Your Unbiased Advisor: 401k, 403b, IRA, Roth IRA which is best?

Which insurance can you drop to save for retirement?

Insurance salespeople don’t always explain the probability of using their products. For instance, the reason term insurance is cheap enough for your employer to provide it is that few die early. The same applies to life cover for children. Insurance sold as an investment is a waste of money. Insuring your travel is risky—check the exclusions for ways they don’t pay. If you have collision on your old car, you will be surprised when you end up paying the bill not the insurer. It is the same with home warranties—look for events no covered. You have coverage on misuse of your credit card too. Most dental insurance does not cover the big expenses. You don’t need coverage on a rental car if your regular cover is comprehensive. Plus most credit cards provide cover. Insuring your pet is usually limited—check this guide. Finally, shop for the car coverage you need—not the policy your agent sells. Most contain duplicate coverage you already have.

Save $3,000 a year: https://www.amazon.com/Industry-Insiders-Guides-Buying-Insurance/dp/1466435712

401k, 403b, IRA, Roth IRA which is best?

Savings for retirement are turbo-charged by avoiding taxes and by compounding your earnings. The earlier you start your account, the more you will have later. First find out whether your employer will match your contributions to a plan at work. This is free money so you need to take it. If there is no match, you can start monthly contributions to an account that will grow tax-FREE for the rest of your life. The Roth 401k or 403b at work or Roth IRA at a low-cost mutual fund provider like Vanguard will avoid taxes on the earnings in your account and never be taxed in retirement. By investing $250 a month in a stock index, you could have over $1,000,000 tax-FREE to provide retirement income. You invest $250 a month for 33 years or $99,000 for $1 million. If you keep HALF in a stock fund, you can spend $70-80,000 a year without income taxes of 12-22%. You may be able to avoid taxes on your Social Security benefits too.

Buffett recommendations: https://www.amazon.com/Warren-Buffett-can-make-millionaire/dp/1530555981

Can you afford to be sued?

If you are sued, an umbrella liability policy can pay your lawyer and legal costs. This policy protects you and your family from huge court judgments if you are the unlucky victim of an accident. If you are involved in any accident—car crash or trip and fall on your property—the lawyers will go after the person or company with the deepest pockets. So if you own any property or assets, you may become the target. You may recall how doctors now refuse to help anyone injured on the street or in a building. In the past, victims went after the Good Samaritan because they had assets and their help was faulted. The most common events are your guest ‘falls’ in your home, your dog ‘bites’ a passerby, a serious car crash, a neighbor’s kid falls while playing in your yard. Any event on your rental property or any suit from something you did or said to someone else. For instance, President Clinton used an ‘umbrella’ to cover his legal defense expenses. If you have normal car insurance, it has limits for paying others’ medical expenses. This policy will cover the rest. These policies are usually written by your car insurer. For the average homeowner, the cost is less than $300 a year for $1,000,000 cover.

Lawyers are expensive: https://www.amazon.com/Lawsuit-Insurance-need-right-policy/dp/1480061123

Where is that refund?

The Internal Revenue Service today reminds taxpayers that the most convenient way to check on a tax refund is by using the “Where’s My Refund?” tool at IRS.gov or through the IRS2Go Mobile App.

Where is the stimulus 1 or 2? If you did not receive stimulus 1 or 2, start filing here: https://www.irs.gov/newsroom/recovery-rebate-credit.

Estimated tax payments are still due April 15. If you are self-employed or do not have enough withheld from a paycheck, pension or Social Security, you may have to send quarterly payments to the IRS. Tax returns for 2020 are due May 17 not April 15 but the estimated tax payments are still on schedule.

IRS will redo your taxes and send refund if you paid tax on Unemployment 2020.

Have tax forms; will file … for FREE but WAIT . . .

If you have unemployment income, ObamaCare coverage you should wait to file since the IRS has not yet implemented tax-FREE provisions of the new Covid law. If you already filed and paid tax on your unemployment income, IRS says it will send you a refund of the tax automatically. DO NOT FILE an amended return to obtain a refund on this tax. Taxes due MAY 17 not April 15. Input the W-2, unemployment, SS benefits, IRAs, pensions, RMD, brokerage, etc. forms you have. You can file for FREE online. If you didn’t receive a correct form, file a Form 4852. Usually filing your state return costs as little as $15 unless you buy the Pro helpline. Avoid $300-400 paid preparer fees—new IRS forms mean higher fees. Unemployment insurance is TAXABLE on the Federal income tax return; not on some state returns. Some states do not tax your SS and pension benefits.

Retirees did not have to take their RMDs in 2020 so taxes may be less: it was a good time to convert IRA to Roth IRA for tax-FREE future. Unless you were self-employed, you can’t deduct home office expenses of working from home. You can deduct as medical expense all Covid prevention supplies. Some states continue the health insurance mandate and penalty unless you have an exemption. Since the IRA contribution deduction has no age limit now, you may reduce your income/taxes by making a contribution of up to $7,000. The standard deduction went up to $12,400 single; $24,800 joint. Jan 15 last day to make 2020 estimated payments. You have to report your April/May and December/January stimulus payments even though they are not taxable. Some of us receive a bank credit; some a debit card; some a check. Even if you don’t have to file, you should file so scammers can’t use your SS number to mess up your IRS file. Tested E file software ratings. Efile Jan 15; IRS processing Feb 12.

E file avoids covid at your preparers’ office: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

What to do if you can’t pay by May 17?

Avoid the penalty for not paying estimated tax. Ask for an automatic extension to file till October. If that does not work for you, you can apply for a payment plan. An individual can setup an IRS installment plan if you owe $50,000 or less and can pay back the amount owed in 3 years. If you are a business owner, you can setup an installment plan if you owe $25,000 or less. The IRS will charge a one-time fee of $105.

If you own less than $25,000 and can pay the amount owed within six years, ask the IRS for a streamlined payment agreement. The IRS will charge a one-time fee of $102.

Request an Offer in Compromise if you cannot pay the total amount owed. This allows you to settle your tax debt for less than the total amount owed if you will be unable to pay back the total amount owed within 10 years. The IRS will charge a one-time fee of $150. Given the pandemic economic hardship, apply for the extension to file now: https://www.irs.gov/pub/irs-pdf/f4868.pdf

Special circumstances help: call the IRS Taxpayer Advocate Service 1-877-777-4778 for free assistance.

IRS has $1.3 billion refunds for 2017 tax returns

Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 return, according to the IRS. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on May 17.” If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. Filing instructions are available on the IRS.gov Forms and Publications page or 800-829-3676.

You have 45 days to collect your cash!

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