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Most real estate agents will tell you this. The worst of the housing market slump is behind us. We have seen housing prices fall nearly 30% and are now ready to see some stability re-enter the market.. We should see the property market staying pretty flat all the way through to 2012, however before we see some stability be prepared for another fall of at least 8-10%.  The question that must be brimming through minds at the moment is: How is this going to affect me?

Housing Market 2010: Consumer Outlook

With changes in the property market, consumers can look forward to the following housing market forecast for 2010

• Affordability

The primary thing to remember at the moment is that for the last 3 years or so housing prices have been inflated. With the latest bust in the housing bubble, homes now and for the next couple of years will be more affordable than ever. In addition to this, one should also keep in mind that low housing prices coupled with low interest rates of 5.15% percent or thereabout make this and the coming months the idea time to buy property.  It might also please buyers to know that interests rates are expected to stay low over the next few months.

While considering the above, there is a flag that you might need to watch out for.  Builders have belief that single-families will be re-entering the market soon. As a result of this they have been applying for permits to construct such dwellings. This is a sign that the housing market could be seeing stability sooner rather than later.

• A Buyers Market

If you have been waiting for an opportune moment to enter the housing market and purchase your first property, this may be your time. Remember that while prices are expected to stay low over the next year or so, these conditions will ease as the housing sector experiences improvements and prices will once again start to rise. Moreover the decision of the government to expand and extend the first home buyers tax credit to not only include more individuals at a higher salary bracket, but to also include individuals who have previously owned makes this the right time to enter the market. Another interesting fact is that while cash is king in the lower tier housing sector with the increased supply of middle to top end properties, if you can stick to your guns you might just be able to pick up a very good property at an absolute steal price.

• Sellers Beware

If you are a seller and are looking to list your property on the market and are not in a desperate situation, then it may be a good idea to hold off for a bit. With the increase in the number of buyers and the falling prices of houses in a same tier most good properties have lost their appeal and hence are no longer facing the prices they should have. This will also be re-asserted should you get a valuation or appraisal done on your property. Your property would either not have moved in value in comparison to when you bought it, or might have only slightly appreciated or in the worst case scenario would have depreciated in value. Hence it might be a good idea to hold off on selling your property at the moment.

Apart from homebuyers and sellers, we have some advice for owners as well. Let us not forget that nearly a quarter of the country is up to get their adjustable mortgage rates adjusted this year. If you feel that you are in a good position to refinance then this may just be the best time to refinance your mortgage and save yourself a rate increase.

This is what the housing sector could look forward to in the new year. On the whole the housing market outlook on the year 2010 remain positive and we hope that a lot of financial sectors including the housing sector will stay stable and start showing signs of sustainable growth.

References:

1. Make money in 2010 – Your home – CNN Money
2. US home builders expect sales improvement – All Business

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The last year has been an extremely turbulent time for money markets across the globe. Investors have seen their investment portfolios dwindle to shadows of their former selves, Investment giants have collapsed, been forgotten and swept under the rug only to be replaced by new investment majors. A lot of clients have lost most of their life’s savings and retirement funds. Clients have also made investment blunders by selling at the bottom of the market only to see the market rise 60% in a matter of months. All these facts makes one question, is there really a point to investing in the market and buying stocks and holding direct equity more so?

Why Owning Stocks Is A Good Idea

So with investments falling through across the board, why should investors consider buying stocks? There are several reasons why it it sensible to buy stocks in the current climate

1. Beating Inflation: As known to most inflation is the biggest detriment to individual savings. It is what the market calls an erosion of savings. Look at it this way if you store your money as cash in a safe or a vault your money is not working for you. While the face value of your money remains the same, the prices of goods and services around you rise at a steady inflationary rate. Even if you held your money in CDs or a savings account, in reality your money would indeed be growing at a slower rate than the rising prices of goods and services thereby causing you to lose money in reality. On the other hand by buying stocks and holding your funds in stocks would mean that your money would be growing faster than the inflation prevalent in the market place. The long term moving average of stocks show that they have always out performed the inflation bench marks. The most important thing at the moment is getting started and getting into the market and not worrying about what the market seems to be doing or where it is headed.
2. Stocks The Way To Go: The reason why most experts recommend that buying stocks are the way to go is for these simple reasons. Let us assume that you invest $5,000 for 35 years in a savings account or in a certificate of deposit. Assuming that as last year the inflation rate remains at 3.8%, you would have only made approximately $2,200 in today’s terms, even though the amount in reality would be something close to $8,000 plus, owing to the fact that these instruments on average offer no more than 1.5 – 2% annually. On the other hand a similar if you buy stocks and had invested in stocks, you would have made in the region of  $70,000 plus and in today’s terms that would have been close to $21,000 and above owing to the fact that on a conservative estimate basis, stocks offer 8% on a long term moving average basis. Hence you actually stand to lose by placing your money else where.

Even though you might consider that the market is a risky place in light of the current economic downturn, let us allow the figures to speak for themselves. Had you bought stocks and invested in the year 2002 after the tech crash, you would have seen your funds increase by roughly 33 percent in year one, 44% in year  and by the fifth year you would be up by as much as 92-95%, there by almost doubling your investment in buying stocks in a matter of 5 years. Even if you suffered a loss with recent global meltdown, bu buying stocks you would still be ahead by about 30 plus percent.

Hence to sum what we have already stated, it might be a good idea to buy stocks and invest in the market especially in this climate when everyone is looking to exit, anticipating a fall. However, as with any investment decision, it is always prudent to consider your own personal circumstance and risk tolerance prior to making any decisions.

References:

1. Roadmap to Riches – MSN Money
2. Is Now the Time to Buy Stocks? – The Wall Street Journal

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If you haven’t started planning for your retirement yet and are in your sixties, it may be a good idea to start taking time out to plan your retirement and ensure a secure retirement future for yourself. If current statistics are anything to go buy, most individuals leave the work force by the age of approximately 62. In addition to this only about 12-15 percent of these individuals feel that they will have sufficient funds in their retirement. The most recent of economic downturns has left several individuals in the lurch about the fact whether they will have sufficient income during retirement from the defined benefit plans.  In addition to this it has also been estimated that unlike previous years, retirees nowadays carry an average debt of $50,000.

If all this has made you feel that you too might be in a similar boat here are a  few tips to help you plan your retirement better and ease in to the transition and ensure retirement security.

Retirement Guide – Tips To Help Secure Your Retirement

1. Set Your Retirement Date: By setting your retirement date, you will be able to zero in on a time frame and hence gauge whether your current savings are sufficient to last you and guarantee you a secure retirement. If this is the case you may be able to extend the date a little longer there by giving yourself a couple more years to boost your retirement savings. However if you feel that you are already in that position it wouldn’t make any sense in prolonging your retirement more than you would have to.
2. Place: Another important decission which you will need to consider where are you going to retire to? Are you going to stay in an unencumbered house, or are you going to downsize to a smaller place? Are you going to be carrying be a mortgage or will you be debt free? Are you going to move to a retirement village or relocate etc. These questions will also help you decipher the amount of money you will require in your retirement and ensure retirement security.
3. Insurance Options: One fact that all retirees must consider is getting long term care insurance. While experts suggest that getting this prior to the age of 65 is not good, prolonging it may mean that you develop a condition or suffer an illness that will disqualify you from getting this insurance. It is always advisable to consult an expert in the field prior to getting this insurance.
4. Debt: Most individuals like to enter their retirement phase debt free. In order to do this make sure that as you approach your retirement date you have paid out your outstanding credit card balances and any other looming debt that you have so you can enjoy a hassle free and secure retirement. Some individuals may also think it prudent to consult an attorney or bankruptcy expert with regard to these issues.
5. Budgeting: Once you have detailed the above it is always advisable to budget to ensure retirement security. Creating a budget will ensure that you have planned your retirement expenses and have an estimate as to what your spending should be through the years so as to ensure that you do not deplete your hard earned money all too quickly.
6. Checking Your Social Security Options and Estate Planning: Individuals can start drawing on their social security benefit payments by the age of 62. However, if you prolong this, it will ensure that your benefit checks are larger, thus guaranteeting you a more safe and secure retirement. While looking into your social security payments and benefits options, it may also be advisable to consider estate planning. If you have not made a will and a power of attorney then it might be time to make sure that these are in place to ease your affairs for your loved ones on your passing. If however you have already had these drawn up then it may help to have them reviewed.

There are a few simple steps that should help you plan your retirement out better and ensure a happy, peaceful and secure retirement.

References:

1. Retirement Advice – Wallet Pop
2. Plan Your Retirement – Social Security Online

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On November 6th President Barrack Obama signed a bill extending and expanding the tax credit for first homebuyers. The $8,000 first home buyers tax credit has been extended till June 30. In addition to this the government has also decided to expand the tax credit to another $6,500 to encompass current home owners who are looking to make new purchases.

Changes To The Homebuyers Credit

In an interesting move by the government to spur market sales the government has extended the homebuyer tax credit to existing homeowners as well. In order to qualify for the homebuyer credit, homeowners should have lived in their existing properties for a period of 5 years consecutively in the last 8 years. In addition to this, the grant for the first home buyers has also been revamped. To qualify now individuals should earn less than $125,000 and couples should have a combined income of less than $250,000. These amounts have been revised upwards from $75,000 and $150,000 respectively.

Homebuyer Credit Stimulus – What It Means

This brings us to the next topic of discussion, what of this information do you need to know:

1. Buyers Are Expected To Surge: If you are a seller who is waiting to sell his property but has been unable to owing to the slack demand in the market, this might be the right time. With the extension of the homebuyer tax credit, experts expect there to be a surge in the numbers of buyers in the market. In addition to this one must also keep in mind that the extension of the homebuyer credit grant in conjunction with the expansion to include existing home owners and low interest rates, makes this a largely buyers market.
2. Timing Is Important: While home buyers have up to April 2010 to make the homebuyer credutgrant, as long as it is under contract by then, only as long as they close it out by the end of June. However, while consumers think that this is a lot of time, in reality they should start shopping now if they feel they are eligible. In the housing world a couple of months is not enough of a window to close the deal. It would be beneficial to have the property under contract by the end of March 2010 so as to ensure you have enough time to close the property.
3. Slow Months: While the seller are headed into the months which are traditionally regarded as the slowest for the real estate industry, with the extension of the homebuyer tax credit and also it’s expansion, a lot of new buyers are going to rush into the market therefore making these slow months rather busy to ensure that they make the grant in time.

If however you are in the middle of negotiations or have recently signed a contract it may be beneficial to check your eligibility. As a first step contact your real estate agent or banker to ensure that you can take full advantage of the grant. This extra money will go a long way irrespective of if you are a first home buyer or a existing home owner.

In addition to this prospective home buyers should remember that they can take advantage of the tax credit as long as they have a contract by the end of April and close it out by the end of June. Hence it is very important that consumers time their purchase decisions and ensure that they have sufficient time to make the grant.

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In the not so distant past it was possible to get a no down payment mortgage loan or a 100 percent lend as the market place calls it. However with the recent economic meltdown and tightened lending policies, no deposit loans are fast becoming the “Dodos” of the banking world. In other words they are extinct. This leaves clients with the obligation of coming up with sufficient funds to be able to secure a mortgage nowadays.

Come to think of it, one of the chief advantages of putting down a down payment for mortgage is that it creates instant owners equity in the market. In addition to this, the larger the down payment, the smaller your monthly interest payments on your mortgage.  In addition to this several industry experts have found that several first homebuyers who are not accustomed to owing a property find it hard to cope with owning an maintaining their homes. Hence as a precaution it is advisable that individuals should not allocate all their money towards their down payments and should store a bit in reserve. As a result of this a lot of mortgage programs nowadays have cash reserve requirements for individuals.

Getting A Down Payment For House

Some quick fixes to getting a house down payment are as follows:

• Ask your parents for the deposit amount as a non-repayable gift. This will ensure that the banks do not treat the mortgage down payment amount from your parents as another debt.
• You can also create your house down payment by selling assets such as cars, boats, bikes collectibles etc.
• In addition to this you could also liquidate your investments such as stocks and managed funds.
• Another alternative for a down payment mortgage could easily be recycling your tax refund and using that as a deposit.
• You could borrow the mortgage down payment from your IRA account.
• If you have received a bonus at work and are planning to buy a property, set this amount aside to use it as your down payment.
• In addition to the above-mentioned methods you could also look into private mortgage down payment assistance programs or if you are an employee of the government you could look into home buyer programs for public servants.

Alternative Methods To Getting a Down Payment

• Government Backed Programs: Apart from the above-mentioned methods there are other alternatives to securing a house down payment for your mortgage loan as well. For instance, The FHA backed mortgage Insurance program allows borrower to secure a loan with as little as a 3% deposit, the entire of  which could be a gift. However, you must be a approved applicant first. In addition the loan programs run by the Department of Veteran Affairs allows retired servicemen to get a home loan without any deposit at all.
• Private Assistance Programs: Private Assistance programs such as Nehimiah and AmeriDream are extremely popular and controversial at the same time. While these programs convert sellers equity into the buyers house down payment, they are not without flaw. One may ask him or herself the question that if an individual did not have the discipline to save up for a deposit,  will they have the discipline to make their repayments.

Hence, as stated there are several ways an individual can come up with a mortgage down payment for their home, but it is always advisable to ensure that you have saved up for it and have made adequate contributions.

Reference:

1. How to come up with a down payment – House Hunt
2. How to come up with a down payment – MSN Money

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One fact that home buyers should remember is that it is more difficult to obtain a home loan today than it was even a few years ago. Hence it is very essential that consumers, first home buyers and experienced buyers, take into consideration all factors that might influence the most important purchase of their lives – buying a house.

Guide To Buying A Home

Before buying a house, it may be beneficial to actually visit the websites of some of the lenders you might be considering. Most of these lenders have calculators online, which can help you gauge how much money you can borrow. Once you have got an idea of the amount of money you can borrow, the following may be beneficial for buying a house.

• Gather the paperwork that you will require to give the mortgage company for buying property. This could include statements from banks, pay slips and other financial documentation and evidence. You may require additional documentation if you wish to apply for the government’s home buyers tax credit or other government grants.

• Having gathered your paperwork for buying a house, it may be beneficial to get yourself a pre-approved home loan once you know the range of property you are looking at. Unlike a pre-qualification, a pre-approved loan is where you already have a loan ready and hence it will make your offer to the seller more attractive as it will mean that you will be able to go unconditional and close the offer much quicker in comparison to other buyers.

• You must bear in mind that if you feel interest rates are going to rise, it may be prudent to lock in rates.

• As a home buyer you could also look in to various FHA loan program and loan programs offered by the Department Of Veteran Affairs, if you have been in the armed services.

• In this current credit climate it is almost a given that you will require a down payment when buying property. This can either be obtained as genuine savings, a gift, through government programs or through private down payment assistance programs or the by the sale of another asset.

Home Buyer’s Guide:  Types of Loan Products

Once you have taken the above factors in to consideration, it is time to consider a loan product that best suits your spending habits and needs. Several products are available on the market today. A brief description of some of them are:

1. Fixed Rate Home Loans: These home loans are beneficial to those home buyers who wish to live in the property for the entirety of the loan. In this case you can fix the interest on the entire life of the loan.
2. Variable Loans: These loans are also known as Adjustable Rate Morgages. With these, the interest rate for buying a house is fixed for a certain period after which it fluctuates according to the market index.
3. Interest Only Loans: With interest only loans home buyers pay only the interest component for the first five years after which they go in to a period where they go back to making to principal and interest repayments.

Buying Real Estate: Questions To Ask

An important part of the home buyers guide is to ask the right questions before you buy property. Some important questions to consider before buying a house are:

• How often will the interest rate be adjusted?
• Have you got mortgage insurance, as this can greatly affect your mortgage repayments?
• When do the payments come due?
• Is there a cap on the interest rate?

Once you have considered all these options for buying a property you could feel fairly comfortable while making a decission with regard to buying a house.

Reference:

1. Your 5 Minute Guide to Home Loans – MSN Money

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We often discuss ways to save money and more so during a recession. However, how often are we savvy financially? During a cloudy economic environment, it is very crucial to have your investments and finances tuned so that, it is possible for your wealth to adapt to changing financial conditions. Here is some basic financial advice you could follow to ensure your financial profile is in the pink of health.

Financial Help & Advice

If you are not very financially savvy yourself, we have some finance tips here for you that you may find useful.

Tax Time

More than half the nation prefers to fill out the stock standard tax returns and are happy to claim the standard $5,450 as deductions for an individual and $10,900 for a couple. However, you may be missing out on a whole lot of deductions that you are entitled to. By filling out the 1040 (long form), you could claim expenses related to your business, donations made, out of pocket medical expenses, work related expenses etc. By taking a bit more time to fill out your taxes in detail you could get a much bigger refund. In addition to this you could also help your children fill out their taxes. It is compulsory for minors to file taxes, even if they are dependents and have earned more than $5,450. Moreover it would be beneficial for them to file their taxes anyway as, they would get all the amount withheld by their employer in the event that they had earned less than $5,450.

Reducing Debt

Everyone in someway or the other has experienced how difficult it is getting finance nowadays. It might be good idea to make sure that you aren’t overspending by destroying credit cards you are not using. However don’t close the accounts as they will hurt your credit score. In addition to this make sure that you contribute a little extra towards your commitments and meet your payments on time. If your credit cards are up to date and you have not missed your monthly repayments it may also be a good idea to talk to yiour bank and reduce the interest rate on our card if you qualify for it. This will make sure that you save a bit more on credit card repayments and will be able to quickly reduce any other debt that you may deem fit.

Investments

Here is one place where even the most seasoned investors can make mistakes. Make sure that you have an eye on the market. Try and keep your ear to the ground and make sure that you adapt accordingly. In uncertain market conditions it is always beneficial to invest in indexed funds and bonds or bond funds. In the recent market downturns indexed fund and bonds lost a whole lot less than managed funds. In addition remember never to put all your investment funds in the one stock, no matter what your friends say. Remember the key to avoiding massive single sector market swings is diversification. When building your investment portfolio remember to take into consideration your risk profile as the weighting of each sector like property, equity, international equity, fixed interest and small caps or alternative investments will depend upon your risk appetite.

These are some ways in which individuals could be financially savvy during a recession to ensure that they are in a much better position coming out of it.

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It is interesting to know that consumers feel that their income is taxed uniformly throughout. However, this is not true and consumers must understand tax basics. Different amounts are taxed a different taxation rates. Put simply the marginal tax rate for an individual is the tax bracket at which his/her highest portion of income is taxed. So in essence when people talk about their income tax brackets, what they are actually talking about is their marginal tax rates.

Below is an example to help you understand the determination of your tax bracket:

Tax Bracket Calculator

Let us assume that your Gross Wage Income for the 2008 income year to be filed in 2009 is $120,000.00. Now the question arises as to how will the income tax liability on your income be calculated.

• The first $8,350 will be taxed at 10%. $8,351-$33,950 will be taxed at 15%.
• The amount from $33,951-$82,250 will be taxed at 25% and the amount between $82,250-$120,000 will be taxed at 28%.
• This will give you a total tax liability of $835 + $3,840 + $12,075 + $10,570 = $27,320.
• Hence your marginal tax rate in this instance is 28%, because that is the rate at which your highest income is taxed.

One of the main reasons to use a marginal tax rate is to calculate the amount by which a deductions will reduce your income. For instance if your marginal tax rate as in this case is 28%, for every $100 deduction that you claim your taxable income will be reduced by $28 ($100 x 0.28).

Effective Tax Rate

Another interesting concept in determining your tax bracket is understanding what your effective rate of taxes is. The effective tax rate of an individual is the total amount of an individual’s income which has been paid in taxes. Effective rate is calculated as below:

Let us assume the above example. In this case the total taxes due are $27,320. The consumer’s gross income for the year was $120,000. In this case the effective rate would be $27,320/$120,000 = 0.2276 or 22.77%.

When trying to uderstand your tax bracket, always remember that your effective rate will always be lower than your marginal rate owing to the fact that you have been paying taxes at lower rates all the way through to your marginal tax rate.

Combined Tax Rate

Another interesting rate to keep in mind is the combined rate. The combined tax rate for an individual is the marginal tax rate for an individual plus the state tax rate minus any state taxes that can be deducted from your federal tax returns. In the above example the combined rate would be 33% (28% + 5%) should you opt for standard deductions. The main purpose of calculating your combined rate is that it enables you to understand the amount of your non-wage related income that you can keep and what your tax liability is. Put simply it tells you how much of your investment income is going to be taxed and how much can you retain. In this example if you earned $10,000 in investment income, you would be paying $3,300 in taxes and would retain $6,700.

These are some of the basic concepts on how to determine your individual tax bracket and there by calculate your tax liability. So when you consider the fact that your taxable income is exactly what was on your contract, this may be wrong as it is usually your income left over after making contributions to 401(K) account and deducting the tax breaks you are entitled to.

References:

1. So what’s your tax bracket? – CNN Money
2. Federal tax brackets – Money Chimp

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One might consider an article talking about choosing the best bank account in this modern day and age rather absurd. But knowing your individual spending habits and money needs might help you choose the correct bank account. In today’s fast evolving economic world no two products are the same and neither are bank accounts. Bank accounts offer different features. Some pay higher interest than others, while some don’t. Some are catered for the needs of senior citizens while some are tailored exclusively for students. Despite their various options, one thing in common to all bank accounts is the fact that they all charge fees. However, this fee can be waived if certain privileges are given up. Listed below are certain considerations which consumers should keep in mind while choosing the best bank account:

Bank Account Information For Choosing The Right One

1. The Amount Of Money You Are Planning To Deposit can be a big determinant in choosing the best bank account. While the default way to go would be to determine which account pays the highest interest or APY (annual percentage yield), bank fees can also be a major determinant. An annual study by bankrate.com shows that for an account to get interest while not having to pay any monthly fees with a check facility, the minimum balance required is $3,460. On the other hand for an account to have a check facility but not earn any interest the minimum balance to not incur any additional fees is a little below $110.
2. Using Your Check-Book: Certain consumers are not going to write too many checks and are not going to exceed the maximum number of allowed free check transactions by their bank accounts. In this case it may be beneficial for consumers to opt for a flat fee checking account. However, if you are in the habit of writing several checks it may be beneficial to talk to a banking representative and work out the best bank account option for yourself so that you do not get charged a high penalty fee for exceeding the number of allowed free banking transactions.
3. Economies Of Scale are what consumers get when they have several bank accounts with the same bank.  If you have been using several products offered by the same bank, make sure you get your fees aggregated or ask for discounts on your current facilities. Most banks nowadays have consumer loyalty programs.

Basic Bank Accounts To Choose From

In addition to the above mentioned considerations, consumers may also want to consider some of the accounts mentioned below to ensure that their funds are in the right place:

• Savings Account: When placing your funds consumers are often concerned with security. In this case bank offered savings accounts are the safest option, although they may not pay as high interest as some of the other available option they make up for the same by offering great security. In addition these bank accounts are backed by what is known as FDIC (Federal Deposit Insurance Corporation) insurance.
• Certificates of Deposit And Money Market Accounts: CDs require consumers to lock in their money for a period of 3 months up to five years. Another option may be investing your money in the money market during a bull market as the returns which the money market would generate would far surpass your interest rates offered by your banks.

These are some of the considerations consumers should keep in mind while choosing the best bank account.

References:

1. Pick the right account – CNN Money
2. Savings Account Overview – Money Instructor

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When it comes to understanding taxes most consumers are ready to go and see a tax professional and get them to look after their tax basics. While this might be the easiest way to handle your taxes if they are way too complicated and beyond your scope, consumers who have less complicated tax returns can actually benefit and save time by being a bit more tax-savvy. Understanding tax basics and your taxation liabilities better can help you make informed decisions and could help you save a lot of money over time. We will be discussing certain basic tax issues in this article:

Understanding Taxation: Basic Issues

1. Refunds: This has been an issue with tax payers over the years. At times certain consumers with the same gross earnings in the year could end up getting vastly different tax return amounts from the tax office at the end of the year in the form of a refund. While there could be several reasons for this, one main reason for this is that you could either be paying too much or too little in tax withheld each year. To simplify this for a better understanding of tax – you are basically paying too much; in essence you are giving the government an interest free loan and are reducing your net income which could have been used to meet other requirements. In the event that you are paying too little in tax withheld, you could be liable for an underpayment penalty. One of the important tax basics to understands is that you are either required to pay 90% of your current year’s tax liability to the government by the end of the year or 10% of the previous year’s liability, which ever is smaller.
2. Varying Tax Rates:This is an area where the consumers understanding of tax is limited. Consumers often feel that their income is taxed uniformly throughout. This is however, untrue. Different amounts are taxed at different rates. Put simply, the marginal tax rate for an individual is the tax bracket at which his/her highest portion of income is taxed.
3. Late Payments: Consumers, who file their taxes by the 15th of April but do not make their payments, could be up for a late payment penalty and is a very important tax basic issue worth knowing. The same is also true for consumers who file for an extension. Extensions only allow you to file your taxes after the due date, however you are still required to make your payments to the tax office by the 15th of April. If you have made a partial payment, you could still be liable for a late payment penalty on the rest.
4. Audits: Understanding tax is important to avoid being audited. One of the ways to reduce your chances of being audited is by ensuring that you complete your tax returns correctly and in full. Should you have any questions regarding your tax basics make sure you contact the tax office customer service team and ask them to walk you though any questions you may have. The tax office enforces penalties on incorrect or misleading information.
5. Estimated Taxes: Paying estimated taxes could be a good idea if you are self employed, are expecting a large sum from the sale of a capital item, feel that you do not have sufficient tax withheld to cover non wage related income or even a pensioner. Estimated taxes are due on the following dates: Jan 15, April 15, June 15 and September 15.
6. Determining Your AGI and Taxable Income: When understanding tax, it is important to understand your income as well. Your AGI or Adjusted Gross Income is your gross income minus any allowable or above the line deductions such as voluntary IRA contributions, child-support / alimony payments, heath savings account contributions etc. Once you have determined your AGI, the next step is determining your taxable income which is your AGI minus any exemptions and further deductions. It may be noteworthy that the lower your taxable income the lower your tax liability. Hence taking advantage on tax breaks is a great idea. In addition to this it may also interest consumers to know that credits are better than deductions for the simple reason that credits are a dollar for dollar reduction in the amount of taxes you owe. Simply put, if you have a $500 credit, that would mean that you owe $500 less in taxes.

These are certain basic and simple facts that are important to know about individuals’ taxes. These could help consumers become more tax-savvy and take advantage of tax beaks where applicable.

References:

1. Money Basics: Tax – CNN Money
2. Tax Basics – Bankrate

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