Your Financial Bodyguard

Eight Things to Know about Medical and Dental Expenses and Your Taxes

If you, your spouse or dependents had significant medical or dental costs in 2011, you may be able to deduct those expenses when you file your tax return. Here are eight things the IRS wants you to know about medical and dental expenses and other benefits.

1. You must itemize You deduct qualifying medical and dental expenses if you itemize on Form 1040, Schedule A.

2. Deduction is limited You can deduct total medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You figure this on Form 1040, Schedule A.

3. Expenses must have been paid in 2011 You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. You’ll need to have good receipts or records to substantiate your expenses.

4. You can’t deduct reimbursed expenses Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. Whose expenses qualify You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.

6. Types of expenses that qualify You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.

7. Transportation costs may qualify You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.

8. Tax-favored saving for medical expenses Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

Posted at 07:29 AM | Permalink | Comments (0) | TrackBack (0)

College Student Aid Dwindling?

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Interesting article written by Annamaria Andriotis on wsj.com about the situation in college funding and I thought I should share.

College financial aid season has just kicked off, and experts say students seeking state grants had better act fast.

At least six states, including Illinois, Kentucky and Tennessee, now have "until funds depleted" policies on grants, meaning late filers risk getting nothing. Other states are shrinking the application window. Oklahoma, for example, moved its grant application deadline to March 1 this year, two weeks earlier than last year. Oregon's Feb. 1 deadline is the earliest of any state for the second year in a row. "It's essentially a technique for reducing the number of students who qualify because not everyone will [apply] on time," says Mark Kantrowitz, publisher of FinAid.org and FastWeb.com.

States defend their actions. Thanks to growing budget deficits and rising demand for financial aid, they say they're running out of grant money earlier and earlier each year. In Illinois, for example, the primary grant program was depleted in early April last year, compared to late April in 2010, mid-May in 2009 and late July in 2008, says Katharine Gricevich, director of government relations for the Illinois Student Assistance Commission. In Oregon, applications for aid are already 32% higher than they were a year ago, says Josette Green, executive director at the Oregon Student Access Commission.

The moves come as many families are in greater need of financial help. Many cash-strapped states have cut student aid, while colleges have been raising tuition. The average annual cost of tuition and fees at a four-year private university in 2011-12 is $28,500 -- a 15% increase from five years ago, according to the College Board. The cost at a four-year public college has risen 28% to $8,244. At the same time, many families are still struggling to rebuild battered college funds.

For some, acting quickly still won't be enough. Last year, New Hampshire announced it was ending its grant support to college students because of state budget woes -- making 2012-2013 the first year that residents can't apply for state aid. (Last year, students were told they would receive state grants but the money never came through, says Tom Horgan, president of the New Hampshire College & University Council.) The cut also impacts Maine residents, who previously could use their state's grant when attending a New Hampshire college, but Maine ended that practice after New Hampshire terminated its grant program. (Maine still offers its state grant for students attending college in its state and in five other states on the East Coast, including Connecticut, Massachusetts and Pennsylvania, as well as Washington, D.C.)

To increase their chance of receiving aid this year, parents should file the Free Application for Federal Student Aid or FAFSA as soon as possible, says Rod Bugarin, a financial aid consultant and former financial aid officer at Brown and Columbia universities. Even parents in states with spring deadlines might want to consider filing soon since more states may run out of aid early, he says. Filing early also helps maximize the free aid students will get directly from colleges, advisers say.

Of course, submitting the required paperwork in the next few weeks may be a challenge, especially for families who have not yet filed their taxes. Rather than waiting, parents should consider filing the FAFSA with estimates based on 2011 paystubs, bank account and brokerage statements and their 2010 tax return, says Kantrowitz. If any changes need to be made on the FAFSA after tax season, students can go online to update it or they can inform the financial aid office at the school they ultimately decide to attend and the school will notify the state.

Experts recommend parents keep in mind that revisions could impact the grant money students receive when school begins. For example, a state may lower the amount of aid given to a specific family if the tax return shows higher income than reported on the original FAFSA. Still, that's better than delaying your application, say experts, and missing out entirely.

Posted at 06:58 AM | Permalink | Comments (0) | TrackBack (0)

Insight on Variable Annuities

I saw a very good post on variable annuities and I thought I would share. If you are interested in this type of investment make sure to do your homework. Here is a quick link to get started:

http://www.smartmoney.com/retirement/planning/how-variable-annuity-income-falls-short-1326323765829/?link=SM_hp_retirement

Posted at 07:18 AM | Permalink | Comments (0) | TrackBack (0)

Underwater Mortgage Help

Great overview of the new "Home Affordable Refinance Program or HARP" by Annamarie Andriotis about the new program. Take a good read and let me know if you have any questions.

Homeowners can start applying for the government's revamped refinancing program on Thursday. But much like the first time around, experts say many borrowers will see it as too little too late.

The program is intended to help borrowers who owe significantly more on their home than what it's currently worth. It expands on the original Home Affordable Refinance Program, or HARP, which was created to help borrowers who owe up to 105% of their home's market value to refinance their mortgage, and was later expanded to those who owed up to 125%. This newest incarnation, dubbed HARP 2.0, removes the 125% cap, allowing borrowers who are deeply underwater to get a new mortgage at a lower interest rate and with more affordable monthly payments. To qualify, borrowers must have either a Freddie Mac or Fannie Mae-backed mortgage.

While experts say the new HARP will help more borrowers -- roughly 11 million homeowners are underwater, according to data and analytics firm CoreLogic -- they point out its limitations.

For starters, the whole process could take months. Lenders who underwrite mortgages manually can start processing refinancing applications this month, say spokespeople from Fannie Mae and Freddie Mac. But those who depend on an automated software system to underwrite mortgages must wait until updates are made, says Brad German, a Freddie Mac Spokesman. (Many lenders rely on the automated system.) Those lenders won't be able to start processing applications and delivering loans until at least early February for Freddie Mac-backed mortgages and until March for Fannie Mae-backed mortgages.

That's not the worst of it, say experts: Some borrowers might not be able to qualify at all. The program requires that borrowers have missed no more than one payment during the past year and none during the past six months, says Keith Gumbinger, vice president at HSH Associates, a mortgage-data firm. If they don't meet this criteria, they'll have to wait until they do in order to qualify. Also, borrowers who've already refinanced through HARP are ineligible. "It's a nice little step, but [it's] not really going to get the housing market restarted," says Ira Rheingold, executive director of the National Association of Consumer Advocates, whose members include attorneys that represent distressed homeowners.

What's more, the program is entirely voluntary. Lenders are not required to refinance mortgages for underwater homeowners. (The government doesn't provide incentives for lenders to participate in HARP.) Many homeowners who qualified for the existing HARP program were turned down because lenders were unwilling to take on that risk, says Gumbinger. Lender resistance may also derail some borrowers' attempts to refinance under HARP 2.0. It's up to each lender to determine whether they'll participate in the program. (Freddie Mac lists participating lenders on its web site.)

That said, experts say some aspects of refinancing will get easier. For example, borrowers who apply to the same lender to whom they make their monthly payments won't have their credit scores checked, they point out, and won't be required to provide documentation proving their income. The lender will simply call the borrower's employer to confirm job status. That could come as relief for borrowers who've recently experienced a pay cut or a ding to their credit score.

Is it worth it? Gumbinger points out that qualifying homeowners stand to save thousands of dollars over the life of the loan by refinancing to a lower rate. However, the program does not reduce mortgage principal, so even after successfully refinancing, borrowers will still remain underwater, he says.

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Get those New Years Financial Resolutions Going

Great blog post by Lynnette Khalfani-Cox from MyMoneyCircles.com. Check it out and subscribe, it is FREE!

Thirty days.

That's roughly the amount of time the average American sticks to his or her New Year's resolution.

If we're honest about our financial New Year's resolutions – like saving money, organizing our finances better or laying off the credit cards – many of us will admit that we might not even make 30 days.

But what if there was a way to jump-start your finances in 2012 so that even if your willpower waned after a month or so, you'd still be enormously ahead of the game?

Actually, there are several steps you can take to greatly improve your chances of achieving your financial goals in the coming year.

Here are three powerful ways to turbocharge your finances in 2012. These strategies can also help you make the most out of just 30 days in the new year.

1. Give yourself a one-month challenge

Behavioral experts say it takes about three or four weeks for you to do something repeatedly and have that action turn into a habit that lasts. So give yourself a one-month challenge to do, or stop doing, something in order to improve your finances.

If you want to start a good habit, try logging your expenses daily to better track your spending. Alternatively, you could carpool to work or even just put every dollar you get into a savings jar each day. Remember, you only have to do it for one month.

At the end of 30 days, you can always stop or tweak what you're doing. But you will likely be so satisfied with the benefits of your newfound habit that you will decide to stick with it for the long haul.

To eliminate a bad habit, like overspending, consider not visiting your favorite retail store for 30 days, not carrying your credit cards with you each day to avoid impulse shopping or not eating out at all for one month.

2. Join a financial boot camp

For the ultimate month-long challenge, and to achieve financial fitness, join a financial boot camp.

One great option is MyMoneyCircles.com, a free, four-week boot camp that guides you to financial health one step at a time. As a Money Coach, I'm proud to lead this online boot camp, along with a team of other personal finance experts.

In just one month, we help you address some of your most pressing financial questions and concerns and deal with your most stubborn financial challenges. For example, you'll learn how to save money quickly on your immediate and long-term bills, including insurance, communications, housing and more.

You'll get the skinny on how to manage credit and debt wisely. You'll figure out what you need to do to adequately protect you, your family and your assets against unforeseen circumstances like a layoff or illness. And you'll get a game plan to save more money for retirement and other future-oriented financial goals.

The boot camp includes community groups that let you to connect (anonymously) with other like-minded people who share your same financial goals. And while MyMoneyCircles is designed to keep you accountable and on track financially, a range of resources, quizzes and tools also make the process doable and fun.

3. Get started now

Why wait until January 1, April 15, or some other arbitrary date in the future to begin fixing your finances? Start taking charge of your money matters today just by adopting this motto: "Think-Do."

Simply put, it means when you think of something you know you should do, or need to do, go ahead and tackle that task immediately. Think-Do.

For instance, if you've been too scared to check your credit report, you can order it online today fromAnnualCreditReport.com. Done.

If you've neglected to buy much-needed life insurance, you can get life insurance quotes today fromInsure.com. Done.

Or if you've put off organizing your tax records, you can start gathering your receipts and financial paperworktoday. Done.

Exactly what you do isn't as important as doing something – and doing so today. If you put the "Think-Do" strategy into practice for 30 days, you'll be amazed at how much gets accomplished.

By taking just one small but powerful action step, you push past the inertia and inaction that cripples many people financially. Instead of procrastinating important financial goals month after month, you'll be addressing many of those issues in just 30 days flat.

So instead of making and breaking financial New Year's resolutions, this time simply put these three ideas into practice for one month – and watch your finances reach another level of success in 2012 and beyond.

Posted at 02:24 PM | Permalink | Comments (0) | TrackBack (0)

Tax Tips for 2011 Returns

IRS Offers Top 10 Tax-Time Tips

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process.

1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more.

4. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It's available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options.

5. Try IRS e-file IRS e-file is the　safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days.

6. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs.

7. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail.

8. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.

9. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return.

10. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.

Posted at 08:53 AM | Permalink | Comments (0) | TrackBack (0)