There may come a time when you are on the receiving end of a debt collection call. It could happen any time you are behind on paying your bills, or if there is an error in billing. In the US, there are strict guidelines in place that prohibit any type of harassment. If you know your rights, you can deal with debt collection with minimum hassle. Here are some suggestions:
Ask for Non–Threatening Transparency
When a debt collector calls, they must be transparent about who they are. The magic words they must say are: "This is an attempt to collect a debt, and any information obtained will be used for that purpose." In addition, debt collectors may not use offensive or intimidating language, or threaten you with fines or jail time. The most a debt collector can honestly threaten you with is that not paying will harm your credit rating, or that they may sue you in a civil court to collect payment.
Know the Contact Rules
Debt collectors may not contact you outside of "normal" hours, which are between 8 AM and 9 PM local time. They may try to call you at work, but they must stop if you tell them that you cannot receive calls there. Debt collectors may not talk to anyone else about your debt (other than your attorney, if you have one). They may try contacting other people, such as relatives, neighbors, or employers, but it must be solely for trying to find out your phone number, address, or where you work.
If you think the debt is in error in whole or in part, you can send a dispute letter to the collection agency within 30 days of first contact. Ask the collector for their mailing address and let them know you are filing a dispute. They will have to cease all collection activities until they send you legal documentation confirming the debt.
Tell Them to Stop
Whether you dispute the debt or not, at any time you can send a "cease letter" to the collection agency telling them to stop making contact. You don't need to give a specific reason. They will have to stop contact after this point, though they may still choose to pursue legal options in civil court.
If a debt collection agency is not following these rules, report them. Start with your state's attorney general office, and consider filing a complaint with the US Federal Trade Commission and the Consumer Financial Protection Bureau as well.
Having insurance for your home and vehicle is vital to ward off financial catastrophe when accidents happen. Unfortunately, insurance policies are becoming increasingly more expensive. One thing you can do to decrease your insurance cost is to consider increasing your coverage deductibles.
Higher Deductible, Lower Insurance Cost
Deductibles are the out-of-pocket cost you must pay before your insurance company steps in with their coverage. If you are willing to increase your deductibles, your insurance company will lower your monthly insurance premium.
By increasing car insurance deductibles from $500 to $2,000, the average American would save 16 percent a year. The exact amount you would save on either car or home insurance depends on the state you live in, your demographic profile, and claims history.
Do the Math
Before you decide whether upping your deductibles is right for you, find out how much you would save. Suppose you would save $200 a year by increasing your car insurance collision and comprehensive deductibles to $2,000 from $500. After 7½ years, you would accumulate enough savings to make up the extra $1,500 out-of-pocket cost should you have an accident.
Now consider how likely you are to have an accident. About six in every 100 U.S. motorists file a collision claim every year and 3 in 100 file a comprehensive claim, according to the Insurance Information Institute. If those claims were spread out evenly, that means every motorist would go 16½ years before filing a collision claim and more than 33 years before filing a comprehensive claim.
Of course, claims are not spread out evenly and no one person's experience is "average." Your actual risk will greatly depend on how safe a driver you are, how many miles you drive a year, and where you drive. You need to make a similar estimate of your chances of filing a claim on your homeowners insurance.
Avoid the Rate–Hike Game
Insurance companies are well-known for raising your premium after you file a claim. A higher deductible reduces this risk as fewer claims need to be filed.
A Word of Caution
Remember that increasing your deductibles can create a financial hardship. In our example, you'll now have to have $2,000 on hand to cover the cost of an insurance claim. Before you change your policy, you need to be prepared by having enough money in a savings account to cover your higher deductible if an accident does happen and you need to file a claim.
These days we're always hearing about "the 1%", but what is the fabled one–percent anyway? Who's in the 1%, and who's in the other 99%?
An interactive tool from the Wall Street Journal, What Percent Are You?, can help you find your place on the range of income levels in America. You can even compare your income based on different factors, like gender or age, to find your percentage.
The phrase seems to have originated out of the "Occupy Wall Street" political protests voicing concern over the difference in income levels of Americans. It is related to the similar "99%" statistic. Based on numbers from 2014, you have to make about $306,460 or more per year to be considered part of "the 1%".
With college students now settling into their first weeks of school, it's important for parents and students to remember that the $4,000 tuition and fees deduction they might have counted on in past years is not available in 2017. The good news is that there are alternatives. Here are two of the more popular education tax credits:
Alternative No. 1: The AOTC
The American Opportunity Tax Credit (AOTC) is a credit of up to $2,500 per student per year for qualified undergraduate tuition, fees, and course materials. The deduction phases out at higher income levels, and is eliminated altogether for married couples with a modified adjusted gross income of $180,000 ($90,000 for singles).
Alternative No. 2: The Lifetime Learning Credit
The Lifetime Learning Credit provides an annual credit of 20 percent on the first $10,000 of qualified tuition and fees, for either undergraduate or graduate level classes. There is no lifetime limit on the credit, but only couples making less than $132,000 per year (or singles making $66,000) qualify. Unlike the AOTC, this deduction is per tax return, not per student.
Credits Usually Beat Deductions
Both the AOTC and the Lifetime Learning Credit are generally more valuable than the expired tuition and fees deduction, because as credits they reduce your income tax directly, while the deduction only reduced how much of your income is taxed.
In addition to the two alternative education credits, there are many other tax benefits that reduce the cost of education. This includes breaks for employer-provided tuition assistance, deductions for student loan interest, tax-beneficial college savings options, and many other tax-planning alternatives.
As we enter into the fall months, it's a good time to check your tax withholdings to make sure you haven't been paying too much or too little. This is especially true if major changes took place in your life this year to your marital status, number of dependents, or your employment.
This quick checkup will ensure you are not surprised with a large tax bill when you file your income tax return. Fortunately, you still have a few months left to fix any problems.
Get an Accurate Assessment
The IRS has an online withholding calculator that will help you calculate how much your current withholdings match what your final tax bill will be. In order to get an accurate reading, you need to have a copy of your latest paycheck or last quarterly estimated tax filing (Form 1040 ES). It may also help to have your last tax return on hand if you expect to take similar credits and deductions this year.
Enter your data, including your filing status, dependents and any information about credits. Then refer to your last paycheck or withholding statement and enter in your total withholdings so far this year. Also enter what you expect to earn by year-end.
After you enter your information, the tool will output something similar to this:
Based on the information you previously entered, your anticipated income tax for 2017 is $15,145. If you do not change your current withholding arrangement, you will have $23,670 withheld for 2017 resulting in an overpayment of $8,525 when you file your return.
How to Fix a Problem
Whether you're paying too much or too little, you can fix it by filling out a new W-4 form and giving it to your employer. If you do so, you'll have to file another W-4 at the start of 2018 to return your withholding schedule to normal. If you're filing quarterly estimated taxes, you can adjust your next quarter's estimate in a similar way.
Why a Checkup Is Important
In a perfect world, you would neither owe too much nor get too large a refund. Unfortunately, the federal government refunds more than $3,000 a year to the average taxpayer. Think of that money as an interest-free loan the government borrowed from you. Conversely, a shortfall means writing a large check when you file your tax return. That's a surprise few of us need.
The IRS announced this week that Hurricane Irma victims in parts of Florida and elsewhere have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments.
This relief is similar to what was granted last month for victims of Hurricane Harvey. It includes an added filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15.
The IRS is offering this relief to any area designated by FEMA as qualifying for individual assistance. Parts of Florida, Puerto Rico and the Virgin Islands are now eligible, but taxpayers in localities added later to the disaster area, including those in other states, will automatically receive the same filing and payment relief.
The tax relief postpones various tax filing and payment deadlines that occurred starting on Sept. 4, 2017 in Florida and Sept. 5, 2017 in Puerto Rico and the Virgin Islands. Thus, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period.
This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. Because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.
The IRS automatically gives filing and penalty relief to any taxpayer with an IRS address of record in the disaster area. So, taxpayers do not need to contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment, or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty removed.
The IRS will also work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers aiding the relief activities who are with a recognized government or philanthropic organization.
Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016).
If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The third-quarter due date is now here.
Normal due date: Friday, September 15, 2017
Remember you are required to withhold at least 90 percent of your current tax obligation or 100 percent of last year’s federal tax obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:
Underpayment penalty. If you do not have proper tax withholdings, you could be subject to an underpayment penalty. The penalty can occur if you do not have proper withholdings throughout the year. So a payment at the end of the year may not help avoid the underpayment penalty.
W-2 withholdings get special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it were made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 withholdings to make up the difference.
Self-employed. Remember to account for the need to pay your Social Security and Medicare taxes as well. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter when you pay your estimated taxes.
Don't forget state obligations. With the exception of a few states, you are often required to make estimated state tax payments when required to do so for your federal tax obligations. Consider conducting a review of your state obligations to ensure you meet these quarterly estimated tax payments as well.
*If your income is over $150,000 ($75,000 if married filing separate), you must pay 110% of last year’s tax obligation to be safe from an underpayment penalty.
Equifax, one of the three main credit reporting agencies, recently announced a cybersecurity breach affecting around 143 million US consumers. More than half of US adult's information was compromised. Criminals exploited a US website application vulnerability to gain access to certain files. Based on the company's investigation, the unauthorized access occurred from mid-May through July 2017.
The information accessed primarily includes names, Social Security numbers, birth dates, addresses and, in some cases, driver's license numbers. In addition, hackers accessed credit card numbers for 209,000 US consumers, and dispute documents with personal identifying information for 182,000 US consumers.
Equifax discovered the breach on July 29. The company has hired an independent cybersecurity firm that has been conducting a forensic review to figure out the scope of the intrusion, including the specific data affected. The company's investigation is still ongoing and is expected to be completed in the coming weeks.
I apologize to consumers... for the concern and frustration this causes.
—Richard Smith, Equifax CEO
Richard Smith, Chairman and CEO of Equifax said, "This is clearly a disappointing event for our company, and one that strikes at the heart of who we are and what we do. I apologize to consumers and our business customers for the concern and frustration this causes."
Equifax has set up a dedicated website, equifaxsecurity2017.com, to help consumers find if their information was affected and to sign up for credit file monitoring and identity theft protection.
When was the last time you reviewed your insurance coverage? An annual insurance review makes good financial sense. Here are points to consider as you review your various insurance policies.
Is Your HSA a Retirement Tool?
Health Savings Accounts (HSAs) are a great way to pay for medical expenses, and since unused funds roll over from year to year, the account can also provide a source of retirement savings in addition to other plans like 401(k)s or IRAs.
But be aware HSAs can also come with significant disadvantages and less flexibility when compared with other retirement investment tools.
HSAs work best when they are used for their designed purpose: to pay for qualified medical expenses. Neither your original contributions to an HSA nor your investment earnings are taxed when used this way.
This makes HSA funds valuable, given that medical costs are one of our largest expenses as we age. The Employee Benefit Research Institute estimates the average 65-year-old couple needs $264,000 to pay for medical care over the course of their retirement. Being able to cover that amount with pre-tax dollars greatly extends the value of retirement savings.
In addition, unlike other retirement plans, there is no required distribution of funds after you reach age 70½.
First, you can only contribute to an HSA if you have a high-deductible health insurance plan. That means you will pay more out of pocket each year when you need to use health services, which could make it difficult to build a balance within your HSA.
Second, contributions are limited. Currently, annual contributions to HSAs are limited to $3,400 a year for individuals and $6,750 a year for families. These limits get bumped up by $1,000 for people aged 55 or older. You also may only contribute to an HSA until your retirement age.
Finally, HSAs typically have fewer investment options compared with other investment tools including 401(k)s and IRAs. The accounts often have high management and administrative fees. All this makes building HSA earnings tough to do.
The worst thing about HSAs: before you reach age 65, non-medical withdrawals from HSAs come with a whopping 20 percent penalty. Plus non-medical withdrawls are taxed as income. Even after age 65, both contributions and earnings are taxed when they are withdrawn for non-medical expenses.
In this way, HSAs compare unfavorably with 401(k)s and IRAs, which end their early withdrawal period earlier, at age 59½. They also have lower early withdrawal penalties of just 10 percent.
HSAs are a powerful tool to help manage the ever-rising costs of health care. Knowing the rules and the costs associated with using these funds outside of medical expenses can help you get the most out of an HSA and avoid costly missteps.