Making Changes to Reverse Mortgages

Traditional mortgages, borrowers, and lenders are still feeling the financial crunch that was the result of the financial crisis. Along with the traditional, the Federal Housing Administration (FHA) is also feeling the pinch with its reverse mortgage program, and as a result, the Department of Housing and Urban Development (HUD) has established guideline that make the program more restrictive by reducing the borrowing limits and increasing the insurance premiums.

The new changes will take effect on September 30, 2013. The changes include:

  • Consolidation of the HECM Saver and HECM Standard loans into one loan
  • An adjustment of the upfront Mortgage Insurance Premium (MIP) to 0.50%
  • The borrower is only allowed to access up to 60% of the principal limit at closing or within the first year.
    • The exception is if they have “mandatory obligations” which could include closing costs, existing liens being refinances, delinquent Federal debt or other debt amounts that exceed 60% of the principal. The cap is moved to meet the mandatory obligations plus 10%.
    • If the borrower will be assessed an additional 2% upfront MIP if more than 60% of the Principal limit is meet at closing or during the first year.

There are additional changes that take effect January 13, 2014. This will require borrowers to undergo an mandatory financial assessment to determine if they are capable of maintaining the property tax and insurance payments with their other income. If they are unable to meet the obligations then the payments will be drawn from the reverse mortgage and placed in an escrow account.

With the new regulations, the goal is to reduce the number of people using reverse mortgage who are already financially distressed, and prevent them from defaulting on the loan and foreclosing on the property anyways.

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College Loans: Paying Them Off

Now that you are a college graduate, you have many things to think about; finding a job, maybe a new place to rent, and paying off student loan debts. With all the talk about student loan interest rates in Congress, it is important for student have a plan for paying off loans after college. Nearly 12 million students will take out loans to help pay for college, and with 37 million students currently with outstanding debt, the total student loan debt is reaching towards 1 trillion. Having a plan to help reduce student debt loan is vital for any college graduate.

Most college students do not fully understand the financial burden student loans will be on their future. Around 75% of them will make sacrifices, either personally or financially, to repay the loan. Some tips that will help make it easier to repay student loans debt are:

  • Understand You Options. It is important to know the different options of payment, including standard repayment, graduated repayments, extended repayment, and income-based repayment. Research which payment would work best for you and contact you lender for financial help. If you cannot pay there are options for you including deferment, forbearance, and loan cancellation. Many of the option will require an application and financial proof, so working with your lender is very important.
  • Keep Track of Paperwork. Keeping accurate records including promissory notes, correspondence from lenders, notes on phone calls and other loan related paper. If you lose any paperwork, you may have problems providing information to your lender if you need to seek a deferment, forbearance, or loan cancellation.
  • Grace Period. Most student loans have a 6 to 9 month grace period before official payments start. Use this time to find a job, make a budget and start tracking your monthly expenses. Make sure to budget in paying student loans, so you are not surprised when the payments begin.
  • Student Loan Interest Deductions. If you pay $600 or more to a single lender, our interest is deductable. At the end of the year you will receive Form 1098-E from your lender showing the exact amount of interest paid over the year.
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How Your CPA Can Help Stop Identity Theft

The thought of identity theft is scary, but during tax season, identity theft becomes a nightmare for almost 450,000 people, and it is increasing every year. The IRS processes 145 million returns in a year. Almost 109 million of the claims are refunds, and average $3,000. This makes tax returns a prime target for any would be thief. It is important to know how to protect yourself during tax season to prevent the worst from happening.

Identity theft has devastating consequences. It will delay taxpayer refunds, victims may lose job opportunities, be refused for loans, housing, cars, and can even be arrested for crimes that they did not commit. The most common ways thieves obtain information is through email or phone phishing and dumpster diving. Thieves are looking for personal information, such as, bank records and credit card receipts.

If your identity is stolen, several steps should be taken. First, file a report with the police. Close any bank or credit cards accounts affected. Inform credit bureaus and consider freezing credit accounts. A freeze restricts access to the credit reports and prevents thieves from opening other accounts with the stolen information. The IRS has a form (Form 14039) that needs filled out if your identity was stolen anytime during the year. Make sure that you answer all IRS notices immediately, using the name and number printed on the notice.

To prevent identity theft, shred any mail that has personal information on it before throwing it away. Watch credit reports from the three major credit bureaus. If working with a CPA, forward any emails that appear to be from the IRS to them and do not click on any of the links before forwarding the email. Keep your SSN safe; do not give it out, store the card in a secure place. Protect your home computer with firewall, anti-spam, and anti-virus software and update regularly. Change passwords to bank and credit cards sites regularly.

None of this is a guarantee that your identity is safe, but the more you safeguard your personal information the better chances you have of not being a victim.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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The Saver’s Credit for Retirement

For many low- and moderate-income workers it can be hard to save for what seems like an elusive retirement. Many feel like they might work long after retirement age because saving just seems impossible. The IRS has a special tax credit that can help offset the cost of setting up a retirement saving plan.

This tax credit, known as the retirement saving contributions credit or the saver’s credit, helps offset part of the first $2,000 dollars that workers voluntarily contribute to an IRA or 401(k) plan. This credit is only for eligible workers that set up a new retirement account or add to an existing account before April 15, 2013. To find out what your filing status is for this tax credit see Form 8880 for instructions.

So what qualifies you for this tax credit and who can claim this credit? Several groups of workers that can qualify for the credit, including:

  • Married couples that file jointly with incomes up to $57,500 in 2012 or $59,000 in 2013
  • Heads of households with incomes up to $43,125 in 2012 or $44,250 in 2013
  • Married individuals filing separately and singles with incomes up to $28,750 in 2012 or $29,500 in 2013

Other rules that apply to the credit are:

  • You must be an eligible taxpayer 18 years old and older.
  • You cannot be claimed as a dependent on anyone else’s tax return.
  • You cannot not be a student, which is someone enrolled full-time during any part of 5 calendar months during the year.

Like any other tax credit this can increase a taxpayer’s refund or reduce the amount of taxes owed. Even though the maximum tax credit is $1000 for individuals and $2000 for married couples, the IRS wants to caution taxpayers. This tax credit is usually much lower because of other deductions and credit and for some taxpayers it may even be nothing. This should not discourage workers from trying to get the credit. Even a little can help a lot.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Frugal is Not a Kind of Fruit

Christmas BellsThe minute someone starts talking about frugality and budgets, people tend slide into oblivion and begin snoring. The thing is, being thrifty or economical or scrimpy or just plain cheap is the only thing helping people keep their heads above the water.

Everyone, in our current economy crisis, seems to have at least a little pinch where spending is concerned. There are many ways to help live within your means and the ideas are practical and useful for daily life.

Get a Deep Freezer

This practical appliance will enable a family to purchase meat and vegetables in bulk and at discount and keep it good for months to come. Even fresh foods can be frozen on a cookie sheet and then transferred to containers and stored.

Deli Meat vs. Whole

If you enjoy making sandwiches with deli meat, the most cost effective way to purchase it would be to buy a whole ham and ask the grocery store deli to slice it for you. Use some and freeze the rest. Buying just a few slices at a time ends up costing you three times as much.

Direct Deposit/Debit

Our culture has gone the way of automation. This can be a beneficial tool for keeping within your budget. Banks often have options to withdraw chosen amounts from your paycheck and put it into savings and even your bills get deducted right away so you don’t have to worry about spending money allotted for something else.

Make Friends with Local Growers

Sometimes a local orchard has such an excess of product that they want to unload it. Make an arrangement to pay a flat fee to pick your own produce and save money in the process. Can or freeze extra.

Price Shop

You do it when getting ready to make a large purchase like electronics, why not for food? Visit your local stores, even some which are further away, and take a list of the staples you use in your house. You will find that certain stores have items that are generally cheaper than anywhere else and shop around. Then stock up when you find a sale.

Cook Smart

Find recipes that are hearty and savory and last several meals. You will find that you can feed a family of four for several evenings at $1-$2 for each person.

Revive Old Clothing

Everyone has those old sweaters or skirts that keep you warm, but have those irritating fuzzies all over. Rather than discard them or pass them off to Goodwill, there is a way to revive them for future use. Using a razor to take off the pillings will give your clothing a brand new lifespan and save you money on your wardrobe.

Clean your House

Now, how does that save you money exactly? If you pick up and wipe down, your home will not collect all the grime requiring the expensive cleaners.

Check your Bills

This may be a no-brainer, but people have spent money they didn’t need to by simply failing to check their bills with the phone company, cable and internet and not catching mistakes.

Winter-proof Your Home

Energy efficiency is important to keeping down your gas and electric bills. A simple way to save money is to buy insulation for your windows and cover them during cold weather.

There are so many creative ways to live a frugal life without pinching pennies and being stressed out.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Prosperity Amongst Holiday Spending: Reality or Myth?

Merry ChristmasNo one likes to be Scrooge during a time of celebration and festivities unless you are actually Scrooge. But as every person who has more than one friend in the world knows, when it comes time to show your appreciation and love during the expected gift-giving moments, your pocketbook begins to scream as its contents are unceremoniously yanked out with abandon.

Can you actually save money during the holidays or is this simply a myth? The following are ways to ensure your wallet is not overspent this year.

Decide in advance how much you can spend.

Making a budget sounds as appealing as watching someone else clip their toenails, but being thorough about your finances will only help you in the future.

When drafting your budget don’t forget to include everything including postage for the cards, holiday favors, home decorations and any other items included in the process of holiday celebrations.

Double-check your gift list

After making your budget, write down all the people you intend to buy gifts for and then go through the list again and decide how much you can spend on each person. If you find yourself over-budget, you may need to consider cutting names or amounts. Stick to your budget, no exceptions.

If you have a large family, talk to them about making a “secret Santa”
policy so everyone gets a gift without breaking the bank.

Credit Cards are Short-Term

Despite the reality of credit cards, this option is really the lesser of two options. Go for the ‘cash only’ approach. But if that is simply not possible, using your credit card as a short-term loan is also acceptable. The problem is that it is so easy to lose track and get out of control before realizing it. Choose the card with the lowest interest rate and keep track of how much you spend by recording all the receipts.

Cash Only

Sometimes it is easy to lose track of how much you’ve spent. Rather than poring over your receipts, withdraw cash and keep it in a “holiday” designated envelope. Once the money is gone, it’s over.

Look out for #1

Putting yourself on your shopping list is smart. You know, without a doubt, that impulses run high during the holidays. Account for the splurge up front and budget for it.

Economical Gifts

Are there people who didn’t make your gift list that you still want to express affection and appreciation for? There is always holiday baking being done. Make an extra batch and send it across the street to your neighbor. Offer to babysit, walk the dog, or take an elderly relative on an outing. The cost is negligible, but the gift is priceless.

Another option for friends and family who live far away is to send e-cards. They are free and are a fun way to show you’re thinking of them.

Wedding Plans

If you are planning a wedding for a different season, it is an excellent idea to search for the wedding party dresses during the winter season because it is the slowest time of year for bride apparel and you will often find excellent deals.

Vacations

During this time, resorts and cruise lines are really hurting for business. If you have always dreamed of a luxury getaway, this would be the time. Escape from all the strain and fluster of holiday shopping and have yourself a ‘merry little Christmas “somewhere else”.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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Tips for picking a CPA

Mike Crowley | Crowley Halloran CPA

Michael W. Crowley, CPA - Principal

One of the most critical decisions anyone can make is picking a good-quality, reliable accountant. There are several things to keep in mind when a business owner chooses an accounting firm. Many accountants are excellent, but are they going to meet your business needs?

There are a few basic tips to keep in mind, as a business owner, when choosing a CPA firm:

Certification: The CPA should meet all the states requirements and passed the required exam. It is important that an accountant has met all the requirements and even continues their education to stay certified. It is the best way to know that they are current in all the new procedures and tax laws.

Experience: Make sure the accountant or CPA firm is experienced in the business field that your business specializes in. It is important that they know what the unique business needs are and how to handle any problems that may arise. They should have worked with that business industry before or something very similar.

Size: While the larger, more popular CPA firms may be ok, do not over look the smaller firms. The larger firms can probably take care of all the business needs and more, but the smaller firms will offer a more personalized approach. Many of the larger firms will contract out the smaller firms to work on small accounts anyway, so why not start with the local, smaller firm and go from there. Just make sure they meet the requirements that your business needs.

Get a Referral: One of the most important factors to finding a good, reliable CPA is to get a referral. Ask your friends, family, co-workers and other business owners to see who they would recommend. The best reference usually comes from word of mouth.

Once all the references have been compiled, do some research on the CPA firm and then ask to meet them and conduct an interview. Ask questions and find the right fit for you. Remember your CPA is to be one of your most trusted advisors, so make sure they are the right fit for you and your business.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.

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