IRS Extends Tax Deadlines for Michigan Storm Victims

Residents of certain Michigan counties can wait until November 1, 2021, to file federal tax returns and make tax payments that would normally be due before that date. The IRS extended the deadlines because of the severe storms, flooding and tornadoes that began on June 25, 2021, in parts of the state that were declared a disaster area by the Federal Emergency Management Agency (FEMA). The tax relief applies to residents of Washtenaw and Wayne Counties.

Various federal tax filing and payment due dates for individuals and businesses from June 25 to October 31 will be shifted to November 1, 2021. Although this will not include tax payments related to 2020 returns that were due on May 17, 2021, it will include:

  • Quarterly estimated income tax payments normally due on September 15;
  • Quarterly payroll and excise tax returns ordinarily due on August 2;
  • Valid extension filings normally due on October 15; and
  • Filing of Form 2290, Heavy Highway Vehicle Use Tax Return, normally due on August 31.

Penalties on payroll and excise tax deposits due from June 25 to July 12 will also be waived if the deposits were made by July 12, 2021.

You don’t have to contact the IRS to get this relief. However, if you receive 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, you should call the number on the notice to have the penalty abated.

The IRS will also waive fees for obtaining copies of previously filed tax returns for taxpayers affected by the storm. When requesting copies of a tax return or a tax return transcript, write “Michigan Severe Storms, Flooding, and Tornadoes” in bold letters at the top of Form 4506 (copy of return) or Form 4506-T (transcript) and send it to the IRS.

In addition, the IRS will work with any taxpayer who lives outside Michigan, but whose records necessary to meet a deadline occurring during the postponement period are located in the state. Taxpayers qualifying for relief who live in another state need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area 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 2021 return normally filed next year), or the return for the prior year. This means that taxpayers can, if they choose, claim these losses on their 2020 return. Be sure to write the FEMA declaration number (FEMA 4607-DR) on any return claiming a loss. It’s also a good idea for affected taxpayers claiming the disaster loss on a 2020 return to put the Disaster Designation (“Michigan Severe Storms, Flooding, and Tornadoes”) in bold letters at the top of the form. See IRS Publication 547 for details.

Source: kiplinger.com

“Plus-Up” Stimulus Checks Have Already Been Sent to 9 Million Americans – Will You Get One Too?

If you already received a third stimulus check, you might find an additional check from the IRS in your mailbox in the coming weeks – especially if you filed your 2020 tax return close to the May 17 deadline. The IRS is calling these extra checks “plus-up” payments, and more than 9 million Americans have already receive the supplemental payment. Over 900,000 plus-up payments were sent in just the last six weeks, and more of them will be sent in the weeks and months ahead as the IRS continues to process 2020 tax returns. The big question is: Will you get one?

The IRS is sending plus-up payments to people who received a third-round stimulus check that was based on information taken from their 2019 federal tax return or some other source, but who are eligible for a larger payment based on a 2020 return that is filed and/or processed later. This could happen, for example, if you had a new baby last year that is reported as a dependent for the first time on your 2020 return (see below for other possible reasons).

So, if you recently filed your 2020 return, you might get a plus-up payment soon. If you requested a filing extension and haven’t filed your 2020 return yet, there’s an extra incentive to get it done quickly (i.e., not waiting until October 15 to file your return). Your 2020 return must be filed and processed by the IRS before August 16, 2021, if you want to get a plus-up payment. That means you still have time to act if you got an extension – but not too much time! Plus, the sooner you file your return, the sooner you’ll get your “plus-up” payment (plus any other tax refund the IRS owes you).

How Stimulus Payments Are Calculated

Most eligible Americans have already received their third stimulus check. The “base amount” is $1,400 ($2,800 for married couples filing a joint tax return). Plus, for each dependent in your family, the IRS adds on an extra $1,400. Unlike for previous stimulus payments, the age of the dependent is irrelevant.

However, third-round stimulus checks are then “phased out” (i.e., reduced) for people with an adjusted gross income (AGI) above a certain amount. If you filed your most recent tax return as a single filer, your payment is reduced if your AGI is over $75,000. It’s completely phased-out if your AGI is $80,000 or more. For head-of-household filers, the phase-out begins when AGI reaches $112,500 and payments are reduced to zero when AGI hits $120,000. Married couples filing a joint return will see their third stimulus check drop if their AGI exceeds $150,000 and completely disappear when AGI is $160,000 or more.

The IRS looks at your 2019 or 2020 tax return to determine your filing status, AGI, and information about your dependents. If you don’t file a 2019 or 2020 return, the IRS can sometimes get the information it needs from another source. For instance, it got information from the Social Security Administration, Railroad Retirement Board, or Veterans Administration for people currently receiving benefits from one of those federal agencies (although the IRS may not have gotten all the information it needs to send a full payment). If you supplied the IRS information last year through its online Non-Filers tool or by submitting a special simplified tax return, the tax agency can use that information, too.

If your 2020 tax return isn’t filed and processed by the time it starts processing your third stimulus check, the IRS will base your payment on your 2019 return or whatever other information is available. If your 2020 return is already filed and processed, then your stimulus check will be based on that return. If, however, your 2020 return is not filed and/or processed until after the IRS sends your third stimulus check, but before August 16, that’s when the IRS will send you a plus-up payment for the difference between what your payment should have been if based on your 2020 return and the payment actually sent that was based on your 2019 return or other data.

(Note: The IRS has had tax return processing delays this year. So, even if you submitted your 2020 return before your third stimulus check was sent, your stimulus payment still might be based on your 2019 return because your 2020 return wasn’t processed in time. Returns filed electronically are generally processed faster than paper returns.)

If for some reason you don’t get a plus-up payment, you’ll still get your money if a payment based on your 2020 tax return is higher than the payment you actually received – but you’ll have to wait until next year to get it. In that case, you can claim the difference as a Recovery Rebate credit on your 2021 tax return, which you won’t file until 2022.

[Use our Third Stimulus Check Calculator to compare your payment if it’s based on your 2019 return vs. your 2020 return. Just answer three easy questions to get a customized estimate.]

Who Will Get a Supplemental “Plus-Up” Payment

Again, you’ll only get a supplemental “plus-up” payment if you received a third stimulus check based on your 2019 tax return or other information, but you would have gotten a larger check if the IRS based it on your 2020 return. So, who falls into this category? Of course, it depends on your specific circumstance. However, to give you a general idea, here are a few examples of hypothetical taxpayers who should get a plus-up payment.

You Had Less Income in 2020 Than in 2019: Kay was unemployed for much of 2020. As a result, her AGI dropped from $78,000 in 2019 to $40,000 in 2020. Kay received a $560 third stimulus check that was based on her 2019 return (she is single with no dependents). Since her 2019 AGI was above the phase-out threshold for single filers ($75,000), her payment was reduced. Kay later files her 2020 tax return, which is processed before August 16, 2021. Since Kay’s 2020 AGI is well below the applicable phase-out threshold, her third stimulus check would have been for $1,400 if it were based on her 2020 return. As a result, Kay will receive a $840 plus-up payment ($1,400 – $560 = $840).

You Had a Baby in 2020: Josh and Samantha had their first child in 2020. They’ve been married for five years, and they file a joint return each year. Their AGI was $110,000 in 2019 and $120,000 in 2020, which are both below the phase-out threshold for joint filers ($150,000). The IRS sent Josh and Samantha a $2,800 third stimulus check based on their 2019 return. They filed their 2020 tax return before the IRS sent the payment, but the return was not processed until a week after the payment was sent. That’s why the payment was based on their 2019 return. Since Josh and Samantha claimed their new bundle of joy as a dependent on their 2020 return, their stimulus check would have been for $4,200 if it were based on their 2020 return (i.e., they would have received an additional $1,400 for their baby). As a result, the IRS will send Josh and Samantha a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

You Got Married in 2020: Patty and Greg were married in 2020. They had a combined AGI of $150,000 in 2020 and have no dependents. In 2019, as separate single filers, Patty had an AGI of $72,000 and Greg had an AGI of $78,000. The IRS sent Patty a $1,400 third stimulus check based on her 2019 return. Since her 2019 AGI was below the phase-out threshold for single filers ($75,000), her payment was not reduced. The IRS sent Greg a $560 third stimulus check based on his 2019 return. Since his 2019 AGI was above the phase-out threshold for single filers, his payment was reduced. Between the two of them, they got a total of $1,960 in third stimulus check payments ($1,400 + $560 = $1,960). After receiving their stimulus checks, Patty and Greg file a joint return for the 2020 tax year that is processed before August 16, 2021. Since the AGI reported on their 2020 joint return does not exceed the phase-out threshold for joint filers ($150,000), their stimulus check would have been for $2,800 if it were based on their 2020 return (i.e., it wouldn’t have been reduced). As a result, the IRS will send Patty and Greg a $840 plus-up payment ($2,800 – $1,960 = $840).

You Used the Non-Filers Tool Last Year: Mary is single and has two dependent children. One turned 15 and the other turned 18 in 2020. Mary was not required to file a 2019 tax return, but she did use the IRS’s Non-Filers tool last year to get a first-round stimulus check. Since children over 16 did not qualify for the extra $500 payment for first-round payments, Mary only reported her youngest child to through the tool. The IRS sent Mary a $2,800 third stimulus check based on the information it received through the Non-Filers tool. Mary later files a 2020 tax return, which is processed before August 16, 2021. She used the head-of-household filing status, reported an AGI of $15,000, and claimed both of her children as dependents. For third-round stimulus checks, an additional $1,400 is added to the total payment for each dependent regardless of the dependent’s age. Since Mary’s 2020 AGI is below the phase-out threshold for head-of-household filers ($112,500), her third stimulus check would have been for $4,200 if it were based on her 2020 return. As a result, Mary will receive a $1,400 plus-up payment ($4,200 – $2,800 = $1,400).

A Federal Agency Supplied Information to the IRS: Ron is a disabled veteran who receives benefits from the Department of Veterans Affairs (VA). He is single and has one dependent child. Ron was not required to file a 2019 tax return, but the VA sent information to the IRS about Ron. The VA did not send any information about Ron’s child. Based on the information it had, the IRS sent Ron a $1,400 third stimulus check. After receiving this payment, Ron files a 2020 tax return, which is processed before August 16, 2021. Ron filed as a single person with an AGI of $18,000 and one dependent. Since Ron’s 2020 AGI does not exceed the phase-out threshold for single filers ($75,000), his third stimulus check would have been for $2,800 if it were based on his 2020 return. As a result, the IRS will send Ron a $1,400 plus-up payment ($2,800 – $1,400 = $1,400).

Source: kiplinger.com

How to Make End-of-Year Donations

Making a charitable donation at the end of the year–or any time of year–can be a win-win-win.

The organization you give your money to benefits. You get to enjoy the good feeling that comes with supporting a project or cause that you believe in. And, you may also be able to lower your tax bill.

This year, the rewards for giving may be especially sweet. Two new tax changes for 2021 can boost donors’ tax deductions for charitable giving, meaning they may be able to give more to charity at a lower net cost.

Here are some things you may want to consider when planning and making your end-of-year charitable donations.

What Qualifies as Charitable Giving?

In the eyes of the Internal Revenue Service (IRS), a charitable donation is a gift of money, property, or other asset that you give to a qualifying organization, known as a 501(c)(3). To find out if an organization you’d like to support is eligible to receive tax-deductible contributions, you can search for it on the IRS’s database .

You may want to keep in mind that money or assets given to political campaigns or political parties do not qualify as tax-deductible donations. In fact, no organization that qualifies as a 501(c)(3) can participate in political campaigns or activities.

Organizations that engage in political activities without bias, however, can still sometimes qualify. So, a group can educate about the electoral process and remain within guidelines. They just have to go about it in a nonpartisan way.

It’s also possible for the IRS to implement measures that can affect charitable donating. For example, there was a tax relief provision passed in the form of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Under it, tax deduction limits shifted for both those individually and jointly filing. So, it’s essential to stay updated on current tax laws and provisions that may affect your charitable donations’ taxation.

Recommended: IRA Tax Deduction Rules

Can I Deduct My Year-End Charitable Donation?

In the past, charitable donations could only be deducted by tax filers who itemized their deductions. That means that rather than take the standard deduction, they chose the more complicated path of listing all of their eligible expenses.

However, the IRS has a special new provision that will allow individuals to easily deduct up to $300, and joint filers to deduct up to $600, in donations to qualifying charities in 2021, even if they don’t itemize.

This is basically an enhancement of the one-year tax break Congress put in for 2020 under the (CARES) Act that allowed a tax deduction for cash gifts to charity up to $300.

The difference is that for 2020, the deduction was limited to $300 per tax return. The new provision allows a married couple filing jointly to deduct up to $600 in cash gifts to charity for 2021.

The rules have changed for people who itemize as well. If you are itemizing on your return, the IRS has increased the limit for charitable tax deductions from 60% to 100% of your adjusted gross income (AGI). And, if you want to give more than that 100 percent threshold, the excess can be carried over into the next tax year.

Whether you’re looking to give $50 to your favorite local organization, or you’re considering a much larger charitable donation, these tax changes make it a particularly good time to do so.

Tips for Making End-of-Year Donations

To make the most of a charitable donation, here are some strategies you may want to keep in mind:

Making a Timely Donation

The deadline for charitable donations is December 31st. If you’re looking to deduct the donation in the current tax year, you will want to make sure your charity has ownership of whatever asset you are donating by the closing of business on the 31st. You may also want to make sure that your preferred payment method is accepted by the charity so it doesn’t get kicked back and cause delays.

Taking Advantage of Company Matching Programs

Your place of employment might have a matching program for charitable giving. They might, for example, match your donation amount dollar for dollar up to a certain amount. If so, it could significantly bump up the amount you could otherwise afford to give.

If you’re unsure about whether your company has a program, it can be worth reaching out to your HR department for further information.

Giving Rewards on Your Credit Card

If you are giving on a budget, you might consider donating rewards you earn on your credit cards, such as hotel points or airline miles. This can be a great way to use points or other rewards that would otherwise just expire. Many credit card companies, hotels, and airlines will make it easy to give your rewards to nonprofit organizations.

Recommended: Credit Card Rewards 101: Getting the Most Out of Your Credit Card

Donating Assets from your Brokerage Account

If you’re looking to lower your capital gains tax, you may want to consider donating assets from your brokerage account to a nonprofit. This may take some time and planning, but the benefits of donating an over-allocated position that’s outperforming can be worth it.

You may be able to receive tax advantages and rebalance your portfolio, while also helping an organization increase its assets.

Setting up a Recurring Donation

You can get a headstart on next year by creating a recurring contribution now. Many organizations allow you to donate monthly through their websites using a credit card, so you might be able to earn rewards at the same time. By establishing your donation plans now, you won’t have to even think about end-of-the-year giving next year.

Keeping Good Records

If you want to deduct your donation on your taxes, you’ll want to make sure you have the right receipts to back up the transaction.

For cash donations under $250, you’ll either need a bank record (like a canceled check or bank statement) or a written acknowledgment from the charity which includes the date and amount of your contribution.

For cash donations over $250, a bank record isn’t insufficient. Instead, you’ll need something in writing from the charity which includes the date and amount of your donation.

Noncash donations from $250 to $500 in value require a receipt that includes the charity’s name, address, date, donation location and description of items donated. If the noncash donation exceeds $500 in value, you’ll also need a record of how and when the items were acquired and their adjusted basis.

If the donation exceeds $5,000 in value, you’ll need to get a written appraisal from a qualified appraiser.

Speaking with a Professional

An accountant can help answer any questions you may have about how the new tax laws will impact your tax contribution, as well as help you make the most strategic and efficient charitable donation.

The Takeaway

Giving can be a good idea for a number of reasons, especially in 2021. In addition to helping a nonprofit organization meet its operating costs for the year, you can feel good about what you are doing with your money, and you may also benefit from special tax deductions.

Giving can also help you get the new year started on the right foot. If you’re looking for other ways to get your financial life in order (now, or any time of year), you may also want to consider signing up for SoFi Money®.

SoFi Money is a cash management account that allows you to earn competitive interest, spend, and save all in one place. And, since you won’t pay any account fees or other monthly fees, you can focus on putting your money towards more important things.

Start saving for the things in life that matter to you with SoFi Money.

Photo credit: iStock/ThitareeSarmkasat


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Does homeowners insurance cover water damage? It Depends

This is one of the first questions homeowners ask — or should ask — when they are shopping for insurance for their home:

“Does homeowners insurance cover water damage?”

The answer they are given is “it depends,” and such is the way with understanding what homeowners insurance covers and what it does not. Read this story to learn what insurance protects in general.

You pay for homeowners insurance because you must in order to get a mortgage, and you hope you never need to use it. But a variety of ills — natural or human made — can put you in a position to make a claim of loss or damage to property. You hope the coverage you have paid for all of these years will extend to the situation you are dealing with, but you just never know.

Again, It depends.

Below, you can find what to do when you need to contact your insurance company because you have suffered property loss or your home is damaged. Then you will find out what to do when your claim is denied.

But, first, let’s look at all the ways your home can be damaged by water, and the chances that your homeowners insurance will cover your loss in that event.

Does Homeowners Insurance Cover Water Damage?

The answer to the question “does homeowners insurance cover water damage?” is multileveled, just as the water damage might be.

In general, water damage caused by accident or mechanical failure of an appliance (washing machine, dishwasher, water heater, etc.) is going to be covered by standard policies. The same is true of a toilet that suffers a sudden leak.

But, if the water damage is a result of poor maintenance, such as broken pipes, mold or rotting pipes or water lines, the claim is likely to be denied.

Coverage for water damage is separated into dwelling damage and personal property damage, What is not covered is replacement of the appliance or machinery that caused the water damage. If your dishwasher develops a sudden leak which causes damage to your home, the structural damage and personal property damage likely will be covered but the cost of replacing the dishwasher will not.

If your home suffers water damage from a backed-up sewer or drain, traditional homeowners insurance doesn’t cover such occurrences. Many companies offer water backup coverage, however.

Flood damage is rarely covered by a standard homeowners insurance policy. Flood insurance policies are available thanks to the National Flood Insurance Program (NFIP) , but it is pricey.

According to the National Flood Insurance Program, the average cost of flood insurance for 2021 is $958 annually. That comes out to about $80 a month. 

If you wonder “does homeowners insurance cover water damage?” check with your agent to determine just what is covered and what is not, and whether you need to consider extended water damage coverage due to current climate conditions or the age of your home.

Making a Claim with Insurance Company

If you have not yet been in a position to make a claim against your homeowner’s policy but know someone who has been denied and you worry about your own policy’s virtues, take time to consider your choices in company and coverage.

What follows is a simplified representation of what is involved in making a homeowners insurance claim for water damage, including the possibility of having your claim denied and what to do in that event.

Step One: Your Home or Property Suffers Water Damage

When your home suffers water damage, you need to determine the actual extent of damage, and if you can, how the damage was caused.

Then contact your insurance company to determine if the damage is covered by your policy. This response to this question is not cut and dried, but it is the starting point for recovering some of your losses.

Step Two: Take an Inventory of What Was Damaged

Take photos or video of water-damaged possessions, structure or property (actually, it would be wise to take a video of your pre-disastered home right now, so you can refer to post-disaster).

Attempt to determine the value of individual items that need to be replaced, and find receipts if you have them (which is actually easier these days since most purchases occur with some form of electronic transaction). If the damage is structural, that will create a need for damage assessment and estimates, but that will occur after the insurance company has agreed to pay up.

Step Three:  Meet with the Adjuster

The insurance company will assign you an adjuster, who will eventually come to your home and assess the damage.

Do not assume this person is out to prevent you from covering your damages, but remember that the adjuster is protecting the interests of the insurance company to prevent fraudulent claims.

The adjuster will require a list of lost or damaged items with an estimated value of those items, and will assess structural or property damage that will require estimates to determine repair costs. Putting together a list of the valuable contents of your home is another thing to do before disaster strikes.

How much homeowners insurance do you need? Our insurance checklist will guide you to make the right decision. 

Step Four: Get the Verdict

The adjuster will eventually call you with a detailed list of what the company is going to cover, the amount it will give you for your lost or damaged items, and what structural damage the company will pay to be repaired. You may or may not like the dollar figures the adjuster offers.

You may also be surprised to hear that the insurance company can deny your claim, in part or in whole. This is where the insurance company is covering its assets: it will present in written form why it is denying your coverage claim. This letter should provide a complete and specific explanation why your policy does not cover the losses you claim.

If your policy explicitly states certain items or losses are exempt from your coverage, that is the end of the conversation. However, if you believe your policy should cover the damage you suffered, speak to the agent who sold you the policy, if possible, or ask to have an in-person conversation with the adjuster to discuss the situation.

Proving that your policy should cover your losses will not be easy. However, if you have a different interpretation of the language in your policy than what the adjuster suggests, or you have notes from your original conversation with your agent at the time you bought the policy, you can go on to the next step.

What’s God Got to Do With It?

Most standard homeowners insurance policies include an Act of God provision. From an insurance standpoint, an Act of God is damage that occurs as a result of natural causes with no human component, something that could not have been prevented by proper care or maintenance.

Earthquakes or floods are often considered an Act of God. Wildfires may also be considered an Act of God if started by lightning rather than humans (campfire gone bad, tossed cigarette and more).

Homeowner’s insurance policies spell out which Acts of God are covered. For instance, floods are Acts of God, although homeowners in flood plains or near coasts or lakefronts can purchase flood insurance at an additional cost.

Often, standard homeowners insurance policies do cover damage from high winds from natural events like hurricanes and tornadoes. If this is a possible factor in your claim, determine what your policy covers before going onto the next extensive and expensive step.

The increased occurrence of wildfires in the Pacific Northwest has made fire protection a must for homeowners in that area. But different companies provide different levels of coverage and full coverage can be expensive.

How to Fight a Denied Claim

You feel your insurance company is not fulfilling its legal promise to cover the cost of water damage to your home. You have documentation of your losses, a detailed description of the event that caused your damage (malfunctioning appliances or plumbing mishap), and you are in a position where it will behoove you financially to argue your case.

Pro Tip

In most cases, there is a limited time frame in which a denied insurance claim can be appealed, and the time frame begins from the moment you are notified of the denied claim.

Your homeowner’s insurance policy includes language stating how to appeal a denied claim. Getting involved in a battle with your insurance company may seem like a lost cause, but often, insurance companies can be convinced to adjust their decision to your benefit.

You might want to consider improving your chances by consulting a property insurance claims professional. These are licensed public insurance adjusters who can assess your claim from an objective viewpoint and will negotiate with our insurance company for you. Deciding on whether to hire a professional outside adjuster will be based on the cost of his or her service versus the amount of money you hope to recover.

The last step to recover funds would be to sue your insurance carrier, which would require hiring an attorney who specializes in property insurance claims. Get references and verifiable information on previous claims regarding water damage that were settled to the homeowner’s benefit.

Here’s hoping this helps and that you never need it.

Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.

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Source: thepennyhoarder.com

Citi Now Allowing Product Changes to the new Citi Custom Cash Card (Preferred, Dividend, Expedia, Etc.)

(Reposting with some additional info based on the comments.)

People are now successfully product changing their Citi cards to become the new Custom Cash card. Readers in the comments report being able to product change their Expedia, Rewards+, Drivers Edge Charter, Diamond Preferred, Premier, Prestige, Preferred, AT&T, Dividend, and American Airlines AAdvantage cards to become a Custom Cash card.

Double Cash cards can not yet be product changed to Custom Cash, though you can try changing it over to a Rewards+ and from there to change it to a Custom Cash. Some people heard from reps that Double Cash will be able to be converted directly to Custom Cash beginning August 1, 2021. Citi Simplicity is a mixed bag with some having success product changing and others being told the August 1st date for doing that product change.

The big question remains whether your card number will change when you product change to the Custom Cash, which might depend on which card you are changing. This matters because, officially, whenever the card number changes it would be considered a ‘card closed’ to reset your 24/48 month clock, whereas if the card number remains the same it won’t reset the clock. You can search the comments below for data points on when the card number will change from a particular card, or you can ask the Citi rep and hope for the best. I’d guess that product changes from cobrands (e.g. AA to Custom Cash) will get a new card number, but product changes from within the ThankYou family (e.g. Preferred to Custom Cash) might keep the same number.

The Custom Cash card uses the ThankYou points system and allows points to also be cashed out at 1 cent per point. The card launched in June and initially was not accepting product changes, but today they began allowing them. When you product change to the card you won’t get the signup bonus, but some people prefer doing it anyone to avoid signing up for a new card. Reports are that the product change can even be done via chat.

Source: doctorofcredit.com

IRS Is Sending More Unemployment Tax Refund Checks This Summer

If you received unemployment benefits last year and filed your 2020 tax return relatively early, you may find a check in your mailbox soon (or a deposit in your bank account). The IRS started issuing automatic tax refunds in May to Americans who filed their 2020 return and reported unemployment compensation before tax law changes were made by the American Rescue Plan. The tax agency has already sent millions of refunds, but additional tax refund checks will be sent through the summer.

The American Rescue Plan Act, which was enacted in March, exempts up to $10,200 of unemployment benefits received in 2020 ($20,400 for married couples filing jointly) from federal income tax for households reporting an adjusted gross income (AGI) less than $150,000 on their 2020 tax return. If you received more than $10,200 in unemployment compensation last year, any amount over $10,200 is still taxable.

The IRS has identified over 10 million people who filed their tax returns before the plan became law and is reviewing those returns to determine the correct amount of tax on their unemployment compensation. For those affected, this could result in a refund, a reduced tax bill, or no change at all. (You can use the IRS’s Interactive Tax Assistant tool to see if payments you received for being unemployed are taxable.)

The IRS is recalculating impacted tax returns in two phases. It started with tax returns from single taxpayers who had relatively simple returns, such as those filed by people who didn’t claim children as dependents or any refundable tax credits. Joint returns filed by married couples who are eligible for an exemption up to $20,400 and others with more complex returns were shifted to phase two.

Remember, though, that the tax exemption only applies to unemployment benefits received in 2020. So, if you receive unemployment compensation in 2021 or beyond, expect to pay federal tax on the amount you get.

Refunds for Unemployment Compensation

If you’re entitled to a refund, the IRS will directly deposit it into your bank account if you provided the necessary bank account information on your 2020 tax return. If valid bank account information is not available, the IRS will mail a paper check to your address of record. (If your account is no longer valid or is closed, the bank will return your refund to the IRS and a check will be mailed to the address the tax agency has on file for you.) The IRS says it will continue to send refunds until all identified tax returns have been reviewed and adjusted.

The IRS will send you a notice explaining any corrections. Expect the notice within 30 days of when the correction is made. Keep any notices you receive for your records, and make sure you review your return after receiving an IRS notice.

The refunds are also subject to normal offset rules. So, the amount you get could be reduced (potentially to zero) if you owe federal tax, state income tax, state unemployment compensation debt, child support, spousal support, or certain federal non-tax debt (i.e., student loans). The IRS will send a separate notice to you if your refund is offset to pay any unpaid debts.

Should I File an Amended Return?

Although the IRS says there’s no need to file an amended return, some early filers may still need to, especially if their recalculated AGI makes them eligible for additional federal credits and deductions not already included on their original tax return.

The IRS, for example, can adjust returns for those taxpayers who claimed the earned income tax credit and, because the exemption changed their income level, may now be eligible for an increase in the tax credit amount which may result in a larger refund. That said, taxpayers will need to file an amended return if they didn’t originally claim the tax credit, or other credits like the additional child tax credit, but now are eligible because the exclusion changed their income, according to the IRS. These taxpayers may want to review their state tax returns as well.

E-Filing Your 2021 Tax Return

Next year, when you try to e-file your 2021 tax return, you will have to sign and validate your electronic return by entering your prior-year AGI or your prior-year Self-Select PIN. If you use your AGI, make sure to use the AGI as originally reported on Line 11 of your 2020 Form 1040 or 1040-SR. Don’t use the corrected AGI if the IRS adjusts your 2020 return to account for the unemployment exclusion.

Withholding from Unemployment Compensation

Again, the $10,200 exemption only applies to unemployment compensation received in 2020. So, to avoid a big tax bill when you file your 2021 return next year, consider having taxes withheld from any unemployment payments you receive this year.

Contact your state unemployment office to have federal income taxes withheld from your unemployment benefits. You may be able to use Form W-4V to voluntarily have federal income taxes withheld from your payments. However, check with your state to see if it has its own form. If so, use the state form instead.

Victims of Unemployment Fraud

Whenever the government starts sending checks, criminals will try to get their hands on some of that money. That’s certainly the case with the unemployment compensation tax refunds. The good news is that you won’t be punished if a crook uses your name and personal information to steal a tax refund from Uncle Sam.

So, for example, if you received an incorrect Form 1099-G for unemployment benefits that you didn’t receive, the IRS won’t adjust your tax return to add the unemployment compensation to your taxable income. You should still report the fraud to the state workforce agency that issued the incorrect form, though.

What About State Taxes?

Just because the federal government is waiving taxes on the first $10,200 of your 2020 unemployment benefits, that doesn’t mean your state will too. To see if your state has adopted the federal exemption for 2020 state tax returns, see Taxes on Unemployment Benefits: A State-by-State Guide.

Source: kiplinger.com

Here’s What You Need to Know About Investing in 2021

Here’s a good question for the new year: Is 2021 a good time to invest in stocks?

In turbulent times like these, it’s hard to know the right financial moves to make. A lot of the tried-and-true advice we’ve always relied on doesn’t seem relevant anymore. Is now a good time to invest? Should I focus on paying off debt? Or saving?

It’s helpful to consult with a pro. So we asked Robin Hartill, a certified financial planner, as well as an editor and financial advice columnist for The Penny Hoarder, for advice.

Here are six financial questions we’ve been getting from readers lately:

1. ‘The Cost of Waiting is High’

Question: “Is 2021 a good time to invest, or should I wait the market out?”

Hartill’s advice: Take the long view. The stock market will grow your money over time, so you might as well get started sooner rather than later.

“The timing of your investment matters much less than how much time you have to invest,” Hartill says. “The S&P 500 has delivered inflation-adjusted returns of about 7% per year on average for the past 50 years. The cost of waiting for the perfect time to invest is high. You’re missing out on long-term growth.”

Profitable investing is all about taking the long view. Not sure how to get started? With an app called Stash, you can get started with as little as $1.* It lets you choose from hundreds of stocks and funds to build your own investment portfolio. It makes it simple by breaking them down into categories based on your personal goals.

“If you were hoping to make a quick buck off the stock market, now may not be a great time,” Hartill said. “We’re still in a recession, but the stock market has recovered. But true investing isn’t about making a quick buck. It’s about growing your money over time.”

She recommends budgeting a certain amount of money to invest each month, no matter what.

If you sign up for Stash now (it takes two minutes), Stash will give you $5 after you add $5 to your investment account. Subscription plans start at $1 a month.**

2. ‘There’s Only So Much Fat You Can Cut’

Question: “My monthly expenses keep going up. Anything I can do?”

“There’s only so much fat you can cut from your budget. Eventually, you start chipping away at muscle and bone,” Hartill said. “Cutting costs is often a good way to meet your shorter-term goals, like saving for a vacation or a down payment. But for the really big long-term goals like retirement and protecting your family from a worst-case scenario, cutting back only goes so far.”

If you need to cut back, though, take a hard look at your mandatory monthly bills — like car insurance. When’s the last time you checked prices? You should shop around your options every six months or so.

And if you look through a digital marketplace called SmartFinancial, you could be getting rates as low as $22 a month — and saving yourself more than $700 a year. 

It takes one minute to get quotes from multiple insurers, so you can see all the best rates side-by-side. Yep — in just one minute you could save yourself $715 this year. That’s some major cash back in your pocket.

So if you haven’t checked car insurance rates in a while, see how much you can save with a new policy.

3. ‘If You Have Your Spending in Check… ’

Question: “My budget is tight. What debt should I focus on paying off?”

“The only way to get out of debt is by spending less than you earn,” Hartill said. “But if you have your spending in check, a debt-consolidation loan can help you shed your debt faster.”

She added a caveat: “This option only makes sense if it lowers your interest payments. Many people who don’t have good credit actually find that the interest rate they’re approved for is even higher than what they’re currently paying.”

There’s a quick way to find out if this would work out for you. It takes just a couple of minutes to check out your options on a website called AmOne. If you owe your credit card companies $50,000 or less, it’ll match you with a low-interest loan you can use to pay off every single one of your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), you’ll get out of debt that much faster. Plus: No credit card payment this month.

It takes two minutes to see if you qualify for up to $50,000 online.

4. ‘You Don’t Have to Settle for Nothing’

Question: “My savings account bottomed out. Any other ways to make passive income right now?”

“Although interest rates will stay low until at least 2023, that doesn’t mean you have to settle for earning nothing on your savings,” Hartill said.

Most banks are paying account holders virtually no interest on their savings these days. Try switching to an Aspiration account. It lets you earn up to 5% cash back every time you swipe the card and up to 16 times the average interest on the money in your account. Plus, you’ll never pay a monthly account maintenance fee.

To see how much you could earn, enter your email address here, link your bank account and add at least $10 to your account. And don’t worry. Your money is FDIC insured and under a military-grade encryption. That’s nerd talk for “this is totally safe.”

5. ‘Most of Us Don’t Earn Enough’

Question: “How can I possibly earn enough to ever retire?”

Hartill shared a brutal truth with us: “The overwhelming majority of us don’t earn enough to get to save our way to retirement.”

Ouch, that hurts. But wait, she offers a solution: “Spending money by investing it in the stock market and earning returns that compound into even more money.”

“If you need a $500,000 nest egg to retire, you’d have to trim $10,000 from your budget for 50 years straight to get there through savings alone. But if you invested just $5,000 a year and earned 6% returns, you’d get there in less than 34 years.”

6. ‘The Only Practical Way to Give Your Family Security’

Question: “I have a family. How can I make sure they’re protected in these uncertain times?”

“Spending money on life insurance is the only practical way to give your family the security they deserve,” Hartill said. “Your life insurance needs are greatest when you have young children. Fortunately, this is often a time when you’re still young enough that life insurance is relatively inexpensive.”

Maybe you’re thinking: I don’t have the time or money for that. But this takes minutes — and you could leave your family up to $1 million with a company called Bestow.

We hear people are paying as little as $8 a month. (But every year you wait, this gets more expensive.)

It takes just minutes to get a free quote and see how much life insurance you can leave your loved ones — even if you don’t have seven figures in your bank account.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. He is not a certified financial planner, but he has stayed in a Holiday Inn Express.

*For Securities priced over $1,000, purchase of fractional shares starts at $0.05.

**You’ll also bear the standard fees and expenses reflected in the pricing of the ETFs in your account, plus fees for various ancillary services charged by Stash and the custodian.

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Source: thepennyhoarder.com

5 Strategies for Paying Off Car Loan Early

Is your monthly car payment a burden to your budget? Paying off your car loan early can earn you much-needed financial freedom and save you potentially hundreds (or thousands) of dollars in would-be interest. 

You can pay off your car loan early using several effective strategies, but before you do, consider any potential penalties and effects to your credit score.

The True Cost of a Car Loan

It’s no secret that cars are our worst big-ticket investment. Unlike houses, which typically increase in value over time, and education, which theoretically opens the door to higher earning potential, cars lose their value over time. In fact, a new car depreciates in value as soon as you drive it off the lot and will lose 20% to 30% of its value in the first year.

That’s a big deal, especially given the average cost Americans are spending on new cars in 2021. According to KBB, that hard-to-swallow number is over $40,000, up more than 4% over 2020.

That means Americans are shelling out $40,000 for a car that, in a year, will be worth anywhere from $28,000 to $32,000, representing an $8,000 to $12,000 loss.

But there’s more than just the sticker price to consider. In addition to sales tax (average of 10.12% in 2020, though it varies by state), be prepared to pay interest on your car loan. Right now, the average car loan interest rate (also referred to as APR, the annual percentage rate, though there’s a difference) is over 4%.

APR includes the interest rate, in addition to other fees, like loan origination fees or mortgage insurance. You should use the APR, not the flat interest rate, when calculating what you’re paying.

Your APR will depend on the current market and your credit score. The better your credit score, the lower your APR. If you have a weak credit score and can put off buying a car, it is advisable to build up your credit score before applying for a loan.

For 2021, rates are expected to hover between 4% and 5% for 48-month (four-year) and 60-month (five-year) loans. 

Car Loan Calculator: An Example

Interest on a car loan adds up. Let’s take the $40,000 new car as an example, with a $995 dealer fee. Assume you put $2,000 down and have a tax rate of a clean 10% and an APR of 5%. You’ve agreed to pay off the loan over 60 months, or five years. (The typical car loan is anywhere from three to seven years; the shorter the loan period, the higher the monthly payment.)

In this scenario, the total cost of the vehicle after tax and dealer fees is $44,995, minus your $2,000 down payment. That leaves $42,995 to be financed. Given the 5% interest rate over 60 months, your monthly payment would be $811.37.

Over 60 months, you will end up having paid $50,682.20 (including down payment) for a car that, with taxes and dealer fees, cost just $44,995. That means, over five years, you’ve paid $5,687.20 in interest. 

And let’s just ignore the fact that, due to depreciation, that car that you’ve just paid $50,000+ on is now worth just $18,752.41 (average value of 37% of original cost after five years).

Use The Penny Hoarder’s car loan calculator to figure out how much you’ll pay with real-life numbers that match your scenario.

How Car Loan Interest Rates Work

Paying off your car loan early, if you can afford it, seems like a no-brainer then. However, before you start strategizing about how to pay off your car loan ahead of schedule, do some digging to determine what kind of car loan you have.

In an ideal world, your loan will be a simple interest loan. If you have not yet purchased your car, only consider lenders that will offer you a simple interest loan. This means the interest is calculated entirely on the principal balance of the loan.

But if your lender charges precomputed interest, that means they will calculate how much you will pay in interest over the life of the loan and include that in your total balance. That means, even if you pay off your car early, the payoff quote will include all the interest you would have paid had you kept the loan open. In this case, there are absolutely no financial savings in paying your car loan off early.

One other element of your loan to research is payoff penalties. Payoff penalties are legal in 36 states and allow lenders to charge you a penalty (usually a fixed percentage of the remaining balance) for paying off your car loan early. In this case, it may be more expensive than what you would have paid in interest over the life of the car loan.

Will Paying Off Your Car Loan Early Hurt Your Credit Score

It is not likely that paying off a car loan early will hurt your credit score, but it could be keeping you from growing your credit score. Regular, on-time payments account for roughly 35% of your FICO credit score, making it the most important factor. Making monthly payments on a car loan is a great way to show lenders you are responsible with repaying your debts.

In addition, lenders like to see a nice mix of credit (mortgage, car loan and credit cards are the big three). Keeping your car loan open also helps extend the length of your credit history. If you have no other open credit (like a credit card), keeping your car loan open may be advantageous in building up your score if you eventually intend to buy a house.

5 Strategies for Paying Off Your Car Loan Early

If you have a simple interest car loan, your credit is in good standing and your loan doesn’t have any payoff penalties, it may be wise to pay off your car loan ahead of schedule. Not only will you avoid spending heaps of money on interest, but it will also give you the financial freedom of hundreds of dollars back in your monthly budget.

The best advice for paying off a car loan early: treat it like a mortgage. If you are a homeowner, you have likely heard that making an extra (13th) payment toward your mortgage principal every year can shave years off your loan. If you pay even more toward the principal each year, you can easily get your 30-year mortgage down to 15 years—and you’ll be able to drop PMI (private mortgage insurance) costs much earlier.

Of course, home loans tend to be much bigger than vehicle loans, so the potential to save is much larger, but the logic works the same with your car loan.

These strategies for early payoff are all effective, if done right:

1. Make One Large Extra Payment Every Year

If you can count on your grandma slipping a fat check into your Christmas card every year without fail, don’t use that money to splurge on alcoholic eggnog (OK, maybe one bottle). Instead, apply it directly to your car loan as a lump sum.

If you have autopay scheduled online, you can log into your account and simply arrange to make a one-time payment. If you’re old-fashioned and pay by phone or mail, simply call your lender and let them know you’d like to make an extra, one-time payment toward the principal.

Apply this logic to any unbudgeted (aka, not-planned-for) funds, like a bonus at work or a tax refund.

2. Make a Half Payment Every Two Weeks

Talk with your lender to see if you can switch to biweekly payments, instead of monthly. If your lender allows you to pay half of your monthly loan amount every two weeks, you will wind up making 26 half payments. Divide 26 by 2, and you get 13 full months of payments, paid over 12 months. That means, by the end of the year, you will have essentially made an extra car payment.

Just check your budget first to ensure that kind of payment plan is feasible.

3. Round Up

Rounding up to the nearest $50 or even $100, if you can swing it, is a great way to add extra money every month to the principal. For example, if your monthly payment is $337, you could round up to $350 or even $400 to essentially pay an extra $13 or $63 a month. This will wind up knocking a few months off the life of your loan.

If you have autopay scheduled, log onto your loan platform and see if you can add the additional funds toward the principal each month so you don’t even have to think about it.

4. Resist the Urge to Skip a Payment

Some lenders may let you skip one or two payments a year. So kind of them, right? Wrong. They do this knowing it will extend the life of your loan, meaning they will rake in even more of your hard-earned cash in interest fees.

Unless you fall on very hard times, fight the urge to skip a payment. You will wind up paying more in the end if you do.

5. Refinance, but Exercise Caution

If you had a poor credit score when you bought your car and opted for a seven-year loan to keep payments low, it might make sense to refinance. Perhaps you’re two years into the loan, you’ve got a higher-paying job, and your credit score is in great shape. You could potentially refinance at a lower APR and build the loan out over 36 months, saving you two years and lots of money in interest.

But borrower beware: Don’t refinance to get a lower monthly payment by extending a loan, as you will end up just paying more in interest. 

When You Shouldn’t Pay Off Your Car Loan Early

As we’ve seen, it doesn’t always make sense to pay off your car loan early. But there are more reasons to hold your horses than just payoff penalties and precomputed interest.

Here are some other reasons not to pay off your car loan early:

  • Lack of emergency savings. Bankrate reported early in 2021 that most Americans could not afford a $1,000 emergency. Just 39% have enough to cover such an unexpected expense. If you are a part of that 61% without a well-padded emergency fund, prioritize adding funds to a high-yield savings account to protect yourself and your family should the unthinkable happen. And it’s not just your family’s medical emergencies; you may need to cover a deductible on your renter’s insurance in the case of a break-in, the cost of an unexpected car repair or even a terrifying trip to the vet when your dog eats something he shouldn’t.
  • Higher-interest loans. If you have a reasonable interest rate on your car loan but are drowning in credit card debt, focus on the debt that has the highest interest rate. Credit cards historically have interest rates in the high teens, so they make the most sense to pay off first. If you are free of credit card debt but have a mortgage or student loans, compare those interest rates to that of your car loan to figure out which makes the most sense to pay down with extra funds.
  • Lack of credit history. If you refuse to get a credit card and don’t yet have a house, a car loan is your best bet for building your credit score. Keeping your car loan open could positively affect your credit score.
  • Investments. For most drivers, car loan APRs are not terrible. If you have some extra funds and are thinking about paying off your low-interest car loan, consider instead investing in your retirement fund or even buying a few stocks on your own. The average stock market return is about 10%. Obviously, you could wind up losing money, but in general, if you invest and hold, over time, you should expect your money to grow.

Timothy Moore is a managing editor for WDW Magazine, and a freelance writer and editor covering topics on personal finance, travel, careers, education, pet care and automotive. He has worked in the field since 2012 with publications like The Penny Hoarder, Debt.com, Ladders, Glassdoor, Aol and The News Wheel. 

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Source: thepennyhoarder.com

[Update] Citi Virtual Account Number (VAN) Changes

Update 7/20/21: Some additional information regarding the VAN changes. Hat tip to reader Daniel P

Update: In the FAQ they indicate that there’ll be a new, improved system rolling out in early summer 2021. Hat tip to reader diggs

Original Post:

In recent times Citi has made a number of changes to creating a Virtual Account Number (VAN), Citi update the card generation page to no longer use flash and also removed and then readded the feature for American Airline cardholders. Currently at the moment it’s only possible to generate a VAN with an end date of 7/21 or 8/21. At first it seemed like this was just part of the service as it was some period in advance, but as we continue to approach this date it’s unclear if Citi plans to discontinued the service at the end of August or make significant changes to VANs. We’ve reached out to Citi for comment but are yet to hear back.

Hat tip to reader Matt I

Source: doctorofcredit.com