In France, Sweden and Spain the government collects tax data from employers and then sends out a pre-filed form to the taxpayer to sign and return.  If the U.S. had a similar program it could work for about 40% of Americans whose tax filings are straightforward.

But in the USA you are in charge of your tax filing.  Remember MoneyYOYO – you are on your own.

Have you gathered all the necessary paperwork to complete your tax filing?  Keep those mailings with the important words on it – “this is important tax information”.  At a minimum you will need your W-2 that states your taxable wages and taxes withheld.

IRS.gov provides information about the federal tax filing and you can print off the necessary forms you will need.

If you decide to use a tax preparation software package, the software will tell you what information you need to complete your taxes.

In 1969 the federal tax code was 16,500 pages.  In 2013 the federal tax code had 73,954 pages.  Very little is straightforward about the U.S. tax code.  Tax reform is desperately needed, but it is doubtful it will happen any day soon.

90% of Americans use a CPA or tax preparation software packages such as TurboTax and others – TaxACT, H&R Block to file their returns.  If your taxes are straightforward a tax preparation software package will work for you.  Or if you are up to the challenge you can file your taxes yourself.  If your finances are complicated you may need the help of a CPA.

There are also state and local taxes to pay.  All 50 states have very different state tax codes.  Consult your state’s website to gain more information on filing state tax filings.

Credit scores determine your ability to get a loan and the interest rate that you will be charged.  A good credit score is necessary to obtain a car loan or a mortgage loan.

Contrary to what you may think, a credit score has nothing to do with your income, your savings or your employment history.  There are two scoring systems – FICO and VantageScore.

FICO uses the following primary variables to score your credit:

• On time payment history – 35%
• Amount owed – 30%
• Length of credit history – 15%
• Type of credit used – 10%
• Number of credit cards applied for in short time – 10%
• Scan public records for bankruptcy and court judgments

An excellent FICO score is 720 and above.  A good FICO score is 680 to 719.  More scrutiny is done on credit scores of 620 to 679.  You are usually disqualified from loans if your score is below 620.

The 3 reporting agencies are Experian, Transunion and Equifax.  You are entitled to a free report once a year by visiting annualcreditreport.com or calling 877-322-8228.

A 2013 FTC study found that 1 out of 5 consumers had an error on one of these credit reports.  You have to take the initiative to see if there is an error and then you have to report it.  Good news is that 4 out of 5 consumers who complain win a change to their credit report.

So, how do you improve your credit score?  The most significant way is to pay your bills on time.  Second, is paying off your debt on time.  If your debt is turned over to a debt collector, it harms your credit score.

The scoring companies use a ratio of outstanding debt to your credit limit.  You can take action to change the numerator or denominator of this ratio to improve your score.  The simplest way is increasing your credit limit.

It is important to have a good credit score, but don’t get carried away with manipulating the scoring formula.  Good financial planning and budgeting is a better long-term plan for obtaining a good credit rating.

You need credit for the scoring companies to give you a score. You need to use a credit card to obtain a credit history.

Comment:  If you are enjoying this blog, like it on Facebook.  Follow this blog if you find it useful.  Comment if you have suggestions for the blog.

Other Sources:  Lew Sichelman, Chicago Tribune, “New credit score is more inclusive”, Dec. 8, 2013; Shaila Dewan, “Buying Street Cred”, New York Times, Feb. 16, 2014

 

 

If you have no student loans, please thank yourself, your parents or whoever paid for that expensive education for the wonderful and unique situation that you are in.

More than 70% of students leave school in debt and one of every seven borrowers falls behind within 3 years of graduating or dropping out.  One out of 8 borrowers are defaulting on their loans.  The average loan amount is $29,400.  Nationwide student debt totals $1.2 trillion.  About half of that debt isn’t being repaid.

Most loans are in either standard 10-year repayment programs or in extended programs, which stretch loan payments and interest over longer periods.  Only about 10% of borrowers are enrolled in an income-based repayment program.

A large number of people have not taken advantage of these income-based programs. These programs can help you with repayment of these loans.

If you are having trouble making your loan payments or have fallen behind with your loan payments or have quit paying at all on your student loans, you should find some help.  These loans are not going away doing nothing.

There are programs that allow you to pay 10% of your discretionary income each month as a loan payment and then loans are forgiven after 20 years if you work in the for-profit sector.   The loans are forgiven after 10 years if you work for a non-profit or federal, state or local governments.

If you are having difficulty finding help, you can contact student.ed.gov that provides you with information about these programs.

If you have loans from the bank-based student loan program that ended in 2010, you are also eligible for income-based repayment plans.

If you are having problems getting answers you can contact the Consumer Financial Protection Bureau to make a complaint.  If there are enough complaints about a lender, it will be investigated.

Financial comment:  If you are planning to borrow money to finance higher education, remember two rules of thumb:

1. Borrow no more money than you can pay off in 10 years
2. Borrow no more than what you expect to earn when you achieve your degree.

Kowalczyk comment:  Blogging in Key West is a joy.