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It is all well and good to start a plan for a solid financial future. We have all heard the sound advice. Buy shares, buy properties, land, precious metals, businesses, so long as you buy something worthwhile, your future financial stability is assured. But is it?

There are three factors that can significantly threaten your net worth, and wealth. These are easily identified by the acronym PIT:

1. Procrastination

2. Inflation and

3. Taxes

The first phase of any financial plan is accumulation. But how many of us put this off until the last minute? Procrastination is an interesting psychological behaviour that we all employ to varying degrees. We often know what we should be doing even though we may not have done it yet. Being aware of procrastination can become the beginning of doing something about it.

Truth be told, until you save, you cannot accumulate. The earlier you start planning, the sooner you will save, and the faster your assets will grow. Remember, it is not about getting it right, it is more about getting going.

When most successful people were asked what they would have done differently, their unanimous answer was, ?I wish I?d started sooner.? Do not be afraid of making ?mistakes?. Think of them as part of learning.

Find yourself a good wealth coach and start taking small steps. Save to invest a minimum of a tenth of your income, regardless. You do not need hundreds, or even thousands to start investing. I know many investments that you can start with as little as ?50 per month. Learn as you go and build your understanding and confidence gradually.

The next biggest threat to your financial future is inflation. Inflation is the fall in the market value of your money and is closely linked to the cost of living. Ten years from now, you will still have to purchase goods and services that will cost much more than they do today. Invariably, your pension plan (if you are lucky enough to have one then) that seems like so much today will most likely be a pittance then. You only have to look at how much our parents bought their homes for to realise what impact inflation can have.

The last, but by no means least threat to your financial future is the taxman. Learn to manage your relationship with him for he plans on becoming your financial partner for many years. What inflation does not wipe out, the taxman patiently will. In trying to avoid the taxman, be careful not to evade him. There is a marked difference between tax avoidance and tax evasion.

There are legal strategies and vehicles to avoid paying excessive taxes on your investments. A good tax advisor or accountant can help you with your plan.

In the UK, the greatest tax avoidance vehicle is the Individual Savings Account (ISA). With an ISA, you can save and/or invest up to ?7,000 each tax year, and not pay any tax whatsoever on the income Read more…

The IRS has set its eyes on a new source of revenue — online business.

The agency is discussing creating new tax reporting requirements that will help crack down on under-reporting by individuals and businesses that sell goods online.

No details have been announced as of yet, but new reporting requirements could change the Web for stand-alone retailers as well as individuals who sell items through online auction sites, such as Ebay.

Sales continue to see rapid growth in e-commerce. Retailers generated $87 billion in online sales in 2005, according to the Commerce Department. The IRS has long thrown around the idea of looking towards the Web as a source of revenue to narrow the tax gap.

Currently, if you sell an item online and make more money than the purchased value, you have to report that money as income on your tax return. If the original purchase value cannot be determined, it is often valued at $0 under the current law.

Many individuals are not aware that they must report their earnings, said Tom Read more…

The terror of most Americans is to be hunted by the IRS for overdue taxes. Well, the terror has evolved a bit as the IRS is now using private debt collectors to do much of the work.

IRS and Private Debt Collectors

If you get behind on your taxes, you undoubtedly worry about the IRS hunting you down. Many people develop a false sense of security because nothing much seems to happen at first. There is no denying the IRS is a huge bureaucratic institution. It takes the agency a while to figure out you haven?t paid and get the collection ball rolling. At least, this used to be the case.

Regardless of your political affiliation, there is no denying that all politicians like to spend money. Of course, this means they need money. In 2004, our beloved leaders decided to speed up the collection process on delinquent taxpayers. In passing the American Jobs Act of 2004, the politicians gave the IRS the ability to hire third parties to collect the back taxes. Apparently, ?American Jobs Act? referred to keeping debt collectors employed!

As you might imagine, debt collectors used by the IRS failed to follow most of the rules when attempting to collect back taxes from delinquent payers. To be honest, they ran roughshod over nearly every right guaranteed to taxpayers often threatening liens, judgments and even jail terms. Objections started being raised and politicians started getting an earful. Despite passing the law, the politicians immediately blamed the IRS and instructed the agency to Read more…

In 2004, the IRS was given the authority to use third party debt collectors to hunt down taxes owed by delinquent taxpayers. Scam artists knew an opportunity when they saw one.

Dealing with Scam Artist Pretending To Be IRS Debt Collectors

In an effort to track down delinquent taxpayers, the federal government gave the IRS the right to hire private debt collectors in 2004. You know, those annoying people that call during dinner. The reason for this change in policy actually made some sense. With as much information as the IRS is forced to deal with, it simply took forever for the IRS to start collection actions. By using the third parties, the IRS would be able to get the process moving without taking up employee time.

As you might imagine, the private tax debt collector program sounded like a good idea, but proved to be problematic. There were two primary problems. First, the legitimate debt collectors were threatening taxpayers. Second, scam artists started posing as debt collectors to collect money from na?ve tax collectors or perform identify theft on them. It is this second problem that we focus on here.

The central problem with the new debt collector program is how does a taxpayer know if they are dealing with a legitimate company or a scam artist trying to rip them off? Well, the IRS has instituted a new program in an effort to clarify matters. Here are the highlights:

1. If the IRS is going to use a private debt collector to come after you, the agency will first send Read more…

The word ?taxes? has a negative affect on people. It makes us look away, it upsets us and we make lots of grunting noises. But that?s looking at the previous year and preparing for the tax season. What about planning for 2006? Can we actually plan ahead for taxes?

Yes, it is possible. It?s important to begin our discussion on taxes by knowing what tax changes are taking affect. So I?d thought I?d get you started in the right direction. Here are some of the tax benefits coming your way in 2006 for your 2007 filings.

?Standard Deduction will increase to $10,300 for married couples filing jointly, $5,150 for singles and $7,550 for heads of household.

?Save more money with retirement contributions into your 401(k) or 403(b). Limits have been increased to $15,000. If you are at least age 50 before the end of 2006, you can now contribute an additional $5,000. Every little bit helps.

?Estate and Gift Tax are certainly getting a gift. The exception amount increases to $2M and the maximum marginal tax rates dropped 1% to 46%.

?Hybrid cars are the new ?in? thing and you?ll get rewarded for it too. But buy it fast to get your $2,400 tax credit. It?s only good for the first 60,000 vehicles per manufacturer.

?Income Limits Increase for Deductible IRA?s. Although regular IRA and Roth contributions limit of $4,000 haven?t changed, people age 50 or older can put in another $1,000 for a total of $5,000 for the year.

?Child Tax Credit will remain at $1,000 per each qualifying child. Better something than nothing.
?You can put a little bigger bow on the Gift Tax Annual Exclusion package. You can now give an Read more…

If you use a part of your home for business, you may qualify to deduct costs related to your home office, including rent, heat, electric, telephone, insurance, utilities, maintenance, repairs and so-on.

There are many tax-saving benefits available to those who operate their own small business in addition to their normal job or employment. First, you have the home-office deduction which can be used to deduct up to 20% of the cost of running your home. The amount depends on how much space you are using for your home office.

Secondly, you will become eligible to deduct a portion of many of the things you’re already paying for such as your computer, your ink cartridges, your printer paper, and any computer related books or business-related classes you may be taking. If you’re using your computer as part of your home-based business, then a portion of that is considered a business-related expense.

Most expenses related to running a business are tax deductible

Having said that, let’s take a look at just a few of the more common home business tax deductions. You will be able to Read more…

As we may know, keeping a diversified portfolio can be beneficial to the overall health of our financial stability and growth. Taking a closer look at each investment, they fall into two categories of taxes: capital gains tax and ordinary tax. Many people have both types of taxes within their portfolio but are not sure which tax applies to the investments.

Which Tax is Which: Capital Gains and Ordinary

Capital gains tax is applied on profits realized from the sale of capital assets such as a home, certain investments and dividends and business interests. The best way to determine how an investment is taxes is to simply ask, ?What occurred with the investment this year?? If the investment generated income such as interest, the income will probably be considered ordinary. But if you sold the investment for a profit then it will be determined a capital gain.

Capital gain is generated when the sale price for a capital asset exceeds your adjusted tax basis in that asset. Generally, your adjusted tax basis in an asset equals the price you paid for the asset with some adjustments. However, different basis rules may apply to assets acquired through gift or inheritance.

Retaining Income Through Capital Gain

Capital gain income is generally preferable to ordinary income. Currently, the highest marginal income tax rate is 35 percent, while long-term capital gains tax rates vary from 5 percent to 28 percent, depending on the asset and your marginal tax rate.

Here?s how capital gain is taxed. Taxation of capital gains depends on how long you owned or held your investments before selling. Assets that are held for less than one year generate short-term gains and are taxed at the ordinary income tax rates. If you hold the asset for more than one year, it is considered a long-term capital gain. The applicable long-term capital gains tax rate is determined by the type of asset and your marginal tax bracket. For taxpayers in tax brackets higher than 15 percent, the rate is generally 15 percent. For taxpayers in the 15 percent and 10 percent brackets, the rate is 5 percent. This applies to sales and exchanges made after May 5, 2003 and before January 1, 2009.

Too Much Income

If selling an asset that you?ve held on to for more than a year puts you into the higher tax bracket, you may not be taxed at 5 percent. You can use a preferred capital gains tax rate of 5 percent on a portion of the capital gain only. The remainder of your capital gain will be taxed at the higher 15 percent rate.

Net it Out with the Netting Rules

In order to properly compute your Read more…

The Tax Software Revolution

The most common service that accountants and CPAs provide to the public at large is tax preparation. That tradition has had a large hole blown in it by the arrival of software packages that allow individuals to prepare their own tax returns with an on-screen guide walking them through the process. The states and the federal government have cooperated by making online filing available and, furthermore, an attractive option because it will get you your tax refund quicker than a traditional paper filing.

Millions of Americans have opted for this method, and for many of them it’s a good choice. Large numbers of them did not use accounting services in the first place, as they had simple tax returns. However there is also a large class of people who are utilizing the yearly software option when perhaps they would do better with professional service. A good accountant can find tax breaks or prepare itemized lists that help your tax situation where you may not see the opportunity or may not be willing to dedicate the time to itemizing.

Why Professionals are Better than Software

The individuals that are caught between the “simple return” pool and the group of people who have to use professional help every year because of complicated personal financial situations are the group that accountants and CPAs need to recapture. The best way to convince someone that paying for professional services will save them money in the long run is to spell it out for them, and the best tool for that is the internet.

Large firms like H

If you ask a volunteer to help you prepare your tax return, you are risking errors in your return.

According to the Treasury Inspector General for Tax Administration, volunteers run a 6 in 10 chance of errors, only a slight improvement over last year.

The Inspector General asked volunteers to prepare tax returns for two hypothetical taxpayers. Only 39% of this year’s returns were prepared correctly. Last year, 34% were correct.

The IRS has been encouraging taxpayers to seek tax filing assistance at volunteer centers, instead of from the IRS. The centers have been developed to assist low- to moderate-income, elderly and disabled filers. They also assist taxpayers with limited English. The IRS provides training and support to volunteer centers that are run by community based organizations.

The first scenario that the volunteers faced was a divorced taxpayer with a 10-year old child. The taxpayer worked as a store clerk and received child support. The second scenario was a single taxpayer who lived with her sister and only had her three children during the summer months.

In most cases, the errors were Read more…

This is one of the most frequently asked questions of those considering the Private Annuity Trust. As with almost all things financial, there is no one single right answer.

For instance, if you attend a seminar presentation sponsored by persons wearing thousand dollar suits, you may hear that your funds should be in stocks, bonds, mutual funds, etc. where they project double digit annual increases by taking advantage of their financial prowess.

This often sounds tempting, as of course, you want your funds to grow by leaps and bounds. These advisors also want to have your money to actively manage, as they earn their living from management fees and commissions.

If you are young enough, and have some funds you want to allocate to more volatile investments with the possibility of large returns, this strategy can sometimes do well for you over time.

It is the opinion of this author that the Private Annuity Trust is not the correct vehicle for investments that can lose principle. It is the trustee who has the fiduciary responsibility to invest the funds so that the trust can provide the required payments to the annuitant for the entire amount of time the trust has been established for. This is their only obligation and it should be taken seriously.

What many do not realize, is that the payments the annuitant receives are based on the Federal Mid-Term Rate in force in the month the trust is established. They are fixed once they begin, and remain so throughout the life of the trust.

So, even if the trust made 20% every year, the payments to the annuitant do not change. The extra monies remain in the trust to either continue payments past the normal end of the trust (such as if you outlive your IRS life expectancy), or pass to your heirs upon your death.

If your trust loses large sums of money while invested in volatile investments, it is very possible that the trust will run out of funds before completing its obligated series of payments. This means money you are Read more…