If you ask people the question, “What is your greatest asset?” you will get a range of answers. Many will say that it is their house, others will boast that their 401k is the biggest, and still others will jokingly say that their life insurance will pay out a million dollars, but only if they’re dead. Almost everyone will miss the true answer: your earning ability. Over the next few decades, you have the potential to earn millions of dollars. But that ability disappears if you are hurt, injured, or suffer an illness that leaves you unable to work. Disability insurance can help you offset that risk, but you should understand how it works, and what the tax implications are.


What is Disability Insurance?

There are big misconceptions about what disability insurance is, and what it can do for you. Here are a few of the biggest ones:

  • Major Disabilities – Disability insurance covers all disabilities. If you cannot perform the duties of your job, then you are disabled. You don’t have to be paralyzed or comatose. There are a number of people out there that have lower back injuries and prevent them from sitting for long periods at a time: they are disabled even though they can still go rock climbing. A painter that fractures his wrist could still do a lot, but is disabled. The policy will dictate own occupation or any occupation.
  • On the Job – Disability insurance is not workers compensation insurance. If you are injured on the job, or off the job, a disability policy will provide an income if you cannot work (assuming you meet the requirements, for instance you can’t become disabled because you were committing a felony).
  • Employer Coverage – Most people mistakenly assume they have coverage through work. While some do, many do not. And even if a person has disability insurance through their job, that policy will often only cover 60% of their income; and the benefit received is subject to taxes.

Taxation of Disability Insurance

Disability insurance is taxed differently depending on who owns the policy. Figuring it out is not too difficult, but in the event of an oddly worded policy, you may need the help of an accountant in Billings, Montana to do so.

  • Employer Provided Policies – A disability policy that you get as a benefit of your job is almost always taxable. Look at it this way: do you pay for the policy? If not, then it is most likely a taxable benefit. These benefits pay about 60% of your salary, so after taxes that could be less 50%.
  • Personal Disability Insurance – A disability policy that you took out, and you pay the premiums on it, is most likely not taxable. You have paid taxes on the money going into the policy, so the money coming out of the policy is not taxed. There can be some situations where this is not the case, so A+ Accounting & Consulting can help you figure that out.

Protecting Yourself with Disability Insurance

If you are working, even if you are not supporting a family, you should have disability insurance. This coverage will protect you in case you cannot work and cannot provide an income any longer. Seek out a financial professional to get a quote on what it will cost to protect your greatest asset; if it is too much then get enough coverage to at least pay for your rent or mortgage. If you need help determining whether or not your policy will be taxable, then you should talk an expert at Practical Taxes. We knows about taxation of disability insurance, tax preparation, business planning, online payroll, and a whole lot more.

Student Loans It’s very easy to see how rapidly the costs of higher education are increasing. But that shouldn’t deter you from seeking an education. There are a number of benefits to completing your degree, and even if you have to take out student loans in order to make it happen you can still benefit. Here is some of the quick math when it comes to taking out student loans and how that will help you with your taxes next time you file.




Costs of Higher Education

Education can be incredibly expensive if you let it. However, there are ways to get a degree without paying outrageous prices. Even if you attend a private university, where the costs are the highest, you can still get by with very few loans if you get to know the right people. Here is what it looks like for an education per year:

  • Private University/College: $30,000
  • State Schools – Resident: $8,900
  • State Schools – Non-resident: $22,200

Now keep in mind these are national averages, so wherever you live those could be vastly different. But suffice to say that the costs of tuition and fees (not to mention room and board) range from $35,600 to $120,000 for a four year degree (assuming no cost increases during your tenure). That is a lot of money to owe when you get done; and there is no guarantee of a job. But that’s another topic for another time.

Paying Back Your Loans

Currently interest rates on your loans are fairly low. For undergrad degrees, the rate (until July 1st when it readjusts) is 4.66%. Even though this is a pretty low interest rate, it also means that you will be paying back quite a bit over the next 20 years.

  • $35,600 loan: Your monthly payments will be $228.31, and pay a total of $19,194 in interest.
  • $120,000 loan: Your monthly payments will be $769.58, and pay a total of $64,700 in interest.

That is a lot of money to pay back over the next 20 years. So how does one justify taking out a loan?

Incomes With and Without a Degree

There are a lot of variables that go into determining income. For instance, there are a number of very high paying jobs that do not require a degree at all. And there are some jobs that require a degree, but pay hardly anything. When you take everything into account, we can determine the average incomes for various educational levels (statistics are for the year 2012).

  • Average annual income with a Bachelor’s Degree: $46,900
  • Average annual income with a high school education: $30,000

Let’s suppose that you go to a state school and get out with just $35,600 in loans, and you are able to land a good job right away. You will be making an additional $16,900 over your peers that have just a high school education. How does that look for the next 20 years (ignoring raises and promotions)?

  • High school education: $600,000
  • College Degree: $932,000

Even after you deduct the cost of the education ($35,600) and the interest that you paid ($19,194), you have still made $877,206; or $277,206 more than if you had skipped the degree. Factor in raises and promotions that allow you a larger income over those who did not get the degree and you have an even greater advantage.

Using Student Loans

Getting your degree without the help of parents, scholarships, or other means is still possible with student loans. The good news is that the interest that you pay on those loans is tax deductible. This means that while you are repaying those loans you get to experience a lower tax bill because of your write-offs.

If you are in need of simple tax preparation services, we can help you maximize the deductions available for student loans and others.   Practical Taxes is a full service accounting firm with services ranging from payroll, to business planning, to tax needs.

Holiday-Debt-300x224Christmas is barely over, and the New Year is rapidly approaching. Now isn’t exactly the time you want to think about what to do about the debt that has crept up from spending on the holidays, but it is a great time to make a plan to wipe out that debt as quickly as possible. Most people end up spending more than they would like to every year. This causes them to go into debt; and if that debt isn’t taken care of it can be a huge drain on your finances. Here are some tips to get out of debt quickly, and get on track for next year’s holiday season.



Determine Your Holiday Debt

The first step to getting out of holiday debt quickly is to figure out just how much you have. This shouldn’t be difficult, since you will soon be getting statements showing what you owe. If you have more than one credit card that you owe on, create a simple spreadsheet that shows the amount and the interest rate.

Call Your Card Companies

Most people don’t understand that the interest rate they are paying is not set in stone. A five minute phone call can help to reduce that rate immensely, and help you pay off your holiday debt sooner rather than later. Keep in mind that the first person you speak to will likely say that they can’t change your interest rate. Politely ask to speak with someone who has that authority. If they push back, tell them you have a 0% interest balance transfer card ready to go, and you will be canceling your account with them if a deal can’t be reached. Be prepared to back up your statements.

Pay Extra on the Highest Interest First

Once you have negotiated the interest rates on all of your cards, it is time to make a plan to wipe them out. Your spreadsheet will tell you how much you owe and what the new interest rates are. Pay the minimum on the lowest interest cards, and put all of your extra money toward the highest interest card. When that one is paid off, move on down the line.

Slash Expenses and Earn More on the Side

Until your holiday debt is gone, no more extra expenses. Cut the cable out, stop dining at restaurants, avoid frivolous purchases, and even keep the lights off to save on your utilities. The goal is to have as much money as possible to wipe out that holiday debt. You may want to pick up some extra money by selling unneeded items, shoveling sidewalks and driveways, or starting your own side hustle.

Use Your Tax Refund

If you haven’t paid off your holiday debt by the time you get your tax refund, you can use that to wipe out the remainder of it. But then take it one step further. Anything that remains from your refund should be set aside to avoid debt when next year’s season comes around. Set up a side account at your bank (most will do this for free), and then put another $50 into it every month. Use that money for Christmas presents and avoid the fiasco in the future.

Hire an Accountant to Help

If you need help planning your holidays, an account in Billings, Montana is probably not going to help you out too much. But  here at Practical Taxes can help you get the biggest tax refund possible. You may be surprised that you have more coming back to you than you originally thought. With his services you can get your holiday savings back on track quickly.

Large bills fanned out and held in hand

Large bills fanned out and held in hand

If you follow any personal finance blogs, you will probably notice that a lot of them tout the advice to “stop giving the government an interest free loan!” This advice is based on the fact that the average income tax refund is around $3,000. When we overpay our taxes, we let the government keep that loan, but they never pay us interest. Sounds like a bad deal doesn’t it? It might not be so bad.


More in the Paycheck

The idea is to reduce your withholdings in order to keep more money in each paycheck. Let’s suppose you were to accurately estimate your taxes so that when you filed your return, your refund was $0. Based on the average refund amount, you will have around $115 extra dollars in your paycheck every two weeks.

Now suppose that you did have the discipline to actually save that $115. You put it into a savings account and let it grow earning you interest all year long. At the end of the year you would have less than $3,030. Based on current interest rates of around 1%, your hard work and discipline would net you less than $30.

Of course, most people won’t have the discipline to save the $115 from each paycheck.

A Bigger Tax Refund

On the other hand, let’s suppose you didn’t worry about estimating your taxes so precisely. After you file your taxes you get a refund of around $3,000. You rejoice that you have some money back, and you dump $2,700 into a savings account and then splurge the other $300 on buying something nice for yourself.

At the end of the year you have $2,700 in your savings.

Which Would You Rather Have?

Most people, if they have the extra $115 in their paycheck will spend that $115. They will see the extra money and think they can stay for that extra drink at the bar. They will go out to eat one more time this month. They will buy a new pair of shoes or a new coat. Now there is nothing wrong with those things, but if your “refund” is being spent on them, it defeats the purpose of taking a bigger paycheck in order to save more.

The reason is that psychologically we see the money coming in differently. When it comes in slowly, as part of our paycheck, we think of it as money that we earned and we can splurge on whatever we want. We also don’t see the harm in small purchases of $20 or $25. However, when it comes in as a big chunk, it’s seen as a windfall. Even though $2000 all at once is the same as one hundred $20 purchases, it feels different. We are more inclined to save large chunks of money than to spend them.

So if you are trying to minimize the size of your tax refund by taking more in every paycheck, you may be setting yourself up to spend more money than if you were to let the government hang on to your money “interest free.”

Hire an Accountant for Maximum Refund

Practical Taxes can help you get the most out of your taxes. We know tax laws. By hiring him to do your taxes you free up your time, make sure they are done right, and most likely your refund will be larger than if you try to do your taxes on your own (even after paying the modest accountant bill). Contact Practical Taxes today to learn more about what we can do for you.

law-books-4-300x225After a person is married, even before they have kids, they should get a last will and testament created. This simple piece of paper will help alleviate a lot of problems that come along down the road (it’s very easy to forget about your will and accidents could happen at any time). As your estate grows, further problems could arise in your tax situation. A simple will can help to alleviate those problems.




What is in a Simple Will?

The biggest thing that goes into your will is who will own what assets after you die. For instance, will your house be sold and the proceeds donated to charity? Or will everything be left to your children? You need to have this clearly planned out, or things may not go as you would want them. Here are the top 5 reasons that you absolutely need a will.

Estate Distribution – As mentioned above, distribution of assets and estate are something that is near to your heart. You spent your life building your estate; you should get to say what happens to it after you’re gone.

Childcare – If you have young children (under age 18) you need to have a will so that they are taken care of if both you, and your spouse, pass away. Without a will the court will get to choose who takes the kids. While they generally choose a close relative, they may be placed with a state-appointed guardian.

Minimize Estate Taxes – Estate taxes are one of the banes of growing your estate. Often called “The Death Tax” these amounts can add up quickly. With a simple will (or a trust if your estate gets large enough) you can divide up your assets in a way that minimizes, or eliminates, estate taxes.

Choose Your Executor – You may have a friend or family member that you trust the most with your estate. Without legally naming your executor, you are leaving things up to the court (and they will take a fee for their time).

Easy to Change – A will is not set in stone. If a grandchild is born, or a sibling is divorced, you can change up your will whenever you please. Your final wishes should be honored, and as long as you are alive you can change them to however you want.

Creating your Last Will and Testament

There are a number of ways to create your simple will. You could write it all up yourself, and get it signed in front of a notary. This is a cheap and easy way to do it, but there may be things that are missed. Instead, many people choose to hire an attorney to help them. But at $200 per hour, a will can easily cost thousands of dollars to get drafted, and hundreds every time a revision is made.

Instead of wasting your time (and missing some key aspects) or wasting your money, you should look into Legal Shield. You can get all of your legal work done for one low monthly price. Even if you sign up and only use it to create your simple will (and hang on to it for a couple of years “just in case”) you will still pay less than if you approached a lawyer directly.

Accountant-in-Billings-300x225Most people, when they think of the services provided by an accountant, think of tax preparation. While that is a huge part of their job, it really only encompasses a small part of what they do throughout the year. If you are a business owner or a busy professional, an accountant in Billings, Montana can be the best way to maximize your time.





Business Consulting – For those who are just starting up a new business, and they need help planning out all of the finer details, your accountant can help you with this. Should you form an LLC or an S Corp? Should you have partners, or take things on yourself? Need help filing the paperwork and making everything official? An accountant is where you will want to turn to get all of your questions answered.

Tax Planning – Taxes incorporate so much more than your simple Form 1040 tax return every April. If you are a business owner, then you understand that taxes are a year-round issue. Filing quarterly estimates can be a huge drain on your time; instead you can focus on running your business and let your accountant do the tax planning.

Payroll Services – Professionals that have employees know that running payroll services is essentially a full time job. Not only do you have to remember to write the paycheck, but you also need to calculate out taxes, double check your work, get checks mailed or direct deposited on time, and a whole host of other tasks that end up bogging you down. Instead of using your valuable time to process payroll every two weeks, let your accountant do that for you.

Accounting services go far beyond a simple tax preparation (although if that is what you need, we would be glad to have you as a client and handle your tax prep needs). If you have a need that has to do with business planning, taxes, staffing, or payroll services, A+ Accounting & Consulting is the right choice that will be able to answer all of your questions.

Before tax season comes around, check out what A+ has to offer. As a full service accounting firm in Billings, Montana, we are able to do it all. From payroll, to tax prep, to business planning and consulting, we are here to help make your life easier. You may be surprised at how much time you have been wasting on services that you can let someone else handle for far less than you thought it would cost.

Learn more about payroll services, or online payroll.

Side-Job-300x225There are thousands of people who would like to make more money or save more money. It would allow them to afford the lifestyle that they truly want. But they run into problems, such as they are at the top of where they can get to at work, or they have scrimped and saved and really cannot cut costs anywhere else. They wonder where they should turn. In today’s society, packed with internet bills, cell phone bills, high utility fees, and many other things that cost a lot of money, many people need to pick up some sort of side income. Depending on how you earn the money, there could be tax consequences that you want to address (also where an accountant in Billings, Montana could help you out).


Getting a Second Job

To bring in extra cash, most people will get a second job. This could be serving at a bar or a restaurant in the evenings, or working part-time as a cashier at a retail store. There are the goods and the bads that come with this choice.

The benefits of a second job are that you will have regular hours. That means a steady second paycheck. Also, you will get another paycheck where taxes have been taken out; there will be less to worry about come tax season (on top of that, the employer will pay half of your FICA taxes).

The downsides, however, are that you are stuck working for someone else. You have to follow their hours, their guidelines, and you are likely to be stuck making close to minimum wage (being a server, however, you could make substantially more because of tips).

Working on the Side

Because of the lack of flexibility and the low pay of working a side job, many people choose to follow their passions, and monetize their hobbies or interests. This method takes a little more planning, but the benefits in the long run are a lot better.

The best part about starting your own side business is that you get to set your hours. You work when you want to, and as much as you want to. So if you only have a few hours per week, you don’t have to rearrange your entire schedule just to bring in some extra money. Another positive aspect is that you get to set your own rates. With proper marketing, and if you have the skills, you can make substantially more than minimum wage.

The biggest drawback of earning income on the side like this is that you will have to pay all of the taxes. Next tax season you will have a bigger tax bill that may drop your tax refund into the negatives. This is especially true because you will be paying ALL of the 15.3% into your FICA taxes (working for someone else, half of this is covered). Combine that with the fact that you have to find all of your own clients, and many people are deterred from this option (even though you can make a lot more, it is quite a bit harder).

Using an Accountant in Billings, Montana

If you hire an accountant in Billings, Montana, you will be able to take a lot of the worry away from your side business. Here at Practical Taxes, we know the tax laws, and if you are starting your own side business we can work with you to get the most deductions possible (and help to offset those taxes that you have to pay).

If you are interested in making more money on the side, consider starting a little side business (often called a side hustle). You will be happy that you did, and the extra income can go a long ways.

Practical Taxes knows all the current tax laws and can help you with your business needs including business planning, accounting, tax preparation, and more.

Emergency-Fund-300x199As a financially savvy adult, you likely know about emergency funds. But if you are like most Americans, you have yet to really get started saving into your emergency fund. This little slush fund, that comes in extra handy during the leaner months, is a tool that everyone needs to utilize. In fact, even before you make the commitment to start saving in your IRA, you should be saving into your emergency fund. Any accountant in Billings, Montana, or financial planner will tell you that. So what are the benefits of an emergency fund? Here are just a few.



Paying Taxes – As much as we hate to do it, we have to pay our taxes. And as much as most people hate to work, the fact is that one job often doesn’t meet our living expenses. So we pick up a side job, or start a little business on the side (in personal finance blogs across the internet you can see this referred to as a side hustle). While it is tempting to just take that money and not report it as income, if you are going to do the right thing you need to report it.

But adding that to your tax return may suddenly drop you from getting a tax refund, to having to pay in. This can be discouraging for anyone, but it can be even more discouraging if you don’t have a source of funds to dip into to pay those taxes. An emergency fund is designed for this exact occasion.

Unexpected Expenses – There will come a time when your car breaks down. You will get sick or injured and be hit with an unexpected doctor bill. You are going to foolishly leave the turkey in the oven too long and it will start a fire causing you to fry your oven from the inside out and then you will have to go buy a new oven. These things happen, and while we call them “unexpected” we can fairly well rely on them. They really are not that unexpected after all.

When you have an emergency fund set up and properly funded, these expected unexpected expenses are no big deal. You have the money, you saved the money for this reason, and it only takes a few clicks of the mouse to transfer the money from your savings into your checking account.

Opportunities – Many financial professionals won’t call it an emergency fund. Instead, they prefer the term opportunity fund. Because sometimes there are opportunities that come up that you just hate to pass on. But if you don’t have an emergency (opportunity) fund, then you really do have to pass. That can be a great business opportunity, a really sweet deal on a vacation, or your dream car just hit the market. If you want to be able to take advantage of the opportunities that life holds, you need to have an emergency fund.

The list of benefits of an emergency fund goes on and on, but I think you get the point. Without an emergency fund, you are putting yourself in a position that could be devastating to your financial health. Instead of taking that risk, make the commitment for 2015 to start your emergency fund. Just $25 or $50 per month will go a long way to offsetting some of those little surprises that life can throw at you.

A financial planner can help you figure out an emergency fund, and an accountant in Billings, Montana can help you make the most of your taxes so you can adequately fund your opportunity fund.