What You Need To Know Before Signing Up For Health Insurance

by Gerri Willis

Monday is a big deadline for the Affordable Care Act. It’s the date by which all of us have to be able to prove we have healthcare coverage or face a hefty penalty on our 2014 taxes next year. So far, the Department of Health and Human Services say signups have failed to meet goals. The administration had said it wanted seven million people to sign up, but only five million have done so, according to the most recent government report. So, you can bet the healthcare.gov website will be pretty busy over the next several days. Here’s what you need to know if you plan to sign up:

Before you go to the web to enroll, talk to your doctor to find out whether he or she is affiliated with any of the insurers offering plans through Obamacare. Best case scenario, you’ll want to stay with any service provider you are already using to make sure that your care is seamless. Once you are armed with that information, head to healthcare.gov, that’s the federal website. In some states, you’ll do your shopping on this site, but in others you’ll be directed to a state site for assistance. Depending on where you live, you may find a dizzying array of plans or only a few. Don’t be confused by the names of the plans. Words like “exclusive,” “premier” and “predictable cost,” have virtually no meaning, except to the insurers themselves. Instead, focus on the level of coverage. Policies are available in four categories from the least to the most generous: bronze, silver, gold and platinum.

According to one analysis of the insurance offerings, you’re best off considering the bronze plans first. According to Dr. Scott Gottlieb, here’s why: You can’t trade up to a better benefit by buying gold or even platinum plans. The benefits are the same regardless of the category or “metal” that you choose. Gottlieb says that the only difference with the plans is the structure of the co-pay and deductibles. As you pay higher premiums for a gold or platinum plan, your deductibles and co-pay decline. The insurer, according to his analysis, typically covers 60 percent of expected medical expenses in a bronze plan, 80 percent in a gold plan and 90 percent in a platinum plan. So, by buying the costlier plans, you are simply fronting a higher premium to buy down your anticipated out-of-pocket costs. The doctor networks are all the same, as are your access to drugs. 

Once you choose a plan and make a payment, be sure you get a clear confirmation that your choice is confirmed. One man I interviewed on The Willis Report, thought he was enrolled and even had money deducted to pay for the policy, but was ultimately denied coverage. Worse, he suffered a heart attack and was directly billed for $407,000 for care. Making sure you are enrolled and actually have coverage is your responsibility. Contact the insurer directly to make sure all the paperwork has been processed and you don’t get caught without coverage when you need it.

Finally, Obamacare requires everyone to have some sort of coverage, whether its ACA offerings, Medicare, Medicaid or employer-sponsored coverage. The first-year penalty for not having coverage is 1 percent of your annual income or $95 whichever is greater. If you miss the deadline, you’ll have to wait for the 2015 enrollment period to get coverage unless you experience a major live event like marriage or divorce. To be sure there may be exceptions to the deadline. Some states will accept enrollments after Monday. Check the healthcare website for details.

 

Don’t miss The Willis Report starting 5pmET on FOX Business

Before You Buy Gluten-Free Products

by Gerri Willis

You can’t go anywhere these days without running into gluten-free products. Whether you’re at the grocery store or in a restaurant, the gluten-free option is everywhere. Heck, even the Girl Scouts this year are offering gluten-free cookies. The question is do you need to buy them?

Gluten-free, according to the Federal Government means getting rid of the protein found in wheat, rye and barley. People with severe gluten allergies, a condition called celiac disease, try to stay away from gluten. But those folks make up only one percent of the population. What’s going on now is the food manufacturers are promoting these foods to everyone as healthier.

And, it’s working. The business of gluten-free products is expected to grow 50 percent in the next few years to $15 billion in sales by 2016. Today’s gluten-free products are purchased by 11 percent of customers – more than ten times the number with celiac. At the same time, wheat flour consumption has fallen to a 22-year low, according to the U.S.D.A. So these non-wheat products are popular with loads of health-conscious consumers who believe in its benefits. Experts say as many as 18 million people or 6 percent of the population may have sensitivity to gluten.

But here’s the rub: These products are more expensive than their more common counterparts – way more. Consumer Reports estimate that gluten-free products can cost two to three times more than regular non-gluten free products. What’s more, you don’t have to pay the premium price to stay away from wheat in some categories. Plenty of foods are naturally gluten-free, like polenta, rice-crackers and nuts. 

Even so, food makers are on the bandwagon. General Mills, whose brands include Bisquick and Pillsbury, have begun reformulating products to remove gluten. It’s already reformulated Chex and plans to introduce gluten-free brownies, cookies and cakes next year. Likewise, the grocery store chain, Wegman’s, is now the country’s largest seller of gluten-free products. New brands, like Udi’s and Glutino, are taking advantage of the trend.

Just keep in mind as you shop the supermarket aisles that cheaper options may be available.

 

Don’t miss The Willis Report starting 5pmET on FOX Business

Avoiding an IRS Audit

by Gerri Willis

Avoiding the audit should be goal No. 1 when it comes to your taxes this year. And, here's where an ounce of prevention can prevent a pound of cure. Here's what to be on the lookout for: 

  • If you are a high earner, you are more at risk for an audit. Taxpayers earning $200,000 or more have an audit rate three times more than the general population. And if you're earning  a million dollars, you're chances jump to one in nine. The lesson of the story: The more you make, the more careful you need to be with your filings. 
  • The home office deduction. It's everyone's favorite, unfortunately not everyone should take it, and this year the rules have changed. You can opt to use a simplified formula that maximizes the write-off at $1,500. Whether you use the new calculation formula or not, make sure the space you say you're using as a home office is used exclusively for that purpose. 
  • Non-cash charitable contributions are a favorite area of scrutiny for the IRS.Many families like to give the old family clunker as an in-kind gift to their favorite non profit. If you choose to do so, be sure the car is properly valued. 
  • You claim deductions that are disproportionate to your income, such as large charitable contributions, substantial mortgage interest or real estate taxes. The IRS knows average deductions for filers of varying incomes. If your deductions are out of line, you may get a second look. Having said that, don't back away from deductions you are due. 
  • You forget to claim income. If you get incomes from various sources, you'll need to report it, even if the 1099 form doesn't reach your mailbox. That's because the employer will no doubt report your pay to the IRS on their income tax form. It's easy to lose track of these payments over the course of the year. Keep good records. 

Finally, if the worst happens and you do get contacted by the IRS, don't panic. Chances are what you're experiencing is a "correspondence audit," meaning it is a request for more detailed information conducted by letter. You may be well able to handle this yourself by supplying the missing information. 

 

What The IRS Doesn't Want You To Know This Tax Season

by Gerri Willis

The IRS is an agency of mystery – and power. The IRS has the power to garnish your wages, throw you in jail or generally make your life difficult, if you run afoul of tax law. So how do they operate and what are they not telling us? Here’s a list of the things the IRS generally would prefer you didn’t know about this tax filing season:

  • It’s all a matter of interpretation. You’d think tax law is hard and fast, but the truth is that things can get pretty grey when it gets down to the details. For example, there’s the case of the couple that the IRS allowed to deduct the cost of feeding wild cats on their property because the cats fended off snakes, rats and other vermin. Or, the man who was able to deduct money he gave his girlfriend to care for rental properties he owned. And, the stripper who was allowed to deduct her breast enhancements as a cost of doing business. Don’t assume your deduction will be rejected, but check with a tax professional before claiming it.

 

  • April 15 is not necessarily the deadline. You can get a no-questions-asked six month extension for filing your final tax form, if you pay any taxes you owe by April 15. Download Form 4868 from www.irs.gov to request an extension and include a check for whatever you estimate you owe – that’s the critical part! Even if you can’t afford the entire bill, the IRS allows you to structure a payment plan.

 

  • Getting audited isn’t the big deal you might think. Getting the letter in the mail from the IRS may cause anxiety, but, these days the agency is conducting correspondence audits, audits automated by computer reviews of your filings. These audits are done through the mail, and are seeking additional information. This is the lowest level of audit and if you can provide sufficient evidence to resolve the question, the audit is dropped. Oh, by the way, the audit rate is just about 1 percent.

 

  • If you’re planning to use the “I had a crook as an accountant,” as a defense, forget it. If you’re tax preparer is incompetent or simply a crook, you’ll still be on the hook for any fines or fees levied as a result of his or her mistakes. Read the final product – the most common way preparers boost refunds is by inventing fake children.

 

  • Don’t expect a returned phone call, if you have a question. The IRS has said it is only responding to “basic” questions this year, whatever that means. So if you’re trying to understand a nuance of tax law, you’re better off asking a tax pro.

 

Don’t miss The Willis Report starting 5pmET on FOX Business

Taking Advantage of Tax Deductions

by Gerri Willis

If ever there was a year to look for deductions to your tax bill, this is it. The reason? Millions of Americans will be paying more because of higher tax levels imposed by Obamacare and the ironically named American Taxpayer Relief Act of 2012. But even if you aren't subject to the higher rates, it still pays to get all the breaks you can.

  • PRIVATE MORTGAGE INSURANCE. The home mortgage interest deduction is a perennial favorite of homeowners and while that deduction is now on a phase out schedule for high earners, others may benefit from the private mortgage interest deduction. PMI is an insurance policy that lenders require if you can't make a 20 percent downpayment on a home. And, 2013 is the last year you'll be able to claim the deduction unless Congress changes its mind.

You'll find the amount of PMI you paid on your bank's mortgage interest form 1098. The break is available to homeowners who took out their mortgage after Jan. 1, 2007.

And, like a lot of deductions, this one has income phase outs too. The sweet spot for this break is an adjusted gross income below $109,000.

  • CARING FOR A DEPENDENT PARENT. This is more complicated than it sounds, but if you can claim a parent as a dependent, you can save on taxes. Your parent must live with you and get more than half of his or her support from you. Keep in mind the parent's earnings must be less than the tax exemption level. The devil is in the details with this one, and you should consult a tax professional. But if you meet the requirements, you'll be able to claim an added personal exemption on your income tax return.

An added plus, any medical expenses you pay for that parent can contribute to the threshold for deducting medical costs. To meet that threshold, you have to spend 10 percent or more of your adjusted gross income on medical expenses. (That threshold increased from 7.5 percent last year.

  • COLLEGE LOAN INTEREST. Parents struggling with the high cost of education will find they can deduct up to $2,500 of annual interest on loans to pay for college. Income phase outs exist, naturally, so high earners might want to consider taking out a home-equity loan instead, which in most cases, will allow you to deduct interest.
  • HOME EQUITY LOAN INTEREST. You probably know that mortgage interest is deductible. Interest on mortgage debt up to $1 million is deductible, but phases out at higher income levels. Interest on home-equity loans totaling up to $100,000 also is deductible, no matter what you do with the money.
  • JOB SEARCH. If you were looking for a job last year as millions of Americans were, the costs of that job search is deductible. File them under miscellaneous expenses. You don't have to be successful to claim the deductions. If you do land a new gig, you can also claim relocation expenses for the new job. Consult a pro to determine exactly what you can deduct. 

There are more deductions -- many more -- but you should be aware that some of them are IRS audit bait. Here are a few of the deductions that might get you a second look, if not an audit:

  • Home office deductions. This one draws attention especially if you claim a salaried income.
  • Non-cash charitable donations, especially if you donate a car to a charity.
  • Earned income tax credit. This benefit for low-wage earners is often abused and the IRS will take a close look.

When it comes to deductions, one of the things IRS auditors keep in mind is just how you stack up with other taxpayers. CCH Inc. recently calculated average deductions, and while you shouldn't use these as a hard and fast guide to your own tax return, it makes sense to have a general idea of what people in your income bracket pay. For example, folks with an income range of $50,000 to $100,000, claim medical expenses of $7,312 interest of $9,320 and charitable contributions of $2,815. These households pay federal taxes of $6,111.

So the point, here, isn't to discourage you from the taking all the breaks that are due to you. In fact, I say take absolutely everything you are eligible for. The IRS expects nothing less. 

 

Don’t miss The Willis Report starting 5pmET on FOX Business

Tax Returns: Do Them Yourself or Hire Help?

by Gerri Willis

Tonight on The Willis Report at 5pm ET we’ll be talking about the best tax software for filers. But that’s not the only way to get the work done. There are times it makes sense to actually hire a tax pro. Tax software is great and for millions of Americans, it’s a good solution, but there are times you need professional help.

It’s best to use a professional when you own your own business, you’ve gone through a major life change like marriage or divorce, you’ve bought or sold a home in the previous year, you own rental property or have a large investment portfolio. In other words, if your taxes are complicated for any reason, it pays to hire a professional. If you manage to pick an experienced accountant, you’ll find that he or she has probably prepared a return for someone in your exact situation. What’s more, if the IRS has issues with the filing, such as wanting more information, your professional will handle the exchange.

Picking a professional is a whole other kettle of fish. Certified public accountants are the gold standard having completed a four-part accounting exam. What’s more, they can represent you in front of the IRS (if it comes to that.) However, there are less expensive ways to get help. Enrolled agents who have passed a tax exam and/or actually worked at the IRS and are licensed to file taxes. You can find an enrolled agent at www.naea.org.   Some certified financial planners also offer tax services. At a minimum, you want your CFP to be talking to whoever prepares your taxes. There are also accredited tax accountants and tax planning services. (I did say it was a whole kettle of fish, right?) Getting a preparer who is recommended by someone you know and trust is a good idea, too. Keep in mind, though, if there is an accountant that everybody in the office uses because he gets incredible refunds, I’d stay away. When a pro gets in trouble, the feds typically audit everyone he did a return for.

Truth is, tax software isn’t nearly as scary as you might think. You don’t do math. The software makes calculations for you. And, the way the packages work is that they have you fill out the form by asking you questions and prompting you for a response. Better yet, if you make a mistake using a software program, like entering the wrong Social Security number, the IRS will ask you to fix the issue, instead of sending you a bill.

For some of us, it comes down to a comfort level – do you want to handle it on your own, or do you want a pro to do it for you. Just make sure that however you get it done that you file electronically. Filing online is the most secure way of filing your taxes, and guarantees the quickest processing.

What Changes to Expect on Your 2013 Tax Return

by Gerri Willis

The countdown is on with just five weeks to go to April 15! Tax season is upon us, and if you are wealthy or simply well-to-do, steel yourself, you are about to get soaked. Tax changes for the 2013 tax year are huge and the nation's top earners are likely to see their tax rates rise above a whopping 50 percent.

At risk for the biggest changes, are Americans earning over $200,000, says Melissa Labant, director of tax advocacy for the American Institute of Certified Public Accountants.  To be sure, though, earners above $400,000 for single filers and $450,000 for married filers filing jointly will get the biggest bite. And, it’s not just wages that will get more heavily taxed; investment income taxes are rising, and tax benefits that you might have taken for granted like personal exemptions and itemized deductions are under assault too. These changes come thanks to Obamacare and the American Taxpayer Relief Act of 2012.

“I think high earners may be surprised that multiple increases are hitting them,” says Rich Coppa, of Wealth Health LLC. “If they didn't pay attention to these changes from last year they are going to find a bigger bill to Uncle Sam.”

Here’s what you can expect: You likely already know about the increase in the Medicare payroll tax. In 2012, the tax was 2.9 percent and employee’s share of the tax, 1.45 percent, was automatically deducted from your paycheck. Effective this calendar year, however, high-wage earners owed an additional 0.9 percent tax on earned income above $200,000 for single filers and $250,000 for those married and filing jointly. This year also starts a new income tax bracket for people earning $400,000 for single filers and $450,000 for joint filers – a top tax rate of 39.6 percent up from 35 percent last year. That’s the easy stuff to understand. Some of the other changes are more complicated.

Your personal exemption of $3,900 last year is phased out. The amount of the reduction is 2 percent for each $2,500 in excess of adjusted gross income amounts of $250,000 for single filers and $250,000 for those married, filing jointly. The result is a complete elimination of the exemption for single filers with an adjusted gross income above $372,501, and for couples filing jointly over $422,501. What’s more, itemized deductions, such as mortgage interest, state income and sales tax and home office deductions will be on phase-out schedules as well. (These are sometimes Pease deductions). This change will reduce the value of itemized deductions by 3 percent of adjusted gross income above $300,000 for couples and $250,000 for single filers to a maximum reduction of 80 percent of its value.

Even more pernicious are higher taxes on investment income. If your income is greater than $200,000 as a single filer or $250,000 married and filing jointly, a 3.8 percent Medicare surtax on investment income will be due. (The tax applies to the lesser of your net investment income for the year or the amount by which your modified adjusted gross income exceeds the income thresholds). Note that a taxpayer could be subject to both the additional 0.9 percent tax on earned income and the 3.8 percent tax.

In addition, Obamacare makes it more difficult to deduct unreimbursed medical expenses. Before the Affordable Care Act was passed, unreimbursed medical expenses could be deducted after they exceed 7.5 percent of adjusted gross income. The threshold is now 10 percent.

All this week, we will be discussing what you need to know about this year's tax bite and what you can do to reduce it.

 

Join us on The Willis Report at 5pm ET.

 

Check Your Charity Before Donating

by Gerri Willis

Americans are the most generous people in the world giving an eye popping 310 billion dollars to charities last year. But if you like to donate, it pays to be sure your money is being used wisely.

According to the New York Attorney General's office, of charities that used telemarketers to fundraise, 62 cents of every dollar donated were kept by those telemarketers. In half of the fundraising campaigns run by telemarketers, the charities retained less than 30 percent of the funds raised. That's not a good return on investment.

And, it's not just pricey fundraising that puts your dollars at risk. Bloated executive salaries, mushy missions and sound-alike charity names can all result in a waste of your charity dollars.

So, be sure to check out your charity before you donate. One great resource is CharityNavigator.org. This website does the heavy lifting for you, vetting many players. If your favorite charity is not on the site, ask basic questions. Is the organization a legitimate non for profit? If the entity doesn't have that designation, you can't deduct contributions on your taxes. Avoid any charity using telemarketers.

Read the mission statement. You should look for organizations that have concrete goals. Charities should also tell you how much of each dollar they receive is going to their cause. Watch for high operating expenses.

Finally, if you have a specific charity you want to give to, be sure to get the name exactly right before you stroke a check. Scammers try to take advantage of your goodwill by promoting ventures whose names sound legit or mimic those of established charities.

Use your charity dollars wisely. Remember, the more care you give in dispensing your money, the more causes you can help.

 

Don’t miss The Willis Report starting 5pmET on FOX Business.

Changes Could Be Coming to Your 401(k)

by Gerri Willis

Hold onto your hats: A proposal coming from the White House could impact your 401(k) and not in a good way. President Obama plans to ask Congress to reduce tax benefits for 401(k) investors, particularly higher earners.  And the proposal doesn’t stop there. The president also wants to limit the value of all tax deductions and IRA deductions to 28 percent of income. Catch-up investors for retirement would be hardest hit by these rules if they were to become law.

Experts say that households caught in the crosshairs would be singles earning $183,000 or more and couples earning $225,000 and more.

 

The proposal, which is sure to reduce savings if it becomes law, comes even as Americans are pitifully under saved for retirement. According to Boston College’s Center for Retirement Research, the average 401(k) and IRA balance for people over 55 years of age is just $42,000. What’s more, just five percent of the roughly 60 million 401(k) plan participants contribute the maximum amount to their 401(k) of $17,500 for people under 50 and $23,000 for people 50 and older. 

 

“You don’t strengthen the caboose by weakening the engine; it’s a bizarre point of view,” says Ric Edelman, a financial advisor and author of “The Truth about Retirement Plans and IRAs. “We need to be creating incentives for people to save for retirement, not putting ceilings on them to discourage them from saving.”

 

What’s surprising is that the administration would look to raise the tax hit on retirement savings rather than increase it. The administration says that wealthier Americans will save for retirement regardless of whether they get tax breaks for doing so, but in many parts of the country, the earnings levels that are targeted -- $225,000 for a couple, for example – aren’t high wage earners, but middle class earners.

 

What’s more, the President’s proposal has the possibility of reducing retirement options for people in all wage categories, if small business owners decide to drop company 401(k)s, rather than deal with the changes. “If you have rich people without incentives to save, they are going to kill their retirement plans at work which means the lower-paid workers won’t have a retirement plan to contribute to at all. So, that’s a real backwards concept,” Edelman says.

 

 

Don’t miss The Willis Report starting 5pmET on FOX Business

Comcast, Time Warner Deal to Get Close Look From All Sides

by Gerri Willis

The proposed $45 billion marriage of Comcast and Time Warner Cable has caught the eye of regulators and Congress, but the real impacts will be felt in American living rooms. The two companies rate among the lowest with consumers in term of customer satisfaction. And, despite the fact that executives called the merger “pro-consumer,” Americans complain about wait times for cable service providers and rising prices already. Monthly cable bills have nearly tripled in the last decade to $128 a month for triple play – phone, interest and cable TV services.

Although many consumer experts are predicting the merger will raise cable prices, others say that changes may be slow to come because it will take at least nine months to a year to get the merger approved by federal regulators. Meanwhile, some in Congress say they plan to hold hearings to give the deal a closer look. The House Judiciary Committee and the Senate Commerce Antitrust subcommittee have both announced plans to examine the deal in detail.

But it may not just be prices that are an issue when and if the deal is approved. Service may also be an issue. Consumer Reports has said Comcast  dropped streaming speeds sharply for Netflix, a popular content provider with its “House of Cards” series which scored record downloads this past weekend.

Ultimately, regulators will decide if the deal goes through. The Obama administration recently blocked the merger of AT&T and T-mobile. Comcast and Time Warner appear to already be positioning themselves for scrutiny by the Justice department. They say that that the two companies currently don’t compete in any single zip code in the country, and that even post-merger, the company will be available to only 30 percent of American households, typically regarded as an acceptable level.

 

Don’t miss The Willis Report starting 5pmET on FOX Business

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