Taxes are notoriously complicated. Most might know that it has to do with money, keeping records, and filing them on time. But what else should we know? As part of our Special Finance Issue, Sampan interviewed Melody Tsang and Richard Soo Hoo to provide us with some reminders and a brief overview on the significance of filing taxes.
Melody Tsang is Asian American Civic Association’s (AACA) Multi-Services Coordinator and specializes in immigration and tax filings. “Everyone in America has to file tax returns no matter what,” said Tsang. “Even if you are a Green Card holder or a citizen, you don’t live in the United States, you may be subject to file tax returns too. But it all depends on how much you make in the past year.”
Filing taxes requires you to provide a Social Security Number (SSN). According to the Internal Revenue Service, those who are not eligible for an SSN, are required to apply for an Individual Taxpayer Identification Number (ITIN). “This is issued regardless of immigration status because both resident and non-resident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code,” stated the IRS on their website. It is important to note that “the ITINs do not serve any purpose other than federal tax reporting.”
If you do have an SSN, filing tax returns every year proves to be more beneficial than not. As a reminder, tax season takes place during January and April 15 every year. That time of the year has always been especially busy for Tsang. She said, “Before we start filing taxes, everyone wants to file tax returns on the first day because they get their money back.”
More importantly, for those in the lower income bracket, there are a lot of benefits. “If you have children, if you’re under 17, there’s child tax credit. If your kid goes to college, there’s tuition credit. Some people, after filing their tax returns, have more than $10,000 refunded to them,” said Tsang.
In addition to receiving money back, filing tax returns regularly not only ensures that you maintain good standing, but also can prove that you qualify for affordable health insurance, such as Health Connector. This is for those who may lack employer-subsidized health insurance. This is particularly important for those who might not qualify for MassHealth, which requires applicants to either be under 17 or have resided in Massachusetts for more than five years to qualify for MassHealth.
Though it might not cost much, there is a penalty for not filing taxes on time, and it goes on your record. Tsang said, “If you want to buy a house, or anything, they have to see your tax returns. To file for FAFSA, financial aid, you have to show them everything. This will all be on your records.”
If one has a bad credit report, it may also make it difficult to file for relatives. “They’re proposing that people who file for their relatives, they might submit the credit report of the person that is doing the filing,” said Tsang. “If you have bad credit, you did not file tax returns on time, then you might not be able to file the tax returns for your relatives. It depends on how bad your credit report is.”
This is all on a case by case basis. If you run your own business, for instance, and you receive rental income, you must report all the expenses it takes to upkeep the property. Tsang stresses how important it is to report everything and know what to report.
She said, “You have to show me the papers of how much your tenants pay you, how much you pay for your mortgage, how much you maintain your house. How many times you drive from your home to your property to look at it. So the mileage is a kind of deduction. And how much you pay for the cleaning, maintenance, chop the tree, clean the leaves, you have to tell me. Of course insurance, and also a lot of things.”
This year, due to the pandemic, there are slight differences in our personal finances, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed on March 27, 2020. This includes the $1200 stimulus check, leniency in IRA early withdrawals, and relieved burden on student loans, all without a tax penalty, according to Ken Berry’s post on AccountingWeb.com.
For those worried about not having received the $1200 stimulus check, it will be counted towards your tax credits for the year 2020.
“People were worried that if they did not receive it, they might not be eligible for it,” said Tsang. “But don’t worry about it. Next January, when you file your tax return, they will ask if you received the stimulus money. No worries, people don’t worry about this. If you tell them that you did not receive it, you can have it back. Because you always file the previous year’s tax returns.”
According to Tsang, if one has investments, rental income, or more property to manage, they need a professional, or a Certified Public Accountant to file their taxes. Richard Soo Hoo is a CPA and serves mostly Chinese companies and owners of the companies who want to do business in the U.S., primarily in Boston. The most common types of businesses they are involved in are real-estate investment and developments, start-ups, in particular biotech or software companies.
Soo Hoo said, “Most Americans find the U.S. tax system complicated, but I work in international taxes as well, so for these Chinese companies and individuals, it’s even more complex because of the extra layer of international tax.” For this reason, Soo Hoo would try to explain this system to his oftentimes successful clients in order for them to run their finances tax efficiently, and their taxes as manageable as possible.
For these clients who are also interested in working their way towards obtaining a permanent residence in the U.S. or perhaps becoming a citizen, there are investment visas that can be satisfied. By sending their children to a college or university in the U.S., once they graduate, Soo Hoo said, “there’s a subsidiary here in the U.S. for them to operate because they’ve been educated here in the U.S. In particular, it gives them more experience before they go back to China.”
In light of the new presidency, tax policies may change, but it is still to be determined. For the most part, Tsang does not think it will too heavily affect her lower-income clients within the U.S. On the international front, Soo Hoo is keeping track of the trade war between the U.S. and China, and how tariffs will affect the economic growth of both countries.
Regardless, taxes and filing taxes have a significant impact on immigration and legal status. There are resources available everywhere, from CPAs to free filing services at nonprofit organizations or from the city of Boston and affiliated organizations. While the process may be complicated for all filers, there are benefits to completing taxes on time, particularly for individuals with a lower income.
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3 credit habits that you need to break
Are you using your credit card responsibly? Or do you have a few bad habits? Take a look at three common bad habits that people have with their credit cards and the best ways to stop doing them.
Habit 1: Pushing the limits
The first bad credit habit is pushing your outstanding balance close to its limit. What’s wrong with that? The first problem is that you’re giving yourself a larger debt load to contend with every month — one that accumulates interest the longer that it sits. It could be very difficult to pay down, and it could even lead to you maxing out your card.
The second problem with this habit is that it leaves you vulnerable to emergencies. You’ve taken up the majority of your available credit, so you can’t depend on it for unexpected payments. What if you need to pay for an urgent repair and there’s not enough room on your card? What can you do?
To avoid that difficult situation, you could apply for an online loan to help you cover the emergency costs and move forward. See how you can apply for an online loan in Ohio when you have no other safety nets to fall back on. It’s important that you only turn to this solution when you’re dealing with an emergency. It’s not for everyday purchases or small budgeting mistakes.
In the meantime, you should try your best to keep your credit utilization at 30% or lower — this means that your balance should be below the halfway point of your limit.
Habit 2: Paying the minimum
You pay your credit card bills on time, but you only give the minimum payment. While this habit can stop you from racking up late fees and penalties, it can still get you into hot water if you’re not careful.
Only paying the minimum for your bill will make it very difficult for you to whittle down the balance, especially when you’re continuing to charge expenses on your card. You’re only taking $20-$25 off a growing pile.
So, what can you do? If you’re paying this amount by choice, stop it — you’re only making things harder for yourself down the line. If you’re paying this amount because you don’t have any more funds, look at your budget to see whether you can cut your monthly costs to get more savings and use them to tackle your balance.
Habit 3: Using it for every single expense
You don’t need to put every single expense on your credit card. Your morning coffee? Your afternoon snack? Putting these small, everyday expenses on your card is a habit that can make your balance climb quickly.
You also don’t want to put some very important expenses on there, like mortgage payments. For one, these payments are large and will take up a significant amount of your credit. Secondly, if you need to use a credit card to make these payments on time, you need to reinvestigate your budget to see whether you can actually afford your living space.
So, what you should you do? Use a debit card, cash or checks to pay for the items above. Only put expenses on your credit card that you’re positive you can pay off in a reasonable timeframe.
Don’t let these bad habits drag you down and get you into financial trouble. Break them now, before it’s too late.
Free credit reports have been extended; here’s why it’s important to check yours regularly
Typically, you’d be able to check your credit report — at least for free — just once annually through each of the three major credit reporting agencies. But thanks to the coronavirus pandemic, credit reports are now more accessible than ever.
Credit reporting companies Equifax, Experian and TransUnion are all offering free credit reports weekly through April 20, 2022.
The move means better insight into your financial health during what, for most, is an economically challenging time. According to experts, it might also be a time that’s ripe for at-risk personal information and identity theft, too — even more reason consumers should be checking their credit on the regular.
Have you checked your annual credit lately? If not, here’s what you need to know about these free nationwide credit reports and how to get them. If you’re not sure where you fit on the credit score spectrum, you may want to start using a credit monitoring service to track changes to your credit score. Credible can get you set up with a free service today.
Free credit reports for all?
The nation’s three credit bureaus initially started offering free weekly credit reporting last year, just after the pandemic began. In early March, they announced they’d extended the offer for another year, this time through April 20, 2022.
To request your free credit reports and access copies, you can go to AnnualCreditReport.com and provide some basic information to verify your identity (things like your date of birth, Social Security Number, and address).
Once your report is ready, you should see a detailed list of all open and closed accounts in your name, your payment history, recent credit activity and more.
Protect yourself from identity theft
There are many reasons why checking your credit activity is important, but chief among them? That’d be the prevalence of data breaches in today’s world — not to mention the risk of identity theft they come with.
“In the past, it was perfectly acceptable for people to check their credit history once a year, but now with security breaches happening on a regular basis, consumers should be monitoring their credit more closely than ever,” said Clint Lotz, president and founder of TrackStar.ai, a predictive credit technology firm.
Lotz said the Equifax breach — which exposed over 147 million Americans’ personal information in mid-July 2017 — is the perfect example of why watching your credit report is important as far as identity theft protection goes. The pandemic, he said, adds an extra layer of risk to things.
“It took them [Equifax] months before they even realized they had been hacked, and considering that they hold files on hundreds of millions of Americans, it’s fair to say that many identities were stolen by the time they caught up to it,” Lotz said. “With many of us worrying about very serious issues not related to our credit, it’s a prime time for that stolen data to be put to work by bad actors in slow, methodical ways and in the hopes that nobody notices it.”
More reasons to check your credit
Checking your credit health often isn’t just good for detecting fraud alerts and to protect your identity, though. You can also monitor your report for errors — things like inaccurately reported late payments, for example — and then dispute those with the credit bureau.
If the error gets corrected, it could improve your credit score and make a jump from bad credit to a FICO score that’s more favorable. Not sure of your credit score? Head to Credible to check your score without negatively impacting it.
You can also use your credit reports and scores to monitor your financial habits — like the timeliness of your payments or how much debt you have left to pay off. Both of these factors can play a big role in your score, as well as how likely you are to get approved for loans, credit cards and other items.
“If you’re taking out a loan, getting insurance or even applying for a new job, checking your credit will allow you to see an overview of what would be seen by others looking at your credit,” said Leslie Tayne, a debt relief attorney with the Tayne Law Group. “Staying up-to-date on your credit reports and information allows you to know exactly where you need to improve.”
Want to be sure your credit is stellar before applying for a loan or insurance policy? Consider Credible’s partner product Experian Boost, which lets you use positive payment history on utilities, streaming and other bills to improve your credit score.
Set up a monitoring service, too
Though checking your credit reports manually is smart, you should also consider signing up for a credit monitoring service. These consumer financial services check your credit information and score regularly and alert you of any changes.
If you’re interested in monitoring your credit or improving your score, head to Credible and learn more about how Experian can help. You can also use Experian Boost to get credit for on-time bill payments.
Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.
Do Personal Loans Have Penalty APRs?
Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.
The Blue Cash Preferred® Card from American Express, for instance, has a 13.99% to 23.99% variable APR, but the penalty APR is a variable 29.99% (see rates and fees). Penalty APRs usually last for at least six months, but card issuers often reserve the right to extend them — especially when you continue making late payments. A look at the terms for the Citi® Double Cash Card show us that the “penalty APR may apply indefinitely.”
Penalty APRs are certainly not a trap you want to fall into, but it’s not something you usually have to worry about if you have a personal loan. Personal loan lenders can, however, charge late fees upwards of $39 per late payment. Whether your loan charges late fees all depends on how good of a loan you qualify for, and that comes down to your credit score, borrowing history and ability to make your payments.
Personal loans also tend to charge lower interest rates than credit cards, too. The average personal loan interest rate for two-year loans is currently 9.46% according to Q1 2021 data from the Federal Reserve, compared to 15.91% for credit cards.
Typically, interest rates for personal loans range between roughly 2.49% and 24%, but personal loans for applicants with bad credit can come with even higher APR — so do your research before applying.
Other common personal loan fees include:
- Interest: The monthly charge you pay to borrow money
- Origination fee: A one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs
- Late fee: A one-time fee charged for each payment that you fail to make by the due date or within your grace period
- Early payoff penalty: A fee incurred when you pay off your balance faster than planned (because the lender misses out on months of expected interest payments)
As you can see, personal loans can be costly, even without a penalty APR. It’s obviously best to avoid paying extra fees whenever possible. That’s easier to do when you have a good to excellent credit score, since you’ll qualify for better loan options.
None of the loans on our best personal loan list charge origination fees or early payoff penalties, but some may charge late fees.
Find the best personal loans
For rates and fees of the Blue Cash Preferred® Card from American Express, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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