One simple idea could save you hundreds on what you spend each month. It has to do with the tendency for inertia. When you are looking for a supplier of basic services, you tend to shop alternative companies, ask friends for recommendations, and get quotes from alternate choices. After completing this often-exhausting work, you sit back and enjoy your new supplier.

The problem. Once a supplier is chosen, review of the service is often not redone. Unfortunately, things change and what was once a good deal can become a very expensive proposition.

Example: A young couple move into a new home. They shop and hire a trash collector. Over the years, the trash collector is purchased by a new hauler and the new hauler merges with another hauler a couple of years later. One day their supplier-provided trashcan disappears. When looking online for the phone number to request a replacement, the couple discovers a listed price for their service much lower than what they are paying. Their $28 per month fee is offered to new customers for $10 per month.

What to do. Every two or three years conduct a review of your suppliers. To keep the process manageable, rotate a few vendors each year for this review exercise. The longer you use a supplier without a review, the more important the review becomes. Here are some common culprits for price creep:

• Cell phone providers
• Cable services
• Internet services
• Auto insurance
• Health insurance
• Trash collectors
• Homeowner insurance
• Cleaning services

It's not just about price. Remember, just because your supplier is not the lowest price, there may be other reasons to continue your service. Trust and quality of service should also be considered in your decision-making process.

Nearly every taxpayer can imagine a worst-case scenario where they run afoul of the IRS and are selected for an audit. Here are a few areas that tend to get unwanted audit attention and ideas to help you stay prepared.

Your audit risk is (probably) low. The first thing to remember is that the risk of having your tax return examined by the IRS is probably very low. The IRS audits less than 1 in 100 returns. If you are among the roughly 95 percent of Americans who make less than $200,000 a year, your chance of being audited is closer to 1 in 200. Audit chances rise dramatically the higher your income is above $200,000, according to the IRS annual Data Book.

Areas That Get Attention:

• Missing something. Aside from your income level, one of the biggest red flags for the IRS is a missing or incorrect tax form. Assume a copy of every official tax form you get also goes to the IRS.
  • Lower your risk: Create a list of all your expected tax forms. Check them off as you start to receive them over the next month or so. Immediately review the forms for accuracy. These include W-2s, 1099s, 1095s, 1098Ts and more.
• Excessive deductions. Your risk of an audit increases when your tax return shows unusually high-value itemized deductions, such as charitable donations or losses from theft.
  • Lower your risk: A legitimate deduction should always be taken. If your itemized deductions are high, make sure your proof of these deductions is well documented.
• Large charitable donations. Your chances of an audit increase if you take large deductions for donations to charity, especially "noncash" donations of property with unclear value.
  • Lower your risk: Always remember to file a Form 8283 for any donation above $500 in value. If you are donating anything at that value or higher, it may be worth paying for an appraisal of the value of the property so you can defend your deduction.
• Disparities with your ex. Your tax return may as well have a red siren attached to it if you and an ex-spouse are not on the same page on claiming dependents, child support, or alimony.
  • Lower your risk: Ensure you and your ex-spouse are consistent in how tax items are treated on your separate returns. If you have had problems with this in the past, a quick phone call could save headaches for both of you.
• Business activity. IRS agents have a keen eye for small business reporting, typically done on a Schedule C. In particular, the agency is quick to review claimed business activities they perceive as being hobbies.
  • Lower your risk: Maintain detailed business accounts and record significant time spent on your business activity in order to demonstrate both professionalism and a profit motivation.

It usually takes a great deal of personal interest and expertise in a given field — whether it's rare art, coins or baseball cards — to judge a treasure from a trinket. For those of you who have been bitten by the collector's bug, here are some tax considerations.

Collectibles Defined
According to the IRS: "Collectibles include works of art, rugs, antiques, metals (such as gold, silver, and platinum bullion), gems, stamps, coins, alcoholic beverages, and certain other tangible properties." What makes something a collectible is that it carries additional value based on its rarity and its market demand. Essentially, the opinion of other collectors and experts, based on what they are willing to pay for your collection, determines its value.
For example, a typical one-ounce gold coin is worth about $1,200 based upon the value of the metal and would not be considered a collectible by the IRS. However, a rare antique double eagle gold coin produced in the 19th century could be worth $20,000 to a collector, even though it is made of exactly the same amount of gold as the non-rare coin.

Collectibles Special Tax Rate
When collectibles are sold, they become taxable at a maximum tax rate of 28 percent. The tax applies to profit on the sale of your collectibles.
That tax rate is considerably higher than the average capital gains tax of 15 percent that most people pay for non-collectible investments such as stocks and bonds (the tax range for long-term capital gains is from 0 to 20 percent). The exception to this rule is that if you've held your collection less than a year before you sell it, your capital gain will be taxed as regular income.

It's All about the Basis
In order to figure out what you owe the IRS if you sell your collectibles, start with your basis. Your basis typically equals the amount you paid for your collectibles, plus any auction or broker fees incurred during your purchase. If you spent money to refurbish, restore or maintain collectibles while you owned them, you can also add that to your basis.
Then, subtract your basis from the sale price of your collectibles; the amount left over is what is taxed. Here's an example:
Ima Dahl decides to sell an 1898 German Bisque porcelain doll from her collection. She's owned the doll for ten years and originally paid $700 for it. She also paid $150 two years ago to repair its cracked finish. She receives $1,800 by selling it at an online auction and spends $100 paying her auction fees and shipping to the new owner. Since she owned the doll for more than one year, her long-term capital gain is $850 and her potential maximum tax is $238. The calculation: $1,800 net sales price, minus the $700 basis, minus $150 for repairs, minus $100 selling expense multiplied by 28%.
​
Some Collectible Hints

• Know the market value. If you inherit a collectible you will need to know the value of the object on the date you obtain it. This will usually become your basis when you sell it.
• Investment or personal use. If your collectible is an investment you can usually take a loss on the sale of the collectible. Unfortunately, if the IRS deems the collectible has an element of personal use, you may not deduct the loss. An example of personal use may be the hanging of a painting on your wall. Being careful how you sell your collectible can also make a difference in managing your potential tax liability.
• Collectibles tax rate good or bad. The 28 percent capital gain tax on collectibles is the maximum tax rate. For example, if you are in the 15 percent income tax range, your collectible gain is taxed at that rate. If your income tax bracket is higher than 28 percent, the collectibles tax rate is capped at 28 percent, resulting in a potentially lower tax rate versus ordinary income taxes.

As you can imagine, the taxes on buying and selling collectibles can be complex. If you are considering selling a potentially valuable item, ask for assistance.

The fate of a Labor Department rule extending mandatory overtime pay to workers by doubling the eligible salary cap is uncertain under the new presidential administration.
The rule introduced by the Labor Department under the direction of former President Barack Obama increases the salary cap for workers eligible to receive mandatory overtime to $47,476. It extends mandatory overtime, or time-and-a-half pay, to workers primarily in managerial or administrative roles in the retail, restaurant, and nonprofit industries.
Opponents of the rule won a court injunction blocking it in November 2016. The case may be abandoned altogether depending on the priorities set by President Donald Trump's new administration. Until the case is resolved, the previous salary cap of $23,660 remains in place.

Your credit score is important. It determines how easy it is to obtain a loan for a car, house, or business purchase. Your score is expressed as a number that ranges between 300 and 850 points. The closer you are to 850 points, the more likely you are to receive a loan and the less you'll pay in interest.

Here are six tips to improve your credit score:

1. Pay your bills on time. Ask your credit card providers or lenders to set all your due dates on the same day, and then set a reminder in your calendar. Consider using auto-pay for more important bills like credit cards and mortgage payments.
2. Manage your credit card debt limits. Ask your credit issuers to increase your card line limit. You can also limit the amount of credit card debt you accumulate by paying your bill in full each month, stop using a card but not closing the account, or switching to cash as you approach your line limits.
3. Build a credit history. The sooner you get started in establishing a credit history, the sooner you'll establish a track record of payments that give lenders confidence in your ability to repay debt.
4. Create variety. Manage your debt, but understand that making student loan payments on time, paying off credit card debts and other loans can present you as a quality credit risk to prospective lenders.
5. Manage your credit hits. Try to limit the number of new accounts you open over a short period of time. Each hard inquiry will only impact your credit score by a few points, but each one stays on your credit report for two years.
6. Know your number. Last, but not least, know your credit score. Sometimes a low score can be the result of an error in your credit history or a recent identity theft problem. You have the right to receive your credit report free once per year from each of the major credit reporting agencies. Learn more about viewing your credit report at AnnualCreditReport.com.

More than 90% of individual tax returns are now filed electronically, and usually the process goes smoothly. However, when an e-filed tax return is rejected, e-filing can become more complicated.

Common Causes for Rejected Tax Returns

• Simple Filing Errors. Most rejections are caused by things such as misspellings, typos on Social Security numbers, or missing forms. When an e-filed tax return is rejected the IRS e-filing system sends back reject codes. These codes are specific to lines on the tax return and descriptions of the problem are readily available. Most of these errors can easily be corrected.
• Dependent Errors. This error occurs when someone else has claimed a dependent on a previously filed tax return. This often occurs with divorced and unmarried couples each claiming the same child on their tax return. The IRS does not take sides in this situation, they simply take the earlier filed return and reject any subsequent returns.
• Identity Fraud. Someone else has already filed a tax return using your Social Security number.

What to Do
Most errors are simple, are easily corrected, and your tax return is resubmitted for e-filing without much additional delay. However, there are two instances that require your immediate attention. When either of these occur, you will need to file your tax return via the mail and work to correct the error for future tax filings.

• Dependent Errors. A dependent can only be claimed on one tax return. If a dependent is already claimed on another individual's tax return you will need to provide proof that the dependent belongs on your return. If this happens, contact the other party who claimed your dependent and ask them to amend their return. Let them know that you’re filing your tax return correctly claiming the dependent. Your filing will target both tax returns for a potential IRS audit. This audit risk often is enough motivation to correct the problem.
• Identity Fraud. Criminals using stolen information submit tax returns electronically in an effort to steal your tax withholdings. Fraudulently claimed refunds are then automatically deposited into thieves' bank accounts. Unfortunately, you may discover the theft when your e-filed tax return is rejected. If this happens to you:
  • File a paper tax return.
  • Include form 14039: “Identity Theft Affidavit” with your tax return.
  • Confirm your identity using the IRS Identity Verification Service or by calling the IRS.
  • Mail your tax return using Certified Mail with Return Receipt Requested so you are certain of timely delivery.
  • Immediately take steps to protect your financial information. The following link will take you to the Federal Trade Commission's identity theft area for recommended steps to protect yourself: FTC Identity Theft Assistance.

While solving the cause for a rejected e-filed tax return can be a headache, the sooner the problem is addressed the sooner your refund can be received.

Seventy-five percent of Americans got a tax refund check last year. According to the IRS, the average refund was $2,777.

​Because the amount of a refund is often uncertain, we may be tempted to spend it without too much planning. One way to counteract this natural tendency is to come up with a plan ahead of time to spend your refund well.

Here are some ideas:

• Pay off debt. If you have debt other than your home mortgage, a great spending priority can be to reduce or eliminate it. The longer you hold debt, the more the cumulative interest burden weighs on your future plans. You have to work harder for longer just to counteract the effect of the debt on your financial health. Start by paying down debts with the highest interest rates and work your way down the list until you bring your debt burden down to a manageable level.
• Save for retirement. Saving for retirement works like debt, but in reverse. The longer you set aside money for retirement, the more time you give the power of compound earnings to work for you. This money can even continue working for you long after you retire. Consider depositing some or all of your refund check into a Traditional or Roth IRA. You can contribute a total of $5,500 to an IRA every year, or $6,500 if you're 50 years old or older.
• Save for a home. Home ownership is a source of wealth and stability for many Americans. If you don't own a home yet, consider building up a down payment fund using some of your refund. If you already own a home, consider using your refund to start paying your mortgage off early.
• Invest in yourself. Sometimes the best investment isn't financial, but personal. If there's a course of study or conference that would improve your skills or knowledge, that could be a wise use of your money in the long run.
• Give some of it away. Helping people, and being able to deduct gifts and charity from your next tax return, isn't the only benefit of giving to a good cause. Research shows that it makes us feel good on a neurological level. In fact, donating money activates our brains' pleasure centers more than receiving the equivalent amount.¹

If a refund is in your future, start planning now on how it can best help your financial situation.​

¹ www.wired.com/2010/12/the-science-of-charity

​If you think President Trump's recent executive order means that the fees for not having health insurance are no longer in effect, you could be sorely mistaken. To avoid potentially thousands of dollars in "shared responsibility" tax penalties, you still need to be covered by a basic level of health insurance.

Current Situation
During his first week in office, President Trump signed an executive order asking federal agencies to reduce the economic burden on American citizens due to the Affordable Care Act (ACA).

Unfortunately, this executive order is causing confusion and a false sense of security that the fines and rules no longer must be followed. Unless the actual laws are changed, including the tax code, you could be in for a very unpleasant surprise when you file your tax return in 2016 and 2017 if you do not have qualified health insurance.

A Potential $2,000 plus Penalty
The "shared responsibility" penalty for not being covered by a minimum level of health insurance costs a minimum of $695 per adult and can range as high as 2.5 percent of your annual income above the federal filing threshold. The penalty is capped at the annual cost of a basic “bronze-level” plan in the healthcare marketplace. Here is the calculation of the penalty.

​If you have children younger than 19 years old (or 24 if a full-time student) coordinate the filing of their taxes with yours. How they file is a matter of tax law.

The Problem
Your child is away at college. You try to file your tax return on April 14th after finally receiving all the required documentation. Unfortunately, your e-filed tax return is rejected because your college student filed their own tax return and received a nice refund. Now you have a mess on your hands. You must file an extension, file an amended tax return for your child, return a refund, and paper file your tax return.

The Law
The dependency rules and kiddie tax laws are clear and must be followed. If you have a dependent child as determined by the tax code, you will need to conduct the tax calculations to determine what is taxed at your child’s tax rate and what will be taxed at your higher rate. The same is true for which tax return receives exemptions and standard deductions. This requires coordination of your tax filings with that of your dependent children.

Some Suggestions

• Remind your independent minded kids to hold off filing their tax return until consulting with you.
• Claiming oneself as a dependent is not a choice, it is a matter of law. Remind your child there are rules that must be followed before making this tax decision.
• Plan for a dependency shift. Sometimes arranging for a shift in dependent from a parent to a student makes financial sense. If you think this might be true, conduct a tax planning exercise prior to making the change.

​
Consider using the tax filing process to introduce your young adult to the benefits of tax planning. You never know, it could save you money as well as the hassle of undoing an improperly filed tax return.

The tax code uses terms that can be confusing. One of them that impacts most of us is the term “unearned” income. Unearned income is often defined as anything that is not “earned” income. If you find this kind of definition a little too vague, here is some clarity:

• Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. Employees will typically see this recorded in an annual W-2 tax form.
• Unearned income includes taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. Much of this income is often (but not always) recorded using 1099 tax forms.

Why does it matter?
If the tax code was simple, it would not matter one bit whether your income was earned income or unearned income. But this is not the case. Here are some things to consider:

• Different tax rates. While most earned income is subject to ordinary income tax rates up to 39.6%, unearned income can be subject to different tax rates. Long term capital gains and certain dividends, for instance, are generally subject to lower capital gains tax rates. These tax rates can max out at 20% prior to applying Affordable Care Act tax provisions.
• Kiddie tax rules. The tax code limits the amount of unearned income that can be taxed at your dependent's, usually lower, income tax rate. Amounts over this limit are taxed at the parent’s rate. The amount is $2,100 in 2016.
• Tax benefit limits. Many tax credits and deductions will limit the amount of unearned income you may have and still qualify for a tax break. As an example, the Earned Income Tax Credit, limits disqualified (unearned) income to $3,400 in 2016.
• Timing matters. Sometimes the timing of an event can shift unearned income from ordinary income tax rates to preferential gain tax rates. This is the case with investment sales. Hold an investment for one year or less before selling it and your unearned investment gain is taxed as ordinary income. Hold it longer than one year and the unearned income is taxed at capital gains tax rates.

It's all in the details. It is important to understand how all elements of income apply to different aspects of the tax code. This is where working with someone familiar with the code can help.