What Tax Preparation Software Makes the Job Less Taxing?

The answers to the question may be different for you, but this is solely based on my experience with tax preparation software.

First, if you go into any store that sells computer software, you will see tax preparation boxes littering the shelves at this time of year. Everyone wants to make a stressful process a little easier. However, I totally do not understand why anyone buys them. They change every year, and you can just go online and get the same software for a cheaper fee or free.

For example, last year I bought Microsoft Money to help me keep track of my income and expenses. I also have access to a voucher program. Now, I have a problem. If I use the voucher program, it puts any amount paid directly into the check registry. Oops! When I download the information from the bank, it is all messed up. It says it will help do my taxes, but I do not think so! Maybe I just need to be smarter than the software?

According to the reviews I have read, Turbo Tax is the most popular because it can do complicated tax forms that many people would not want to consider completing by hand. With a series of questions, it is said to have the capability to get you painlessly through most any standard or unique tax issue. It has Federal, State, and home business capabilities.

As for me, I used to do my taxes all by myself for years, until I found TaxAct online. I wanted to e-file my taxes and get the job done quicker. In comparison to the top three, it ranks 3rd. It ranks under Turbo Tax and TaxCut by H & R Block because it does not import files and it does not offer as many help messages during the process.

I did mine online with TaxAct and it served my needs well. Plus, it was free! I plan on using it again this year. Admittedly, I do not have very complicated tax issues, but when doing them manually I was never quite sure whether I should I file single or head of household, since my ex claims the kids on his taxes. (He accused me of misfiling one year. I did not, but he was being audited.) Thank goodness, the online program simply asks me, “do you have dependents that live in your house the majority of the year, but you can’t claim them because of a former spouse? Life saver! I am sold!

What tax software would you recommend and why?

Tina


Reduce Your eBay Taxes with a Home Office Deduction

Do you know how much you’ll owe this year on your eBay income tax? Did you know you might be able to reduce those taxes by claiming a home office deduction?

If you’re running a profitable business on eBay hopefully you’ve been making estimated tax payments throughout the year to avoid any kind of fees and interest.  I just sent in my estimated payment for fourth quarter of last year and it sure wasn’t any fun writing that check to the United States Treasury. If your home office qualifies, it may be one way you can shrink the size of the check you write the IRS.

eBay Home Office Deduction
As an eBay seller, you probably do most of the selling work from home. If your home office is your principal place of business, and you use it regularly and exclusively for business you can probably deduct part of your housing expenses on your tax return.

Principal Place of Business
To pass the ‘place of business’ test, your home office must be the principal place you conduct your business, or a place where you regularly meet with clients or customers, or it must be a separate structure not attached to your home.  Although I recently teamed up with an eBay partner, prior to that I did the majority of my eBay work in our home office.  My wife will tell you that I spend more time in there than I do with her : )

Regular & Exclusive Use
Regular and exclusive use means that you spend at least 10-12 hours per week conducting business in your home office, and that you don’t use this space for other purposes. For example, you can’t just clear off your dining room table and call your dining room a home office.  The IRS is a big fan of documentation so I’d recommend keeping track of the hours you work each week as proof of the regular and exclusive use.

If you track your time electronically it’s a good idea to make periodic backups of that information in case the IRS ever comes looking for it. I use the export function in Freshbooks to download all the time I track there and burn it onto a CD for safe keeping.

Which Rooms Qualify?
Although I have a separate office, your home office does not have to constitute an entire room. You can identify part of a room as your home office, but you should have some type of partition and you should not mix personal items with your business items. In addition, if you are storing inventory in your home, then the portion of a room that is used for storage qualifies for the home office deduction.

Which Expenses Qualify?
Expenses that can be deducted as part of your home office include:

  • mortgage interest
  • real estate taxes
  • utilities
  • insurance
  • repairs
  • security
  • depreciation

How Much Can You Deduct?
Keep in mind that only the business use percentage of these expenses can be deducted. The business use percentage is calculated by dividing the square footage of the office space by the square footage of the home, or by dividing the number of rooms you use for business by the number of rooms in your home.

Direct expenses, such as repairs made solely to the room used for your home office, or telephone lines installed just for business use, can be deducted in full. Indirect expenses, such as mortgage interest and real estate taxes should be allocated between the home office deduction and your itemized deductions to get the greatest tax benefit.  Of course everyone’s situation is different so you can ask your tax advisor for guidance there.

Will You Get Audited?
The home office deduction is often considered by many to be a red flag. It’s more and more common these days so it doesn’t stand out as much as it used to, but you should still use caution when calculating this deduction. Keep good documentation that proves your office is your principal place of business and that you use it regularly and exclusively for business.

One thing to remember is that your business must earn a profit to take the home office deduction. If your home office expenses are larger than your business profits, you must carry the excess expenses forward to future years.

Depreciation Recapture
Be aware, if you deduct the depreciation expense of your home office you’ll have to pay tax on that depreciation when you sell your home someday.  The amount of the depreciation deduction is taxed at a flat rate of 25% and reported on Schedule D. Basically what this means is that by using the depreciation deduction for a your home office now, you’re deferring the taxes to some point in the future. 

Where Can I Get More Information?
The whole home office deduction can be a bit overwhelming for those of us who aren’t tax experts. You report your home office expenses on IRS Form 8829 and can turn to IRS Publication 587, Business Use of Your Home, for some more information. 

If you’re interested in the home office deduction but are unsure of how to proceed, I’d recommend checking out a resource by a friend of mine, eBiz Tax Tips. Kristine is an expert in the field of entrepreneurial taxes and spent over a year capturing her knowledge in this guide. While this post talks about the home office deduction for eBay sellers the deduction can also apply to people that run other types of businesses from their home. The eBiz Tax Tips book covers not just eBay businesses but tax strategy for online businesses in general. Good luck with those taxes!


How to Earn Extra Money in 2008

I just got done watching a news program that said consumer spending is up only because people have been charging like crazy. I believe it! I can personally attest to the fact that if you charge it today, watch out for tomorrow. Someday, the bill is going to come. Unfortunately, the paycheck can only stretch so far, and a whole lot of people are going to want to know how to earn extra money in 2008.

You could go out and get a part-time evening job at a convenience store, but there is a reason why a “help wanted” is ever-present in the window. In terms of danger level, I think attendants should get hazard pay, and that is one place I would never want anyone I know to work-so forget that!

Today, considering our global community, may people are actually staying right at home with their families, working a few hours in the evening, and making extra money. For example, companies are now outsourcing normal office documents and hiring people across the country to do the typing.

I was checking around the other day and found a site that actually pays you to post comments on other people’s blogs. I do know it is free to sign up, but I think you need a website of your own.

If you are a computer guru, you could probably quit your day job and work totally out of your home. Desperate people like me, who are not as skilled with the computer as they wish, call you when something goes.

I also have a friend that earned money doing technical writing. Although not for me, he says it isn’t very hard. You might have a product that you have to explain step-by-step how to put it together or make it work, like the directions that come with all those toys you bought your children for Christmas.

In fact, you can Google “work at home jobs”, or something similar, and come up with a plethora of ideas like an eBay store, affiliate programs, and more. Just watch out for the scams, do your due diligence to find ones that are legitimate. If it sounds too good be true, it probably is.

The point is, why leave home to work a second job after putting in a full day at work? A computer is a great source of entertainment and information, but it can also be a great place to earn extra money from the comfort of your home in 2008.

Tina


How to Make Sure You Get What’s Coming to You at Tax Time

Whenever tax time rolls around, I still see my mother sitting at the kitchen table with all sorts of forms, receipts, and scraps of paper in piles encircling her. She was the mathematician in the family. If my dad had done the taxes, he probably would have tried to deduct something that wasn’t allowed. So, it became Mom’s job.

When I grew up, and was on my own for the first time, I started doing my own taxes. After all, if Mom did it all those years, I certainly could. Then, when I got married, I never understood why my husband always took it to a tax preparer. Why pay someone, when you can do it yourself and save money? At the time, our taxes were so simple, because we did not own a home or have any special deductions. But, that is the way his parents always handled it. So, who am I to argue?

Today, I do not do it like my mom or my ex, I e-file. I have several reasons. First, it is faster and easier to file. The computer asks a bunch of questions, I answer them, and presto! My taxes are filled out and ready for me to electronically sign. Then, if I am due a refund, I can have it directly deposited in my bank account in less than 3 weeks. Yippee!

However, the main reason I like doing my taxes via computer is because I want to make sure I get what’s coming to me. If I have to pay, I certainly do not want to give a cent more than is absolutely necessary. If I am getting something back, I for sure want to receive the maximum amount.

When I was a kid, tax time was extremely stressful. We knew to leave my folks alone, when all the paperwork can out. My ex-husband avoided stress by paying someone else to go through the forms. Now, I do not have the stress; and, I do not have to pay either. Some e-filing sites are free.

What would you recommend for making sure you get what’s coming to you at tax time?

Tina


How to Choose a Charity

Choosing a charity should be easy. You find a cause you support, and you send you in your check. However it is a little more complicated than simply picking a group for your donation.

Unfortunately, like everything else in this world, unscrupulous people are out there taking advantage of kind hearted individuals. For example, anybody can build a web page and set it up to take charitable donations. But, what you read is not necessarily so. While claiming to be a foundation for helping underprivileged kids, a person can rake in a ton of money-until they get caught. Yes. The scoundrels usually get caught, but will it be before they take advantage of your pocket?

I am in no way suggesting that people cease to give to those less fortunate. But, there are a couple of things you can do to make sure your money gets where you expect it to go.

First, check out the charity. Although it can profess to be a non-profit organization, it must be registered with the Federal government. If you can claim your gift as a tax deduction, it first needs to be recognized as such. If the charity is not registered with the IRS, be leery, unless it is a community fund-raiser for an individual in need. Then, you just have to trust the people collecting the monies to spend it wisely-which bring me to my second point.

Even government-recognized charitable organizations do not always spend your donation wisely. In fact, some administrator at the top may be getting rich at the expense of the needy. Before donating to a particular charity, ask to see how your donation dollar is spent. Does only 20 cents on the dollar actually get to the needy, and the rest go for a plethora of administration costs? (Personally, I would rather send my money directly, in that case).

Of course I understand that administration costs are necessary. But, why not 20 cents on the dollar go for expenses and 80 cents actually spent on the purpose for the charity. It can be done.

For example, as a former recipient of the Shriners, I know that people who donate to their burn centers and orthopedic hospitals can expect 100% of their money to go to the children needing medical attention. Shriners pay for their own expenses.

Recently, I saw an organization on the news that sends care packages to soldiers in Iraq. I am not being in any way political here. No matter how you stand on the war, there are people who are in harm’s way, missing their families, in order to do their duty. One mother thought to start a group. Now, there are 1000s, and the workers donate out of their own pockets as well. If money is an issue, they sit down and write millions of cards or help box goods.

In short, charities are a wonderful thing and kudos to you if you give. Simply be careful.

Do you know of other charities that will spend our money wisely?

Tina


Health Insurance Companies Suck – Personal Finance Review

What would happen if you had a bill more than a year overdue?  Can you say late fees, collection agency?  Why is it that insurance companies can jack you around for more than a year and suffer no consequences at all?

I’ve written before about a health insurance problem we’ve been fighting, caught between a doctor’s office and health insurance company.  Just last week I think I finally brought it to an end.  After countless phone calls someone at the insurance company finally noticed the date of service was over a year ago and decided to take care of my problem.

I had to laugh when I was transferred to the “Rapid Response Team” to take care of the issue.  I don’t know that I’d call more than a year of waiting very rapid.  To add insult to injury, I was put on for multiple long intervals by the rapid response team as they “researched” the problem, hmm isn’t that what they’ve been doing for over a year now? 

I can’t declare “victory” until the payment actually reaches the doctor’s office but I think my main question is why it has to be a battle to be won? Why can’t they honor their commitments in a timely manner just like everyone else in this economy has to?  Anyhow, if this gets you worked up as it did me, here are some money posts you can read to let off a little steam:

Congrats to Golbguru who has found his dream job and will finally have time to blog again!

The Sun gives a comparison of the TransUnion VantageScore Credit Score compares it to the FICO score, The Digerati Life has 5 Hot Tips for First Time Investors, and Generation X Finance warns us to learn from the past and not repeat financial mistakes.

Lazy Man asks Netflix vs. Blockbuster – Which to Choose?, I say sign up for both Blockbuster & Netflix!

If you’re looking for a way to control your personal finances for the new year check out 4 Ways To Make It Harder To Spend Money by Blueprint for Financial Prosperity and Discipline and personal finance by Mighty Bargain Hunter.  Of course that may be easier said than done, if any of you have a new baby on board, checkout No Credit Needed for his take.

Five Cent Nickel talks about keeping cash on hand and Free Money Finance reminds us of the 13 Most Overlooked Tax Deductions, tax season will be here before you know it!

One of my favorite personal finance steps I’ve taken is to automate our investing and bill paying.  Get Rich Slowly has a good overview of How to Automate Your Personal Finances.  Just watch out for some of the potential problems with automated online bill pay.

Have a great week!


Prosper: the Leader in Social Lending

If you are like me, social lending is a new concept. What is it anyway; and how might it turn the financial world of borrowing and lending on its proverbial ear? To find the answers, go to Prosper, the leader in social, or peer-to-peer lending, at least for now.

Lending with Prosper works much the same as bidding for a freelance project or shopping on an auction site. As a Prosper lender, you will apply for an account, state what amount you are willing to invest, and the minimum amount of return on your dollar that you are willing to accept.

The amount you are willing to invest can range anywhere from $50-$25,000. Although most borrowers will obviously need more than $50, it is no problem. Prosper establishes groups of lenders with similar goals and expectations. So, when a potential borrower requests a loan, up to 50 lenders can be awarded the bid.

Now the thought may be disconcerting for someone who wants to finance a home renovation, consolidate loans, paying for an education and more. However, multiple lenders are not a precursor to multiple loans. More than just matching lenders with loans, Prosper consolidates the lenders and varying interest rates to find the best possible deal for paying back the money.

A recent article by BusinessWeek tells the story of Chris Lindgren who used Prosper to help fund his successful textbook business. He needed more money for advertising but was in a cash crunch so he turned to Prosper.

“Lindgren applied for the maximum $25,000 loan the next day, offering to pay 17.5% interest. Lenders found the offer so attractive that they bid the rate down to 10.2%, and Direct Textbook had the cash in its account within two weeks.”

Although Prosper currently holds the lead in peer to peer lending, a couple of competitors such as Zopa, Lending Club, and Loanio are entering the game. Hopefully this competition will keep the peer to peer lending industry changing and adapting to continue to provide good investment opportunities for lenders and much needed money for borrowers.

Would you consider becoming a peer to peer lender?


A Kiva Loan can Change a Life

“Loans that change lives” is Kiva’s tagline. Based upon the testimonials I have read, I believe they are keeping their word. So, how can they make such a claim?

Kiva is a peer to peer lender with a charitable mission. Unlike their counterparts who pay interest to the lenders, Kiva matches small business owners around the world with lenders who want to help them get the financial backing to succeed, without paying interest.

A more traditional social lending site will loan money for home renovations, education, loan consolidation and more. But, Kiva is concentrating on the poor who want to start a business and raise their standard of living. So, they do not loan money for building a new deck, consolidating credit card debt, purchasing a new car, or whatever. It is strictly for helping others help themselves. The people borrowing the capital don’t pay interest on the loan but they do have to pay the money back.

This idea of microcredit or microloans is somewhat modeled after the successful Grameen Bank which was initiated by the winner of the 2006 Nobel Peace Prize, Professor Muhammad Yunus. Kiva has a good example to follow in Grameen Bank and adds in their own approach by making great use of technology to connect developed country lenders and 3rd world borrowers. In a recent interview the CEO of Kiva, Matt Flannery, shared Kiva’s next goal. To connect people in developing world who are willing and able to lend capital with people looking to borrow money in the same country or region.

Kiva lenders can search through over 1556 pages of journals from men and women in Bolivia, Ecuador, Uganda, and other less fortunate nations to read how the money they lend is making a difference. Kiva is constantly adding new lenders and borrowers to the site so would-be entrepreneurs world-wide can succeed and start to climb out of poverty.

Altruistic at heart, I love this idea. So many people have more money than they know what to do with, yet they take it for granted. The borrowers at Kiva simply want to have the opportunity to have a decent life.

Check out www.kiva.org. Let me know what you think.

Tina


Why Borrow from a Bank when you can Prosper?

As the economy worsens and interest rates rise, it has become increasingly difficult to obtain a bank loan to consolidate debt, pay for college, buy a house, or start a new business. More and more people are searching for alternative solutions to their financial needs. So, my question is:

What can you do if your bank won’t lend you money?

Now there’s an alternative to bank loans and credit cards, borrowing on Prosper!

A group of smart economically-minded people got together and came up with a solution to the lending crisis. Now, instead of depending on a big financial institution that charges extremely high interest, you can experience social lending at Prosper.com.

Currently, Prosper is probably the leader in peer to peer lending. They help match a wannabe borrower with one, or a group of lenders. The company works much like an online auction. It matches the needy with people who have money to invest helping others, yet make a profit at the same time.

Naturally, a borrower’s potential for repayment is verified. Yet, the risk to the lenders is minimized. Why? Consider the following scenario for illustration:

John doesn’t qualify for the $10,000 bank loan he needs to start his new business. So, he fills out an application at Prosper.com. After he is approved as an acceptable risk, potential lenders bid on how much they are willing to lend and at what rate.

Two hundred different lenders are willing to loan John $50 each at a rate of 8%. The risk is reduced for each bidder since they are making a “micro-loan” of only fifty bucks. There’s likely no way John could have convinced 200 random people he didn’t know to lend him money but the lending marketplace makes it possible. At the end of the bidding period, Prosper takes $50 from each lender’s account and gives John a loan of $10,000. John will make his monthly payments to Prosper who then pays each lender.

Would you be willing to borrow money through a social lending agency?

Tina


What is Peer to Peer Lending?

Have you ever gone to a bank in desperate need and been turned down for a loan? Have you checked into a bank loan and realized that the combination of the loan and the excruciatingly high interest rate will put you further in the poorhouse? Are you tired of the government regulating how you pay back loans, because they seem to control your money coming and going? Then, you may be interested in learning about peer to peer lending.

When a bank turns you down or charges too much interest to justify a loan, you are pretty much stuck without any recourse. Fortunately, some financially savvy businesspeople got together and came up with the novel idea of peer to peer lending. Instead of going to a bank, struggling entrepreneurs, homeowners, people struggling under a mountain of credit debt, and virtually anyone who wants a financial backer to give them a boost, can apply for a peer loan.

Instead of going to a financial institute and repaying one lender, you can now go to a social lending site and ask for the amount of money you need and state the highest interest rate you are willing to pay. Other people that are signed up as lenders review your profile and can loan you a portion of the requested money.

The peer to peer lending sites match up you, the borrower, with one or a group of lenders that are willing to loan you the money at the rate of interest you’re offering to pay. Prospective lenders can review information about your credit and debt and decide whether they’re comfortable making a micro-loan to you. The social lending site facilitates transferring the money that is loaned to the borrower and the handling the payments back to the lenders. In return for offering the loan marketplace and facilitating the loans they charge some type of fee.

Today, the novel idea is really taking hold and is offering many people an alternative to loans from banks and other regulated financial institutions. For several examples, check out the companies listed below:

What are you initial impressions concerning peer to peer lending?

Tina



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