Consolidate Your Savings Accounts to Simplify Your Taxes
A surprising number of people have their savings accounts spread out over a number of different institutions. For some they just have not taken the time to close one account and move the money into another, for others they are fearful of losing their money if the institution were to fail. There are different reasons for spreading out money, but the bottom line is that it really doesn’t make any sense to do so.
FDIC Insurance Protects Your Savings
Most banks and credit unions are members of the Federal Deposit Insurance Corporation. The FDIC protects the deposits at that bank against a variety of factors that could wipe them out. For instance, back when Washington Mutual went under due to stress from the Great Recession, most people were still able to get their savings back without any problems.
FDIC insurance protects your deposits up to $250,000 per person, per institution. What this means is that you can have $250,000 in all of your combined accounts at one bank, and never have to worry about losing that money if the bank is robbed, burns to the ground, or fails financially. If you happen to have over $250,000, you may want to spread it between institutions, or take the risk that anything about the limit won’t be replaced if it’s lost.
Why Consolidate Your Savings Accounts
Nearly all savings accounts offer interest. This interest is taxable. Because it is taxable the institution where you have your savings account must issue you a 1099-Div each year. Even if you only earned $20 in interest, you get a tax form. If you have 10 different savings accounts, then you will get a tax form from each of them. Every added form makes your taxes that much more complicated, and your accountant in Billings, Montana has to do even more work.
Simplifying your taxes is a huge reason to consolidate your savings accounts. But there are other reasons as well. Many savings accounts, especially those online, give you a bonus if you maintain a certain balance. For instance, if you have over $20,000 in your savings, you might get an additional .25% interest every quarter you have the higher balance. By consolidating your savings accounts, you get the opportunity to earn more interest.
Aside from the monetary reasons to consolidate, there are organizational reasons as well. Moving all of your savings accounts to the one that pays the highest interest rate will let you get rid of a lot of paperwork from your life. Each account you close is one less thing to worry about. Imagine simplifying from 10 to just 1. Even if it only saves you an hour per account per year, that’s 9 hours of less stress.
Contact Practical Taxes
Tax season is approaching, and if you are looking for an affordable way to get your taxes prepared, you need an accountant in Billings, Montana. Practical Taxes is a full service accounting firm. We can handle your tax preparation needs, business consulting needs, online payroll services needs, and more. Call 406-894-2050 to schedule your appointment today.