4 Smart Ways to Spend Your Tax Return in 2017

Tax form with paper money, silver pen, calculator on white background

Here are some smart ways to spend your money once you get that tax return this year.

Pay down credit card debt. This may be the smartest choice when deciding what to do with your refund. Decreasing your debt helps alleviate the interest you’re paying, which will be a huge weight off your wallet and credit score. Debt can feel like a mountain, so take the opportunity to dig yourself out from under it.

Debt overload? Check out First Financial’s free, online debt management tool, Debt in Focus. In just minutes, you will receive a thorough analysis of your financial situation, including powerful tips by leading financial experts to help you control your debt, build a budget, and start living the life you want to live.

Put it into retirement. Your retirement account (401k, Roth IRA) can sometimes be neglected if you’re not steadily adding funds, so use your refund as a chance to jump start your contributions for 2017. It may not seem super important now, but you’ll be retirement age before you know it.

Questions about retirement savings or investments? To set up a complimentary consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings goals, contact us at 732.312.1564, email samantha.schertz@cunamutual.com or stop in to see us!*

Build that emergency fund. Even if you’re doing a good job of saving for retirement, that may be all you’re saving. If this is you, use your tax return to create an emergency fund in case things go south. It’s never a bad idea to be prepared!

Invest in yourself. This could have a lot of different meanings. Exercise is good for your body and taking a trip can be a good way to unwind and refresh your mind. If these sound like good ideas, join a gym or book a flight. Have a favorite charity? Give some of that money away. Helping others can be good for the soul too.

*Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Non-deposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

Article Source: John Pettit for CUInsight.com

3 Ways to Ensure Cyber Safety During Tax Time

Income Tax File Meaning Paying Taxes 3d Rendering

The IRS is now officially open for business as tax season gets underway. Here are three ways you can protect yourself over the next few months as you manage important and sensitive, financial documents.

Stay on secured networks: As with other financial transactions, make sure to only e-file your taxes (or view private documents) on a protected Wi-Fi network. You may be tempted to work from a coffee shop or the library, but remember using a public server can make you an easy target for cyber thieves.

Beware of IRS emails: The Internal Revenue Service will never directly reach out to you; if you receive a fraudulent message report it immediately to phishing@irs.gov. Use caution when dealing with these and be sure not to click on web links or open suspicious email attachments.

Set strong passwords: Most of us may think that choosing a password such as “password” or “123456” is an obvious mistake but according to TIME, these are in fact the most popular password picks. Review their list of these commonly used passwords and make necessary adjustments to yours to ensure your information stays safe online.

Remember, due to a holiday in Washington, DC – the tax deadline this year is April 18, 2017.

First Financial members get discounts on TurboTax products – get started today!

Article Source: Wendy Bignon for CUInsight.com

5 Reasons You Should File Your Taxes Early

Printed copy of Form 1040 for income tax return with reminder for April 18 deadline

You’ll get your money as soon as possible.

This one may seem obvious. The sooner your file for a refund, the sooner you’ll get it back. The closer you wait until Tax Day, the busier the IRS is, and the longer it’s going to take to get your money back.

You can prevent your return from being stolen.

Criminals would love to have your tax return, so filing quickly will give them less opportunity to commit fraud and steal your money.

You’ll be less stressed.

The 2017 tax deadline is April 18th. If you find out your taxes are going to be more difficult than past years, you may find yourself scrounging around for paperwork and the process may take a lot longer than you planned. By filing early, this date shouldn’t be a source of stress for you.

You’ll have more time if you have to pay.

Hopefully you’re looking at a refund this year, but if not, you’ll have to be paid in full by April 18th. If this is the case, you’ll give yourself more time to pay by filing early. Think about that if you know you owe money this year.

Tax pros are less busy.

Not only is the IRS less busy at the beginning of the year, but tax professionals are as well. Keep this in mind if you’re not filing on your own. For those of you who file online, this won’t be a big deal, but if you need a pro to help sort you out, you’ll be glad you made an early appointment.

First Financial members get discounts on TurboTax products – get started today!

Article Source: John Pettit for CUInsight.com

How to Get Ready for Tax Season

Tax Forms

Make a list of major life changes.

Getting married, having a baby, buying a house, or a death in the family this year means that your tax situation is probably going to change. Make sure you fully understand how these events are going to affect you now to offset any tax increases that you may experience.

Make a tax folder.

Shortly after the first of year all of your tax documents are going to start rolling in. When they do, put them all into one place. Even before those W-2s or 1099s show up, gather all of the receipts from your tax-deductible expenses and donations.

Decide if you are going to go it alone.

If you are going to file yourself, the best time to get a deal on the updated tax software is right after the first of the year. The longer you wait, they more expensive it could be, so make sure you aren’t missing out. If you are going to use an accountant, you should be scheduling an appointment now.

First Financial members get discounts on tax software from TurboTax. Get started today!

Know how to file for an extension.

Sometimes it can be difficult to find all the right documents before the deadline (which in 2017 is going to be April 18th). All you need to do to receive an extension is fill out and submit Form 4868, though the IRS will not be ready to process these forms until March at the earliest.

Educate yourself.

Last year a NerdWallet survey found that the average American scores a 51% on personal finance questions related to US federal income tax returns. Most of the questions missed had to do with how retirement accounts, college savings and healthcare can affect your tax return. Take some time to fully understand all these factors so you can be sure to get your largest return in 2017.

Article Source: Tyler Atwell for CUInsight.com

 

6 Smart Uses for Your Tax Refund

680856_21Expecting a tax refund? Sounds like a great time to jump start your finances.

If you’re expecting a refund, you might be tempted to rush out and spend it on a new car or a fancy vacation. After all, it might be the single biggest check you will receive all year.

In all, 70% of Americans are expected to get a tax refund this year, according to the IRS. Last year, the average refund amounted to $2,797.

But remember, this was your money all along, not a prize that’s fallen from the sky. There are much better uses for this chunk of cash that could actually pay off in the long run.

“There are great ways you can invest in yourself and get on sound financial footing,” said Gerri Walsh, FINRA’s senior vice president for Investor Education.

Here are six smart ways to put your refund to work for you:

1. Pay Down Your High-Interest Debt.

One of the smartest things you can do with your refund is to zap your credit card balances or other types of high-interest debt, Walsh said.

Facing down your debt with your refund bucks could yield sizeable savings. By lowering your balance, you reduce the amount of interest you owe.

“Getting debt under control and out of the way quickly can save hundreds, or even thousands of dollars, over time,” said Bruce McClary, a spokesman for the National Foundation for Credit Counseling.

2. Supersize Your Savings.

Your tax refund might help you sleep better at night if you use it to bulk up your savings.

“Make sure your emergency fund is fully funded,” Walsh advised.

Experts typically recommend having three to six months worth of living expenses in a savings account to cushion the blow of a job loss or another financial setback. But many people are woefully behind in achieving this goal. In a recent survey conducted by Bankrate.com, close to a third of respondents said they have no emergency savings.

Luckily, the IRS makes it easy for taxpayers to save their refunds. By opting for direct deposit, you can deposit your refund, for free, in up to three accounts in U.S. financial institutions. You can also direct your refund money toward the purchase of up to $5,000 in U.S. Savings Bonds.

Think of it this way: the more of your tax refund you save, the less of a chance you’ll end up needing to tap your credit cards if you hit a rough patch.

3. Fund Your Retirement Accounts.

The “found money” you receive today could make a big difference in the years to come. Consider making an extra contribution to your Roth or traditional IRA.

“That extra contribution could grow three or four-fold by the time you need it in retirement,” said Greg McBride, Bankrate’s chief financial analyst.

Remember the IRS’ direct deposit option? You can choose to have some, or all, of your refund money sent directly to your IRA. If don’t already have an IRA, you might want to use your refund money to start one.

The annual contribution limit for IRAs in 2016 is $5,500 ($6,500 for those 50 and above).

Does your company offer a 401(k)? If yes, while you’re focused on retirement, figure out whether you’re on track to save the max this year using FINRA’s 401(k) Save the Max calculator. The contribution limit for 401(k)s this year is $18,000 ($24,000 if you are age 50 or above).

Set up a no-cost consultation with the Investment & Retirement Center located at First Financial Federal Credit Union to discuss your savings and retirement goals. Give us a call at 866.750.0100, email samantha.schertz@cunamutual.com or stop in to see us!*

4. Bulk Up Your Kids’ College Funds.

Once you’ve taken care of more immediate financial concerns and your retirement, it’s time to think about your kids and their future.

Two types of college savings vehicles, 529 plans and Coverdell Education Accounts, offer potential tax benefits so long as the money is used for qualified educational expenses.

Why is so important to do what you can to bulk up your children’s college savings accounts? Every dollar you save reduces the chances your kids will face a heavy student loan burden down the road.

5. Invest In Your Career.

If you’ve been dreaming of developing new skills, or of getting a degree, this could be your shot. You might want to invest your tax refund in continuing education courses.

The payoff might be more than just a higher paying job—it might also include personal satisfaction. Now that beats a shopping spree at the mall, any time of the year.

6. Plan For Next Year.

No matter how you use the cash from your refund, there is one simple step any citizen should take: adjust your withholdings to prevent a refund next year.

A refund sounds great, but in reality it means you overpaid on your taxes over the course of the year. A tax refund is often referred to as an “interest-free loan” to Uncle Sam. It is money you might otherwise have used during the year to pay your bills, invest or reduce your debt, but that instead, you paid to the government.

For many taxpayers, figuring out how much to pay in taxes throughout the year to avoid getting a refund is a difficult task. Some people deliberately withhold too much from their paychecks, using this tactic as a forced savings plan. Many others, though, experience changes in their life that impact their tax status, whether that means getting married or divorced, having a child or changing jobs.

But if you can help it, you might be better off foregoing the refund and using the extra cash from each paycheck to invest or to pay down your debt throughout

*Original article source courtesy of Phyllis Furman of Business Insider.

 

3 Reasons Your Tax Refund Might Not Be As Big As You’re Expecting

09ba4dd1-bbe3-4f1f-9400-940dc6df347fEveryone tells you not to plan on having a tax refund. If you’re living paycheck-to-paycheck, though, you know where every dollar is going. You might be counting on that money to give you the breathing space you need.

Even if you’re a little further ahead than that, you may still have made plans for your tax refund. You might be planning to pay off a credit card from the holidays or hoping to put a down payment on a car. You might just be hoping to take a little vacation over spring break!

Whatever your plans for the money, it’s a good idea to temper your expectations. Unfortunately, you can’t count on the same tax refund you got last year. Here’s why.

1. Student loan garnishments. 

If you’re behind on your student loans, you might not see much of your refund. If you don’t have much of an income, it’s easy to get behind and it’s hard to catch up. Student loan companies know that, for people with minimal income, tax refunds are a source of a big chunk of money. Also, since it’s not a regular source of income, the rules regarding garnishment are more lenient. Ordinarily, creditors are only allowed to take 15% of your discretionary income if you have one loan, or 25% if you have multiple loans. For a tax refund, the Department of Education can instruct the IRS to apply the full amount of any tax refund you’re due to the balance of your loan.

Even if you’re paid off in full, it might be wise to check with your spouse. This process can also apply to your refund for his or her defaulted student loans. As far as the IRS is concerned, you’re one taxpayer with one set of obligations.

This process can apply to federal student loans, federally subsidized loans and some private loans. You’ll receive a notice of proposed offset from the IRS. You have 65 days from receipt of the notice to object to the offset. Deferments can be provided for up to 3 years for economic hardship and unemployment. They may be provided indefinitely for individuals seeking an advanced degree or for people with disabilities.

It’s also possible the “loan” may just be a paperwork error. If you’ve unenrolled from classes but haven’t yet received a repayment from the school, for instance, you might get your refund back with a short letter. The notice of referral will provide you instructions to request a review.

2. You made more money.

Usually, getting a raise is something to celebrate. If you got one this year, that’s good news for your career future. It’s less good news for your refund. The refund is the difference between what you paid in taxes and what you ended up owing. Your taxes are withheld from your paychecks assuming they stay the same all year. If you got a raise in June, then you were effectively under-withholding for the first half of the year.

Beyond the difference in payment, you may find your raise puts you just above the threshold for credit programs. Credits like the Earned Income Tax Credit (EITC) have income eligibility requirements. If you made more money this year than you did last year, you may not qualify. The same is true for subsidized insurance premiums through the Affordable Care Act (Obamacare). If your income changed after you obtained coverage, you may have to hand back a part of that subsidy.

The EITC is fairly significant, particularly if you have kids. It may be worth your time to look for other deductions you can take to get your gross income under the threshold. Consider working with a professional tax preparer, too.

3. You were the victim of identity theft.

The past few years have seen an increase in tax returns filed fraudulently on behalf of victims of identity theft. A crook uses your Social Security Number and fabricates financial information to get a hefty tax refund, then cashes the check. You’re not only out your tax refund, but also may be facing criminal charges for the phony info on “your” return.

With cuts to the IRS budget this year, its enforcement and investigation of these crimes has dropped. You should contact the IRS immediately if you receive notice that more than one tax return was filed using your Social Security number or if you are issued a W-2 (an income statement report from your employer) by an employer you don’t recognize. These are red flags that someone is fraudulently using your identity.

The FTC recommends you contact the IRS’s Specialized Protection Unit at 1-800-908-4490. You should also prepare proof of your identity, like a copy of your drivers’ license, Social Security card, or passport. The IRS has a form, IRS ID Theft Affidavit Form 14039, that will start the investigative process. Recovering from this crime will take time, but you will get the refund you’re due.

To prevent identity theft, check out First Financial’s ID Theft Protection products – with our Fully Managed Identity Recovery services, you don’t need to worry. A professional Recovery Advocate will do the work on your behalf, based on a plan that you approve. Should you experience an Identity Theft incident, your Recovery Advocate will stick with you all along the way – and will be there for you until your good name is restored and you can try it FREE for 90 days!* To learn more about our ID Theft Protection products, click here and enroll today!**

TurboTax has some great offers for the 2014-2015 tax season! Click here to get started and save with First Financial’s TurboTax microsite. From now until 2/26/15, TurboTax users are automatically entered into this year’s $25,000 Giveaway when they file between the sweepstakes dates and provide a valid email address. One grand prize winner will win $15,000 and ten first prize winners will receive $1,000 each! This is a nationwide sweepstakes.***

*Available for new enrollments only. After the free trial of 90 days, the member must contact the Credit Union to opt-out of ID Theft Protection or the monthly fee of $4.95 will automatically be deducted out of the base savings account or $8.95 will be deducted out of the First Protection Checking account (depending upon the coverage option selected), on a monthly basis or until the member opts out of the program. **Identity Theft insurance underwritten by subsidiaries or affiliates of Chartis Inc. The description herein is a summary and intended for informational purposes only and does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions. ***TurboTax is a tax preparation software product offered to our members through the Love My CU Rewards Program and is not a product of this Credit Union.

Article source courtesy of CUContent.com.