anticipated IPO — deserves a place in your portfolio.

How to Decide if You Should Buy Snapchat Stock

Consider the Risk

When you’re first learning how to buy stocks, a hot prospect like Snap can be appealing. But there’s a lot to consider before you click the buy button.

Key questions to ask yourself include: Are you saving for retirement? Taking advantage of your employer’s 401(k) match? Up to date on monthly expenses? Set up with a savings account to cover emergencies? Free of high-interest debt?

If you answered “no” to any of the above, tackle that first. If you’re buying stocks to make a quick return on money you may need within the next few years (or less), you may be setting yourself up for disaster. Even worse, you may be investing in the market with money you don’t actually have.

Whether you invest in a company that’s been trading for decades or one that’s issuing shares for the first time, the premise is the same: You expect the value will increase with time. Simply put, that’s not guaranteed. Stock prices can fluctuate wildly over the course of years, days or even hours.

IPOs are no exception. You may have heard cautionary tales of the dot-com era, such as Pets.com, which liquidated less than a year after going public. A more recent example is Facebook, which didn’t trade above its 2012 IPO price for more than a year.

Then again, Facebook shares have now more than tripled in value since going public. This type of reward potential, along with the ease of trading, makes stocks appealing to many investors. But beware the flip side of stocks: You could also lose your entire investment.

Don’t Lose Sight of Diversity

Still salivating over one particular stock? Put it in perspective. Ideally, purchases of individual stock should complement an existing, diversified portfolio. Pouring any significant amount of money into one young company’s stock doesn’t generally fit that theme, particularly if that purchase is among your first investments.

Sure, the goal of investing is to grow assets over time. But an equally important consideration is reducing risk so your investment isn’t subject to the fate of one company (or industry).

If you’re new to investing, building a diversified portfolio may seem more daunting than buying shares of a few companies here and there. The good news? It’s not.

If you have a 401(k) or similar employer-sponsored plan, that’s a great place to seek diversity. These accounts typically offer a small list of fund choices, with options for different asset types (stocks or bonds, for example), geographies (U.S., international or emerging markets) and company sizes (from small to large cap).

You can find similar options in an individual retirement account, where exchange-traded funds and index funds offer an easy way to diversify. These funds allow you to distribute money across a variety of companies, industries or asset types — often with relatively low fees.

When an IPO Makes Sense

There’s nothing wrong with owning individual stocks. During your lifetime you may acquire them in a variety of ways — a gift from a relative or as employee stock options, for example. They could prove to be fantastic or terrible investments, and if you have only a few, they won’t dictate your portfolio’s success or failure. That goes for IPOs as well as shares from established companies.

But if you’re a beginning investor with, say, $5,000 at your disposal, investing it all in one company is risky, especially if you don’t have a long-term strategy in mind. If your long-term strategy is hazy, read up on how to start investing before you jump into any IPOs.

No matter what piqued your interest in investing, consider it a blessing. The road to retirement is long, and you’ll inevitably encounter bumps along the way. But those can be alleviated by managing your risks, diversifying and investing for the long haul.

After all, you don’t want your time in the market to be ephemeral, like the photos on a certain app.

Snapchat Photo via Shutterstock

This article, “Should You Invest in the Snapchat IPO? Read This First” was first published on Small Business Trends

9 Ways to Get Free Help With Taxes from a Real Live Person

9 Ways to Get Free Help With Taxes from a Real Live Person

Tax help can cost a lot of money. Pros charge $150 an hour on average to do a federal and state return, according to the National Society of Accountants. Help with planning, back taxes or audits can cost even more. But there are a few ways to get human tax help for free.

Where to Get Free Help With Taxes

1. Volunteer Income Tax Assistance (VITA)

What it is: A federal grant program that helps community organizations provide free tax-prep services to low- and moderate-income individuals, the disabled, the elderly and limited-English speakers.

How it works: Taxpayers can get face-to-face help from local, IRS-certified volunteers. Generally, the income limit is $54,000. Volunteers won’t prepare the Schedule C (sorry, freelancers), the complex Schedule D (sorry, investors) or forms associated with nondeductible IRA contributions, investment income for minors, premium tax credits, requests for Social Security numbers or determinations of worker status.

“In a lot of communities, [people] can just dial 211 to find out information about the nearest VITA site and get more information about whether or not they qualify,” says Rebecca Thompson, project director of the taxpayer opportunity network at the Corporation for Enterprise Development, which focuses on fighting poverty.

Get help from the Volunteer Income Tax Assistance program.

2. Tax Counseling for the Elderly (TCE)

What it is: A federal grant program that gives money to community organizations to provide people with free tax help. Although the program was established to help people 60 and older, and still prioritizes serving them, there’s actually no minimum age requirement. Trained volunteers provide the assistance.

How it works: Similar to VITA, community organizations and nonprofits use the grant money to provide help. Most TCE sites are operated by the AARP Foundation’s Tax-Aide program.

“The TCE program and the VITA program use, as a base, the same training program [for volunteers]. They use the same certification test and, for the most part, the same software,” says Fran Rosebush, deputy director of the Corporation for Enterprise Development.

Get help from the Tax Counseling for the Elderly program.

3. AARP Tax Foundation

What it is: A nonprofit arm of AARP that operates the Tax-Aide network of tax preparation sites for the IRS’s VITA and TCE programs.

How it works: AARP’s Tax-Aide connects taxpayers with tax counselors who have advanced IRS training. It also operates an online FAQ page where you can submit tax questions to IRS-certified volunteers. You don’t need to be an AARP member to get help.

Get help from the AARP Tax Foundation.

4. IRS Taxpayer Advocate Service

What it is: An independent organization within the IRS that protects taxpayer rights.

How it works: You can turn to the Taxpayer Advocate Service if you’ve already tried to resolve your tax problem through normal IRS channels or you think an IRS process isn’t working the way it should. There’s at least one Taxpayer Advocate office in every state.

Get help from an IRS taxpayer advocate.

5. Low Income Taxpayer Clinics (LITCs)

What it is: A federal grant program that gives money to legal-aid and legal-services organizations to help low-income taxpayers or taxpayers who speak English as a second language. Law schools and business schools also are common providers. Some charge nominal fees.

“We don’t prepare tax returns, generally speaking, but if somebody, for example, has their refund frozen and they need help figuring out why, they can call low-income tax clinics,” says Christine Speidel, an attorney at Vermont Legal Aid, which runs clinics in the state.

How it works: The program generally provides representation for people in IRS disputes, including audits, appeals, collections and litigation. It also can help respond to IRS notices and fix account problems. Typically, the income ceiling is 250% of the federal poverty rate, but some programs have a little wiggle room, Speidel says. Sole proprietors are usually welcome, she adds.

Get help from the Low Income Taxpayer Clinic program.

6. IRS Taxpayer Assistance Centers

What it is: Local IRS offices across the country.

How it works: Services vary by office but can include basic tax-law assistance, payment arrangements, procedural inquiries, help with IRS letters and notices and other support. You’ll need to schedule an appointment and provide a valid photo ID and taxpayer identification number, such as your Social Security number.

Get help at an IRS Taxpayer Assistance Center.

7. Military OneSource

What it is: A Department of Defense program that provides financial and legal resources, among other things, to military members and their families. The tax program is called MilTax.

How it works: Trained MilTax consultants are available by phone seven days a week during tax season from 7 a.m. to 11 p.m. ET at 1-800-342-9647. After April 18, they’ll be available Monday through Friday, 8 a.m. to 10 p.m. ET. MilTax is part of the VITA program, which means you also can get face-to-face help on base or nearby.

Get help from Military OneSource.

8. The tax pro down the street

What it is: A certified public accountant, licensed attorney, enrolled agent or someone who has completed the IRS’ Annual Filing Season program. The IRS also requires anyone who prepares or helps prepare federal tax returns for compensation to have a Preparer Tax Identification Number, so be sure to look for that.

How it works: To get free help, all you might need to do is ask. According to the National Society of Accountants, 89% of tax pros offer free client consultations worth more than $100.

Seek help from a credentialed tax professional.

9. Your tax software

What it is: Many versions of do-it-yourself tax software come with free help from a tax pro via phone, chat, email or even face-to-face via your cell phone’s camera.

How it works: Tax software providers frequently offer free help, though it’s more common among the higher-end paid versions. Audit support and audit representation are often provided, though you might have to pay extra.

Where to find: Companies such as TurboTax, H&R Block, TaxAct and TaxSlayer offer free help for all or some of their tax software packages.

Tax Pro Photo via Shutterstock

This article, “9 Ways to Get Free Help With Taxes from a Real Live Person” was first published on Small Business Trends

Walmart’s Two-Day Shipping to Rival Amazon

The new Walmart free two day shipping offer is taking aim at Amazon’s loyal following with a program that also offers free two-day shipping.

One of the biggest motivations for shopping online is free shipping. Almost 9 in 10 consumers say free shipping would induce them to shop more online, according to a 2016 Future of Retail study by marketing firm Walker Sands.

Stores have been taking notice. Expensive shipping may become a thing of the past, thanks to subscription services such as Amazon Prime, in which members pay an annual fee to secure free shipping on all their eligible purchases.

Now, Walmart (NYSE:WMT) is taking aim at Amazon’s loyal following with a program that offers free two-day shipping.

What Does Wal-Mart Offer?

At Walmart.com, free two-day shipping is available on eligible orders of $35 and above without having to pay a membership fee. Look for items with the green “2-Day Shipping” logo. Walmart says millions of products qualify. The program is available in the contiguous United States.

For items that do not qualify, customers can get free three-to-five day shipping on orders of more than $35. For more information about shipping options, visit the online help page. Marketplace and freight orders count toward the order threshold, but shipping costs and times vary.

In 2016, Walmart launched a pilot program called ShippingPass, a membership program that customers signed up for to receive unlimited two-day shipping for $49 per year.

The retail giant, which has canceled the program, says all active ShippingPass members will receive a full refund for their subscription.

How Does It Compare to Amazon Prime?

Walmart’s biggest competitor in the shipping space is Amazon (NASDAQ:AMZN) Prime, which is well-established and costs $99 per year or $10.99 per month.

Prime offers members multiple shipping options, including free two-day shipping nationwide on more than 50 million items, free same-day delivery by 9 p.m. on more than 1 million items in select areas, and free two-hour delivery on some products in select metro areas via its Prime Now option. (Note that you’ll need to order at least $35 worth of eligible items to get free same-day shipping and have to meet a minimum order threshold for free two-hour delivery.)

Prime offers more than fast shipping. Members also receive access to movie streaming, photo storage, Prime Music streaming and 30-minute early access to time-sensitive sales called Lightning Deals.

Things to Watch Out For

Before signing up for Amazon Prime, keep in mind that:

  • Not all items are eligible. Not every purchase you make will qualify for free, fast shipping. Consider the types of items you regularly buy.
  • Your subscription will renew automatically. If you take no action, your subscription will renew automatically after a year. You’ll need to sign in to your account to opt out of the renewal if you wish to cancel.
  • You should figure out if you’d get your money’s worth. Determine the value of this subscription in your life. Consider the number of purchases you’ll make in a year. Would you accumulate enough in shipping costs to more than offset the membership fee?

What It Means for You

For loyal Walmart shoppers, free two-day shipping with no membership fee is a welcome change.

But for those who want a comprehensive online shopping experience — including options for free same-day and two-hour delivery in some metro areas — Amazon Prime remains a good choice, especially with features such as streaming music and movies.

One more thing to consider: You also can get free shipping from Amazon without a Prime membership. Orders of $49 or more of eligible items or $25 or more of eligible books qualify for free shipping. Delivery will occur five to eight business days after all the items are available to ship.

Walmart Photo via Shutterstock

This article, “Walmart’s Two-Day Shipping to Rival Amazon” was first published on Small Business Trends

Small Business Owners, Have You Created a Rainy Day Fund?

When Is It OK to Tap Into a Rainy Day Fund?

You’ve got your emergency fund set up — three to six months of living expenses set aside for unexpected events — and you’re finally feeling a sense of financial security. But what, exactly, constitutes a financial emergency?

We asked financial advisor Laura Scharr-Bykowsky for tips on when to tap your emergency fund and other advice on saving up for a rainy day.

When Should People Tap Their Emergency Funds?

Emergency funds provide peace of mind when there’s an unusual or catastrophic event in your life. Loss of income due to unemployment or disability is the primary intended use. Your emergency fund can also provide much-needed money if you face a major medical event.

Your fund should be able to cover out-of-pocket deductibles for your health, property and casualty insurance and at least six months of income to cover your expenses during a job search. Keep the money in a cash account insured by the Federal Deposit Insurance Corp.

Does it Ever Make Sense to Use It for a Non-emergency?

Some people may decide to tap this account if they have a large, unexpected maintenance or repair bill such as a new roof or heating and air conditioning unit. Others may raid their account to buy a new car. If you deplete your account in this way, try to build it back up as soon as possible, because you’ll be vulnerable if you have a true emergency. I would recommend this only if you have a stable job and good insurance.

Any Other Savings Tips?

Set up separate savings accounts for different goals and include a line item in your monthly budget to save for these less frequent expenses — for example, one savings account for home repair, one for car replacement and another for at least six months of living expenses.

This method can prevent you from raiding your emergency fund. Setting up separate savings accounts is easy and helps us stay honest with our spending.

Rainy Day Umbrella Photo via Shutterstock

This article, “Small Business Owners, Have You Created a Rainy Day Fund?” was first published on Small Business Trends

These Are the 10 Most Important Tax Forms

These Are the 10 Most Important Tax Forms

Ask the IRS’s website for a list of all federal tax forms and you’ll get over 900 results. That’s a ton of forms.

Happily, you probably don’t need to care about most of them. But here are 10 major IRS tax forms you should know about before you file.

Three of them — the W-2, 1098 and 1099 — are forms that may be sent to you with information you’ll need in order to file. The others are forms that you might need to fill out as part of your tax return.

Most Important Tax Forms

The Biggie: Form 1040

The Form 1040 (and its buddies the 1040EZ and 1040A) is the star of the tax show — it’s the form where you tally your income and deductions and calculate your actual tax bill. The 1040 “long form” itself is just two pages long, but to fill in its 70+ lines, you usually have to fill out lots of other forms.

There are rules about which of the three 1040s you can use; here’s a quick breakdown.

  • Form 1040A: Also for fairly simple tax situations, with a twist. Although you can’t itemize, you can claim certain popular tax credits, and you can deduct your student loan interest, IRA contributions and a handful of other things. Your taxable income has to be under $100,000.
  • Form 1040: Anyone can use it, regardless of filing status. You can itemize and claim all allowable deductions and credits.

For Itemizers: Schedule A

Schedule A is for itemizing your deductions — property taxes, charitable contributions, mortgage interest, state taxes, medical expenses or one of myriad other options. Its tax-bill-reducing powers make it one of the single most valuable pieces of tax paper in the stack.

For Those with Investment Income: Schedule B

This form tallies all the taxable interest and dividends over $1,500 that you received during the year. Note the word “taxable.” The lower the total, the lower your tax bill, which is one reason tax-advantaged accounts such as IRAs and 401(k)s can be so valuable — they don’t raise your taxable income.

For Freelancers and Small Business Owners: Schedule C

Schedule C (or the simpler Schedule C-EZ) is what you use to report the profits and losses from freelancing, consulting or contractor work. It’s also where you can deduct expenses related to the growth and development of your business, such as advertising, home office expenses or office supplies. You might be able to get away with using the shorter C-EZ if your expenses are below $5,000, and you have no employees, no inventory and no depreciation or deductions for the cost of your home.

For Investors: Schedule D

If you trade stocks, bonds or other instruments, Schedule D is for you, because it’s where you tally your capital gains and losses for the year. If you’re like most investors, some of your investments probably did well, and some probably didn’t. Report both types: Up to $3,000 of your net losses could be deductible — and Schedule D is where that mathematical magic happens. You’ll likely need information from your 1099s (see below) to get it done.

For Regular Employees: The W-2

The W-4 is a form you give to your employer (typically when you start at a job), instructing how much tax to withhold from each paycheck. The W-2 is a form your employer sends back to you in January or February. It shows, among other things, how much you earned, what you contributed to your company’s retirement plan and the amount of taxes withheld on your behalf. A copy goes to the IRS, so be sure you report this information accurately. (Side note: If you got a huge refund last year, fill out a new W-4 to reduce your withholding — otherwise, you’re just giving the government a free loan.)

For Homeowners and Students: Form 1098

If you have a mortgage, you’ll get one of these tax forms in the mail. It shows the interest (over $600) you paid on your home loan during the year, and that mortgage interest is generally deductible. Students might get a 1098-T, which reports tuition payments they’ve made, or a 1098-E, which reports the interest they’ve paid on their student loans. Student loan interest and tuition payments may also be deductible.

For Multitaskers: Form 1099

The 1099 tax form comes in several flavors, but the big four are the 1099-DIV, 1099-INT, 1099-OID and 1099-MISC. They’re all records of income you’ve received from a source other than your employer, and whoever sent you one also sent the IRS a copy, so don’t forget to report it on your return. In a nutshell, the 1099-DIV reports dividends and distributions from investments; the 1099-INT reports interest you earned on investments; the 1099-OID comes when you buy a bond or note for less than face value; and the 1099-MISC is for most everything else not derived from investments, such as money a client paid you for freelance work.

For People Who Made a Mistake: Form 1040X

If you filed your return and then realized you made an error, the 1040X will save your bacon. You may need to include copies of your other tax forms when you file it (go here to learn more about amending your return). Note that you’ll have to file this form on paper and mail it the old-fashioned way, so be sure to keep a copy of all supporting documents, and consider sending it certified mail. If you find out you owe more due to your mistake, you can still pay online. If you score and realize you’re owed a bigger refund, you can still get a direct deposit.

For People Who Need More Time: Form 4868

File this form with the IRS by the April deadline — you can even do it online — and you’ll buy yourself an extension until October. Beware: You have to make a good estimate of what you owe the IRS and send in some or all of that amount along with your extension request. If the estimated payment you send in April ends up being less than what you actually owe, you’ll need to pay interest on the difference. And don’t miss your extended deadline: The IRS can sock you with a late-filing penalty of 5 percent of the amount due for every month or partial month your return is late.

Tax Form Photo via Shutterstock

This article, “These Are the 10 Most Important Tax Forms” was first published on Small Business Trends