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.

Which Tax Software Should You Use?

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It’s January, and that means that employers have begun to give employees their W2 forms. When it comes to filing your taxes, you should consider your options. Do you want to meet with a professional, or would you rather use a tax software? This article focuses on tax software. Below is a breakdown of three of the most popular tax software options.

TurboTax

TurboTax is one of the most popular names when it comes to online tax software. The software is easy to navigate, and the instructions are straightforward which makes it a great choice for taxpayers who are using tax software for the first time. Furthermore, the software allows you to import documents from over a million employers and financial institutions. The bottom line is that TurboTax is one of the most user-friendly tax software options that are available. With TurboTax it’s never an issue to go back and update your entries, so you don’t have to worry if you forget to add something. One of the only cons with TurboTax is its price. There’s a fee for using the online version and a fee for getting a state tax return. Plus if you have certain investments you might have to use TurboTax Premier which is more expensive than their basic version.

H&R Block

H&R Block’s tax software is just as easy to use as the TurboTax software. One of the best features of Block’s software is the checklists it provides. For example, one checklist makes sure you don’t forget to provide all of the required tax forms before you submit your filing. Block also provides “Learn More” links that answer most of the questions you will have when completing your taxes. The cost of using Block is similar to TurboTax; however, unlike TurboTax, you don’t have to pay more if you have investment income. One of the only downsides of Block is its search feature. It doesn’t always provide the best resources to help you get the answer you’re looking for.

TaxAct

TaxAct is one of the most inexpensive software on the market. However, if you decide to itemize you may have to pay more than you would otherwise. Still, the software offers a great deal when compared to competitors. Compared to competitors’ software, it’s not as easy to update your filing if you realize you forgot to add information. TaxAct probably isn’t the best choice for taxpayers who have never used tax software before. Other programs do a better job of hand-holding. The software has some reassuring security features, though. If you leave the program open but aren’t active, it will automatically log you out after a couple of minutes. Ultimately, TaxAct is the best software to use if your biggest concern is affordability. The software’s “Price Lock Guarantee” means that once you pay for the program you won’t have to pay more—even if you purchase it in January and wait until April to submit your filing.

Online Streaming Services Usher In New Form Of Taxes

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The city of Chicago has recently announced that they will begin targeting online databases and streaming entertainment services with a new “cloud tax.” This new tax will affect users of online streaming service such as Netflix and Spotify.

The new tax is composed of two recent ruling made by the city of Chicago’s Department of Finance. The first, covers “electronically delivered amusements” and the second covers “nonpossessory computer leases.” These rulings are essentially extensions on existing laws to include an extra 9 percent tax on certain types of online services. It is assumed that first of these ruling will affect services such as Netflix and Spotify and the second will affect services such as Amazon Web Services or Lexis Nexis.

Consumers of such services should not worry just yet about increased payments, as Netflix has already begun making arrangements to add the tax to the cost charged to its Chicago customers. This means that while the tax is technically levied upon customers of these services, the companies are likely to actually carry the burden of the tax.

This new “cloud tax” is likely to be just the beginning and online streaming services recognize that they need to prepare for this to be a trend utilized by more areas across the country in the future. As these massive online streaming services have taken vast entertainment resources and moved them online, it has made it a challenge for cities that have previously relied on tax from the sale of these entertainment services at local businesses. The “cloud tax” is a move to fight back against the loss in tax revenue due to the online streaming services.

Many have already voiced their displeasure with this new tax. After the announcement was made, Michael Wynne argued that the tax violates the Federal Telecommunications Act and the Internet Tax Freedom Act, intended to prevent discrimination against services delivered over the internet. In his response, Wynne stated “I could do that same activity of research using books or periodicals without being tax, so it seems like I’m being picked on because I chose to do it online.”

This “cloud tax” is clearly a response by cash-strapped cities to the continuing loss of tax revenue from sales previously made in brick and mortar stores. Online services are swallowing up business that use to be conducted within the city but is now happening online. Before the rise of these services, people would consume entertainment at video rental outlets and music stores – which paid local property taxes along with municipal sales taxes – and now these entertainment outlets have become irrelevant with the birth of online services. The cities clearly are looking for a way to make up the difference in lost tax revenue, and the new “cloud tax” seems to be the prevailing option.

 

15 Facts About U.S. Taxes

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Americans pay taxes to the government basically everyday. Whether it is at the store or the income tax withheld from their paycheck throughout the year. No one enjoys paying taxes and when tax season rolls around it can become an extremely stressful time. However, at the end of the day, taxes are a vital part of how our country functions. Despite taxes having such a large influence on our lives, many people do not know much about them.

Check out some of these interesting facts about the American tax system and learn how you fit into the tax system as a whole:

  1. The IRS is the U.S. government agency that is responsible for collecting taxes and enforcing revenue laws. This agency is part of the U.S. Department of the Treasury.
  2. Every year the IRS receives over 140 million individual tax returns. In total, they collect over $950 billion in taxes.
  3. Over $325 billion in tax refunds are paid out each year. The average tax refund is $2,953. Keep in mind that a large tax refund suggest that you had to much money withheld from your pay or you made estimated tax payments that were too large. In a sense, it is money that you loaned to the government interest free.
  4. More than 40,000 Californian residents reported over $1 million in income, the most of any state. Vermont, on the other hand, has less than 300 millionaires.
  5. Electronic filing is now nearly a universal practice. Almost 90% of individual tax returns are e-filed.
  6. The tax code is extremely wordy, with about 4 million words in all.
  7. The tax code is continually changing. There has been more than 4,500 changes since 2001.
  8. The biggest tax deductions are those for taxes paid to the state and local governments. After that, taxes paid for interest is the next highest, especially on home mortgages.
  9. The word ‘tax’ derives from the Latin word taxo, which means “I estimate.”
  10. Around 90% of Americans who employ a housekeeper and babysitter cheat on their taxes.
  11. The United States has a progressive tax system. This means that the more money a person makes, the more he or she pays in income taxes.
  12. As a whole, Americans spend over $27.7 billion each year doing their taxes.
  13. Americans spend over 7.6 billion hours complying with federal tax requirements.
  14. The top 20% of all income earners in the United States pay about 86% of all federal income taxes.
  15. The United States is the only nation in the world that tries to tax citizens on money they earned in foreign countries.

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!