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September 2020

Feature Articles

Tax Tips

QuickBooks Tips

 
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Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.


Small Business Update: Payroll Tax Deferral

On August 8, 2020, the President issued a Memorandum allowing employers to defer withholding and payment of an employee's portion of the Social Security tax (i.e., the 6.2% FICA portion of the federal payroll tax on employees). Medicare taxes, however, are not covered. The payroll tax deferral is effective starting September 1, 2020, and also applies to the employee portion of the Railroad Retirement Act Tier 1 tax. While employers are allowed to defer the withholding and payment of the payroll taxes on employees' applicable wages, they are not required to do so.

Let's take a look at how this affects employers and employees:

Applicable Wages

Applicable wages refer to wages paid to employees during the period September 1, 2020 through December 31, 2020. The payroll tax deferral only applies to an employee's taxable wages that are less than $4,000 during a bi-weekly pay period (approximately $104,000 per year) or the equivalent threshold amount with respect to other pay periods.

An employee earning $50,000 a year will owe approximately $1,073 in deferred taxes next year while one making $104,000 will owe $2,232.

No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.

The determination of applicable wages is made on a pay period-by-pay period basis. For example, if the amount of wages or compensation payable to an employee for the pay period is less than the corresponding pay period threshold amount, then that amount is considered applicable wages for the pay period, and the relief applies - irrespective of the amount of wages or compensation paid to the employee for other pay periods.

Payment of Deferred Applicable Taxes

The IRS has issued a revised Form 941 for the second quarter of 2020, Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund that adds a line to reflect any payroll tax deferrals. If an employer chooses not to defer the FICA portion of an employee's wages (i.e., the taxes are withheld as they normally are), payment of any applicable payroll taxes is required as it normally is.

Unless Congress authorizes forgiveness for these tax liabilities, employers deferring payroll tax obligations must withhold and pay the total applicable taxes between January 1, 2021, and April 30, 2021. Interest, penalties, and additions to tax do not begin to accrue until May 1, 2021. This means that employees could, in effect, have double the deduction taken from their paychecks next year to pay back the deferred portion of tax.

Additional information regarding payroll tax deferral is likely forthcoming, but if you have any questions about payroll tax deferment right now, please don't hesitate to call.

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It's Never Too Early to Check Tax Withholding

While it probably seems like tax season just ended, it is never too early to do a "Paycheck Checkup" to make sure the right amount of tax is withheld from earnings - and avoid a tax surprise next year when filing your 2020 tax return. As a reminder, because income taxes operate as a pay-as-you-go system, taxpayers are required by law to pay most of their tax as income is received.

Income tax withholding is generally based on the worker's expected filing status and standard deduction. The Tax Withholding Estimator is a tool on IRS.gov designed to help taxpayers determine how to have the right amount of tax withheld from their paychecks. It allows workers, retirees, self-employed individuals, and other taxpayers to enter their information using a clear, step-by-step method that helps them determine if there is a need to adjust their withholding and submit a new Form W-4, Employee's Withholding Certificate, to their employer.

Who Should Check Income Tax Withholding

People who should check their withholding include anyone who:

  • is part of two-income families
  • works two or more jobs or who only work for part of the year
  • has children and claims credits such as the child tax credit
  • has older dependents, including children age 17 or older
  • itemized deductions on their 2019 tax return
  • is a high-income earner with a complex tax return
  • received a large tax refunds or had a substantial tax bill for 2019
  • receives unemployment at any time during the year

When To Do a Paycheck Check-Up

Taxpayers should check their withholding annually and when life changes occur, such as marriage, childbirth, adoption, and buying a home. The IRS recommends anyone who changed their withholding this year or received a tax bill after they filed their 2019 return should do a Paycheck Checkup.

Unemployment Compensation

By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

Millions of Americans currently receiving unemployment compensation (and for many individuals, an extra $600 in addition to regular unemployment benefits) may not realize that unemployment benefits are considered taxable income by the IRS and that tax should be withheld now to avoid owing taxes on this income when filing a federal income tax return next year.

Withholding is voluntary; however, federal law allows any recipient to choose to have a flat 10 percent withheld from their benefits to cover part or all of their tax liability. To do that, fill out Form W-4V, Voluntary Withholding Request (PDF), and give it to the agency paying the benefits. Do not send it to the IRS. If the payor has its own withholding request form, use that form instead.

There are a number of different types of payments that taxpayers should check their withholding on including:

  • Unemployment compensation includes: Benefits paid by a state or the District of Columbia from
  • the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability benefits paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
  • Unemployment assistance under the Airline Deregulation Act of 1978 Program

Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure they are having enough tax taken out of their pay.

In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments (PDF) from the agency paying the benefits. The form will show the amount of unemployment compensation they received during 2020 in Box 1, and any federal income tax withheld in Box 4. Taxpayers report this information, along with their W-2 income, on their 2020 federal tax return.

Paying Estimated Taxes

Taxpayers with a substantial portion of their income not subject to withholding − the self-employed, investors, retirees, those with interest, dividends, capital gains, alimony, and rental income − often need to pay quarterly installments of estimated tax.

Recipients of unemployment compensation that don't choose withholding - or realize that the amount withheld is not enough - can also make quarterly estimated tax payments. The payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on September 15, 2020, and January 15, 2021, respectively.

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. IRS offers two free electronic payment options where taxpayers can schedule their estimated federal tax payments up to 30 days in advance with IRS Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

Financial transactions, especially those incurred late in the year, can often have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.

Don't hesitate to contact the office if you need assistance figuring the correct withholding amount or have any questions about your tax situation.

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Preparing for a Successful Retirement

As you approach retirement, it's vital that you pay attention to several important financial matters to ensure a smooth transition. Here are five of them:

1. Health Insurance

Are you among the lucky few who will continue to be covered after retirement? If not, then you'll need to replace your health coverage.

If you will be eligible for Medicare at the time of your retirement, then you may want to start checking into "Medigap" coverage. Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. Medigap is Medicare Supplement Insurance that helps fill "gaps" in and is sold by private companies to individuals age 65 and older that covers medical expenses not covered or only partially covered by Medicare.

If your employee plan coverage is broader than Medicare, then take care of any non-emergency medical, dental, or optical needs before you retire.

2. Other Insurance

Once you retire, and depending on individual circumstances, you may need to replace employer-provided life insurance with extra coverage. You should also consider purchasing long-term health care insurance in case of a lengthy nursing home stay in the future. Premiums for qualified long-term care insurance policies are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 10 percent of the insured's adjusted gross income in 2020.

3. Social Security

Decide whether you want to take early Social Security benefits if you're retiring before your full retirement age, which is currently 66 years of age for people born between 1943 and 1954 and age 67 for those born after 1960. The years in between are prorated accordingly. If you choose to retire as early as age 62, doing so may result in a reduction of as much as 30 percent of your full benefits. Conversely, starting to receive benefits after normal retirement age may result in larger benefits.

Taking Social Security benefits at full retirement age makes financial sense for most people, but if you think you might need to take early benefits, please call and speak to a tax professional first.

4. Pension Plan or 401(k) Retirement Plan Payout

You should plan well in advance how you'll take the payout from your pension plan or 401(k) plan. For example, will you transfer the funds to a conventional or Roth IRA? How will the funds be invested?

5. Relocation

If you're planning a move to another state or country, make sure that you fully explore the financial ramifications of living there before you move. Cost of living as well as rates of taxation can vary significantly from one region of the country to another.

If you have any questions or need assistance planning for a smooth transition into retirement, please call the office.

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Tax Considerations When Hiring Household Help

If you employ someone to work for you around your house, it is important to consider the tax implications of this type of arrangement. While many people disregard the need to pay taxes on household employees, they do so at the risk of paying stiff tax penalties down the road.

Household Employee Defined

If a worker is your employee, it does not matter whether the work is full-time or part-time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily or weekly basis or by the job.

If the worker controls how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

Also, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

You pay Kate an hourly wage to babysit your child and do light housework four days a week in your home. Kate follows your specific instructions about household and childcare duties. You provide the household equipment and supplies that she needs to do her work. Kate is your household employee.

You pay Nick to care for your lawn. Nick also offers lawn care services to other homeowners in your neighborhood and provides his own tools and supplies, He hires and pays any helpers he needs. Neither Nick nor his helpers are your household employees.

USCIS Form I-9: Employment Eligibility Verification

When you hire a household employee to work for you on a regular basis, they must complete USCIS Form I-9, Employment Eligibility Verification. It is your responsibility to verify that the employee is either a U.S. citizen or an alien who can legally work. Once this is determined, you then complete the employer part of the form.

It is unlawful for you to knowingly hire or continue to employ a person who cannot legally work in the United States. Keep the completed form for your records. Do not return the form to the U.S. Citizenship and Immigration Services (USCIS).

Employment Taxes

If you have a household employee, you may need to withhold and pay Social Security and Medicare taxes, or you may need to pay federal unemployment tax or both. If you pay cash wages of $2,200 or more in 2020 to any one household employee, then you will need to withhold and pay Social Security and Medicare taxes. Also, if you pay total cash wages of $1,000 or more in any calendar quarter of 2019 or 2020 to household employees, you are also required to pay federal unemployment tax.

If neither of these two contingencies applies, you do not need to pay any federal unemployment taxes; however, you may still need to pay state unemployment taxes. Please contact the office if you're not sure whether you need to pay state unemployment tax for your household employee. A tax professional will help you figure out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance.

Social Security and Medicare Taxes

Social Security taxes pays for old-age, survivor, and disability benefits for workers and their families. The Medicare tax pays for hospital insurance. Both you and your household employee may owe Social Security and Medicare taxes. Your share is 7.65 percent (6.2 percent for Social Security tax and 1.45 percent for Medicare tax) of the employee's Social Security and Medicare wages. Your employee's share is 6.2 percent for Social Security tax and 1.45 percent for Medicare tax.

You are responsible for payment of your employee's share of the taxes as well as your own. You can either withhold your employee's share from the employee's wages or pay it from your own funds.

Do not count wages you pay to any of the following individuals as Social Security and Medicare wages:

  1. Your spouse.

  2. Your child who is under age 21.

  3. Your parent.

  4. Exception. You should count wages to your parent if they are caring for your child and your child lives with you and is either under age 18 or has a physical or mental condition that requires the personal care of an adult and you are divorced and have not remarried, or you are a widow or widower, or you are married to and living with a person whose physical or mental condition prevents him or her from caring for your child.

  5. An employee who is under age 18 at any time during the year.

  6. However, you should count these wages to an employee under 18 if providing household services is the employee's principal occupation. If the employee is a student, providing household services is not considered to be his or her principal occupation.

Maximum Taxable Earnings. If your employee's Social Security and Medicare wages reach $137,700 in 2020, then do not count any wages you pay that employee during the rest of the year as Social Security wages to figure Social Security tax. You should, however, continue to count the employee's cash wages as Medicare wages to figure Medicare tax. Meals provided at your home for your convenience and lodging provided at your home for your convenience and as a condition of employment are not counted as wages

Help is Just a Phone Call Away

As you can see, tax rules for hiring household employees are complex; therefore, professional tax guidance is highly recommended. This is definitely an area where it's better to be safe than sorry. If you have any questions at all, please contact the office to set up a consultation.

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Tax Tips for Workers in the Gig Economy

The gig economy, also called sharing or access economy, is defined by activities where taxpayers earn income providing on-demand work, services, or goods. This type of work is often carried out via digital platforms such as an app or website. There are many types of sharing economy businesses including two of the most popular ones: ride-sharing, Uber and Lyft, for example, home rentals such as Airbnb, and TaskRabbit.

If taxpayers use one of the many online platforms to rent a spare bedroom, provide car rides or other goods or services, they may be part of the sharing or gig worker economy. If so, there are several things taxpayers should keep in mind.

Income is Taxable

Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time, or a side job or if an individual is paid in cash or if an information return like a Form 1099 or Form W2 is issued to the gig worker. Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.

Special Rules for Renting Out Your Home

Special rules generally apply if a taxpayer rents out his home, apartment, or other dwelling but also lives in it during the year - this residential rental income may be taxable. For more information about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes). Taxpayers can also use the Interactive Tax Assistant Tool, Is My Residential Rental Income Taxable, and/or Are My Expenses Deductible? to determine if their residential rental income is taxable.

Worker Classification: Employee or Independent Contractor

While providing gig economy services, the taxpayer must be correctly classified. This means the business or the taxpayer must determine whether the individual providing the services is an employee or an independent contractor. Taxpayers can check out the worker classification page on IRS.gov to determine how they are classified.

This is important because some gig workers may be classified as independent contractors and may be able to deduct business expenses, depending on tax limits and rules. Taxpayers need to keep records of their business expenses. For example, a taxpayer who uses his or her car for business often qualifies to claim the standard mileage rate, which is 57.5 cents per mile for 2020.

Paying Taxes on Gig Income

Since income from the gig economy is taxable, it's important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file. An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe. However, gig economy workers who are not considered employees must pay their taxes. There are two ways to do this:

  • Submit a new Form W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
  • Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.

If you have any questions about the sharing economy and your taxes, help is just a phone call away.

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IRS Form 1040-X Now Available for E-Filing

Form 1040-X has been one of the last major individual tax forms that still needed to be paper-filed, but now taxpayers can quickly correct previously filed tax returns by submitting Form 1040-X, Amended U.S. Individual Income Tax Return electronically using commercial tax-filing software.

Approximately 3 million Forms 1040-X are filed by taxpayers each year and taxpayers must mail a completed Form 1040-X to the IRS for processing. The new electronic option, however, allows the IRS to receive amended returns faster while minimizing errors normally associated with manually completing the form. The process is also simplified because the tax-filing software allows users to input their data in a question-answer format. The new form also makes it easier for IRS employees to answer taxpayer questions since the data is entered electronically and submitted to the agency almost simultaneously.

Currently, only tax year 2019 Forms 1040 and 1040-SR returns can be amended electronically, but additional improvements are planned for the future. Taxpayers still have the option to submit a paper version of the Form 1040-X and should follow the instructions for preparing and submitting the paper form.

As always, don't hesitate to call if you have any questions.

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The Home Office Deduction

With more people working from home than ever before, taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year. The short answer is that self-employed taxpayers who use their home for business may be able to deduct expenses for the business use of it whether they rent or own their home. If you are an employee, however, you are not eligible to take the home office deduction - even if you are working remotely in your home office.

Here is what taxpayers should keep in mind when it comes to understanding the home office deduction and whether they can claim it:

1. Regular and Exclusive Use. Generally, taxpayers must use a part of their home regularly and exclusively for business purposes. The part of a home used for business must also be:

  • A principal place of business, or
  • A place where taxpayers meet clients or customers in the normal course of business, or
  • A separate structure not attached to the home. Examples could include a garage, barn, greenhouse, or studio.

For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.

The term "home" for purposes of this deduction is defined as a house, apartment, condominium, mobile home, boat or similar property. It does not include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.

A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

2. Expenses that can be deducted. Taxpayers can deduct certain expenses such as mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent. They must meet specific requirements to claim home expenses as a deduction, and the deductible amount of these types of expenses may be limited.

3. Simplified Option. To use the simplified option, multiply the allowable square footage of the office by a rate of $5. The maximum footage allowed is 300 square feet. As such, the maximum deduction under this method is $1,500. This option saves time because it simplifies how to figure and claim the deduction and makes it easier to keep records. The rules for claiming a home office deduction remain the same.

4. Regular Method. This method includes certain costs paid for a home. For example, part of the rent for rented homes may qualify. Deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

5. Deduction Limit. If the gross income from the business use of a home is less than expenses, the deduction for some expenses may be limited.

Taxpayers who are self-employed and choose the regular method should use Form 8829, Expenses for Business Use of Your Home, to figure the amount to deduct. Claim the deduction using either method on Schedule C, Profit or Loss from Business.

Please call if you would like more information about the home office deduction and how it applies to your tax situation.

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Recordkeeping Tips for Individuals and Businesses

The key to avoiding headaches at tax time is keeping track of your receipts and other records throughout the year. Whether you use an excel spreadsheet, an app, an online system or keep your receipts organized in a folding file organized by month, good record-keeping will help you remember the various transactions you made during the year.

Taxpayers should add tax records to their files throughout the year as soon they receive them. This includes Notice 1444, Your Economic Impact Payment, and unemployment compensation documentation. Reviewing your recordkeeping systems now - or setting one up if you don't already have one in place - will pay off when it comes time to file your 2020 tax return next spring. Keeping good records also helps document any deductions you've claimed on your return and you will need this documentation should the IRS select your return for audit.

Normally, tax records should be kept for three years, but some documents - such as records relating to a home purchase or sale, stock transactions, IRA, and business or rental property - should be kept longer. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return such as:

  • Unemployment compensation
  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged, or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

Taxpayers should also keep records relating to property they dispose of or sell. These types of records are used to figure their basis for figuring gains or losses.

As a reminder, taxpayers should keep records for three years from the date they filed the return. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.Good record-keeping throughout the year saves you time and effort at tax time.

For more information on what kinds of records you should keep or assistance on setting up a recordkeeping system that works for you, please call the office.

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What To Do If You Get a Letter From the IRS

The IRS mails millions of notices and letters to taxpayers every year for a variety of reasons. If you receive correspondence from the IRS don't panic. You can usually deal with a notice by simply responding to it; most IRS notices are about federal tax returns or tax accounts. Each notice has specific instructions, so read your notice carefully because it will tell you what you need to do. In most cases, your notice will be about changes to your account, taxes you owe or a payment request; however, your notice may also ask you for more information about a specific issue.

Unless you are specifically instructed to do so, there is usually no need for a taxpayer to reply to a notice. For example, if your notice says that the IRS changed or corrected your tax return, review the information and compare it with your original return. If you agree with the notice, you usually don't need to reply unless the notice gives you other instructions or you need to make a payment.

If you don't agree with the notice, you will need to write a letter that explains why you disagree and include information and documents you want the IRS to consider. Mail your response with the contact stub at the bottom of the notice to the address on the contact stub. Allow at least 30 days for a response.

For most notices, there is no need to call or visit the IRS. If you have questions, call the phone number in the upper right-hand corner of the notice. Be sure to have a copy of your tax return and the notice with you when you call. As always, keep copies of any notices you receive with your tax records.

Be alert for tax scams as well. As a reminder, the IRS sends letters and notices by mail and does NOT contact people by email or social media to ask for personal or financial information.

If you need assistance understanding an IRS Notice or letter, believe it is in error, or discover you owe additional tax, please call the office.

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E-Signatures Temporarily Allowed for Certain Forms

The use of digital signatures on certain forms that cannot be filed electronically will now be temporarily allowed. Expanding the use of digital signatures will help to protect the health of taxpayers and tax professionals during the coronavirus pandemic by reducing in-person contact between taxpayers and tax professionals.

Form 1040, U.S. Individual Income Tax Return, already uses an electronic signature when it is filed electronically, either by using a taxpayer self-selected PIN, if self-prepared or a tax-preparer selected PIN, if using a tax professional. While more than 90 percent of Form 1040s are filed electronically, if you haven't filed your 2019 tax return this year, it is important to consider e-filing forms whenever possible, due to COVID-19.

The following forms can be submitted with digital signatures if mailed by or on December 31, 2020:

  • Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
  • Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
  • Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;
  • Form 3115, Application for Change in Accounting Method;
  • Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts;
  • Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner;
  • Form 8832, Entity Classification Election;
  • Form 8802, Application for U.S. Residency Certification;
  • Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
  • Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies;
  • Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
  • Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
  • Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;
  • Form 1120-L, U.S. Life Insurance Company Income Tax Return;
  • Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; and
  • Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms.

This temporary option for e-signatures is subject to change at any time. Please contact the office with questions about this or any tax-related information.

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How to Track Employee Time, Part 1

It's easy to track sales of goods in QuickBooks. You create an invoice or a sales receipt, select the product the customer wants along with the quantity, and save the transaction. QuickBooks reduces the corresponding inventory level and records the purchase in the correct account.

Accounting for services sold, however, is a bit more complicated. Whether you're charging customers for consulting, labor, or any other task that gets billed by the hour, you have to both create records for that billable time and track the hours spent on it carefully. QuickBooks provides tools that simplify both chores.

You'll use those same tools if you need to record the hours that employees work for payroll purposes. QuickBooks allows you to track time in individual records and/or traditional timesheets.

Here's what you need to know:

Editing Preferences

Before you can start tracking time, you'll need to make sure that QuickBooks is set up for that job. Open the Edit menu and select Preferences, then click on Time & Expenses. With the Company Preferences tab highlighted, click the button in front of Yes under Do you track time? if it's not already filled in. Click the down arrow in the field next to First Day of Work Week to open the list and choose the correct day. If it's appropriate, check the box in front of Mark all time entries as billable. Click OK.

Figure 1 - QuickBooks needs some information from you before you can start tracking time
Figure 1: QuickBooks needs some information from you before you can start tracking time.

While you're still in the Preferences window, click on Sales & Customers, then My Preferences. When you create an invoice for a customer that has unbilled time, QuickBooks can open a window listing the billable services (Prompt for time/costs to add) or display a small box asking you whether you want to include those items (Ask what to do). Select your preference or Don't add any, then click OK.

Individual Time Entries

Le'’s look first at creating individual time entries. Click the arrow to the right of Enter Time on the home page (or Customers | Enter Time) and select Time/Enter Single Activity. In the window that opens, make sure the Date is set to the date the service was provided (if that is different from the current date that appears). Click the down arrow in the Name field and choose the correct employee, and in the next field, select the Customer:Job.

Warning: If this work was done for a specific job, be sure to click on the actual job, not the main customer entry.

Figure 2 - The <strong>Time/Enter Single Activity
Figure 2: The Time/Enter Single Activity window.

Next, select the Service Item, the actual work that the employee did. Below that, you can either enter the Duration worked manually, or click Start to launch the automatic timer. If the work is Billable, be sure to check that box in the upper right. Add Notes if you'd like.

The Payroll Item (pay type) and WC Code (workers' compensation) fields will only appear if you have QuickBooks set up for payroll. If this is the case, and you don't see those fields, minimize the Time/Enter Single Activity window by clicking in the small horizontal line in the upper right. Click Employees in the toolbar (or Employees | Employee Center) and double-click on the name of the employee. Click on the Payroll Info tab to the left. You'll see a line toward the bottom that says Use time data to create paychecks. Check that box and click OK, then reopen the Time/Enter Single Activity window by clicking the double box icon in the lower left of the screen. The two fields should be there.

When you've completed all of the fields required, save the time entry.

Note: Are you still doing payroll manually? It is much easier to track time and pay employees if you're doing payroll through QuickBooks, but setup can be complex. It may be easier to guide you through the process, so please call if you'd like assistance with this.

Creating time entries isn't difficult, but it can be time-consuming if you have a lot of employees being paid by the hour. Next month, the topic will be the QuickBooks' Timesheet features well as how to get information about the time entries you've created and what to do if QuickBooks' time-tracking isn't robust enough to meet your needs. In the meantime, don't hesitate to call if you need help with QuickBooks or your accounting in general.

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Tax Due Dates for September 2020

September 10

Employees Who Work for Tips - If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.

September 15

Individuals - Make a payment of your 2020 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2020.

Partnerships - File a 2019 calendar year income tax return (Form 1065). This due date applies only if you were given an additional 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1.

S corporations - File a 2019 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.

Corporations - Deposit the third installment of estimated income tax for 2020. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.

Employers - Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in August.

Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in August.


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10 Great Tips to Save You Money on Your Car Insurance Policy

Care insurance can be one of the most expensive items on your budget. It can also feel like you’re dumping money down a hole because, as a good driver, you may not use it much. However, it is the law and a must-have for every responsible driver. The good news is, there are some ways you can cut your bill and save a few dollars here and there that will add up!

1. Provide Your VIN When Getting Quotes

Some cars tend to have more safety features and often come with built-in factory alarm systems. These features could save you money on car insurance. Since it is generally more expensive to insure a newer car than an older one, you’ll need all the discounts you can get! Make sure your insurer knows about any relevant safety or anti-theft features your car has.

2. Go Paperless

Many insurers offer a discount for going paperless. Going paperless helps the planet due to fewer trees being cut down and fewer toxic emissions. It also saves your insurer money because they don’t need to pay the numerous overhead costs associated with printing and mailing your statements to your home each month. They forward that cost savings on to you, so it’s a win-win for everyone. Besides, would you rather get even more paper junk mail to sift through and clutter your countertop, or get a smartphone app notification or email instead? The paperless option is slightly better in every way, so go for it!

3. Drive Safely

This one goes without saying, but the way you drive can dramatically affect your car insurance premiums. If you are an aggressive driver with a lead foot, consider dialing it down a notch or two and taking a defensive driving course or other safety courses. Make sure your insurer knows about these courses, too!

Likewise, if you have traffic tickets to your name, that could raise your premiums. The bottom line is the safer you drive, the less you’ll pay. Things like speeding and aggressive driving are almost certain to cost you in the long run, one way or another, so why not become a safer and more responsible driver?

4. Buy an Older Car

Car insurance is priced in large part based on replacement and repair costs. Older cars tend to be cheaper to fix and less expensive to replace, so they also tend to be economical to insure. For example, if you price out identical insurance policies on two cars of the same model, one being five years older than the other, the older car would likely be about 13 percent cheaper to insure.

Brand new cars are more expensive to insure because they typically cost the most to replace. They also stand to lose the most value in depreciation over the first few years of ownership. By purchasing a car that’s at least a few years old, you can save money on your insurance and on your vehicle too.

5. College Graduate? Tell Your Insurer

Some insurers offer a discount for drivers with higher levels of education completed, so letting them know if you graduated from college could save you money on your premiums. As with many other areas of insurance valuation, the risk is the driving motivator here. Insurers know that people with the discipline to stick it out and finish a college degree are often safer, more responsible drivers. That college degree probably cost you a lot of money, so why not let it save you some now?

6. Learn the Lingo of the Insurance Industry

This is all about knowing what you are buying and how to use it. Insurance may be mandatory, but that doesn’t mean we should check all the boxes and pay the bill without knowing precisely what we are getting in return. When it comes time to file a claim, you’ll be glad you understood what you were doing and purchased the right policy for your needs.

7. Set Up Auto-pay

Some insurers will give you a discount for auto-pay. They want to know they will get paid on time each month, and they know that if you have to make that payment manually, there is a higher chance of it being late. Therefore, they offer discounts for auto-pay, because you won’t have to think about paying your bill on time. And they won’t have to worry about it either.

8. Buy 10 Days Early

If you need car insurance at the last minute, you could end up paying more for it. Yet most of us tend to buy our car insurance and activate it on the same day. To potentially save some money, try taking out your car insurance policy a full ten days before the date you’ll need it activated on. This lack of urgency can result in some savings.

9. Pay Annually or Semi-Annually

If you pay upfront, you could save an average of $62. If you pay annually or semi-annual, there are also discounts for paying that lump-sum. As soon as you click the button to use a monthly installment plan, you’ll probably see your premium go up slightly. They may call it an installment fee, or offer a discount for not using installments. Insurance companies like to get their money upfront, as you are less likely to cancel your policy and are guaranteed not to be late on any monthly payments.

10. Maintain Continuous Coverage

Car insurance companies don’t like to see lapses in coverage. Instead, they prefer to see one continuous, clean record of being insured and accident-free. After being insured without an accident for one year, your rate could potentially drop by as much as 7.7 percent. If you have more liability coverage on your policy rather than less, this discount could go up. Overall, the higher the amount of your liability coverage, the greater the discount you stand to earn.

If you have any tips of your own to share that could prove helpful to others seeking to save some money on their car insurance premiums, feel free to share in the comments below!

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7 Ideas to Increase Your Retirement Savings

Most of us want to retire someday, ideally, with a comfortable retirement nest egg saved up, growing and earning interest for many years. However, this does not happen by accident! It takes many years of discipline, dedication, and hard work to retire successfully. In this article, we’ll explore several ways you can help to increase your retirement fund so you can retire and live happily with the peace of knowing you prepared for it properly.

1. Begin Right Away

Whether you’re 25 or 55, if you haven’t begun saving and investing in your retirement, it is essential to start now. You can’t undo the past, but you can choose to make sound financial decisions today. Of course, the younger you are, the more advantage you gain by starting early. Interest earned on investments and savings compounds over time, and the longer it has, the more dramatically it grows. Your earnings increase over time, and that growth is reinvested. Then those proceeds are reinvested, and on the cycle goes. This is the miracle of compound interest.

2. Open an IRA

An IRA (Individual Retirement Account) is a way for individuals to save for retirement regardless of the options provided by their employer. IRAs offer various tax benefits depending on which type you choose. The Traditional IRA features tax-deductible contributions where the tax is deferred on the earnings until withdrawal during retirement. There are specific income limits on Traditional IRAs, and if you don’t meet them, you may be better served by a Roth IRA.

A Roth IRA is funded using after-tax contributions. The advantage is that taxes have already been paid before the contributions. The withdrawals are tax-free if made after the age of 59.5, provided you meet the withholding requirements. This option means you do not pay taxes on the earnings and distributions, which would have been taxed under a Traditional IRA.

3. Contribute to Your 401(k)

If you are eligible to pay into an employer-provided 401(k) plan, this will allow you to add pre-tax income to the account, which can provide an advantage not offered by either of the two IRA options above. For instance, let’s say you invest $100 of your paycheck each month in the 401(k) plan. If this had been after taxes, that amount would have been reduced by all of your various taxes. But because it is contributed pre-tax, you will actually be giving the full $100 you earned.

Some employers offer Roth 401(k) plans, which use the after-tax income for contributions rather than pre-tax income. Then, you pay taxes at the time of withdrawal based on the income bracket you happen to be in at that time. You will need to do some work to estimate what that tax bracket will be, compare it to your current tax bracket, and decide whether you want to contribute this way or not.

4. Maximize Your Employer 401(K) Match 

Some employers will match employee 401(k) contributions if you contribute a certain specified amount to the 401(k) each month. If your employer offers this, it would be a good idea to contribute at least that amount each month to qualify for the match, as this will give your retirement contributions a very substantial boost! For example, if your employer matches your donation by half and you choose to contribute $2400 over a year, they would then deposit an additional $1200 of company funds into your account, free of charge. It’s quite literally free money, and who doesn’t love free money?

5. If You’re Over 50, Use Catch-Up Contributions

It is important to start contributing to your retirement early for the reasons we described above. However, suppose you haven’t been able to maximize your contributions. In that case, the IRS will allow you to make additional contributions beyond the normal limits (up to specified limits) as of the calendar year you reach 50. For instance, as of 2019, you can contribute an additional $1,000 per year to your IRA (Traditional or Roth) and $6,000 more to your 401(k) plan each year.

6. Set Up Automatic Savings on Your Bank Accounts

Ideally, you should pay yourself first each month by setting up an automatic contribution to your retirement plan that happens in the background without your intervention. This way, you can avoid the temptation to spend that money on impulse or short-term purchases, and you can be confident that your retirement plan is on track. How well this works will depend on the features offered by your bank or financial institution. Still, you should be able to set up some form of automatic savings and periodically transfer the contents into your retirement accounts.

7. Establish A Budget and Stick to It 

There are often countless places to save money in a typical monthly budget. It may mean canceling various subscriptions you’ve long since forgotten about or stopped using. It could mean getting a better coffee setup at home, so you don’t have to stop every day on the way to work. It could mean bringing your lunch to work instead of buying it out every day. It could mean watching a movie at home on your sofa instead of going to the theater.

Perhaps you could negotiate a lower car insurance payment or other bills. Most importantly, having a budget means creating a plan to live within (or ideally below) your means, and saving (to invest) the difference each month.

Hopefully, you can get started on a successful journey towards your retirement, and these tips prove helpful to you in reaching that goal. If you have any other information on how others can save more towards their retirement, please share them below!

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7 Ways to Build Your Credit Score Without Using Credit Cards

In today’s world, so many things are paid for using debt, ranging from mortgages and cars to smartphones and student tuition. Having a good credit score is one of the best things you can do to ensure you get reasonable interest rates on any large purchases in the future. However, no one is born with a good credit score. Credit scores must be built from the ground up.

Traditional credit cards typically require a decent credit score to get approval, so if you don’t have a score, how will you begin? Simultaneously, these credit cards are also a notorious trap that can very easily lure you into a vicious cycle of debt and high-interest credit card payments. So what is a young person who wants to establish credit to do?

The good news is there are some options for building a credit score from scratch without applying for any new unsecured credit cards.

1. Take Out a Personal Loan

A personal loan is a form of debt commonly referred to as unsecured debt. This type of loan is not backed by any form of collateral, such as a car or house. Because of this inherently higher risk, lenders will typically charge a higher interest rate to mitigate their risk.

If you have no credit score or a very low one, you may need to get someone to cosign this loan with you. It would need to be someone you trust and who can trust you because that person would be liable if you were to default (not repay) or miss payments. Please be very responsible and appreciate the risk the cosigner is taking on for you.

You can use a personal loan for almost anything, ranging from buying a computer or appliance to a used car or home improvement renovation. As with any form of credit, remember that this is debt that needs to be repaid. You should only take out a loan if you have a legitimate use for it, and never to add diversity to your credit report.

2. Try a CD Loan

Passbook or CD (Certificate of Deposit) loans are relatively easy to secure, even if you lack a high credit score. You will need to use whatever savings you have or use a CD account to take out the loan. Those savings or that CD will then be collateral against the loan. If you default on it, the bank can seize the collateral as its payment. This is why the loan is easier to get; the bank lacks the risk associated with unsecured personal loans like the ones described above.

3. Make Rent Payments on Time

This option is interesting and unusual because few people have considered or even know about it. Most landlords do not report rent payments to any credit bureaus. You might be able to ask them if they do, and if not, to consider doing so. However, they may not be willing to invest the time. Thankfully, there is a service that reports rent payments on your behalf so that you can build your credit score.

RentTrack is a service that helps renters improve their credit score and credit history simply by paying their rent on time each month.

To use it, you sign up, answer a few questions, and verify your identity. Then you pay RentTrack, who processes your payment and relays it to your landlord on your behalf. They can either mail a paper check or make a direct deposit for you. All payments are guaranteed to arrive on time, and a confirmation of receipt is logged so you can make sure it was received. You can access and verify this payment receipt information if you have a landlord who is not great at keeping accurate records.

Now, here’s the best part: tenants who use RentTrack have reported that their credit score increased by 29 points on average in just the first two months of using the service, and by a gigantic 132 points after two full years. This increase is unparalleled. You would have a tough time creating this much of a credit score boost using any other means. Considering most people’s credit scores range from about 550 to 850, a move of 132 points is a massive shift in that window!

4. Pay Your Federal Student Loans on Time

Student loan repayments are automatically logged and reported to all three major credit bureaus. If you have used student loans to pay for college, you already have a significant way to build your credit score by paying them back on time. One of the (few) upsides to student loans is that you don’t need to have a good credit score to get approved for one. You can use a student loan to build a credit score from scratch, although this alone wouldn’t be a good reason to get one. But, if you already need one to pay for school, it’s a nice silver lining.

5. Become an Authorized User on a Friend’s Credit Card Account

One of the easiest ways to build credit is to get added onto a friend’s account as an authorized user. You would get a credit card with your name on it and connected to your friend’s credit card account. They will ultimately be responsible if you don’t pay your credit card bills on time, so you will need to be extremely careful and responsible when using this method to build your credit.

You will also need to make sure that whatever friend you join on with is also accountable. Just as you can hurt their credit score by not paying your bills on time, they can hurt yours if they are not responsible. This is a mutual arrangement where you both need to watch out for and respect one another. If handled responsibly, it can be useful as a means of building your credit score up from scratch.

6. Use a Peer Lender Loan

A peer lender loan is a type of loan that reports payments to the credit bureaus. The downside of using a peer lender loan is that the interest rates tend to be relatively high, so you probably won’t want to use this type of loan unless you have not been able to succeed with the other options on this list. You do get access to higher limits than other types of loans, however, making them work for larger purchases.

7. Get a Secured Credit Card

A secured credit card works like a debit card. You supply an up-front security deposit, which becomes your credit limit. If you provide $500, your credit limit will be $500. If you ever fail to pay your credit card bill, the credit card company will keep your security deposit. However, this would not be good for your credit score!

You can use a secured credit card to build your credit score from scratch because the lender takes on no risk thanks to your security deposit. They do report on-time payments to the major credit bureaus, which builds your credit score. You can often raise your credit limit by sending in more money to add to your deposit amount. Eventually, once you’ve built your credit score up enough, you can apply for an unsecured credit card, should you so desire.

Do you have any additional tips for building a credit score? Be sure to share them below!

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Tax Filing: Should You Itemize Deductions This Year?

With 2020 coming to a close soon, many are curious how much sense it makes to itemize their deductions. Although we don’t have a choice when it comes to paying taxes, we do have the opportunity to benefit from deductions. However, there are pros and cons to both that you should be aware of before making a decision.

Itemized Deductions vs. Standard Deduction  

When you file your taxes, you will have the choice of whether to report individual itemized deductions or to claim a standard deduction. Itemized deductions are individual expenses that you add up and report to the IRS to deduct from your gross income. After the itemized deductions are totaled, your adjusted gross income is the amount you’ll pay income taxes on.

A standard deduction is something that you can choose to use instead of itemizing all of your deductions. If the total value of your itemized deductions is less than the standard deduction, it rarely makes any sense to file a smaller deduction when the larger deduction is right there, ready for the taking.

Standard Deductions Have Changed

In previous years, the standard deduction was low enough that it made sense for many people to itemize. However, the 2017 tax reform bill eliminated or restricted many itemized deductions beginning in the 2018 tax year and raised the standard deduction. That means fewer taxpayers are likely to itemize. Now, in 2020, many filers realize the significant impact these changes make on their income taxes and refunds.

Changes to Single Taxpayer Deductions

Previously, the standard deduction for a single taxpayer was $6,350 and $12,700 for married couples filing jointly. If you were single, you had to ask yourself, do all of my itemized deductions exceed $6,350? If the answer was yes, you most likely itemized. It was relatively easy to rack up more than $6,350 in deductions for many people. Now the standard deduction for single taxpayers has been raised to $12,400. It may be a lot harder to come up with over $12,400 in itemized deductions, so it will make more sense to claim the standard deduction instead.

Changes to Married Filing Jointly Deductions

For married couples filing jointly, the new standard deduction has risen to $24,800. In 2017, the couple would need to find $12,700 in itemized deductions to make it worth filing them rather than claiming the standard deduction. However, most couples will find it futile to itemize deductions, as they will be unlikely to exceed the new $24,800 standard deduction, which they can claim without having to itemize.

For example, if you are a couple filing jointly this year and your total itemized deductions total $22,000, it will still make more sense for you to claim the standard deduction. This is because you will not save any money by filing the itemized deductions this year with the larger $24,800 standard deduction available to you.

Why Most People Don’t Itemize

With all these changes to the tax code, fewer people are likely to itemize now than ever before. However, lest we think this is a significant change in itself, consider that even before the tax bill took effect, the vast majority of filers chose to claim the standard deduction.

Approximately 70 percent of all filers last year chose the standard deduction, despite it being much lower than it is now. Many of them chose this because it was just easier than digging up all those individual deductions. Others decided it because they couldn’t come up with enough deductions for it to be worthwhile. With the much higher standard deductions, we can expect very few people to itemize this year.

These increases in the standard deductions aren’t the only reasons people are choosing not to itemize. There are other changes to the tax code, which may lead to even more people filing for the standard deduction.

Changes to State and Local Tax Deductions

The State and Local Tax (SALT) deduction used to be one of the most significant itemized deductions claimed by taxpayers. The most recent tax bill caps that deduction at $10,000. Before, there was no cap on it. If your state, local, and property taxes totaled $25,000 last year, you could deduct all of them. This year, only $10,000 of those will be deductible. High-income filers are taxed at a higher rate, making them more likely to itemize and use the SALT deduction. If you have an expensive home in a prospering community, you will benefit from this deduction—likewise, those who live in very high tax states such as California and New York.  

The mortgage interest deduction is still available, though the threshold has been reduced. Before, you could deduct the interest on loans of up to $1 million, but now the limit is $750,000. If you have a high mortgage or two mortgages, it pays to claim the mortgage interest deduction.

To Itemize or to Standardize: That is the Question

In light of all these significant changes to the tax code, should you itemize your deductions or claim the standardized one? The answer tends to be reasonably straightforward. If you can add up your itemized deductions and they continue to exceed the newly increased standardized deductions, then it still makes sense to itemize. If, like many people, your itemized deductions don’t add up to more than the new standard deduction, then you can say goodbye to itemizing.

What if you add up the itemized deductions, and it is within a few hundred dollars or so of the standardized deduction? Claim the standard deduction. Why? Because it is a lot simpler and more bulletproof. Itemized deductions can be challenged in an IRS audit and could potentially trip red flags if you aren’t careful (or in some cases, even if you are). By claiming the standard deduction, you aren’t giving the IRS anything to question.

The tax code can be complicated, and in most cases, it is wise to consult a professional. They can clarify any confusion you might have surrounding the tax reform bill and its ramifications on your filing of deductions. If you have any tips or suggestions of your own for fellow tax filers, feel free to share them in the comments below.

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7 Places to Find Money to Pay Down Your Credit Card Debt

If you have been carrying a balance on one or more of your credit cards and struggling to find the money to make the minimum payments, it may feel overwhelming. It can be easy to get discouraged and think you will be stuck in debt forever. Credit card debt can feel like a cruel cycle that forces you to spend money to survive while trying to reduce your balances.

However, with some creative problem solving, it can be easier than you think to pay off your credit cards and become debt-free. Here are seven ideas that can help you find money to pay off your credit cards.

1. Liquidate Non-Retirement Investments

If you have a retirement plan, taking money out of that could incur tax penalties or hurt your ability to retire on time. However, if you have investments in other types of accounts, such as a regular brokerage account, you should be able to liquidate those and use them to pay off credit cards without issues.

Things like stocks, bonds, mutual funds, and ETFs can be sold to pay off credit card debt. If you have outstanding debt, that debt is costing you a lot in interest payments. This situation is counterproductive because you will have some interest coming in from your investments, yet be paying interest out on debt. It is more logical to use the assets to pay off the debt and re-invest after being debt-free.

2. Get Rid of Items You No Longer Need

Websites and services like eBay, Craigslist, LetGo, and Facebook Groups all allow you to sell items you no longer need online to make extra cash. You might be surprised just how much money you can bring in by merely selling items you don’t even use. Most of us have closets and garages full of things collecting dust, which would be valuable to someone else.

3. Eliminate Subscriptions You Don’t Use

In today’s online world, many of us have subscriptions for just about everything. You might have a subscription for cloud storage, one for online backups, another for streaming music, and two or three for games. You might have also signed up for a few different memberships that you have forgotten about or never use.

Try going through your bank and credit card statements and look closely for subscriptions. If it helps, you can print them out and use a highlighter. The key is to understand how much money you are spending each month on subscriptions in total. Once you have the list, go through and evaluate which ones you don’t need. Then, cancel the subscriptions or reduce the ones you have by switching to cheaper plans. Once you’ve freed up that money each month, funnel it into paying down one of your credit cards.

4. Consider Switching Phone or Internet Providers

Your mobile phone and home internet providers are probably responsible for some of the most significant bills you pay each month. Yet many of us sign up for these plans and don’t evaluate them for years, dutifully paying the bill every month without question.

There may be newer plans available from your provider or other competing providers that could save you a lot of money. You might be able to trim services you no longer need or don’t use to save more money still.

If you have signed up for a bundle package from your internet provider that includes cable channels you don’t watch, or a landline for a phone you never use, consider switching to a dedicated internet plan to save a lot of money. If you never watch cable TV and instead rely on services like Netflix, Hulu, and Amazon, consider cutting cable once and for all and using the internet to manage your video content. Also, evaluate how often you use streaming video and consider giving up the most expensive or least watched one.

5. Get Quotes From Other Car or Home Insurance Companies

As with the phone and the internet, insurance bills are another area where we routinely pay for something each month for years on end without considering whether cheaper options have become available. You can request free quotes from competing companies who would love to have your business, and some of those quotes may be cheaper. You could save hundreds of dollars each year by merely switching insurance providers.

If you have more coverage or services on your policy than you need, you might consider adjusting it to reflect your current needs better. For instance, if you signed up for your car insurance while you were still paying off your car, you will have been required to have collision and comprehensive coverage. However, if you now own your car outright, you can switch to liability coverage or reduce the values on your other services. Taking the time to comparison shop could save you a significant amount each month.

6. Cash Out or Borrow From a Cash Value Life Insurance Policy

If you have a cash-value life insurance policy that has been sitting around for years and costing you money regularly, you could consider using it to pay your credit card bills. To do so, you could either borrow from the policy or cancel it altogether and cash it out. Both solutions would potentially provide you with an influx of cash that you could then use to pay off high-interest credit card balances, saving you a great deal of money.

7. Get Creative With Your Finances

Lastly, get creative, and don’t be afraid to make some changes to your monthly budget to better reflect your priorities. You might be surprised where you can find money if you carefully evaluate your budget and choose to spend with intention rather than on impulse.

These tips may help you find some extra cash you didn’t think you had to reduce your credit card balances. Do you have any suggestions on finding spare cash to pay off credit cards that others might find useful? Feel free to share them here in the comments below!

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