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Friday, October 4, 2013

How to claim the retirement savings tax credit

Tax payers can lower taxable income via contributions to retirement accounts
Retirement contributions lower taxable income
Tax credits help lower money owed to the Internal Revenue Service (IRS) and assist with retirement planning. The retirement savings contribution credit is one of several tax credits that enable tax payers to reduce their taxes via contributions to a retirement account such as an Individual Retirement Accounts (IRAs) and 401(k) accounts.

Being properly aware of what tax credits you qualify for is essential to keeping your taxes to a minimum in addition to accurately recording financial activities to the IRS. The retirement savings contribution credit is the governments way of helping tax filers prepare for retirement while also benefitting in the near term through tax breaks.

Regulation of the retirement savings contribution tax credit is set forth in Section25B of the Internal Revenue Code (IRC). The credit and the IRC are governed by The Job Creation and Woker Assistance Act of 2002 also known as PublicationL. 107-147 Statutory details regarding the retirement contribution tax credit are outlined within Title 26, Subtitle A, Chapter 1, Sub-chapter A, Part IV, Sub-part A, Section 25B of the U.S. Code.


To determine whether or not you qualify for the savings tax credit review the Internal Revenue Service (IRS) Form 8880. This form provides information on who can use the credit in terms of which types of savings accounts qualify, income limitations and filing status. Claiming a retirment savings tax credit is not necessarily allowable if a retirement contribution deduction is being made to taxable income.

Gather financial documents

Knowing how much credit to take, and justifying the credit to the IRS requires proper documentation of the qualifying retirement contribution. The IRS Form 5498 is a document used to record and report retirement contributions to the IRS and contributor(s). Be sure to not exceed any credit maximums to avoid being flagged for an audit.

Complete IRS Form 8880 

IRS Form 8880 is the means by which you demonstrate your intent to claim the retirement savings contributions credit. This form includes savings contributions amounts for both single and married tax filers. Early distributions from retirement savings may reduce the amount of tax credit claimed unless they are directly rolled over between financial institution custodial accounts.

Record credit on 1040 

Once the IRS Form 8880 is complete the tax credit due should be on the last line of the form. This value is transferred over to the applicable IRS Form1040. Since there are different Form 1040's and they can change from year to year, the line on which the retirement contribution tax credit is reported varies. If in doubt about any of the tax filing procedures or to optimize tax filing returns, contact the IRS and or a qualified tax professional.

* Image license: ba1969; RGBStock royalty free 


Thursday, October 3, 2013

New Jersey tops charts for property taxes

By Natalie Gilmore

According to the U.S. Census and a study by The Tax Foundation, New Jersey State and its local government bring in an average amount of $2,819 per person of real estate tax per year. Homes in Hunterdon County is at the top of the list as one of the priciest in New Jersey. According to The Tax Foundation, New Jersey is home to seven of the top ten counties in the United States with the highest Real Estate taxes. Even though New Jersey Property taxes are high, people are still moving there either for work or for a better life. However, New Jersey does offer some property relief programs that benefit Hurricane Sandy victims, Retirees and Military Veterans. Some tax relief programs include:
However, even with these tax benefits, a study by Kiplinger proved that New Jersey is towards the bottom of the list in terms of being a tax-friendly state. Let's take a look at how much property tax was collected by each state:

State and Local Property Tax Collections Per Capita

Fiscal Year 2010

StateCollections Per CapitaRank
New Hampshire$2,4634
New Jersey$2,8191
New Mexico$63348
New York$2,2805
North Carolina$90238
North Dakota$1,02735
Rhode Island$2,0837
South Carolina$1,02236
South Dakota$1,14231
West Virginia$74544

It is a testament to the quality of living in New Jersey, considering they are ranked #1 for property taxes collected, as people still continue to move their families there.

Although the taxes were high in 2010, Governor Christie has been working towards enacting some legislature that would overhaul the property tax incentives in New Jersey which he believes will “spur investment and employment within the state.”

Regardless of which approach is the correct one to take, it is obvious that something needs to be done to help lower the tax burden on individual families as well as businesses. Being ranked the #1 collector in real estate taxes is not something to brag about, and should motivate legislatures to take action.

About the author: This article was written by Natalie Gilmore with Callaway Henderson Sotheby's International Realty.   Natalie lives in New Jersey and loves to provide real estate advice to home seekers that will help them save money.

Wednesday, October 2, 2013

How to save for a car and other big purchases

By Amanda Sozak

There are things people try when they’re trying to save money for a rather extravagant purchase like a new car. We’ve put together a list of things we think can help you save for your next car, or that you can apply to your general spending habits to help you save more overall.

Avoid wasteful spending using smart shopping techniques
Reduce impulse purchases using the "put-back rule"

Depending on the purchase you’re making, there are a couple of simple rules to follow that can help you to save money.

1. The “Put Back” rule: It’s safe to say most of us have fallen victim to this: running into a store “just to grab a couple things,” getting distracted and leaving with bags upon bags of things we didn’t need. A great rule to follow on these trips is what I like to call the “put back” rule.  Think you can’t live without that $30 shirt that barely differs from several other shirts you own? Put it back where you found it, go pick up the things you actually need, and then go back to the shirt. If you’re still longing for it when you come back, go ahead and purchase it. After the impulse passes, if you still want the item, whether its clothing, a book, a movie, etc, it’s more likely that you will get a better use out of it.

2. The “24 Hours” or “One Month” rule: When deciding whether or not to make expensive purchase or an online purchase, follow one of these two rules, depending on the spending situation. Following either the “24 Hours” rule or the “One Month” rule will help you to make smarter choices when it comes to expensive or online purchases. Waiting a period of time and then reconsidering your purchase will help you to save money because you may realize you don’t need to make that purchase, or maybe you’ve found a better deal somewhere else.

3. Force your shopping timeline: The next time you need to go grocery shopping, make sure you have a list prepared and go when you need to shop in a hurry. Something as simple as not wanting to miss your favorite TV show that starts soon, or needing to be somewhere at a certain time, will help you to stick to your list and avoid impulse purchases that can add up.

4. The spend/save equilibrium: Another great way to save money is to match your savings to your indulgences. Spent a little too much at the bar on Friday night?  Match what you spent by putting that exact amount into your savings account. Doing this can help you to make more responsible choices and ensure that you’re saving as much as you’re spending. It may also deter you from spending more money than you would have, which ends up saving you more in the long run.

5. Go cold turkey: Making yourself participate in a “no spend week” (or month if you’re especially strapped for cash) can help you to save tons of money. Create a budget for any necessary spending, such as gas money, groceries, etc, and stick to it. Don’t spend any extra money than you’ve allowed in your budget for necessities. Depending on your spending habits, you can save an extra $50-$200 a week.

6. Bury your money in the yard (not literally): Finally, another great way to make sure you’re saving money is to put your savings on lockdown. Keep your savings somewhere or with someone where it won’t be easily accessible. Maybe keep it with a trusted relative or friend who won’t give in no matter how much you’re begging to tap into the savings.

To assist with your budgeting it can make sense to use one of the many apps available to help you track your saving and spending. Mint's iPhone app and the free app called Toshl are just a couple of options that can assist in your budgeting.

Apply these tips to your spending habits, as well as other helpful tips you can find on the internet, and soon you will have saved up enough money for your next big purchase.

About the author: Amanda Sozak is a guest blogger with a major interest in cars, car care and personal finance. She is a regular contributor for several automotive and financial websites including used car warranty provider Auto Warranty One.
    Photo credit: My Blog Guest community

    Tuesday, October 1, 2013

    Creative ways to fund your start-up

    Numerous ways of financing new businesses exist
    Vendor or supplier credit accounts help new businesses maintain cashflow
    By Alex Faubel
    If there’s one roadblock that haunts entrepreneurs, it’s financing. You have that great idea, you have that strategic plan in place, you have the drive and motivation, the only thing you need is money. 

    Luckily, there are plenty of creative solutions to your money woes. With so many resources right at your fingertips, there is no reason to give up on your dreams! In this article, we’ll teach you several creative ways to fund your start-up!

    Customer financing

    What if you could direct consumers to buy your product before it’s even produced? Believe it or not, this type of financing does exist and has been an avenue of success for many business owners. In essence, the business convinces customers to pre-order their products. For example, Tesla Automotive Company is still in the production phase of its high-end electric vehicles. The funding that they are currently using to build these ultra-chic vehicles comes from high-end customer pre-orders. Basically, the customer buys the vehicle before they even receive it. Once the cars are produced, the customer will then receive their vehicle.


    Perhaps one of the most basic ways to finance your start-up is through the use of loans. Fortunately, there are government supported initiatives that allow entrepreneurs the chance to start their own business. Known as the Small Business Administration (SBA) loan, this federally-backed incentive program offers loans to businesses, not individuals. To find a lender, check with your local banks and inquire about an SBA loan.

    Selling your capital

    As you venture out and start your business, you will find out just how many sacrifices you must make. One of those sacrifices may entail selling some of your personal assets. Do you currently drive a 20 thousand dollar car? Perhaps you can sell it and get by on a cheaper vehicle. Do you currently own a home when you could be living in a cheaper apartment? How about selling some of that expensive jewelry you never wear? Sometimes, sacrifices like this make all the difference. In the end, you’re better off with the least amount of debt possible.

    Crowd funding

    Let’s face it, convincing investors to believe in your product and business can be a difficult process. Not only is it time consuming and stressful, but the return rates can be astronomical! That’s why there’s an alternative option: crowd funding. Sometimes known as crowd sourcing, this type of deal involves gathering small investments from numerous investors. These investors want a return on their money without risking too much. The business owner benefits because they end up with the funding they need to get their start-up going. It’s a rather simple process and you can receive funding quickly. To explore the crowd funding option, check out some popular websites such as Indiegogo or Kickstarter.

    Friends and family

    The importance of a support system cannot be stressed enough when you’re an entrepreneur. The ups and downs of starting a new business will mean that you may need some help along the way. You may be amazed at just how much help you can receive if you only ask. Even if all you can do is secure a loan, the interest rate is bound to be much lower than those of banks. Never overlook an opportunity when you see one!

    Do keep in mind that what may work for one person, may not work for you. If you’ve tried the customer financing route and it doesn’t work out, don’t get discouraged and beat yourself over it. Instead, try asking crowdfunding. Or better yet, try and adjust your monthly living expenses so you can have more expendable income. Do keep in mind that the mark of success is determination; it is never quitting, never giving up. 

    About the author: Alex Faubel enjoys writing about topics related to business and technology in career-focused education programs.

    * Image license: Zela; RGBStock royalty free