Know any “lucky” people? You might want to pass this article along to them so they don’t wind up in hot water with the IRS. With revenues declining for local, state, and federal governments, you can be sure the Tax Man will be on the lookout for his cut of your winnings, even if those winnings aren’t in cash. And you don’t want to end up on this list of people with tax troubles.

Being lucky may not be all it’s cracked up to be. Most people realize that winning a huge jackpot automatically means a large chunk of change goes to Uncle Sam, but gambling winnings can show up in the strangest of places. Like where?

That iPad you won is taxable

Various sites around the Internet giving away prizes ranging from iPads/Pods/Phones to costume jewelry, and winners are required by law to report those prize winnings on form 1040.

All income (including non-cash prizes) from gambling of any sort has to be reported on form 1040. Form 1040A or 1040EZ users are not allowed to use these forms to report gambling winnings. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G 1099-MISC or any other reporting form from the casino, track, bookie, company or … website.

Income includes, but is not limited to, winnings from lotteries, raffles, and random drawings. It includes cash winnings and also the fair market value of those prizes. It doesn’t include qualified educational scholarships, non-cash employee achievement prizes and designated prizes transferred to charities (check with your tax advisor or the IRS).

Prize winnings are fully taxable and must be reported on your tax return.

1. Income includes – but is not limited to – winnings from drawings, raffles, and lotteries, as well as the fair market value of prizes you may have won.
2. Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G or a 1099-MISC and may have withheld federal income taxes from the payment.
3. The full amount of your prize winnings for the year must be reported.

Don’t let the taxable nature of any prize stop you from entering a drawing or contest.  After taxes are deducted from the winnings, the winner is still ahead of anyone who didn’t enter! But don’t forget your legal obligation either. You and I are legally bound to report any and all prize winnings on our tax return. Failure to do so could come back to bite you and cost a lot more than just an iPad.

For further information, see Tax Topic 419, Gambling Income and Expenses on the IRS website.

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Note: This is a guest post from Taxdebthelp.com.  If you would like to guest post here at The Wisdom Journal, please use my guest post submission form.

Take a good look at your most recent pay stub and note the box that identifies how much in taxes the government skimmed off the top of your pay. Those funds are supposed to be used for better roads, cleaner water, and of course to pay the salaries of the elected officials.

In the spring, when taxes are due, refunds are met with joyful dancing and unexpected windfall spending. Wouldn’t it be better to get more greenbacks each pay period rather than lump sum windfall at the end of tax season?

When you overpay your taxes each pay period, your money is used for ‘free’ by the government. It skims a percentage from each paycheck and if you don’t ask for it back, it keeps it. It is up to you to prove that you have paid the government too much by filing your tax return. Usually when money is borrowed, the lender gets paid an interest rate.

If the government owes people money from overpayment of taxes, it doesn’t have to pay interest. Ironically, if the tables are turned, the government certainly charges interest (and penalties and fees) on money owed to the Treasury should the taxpayer fail to pay by the deadline! Seems just a bit unfair, don’t you think?

Forced Saving

Sometimes it is easy to determine the withholding tax. A single person, for example, may receive one W-2 form and the government extracts (via your employer) a certain amount per pay period. This person typically gets a refund.

But this means the government was paid more money than necessary. This can be seen as some as a ‘forced saving’ routine. The government takes off more money than is necessary and after tax time everyone forgets about it because they are so happy they got a refund rather than having to pay more in taxes.

‘Forced savings’ at best puts more money in the hands of government officials to satisfy day to day operations. The worst of the forced savings is that the government has use of the money rather than the person that made the money.

Earn More Money

The money that the government takes in taxes every pay period is earning them money. Each year the government plans on millions of people paying too much on their taxes throughout the year. This money earns interest in the coffers of the government until they have to pay it back to individual tax payers.

Why not LEGALLY reduce the amount that the government takes each pay period and put it to your own good use? Rather than giving YOUR money for excess taxes, keep the funds, invest them and make more money with interest. Taxes will have to be paid on the interest, but rather than handing your excess cash over directly to the government, why not make some interest on it until tax time? It might make you a tidy sum … certainly more than you would make otherwise! It may be even more than what you were expecting with a tax refund.

This article is provided for Taxdebthelp.com, a site designed to help with tax debt.  If you are in need of IRS debt help, this site can help you figure out what your options are.

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According to the Wall Street Journal, the Federal Deposit Insurance Corporation (FDIC) now lists 775 banks considered to be in trouble. What if your bank is amongst them? What if your bank fails? What will happen to your money? If the account is insured, how long does it take to get your money?

For the vast majority of people with deposits in one of these banks, there will be very little to worry about. Few banks ever truly fail, that is, close up shop and completely go away. What the FDIC generally does is arrange a sale of the troubled bank and it’s deposits to a more stable, healthy bank. But even if your bank does close, if it was operating under the FDIC, you still have very little to worry about.

There are two types of transactions handled by the FDIC when a bank becomes insolvent:

1. Purchase and Assumption Transaction.

This is the preferred and most common method, where a healthy bank assumes the insured deposits of the failed bank. Insured depositors of the failed bank immediately become depositors of the assuming bank and have access to their insured funds.

2. Deposit Payoff.

When there is no open bank willing to acquire the deposits, the FDIC will pay the depositor directly by check up to the insured balance in each account. These payments usually begin within a few days after the bank closing.

How long before the FDIC reimburses depositors in a Deposit Payoff?

If the FDIC cannot arrange a sale to a healthy bank, Federal law requires the FDIC to make payments of insured deposits “as soon as possible” upon the failure of an insured institution. Though every bank failure is unique, there are standard policies and procedures that the FDIC follows in making deposit insurance payments. It is the FDIC’s goal to make deposit insurance payments within two business day of the failure of the insured institution.

Some deposits may require supplemental documentation from the depositors. The sooner that documentation is provided to the FDIC, the sooner it can make payments!

What about accrued interest on my deposits?

The FDIC’s insurance coverage includes principal and interest through the date of the bank failure up to the applicable insurance limit for each deposit (currently $250,000 for each insurable account). But once the bank is closed, the interest will stop accruing. If the healthy bank acquires your deposits from the failed bank, you will have to establish new interest rates with it. The acquiring bank may change the interest rate on your deposits, but you can withdraw your insured funds without penalty if you so choose. If no acquiring bank is found for the deposits and the FDIC pays the depositors directly for their insured amounts, interest does not accrue past the date of failure.

What happens to my direct deposits if my bank closes?

If the failed bank is acquired, all direct deposits, including any Social Security payments, will automatically be re-directed to the deposit accounts at the acquiring bank.

If there is no acquiring bank, the FDIC typically attempts to find a nearby bank to take over the direct deposit function temporarily, to make Social Security and other government annuity payments available to the customers. Specific information about any changes in the payment of direct deposits will be made available at the office locations of the failed bank.

What happens to checks and automatic payments that have not cleared an account before my bank is closed?

When the failed bank’s deposits are assumed by an open bank, some or all of the offices typically reopen the next business day and there is usually no interruption in the processing of checks drawn on the failed bank. An exception to this procedure may include checks that were drawn against a deposit account that has been determined to be uninsured or an account that the deposit insurance determination is pending.

In a payoff, however, any outstanding transactions or checks presented after the bank has closed cannot be paid or charged against the account. The FDIC needs to freeze all deposit accounts at the time the bank is closed to quickly pay the depositors for the insured deposit balances in their accounts. Any outstanding checks or payment requests presented after the bank failure will be returned unpaid and will be marked to indicate that the bank is closed. This does not reflect on your credit standing. However, it is your responsibility to make other funds available to creditors who receive checks that were returned and did not clear your deposit account because of the bank closing.

Can I continue to use my checks and deposit slips at the new bank?

If there is an acquiring bank, it will accept the checks and deposit slips of the failed bank for a short time. You will receive information about new checks and deposit slips from the acquiring bank. Otherwise, no, you should not continue to use those old checks.

If I have more than $250,000 in a closed bank and I am paid $250,000 by the FDIC, what happens to the amount in excess of $250,000?

If for example, a depositor has only a single account with a balance of $255,000, he or she would be paid $250,000 through FDIC insurance and would receive a claim against the estate of the closed bank for the remaining $5,000 which is not insured. The depositor would be given a Receiver’s Certificate as proof of this claim and would receive payments as the assets of the bank are liquidated.
It is possible to have deposits of more than $250,000 at one insured bank and still be fully insured if the deposits are maintained in different categories of legal ownership.

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Property taxes vary widely from state to state and city to city. In some locales, property taxes make up for a state’s lack of an income tax, but in others, they’re high in spite of a state’s claim on the fruits of your personal labor. Even if you’ve paid off your mortgage, the property taxes continue, and in all but the rarest of cases, property taxes consistently rise over time. But there are legal and legitimate ways you can reduce your property taxes.

Lower your property tax:

• Review your rate card
• Don’t make improvements
• Know the cost
• Scale back on the landscaping
• Know what your neighbors pay
• Welcome your tax assessor
• Let the assessor know what’s wrong with your home

1. Take a trip

Head down to the tax assessor’s office and request to see your property tax rate card. The property taxes you pay is public information and your rate card should be readily available to you. The card will have information about the size of your lot, the dimensions of your rooms, and the number and type of fixtures located within the home. It may also include information on any special features that could increase your property tax, such as a pool, a detached garage, or notations about any improvements that have been made.

When you review your property tax rate card, scour it for potential discrepancies. My property tax increased a substantial amount (doubled) one year and my wife marched down to city hall to find out why. Somehow, our information had merged with another homeowner’s – one who’s home was twice as large, was on a lot 8 times larger, and had a pool house. The clerk laughed about it saying, “Oh, that happens all the time.” I didn’t think it was too funny.

2. Get content

Hold off making improvements to your home in the months before it’s assessed particularly if those improvements will require building permits. Improvements could increase the value of your home and thereby, increase the amount of property taxes assessed on your home.

3. Know what improvements WILL cost

If you just can’t avoid making improvements, it’s best to know what those improvements will cost you ad infinitum in property taxes. A simple call to your tax assessor or building official and they will be able to give you an idea of how much an improvement will add to your property taxes.

4. Cut the flowers

Though tax assessments are strictly controlled by formulas and specific criteria, these are human beings conducting an “assessment” on your home. If your green thumb goes crazy (like mine), be aware that pretty homes generally get a higher assessed value than plain homes.

5. Spy on your neighbors

Since your property tax assessment is public knowledge, so is your neighbor’s! Investigate what your neighbors are paying and if your home is assessed at a higher rate, try to find out why. If you have a 3 bedroom 2 bath home with a basement garage and an assessed value of $315,000 but your neighbor has 4 bedrooms 3 baths and a basement garage with an assessed value of $275,000, you have every right to know why. Ask. Then ask for a re-assessment for you (not your neighbors!).

6. Let him come on in

If your property tax assessor wants to tour you home, by all means, let him or her in! Refusing to allow an assessor inside you home could result in your home being assessed at the highest possible rate. In many cities, this is standard practice because there is an assumption that you’ve made improvements that you don’t want the assessor to see.

7. Sell your home’s bad side

Walk around your home with the assessor if possible. When you do, point out any negatives about your home. Typically, a property tax assessor will only notice your new flooring, refinished cabinets, and fancy new front door. He will probably overlook the cracked foundation, the aging roof, and the unusable fireplace. Those negatives should be considered to get a fair assessment.

Challenge your property tax assessment

If you’re convinced that your property tax is too high, ask your assessor’s office what steps you have to take to challenge your assessment. Most offices have a formalized process with forms and step by step instructions.

The bottom line on property taxes

Don’t make your home look like a dump just to save a few bucks on your property taxes. There is a certain sense of balance between making your home look nice and saving money on your property taxes. Time your improvements, walk your home with the assessor, do some research at city hall, and challenge anything you feel is unfair. You can take control of your property tax situation!

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Note: This article was included in the Carnival of Personal Finance: The origin of the piggy bank at Well Heeled Blog.

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This is a Guest Post from Allie Gray, Online Marketing Manager for Rasmussen College.

How Health Insurance Reform Will Affect Student Loans

Health insurance reform has passed in America; Congress has voted, and Obama has signed the bill. Beyond aiding millions of Americans to buy affordable health insurance, the bill also surprisingly affects many American students.

What is this Bill all about?

The Bill features a provision, included in the “reconciliation,” which orders the increase of Pell Grants by over $36 million dollars. Pell Grants, money (your taxes) awarded and provided by the federal government that does not require repayment, are given based on financial need as determined from the Free Application for Federal Student Aid (FAFSA).

What does this mean for the average student?

First of all, the maximum amount awarded by Pell Grants will increase. However, this will not go into effect until the 2013-2014 academic year, meaning many current students who will have graduated by 2013 are ineligible.

Researchers estimate that, with inflation, by 2020 Pell Grants could at a maximum be as much as $5,975 per year. In all, this is only a $435 yearly increase from the current maximum grant amount. The original bill in Congress proposed an increase of nearly $1,000, but the number was pared down to ensure easier passage of health care reform.

Further, the bill stipulates that eventually government loan repayment plans will be set according to a former student’s personal income, as opposed to real-money debt. However, this part of the bill will similarly take many years to implement (starting the 2014-2015 school year), and will more than likely only benefit workers on the very low end of the income scale. The benefit will cap repayments at 10% of discretionary income, as opposed to the current 15% of discretionary income rate. After 20 years of repayment, all federal loans will be forgiven, which is a decrease from the current 25 year limit.

What can you expect to change immediately?

If you receive federal loans, from the next academic year on (officially July 1, 2010), they will be distributed directly from the United States Government—they will no longer be provided by banks or private lenders. Because of this change, the possibilities of lower interest rates are increased, especially for PLUS loan awardees, who are typically graduate students and parents of students. Additionally, approval rates on federal direct loans are historically much higher than bank or middle-man managed federal loans, so families may be more likely to qualify.

Although the bill has been met with praise, there is controversy over the switch; some worry that the bill could cause tens of thousands who work for private lenders to lose their jobs, and many colleges are concerned that they will need to crunch in order to put necessary regulations in place by the July 1, 2010 due date.

Sources and more reading on the Health Care Bill:

• The Not-so-Hidden Dangers of Federal Direct Student Lending
• Student Loans: Obama Right
• Health-Care Reform and Your Student Loans
• Student-loan reform slid into health law
• Student Loan Bill Poised to Pass in Health Vote
• Student loans targeted in health care bill

About the Author: Allie Gray is an Online Marketing Manager for Rasmussen College. Rasmussen is one of the premier colleges in Illinois and one of the nation’s leading online colleges.

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You’re not alone. Approximately 40 million of the 135 million tax payers actually file their taxes after April 5th and as you can see from the graphic below, 27 million wait until the last possible minute. I can’t stand waiting until the last minute – too much drama for my life – though I did wait a lot longer this year.

If you haven’t completed your tax return just yet, H&R Block is the way to go. With untold numbers of returns under their belt, they have the experience, the personnel, and the software to help you get that tax return done and finished.

Don’t wait too much longer! You can also use H&R Block if you need to file an extension!

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If you decide to itemize your taxes like I did, there are some great deductions you can take when you own your home. You probably already know you can deduct your mortgage interest, but what are some other items you can deduct? I don’t know about you, but I can use all the deductions I can get.

(Hint: If you use H&R Block At Home like I did, you’re already on top of these deductions)

Homeowners CAN deduct:

Late charges

Late payment charges and pre-payment penalties are eligible to be deducted from your taxes so long as they were not for a specific service received in connection with your home loan.

Property taxes paid during the year

You can also deduct any property taxes you reimbursed to the seller at closing. These are the funds the seller had already paid into escrow before you took ownership. This amount will be on your mortgage settlement sheet but you won’t get a 1098.

Mortgage interest on a second home

The mortgage interest on a second residence is also deductible within limits.

Interest on an equity loan

The interest on $100,000 (or less) borrowed on a home equity loan or home equity line of credit, regardless of the reason for the loan, is also deductible.

Mortgage Points

If you paid mortgage points when you purchased your home, those are also deductible, but if you refinanced, you have to spread that deduction over the life of the loan .

Private Mortgage Insurance (PMI)

You can deduct PMI in 2009, but only for policies dated after 2006. (The right to this deduction disappears as Adjusted Gross Income rises from $100,000 to $110,000 (or $50,000 to $55,000 for those who use married filing separately status.)

Home improvements required for medical care

If you had to make changes to your home for medical care, such as installing a wheelchair ramp or making a doorway wide enough to accommodate your wheelchair, those expenses could also be deductible.

Homeowners CANNOT deduct

Homeowners insurance

Premiums paid for your homeowners insurance is not deductible on your federal taxes.

Homeowner’s Association Dues

Yeah, they’re expensive and sometimes you wonder how they’re spent, but HOA dues are not deductible.

Maintenance and repairs

Maintenance items like lawn care, pressure cleaning, carpet cleaning, maid services, or HVAC maintenance are not deductible. Repairs are not deductible either.

Improvements

Improvements you make to your home are not deductible now, but if you save those receipts for improvement expenses, you can deduct them from the profit you make from selling your home.

Appraisal fees

If you had your home appraised, those expenses are not deductible.

As always, be sure and verify the deductibility of all your expenses with a qualified tax advisor.

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No matter how you slice it, completing your federal and state income tax returns are a pain in the neck. Has anyone ever stopped to think why the Internal Revenue Code is over 80,000 pages? Personally, I think it’s so the feds can always find something to nail you on, but that’s just me …

All I know is that with 80,000 pages of rules and regulations, H&R Block At Home (formerly known as TaxCut software) has saved my skin for the last 14 years! I started using them in 1996 and I’ve never regretted it, even when I was audited three straight years. H&R Block pulled me through because their software was right on the money!

If you’re still waiting around to get your taxes completed, you’d best be getting started and using H&R Block At Home is the easiest way I know to get your tax return done, e-filed, and over with.

It all starts with importing and they walk you through every bit of it.

From there, your next step is to either begin importing information or being entering the appropriate data into their easy to fill forms. Folks, it really IS that easy.

Not only that, but every screen has a sidebar with frequently asked questions and explanations of everything you’re filling out. The software asks questions, easy to understand questions for the most part, but at times you may need more clarification on what’s being asked. H&R Block At Home thought through that process and created answers to your questions before you even thought to ask them.

Each section has a unique set of answers to the most taxing questions (sorry, I couldn’t resist). Whether you’re entering your personal information, information about your income(s), your adjustments, deductions, tax credits, or taxes you’ve already paid, the software is easy to use, easy to understand, and deadly accurate in my personal experience. Three audits later and I owed nothing on any of them.

H&R Block At Home can also easily use the same data you input to complete your state return.

After you’ve finished your tax returns, then you can move on to the e-file process which, true to form, went off without a hitch in my case. E-filing can reduce the temptation to get one of those high interest tax refund anticipation loans because if you have a checking account (or even a savings account) your refunds can be direct deposited in anywhere from a few days to just a few weeks.

So did I get a refund this year? Yes, but believe me, I tried NOT to. I’m listed as married with 10 dependents at work so I pay as little in as possible but with over $10,000 in surprise medical deductions this year, I was given a small refund of my own money that I already paid in … 

If you’re still sitting on the fence about getting your tax return completed, get off that fence and head over to H&R Block At Home. It’s a quick and easy download and, if you have your paperwork ready, you could be finished in record time!

Note: For the record, I bought and paid for this software out of my own pocket.

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Perhaps our elected “representatives” could take a few lessons from Davy Crockett. Whether this actually happened or not is contested, but the lesson is well worth learning:

“The power of collecting and disbursing money at pleasure is the most dangerous power that can be entrusted to man, particularly under our system of collecting revenue by a tariff, which reaches every man in the country, no matter how poor he may be, and the poorer he is the more he pays in proportion to his means. What is worse, it presses upon him without his knowledge where the weight centers, for there is not a man in the United States who can ever guess how much he pays to the government. So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he.”

“If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other.”  Originally published in The Life of Colonel David Crockett, 1884 by Edward Sylvester Ellis.

How easily it is to give that which is “not yours to give.”

• Junior Boomer presents Charitable Gifting Rules for Baby Boomers
• Jeff Rose shares How To Make Quarterly Estimated Tax Payments
• Ben wrote QuickBooks Accounting Software = Small Business Relief
• Ryan clues us in on Comparing Money Market and Savings Accounts
• Richard Davis posted New Data Source Shows Lower Consumer Demand Leading to GDP Contraction in Second Quarter
• The Rat enlightened us on Do You Have A “Buy & Hold” Investment Strategy?
• Dave Ozment informs us about Wake Up Call
• Junior Boomer reported about Roth IRA Limits: Aged, Contributed, Phased Out, and Converted
• Jeff Rose advises us on Why You Should Avoid PayDay Cash Loans
• Mike points out Pros and Cons of Reward Credit Cards
• ABC presents What are junk bonds?
• MD shares Best Student Loan Consolidation Advice
• Kyle wrote Roth IRA Distributions: Rules And Caveats
• Dave Ozment clues us in on Views of Money – Part 1

Thanks to Liberty Pen for posting this video.

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Sounds far fetched, I know, almost as crazy as our current administration banning the great American pastime of fishing. With bad news coming out of Washington so fast and furious that it’s hard to keep up, maybe someone from YNAB needs to educate our legislative and executive branches on what a budget really is and how it’s supposed to work. Deciding where to spend money on isn’t a real budget. Neither is deciding how much to spend. Deciding where NOT to spend is where a real budget begins. Once you understand that aspect, budgeting takes on a whole new meaning.

What would it look like if the government used YNAB?

First, we wouldn’t be operating on a month to month basis. Last month, the federal government went into the red $209 billion, 14 percent higher than the previous record set in February of last year. You Need A Budget (YNAB) teaches its users how to stop the paycheck to paycheck cycle by simply knowing where their money is spent and formulating a REAL plan to get out of this vicious cycle.

Second, every dollar would  have a job, a mission, a purpose. Some may claim that this is already happening to a degree in our federal, state, and local governments, but I disagree. These faux budgets our legislators are concocting are shams, they have no idea what’s being purchased, what’s being spent, or WHY. Some people even encourage legislators to “pass the bill to learn what’s in it.” YNAB eliminates that possibility because its proprietary software helps you not only track, but helps you dictate how to spend your money. You are in control, not your money, not your debt, not your bill collectors. YOU.

Third, by using YNAB, governments would be able to save for a rainy day. You know they’re coming – those 6 month car insurance premiums that eat your lunch – and this budgeting software helps you prepare for them. YNAB would help our government prepare for the upcoming rainy day known as the Baby Boomer Social Security Buster that’s looming on the horizon in about 10 to 15 years.

Fourth, YNAB would help governments roll with the punches. Things come up, like wars, recessions, and the need to payoff entire states to get your legislation passed.  YNAB makes small adjustments when you overspend, ensuring that you fix those mistakes before you go to the next month. What a concept! Can you imagine anyone in government actually admitting to overspending and doing something about it?

I know. It’s more than just a little far fetched to wish that any government, federal, state OR local, would budget the YNAB way, but that doesn’t mean you shouldn’t. Check out YNAB and see if it isn’t the most innovative, intuitive, and incredible way to take back control of your money, because if you don’t control your money, it will certainly control you. Don’t believe me? Just look at the Federal government’s projection of its own debt problems.

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