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Archive for January, 2011

The story of American income taxes begins 1812.

The 1st attempt to inflict an income tax on Americana occurred as a result of the War of 1812. At the end of two years of war, the federal government owed an unbelievable 0 million of debt (in inflationary terms, it probably had the same impact on the treasury as 0 billion debt would today). To pay for this, the government doubled the rates of its major source of revenue, customs duties on imports. This measure obstructed trade so severely that the government ended up bringing in less revenue than it had received from the lower rates. It’s ironic that the American Revolution was began because of Tea Taxes in Boston.

Also, excise taxes were imposed on goods, and commodities such as housing, slaves and land were taxed pay for the war. After the war ended in 1816, these taxes were repealed and instead high customs duties were passed to retire the accumulated war debt.

What is Taxable Income?
The amount of income utilized to arrive at your income tax. Taxable income is your gross income minus all your adjustments, deductions, and exemptions.

A few specific taxes:

Estate Taxes:
One of the oldest and widely-used forms of taxation is the taxation of property held by an individual at the time of demise.

The US currently has Estate Taxes, although there are proposals to do away with them.
Such a tax can take two forms of implemantation. A direct estate tax can be levied on the estate prior to any transfer to heirs. An estate tax is a charge upon the deceased’s entire estate, regardless of how it’s disbursed. Another option form of death tax is an inheritance tax (a tax levied on beneficiaries getting property from the estate). Taxes imposed upon demise provide incentive to transfer assets prior to demise.

Canada no longer has Estate Taxes.

Virtually all European countries have Estate Taxes. The prime illustration is Great Britain, where high estate taxes have effectively ruined the financial well-being of virtually all of Britain’s Nobility, who have been forced to sell vast real estate holdings or place them in historical trusts.

Capital Gains Taxes
Capital Gains are the increases in value of anything (including investments or even real estate) that makes it worth more than the price for which it was bought. The gains are likely not to be realized or even taxed until the asset is sold.

Capital gains are ordinarily taxed at a lower rate than regular income to promote business development or entrepreneurship during all economic phases. This is thought to help companies invest in technology and expand to create more employment.

HOW TO MANAGE YOUR DEBTS: BUDGET MANAGEMENT FOR DEBT MANAGING

Creditors could use you and your family at pleasure for 60 days, at one time, then keep or sell you to another at auction as slaves!..

Many in debt do not know how to avoid or ease the pain of innocence of debt management

But credit we need, be itas money loans, or by easy-payments or hire purchase.

Many with debt problems are innocent of debt management. Not onlycredit one needs, but, indeed, one often, if can be reasonably managed, has wisdom considerations on the lines of(as the Cypriot thinker-writer-poet teacher Orhan Seyfi Ari put it) “I am no so rich as to afford cheap things” -and these have to do with personal finance. That is a money problem to many who have no or little knowledge of personal budgeting and debt management.

Advice on managing debt problems is often source-specific, not of general use ~psychology, politics, law, commerce, each, advises from its own perspective -in practice one needs in all respect relevant basic advice in coping with debt.

The following seeks to combine these ~it is easy to learn how to manage debt, cope with it, and then avoid debt and problems -here is how:-

>> First, know these it helps manage your debt, and do not panic if civil debts are causing you anxiety there are ways of managing debt.

1. Normally you may not be imprisoned for debts unless concealing funds -you may complain to the police if the creditor harasses or tells your employer…

2. Creditors may not repossess goods you have bought on credit or by loan -unless hire purchase goods of which remains unpaid still a portion of it specified generally by law yet…

3. If you think that the price was extortionate you can take the creditor to court -if you can show so the court may reduce your debt and you owe less…

4. Creditors must show that help in debt management, in paying your debt was considered ~many accept small regular payments if realistic -some may freeze the interest on the debt…

5. If a creditor sells your debt to a non-bona-fide party you may choose not to deal with other than the creditor’s own staff or lawyers in respect of that debt… Indeed the creditor having by such sale of your debt lost title to it, you may be able lawfully to deem your debt erased if you can show the party to whom it has been sold not to be a bona-fide party.

6. Debts up to sums specified by law may be arbitrated at courts, often at no cost -if you need it free legal representation may be available…

7. If you lose in court, repaying the debt in time given you by law protects and keeps your credit rating from being adversely affected…

8. If you can not manage to repay a debt and worse comes to worst, you may ask the court to pay by instalments or, if you can satisfy that you will be able to manage the debt and keep up with them, by lower instalments -if circumstances change or you can not manage the instalment you may ask again to give you more time or lower the instalment more…

9. If you cannot manage debt repayments and bailiffs got involved, lawfully may not be confiscated any essentials -e.g., beds, bedding, clothes, cookers, tables, chairs (or anything that you may need to continue earning your living)…

(Also, beware: administrative or clerical errors are known to have resulted in the form of demand for bailiff notice fee and under payment of seizure of goods for credit amounts i.e. if one has overpaid by additional instalment and the credit balance has been mistaken for short payment.)

10. Credit agencies by law must give you details of your credit rating, and if you have been successful in managing your debt after a judgment against you and have satisfied it, credit rating agencies must correct their records.

(Laws to do with debt vary among countries and states it helps to enquire)

>> Second, do the following: if you need to budget differently and fear that you may not manage to repay debts as expected, ensure to contact your creditors for more time or lower instalments.

1. Work out your net income debt management begins with knowing what you have regularly coming in…

2. Work out your essential outgoings -rent, mortgage, electricity, gas, food, toiletry, child-care, telephone, fares, car, in Britain the TV license fee, and the like…

3. Calculate your disposable income -what’s left for other things…

4. Trying not to upset your budget for essentials, see what you can offer who…

5. Write to your creditors and explain your circumstances and the above and make an offer, e.g., time-wise, or instalments-wise ~keep copies of all letters, records of payments -and where sent.

(If taken to court you will need to show all of the details above ~if you can not sort these out, you may ask the county court to do so for you -that is not bankruptcy but last-resort administration: it is the court managing you debt by way of you regularly paying to the court what it decides -for all of your creditors, for the court to pay each creditor separately on your behalf)

>> At the meanwhile, and later, you need to budget, to manage not to get into debt You do not want your house or valuables sold, nor your employer ordered to deduct from your pay ~nor the worry, the anxiety affecting your wellbeing.

(A branch of humanistic psychology, indeed, considers financial wellbeing to be a basic essential to one’s proper functioning.)

There is a way to avoid such risks…

Change your money habits -this is not so difficult to do…

If you often have debts or debt management problems, list them, look for a pattern

You may be compulsive

(A test advertisement in an experiment by the New York Times offered nothing for .- -many responded, most of the sent money and ordered it).

You may not be adequately money conscious -money goes, you don’t know how or where

You may be insufficiently organized, overlooking, delaying and allowing repayments to accumulate (delayed instalments may add to any interest payable, and may involve a charge)

You may be panicky in debt management ~running to ‘loan-sharks’ and trying to manage and repay your debts by debts by loans to be repaid themselves, for ever paying the interest on them with interest charged on interest too and often amounting to several times what you borrowed.

(If you do need to borrow, consider joining a credit union ~their loans are interest free.)

There is a tried, tested and proven psychological technique to help manage your debts and become debt-free

The rewards awareness technique ~it is not difficult and works in managing your debts by overcoming the negativity opposing changing your money habits.

Keep a daily record of what you spent, what is left, if you wasted or could have saved.

Be conscious, especially, of what you could have saved but wasted -and haw the waste accumulates and what it adds up to ~it is important in managing debt, changing money habits

(This, in experiments carried out, not only with group support, but also at lone individual level, it has been enormously, and popularly as to the ease of getting into the habit of it, successful).

Think of this: It will constantly keep you aware of your income and out-goings -habitually ~it will enable you to manage your debts and make free of debt problems and risks involved in debt.

This is as much a budget management technique as a debt management and essential.

I will also boost your self respect and the pride and confidence in yourself to show to yourself and those around you that you can be, are, in charge of your money affairs more, better and easier.

It is also fun ~give it a try -do try it.

Withthe governmentraising thegratuitylimit, it makes sense to negotiate for ahigherbasicsalary to ensure a better payout.

The Union cabinet’s decision toraise thetax-freegratuitylimit from Rs 3.5 lakh to Rs 10 lakh is likely to become a tool forcompaniesto retainemployees.

In 2008, whenthe governmentimplemented the Sixth Pay Commission for central governmentemployees, it was with effect from 2006. This helpedemployeesreap richbenefits. The decision to increase the limit forprivate sectoremployeesbrings them at par with governmentemployeesin terms ofgratuitybenefits.

However,employeeswanting to take advantage of this decision need to be aware of a few things. One, salary negotiations will become critical as it makes sense to ask for ahigherbasicsalary, especially if he is planning to stay with the company for long. Also, job-hoppers stand to lose money which is deducted from their salary under thegratuityhead.

“To have a cost-optimum structure, thebasicsalary should be 40-50 per cent of the pay,” says Vikas Vasal, executive director, KPMG. This ensures that a person strikes a balance between the taxes he has to pay, his take-home salary, and exemptions and deductions available under the Income-Tax Act.

While negotiating for a new job, it is best if you ask for ahigherbasicpay. This will help you accumulate a goodgratuity, or “accrued benefit,” as it is called. “After this announcement,employeesshould be more concerned with thebasicsalary than the cost to company, especially the middle class, for whom Rs 10 lakh is a significant sum,” said K Pandia Rajan, managing director, Ma Foi Randstad, citing the example of the US, where thebasicsalary is 70 per cent of the total.

In India, many employers keep thebasicpay low, say tax experts. In such cases,employeesshould take a re-look at theirbasicsalaries. If thebasicsalary as a percentage of the overall salary is low, the person should ask the employer to bring it to the 40-50 per cent level. “In small organisations, there is a scope for such negotiations,” said a tax expert. Knowing the method ofgratuitycalculation will clarify this point. The calculation is based on the currentbasicsalary multiplied by the number of years, and further multiplied by 15/26.

If an employee with abasicmonthly salary of Rs 20,000 has resigned after completing five years of service, he will get Rs 57,692 asgratuity. For someone who is retiring after 30 years and has abasicsalary of Rs 60,000, thegratuitywill be Rs 10,38,461. Of this, the person does not need to pay tax on Rs 10 lakh. The remaining Rs 38,461 will attract tax. The taxpayer needs to add the excess amount to his income to calculate his tax liability.

In future, an employee will be able to save tax ongratuityif he invests the amount in an annuity plan. “The draft of the Direct Tax Code has made a provision for such an investment,” said Vasal. In the Budget speech, the finance minister saidthe governmentwas likely to implement the Direct Tax Code from April 1, 2011.

Any organisation with more than 10employeesneeds to make provision forgratuitypayouts according to the Payment ofGratuityAct, 1972. An employer makes this payment at the time of retirement, resignation, and death or disablement due to an accident or a disease.

In theprivate sector, only manufacturingcompanieshave low employee churn. In other sectors, attrition rates are quite high.

Many feel thatemployeesin theprivate sectordo not give importance togratuityas they rarely work in a company for long. “Youngemployeestoday look at cash-in-hand more than long-termbenefitslikegratuity,” said a human resource head of a large company.

To be eligible forgratuity, an employee needs to put in a substantial number of years in the job. While the Payment ofGratuityAct, 1972, pegs this at five years, manycompanieshave sethigherlimits.

Individuals and organizations are known to make a lot of money from trading structured settlements. But what are structured settlements and how can they be traded? Structured settlements are legally binding contracts on individuals, institutions and organizations dictating that a certain amount of money has to be paid to a claimant over a period of time as a compensation for a loss or some sort of damage.

If an individual files a tort suit claiming financial compensation for injury or damage of any sort and the amount being granted by a court id high the defendant, through their legal representatives may beg the court to reduce the amount to be paid over a period of time in annuities. If the court deems fit the defendant may be asked to pay a lump sum and pay the rest over a period of years as annuities.

Getting a tort as annuity has an advantage. The pinch is not felt by the defendant who may not find it necessary to negotiate on the amount, while the claimant will be better able to manage small sums of money over a period of time instead of spending all the money received as a lump sum as a result of bad financial management.

However, many claimants, who accept a structured settlement, find it a bit unattractive a few years down the line. Some may just need a huge sum of money for reasons best known to them and they wish they never had accepted the settlement. For these individuals purchasers of structured settlements can be a way out.

There are individuals who are constantly on the look out for a secure and lucrative investment opportunity. For them buying structured settlements is a very attractive opportunity. Investing in a structured settlement has a distinct advantage. The returns are guaranteed by a court of law, default in payments carry a very heavy penalty in most cases and the returns are just unmatched.

So how does one make money by buying a structured settlement?

The answer is simple: the deal is in the sellers’ requirement! The seller of a structured settlement may be in need for a lot of cash. This seller may agree to sell the structured settlement fro a sum of money that is about 30 percent lower than what the total payout would amount to. Since a structured settlement buyer is a long-term investor they buy these settlements at lower prices and have the seller transfer receiving rights of the annuities to them.

The annuities then become the installments for the sum of money paid out when the structured settlements were bought. Any additional delay penalties monies that exceed the amount paid for the structured settlements minus the transaction fee for the brokers are the total profit. This profit may be as high as 25 percent!

There are online portals that deal in transferring of settlements. They have a list of people waiting to invest in the settlements and match these buyers up with people wanting to sell their settlement. The site assists with the legal documentation and charges a small fee for their services. It may take just a few days before a lucrative deal becomes a reality using their services.

Have you found yourself in a bit of a financial black hole, wondering where the money goes? Are you in a position where every month you are struggling to make ends meet, shifting funds around in an attempt to keep your creditors at bay? It’s not an uncommon story the length and breadth of the UK. There are plenty of people in the same leaking debt boat, frantically bailing and trying to work out ways to deal with their financial problems. At least those with the realisation that there is an issue that needs to be addressed are facing up to the less than convenient truth they have money problems and are seeking debt management services to assess the lay of the land and implement a viable debt management solution. They are the fortunate ones.

The poor souls in the worst of trouble are the ones in denial. Those who simply refuse to acknowledge their financial woes and try to avoid tackling them head on with informed and impartial debt advice. The problem (as we all known deep down inside) is that these things just won’t go away of their own accord. And rather than retaining an element of control over events and being in a position to act out of choice, the debt advice deniers soon find themselves hostages to fortune and forced to take drastic measures to sort the situation out.

Which side of the reality line are you on? Do you deal with this through a proper debt management services to craft a viable debt management solution side? Or the head in the sand debt advice avoider, the person who crosses the road to avoid debt management plans for fear that the cold light of day would be too much to take?

As the effects of the recession drag on and increasing numbers of people begin to feel the squeeze on income and savings, so the number of people having to choose between facing up to financial problems or just wishing them away will rise. Now is the time to realise that there is plenty of help at hand if you want it. Experienced, impartial and best of all free. Debt management services that can quickly and expertly help you turn your financial problems around, saving you both money and sleepless nights in the process.