Collections

Why You Need To Always Make Collection Agencies Prove Your Debt

Last year we wrote a post titled 5 Rights You Have With Collection Agencies. The beginning of our second right was this sentence: “You have the right to ask them to prove you owe what they say you owe”. Turns out this is important advice and we’re going to tell you why.

Over the last year there have been some collection agencies that were fined for trying to collect on debts that didn’t exist. One of those companies, Expert Global Solutions, was hit with a $3.2 million fine for that and other illegal practices. In September, National Attorney Collection Services Inc was fined $1 million for the same, as well as representing themselves as a law firm and violating the confidentiality of those it was trying to get money from.

There’s two things most people don’t know about credit.

First, since most large companies get their money from insurance claims if they’re not paid, they’re getting paid a second time when they give these accounts to collection agencies, and they’ll do almost anything, including lie and harassment, when they’re able to earn anywhere from 80-92% or sometimes even more of their initial investment.

Second, it’s true that if you have something hit your credit report that if you don’t pay it in 7 years it falls off your credit report (well, not medical bills or anything owed to the government, but everything else). However, if a collection agency gets its hands on this stuff they can legally keep chasing you for the money.

One other thing collection agencies are counting on is your not having any record of an outstanding claim, thus feeling pressured and anxious when you get that sudden phone call. These days they’ll even call you on your cellphone, although if you tell them they’re violating the Telephone Consumer Protection Act and that you’re going to report them to the federal government they’ll probably hang up and leave you alone for a while because the fine they’ll get is sometimes higher than any money they get from you.

In any case, what happens sometimes is they’ve laid their hands on some paperwork and falsified a number, but you’ll never be able to investigate it for yourself if you don’t request anything from them. And sometimes when you request information, they’ll never call you again because they don’t really have anything to send you, since they have to send you not only proof of the outstanding debt but proof that the original company billed you for it.

It’s always wise to ask for proof whenever someone wants your money, but when it comes to collection agencies, who can hurt your credit, it’s critical to do.
 

Finances

5 Things To Know Before You Start Investing Your Money

It’s not a bad idea to think about finding ways to grow your finances through investing. With that said, one has to know that investing can be dicey, and rushing into it without knowing the good and the bad is basically gambling with your finances. I know many people who were cruising along with their investments until the recession of 2008-2009 hit, and many people lost money needlessly, although those who were able to weather the storm made it back and more over the last couple of years.

It’s not that investing isn’t easy; it really is. All you have to do is give the right person some money and off you go. But how do you determine who the right people are? Here are 5 tips to help you:

1. Ask people who they invest with specifically, but initially only stick with people you can talk to or research online. Everyone knows at least a couple of people who are investing their money in some fashion, whether directly with a broker or through some plan at work. If you can, get names of some of these brokers and the names of their company as well. If you can find out who’s backing them even better, as many brokers are associated with a specific trade organization.

2. Research everyone, always. Ever heard of Google? There’s no excuse for not going online to check out every person whose name you might get, as well as learning something about the companies they work with. Just because someone might not be online may not mean they’re not capable, but the way I see it if they’re not visible online and you can’t get information on them be wary.

3. If they claim high rates of returns, beware and research strongly. Remember the name Bernard Madoff. There were a lot of people vouching for this guy, many famous people who thought they were making money hand over fist, and when it all came crashing down it was ugly, not only for Madoff’s family and people who were cheated but people who had cashed in, thinking they’d earned their profits legitimately and suddenly found themselves being sued by the government to return those funds. When something sounds too good, it’s smart to look at the negative reviews and see why some people might not trust them; there was a lot out on Madoff that those investing with him decided to ignore.

4. Only invest what you can stand to lose. Starting off relatively small, maybe $100 a month if you can handle it, is a lot smarter than giving someone $5,000 without knowing if you might have something major coming up such as having to replace a furnace and not having the funds to take care of it. No matter how much you invest, the returns are relatively small percentage wise, even with the most aggressive investing position. Always take care of your present as much as your future.

5. Even if you don’t understand it, make sure you talk to your broker at least once every 3 months and open your mail regularly. A big mistake many people make is not opening up their mail and seeing if their money is moving in a positive direction or not. A secondary mistake is not keeping up with their brokers, who are sometimes known to leave and suddenly you have no idea who’s managing your money, if there is anyone managing it.
 

Tax Preparation

15 Tax Related Events Affecting You In 2014

If you were hoping for 2014 to be a good year when it came to tax related items we’re sorry to be the bearers of bad news but it’s not happening. That Congress is actually talking and starting to get things done is nice. Unfortunately, unless they take up some of the items on this list there’s little benefit to we, the taxpayers, in 2014. If you acted quickly before the bell tolled on December 31st you got the best you were probably going to get.

It’s not all bad, and in actuality, saying things are bad is kind of a misnomer. What’s happened is all the tax breaks that were pushed through during the Bush Administration, as well as some of those the Obama Administration allowed in 2009 and 2010 when the economy was in the tank, have expired. It’s good and bad news in a way. The good news is that the government will generate more income, and with spending still in check the deficit will come down. The bad news… there’s a lot that’s going to cost us, or not benefit us anymore. Let’s look at the list:

1. Mileage reimbursement falls from 56.5 to 56 cents a mile. That’s not too bad but it’s still less for our business expenses.

2. Teachers were allowed to deduct $250 worth of pencil and paper purchases if those items went for their students; yes, some teachers actually do this. Unfortunately, that deduction is gone.

3. If you missed the cutoff for the 10% tax break on energy efficiency that’s too bad because it’s gone now.

4. We used to be able to write off mortgage premiums if we put down less than 20% on a home purchase. It’s not totally gone, but it’s only available if you itemize.

5. In 2013, if you commuted to work you could deduct up to $245 a month, the same as the parking deduction. In 2014 the commuter benefit drops to to $130, but the parking benefit is the same.

6. Did you try to conserve by buying an electric car? You used to get a tax credit of $7,500; that’s now gone.

7. If you or anyone invested in a small business you used to be able to write off 100% of it. That now goes to 50%.

8. Late in 2013 there was a lot of talk in Congress about extending a tax benefit to help college students or parents of around $4,000; it didn’t pass, so it’s now gone.

9. The standard deduction rises to $6,200 (was $6,100) for single taxpayers and married taxpayers filing separately. The standard deduction is $12,400 (was $12,200) for married couples filing jointly and $9,100 (was $8,950) for heads of household.

10. As you know, the Affordable Care Act has gone into effect. You actually get a tax credit for this of 72.5% as long as you pay more than 50% of the premiums on a qualified plan. This means if you’ve qualified for a reduction of more than 50% of your premium, you can’t write anything off.

11. While we’re talking about health care, if you don’t get it or have coverage at least 8 months during the year it’ll cost you either a flat fee of $95 or 1% of your taxable income per uninsured adult and $47.50 per child (up to $285 for a family), whichever amount is higher. By the way, it jumps much higher in 2015.

12. The top tax rate in the country goes to 39.6% and is for individuals that make $400,000 or married couples filing jointly who make $450,000.

13. While we’re talking about tax rates, those folks who make more than $200,000 ($250,000 for married couples) will have to pay a Medicare surtax in 2014.

14. If you’re self employed, you get a little bit of a break. You get to claim a deduction for your home office of $5 per square foot as opposed to going through all those weird calculations your accountant has always had to figure out before.

15. The federal government is recognizing all same sex marriages this year, which means that gay couples will be subject to paying the marriage tax like every other couple this year, even if you’re living in a state that doesn’t recognize your marriage.

The one caveat we can give everyone is that there has been some talk that Congress might bring some of these back in 2014, in which case you’ll still get to make those deductions at the end of the year. We’ll see if it works out.
 

Tax Preparation

Time To Think About What To Put Together For Next Year’s Business Taxes

Back in September 2012 we had a post titled Are You Preparing For Next Year’s Taxes. In that post we gave some general ideas of things you should have started preparing early to give to your accountants, or to have if you’re doing your own taxes, for the next year. Since it’s hard to get people moving that far in advance we decided to do it in December this year. So while you’re thinking about Christmas or other holiday gifts, keep these things in the back of your mind:

1. Mileage. We had mileage in our previous post but we’re taking it a bit further. Our hope is that you at least kept a calendar of all your business events and travel for the year, even if it was just meetings or business luncheons. Maybe you kept receipts from the post office or Fed Ex; if you had to drive to those places that counts as business mileage. Educational seminar; you can use the mileage for that as well. If you’ve kept up with it all on a monthly basis this will be a snap; if not, well, it’ll take some time, but it’ll be worth it.

2. Receipts. Do you keep all your business receipts in one place? Are they in order? They don’t necessarily have to be for some accountants but if you can help out they’ll appreciate it. If you work in a home office do you have expenses that your business takes a chunk out of such as internet access, utility bill, cellphone bills or things like that? Hey, every little bit of expense helps.

3. Amount of pre-paid taxes. Whether you’ve paid a lot or a little, it all helps your accountant figure out just what you owe. You might have to indicate it on a bank or credit card statement but hopefully you’ve kept track of it in some fashion.

4. Advertising and other business expenses. Sometimes people don’t think about this as a business expense if all that was done was printing some letters and mailing them out but if you spent money doing it, it counts. If you have a website how much as you paying for hosting and for your domain name? If you paid someone to write for you that’s another expense you get to claim.

Just a few things to help get your mind thinking about expenses to help you pay less on your taxes in the coming year; good luck.
 

Budgeting

Setting Financial Goals

As we get closer to the new year, it’s a good time for you to start thinking about financial goals. Those goals will be different if you’re a business, an independent professional or an individual or family, but it’s still important to work on setting at least a few goals.

There’s always a debate about whether it’s better to set goals that are definitely reachable or whether thinking outside of the box and shooting for the moon is the way to go. Truthfully, the best goals are the ones where you actually have some kind of control over it because it’s easier to stay focused. For instance, if you said you were going to save $25,000 but you only make $30,000 a year right now and have $5 in your savings account, it’s probably a very unrealistic goal without some other plans that have nothing to do with finances.

All financial goals are about 3 things: saving money; reducing debt; and increasing income. You can set your goals based on one thing, or you can try to do something with all three. If you’re already doing well financially maybe you don’t have to worry so much about the last one, and yet even there the concept of income isn’t a strange one, as income is more about growing your money than about finding a new job.

Whereas when we talk about budgeting we always start with figuring out income, when setting financial goals you always think about your debt first. This is because most people have higher debt, as it pertains to percentages at least, and it’s probably the most important thing to know where you stand.

Next on the list comes saving money. This is important because it’s your first step towards becoming fiscally responsible. Saving money takes on two forms. One is actually saving money, such as in a bank, investments, etc. The other is saving money on purchases, whether it’s new items such as clothing or items such as food, which are recurring purchases. There are families that learn how to save $100 or more each month just using coupons or store coupons at stores they don’t usually frequent. Just imagine how important an extra $100 is a month without having to worry about an increase in taxes.

Finally comes the topic of increasing income. It’s last on the list for two reasons. One, not everyone has to deal with this one as a definite thing, although looking at different ways to invest money in higher yield returns might not be a bad idea. For some people however this will be important if they’re just barely getting by on what they make now. We’ve previously warned people about the tax dangers of part time jobs but that might be one way to go. Another way to go is to see if you can get a raise where you work. If it’s a large company where you can’t just ask for a raise, it might be time to broaden your scope of employment opportunities for something that pays better.

No matter what you do, setting goals is only the first step. No goal can be achieved without plans for how you hope to get there. Of course if you ever need help in that arena, give us a call. 🙂
 

Accounting & Financial Advice from the Syracuse NY area