Credit Card Law and the 5 Rules You Need to Know

You may have noticed a few changes on your credit card statements recently, including lower late fees. That’s because the final round of new regulations from last year’s sweeping credit card legislation just went into effect in August 2010.

These most recent credit card regulations protect consumers from unreasonable penalty fees and require credit card companies to re-evaluate interest rate increases at least once every six months.

Here’s a summary of new rules, and what they mean for you:

1)  New Caps on Penalty Fees

In general, card issuers can’t charge more than $25 for late or returned payments or over-the-limit transactions unless:

• A cardholder shows a pattern of repeated violations, such as making more than one late payment within six months.
• The card issuer determines that a higher fee reasonably offsets its cost of dealing with the violation that caused the penalty. The card issuer has to review this determination every 12 months. Alternatively, rather than making a fee decision every 12 months, card issuers can simply charge a penalty fee up to $25 for the first violation and up to $35 for each repeated violation that occurs during six billing cycles.
• In any case, a penalty fee can’t exceed the dollar amount associated with the violation that caused the fee. For example, if you’re late making a $20 minimum payment, the late fee can’t exceed $20. Or, if you exceed your credit card limit by $10, you can’t be charged an over-the-limit fee of more than $10.

2) Prohibited Fees

A card issuer can’t charge a fee for a transaction it declines, a fee if you don’t use your card or a fee if you close your account.

3)  One-fee Limit

A credit card company can only charge one fee for the same conduct during a billing period, whether it results in a single violation or multiple violations of your credit card terms. For example, a card issuer can’t charge two late fees for a single late payment, or both a late and returned payment fee based on a check that is received after the due date and then bounces.

4)  Re-evaluation of Rate Increase

Previously, your credit card annual percentage rate could be raised permanently. Now, whenever a card issuer raises your rate, it is required to review its decision every six months to determine if your rate should be decreased. If so, the company must reduce your rate within 45 days of its decision. This requirement doesn’t apply to any rate increases made before Jan. 1, 2009, or to rate increases due to the operation of a variable rate or the expiration of a promotional rate. The first review must be made by Feb. 22, 2011.

5)  Explanation of Rate Increase on Future Balances

Any time your credit card company increases your APR after Aug. 22, 2010, it must tell you why in a written notice sent at least 45 days prior to the rate increase.

While I cannot do battle with your credit card company, this information should make it easier for you to do so.  If you do notice something that doesn’t feel right, give the credit card company a call to inquire.

Facts about Mortgage Debt Forgiveness

If your lucky enough for your lender to have cancelled or forgiven any of your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2015 and 2016.  This provision expires after 2016.

1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.

7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.

8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings.

9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

 

High Tower Business Solutions · 121 W Commercial St · Broken Arrow, OK 74012
Tel: (918) 615-9887 · Fax: (918) 730-9718 · e-Mail: rebecca@tower-business.com

Five Important Tips on Gambling Income and Losses:

Whether you the roll dice, bet on the ponies, play cards, or enjoy slot machines, you should know your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are five important tips about gambling and taxes:

1.  Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2.  If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

• · $1,200 or more in gambling winnings from bingo or slot machines;
• · $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
• · More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• · $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
• · Any other gambling winnings subject to federal income tax withholding.

3.  Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4.  You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.’ You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5.  Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements, and documentation such as a diary or similar record of your losses and winnings.

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High Tower Business Solutions · 121 W Commercial St · Broken Arrow, OK 74012

Tel: (918) 615-9887 · Fax: (918) 730-9718 · e-Mail: rebecca@tower-business.com

As the year kicks off, it’s time to get a move on the financial housekeeping you’ve been putting off.  You’ll want to update important paperwork, retirement accounts, and insurance coverage with any adjustments.  You should do these every year.

An Annual Financial To-Do List

1.   Wills and estates – don’t wait until you have a big life change like having a child to update a will and estate plan. Start by taking a look at your beneficiary designations and making sure your life insurance and retirement accounts will go to the intended recipients.  Make sure your will or estate plan reflects any new assets you’ve obtained.  Consider putting a financial power of attorney and medical power of attorney in place. These people can temporarily handle things if you are incapacitated.

2.   Insurance policies – make sure you have suitable coverage and aren’t paying too much in premiums. If your family is more reliant on your income (say, one spouse is no longer working), consider boosting your life-insurance coverage.  If you have a policy through your employer, since it’s often less expensive and you may not need a physical exam, consider increasing that coverage. Make sure you also review the coverage on your home by reviewing both the value of your home and the cost to rebuild.  Also, if you inherited any antiques or valuable jewelry, you may need a separate rider to cover those items.

3.   Investment accounts – make sure you’re keeping up with your contributions to your retirement account or a 529 college-savings plan.  If you received a raise, consider boosting your contributions.  If you reached the age of 50, you can start making catch-up contributions to your retirement plan or IRAs. Other than for Roth IRAs, owners who have reached the age of 70 ½ must begin taking required minimum distributions on an annual basis.  If you don’t take the required distribution, the penalty can be as high as 50%.

4.   Flexible spending accounts – don’t forget that if you don’t use up the tax-free money in a flexible spending account by year-end, you lose it (some plans have a small grace period).

5.   Charitable and family gifts – one smart gift is a low-basis stock.  A non-profit can cash in the stock certificate for its full value and you won’t pay the capital gains tax.

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Tel: (918) 615-9887 · Fax: (918) 730-9718 · e-Mail: rebecca@tower-business.com

High Tower Business Solutions · 121 W Commercial St · Broken Arrow, OK 74012

Just wanted to take a moment to share our newest High Tower logo.  We hope you like it.

You may now resume whatever you were doing before.

 

Happy Thanksgiving from High Tower Business Solutions!  Wishing you and your loved ones priceless time together this Thursday.

Experienced personal and business tax preparation can make all the difference when it comes to filing your tax return. Here’s why:

• A tax program in a box cannot represent you in an audit
• Even small mistakes on business tax preparation are extremely costly
• A tax professional can offer insight on ways of saving in the future
• You don’t have to keep up with all the tax law changes each year
• Even one significant deduction a professional can find could save you much more than the cost of the return
• It offers you peace of mind