How to Plan Your Income for Retirement

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Planning for retirement is important if you want to cope with life after your days in the office. According to the Employee Benefit Research Institute, 4 out of 10 American workers are saving money for their retirement. Do you want to be part of these smart employees or the lost majority? Here are some of the things you need to know about preparing for retirement.

Setting Financial Goals
Saving is a process that demands commitment. Since retirement is definitely not your only saving goal, you should try striking a balance or prioritizing what is necessary and weighty. For instance, you could comfortably do away with lingering debts and saving for vacations, cars, homes, and lattes.

Saving for Retirement
Retirement involves more than just assessing the amount of saving you need. When planning for retirement, it’s is also important that you pay attention to where you save your money. Find the best investment or saving account. Take time to calculate how much you need to save for retirement as well.

Investing
While saving is simply amassing wealth, investing is the process of multiplying the wealth. Cash is not a great way to store your wealth, and there are thousands of reasons why. Before investing your money in any project, assess the reward-to-risk ratio and the return on investment. Which investments are more diversified, and when do you get in for maximum gains.

What Do You Invest In?
Are you ready to have your retirement saving work for you? Well, if that’s the case, setting up an investment portfolio should not be complicated. Acquaint yourself with principal retirement investment rules. Are you a DIY person, or will you need to hire the services of a financial adviser? If you want to manage your retirement saving yourself, it is recommended that you gather sufficient knowledge on investment strategies. If you will choose to work with a professional, get to know about the related costs.

Building Wealth
Retirement investing is not a phenomenon that occurs in one sitting. It is a process that will change with the dynamics of your employment as you move from one job to another or up the promotion ladder. You will also have to endure changes in the stock markets and meet family obligations. However, that does not necessarily mean that you will have to babysit your retirement investment. There are numerous ways to protect and manage your wealth and savings in the long haul.

Post-PPP Taxes to Understand

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The Paycheck Protection Program loans were a top priority for most struggling businesses due to the COVID 19 pandemic. Although these loans were beneficial to small businesses, most business owners find it hard to understand the tax implications. Below is a comprehensive description of the Post-PPP tax obligations.

Paycheck Protection Program Loans

PPP loans were awarded to small business owners to prevent them from going out of business and to retain their employees. Under the PPP program, small and medium business owners received a loan of up to two-and-a-half times the average monthly payroll. This loan had a cup of about $10 million.

The PPP loan intent was to cover the payroll and other business expenses during the COVID 19 pandemic. If properly appropriated on the approved expenditure, these loans are forgivable. However, if not, repayment of the funds will attract low interest and extended repayment periods. Although these funds have been beneficial to most small businesses and their employees, confusion about the tax implications has arisen.

Tax Implications of The PPP loans

Will the businesses that received the Paycheck Protection Program loan have a different tax situation than the previous years? This question was the concern of most business owners. The possibility that the loans would get considered as the taxable expense was another confusing aspect of these funds.

Although the Paycheck Protection Program (PPP) was seen by many as a lifeline, experts warned that the legislation could become a tax-laden time bomb. In May 2020, the IRS issued Notice 2020-32. This notice declared that if PPP loans were not taxable. However, the expenses usually not considered as tax-deductible wouldn’t be deductible. These expenses include utilities and rent.

This declaration threatened to kneecap the most attractive part of the PPP loans. However, Congress came to the rescue when they passed the recent PPP funding through the (C.R.R.S.A.A) Coronavirus Response and Relief Supplemental Appropriation Act. This act reversed the decision of the IRS made on the Notice 2020-32.

The Congress act declared that any forgiven PPP loan would be tax-exempted income. Thanks to this clarification, business owners can now take a Paycheck Protection Program loan and still get the (ERTC) employee retention tax.

Frequently Overlooked Tax Deductions & Credits

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Every year, millions of dollar in unclaimed and undelivered tax refunds stack up in the IRS bank account. The rightful owners of this money, often times, do not even know the money is waiting for them or how to claim it. In an effort to help you get all the money you deserve back into your pocket, I offer 9 frequently overlooked tax deductions and credits that you should familiarize yourself with going into the next tax season.

1) Job-Hunting Costs

If you spend time looking for a job during the year (as long as it is not your first job) then most of the expenses incurred while job-hunting can be deducted from your taxes. These expenses include: transportation costs (56 cents a mile for driving), parking, tolls, cab fares, food and lodging, employment agency fees, and cost of printing resumes, business cards, postage, and advertising.

2) Moving Expenses For New Job

If you moved over 50 miles away from your old home than you can qualify for moving expensed deductions. You can deduct the cost of moving yourself and your household goods to the new location. A few of the larger eligible deductions include: 23.5 center per mile while driving your car, parking and tolls, and lodging. This deduction is available even if you do not itemize.

3) Sales Tax

You have the option to deduct sales taxes or state taxes off your federal income tax. The sales tax deduction is especially important if you live in a state that does not impose a state income tax. However, even if you have to pay state taxes, the sales tax break may be the better deal if you made larger purchases (such as a car or engagement ring).

4) Child-Care

You are eligible for a tax credit worth between 20% and 35% of what you pay for child care while you work. A tax credit is even better than a deduction! It is also legal to list the cost of a babysitter as a charitable contribution on your tax return if you can document that you were volunteering while the babysitter was performing their duties.

5) Energy-saving Home Improvements

If you install qualified residential alternative energy equipment then you can be eligible for a credit of up to 30% of the total cost of such systems installed through 2016. This can include things such as a solar hot water heater, geothermal heat pump, or wind turbines.

6) Lifetime Learning Credit

The Lifetime Learning credit can provide students up to an additional $2,000 a year. You are eligible to take 20% off of the first $10,000 you spend on education after high school in an effort to give yourself a new or improved skill. While this deduction phases out at higher income levels, it does not discriminate based on ones age.

7) Health Insurance Premiums

In some cases, insurance premiums can be deducted from your taxes. Medical expenses usually need to exceed 7.5% of your adjusted gross income in order to be deducted. However, if you are self-employed and responsible for your own health insurance cover then you can actually deduct 100% of your premium cost. This will be taken off your adjusted gross income as opposed to an itemized deduction.

8) Self-employed Social Security

If you are self-employed and forced to pay the full 15.4% Social Security tax on your own, then you can write off half of what you pay. This deduction can be found on the face of the 1040 form, therefore, you do not need to itemize to take advantage of this deduction.

9) Out-of-pocket Charitable Deductions

You can write off out-of-pocket expenses incurred while doing charity work. For instance, if you make food for a soup kitchen or fundraiser, you can deduct the cost of ingredients used to make the food. It is important to save the receipts or itemize the cost inc case you are audited.

 

 

Crazy Taxes: 4 Crazy Tax Laws from Around the World

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Tax is complicated business, but at its heart it is a way for the government to generate more revenue. So, when a nation is strapped for cash (or just trying to get that extra bit of cash), some lawmakers have turned to some pretty wacky ideas. In no particular order here are four of the strangest tax laws known to man.

 

Bagel Tax

You read that right. In New York, the state taxes bagels that have been altered in anyway. The grounds from this comes from the fact that an extra tax is placed on food prepared on premises. So, you get that bagel cut, toasted, and filled with a nice spread? That’s about as prepared as you can get, and will cost you an extra .08¢.

Card Tax

No, not greeting cards. Alabama has been charging an extra dime on playing cards since 1935. Make no mistakes, Alabama legislators are serious about this tax, and require an official state revenue stamp on all playing card decks. It’s only limited to decks of up to 54 cards, though.

Window Tax

For this one, we need to take a trip across the pond– and back in time. In 1696, England introduced a tax on windows that lasted for over 150 years. While it seems odd on the surface, it was essentially a wealth tax. This was based on the idea that bigger houses had more windows, and that extra wealth could be a marginal source of revenue for the Crown. It was repealed after enough subjects complained it was a tax on light and air.

Beard Tax

Another gem from history. Back at the turn of the 17th century, Russian Emperor Peter the Great struggled to get his vast empire to conform to the beauty and fashion standards of western Europe. However, he noticed many mean were still attached to their beards. Not to be outdone, he cooked up a way to incentive Russian men to part with their whiskers. Excepting priests, all bearded Russians had to pay a then-hefty tax of 100 Rubles per year!