Tag: Taxes

 

3 Common Mistakes People Make When Filing Taxes and How to Correct Them

Spring is here, March Madness is in full swing, and it’s no longer pitch-black before dinner. All good stuff. But for me, March means crunch time – or rather, time to organize and file my taxes. I’d rather be doing just about anything else, including cleaning out my basement.

Indeed, filing taxes can be stressful. If you’re still procrastinating or worrying about making mistakes on your tax return, you’re not alone. To help you file your taxes correctly and put your mind at ease, we’ve pinpointed three common mistakes. Read on to learn how you can avoid making them.

 1. The Math Doesn’t Add Up

According to Forbes Magazine, math is one of the first things the IRS checks for on tax returns. In other words, your numbers should add up correctly. Sounds easy, right? Yet, entering figures onto forms can make your eyes glaze over and before you know it, you’ve transposed a number or two. Seemingly small mistakes can add up. Not only can a math error trigger a correction notice from the IRS, but it can potentially delay an expected refund. Mathematical errors might also result in a lower tax refund than you were counting on. Worse yet, you might even end up owing money to the IRS.

How to Avoid Making Math Mistakes

  • If your taxes are pretty simple – as in you’re an employee and receive a W-2 form, you don’t own a home and you don’t have a large stock portfolio – the simplest solution is to use tax software from companies like TurboTax, H&R Block, or TaxSlayer. The calculators on these platforms will add up your figures and help ensure that your math is accurate. Most tax software programs offer free versions as well as more immersive options that you’ll have to pay for. Yet, if you earned less than $64,000 in 2016, you can file your taxes using the IRS’ Free File software.
  • Hire an accountant. It’s hard to beat free or low-cost tax filing software. However, if you’re a married freelancer like me with piles of 1099 tax forms stating your self-employment earnings, a house, dependents, and investments of some nature, you may need a little more hand-holding. Years ago, I hired an accountant and have never looked back. Every March, I gather my information, fill out a tax organizer, and drop off a big thick folder to my CPA’s office. From there, I let him do the math.

2. You Forgot or Neglected to Report Income From All Sources

If you’re a freelancer or an employee who has a side hustle, like driving for Uber or Lyft, you probably received one or more 1099 forms this year. These forms state the amount of untaxed money you made. At the same time, if you earned interest income in a savings or investment account, you’ll receive a 1099 for that as well.

While it’s certainly easier to exclude your 1099 income on your tax return, this can throw up a red flag with the IRS – not to mention that neglecting to report all of your income can result in a penalty.

How to Avoid Inaccurate Reporting

  • Stay organized and as soon you receive 1099 forms, put them away in a folder. If you are missing a 1099, call the business and ask for one. Companies are required to send 1099 forms to all independent contractors who earned in excess of $600 during the tax year.
  • Prepare to do some extra legwork and fill out all necessary forms to report your additional earnings. It’s also important to understand that the IRS receives copies of all of your 1099s. This means the government knows how much you earned and your tax return should reflect this accurately. Another tip: Extra forms can seem overwhelming and tax software can help you stay on point.  
  • This may sound like a broken record, but if you need extra help, hire an accountant. For me, launching my freelance career was the tipping point that led me to hire a CPA.

3. You Didn’t Enter the Correct Banking Information

If you’re expecting a tax refund, the easiest way to get your cash fast is to have the funds directly deposited into your bank account. Yet, in order for the money to go into your account, you need to enter the correct bank account information and routing number on your return. Yup, more numbers. What happens if you fill out the wrong account number? Your refund may get sent back to the IRS or end up in someone else’s bank account. You’ll then have to spend your time trying to track down your money and this is no fun.

How to Avoid Problems with Your Direct Deposit Refund

  • Triple-check your account and routing number for accuracy and then e-file your return, designating on the tax form that you want to receive your refund via direct deposit. For example, to look up your spending account number at Chime, all you have to do is log onto the website or open the app on your phone and go to the “Move Money” tab. From there you can see your account number and routing information under “Deposit Funds.”
  • If you opt for direct deposit on your tax return, you can expect to receive your refund from the IRS within 21 days. This is the fastest way to receive your money, according to the IRS. If you haven’t received your money within this time frame, it’s time to check on your refund status through the IRS’ refund tracker tool. Some banks, like Chime, will send you an email and text alert as soon as you receive a deposit.

According to the IRS, 83% of tax filers received a refund in 2015, This means that you’re more likely to get a refund than owe money to Uncle Sam. Yet, it’s always a good idea to be prepared with money set aside to pay taxes – just in case. With this in mind, there’s no time like the present to take advantage of automating to boost your savings, To help you save without even thinking about it, Chime rounds up each of your transactions to the nearest dollar and stashes this into your savings account. With automated savings and a possible tax refund in your future, this will give you some newfound cash to sock away. A sweet reward for avoiding pitfalls this tax season.

 

The 5 Best Ways to Use Your Tax Refund to Grow Your Money

So you’ve netted a tax refund — congrats! For 2015 taxes, the average tax refund was $3,218, to be exact. That’s quite a wad of cash. But remember, a tax refund is really just your hard-earned income that’s been deferred for a short time. So, before you go on a mini spending spree, here is a list of the best ways to use your tax refund to give your money-growing goals a boost:

Kickstart a couple savings goals with the cash

We all need a place to start and having specific goals in mind helps provide both long-term vision and short-term motivation. Setting clearly defined savings goals enables you to see progress and take pride in accomplishments. It also helps you organize your time and resources so that you can spend more time enjoying life vs. stressing out about your financial situation. Set a savings goal and fund part of it with your tax refund. It will help you kick start the healthy habit of setting financial goals and achieving them. 

How to start:
Write down 10 savings goals that are most important to you. Divvy them up by short-term and long-term goals. Get specific as possible. For instance, short-term goals may take anywhere from a few months to a couple of years to achieve. They might include buying a new set of wheels, going on a backpacking trip to Europe, or maybe sprucing up your digs. Long-term goals might take several years to hit, such as saving for a down payment on your first home or raising a family.

Next, pick just one short-term goal and one long-term that you want to make serious headway on. This might be the thing that you’ve been putting off or would really help add value to your life. Keeping focus by choosing just one thing from each list, and use your tax refund to infuse some cash into these goals. Getting a solid start will give you the motivation mojo to keep saving.  It’s one of the best ways to use your tax refund. 

Open a new savings account

Now that you’ve figured out what your savings goals are, open an account to help you make steady progress. You can think of your savings account as a hub of sorts for your moola: to transfer to other savings accounts, or stash money it into another goal down the line. 

How to start:

Consider opening a free savings account with a bank that automates your savings and helps you keep up healthy financial habits. If you’re a Chime member, opening an Automatic Savings Account allows you to grow your savings by just simply using your card and you never having to worry about getting dinged by banks charging you fees. Every time you swipe your Chime card the purchase is rounded up to the nearest dollar and is safely stowed away in your Savings Account. Plus each Friday Chime gives you an extra 10% bonus. And who doesn’t love free money?

Stash away your refund in a tax-sheltered account

While it’s quite tempting to use your refund to splurge, one of best ways to use your tax refund and make that moola grow is to hold onto it for a while. Luckily, Uncle Sam encourages long-term growth through a few types of investment accounts. 

Through the magic of compound interest, funneling your refund into one of the following accounts can help multiply those savings. You’ll just need to follow a few simple rules. An added bonus is that stashing some of that money in one of these accounts lowers your tax bracket, and can help when tax time comes around next year.

How to start:

Check out Traditional IRAs and Roth IRAs

Two tax-sheltered accounts you may consider starting with your refund are a traditional IRA and a Roth IRA. Both offer very generous tax breaks, but differ as to when you benefit from those breaks. Traditional IRAs help you avoid taxes when you put the money in, while Roth IRAs help avoid taxes when you take it out.

Traditional IRA contributions are deductible on your tax return for the year that you make them. That means if you roll your refund into a Traditional IRA, you can deduct $5,500 from your return the next year. Note that anytime you withdraw those savings in the future, you will be taxed at the ordinary income tax rate — which is where the Roth IRA differs. 

Bear in mind that both types of IRAs don’t offer the immediate gratification of a tax break in the year you make a contribution. However, withdrawals of your contributions are generally tax-free at any time. For both types of IRAs, if you’re under 50, you can put away up to $5,500 for 2017, and up to $6,000 if you’re 50 and over.

Check if your health plan offers an HSA

If you’re on a health plan with a high deductible, another account you can put money into is a health savings account or HSA. Like a traditional IRA, an HSA is a pre-tax account, so is tax deductible. A major bonus with HSAs is that you can use it as means to invest in stocks. That’s right, it can be used as an investment vehicle. The maximum amount you can contribute in 2017 for HSAs is $3,400 for individuals and $6,750 for families.

Use your tax refund to boost your rainy day fund 

Nobody is immune to the uncertainty of life. While things may be fine in the here and now, in the near future you may suffer an injury, one of your tires may go flat on the highway, or hours at your job might get scaled back. A rainy day fund will help you get back on your feet when life throws a curveball your way.

How to start:

While the recommended amount is anywhere from 3–6 months of basic living expenses, only you know what you’re comfortable with. If you’re not sure how much you need, check your bank’s transactions for the last few months, or use an app such as Chime, Mint or Level Money. Consider stashing a little more into your emergency fund in case of the unexpected.

If you don’t have the time to analyze your spending, start with $400. You will be ahead of 47 percent of Americans and will be prepared to repair the dishwasher when it breaks, and cover out-of-pocket medical expenses if you injure yourself on the slopes.

Pay off debt

Debt can feel like a heavy weight, keeping you from living the life you really want to have. And you fully know that the sooner you pay it off, the quicker you can focus on other savings goals. Plus, avoiding those hefty compounding interest rates will save you money in the long run. So consider using some of your tax refund money toward paying off some of that dreaded debt!

How to start:

If you have different kinds of debt, to figure out which one to pay off first, look at the total amounts owed and terms such as the interest rate, payment period, and so forth. Two popular ways of paying off debt are the avalanche debt method, which is when you pay the debts with the highest interest rates first; and the snowball debt method, where you pay off the debts with the lowest amounts first. The pros of the avalanche are that it will save you money in the long run, while the snowball method is that you’ll net quicker wins, which could be a huge motivator.

If you’re going to splurge…

Buy something that adds value. You won’t be committing a money cardinal sin by spending some of that tax refund on a purchase. Just make sure it’s something that you’ll 1) actually use, and 2) adds value to your life. Maybe you’ve been eyeing that fancy blender to make your breakfast smoothies or go to a mega music festival like Coachella this year. Or you want to buy a digital camera to take awesome, professional pics.

To curb impulse buys, exercise your delayed gratification muscle. I keep a 30-day list on my phone and wait it out a month or so to see if I really want or need a certain item. I have a friend, Jen, who will physically walk into a store or three times before buying something.

While you most likely aren’t hurt for ideas on how to spend your tax refund, remember that the best way to use your tax refund is to put it toward goals that will grow your money and give you deeper pockets. You’ve already paid Uncle Sam, now it’s time to pay yourself.

 

Key Tax-Preparation Tips to Cut Stress

Although it comes around every spring, tax season tends to inflict the same headaches year after year. To reduce your stress — and maximize your refund check — it’ll help to stay organized and be aware of recent changes to the tax code.

For additional motivation to get on track, keep in mind that the average refund has been about $3,000 in recent years. Even if you don’t expect to get that much back, there are plenty of ways to put a refund to good use. But first, you’ll have to file your returns properly, taking advantage of any deductions you might qualify for. Here’s a look at where to get started.

Compiling the necessary information

For starters, you’ll need your W-2 form listing earnings and tax withholdings, which employers typically send out in January or early February. Be sure to have your Social Security number or taxpayer identification number available, as well as those numbers for any dependents you’ll claim. You’ll also need documentation of any income they may have had.

Affordable Care Act penalty

The Affordable Care Act ushered in one of the most significant tax law changes in recent years. It stipulates that if you didn’t have health insurance for more than three months in 2016 and didn’t qualify for an exemption, you may face a penalty.

For the tax year 2016, taxpayers who lack adequate insurance may be penalized at either 2.5% of a portion of their income or $695 per adult and $347.50 per child, to a maximum of $2,085 per family — whichever is higher. To avoid those fees in the future, it may be a good idea to get insured.

Tax deductions reduce taxable income

Deductions reduce the amount of your income that you have to pay taxes on. Sit down and figure out whether the standard deduction or itemized deductions will work best for you. The former is a set amount that reduces your taxable income depending on your filing status; the latter lets you list qualified expenses separately, such as mortgage interest and local property taxes. If your itemized deductions add up to more than your standard deduction amount, go with that.

So what kinds of expenses can you deduct? Contributions to eligible organizations and interest on education loans are among the more well-known deductions you can take. Others, such as medical and home office expenses, aren’t as widely used for various reasons. Make sure to look into which of your expenses you can use to reduce your taxable income, which will probably increase your refund. Bear in mind that income limits and expense thresholds may limit these deductions or eliminate them entirely.

If you qualify to contribute to a traditional individual retirement account, or IRA, you may be able to invest in your future and shield up to $5,500 of income from taxes — plus $1,000 more if you’re 50 or over — by putting it in an IRA. You have until the April filing deadline to make deductible contributions for the previous year. Withdrawals are subject to income tax, however.

The bottom line

Completing your tax returns won’t be much fun, but it’s the first step in claiming a refund. Once you’ve filed your returns, you should expect to get what you’re due within three weeks — or in less than half that time if you ask for the money to be directly deposited to a savings or checking account. Just remember to compile all the essential paperwork before getting started, keeping an eye out for tax credits and changes to the tax code.

© Copyright 2016 NerdWallet, Inc. All Rights Reserved

 

Simple Tax Tips to Get Your Finances in Order Before Year Ends

Do yourself a favor and before the year winds down, add one more item to your holiday checklist: tax prep. With all of the holiday craziness, it’s easy to forget that now is the critical time take care of year-end tax planning. I’ve learned the hard way how much you can forfeit in tax savings by failing to take a few simple steps before ringing in the new year.

Last year, when I made the transition from full-time employee to becoming a self-employed writer, I waited until the 11th hour to think about taxes. That’s right, in April I was scrambling to gather my receipts, tracking down 1099s that got lost in transit and almost had to file for an extension. No Bueno. Not to mention, I missed out on a few simple tax saving opportunities that had already expired on Dec 31.

So take it from me, don’t miss out on these year-end money moves that can help you lower your tax bill or net a sizable refund: 

Hustle to save for your side hustle 

To avoid being blindsided come tax season, remember to stash away a portion of your side hustle income earned as a cushion to pay for your impending tax bill. The recommended amount? Anywhere from 25–30 percent. And if you haven’t been doing that, take advantage of the holiday season hustle. Expect to see a spike in demand for certain side gigs: pet sitting, ride sharing or delivering packages, to name a few. Be sure to consider alternative ways to save money automatically to get out ahead next year.

As the year winds down, remember that dedicating a small amount of time to these simple tasks can help you get a serious jump start on 2017. Come April, your future self will thank you.

Give to charity 

Not only will donating to a charity score you serious do-gooder points, but you’ll also yield benefits come tax time. Look to donate to organizations that are in step with your values: are you an aspiring painter? Consider donating art supplies to a community arts center. Did you adopt your pet? Look up your local no-kill shelter. If you’re looking for guidance on which nonprofits to donate to, do a search on Charity Navigator and be sure to consider what makes a good charity.

Aside from monetary donations, some organizations also accept physical items, such as clothing, furniture, canned food, and even your car. Before stopping by with piles of stuff, check beforehand to see what donations a charity accepts and if it’s a non-profit that you can receive a tax deduction for your donation. And don’t forget to ask for a receipt for your donation; you’ll need a record when filing your taxes.

With charitable donations, you can generally deduct anywhere from 20% to 50% of your adjusted gross income (AGI). Just know that if you decide to take the standardized deduction, you won’t be able to deduct any charitable contributions.

Play the tax-deduction game 

If you’re self-employed and had a profitable year (congrats!), make tax-deductible purchases related to your business to help lower your taxes. For instance, invest in a new laptop, home office furniture, a professional membership, or an annual subscription to some essential cloud software. Even better, put on your learning cap and enroll in an online course — those can be tax-deductible, too. Plus, with end-of-year sales, you’ll be able to take advantage of some solid deals. Of course, make sure it’s a reasonable purchase that’s within your budget — hold off on buying that catamaran for now.

Get organized to itemize

If you’re going to itemize versus going with the standard deduction, you’ll need to gather the proper documents. These include receipts from donations you made to non-profits. You’ll also want to keep track of mileage, gather receipts for out-of-pocket expenses such as supplies and parking fees you paid for when volunteering your time. You can also itemize expenses related to job hunting, such as parking and transport to job interviews, printing your resume, and any employment agency fees. 

Other documents you’ll want to begin gathering include the 1098-E and 1098-T to receive a deduction on your student loan interest and tuition paid, home mortgage statements, and medical expenses if they cost more than 10% of your adjusted gross income.

Put off receiving your bonus 

Unless you could use it during this time of year, ask your employer if you can put off receiving your bonus until after the new year. This simple act of delayed gratification will lower your income for 2016. In turn, this will lower the total amount you’ll need to pony up in taxes. Anticipate owing money to Uncle Sam? If you can afford to, put away part of it for your taxes. While it may not be the most exciting thing to do, your finances will be better off down the line.

Contribute to your retirement

If your employer offers a 401(k) retirement plan, consider increasing your contribution before the new year. If you’re under 50, the maximum contribution limit in 2016 is $18,000 for the entire year. Money toward your 401(k) is tax-deferred, which means you’ll be taxed when you take money out, your contributions will bump down your taxable income. And if your employer provides a match, that’s all the more reason to contribute a little extra now. That’s free money you’d be leaving on the table. 

While you have until April 17, 2017, to make contributions to your IRA accounts for 2016 if you can swing it, put in a little extra at the end of the year. Contribution limits on IRAs for 2016 are $5,500, and $6,500 if you’re 50 and older. If you have a traditional IRA, where contributions are made from pre-tax income, you will be able to deduct contributions on your tax return.

Get your flexible spending account down to zero

If you put in money toward a flexible spending account (FSA) to use toward medical expenses or childcare, now is the time to spend whatever’s left. Otherwise, you’ll lose it. Get your eyes checked, get customized earplugs or a pair of prescription sunglasses. Hard-pressed to find ways to spend any remaining funds? Check out fsastore.com, a one-stop-shop stocked exclusively with FSA-eligible products.

 

Last-Minute Tax Filing Tips

This information is not intended to be tax advice. Consult a tax preparation professional for tax advice.

No one enjoys doing taxes. That’s why a lot of us procrastinate until the last… possible… second. We’d rather clean the toilet, binge watch Here Comes Honey Boo Boo, or pick food out of our teeth before succumbing to the painstaking chore of filing taxes.

Instead of staring at the clock as the minutes until tax day melts away, let’s dive into some simple and proactive ways you can meet this year’s deadline both efficiently and confidently.

Put paperwork together.

Begin collecting all the necessary documentation needed to complete the process of filing your returns, including a W-2 from your employer, bank statements, investment documents, or other sources of miscellaneous income.

Get free help from the IRS.

Itching to get the preparation underway, but don’t have the budget to pay a professional? You may qualify for free assistance. IRS-certified volunteers will provide basic income tax preparation with electronic filing available to certain individuals. If you don’t qualify, you can still leverage the IRS’s website for all of your tax-related questions.

Don’t rush.

The most common mistakes made on tax returns are the easiest to prevent because they typically occur through inattention or hurry. Tiny errors can significantly delay your refund, so even if you’re short on time, make sure to avoid these common oversights:

  • Math errors (don’t underestimate the power of a calculator or tax software)
  • Incorrectly typed or written social security numbers
  • Failure to date or sign your tax return

Don’t sweat the deadline if you don’t owe.

Don’t panic if you don’t owe or are expecting a refund this year because in these instances there are no penalties for filing after the April 18th deadline. The only drawback for not submitting your return on time is that you will be postponing your refund.  

E-file with direct deposit.

One of the best ways to ensure that you receive your refund is by electing to e-file with direct deposit, which according to the IRS is thebest and fastest way to get your refund. Filing with direct deposit is convenient and easy. Here’s a quick step-by-step guide to getting your tax refund direct deposited to your Chime Spending Account:

Step 1: Get your Spending Account and Routing Numbers

  • Open the Chime app on your smartphone or log in to your Chime Account on the web.
  • Visit the ‘Direct Deposit’ screen under ‘Move Money’ to view your Spending Account and routing numbers.
  • Copy these numbers and paste them directly into the tax software you’re utilizing to process your return.

Step 2: Include your Spending Account information when you file your return

If you’re using a tax software, select direct deposit as your refund method and include your Spending Account and routing numbers as the account to which you want your refund deposited. If you are having your taxes filed by a professional, let your tax preparer know that you want to receive your refund via direct deposit and provide them with your Spending Account and routing numbers. Be sure to triple check the information provided to avoid any errors which could delay your refund.

Step 3: Get notified when your refund arrives

When you e-file your return with direct deposit as the payment method, the IRS expects to issue 9 out of 10 refunds within 21 days, as opposed to 8 weeks for a check in the mail. We’ll let you know the moment your refund is deposited to your Spending Account by email and by push notification if you have downloaded the mobile banking app. If you think it’s taking too long to get your refund, you can always check on your refund status with the IRS’s nifty refund tracker.

You can dawdle, procrastinate, and lollygag as much as you want, but the tax man cometh whether you like it or not. So what are you waiting for? Knock out the nagging stress of doing your taxes so you can get out and enjoy spring, or maybe even consider some spring cleaning for your finances.  

 

8 Unbelievable Tax Deductions

Every year, the IRS comes a-knockin’, and every year many of us wait until the last possible minute to file our taxes. In the frantic hours before the annual filing deadline, don’t get so frazzled that you forget about some commonly overlooked tax deductions that could mean more money in your pocket. Here are eight deductions you don’t want to ignore.

1. Fostering a Pet.

If you foster little furry babies while they wait for placement in a permanent home, you have the liberty to deduct expenses for litter, pet food, paper towels, and potentially even your mileage to the vet. The only caveat is that the organization you’re working with has to be a 501(c)(3) charity.

2. Baggage Fees.

Airlines don’t seem to mind driving passengers insane with outrageous baggage fees. If you get burned, perhaps Uncle Sam will help alleviate the pain. If you’re self-employed and are required to travel for business, make sure to allocate those costs to your deductible travel expenses.

3. Weight Loss.

Has your doctor told you that your weight is threatening your health? That may not be good news, but here’s what is: The cost of weight-loss programs or aids you choose to use to combat a specific disease may be tax deductible–if your doctor writes a recommendation for use.

4. Uniforms.

Wearing a uniform to work may get monotonous, but great news, it can boost your tax return! The cost of the uniform itself, as well as the costs associated with maintaining it, are deductible.

To deduct the cost and upkeep of work clothes, they must be worn as a condition of employment, and cannot be considered for everyday wear. A button-down shirt and a tie probably won’t qualify. However, scrubs, police officer uniforms and hard hats likely will.

5. Smoking Cessation.

Stopping smoking can be difficult, but the government has made the financial burden associated with quitting less painful. The cost of cessation aids, such as patches and gum, can count as tax deductions.

6. Moving Expenses.

The costs associated with relocating for a job are deductible if you pass the distance (over 50 miles from your last residence) and time (39 weeks of full-time employment at your new employer) tests. What is not well known is that recent graduates who move for their first job can claim this deduction as well.

7. Hobby Expenses.

Hobby expenses fall under “other miscellaneous deductions”. You can only deduct as much as you generated in income from your hobby. For instance, if your fashion blog made you $300, but you spent over $1,000 to maintain it, you can only claim $300 in expenses. This will help regain some money if you have a small business that has gone three years without a profit, at which point the IRS recognizes your operation as a hobby.

8. Tax Preparation Fees.

You can write-off the cost of preparing your taxes. If you paid taxes with a credit or debit card, you can also deduct convenience fees. Keep in mind that this deduction only applies to fees paid in the year you’re deducting them. For instance, when you file taxes for 2015, you are only able to deduct fees paid in 2015 for your 2014 tax return.

Don’t leave money on the table this tax season. Take the time to look over these and other potential deductions. They could be the difference between a good refund and a great one!

And remember, E-file your taxes and open a Chime bank account to get your refund early.

 

4 Smart Ways To Spend Your Tax Refund

Let’s be honest. When our tax refund arrives, a lot of us are tempted to treat it like a magic windfall that enables us to spend freely on the latest attention-grabbing indulgence. Why not blow it all on a humble-brag-worthy zero gravity experience? You only live once, right?

We’re going to level with you. You do only live once. And while taking selfies or snaps in zero gravity might sound like an experience of a lifetime, you’ll also need to be managing your finances for the rest of your life, not just the next few weeks.

Small steps can add up to big opportunities over time when it comes to your finances.  And your tax refund has the potential to get you to those big opportunities even faster. Think of your refund as a bonus for your future self – one that can help set you on a healthy financial path that can lead to a lifetime of sound and satisfying experiences.

Here’s a list of four smart ways to use your tax refund to build a foundation for lasting satisfaction and not just short-term fun.

1. Pay down debt.

If you’re in the habit of just making the minimum monthly payments on your student loan or credit card balance, you’re giving away a lot of money in the form of interest. When you use a chunk of your tax refund to pay down some of the principal, your loan will cost you less in the long run.

2. Build up emergency savings.

Beefing up your savings account is another practical, decidedly non-glamorous, choice, and a great way to help yourself sleep better at night. For optimum peace of mind, you should aim to save at least six months of salary. Interested in starting a rainy day fund? With your Chime Spending Account, you have the ability to open a Savings Account and enroll in Automatic Savings. You’ll reach your goal faster with each purchase you make.

Here’s how it works:

Turn on Automatic Savings and each Chime card purchase is rounded up to the nearest dollar. Roundups are transferred from your Spending Account to your Savings Account. 

3. Automate your savings.

If you like the thrill of taking risks, your tax refund is a good resource to help you try out a new type of investment. Personalized investing has come of age in the digital marketplace with companies like Betterment that help you set and achieve your financial goals by investing your money in a globally diversified portfolio of exchange-traded funds at a fraction of the cost of traditional financial advisors.

4. Save for an amazing experience. 

If you’re still thinking about that $8,000 flight where you get to spend a few minutes spent floating in zero gravity, then start a savings account earmarked specifically for once-in-a-lifetime experiences. If it’s still at the top of your list in a few months and you have the money, then by all means, go for it!

So go ahead and make your future self, proud. E-file your taxes, open a Chime Spending account, and get your refund early. Then, use that chunk of cash from Uncle Sam to lay the foundation for a prosperous, fulfilling future.

 

10 Basic Tax Terms You Should Know

 This information is not intended to be tax advice. Consult a tax preparation professional for tax advice.

One of the most difficult things about doing your taxes is learning the lingo. All those tax forms can be harder to translate than DJ Khaled’s wild catch phrases. That’s why we’ve put together this list of ten key tax terms you should know.   

1. Withholding.

No, this isn’t about your significant other’s emotions. Withholding is the portion of your paycheck that your employer sends directly to the government each pay period as partial payment of your income tax. The withholding amount is determined by the number of allowances you claim on your W-4.

If you claim too many allowances, you may owe money at tax time, and if you significantly underpay your taxes during the year, you may get hit with a penalty when you file your tax return.

Read more about withholding via GoBankingRates: How to Correctly Fill Out Your W-4 for a Bigger Paycheck

2. Filing Status.

Whether you’re single and ready to mingle or joined in matrimony, your relationship status determines how you file and what, if any, tax breaks you’re entitled to such as the amount of your standard deduction.
The most common filing status options are “Single,” “Married Filing Jointly” and “Head of Household,” and the IRS offers a handy cheat sheet to help you determine the appropriate filing status for you. They also make it easy to choose the correct filing status when you use IRS e-file, which also happens to be one of the fastest ways to get your refund.

3. Gross Income.

From maggot farmers to chimney sweepers, there are plenty of disgusting jobs out there that we’ll never want to do. Fortunately, that has nothing to do with gross income.

Gross Income is your total income before accounting for deductions and taxes. Sources of gross income include salary, wages, tips, capital gains, interests, and dividends.

4. Capital Gains.

A capital gain is one type of earning that counts toward your gross income. You earn capital gains when the sale price of an asset is higher than the initial purchase price and as noted above, it’s considered a form of income. Say you purchased a vintage car for $3,000, spent $2,000 restoring it, and sold it for $6,000. You made a grand of profit, i.e. capital gains, on that sale – nice job! Before you go spending all that profit, be aware you’ll have to pay taxes on it. The same principle applies if you buy stock for $5,000 and sell it for $6,000.

5. Deductions.

Deductions are items or expenses subtracted from your income to reduce the amount of income that is subject to being taxed. Whether or not a tax-deductible expense ultimately reduces the income tax you owe depends on several factors. The biggest differentiator in tax deductions is whether a taxpayer decides to take the standard deduction or to itemize their deductions.

An itemized deduction requires taxpayers to keep track of each possible tax-reducing expense throughout the year and is usually limited to a certain percentage of one’s adjusted gross income.

If you’re someone who frequently spends significant amounts on medical care, donations, or other deductible expenses you may be better off itemizing. However, tax law may set certain thresholds in spending that must be exceeded before deductions can be made.

Taxpayers who choose not to itemize deductions on their tax return can take a standard deduction. The amount of the deduction is based on your filing status, age, and whether or not you’re claimed as a dependent on someone else’s tax return. 

6. Charitable Contribution.

A charitable contribution is a type of itemized deduction. When it comes to charitable giving, unfortunately acting as your best friend’s wingman isn’t going to save you any money at tax time.

Charitable contributions can earn you an itemized tax deduction when you donate to a qualifying non-profit organization, charity, or private foundation. These gifts are commonly made in the form of cash, but can also include real estate, clothing, appreciated securities or other assets.

To determine if the organization that you have contributed to qualifies for income tax deduction purposes, refer to the IRS’s Exempt Organizations Select Check tool.

7. Adjusted Gross Income.

Adjusted Gross Income or AGI, is all the personal income you receive over the course of the year, minus certain types of deductions noted above. These include such things as retirement plan contributions, some unreimbursed business expenses, moving costs, and alimony payments.

8. Exemption.

Tax exemptions are specific amounts that reduce how much of your taxable income is taxable. For Tax Year 2015, each tax exemption is worth $4,000.

Generally, you can claim one exemption for yourself and one for your spouse assuming you’re married. You can also claim one exemption for each dependent. Be aware, while you may think differently, your spouse is never considered your dependent.

9. Taxable Income.

Taxable income is calculated by taking your adjusted gross income and subtracting your total exemptions and itemized deductions. It determines your tax liability before tax credits.

10. Tax Credit.

Happiness is a tax credit!

A tax credit is a dollar-for-dollar reduction of the amount you owe. For example, you may be eligible for the Plug-in Drive Vehicle credit, between $2,500 & $7,500, if you purchased a car that draws energy from a battery with at least 4 kilowatt hours, was purchased in or after 2010, and began driving it in the year in which you’re claiming the credit.

These credits are designed to reward behaviors that the government deems important.

Knowing your basic tax terminology is the first step toward saving money on your taxes. When you know the terms and the rules, you’ll be able to avoid overpaying on your taxes while maximizing your refund. Be sure to choose direct deposit when you e-file for one of the fastest ways to get your refund.

 

How to Deposit Your Tax Refund Fast

The end of the year is just around the corner, which signals the beginning of everyone’s favorite part of the year: tax season, or as we like to think of it, refund season!

Tax season can be stressful, but did you know that nearly 80% of people who file a return will receive a tax refund check? Yes. You read that correctly. Uncle Sam has refunded an average of $3,120 over the past few years. If you’re eagerly awaiting that big payday like most Americans, you’ll want to receive your reimbursement ASAP. Below we’ve outlined the fastest way to deposit your tax refund check with Chime.  

Why wait for a tax refund check in the mail, when you can have it automatically deposited directly into your Chime Account?

One of the best ways to ensure that you receive your refund check quickly is by electing to e-file with direct deposit. According to the IRS, it’s “the fastest way to get your tax refund check.” Filing with direct deposit is convenient and easy. Here’s a quick step-by-step guide to getting your tax refund direct deposited to your Chime Spending Account:

Step 1: Get your Spending Account and Routing Numbers. 

First things first. Get your bank account information:

  • Open the Chime app on your phone or log in to your Chime Account on the web.
  • Visit the ‘Direct Deposit’ section under ‘Move Money’ to view your Spending Account and routing numbers.
  • If you need a copy of your account information, you can also email, print, or download your direct deposit form. The form which has your account information needed for direct depositing your refund.

Step 2: Include your Spending Account information when you file your return.

If you’re using a tax software, like TurboTax or Quickbooks, you’ll be presented with options as to how you would like to receive your tax refund check: direct deposit or check by mail. Select direct deposit and make sure to include your Spending Account and routing numbers. If you are having your taxes filed by a professional, let your tax preparer or accountant know that you want to receive your tax refund check via direct deposit and provide them with your account information.

Be sure to double, triple, and quadruple check the information provided to avoid any errors which could delay your refund.

Step 3: Get notified the instant your refund arrives.

When you e-file your return and select direct deposit as your payment option, expect to receive your refund within 21 days. The IRS issues 9 out of 10 direct deposit refunds within 21 days, as opposed to waiting 8 weeks for a check via snail mail. The moment your refund is deposited into your Spending Account, we’ll send you an email and an alert to your phone. If you think it’s taking too long to get your refund, you can always check on your refund status with the IRS’s nifty refund tracker.

The deadline for filing your 2016 return is April 18 (due to Emancipation Day) but the sooner you file, the sooner you’ll get your refund. Following these tips will ensure you follow the IRS’s recommendation on the fastest way to deposit your tax refund check and be the envy of all your friends. 

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