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Liz Weston

Wednesday’s need-to-know money news

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Today’s top story: How to maximize paying taxes with a credit card for points. Also in the news: How travel is back, 5 reasons to be optimistic about your summer travel plans, and how rising fed interest rates affect home buyers, homeowners.

How to Maximize Paying Taxes with a Credit Card for Points
You can rack up some serious points by paying your taxes with a credit card — just be conscious of fees.

Travel Is Back, in Case You Missed It
The pandemic has changed the way we travel, but the industry is bouncing back.

5 Reasons to Be Optimistic About Your Summer Travel Plans
The gradual travel bounce-back from deep COVID looks poised to accelerate this summer.

How Rising Fed Interest Rates Affect Home Buyers, Homeowners
Interest rates on mortgages and home equity lines of credit may rise following the Federal Reserve’s rate increase.

Tuesday’s need-to-know money news

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Today’s top story: How to know if you qualify for free file and use it. Also in the news: 5 things to know about guaranteed universal life insurance, the worst that will happen if you file your taxes late, and if gas is really cheaper at Costco.

Analysis: Taxpayers Waste Billions on Filing Federal Returns
Each year, 70% of taxpayers qualify to file federal returns for free, but few do. The unnecessary spending could top $13 billion.

5 Things to Know About Guaranteed Universal Life Insurance
Here are five things you should know before buying a guaranteed universal life policy.

What’s the Worst That Will Happen If You File Your Taxes Late (or Not at All)?
Taxes are the least-popular aspect of modern civilization, but filing late—or not at all—is a big mistake.

Is Gas Really Cheaper at Costco?
Gas prices likely aren’t dropping any time soon. Could Costco be your saving grace?

How buy now, pay later loans could alter credit

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Expanding access to credit is a worthy goal. Too many people can’t get a mortgage or an emergency loan at a reasonable rate because they can’t show a solid credit history. They may pay more for insurance or make large security deposits to get utilities or rent an apartment.

Recently, the three major credit bureaus announced plans to incorporate “buy now, pay later” plans, a hugely popular type of point-of-sale financing that until now remained mostly outside the traditional credit ecosystem.

But no one should expect that their buy now, pay later purchases will instantly open the door to better credit. If you want reliable access to the largest number of lenders, building credit through traditional means is still the better route.

In my latest for the Associated Press, learn more about buy now, pay later loans and how to build better credit now.

Monday’s need-to-know money news

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Today’s top story: Combating inflation, and saving for retirement amid climate change. Also in the news: 3 ways to lessen the impact of inflation on your small business, 3 ways small-business owners will feel a fed rate increase, and how to get on top of planned expenses with sinking funds.

Smart Money Podcast: Combating Inflation, and Saving for Retirement Amid Climate Change
Things may seem grim, but you can still take steps to set yourself up for long-term financial success.

3 Ways to Lessen the Impact of Inflation on Your Small Business
Lessen the impact of inflation on your business by raising your prices, refining your operations and working with a financial advisor.

3 Ways Small-Business Owners Will Feel a Fed Rate Increase
The Federal Reserve plans to raise interest rates multiple times in 2022.

Get on Top of Planned Expenses With Sinking Funds
Mapping out big purchases in advance gives you time to save by adding regularly to “sinking funds” for each goal.

Q&A: Reporting caregivers’ pay to the IRS

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Dear Liz: We have a gardener, pool man and caregivers. We pay the gardener, pool man and some of the caregivers directly, while we pay an agency for the other caregivers. Do we have an obligation to report payments to the IRS?

Answer: As an individual taxpayer, you typically don’t have to report payments to businesses. Your gardener and pool cleaner probably either are self-employed or work for a company that takes care of reporting requirements for its workers. Likewise, the caregiving agency should handle reporting requirements for its employees.

The caregivers you pay directly, however, are generally considered your household employees. That means you may be responsible for reporting their wages to the IRS and paying their employment taxes. That responsibility kicks in if a caregiver receives at least $1,000 in any calendar quarter or at least $2,400 per calendar year for 2022 (or $2,300 per calendar year for 2021), says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. IRS Publication 926, Household Employer’s Tax Guide, has details.

Q&A: Taxes on trust’s income

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Dear Liz: My father passed away last year leaving an estate that will make us comfortable through the foreseeable future. His holdings are mostly securities that are traded either on the NYSE or the Nasdaq. From our investments, we currently have non-earned income of between $75,000 and $100,000 annually without any other income. After estate taxes are paid for my father’s estate, the annual yield (mostly dividends) will be in the $225,000 to $250,000 range. My question for you is should we keep my father’s holdings within his trust and let the trust pay the taxes on the income, or should we take the income and pay the taxes ourselves?

Answer: Tax rates on trusts are notoriously high. If you have a choice, you probably would want to pay the taxes yourself rather than letting the trust do so. The question is whether you have a choice, and that will be determined by the wording of your father’s trust, Los Angeles estate planning attorney Burton Mitchell says.

Speaking of estate planning attorneys, you need to hire one, along with a tax pro and a fee-only financial planner, so you can get solid, personalized advice on questions like this. You already had substantial income, and you just inherited an estate worth multiple millions, so you’re long past the point when doing it yourself makes sense.