Cash back and other reward credit cards

http://www.nerdwallet.com/ is very helpful site for people who love using credit cards for cash back and other reward credit cards. All you have to do is choosing card type (cash back, point or travel), select your credit type (poor, average, good and excellent) and enter amount for your different spending categories and it will tell you to which card will be most beneficial! You can also personalize these choices further if you are interested. And you dot need to enter any personal information for that.

Working on 1099 vs W2 and self employment tax

Person working on 1099 is required to pay self employment tax. Self employment tax is 15.3. Self employment tax includes 12.4% social security tax on earnings up to $106,800 and 2.9% Medicare taxes.

Person working on W2 pays 6.2% social security tax on earning up to $106,800 and 1.45% Medicare taxes. Employer pays the same (6.2% social security tax on earning up to $106,800 and 1.45% Medicare taxes).

You can get current information regarding these taxes at http://ssa.gov/pubs/10003.html

Social security tax deduction cap

It is the maximum amount that is being deducted for social security deduction. It is also the maximum amount that is being considered when calculating someone’s social security benefits.

In 2011, $106,800 it the maximum wage on which social security tax is being deducted. Generally 6.2% social security tax is being deducted from wage unto this limit. But for the year 2011, it is 4.2%. 6.2% is being paid by employer and 6.2% is being paid by employee.

When an employee works for more than one employer in a give year, this deduction could exceed the cap. If exceeded, employee can claim this while filing tax return. You just need top mention it on your tax return filing and you will get it in tax return. Employer can not claim this overpaid tax.

What is AMT (Alternative Minimum Tax)?

AMT stands for Alternative Minimum tax. Some people have to pay AMT in addition of regular income tax. It was introduced to prevent people with very high income to pay very little tax.

Everyone is required to calculate AMT when they file tax return. If someone is already paying that amount via regular income tax, that person doesn’t need to pay AMT. but if regular income tax is below calculated AMT, you will have to pay it.

How to calculate AMT?

There is not a clear cut answer for this as this depends on many things. Preferred deductions are added back while calculating AMT. If you are using tax software, it should calculate AMT for you. If you are not using tax software, you will need to file form 6251 in your tax return. Here is the link for this form from irs at the time of writing this: http://www.irs.gov/pub/irs-pdf/f6251.pdf instruction for the same from irs site whie write this is here: http://www.irs.gov/pub/irs-pdf/i6251.pdf filling this form Though it is not straight forward, irs website detail information to you to follow guidelines and fill up this form. You don’t need to be math expert to do so.

Who needs to file AMT?

AMT is imposed on Individuals, corporations, estates, and trusts

How and where to check credit report for free?

It is necessary to check your credit report regularly.

TransUnion, Experian and Equifax are thee credit reporting agencies. You can check your credit report for free from each of these agencies once a year – it’s required by federal law that these agencies will provide your credit report free once a year. Ideally you should check your credit report every four months – once a year from each credit reporting agency. Remember that you don’t have to pay for this. It can be done via https://www.annualcreditreport.com/

Why should I check my credit report?

Credit report contains your payment history and all credit related information. When you apply for a loan, based on your credit report lender approves or declines your application. It will also play significant part in deciding rate at which lender is going to lend you money.

Make sure that you check every detail and report any discrepancy in it.