What you need to know about money before quitting a job to work for yourself

What kind of money action plan do you need to put in place if you decide you want or need to work freelance? The really streamlined version, where you pay all your bills, put some money aside into savings, and have a modest amount of discretionary money. Build your runwayThe scariest part of transitioning from a steady paycheck to freelance life is the variable income. Depending on your risk tolerance, you may want an emergency savings fund, plus a “starting out as a freelancer” savings fund to


What kind of money action plan do you need to put in place if you decide you want or need to work freelance?
The really streamlined version, where you pay all your bills, put some money aside into savings, and have a modest amount of discretionary money.
Build your runwayThe scariest part of transitioning from a steady paycheck to freelance life is the variable income.
Depending on your risk tolerance, you may want an emergency savings fund, plus a “starting out as a freelancer” savings fund to
What you need to know about money before quitting a job to work for yourself Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-18  Authors: erin lowry
Keywords: news, cnbc, companies, money, months, freelance, work, taxes, need, job, life, know, freelancer, pay, quitting, paycheck, savings


What you need to know about money before quitting a job to work for yourself

Welcome to Asking for a Friend, Grow’s money advice column. Got a question for one of our money experts? Email us at getgrowing@cnbc.com. Dear Asking for a Friend, I’ve started thinking that I would like to work for myself. What kind of money action plan do you need to put in place if you decide you want or need to work freelance? Sincerely, Hopeful Freelancer * Dear Hopeful Freelancer, Four years ago, while walking laps around Madison Square Park during my lunch break, I realized it was time to take the leap into freelance life. Nothing upsetting had happened that day. I actually quite enjoyed my job. But something in me wanted to see if I had what it took to become my own boss and ultimately build a brand and a company. I also knew my generally low risk tolerance would prevent me from leaving the security of a stable income and benefits if I got much further in my career. I made that decision about six months before I put in my notice, because financially planning to become a freelancer can be a determining factor in whether you can sustain in the early years. Here are some steps to take now if you want to strike out on your own sooner or later.

Crunch the numbers

How much does your life cost you right now? The really streamlined version, where you pay all your bills, put some money aside into savings, and have a modest amount of discretionary money. Now tack 35% to 40% onto that number, because that streamlined budget is just the starting point. You’d probably need to earn more to account for your own health care, taxes, and other daily or business expenses. Does that figure seem reasonable? Scary? Can you figure out how you might get there?

Start working a side hustle

The lowest risk way to get started as a freelancer or otherwise self-employed person is to establish yourself while earning a steady paycheck. Start picking up gigs on the side in order to build a stable of clients in advance. Of course, that only works if your day job isn’t going to fire you for side hustling, so be sure to check your employee handbook.

Build your runway

The scariest part of transitioning from a steady paycheck to freelance life is the variable income. Some months you will be “flush with cash,” in the words of Jean-Ralphio from “Parks and Recreation,” while other months will leave you questioning your decision to become a freelancer. In order to minimize the potential damage of the slow months, you should build up a runway now. At the very least, you want six months worth of living expenses in your emergency savings fund. Depending on your risk tolerance, you may want an emergency savings fund, plus a “starting out as a freelancer” savings fund to help you handle those fluctuations.

Video by David Fang

Simulate the self-employed experience

One of the best things I did before going freelance was simulating the experience in advance. I was working a full-time job and doing both freelance writing and speaking engagements on the side. About three months before I was going to take the leap into self-employment, I switched to putting my entire day job paycheck into savings and then practiced living and budgeting with my freelance income. Doing this boosted my savings accounts and gave me a taste of life on a variable income.

Figure out your health insurance

Steady paychecks are nice, but health insurance is often what keeps so many people tied to a traditional employer. You need to figure out how you’re going to secure health coverage and factor that into your monthly budget. Talk with other self-employed people you know about what has worked for them. Do some research about which plan would be the best fit for you based on your age, where you live, and your current medical needs.

Video by Ian Wolsten Once you’re ready to start working for yourself full time, here are a few more smart money moves to make.

Create a business checking account and pay yourself a salary

Your business income needs to be kept separate from your personal money. That’s mostly for tax purposes, but also to make life easier. Consider paying yourself a salary out of your business account. It’s great for your mental health, and it’s smart, since paying yourself a salary can reduce the impulse to overspend during good months. It’s also important to know that many companies pay on a “net-60” or even a “net-90” period. That means you might not get paid until two to three months after your work is done.

Don’t forget about quarterly estimated taxes

Your whole tax experience is about to change: The IRS doesn’t want to wait a full year to get your money, and you also need to pay a self-employment tax because you don’t have an employer paying into Social Security and Medicare on your behalf. Depending on how you structure your business, you may also need to pay fees, such as an LLC fee. Rarely will taxes be taken out of your freelance paychecks, either. It’s on you to set money aside and to pay your taxes quarterly instead of annually. The self-employed taxes rule of thumb is to set aside 30% of each paycheck for Uncle Sam. I put 45% of every paycheck into a separate account for taxes so I know I’ll have enough to pay New York City, New York State and federal taxes. Then I also have money left over for my LLC fees and plenty to put into my SEP IRA, which ensures I’m still investing for retirement.

Come up with a retirement plan

Say goodbye to the perk of an employer-matched retirement fund. There are plenty of great things that come with being your own boss, but it also means watching out for your own ability to retire. There are lots of options for freelancers, including a Roth IRA, Traditional IRA, Solo 401(k) and a SEP IRA. In your first year of self-employment, I’d challenge you to try and max out a Roth IRA, which would mean putting away $6,000 in 2020, or $500 per month.

Invest in your network


Company: cnbc, Activity: cnbc, Date: 2020-01-18  Authors: erin lowry
Keywords: news, cnbc, companies, money, months, freelance, work, taxes, need, job, life, know, freelancer, pay, quitting, paycheck, savings


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How Congress made it easier to avoid the IRS

In total, IRS funding has declined by more than 20% since 2010, factoring for inflation. According to an analysis by Robert Weinberger of the Tax Policy Center, the fiscal 2020 budget Congress passed last month continues the inflation-adjusted decline in IRS funding over the past 20 years. According to ProPublica, the IRS enforcement budget is now down by more than 25%, with the number of IRS employees down by 30,000 over the past decade. In preparing the 2020 IRS budget, Treasury Secretary Stev


In total, IRS funding has declined by more than 20% since 2010, factoring for inflation.
According to an analysis by Robert Weinberger of the Tax Policy Center, the fiscal 2020 budget Congress passed last month continues the inflation-adjusted decline in IRS funding over the past 20 years.
According to ProPublica, the IRS enforcement budget is now down by more than 25%, with the number of IRS employees down by 30,000 over the past decade.
In preparing the 2020 IRS budget, Treasury Secretary Stev
How Congress made it easier to avoid the IRS Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-14  Authors: robert frank
Keywords: news, cnbc, companies, weinberger, taxes, revenue, taxpayer, funding, congress, budget, taxpayers, tax, irs, avoid, easier


How Congress made it easier to avoid the IRS

Overall funding to the IRS was $11.5 billion, up 1.8% from the previous year. But when inflation is factored in, the budget represents a reduction — and almost all of the added funding will go to a mandated pay increase for existing staffers. In total, IRS funding has declined by more than 20% since 2010, factoring for inflation.

According to an analysis by Robert Weinberger of the Tax Policy Center, the fiscal 2020 budget Congress passed last month continues the inflation-adjusted decline in IRS funding over the past 20 years.

Every budget cycle, members of Congress solemnly promise to better fund the Internal Revenue Service so it can do its job of collecting taxes and serving the taxpayer. And once again, Congress has done the opposite.

“This year’s IRS appropriation is just more of what we’ve seen over a decade of decline,” Weinberger said in the report.

All of which means the IRS has less money for auditors and enforcement, and therefore less ability to collect the taxes owed to the federal government. According to ProPublica, the IRS enforcement budget is now down by more than 25%, with the number of IRS employees down by 30,000 over the past decade.

And a new IRS report, as cited by The Wall Street Journal, shows that taxpayers are now half as likely to get audited as they were in 2010 — with only 0.45% of returns audited. The wealthy are even more likely to escape the scrutiny of the IRS: Audit rates for those making $10 million or more have fallen from 14.52% in 2017 to 6.66% in 2018.

In preparing the 2020 IRS budget, Treasury Secretary Steven Mnuchin promised to “deliver a customer experience comparable to the best financial institutions in the world,” emphasizing taxpayer services. But compliance offers the best return for American taxpayers. Estimates show that every dollar invested in the IRS generates at least $4 in added revenue, by chasing down uncollected taxes. The current “tax gap” — the difference between taxes theoretically owed and taxes collected — is now estimated at about $380 billion, according to the IRS itself.

What’s more, a lack of funding and poor technology means the IRS is increasingly prone to cybersecurity threats and identity fraud.

“The IRS remains a deeply challenged agency with reduced resources,” Weinberger said. “It’s playing catch up in halting tax shelters and income shifting to tax havens, at a high risk of filing season glitches affecting over 155 million individual taxpayers.”


Company: cnbc, Activity: cnbc, Date: 2020-01-14  Authors: robert frank
Keywords: news, cnbc, companies, weinberger, taxes, revenue, taxpayer, funding, congress, budget, taxpayers, tax, irs, avoid, easier


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Bills in several states aim to help those in the gig economy. Some are worried they’ll lose work instead

And the 35-year-old journalist, who lives in Brooklyn, New York, earns more working for herself than she did as a full-time employee. Now, a proposal in New York state that could require companies to classify more of their freelancers as employees is spreading panic among people like Bondy. Proponents of the efforts say companies misclassify their workers as independent contractors to save money. “Caught in the middle are people who are and who want to be independent contractors,” Estlund said.


And the 35-year-old journalist, who lives in Brooklyn, New York, earns more working for herself than she did as a full-time employee.
Now, a proposal in New York state that could require companies to classify more of their freelancers as employees is spreading panic among people like Bondy.
Proponents of the efforts say companies misclassify their workers as independent contractors to save money.
“Caught in the middle are people who are and who want to be independent contractors,” Estlund said.

Bills in several states aim to help those in the gig economy. Some are worried they’ll lose work instead Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-11  Authors: annie nova
Keywords: news, cnbc, companies, work, states, help, worried, say, lose, state, taxes, contractors, gig, instead, economy, independent, companies, freelancers, bills, york, theyll, theyre


Bills in several states aim to help those in the gig economy. Some are worried they'll lose work instead

Halley Bondy loves being a freelance writer.

And the 35-year-old journalist, who lives in Brooklyn, New York, earns more working for herself than she did as a full-time employee.

Now, a proposal in New York state that could require companies to classify more of their freelancers as employees is spreading panic among people like Bondy.

“All of my employers would probably just ditch me,” Bondy said. “I don’t think any one of them would take me on full-time.”

More from Personal Finance:

Not all agree buying steady retirement income is a good idea

More people may soon have annuities in their 401(k) plans

RMD changes may affect retirement accounts

Several states are moving to reshape their labor laws so that more independent contractors are turned into employees.

Proponents of the efforts say companies misclassify their workers as independent contractors to save money. Unlike contractors, employees have to be given a minimum wage and are eligible for overtime pay and unemployment insurance. Half of their Social Security and Medicare payroll taxes are also covered by the company.

Employers might be saving as much as 30% of employee-related taxes by hiring more people as contractors, according to the National Employment Law Project.

“There’s been this crisis of misclassification and employers are gaming the system,” said Cynthia Estlund, a professor at the New York University School of Law.

Yet the state efforts have sparked a backlash among freelance writers, artists, translators, cooks and other freelancers who say they’re happy with their work arrangement and fear their livelihoods could now be in peril.

“Caught in the middle are people who are and who want to be independent contractors,” Estlund said.

Many freelancers in California say they’re already paying a price, after Assembly Bill 5 went into effect on Jan. 1.

To classify a person as an independent contractor rather than an employee, companies in the state now have to prove the person is free from their control and is performing different work than what the company specializes in. Although, there are a number of carve-outs.


Company: cnbc, Activity: cnbc, Date: 2020-01-11  Authors: annie nova
Keywords: news, cnbc, companies, work, states, help, worried, say, lose, state, taxes, contractors, gig, instead, economy, independent, companies, freelancers, bills, york, theyll, theyre


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New parents shouldn’t count on penalty-free 401(k) withdrawals just yet

But it may be months before 401(k) plan sponsors are able to offer these benefits — and for some families that may be too late. It also gives new parents one year to take advantage of penalty-free baby withdrawals — up to $10,000 for couples with separate retirement accounts. Change takes timeIf you have an IRA, it may be easier to take these baby withdrawals right away. In some cases, the employer will need to amend their 401(k) plan, a process and time frame that will vary by company. But ther


But it may be months before 401(k) plan sponsors are able to offer these benefits — and for some families that may be too late.
It also gives new parents one year to take advantage of penalty-free baby withdrawals — up to $10,000 for couples with separate retirement accounts.
Change takes timeIf you have an IRA, it may be easier to take these baby withdrawals right away.
In some cases, the employer will need to amend their 401(k) plan, a process and time frame that will vary by company.
But ther
New parents shouldn’t count on penalty-free 401(k) withdrawals just yet Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-10  Authors: megan leonhardt
Keywords: news, cnbc, companies, shouldnt, parents, penaltyfree, money, withdrawals, baby, taxes, 401k, providers, withdrawal, plan, retirement, need, count


New parents shouldn't count on penalty-free 401(k) withdrawals just yet

In an effort to help new parents successfully navigate the increasing costs of raising a family, last month lawmakers signed off on new rules that will allow eligible Americans to tap into their retirement savings. But it may be months before 401(k) plan sponsors are able to offer these benefits — and for some families that may be too late. The rule, part of the comprehensive retirement legislation known as the SECURE Act, gives Americans who’ve had a baby or adopted a child within the past year the option to take a withdrawal of up to $5,000 from their retirement savings, including 401(k)s or individual retirement accounts, without the typical 10% penalty. The changes sparked James Bednar’s interest: He has a baby and feels the financial squeeze of trying to manage the cost of having kids. “I don’t know that I necessarily need the money, but my son is 5 months old, and it’s expensive to have kids these days, especially up here in the Northeast,” Bednar, who lives in New Jersey, tells CNBC Make It. The 43-year-old father of two called up his 401(k) provider, Principal, to get more information and ask about the steps required to start a withdrawal. That’s when he learned that while the law had gone into effect, he wasn’t going to be able to take advantage of this benefit for a while, if ever. Principal says the company needs more guidance from regulators before making this 401(k) benefit available to the public. “Principal is thrilled about the passing of the SECURE Act and what it means for financial security for Americans,” the company said in a statement, adding that “there are many details to work through with such sweeping legislation, and this particular provision has many questions that will have to be answered by regulators.” And Principal is far from the only company struggling to accommodate these new rules. CNBC Make It spoke with nearly half a dozen major plan providers, including Charles Schwab, Fidelity and Vanguard, and they all confirmed they were not yet able to offer these so-called “baby withdrawals” to eligible 401(k) investors. “I was taken aback a bit,” Bednar says. “I read the law, and it seemed very clear cut and straightforward to me.” But it turns out, it’s not that simple.

New rules of the road to retirement

Late in December, President Trump signed a $1.4 trillion spending deal that, among other provisions, contained the SECURE Act. The legislation introduced a number of overhauls to retirement accounts, including raising the age when people need to take minimum withdrawals as well as giving small businesses the ability to join together to participate in multi-employer 401(k) plans. It also gives new parents one year to take advantage of penalty-free baby withdrawals — up to $10,000 for couples with separate retirement accounts. While you can opt to repay the withdrawal amount, this is not a loan and you’re not required to adhere to a strict repayment process.

I don’t know that I necessarily need the money, but my son is 5 months old, and it’s expensive to have kids these days, especially up here in the Northeast. James Bednar

Until now, you could only take penalty-free withdrawals from your 401(k) before 59½ if you had education expenses, bought a home for the first time, incurred massive medical debts or were ordered by a court to provide alimony or child support. For other circumstances, you had to pay a 10% early withdrawal penalty, plus taxes on the funds you withdrew. According to the new law, these changes affect any withdrawals (also known as distributions) made after December 31, 2019, according to the National Association of Plan Advisors.

Change takes time

If you have an IRA, it may be easier to take these baby withdrawals right away. Currently, Charles Schwab and Vanguard both tell CNBC Make It that they are already able to accommodate requests for IRA distributions. “Looking at the birth and adoption provision specifically, we made this withdrawal available to IRA account owners, obviously assuming they meet the requirements,” says Shannon Nutter, head of participant strategy and development for Vanguard’s institutional business. But if you’re interested in taking money from your 401(k), it will likely be months, potentially up to a year, before you’re able to take advantage of the new benefit. And some people will never get to use the benefit. Retirement plan providers read the new law’s withdrawal exemption as an optional plan feature, which means that the decision whether to include this benefit rests with the employer. It’s similar to existing rules allowing you to take a loan from your 401(k) or a financial hardship withdrawal. Roughly 15% of 401(k) plans don’t allow account holders to take distributions when they are experiencing a financial hardship. In some cases, the employer will need to amend their 401(k) plan, a process and time frame that will vary by company. “Many employers only meet quarterly, semi-annually or annually to make design changes to their retirement plan. In addition, we expect employers will want to educate themselves on the pros and cons of offering this new distribution type, which may delay their employees’ ability to receive a qualified birth/adoption distribution,” Schwab spokesman Mike Peterson tells CNBC Make It. Beyond getting employer buy-in, plan providers will also need to set up back-end systems to track which plans are allowing these types of withdrawals, figure out the best ways to collect documentation such as birth certificates or adoption paperwork from consumers and educate their customer reps on how to answer questions. “All of that takes time,” says Michael Hadley, a lawyer with the D.C.-based law firm Davis & Harman. “If you want to take a distribution from your plan, the plan, and its service provider, can’t just say ‘OK, you can have it.’ It’s gotta be documented.”

Individual companies, as well as trade groups such as Society of Professional Administrators and Recordkeepers (SPARK) have sent letters to U.S. Department of the Treasury and the IRS asking them to weigh in on what information exactly companies need to be collecting from consumers and what tax laws apply. As it stands, normally the IRS requires plan providers withhold 20% of any withdrawal for taxes, since the money you contribute to a 401(k) is taken out of your paycheck before taxes are applied. So if you take out $1,000, you’ll only get about $800 right away, and that’s assuming you don’t have to pay the 10% early withdrawal penalty. But there’s no mention in the new law whether this 20% withholding rule applies to baby withdrawals. If it does, parents will really only receive up to $4,000 and plan providers will need to withhold the rest for taxes. This just one example of the many questions plan providers are putting to regulators. In fact, Hadley who works with SPARK on legislative and regulatory changes, says that of all the provisions in the SECURE Act, the baby withdrawal change is the one that has the biggest unanswered questions. Plan providers are “in unprecedented waters,” Hadley says, adding that typically there’s a long window, at least six months, between when a law is passed and when it goes into effect, giving companies time to get the details sorted out. This time, that implementation period was just five business days during a holiday week. Typically a major change to create a new plan feature “will take six months to a year, and often that clock starts once we have the answers to all the questions we really need, ” Hadley says.

Other options if you need some cash

If you are a new parent who is experiencing some financial hurdles, check with your provider to see if you can take a baby withdrawal from an IRA now, if you already set up and deposited funds into this type of account. With a Roth IRA, you may not even need to claim a baby withdrawal to take out money. Within these accounts, you can withdraw any money you’ve invested at any time, without taxes or penalties. And after your account has been open at least five years (or you’ve reached the age 59½), you can withdraw any investment earnings without incurring the typical 10% penalty. If you only have a 401(k) and are facing major debts, you can check to see if your plan allows hardship withdrawals. Keep in mind that these are classified as emergency situations that pose “an immediate and heavy financial need of the employee.” You will have to pay taxes on this money, taxed as ordinary income, and you may also have to pay the 10% penalty. There’s also the option to take a 401(k) loan. These loans are not taxed, but you can only take up to half of your vested account balance — but not more than $50,000, no matter how high your balance. And all loans need to be repaid within five years with interest (this is set by your plan, based on the prime rate, which is currently about 4.75%), or you’ll be hit with taxes. You could also apply for a personal loan from your bank, which is generally used to consolidate debt or make a big purchase. On average, those with credit scores below 680 will be paying higher interest rates for a personal loan than the average credit card APR of 16.97%, according to an analysis by loan marketplace Credible. For personal loans, the rate not only depends on your credit, but also on the length of the loan, as shorter loans tend to have lower APRs. If you feel that paying off your debt will take longer than three years, you may be subject to a higher rate, Credible finds.

Think twice before using retirement money


Company: cnbc, Activity: cnbc, Date: 2020-01-10  Authors: megan leonhardt
Keywords: news, cnbc, companies, shouldnt, parents, penaltyfree, money, withdrawals, baby, taxes, 401k, providers, withdrawal, plan, retirement, need, count


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Here’s how to lower your tax season stress level

katleho SeisaThe new year is just over a week old, but it’s almost time to get cracking on those 2019 tax returns. Proactive taxpayers can start submitting last year’s tax returns to the IRS as early as Jan. 27. As always, you have until April 15 to file your 2019 tax return. The IRS predicts it will receive about 150 million individual income tax returns this season. Here’s one reason to get started early: Scammers who make off with your Social Security number may rush to file fraudulent return


katleho SeisaThe new year is just over a week old, but it’s almost time to get cracking on those 2019 tax returns.
Proactive taxpayers can start submitting last year’s tax returns to the IRS as early as Jan. 27.
As always, you have until April 15 to file your 2019 tax return.
The IRS predicts it will receive about 150 million individual income tax returns this season.
Here’s one reason to get started early: Scammers who make off with your Social Security number may rush to file fraudulent return
Here’s how to lower your tax season stress level Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-09  Authors: darla mercado
Keywords: news, cnbc, companies, taxes, heres, income, stress, transactions, form, receive, level, returns, expect, tax, taxpayers, lower, 2019, season


Here's how to lower your tax season stress level

katleho Seisa

The new year is just over a week old, but it’s almost time to get cracking on those 2019 tax returns. Proactive taxpayers can start submitting last year’s tax returns to the IRS as early as Jan. 27. As always, you have until April 15 to file your 2019 tax return. While you can ask the taxman for a six-month extension to submit your paperwork, you’ll need to pay the taxes you owe by April 15. The IRS predicts it will receive about 150 million individual income tax returns this season.

Here’s one reason to get started early: Scammers who make off with your Social Security number may rush to file fraudulent returns to snag your tax refund. Another reason to get rolling: Congress renewed a package of tax credits and deductions at the end of 2019 and now they’re up for grabs. “Some tax extenders were passed over the holidays,” said Lisa Greene-Lewis, CPA and TurboTax blog editor. “People will want to have the appropriate forms related to them.” Those last-minute tax breaks include deductions for qualified tuition expenses and mortgage insurance, as well as a lower threshold to deduct qualifying medical expenses.

Reporting income

LaylaBird

Employees should expect a Form W-2 from their employer by Jan. 31. This document will detail the amount of wages earned, Social Security and Medicare taxes paid, and state and federal taxes withheld. If you’re an independent contractor, you should expect a Form 1099-MISC from businesses who’ve hired you. Entrepreneurs and freelancers should have already been tracking their income over all of 2019, paying estimated taxes every quarter. Here’s where things can get tricky. Gig economy workers might not get a 1099-MISC; they may receive a 1099-K, which should come in by Jan. 31. This form will show payments received from debit and credit card transactions. “In that first year of operations, small business owners don’t think about keeping track of all their expenses,” said Andy Phillips, director at the Tax Institute at H&R Block. See below for the most important tax forms and when you can expect them:

People who participated in a high-deductible health plan last year with a health-savings account should expect to receive some additional documents, too. HSAs allow you to make tax-deductible or pretax contributions, have them grow tax-free and then use the money free of taxes to pay for qualified medical expenses. If you wound up using any of the cash last year, the bank that administers your HSA will send you a 1099-SA by mid-February. Some taxpayers are going to be forced to wait well into the spring to file. Investors in partnerships have to wait for a Schedule K-1 from the entity. This document spells out the filer’s share of income, losses and dividends. Taxpayers awaiting a K-1 may wind up requesting an extension with the IRS.

Documents for retirees

WHL | Getty Images

Retirees’ days of collecting a W-2 may be over, but they should still watch their mailbox. That’s because the Social Security Administration sends out a statement in January showing the amount of benefits you received in the prior year. If you took a withdrawal from your 401(k) plan or your individual retirement account — or if you received a distribution from a pension or annuity, you should also be on the lookout for Form 1099-R.

Bitcoin reporting

A computer programmer sets up a mining rig to mine for bitcoin. eclipse_images | Getty Images

Sharp-eyed taxpayers will notice that the IRS is asking a new question on Schedule 1 of the 2019 tax return: “At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency?” The agency has signaled that it would take a closer look at cryptocurrency holdings, including sending letters to more than 10,000 taxpayers who may have failed to report income and pay back taxes. The problem taxpayers face with reporting their crypto transactions is that tracking the cost basis or original value of the asset, along with the transactions, can be cumbersome. “Sales and transfers of cryptocurrency are treated like sales of property, but the problem is that the reporting is very sporadic and in many cases you get no Form 1099,” said Phillips of H&R Block. “You need to stay on top of your records.”

Credits and deductions


Company: cnbc, Activity: cnbc, Date: 2020-01-09  Authors: darla mercado
Keywords: news, cnbc, companies, taxes, heres, income, stress, transactions, form, receive, level, returns, expect, tax, taxpayers, lower, 2019, season


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Powerball jackpot hits $258 million. Here’s the tax bite for the winner

Do you have your eyes on that $258 million Powerball jackpot? And that tax withholding wouldn’t be the end of it. Justin Sullivan | Getty ImagesWhether you take the jackpot as an annuity spread across three decades or as an immediate, reduced lump sum, 24% is withheld for federal taxes. The 24% federal withholding would reduce that amount by $42.1 million, leaving you with $133.4 million. And, like the federal withholding rate on jackpot wins, the amount withheld for state taxes might also be le


Do you have your eyes on that $258 million Powerball jackpot?
And that tax withholding wouldn’t be the end of it.
Justin Sullivan | Getty ImagesWhether you take the jackpot as an annuity spread across three decades or as an immediate, reduced lump sum, 24% is withheld for federal taxes.
The 24% federal withholding would reduce that amount by $42.1 million, leaving you with $133.4 million.
And, like the federal withholding rate on jackpot wins, the amount withheld for state taxes might also be le
Powerball jackpot hits $258 million. Here’s the tax bite for the winner Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-08  Authors: sarah obrien
Keywords: news, cnbc, companies, bite, 258, irs, federal, rate, heres, hits, tax, million, taxes, winner, jackpot, powerball, withholding, wins, withheld


Powerball jackpot hits $258 million. Here's the tax bite for the winner

Do you have your eyes on that $258 million Powerball jackpot? So does Uncle Sam. If you’re lucky enough to win the top prize in Wednesday night’s drawing, remember that the IRS gets an up-front piece of big lottery wins. And that tax withholding wouldn’t be the end of it. “There is still a sizable tax bill coming, for sure,” said April Walker, lead manager for tax practice and ethics at the American Institute of CPAs. “Winners have to plan for any additional amount that will be due … to the IRS and the state.”

Justin Sullivan | Getty Images

Whether you take the jackpot as an annuity spread across three decades or as an immediate, reduced lump sum, 24% is withheld for federal taxes. However, the current top marginal rate of 37% would mean owing a lot more. For Wednesday night’s jackpot drawing, the cash option — which most winners go with — is $175.5 million. The 24% federal withholding would reduce that amount by $42.1 million, leaving you with $133.4 million. Assuming you had no reductions to your taxable income — such as large charitable contributions — another 13%, or $22.8 million, would be due to the IRS at tax time (which would be April 2021 for jackpots claimed in 2020). That would be $64.9 million in all going to Uncle Sam, leaving you with a cool $110.6 million.

However, state or local taxes would be on top of that. Those levies range from zero to more than 8%, depending on where the ticket was purchased and where the winner lives. In other words, you could end up paying more than 45% in taxes. And, like the federal withholding rate on jackpot wins, the amount withheld for state taxes might also be less than what you’ll owe. “They might withhold at, say, 5%, but the rate you pay might be 6%,” Walker said. There are ways to reduce the amount of winnings that gets taxed, although not many.


Company: cnbc, Activity: cnbc, Date: 2020-01-08  Authors: sarah obrien
Keywords: news, cnbc, companies, bite, 258, irs, federal, rate, heres, hits, tax, million, taxes, winner, jackpot, powerball, withholding, wins, withheld


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A big tax deadline is just a week away. Here’s what you need to know to avoid underpayment penalties

MaskotWhether you have a side hustle or you’re running your own business, you’re a week away from a major tax deadline. The quarterly deadlines for the 2020 tax year are April 15, June 15, Sept. 15 and Jan. 15, 2021. While employees have taxes withheld from their pay by their employer, people who run their own businesses are responsible for paying self-employment taxes and income taxes four times a year. Late-year surprises can leave taxpayers with more or less income than expected for the fourt


MaskotWhether you have a side hustle or you’re running your own business, you’re a week away from a major tax deadline.
The quarterly deadlines for the 2020 tax year are April 15, June 15, Sept. 15 and Jan. 15, 2021.
While employees have taxes withheld from their pay by their employer, people who run their own businesses are responsible for paying self-employment taxes and income taxes four times a year.
Late-year surprises can leave taxpayers with more or less income than expected for the fourt
A big tax deadline is just a week away. Here’s what you need to know to avoid underpayment penalties Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-08  Authors: darla mercado
Keywords: news, cnbc, companies, need, penalties, underpayment, work, know, big, deadline, week, heres, income, quarter, tax, yearend, taxes, fourth, away, pay, youre


A big tax deadline is just a week away. Here's what you need to know to avoid underpayment penalties

Maskot

Whether you have a side hustle or you’re running your own business, you’re a week away from a major tax deadline. Individuals who pay their estimated taxes every quarter — including independent contractors and members of partnerships — are expected to make their fourth and final payment for 2019 on Jan. 15. The quarterly deadlines for the 2020 tax year are April 15, June 15, Sept. 15 and Jan. 15, 2021. While employees have taxes withheld from their pay by their employer, people who run their own businesses are responsible for paying self-employment taxes and income taxes four times a year.

This means entrepreneurs must crunch the numbers and see how their income and expenses will measure up, as well as figure out what they’ll owe Uncle Sam. “The fourth-quarter estimate is one of the more important quarterly estimates,” said Thomas Neuhoff, CPA and senior associate at Henry & Peters in Tyler, Texas. “You have more information on the full calendar year at this point, compared to a second- or third-quarter estimate.”

Avoiding a penalty

John Ewing | Portland Press Herald | Getty Images

To avoid an underpayment penalty from the IRS, you must pay at least 90% of the taxes owed for a given year — or 100% of the liability from the prior year. If your adjusted gross income on the prior year’s return exceeded $150,000, you’re responsible for 110% of the tax liability. Failure to pay the appropriate estimated tax can result in underpayment penalties. Late-year surprises can leave taxpayers with more or less income than expected for the fourth quarter of 2019.

“Sometimes we have independent contractors or people who work in real estate and work on commission, and they get a big year-end bonus or close a big deal close to year-end,” said Neuhoff. Similarly, large capital gains from a mutual fund you hold in a taxable account can affect estimates, too. Those funds typically distribute capital gains by selling underlying investments during the fourth quarter. Your fourth-quarter estimate should consider this tax liability.

Don’t expect a lighter touch


Company: cnbc, Activity: cnbc, Date: 2020-01-08  Authors: darla mercado
Keywords: news, cnbc, companies, need, penalties, underpayment, work, know, big, deadline, week, heres, income, quarter, tax, yearend, taxes, fourth, away, pay, youre


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New parents can take penalty-free early withdrawals from retirement savings, but it will increase your taxable income

New parents will have one new source to tap for money — their retirement savings. The Secure Act, which was passed by Congress in December, is ushering in some of the biggest changes to retirement savings since the Pension Protection Act of 2006. So technically, a couple could take out up to $10,000 from their retirement savings, as long as they both have separate accounts in their own names. But parents would still have to pay taxes on that income. Aside from owing taxes on that money, it also


New parents will have one new source to tap for money — their retirement savings.
The Secure Act, which was passed by Congress in December, is ushering in some of the biggest changes to retirement savings since the Pension Protection Act of 2006.
So technically, a couple could take out up to $10,000 from their retirement savings, as long as they both have separate accounts in their own names.
But parents would still have to pay taxes on that income.
Aside from owing taxes on that money, it also
New parents can take penalty-free early withdrawals from retirement savings, but it will increase your taxable income Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-06  Authors: lorie konish
Keywords: news, cnbc, companies, parents, taxable, withdrawals, savings, income, increase, pay, penalty, retirement, slott, penaltyfree, taxes, early, money, reason


New parents can take penalty-free early withdrawals from retirement savings, but it will increase your taxable income

New parents will have one new source to tap for money — their retirement savings.

The Secure Act, which was passed by Congress in December, is ushering in some of the biggest changes to retirement savings since the Pension Protection Act of 2006.

But experts warn that tapping your retirement accounts, even if it is to care for a new child, may not be the best financial decision.

First, a look at what the change means.

The new rule will let parents who have a new child take up to $5,000 out of their retirement plan or individual retirement account without having to pay a 10% penalty. Typically, individuals who are under 59½ have to pay a fine when they take those early distributions, except for certain circumstances.

More from Personal Finance:

Why you should consolidate those 401(k)s and IRAs

These are the retirement numbers you need to know in 2020

Why retiring at 65 could become a thing of the past

The $5,000 limit would apply to each parent, including those who have adopted children. So technically, a couple could take out up to $10,000 from their retirement savings, as long as they both have separate accounts in their own names.

But parents would still have to pay taxes on that income.

That’s just one reason Ed Slott, CPA and founder of Ed Slott and Co. in Rockville Centre, New York, said taking these kinds of withdrawals — even if you don’t have to pay the 10% early distribution penalty — is problematic.

One big reason: It’s an expensive strategy.

Aside from owing taxes on that money, it also takes a dent out of your retirement funds. That’s often money that has taken you years to accumulate — and could take years to replace.


Company: cnbc, Activity: cnbc, Date: 2020-01-06  Authors: lorie konish
Keywords: news, cnbc, companies, parents, taxable, withdrawals, savings, income, increase, pay, penalty, retirement, slott, penaltyfree, taxes, early, money, reason


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Bill Gates: My $109 billion net worth shows the economy is not fair

I think the rich should pay more than they currently do, and that includes Melinda and me,” Gates wrote, referring to his wife. “The distance between top and bottom incomes in the United States is much greater than it was 50 years ago,” Gates wrote in a blog post reflecting on 2019 published Tuesday. Bill Gates — the second richest person in the world with a current net worth of $108.8 billion , according to Forbes — says his extreme wealth is not fair. Many have joined the Giving Pledge, promis


I think the rich should pay more than they currently do, and that includes Melinda and me,” Gates wrote, referring to his wife.
“The distance between top and bottom incomes in the United States is much greater than it was 50 years ago,” Gates wrote in a blog post reflecting on 2019 published Tuesday.
Bill Gates — the second richest person in the world with a current net worth of $108.8 billion , according to Forbes — says his extreme wealth is not fair.
Many have joined the Giving Pledge, promis
Bill Gates: My $109 billion net worth shows the economy is not fair Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-03  Authors: catherine clifford
Keywords: news, cnbc, companies, fair, 109, economy, billion, pay, gates, worth, taxes, shows, bill, going, work, net, tax, buffett, cuban, wrote, wealth


Bill Gates: My $109 billion net worth shows the economy is not fair

“I don’t see any reason to favor wealth over work the way we do today,” he wrote. It’s “the clearest evidence I’ve seen that the system isn’t fair,” he said.

Specifically, he said there should be a higher capital gains tax (a tax on money made on investments), which would disproportionately affect the wealthy. None of the richest people in the world have made their fortunes solely through a salaried job, and for that reason Gates believes the government “should shift more of the tax burden onto capital” rather than labor.

“I’m for a tax system in which, if you have more money, you pay a higher percentage in taxes. I think the rich should pay more than they currently do, and that includes Melinda and me,” Gates wrote, referring to his wife.

To solve the problem, Gates said the U.S. government should raise taxes that affect the wealthy.

“A few people end up with a great deal—I’ve been disproportionately rewarded for the work I’ve done—while many others who work just as hard struggle to get by,” he wrote.

“The distance between top and bottom incomes in the United States is much greater than it was 50 years ago,” Gates wrote in a blog post reflecting on 2019 published Tuesday. (Indeed, American income inequality is at its highest level in decades, according to U.S. Census Bureau’s Gini index .)

Bill Gates — the second richest person in the world with a current net worth of $108.8 billion , according to Forbes — says his extreme wealth is not fair.

Billionaire tech entrepreneur and investor Mark Cuban has also highlighted how the difference between the investor class and paid labor is a factor in the wealth gap.

“If someone is only going to be paid by the hour…they’re always going to fall behind,” Cuban told Recode Decode in May. “And income distribution is … [the] disparity is going to get wider and wider.”

While Cuban has called paying taxes “patriotic,” he also suggests founders and owners should distribute stock in the company to employees to bring them into the investor class.

“We as entrepreneurs have got to make a point to give stock to everybody that works for us. Period. End of story. No exceptions, because that’s the only way people are going to get any type of equity appreciation.”

Cuban said he did just that with online streaming service Broadcast.com, which Cuban co-founded and sold to Yahoo in 1999 for almost $6 billion in stock. “Three hundred out of 330 [Broadcast.com] employees became millionaires” at the time of its sale, Cuban previously told CNBC Make It.

Gates also said in Tuesday’s blog post that the U.S. should have a higher estate tax, which would affect the rich.

“A dynastic system where you can pass vast wealth along to your children is not good for anyone; the next generation doesn’t end up with the same incentive to work hard and contribute to the economy,” Gates said.

Gates said it’s one of the reasons he co-founded The Giving Pledge with Warren Buffett (who has also said the rich should pay higher taxes). The Giving Pledge invites billionaires to commit to giving away the majority of their money to charity, and both the Gates and Buffett have made the pledge.

“I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy,” Buffett wrote in The New York Times in 2011.

“Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering,” Buffett added. “My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

Fundamentally, whether through taxes or philanthropy, extraordinary wealth needs to be reinvested in society, according to Gates.

“Melinda and I believe that driving progress is wealth’s highest purpose,” Gates wrote in Tuesday’s blog post. “Our wealth comes with an obligation to give back to society, and in 2020, we’re committed to continue living up to that obligation: through our taxes, through our foundation, and through our personal giving.”

See also:

Mark Cuban: Workers paid by the hour are ‘always going to fall behind,’ making wealth inequality worse

What billionaires said about wealth inequality and capitalism in 2019

Billionaire Warren Buffett says ‘the real problem’ with the US economy is people like him


Company: cnbc, Activity: cnbc, Date: 2020-01-03  Authors: catherine clifford
Keywords: news, cnbc, companies, fair, 109, economy, billion, pay, gates, worth, taxes, shows, bill, going, work, net, tax, buffett, cuban, wrote, wealth


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How to get a bigger tax refund from the IRS in 2021

kate_sept2004It’s about to get a little easier for you to figure out how to break even or get a bigger tax refund from Uncle Sam. Tax withholding is a balancing act. You can even aim for a refund of approximately $0, meaning you’ve just about broken even with the IRS. A total revampErich Schlegel | Getty ImagesIn December, the IRS released a new Form W-4 for the 2020 tax year. Workers use this document to detail how much income tax is withheld from their pay.


kate_sept2004It’s about to get a little easier for you to figure out how to break even or get a bigger tax refund from Uncle Sam.
Tax withholding is a balancing act.
You can even aim for a refund of approximately $0, meaning you’ve just about broken even with the IRS.
A total revampErich Schlegel | Getty ImagesIn December, the IRS released a new Form W-4 for the 2020 tax year.
Workers use this document to detail how much income tax is withheld from their pay.
How to get a bigger tax refund from the IRS in 2021 Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2020-01-03  Authors: darla mercado
Keywords: news, cnbc, companies, bigger, taxes, irs, income, 2021, spouse, number, youll, tax, refund, withholding


How to get a bigger tax refund from the IRS in 2021

kate_sept2004

It’s about to get a little easier for you to figure out how to break even or get a bigger tax refund from Uncle Sam. The IRS kicked off the new year with a revamp of its tax withholding estimator tool, a calculator that helps you fine-tune the amount of federal income taxes that are pulled from your paycheck. Tax withholding is a balancing act. If you withhold too little, you will wind up owing the IRS when you file your taxes. Overpay your taxes, and you’ll get a heftier refund. The downside is your take-home pay will go down. More from Personal Finance:

Time is up for maximizing this new tax play

Why you might not want to put all your money in a Roth IRA

Paying off that holiday debt could take 5 years This latest round of updates to the IRS withholding tool allows users to plug in their pay information and find out how much they may owe or get back in the 2020 tax year. This is for the return you’ll be filing in April, 2021. An interactive slider on the calculator allows you to tweak your expected refund or lower your expected bill in increments of $250, and gives you directions on how to adjust your withholding — as well as that of your spouse — to get the desired amount back.

You can even aim for a refund of approximately $0, meaning you’ve just about broken even with the IRS. “A lot of people want to tailor their refund; they might not want it to be so big that they don’t have that money throughout the year,” said Eric Smith, a spokesman for the IRS. Be aware that it’s mostly too late to overhaul your 2019 tax picture, but you can right the ship for 2020.

A total revamp

Erich Schlegel | Getty Images

In December, the IRS released a new Form W-4 for the 2020 tax year. Workers use this document to detail how much income tax is withheld from their pay. This new form, along with a 2018 overhaul of the withholding tables, reflects changes from the Tax Cuts and Jobs Act. The new tax law, which took effect two years ago, nearly doubled the standard deduction, eliminated personal exemptions and curbed certain itemized deductions, including applying a new $10,000 cap on the state and local tax deduction. Under the old law, the IRS used to ask taxpayers to detail the number of allowances claimed on their W-4. The more allowances you claimed — for yourself, your spouse and your dependents — the less tax you’d have withheld from your pay.

A lot of people want to tailor their refund. Eric Smith IRS spokesman

Now, those who might have taken many allowances could find themselves paying far too little in taxes. “The tables were adjusted, but people didn’t adjust their withholding,” said Cari Weston, CPA and director of tax practice and ethics for the American Institute of CPAs. “They got more in their paychecks and were in a panic because people owed the IRS when they normally didn’t or their refunds were smaller,” she said. The new W-4 now wants you to detail the number of qualifying children in your household, as well as the number of “other dependents” you care for.

You would also be factoring in the $2,000 child tax credit for each kid under 17 or the $500 credit for other qualifying dependents. Further, the IRS wants you to share information on whether you held more than one job, or whether you and your spouse work and file jointly. This way, you can pinpoint your withholding based on income earned from all those jobs. “The old W-4 never considered that people would have multiple sources of income,” said Weston. You can also spell out the number of deductions you expect to claim if you think you’ll be itemizing on your return. This way, you’d lower your withholding and take more money home.

Update your withholding

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Company: cnbc, Activity: cnbc, Date: 2020-01-03  Authors: darla mercado
Keywords: news, cnbc, companies, bigger, taxes, irs, income, 2021, spouse, number, youll, tax, refund, withholding


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