Tag: taxes

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Is Not Paying My Tax Refund a Crime?

When it comes to taxes, people would like to believe that there are a lot more gray areas than there actually are. For example, some people would like to believe that taxes themselves are a gray area, that is, more of a suggestion than a real obligation. Sorry to burst your bubble, but taxes are not optional, but mandatory, and if not promptly taken care of could result in some very crippling results, one of which is jail time.

To complete your taxes, you have to not only file state and federal, but you also have to pay whatever refunds that come out at the very end of your filing. If you are lucky, you may receive some money back as a result of your filing, but if you do not qualify for a return, then you must pay back what you owe. This is where people get turned around when it comes to their taxes, as the question appears as a result of the large bill they just received: “Do I really have to pay back my taxes?”

The short answer is yes, yes you do. Read on for why it’s a much better idea to work to pay your bill rather than try to dodge it. You’ll be glad that you do.

You more than likely will not get away with it.

For those thinking that they can get away with skirting by while not paying any taxes, or that the IRS (Internal Revenue Service) is only after the rich, think again. The IRS is after people who aren’t willing to play ball when it comes to giving the government what is rightfully theirs. Freedom isn’t free (which sounds contradictory, we know), and taxes are how we as a country can afford to keep our figurative lights on.

The IRS is not an agency that is to be feared only by tax evaders and dodgers who are rich, but by people of all financial classes who are trying to get around paying up, and they will find you. Like how Liam Neeson searches for his family all over the world after they get kidnapped (You’ve seen those movies, right?), IRS agents possess a very special skillset that equips them to find perpetrators wherever they think they might be safe from the agency’s reach. If you follow the rules (that are not hard to keep to by any means) and file and pay your owed taxes, then you haven’t anything to worry about.

If you however try to cook your books (alter documentation to cover up your having pay your full due of taxes), then you can expect IRS agents to show up either at your home or even at your office to ask you some questions that could eventually lead to a lengthy and expensive trial. All of this anxiety and trouble is not worth the risk that follows not filing or paying, so do yourself a favor and pay your dues, and pay them as soon as possible. Read on for why you should pay them ASAP.

 

Interest, tax payments, and you.

Contrary to what you may have thought, your taxes work like a really bad and very painful credit card debt, minus the fact that you got to buy something before you revived a debt. Your owed tax debt accrues interest the longer you leave it unattended and unpaid, and it grows a lot faster than that of a credit card. You can use this calculator to get an idea of how much you will have to pay if you are late in your taxes.

Unless you want to have a sizable government debt that rivals that of a small nation, pay your due taxes as soon as you can to avoid the compounding that will soon follow a formal bill being sent to your doorstep. People forget sometimes, and that is okay, but be sure to get on it as soon as possible. Better late than never.

What to do if you can’t pay your tax bill right away.

If you cannot pay the lump sum that is due and expected by the federal government right away, but fully intend to, then know that there are multiple ways that you can legally handle it. There are options that are government approved to help you with your tax debt, all of which you should note does NOT include ignoring your debt. What you can do is:

Formally ask for a delay.

If you currently do not possess the money needed to pay off your due taxes, then you can file an appeal for an extension, all the while without incurring a heavy accruement of interest. Call your and get in touch with your local IRS office to find out more details on how you can work out this handy feature.

Pay in installments.

That’s right, although the IRS comes off as the adult version of the Boogieman, this government agency is not made up of monsters. They want what belongs to them and the federal government, but they also understand that it is a pretty tall order for some people to cough up steep piles of money on command.

Get in touch with your IRS office to get more details on setting up a payment installment plan, or log on here to get on it and start reducing that tax debt of yours now.

NOTE: They do take major credit cards as well as cash and check, so if your credit limit is upstanding enough to take on your tax debt and get the IRS off your back, it might be a wise idea to consider moving it onto the plastic.

File Form 656 A.K.A. an “Offer in Compromise”.

For those who qualify, you can propose to work out a deal with the IRS to pay what you can on your owed tax debt and be forgiven of the rest. The perks of this option is that if you can prove that you cannot legitimately pay off all of your owed debt but can pay most of it, and also have an upstanding history of paying and filing your previous taxes, then you can get away with not paying your full taxes but still having your record be untarnished as a tax evader or tax fraud-er.

Know that Form 656 works like a sweepstakes does though: many will enter, few will win. So just because you pay to submit an application, it does not mean that your application will be received with a confirmation to go through.

 

Pay your taxes people. Unless the idea of being chased down by government agents (in extreme cases) sounds fun, you should make it a point to both file your taxes and pay your owed refund if applicable. If you do not pay up, then you risk significant charges alongside your initial tax sum, which includes multi-thousand dollar fines and jail time.

Be a responsible grown up and pay your taxes. It’s the law to do so, not a suggestion.

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Chase British Airways Visa Signature Credit Card Review

Looking at the numbers, the Chase British Airways Visa Signature card is one of the best travel rewards cards on the market today. First thing that might jump out at you is the rate at which spending earns rewards: you get 2.5 miles per $1 spent on British Airways and 1.25 miles per $1 spent on all other purchases. This is significantly higher than the standard rate that you see on virtually all other airlines cards, usually 2 miles per $1 of airline purchases and 1 mile per $1 spent everywhere else.

The second thing you’ll probably notice is that sweet sign-up bonus of 50,000 Avios miles after spending $2000 in the first 3 months. Unfortunately, the legendary 100,000 bonus miles sign-up offer hasn’t been seen for two years, so we don’t recommend holding your breath for it. Still, 50,000 miles is enough for a round-trip ticket to Europe, with some exceptions. For example, Spain, Portugal, and eastern Europe award flights cost slightly more, around 60,000 miles.

However, with British Airways there is a slight catch. Well, more like a massive bear trap. Charging taxes and fees on award flights is pretty standard practice, but British Airways is notorious for having some of the worst ones. The fees easily reach $500 and up. From their own fine print, you can expect a round-trip flight from Seattle to London to rack up $682-$1250 for a coach ticket. At that rate, the discount you’re getting from the full fare (typically around $1100) doesn’t amount to much.

Probably the best way to use Avios miles is to book with partner airlines to avoid these high fees. For instance, you can transfer to American Airlines for slightly better domestic rates than AA offers. Even going to Hawaii or Central/South America is a better deal with Avios miles. Just be aware that for flights going to the UK, you don’t have the option of flying with a partner.

Big spenders will also enjoy receiving a Travel Together Ticket after spending $30,000 in a calendar year. This voucher is good for two years from when you receive it and allows you to get a companion ticket in addition to your award flight for 0 additional miles. The companion flight has to share your itinerary and can only be used if you’ve redeemed the award flight on the main British Airways, not their partners. This isn’t exactly a free ticket, either. It’s still subject to those atrocious fees.

So, the British Airways Visa card is by no means perfect, but it’s still one of the best offers of the year. Although it doesn’t come with a long list of airline-specific perks, it does sport no foreign transaction fee, for the serious traveler. And right now, for the first time, the $95 annual fee is waived for the first year. This offer is only good until the end of this September, so if it titillates you, by all means jump on it. Check out our guide to the details below.

 

Money Math

  • Annual Fee: $95, waived for first year
  • Foreign Transaction Fee: $0
  • APR: var 15.24%
  • APR for Balance Transfers: var 15.24%
  • Balance Transfer Fee: 3%
  • APR for Cash Advance: var 19.24%
  • Cash Advance Fee: 5%
  • Late Fee/Returned Payment Fee: up to $35
  • Over Credit Limit Fee: $0
  • Penalty APR: var 29.99%, applies with late/returned payment or exceeding credit limit

Rewards

  • Bonus: 50,000 miles after spending $2,000 in first 3 months
  • 2.5 miles per $1 spent on British Airways purchases
  • 1.25 miles per $1 spent on all other purchases
  • Miles Worth: Varies
  • Rewards Limit: None
  • Rewards Expiration: None
  • Redeem Rewards For: Award flights or partners

Benefits

  • $0 Fraud Liability Protection
  • Purchase Protection: Yes
  • Travel Insurance: Yes
  • Rental Car Insurance: Yes
  • Extended Warranty: Yes
  • Customer Service: Yes

 

So, with this card you can easily get 50,000 bonus miles. Use them to pay for a round-trip ticket to Europe or simply transfer them to American Airlines or another partner to avoid high fees and get better award rates. Then enjoy earning a higher-than-average amount of miles for the spending you were going to do anyway!

Don’t forget to check out our list of the best travel credit cards and best rewards credit cards.

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Is A Roth IRA The Perfect Savings Plan For You?

As far as retirement plans go, a Roth IRA can make the most sense for a lot of people. Both Traditional and Roth IRAs provide a way to shelter your savings from taxes. Typically, when you invest in, say, a mutual fund, you pay taxes on the money you put in and then you pay more taxes on your capital gains. Traditional IRAs allow you to defer taxes and Roth IRAs let you escape paying tax on earnings altogether.

Pay taxes now or later

In a traditional IRA, you can contribute money pre-tax. So if you made $40,000 and put $3000 away in your traditional IRA, then you only get taxed on $37,000 this year. But a few decades down the road, when you are ready to retire and dip into your IRA, then you do have to pay tax on your contributions and the earnings they have gained.

On the other hand, with a Roth IRA, the contributions you put in are post-tax, but when you withdraw money later, you don’t pay tax, provided you meet certain guidelines. These guidelines include the account being at least 5 years old, AND you being either a) disabled, b) at least 59.5 years old, or c) qualifying for some other exemption. Follow these requirements and you’re looking at a retirement account that lets earnings grow tax-free. Pretty sweet. There’s also no required minimum distribution (RMD) as there is with a traditional IRA, which forces you to start taking money out once you hit 70 — because Uncle Sam has waited long enough for his taxes. With a Roth, the tax man already got his, so you can leave it for as long as you want, or even pass it on to your heirs if you wish. (Inheriting Roth money is particularly nice because it is tax-free!)

Roth advantages

Plus, since you already paid taxes, every penny of your contributions is still yours, with nothing for Uncle Same to quibble over. That means that as long as you wait 5 years after opening the account, you can withdraw as much of your direct contributions as you like without any fees or penalties. (If you do not wait 5 years, you’re still subject to the usual 10% penalty.) What this means is that a Roth IRA can simultaneously serve as an emergency back-up fund. Not only that, but you are also allowed to withdraw up to a lifetime maximum of $10,000 of the earnings for certain expenses such as education or your first home.

A final pro for the Roth IRA is that it effectively allows you to contribute more. Contribution limits vary with income level, but everybody is looking at no more than $5,000 in contributions to an IRA annually. (Except those 50 years of age or older, who get to put in an extra $1,000.) Let’s assume you want to max out your contributions — not a bad idea. If you put in the $5,000 max into a traditional IRA, and you’re looking at a 20% tax when you take it out later, you’re really only putting $4,000 away. With a Roth, since you’ve already paid taxes and will (hopefully) pay no more, you really are putting away the full $5,000.

Decide what’s right for you

So is a Roth IRA the right choice for everybody? Not necessarily. The biggest determining factor should be your guesses about taxes in the future, both for yourself and the country in general. If you foresee being in a lower tax bracket when you retire, then the traditional IRA makes more sense. If you think you will be a higher tax bracket when you retire, go with the Roth. Also consider how you predict taxes will change for everyone, on a country-wide level. Many Roth supporters point to the fact that we are at a historical low for taxes, so the time to pay is now rather than later. Then again, anything can happen. Congress might even change the laws that allow for tax-free withdrawals in the future.

So, nothing is risk-free. That’s the nature of finance. Assess your own risk-tolerance, your hunches, and determine what the best savings plan is for you.

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Personal Expenses and Business Credit Cards

“Can I put non-business expenses on a business credit card?”

The million dollar question. You want to meet the minimum spending requirements to earn those tasty bonus rewards, but don’t want to get in trouble. Well, luckily the answer is “very probably.” Nobody knows the reason behind your charges, so it’s not like the card can refuse a charge. Just don’t lie to the IRS.

Technically, a credit card company could become suspicious of charges, but is only likely to do so if you become delinquent. If they do, they will ask you to justify those charges, so be ready to explain. If you fail, they might close the card, in which case you suffer credit score damage in the range of 50 to 200 points and lose all your accumulated rewards. Or they might simply convert the credit card to the personal version, meaning you lose the business account privileges.

Again, this is highly unlikely. But be forewarned: if you co-mingle funds this way, it makes tracking your expenses much more difficult. Not to mention that putting personal expenses on your business account might end up creating more debt than the business can handle, especially if the card is a rewards one with a higher APR and annual fee. Also, be aware that business credit cards are not covered by the Credit CARD Act of 2009, and thus don’t come with the same consumer protections as personal accounts.

Interestingly, this can work in reverse too. If a credit card company somehow finds out that a business owner is using a personal credit card for primarily commercial purposes, they can effectively dodge CARD regulations, possibly increasing APR or denying certain rewards or protections such as zero fraud liability.

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Applying for a Business Credit Card

Should you add a business credit card to your collection? For the grand majority of people, the answer is undoubtedly “yes.” And many don’t even realize the benefits they can reap — or think that a business card doesn’t apply to them. Think again.

Make no mistake: a business credit card is separate from the personal cards you have, even if they share a brand name. It comes with its own credit limit and its own sign-up bonus. That’s right — you can get that sweet 40,000 point bonus twice. The initial inquiry will ding your credit, as any application process does, but after that the business account history is kept separate from yours. That means your credit score won’t be affected by such factors as utilization, balances (a good option if you need to run big balances for now), closing the account, or opening the account (which usually affects your score by shortening average account age). However, this is no free ticket: if you default, the issuer will come after you and your personal assets, since business cards are guaranteed by your personal credit. And you can be sure that will wreck your credit score.

 

“But I don’t have a business.”

We bet you do. Maybe you freelance sometimes — writing, developing, designing, re-appropriating old furniture, music gigs, etc. If you have a hobby, you can and should pick up some freelance work with it. It will develop your skills, professional assets, and make extra cash. If you are knowledgeable in a particular area, consider consulting work. If you don’t have any special hobbies or skills, there are still plenty of people looking to contract reliable workers for non-skilled odd jobs and errands. Try Craigslist or TaskRabbit — even ‘odd jobs’ qualifies as freelancing work. Or maybe you like to sell things on eBay or you manage a personal project such as a website. Maybe all you have is an idea for a start-up — the business doesn’t have to be producing revenues already.

All of these possibilities justify separating their expenses from your personal ones. All you have to do is apply as a sole proprietor.

 

Business benefits

Most importantly, a business credit card is an easy way to separate business and personal expenses. This lets you assess operating costs efficiently, revolve business debt, and take advantage of discounts offered only to businesses. It makes both filing taxes and responding to audits a breeze. With the costs already separated, you won’t have to pay extra accounting fees to sort them out.

Plus, such a card establishes a credit history for your business. By building the company’s credit, it will be easier to get loans for the business in the future. And of course, there are ample rewards opportunities for business expenses, usually offering bonuses on categories such as office supplies, inventory, gas, and utilities. Don’t forget to check out our top pick in the business credit card department.

 

Applying for a business card guidelines

Personal & Business Cards at the Same Time

Feel free to apply for both the personal and business versions of a credit card you like at the same time. This will minimize the impact on your credit score, since issuers often do only one inquiry if you apply for both at the same time. If you are accepted for the personal card and rejected for the business card, simply call them up and explain that you want to separate your expenses.

Applying as a Sole Proprietor

The application will ask for the type of business. If you have an EIN or federal tax ID, great. But you don’t need one if you are applying as a sole proprietor, in which case you simply put down your social security number in place of the tax ID. This generally works for all but the toughest banks. Citi tends to be the strictest, and will likely ask for proof of your business, including government EIN and business checking account documents. Research the issuer you’re interested in ahead of time.

When applying as a sole proprietor:
  • Use your personal name as the business name. Your position is “owner.”
  • Be honest with the income, even if it’s $0.
  • Be ready to explain the need for a business account and to provide proof of address (bank statement, utility bill, etc.)
  • Remember that the largest drawback to being a sole proprietor is the unlimited liability — you alone are responsible for all losses.

Other Tips:

  • Typically a sole proprietorship has one owner, but married couples can also own one, provided that they are the sole owners, both participate, and file a joint tax return.
  • Usually the application will not ask for things such as business tax filings or incorporation documents. But if you do want to incorporate, you can do so with The Company Corporation.
  • Lots of small businesses operate as DBA’s (“Doing Business As”), meaning the business name is different from the true name of the person or entity in control. You don’t have to open a DBA account, but it won’t hurt, and some companies do ask for a DBA form. You can get one for $10 at the county court house.

 

Parting Words

When looking to apply for a business credit card, try to be honest with yourself about the credit needs of your business. If you foresee having to carry a balance, a rewards card may not be the best choice, as they typically come with higher APRs and annual fees. On the other hand, often the presence of an annual fee also comes with a longer grace period until the payment deadline. However, there are some good business card options out there that have no annual fee at all and still offer benefits.

Check out our Best Business Cards page for our top picks!