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When are Per Diem Payments Taxable?

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Per diem payments are used when businesses have employees that travel. These payments are designed to relieve the employee from certain costs associated with traveling. Particularly meals and incidentals (ground travel, laundry, room service, etc.), and lodging.

This is great for both the business and the employee, but there are certain situations when per diem payments are taxable. In this article, we’ll explore exactly when an employee will pay per diem tax.

Two types

There are two types of per diem payments, meal-only, and meal and lodging. The names imply their use. One pays for meals, the other pays for meals and lodging.

It’s important that we specify the meals must be “non-entertainment related” meals.

Stipulations

As with many parts within the tax code, per diem rules are very specific. Meals and lodging have different rates.

Also, different cities have different rates. These differences are typically relegated to “big cities” and “small cities”, with bigger cities getting the larger rates. This is referred to as the high-low method. Businesses may also make payments based on the state in which you travel.

The per diem payments must be equal to or less than the federal allowable limit (depending on what method is selected). The employee is responsible for filing an expense report within 60 days. The expense report needs to include, date and location of the trip, purpose of the trip, and lodging receipts (if the meal-only option is selected).

You’re not allowed to “transfer credits”. What’s meant by this is if you use less on your lodging than is allotted, you can’t use the excess on food, or vice versa.

Tax Consequences

As I mentioned in the introduction, per diem payments can have tax consequences.

  • If per diem payments over the limit are taxable on the employee’s wages
  • If an expense report isn’t filed, or the filed expense report doesn’t include the required information, those per diem payments become taxable to the employee.
  • If the employer allows you, the employee, to keep whatever you don’t spend.

If you travel for business and receive per diem payments, just make sure you keep good records, and you hang onto your receipts. It’s better to have too much information than not enough.

Related reading:

Some Often Overlooked Tax Deductions for Busines Owners

Top 5 Overlooked Tax Deductions You Should Be Using

Why Financial Literacy is Important

 

*Be advised: Securities America and its representatives do not provide tax advice. Please consult a tax professional for specific information regarding your individual situation.

Is My Credit History Important During a Job Search?

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While the average FICO credit score is around 703, an estimated 68 million people have scores below 601. Which gives them a poor or bad rating. That is dependent on exactly where they fall. Plus, about 45 million adults have no credit score. Either because their credit history is insufficient or there is nothing on record. As a result, many people worry that their credit history will hold them back. And not just when they need a financial product. They may wonder if their credit history can hurt their chances of getting a new position. If you’re trying to figure out if your credit history matter during a job search. Here’s what you need to know.

Do Employers Check Candidates’ Credit Reports?

While it isn’t universal, some employers do check the credit reports of job candidates. However, they won’t see a job seeker’s credit score. That’s usually unnecessary.

Usually, companies are looking for signs of financial trouble, mainly because they believe it could demonstrate a higher theft or fraud risk. Additionally, certain facts from a report could indicate a candidate lacks certain skills. For example, a slew of missed payments may mean a job seeker isn’t particularly organized or isn’t good with deadlines. It may also suggest a person doesn’t take their commitments seriously.

At times, a poor credit report could indicate a candidate isn’t ideal for financially-oriented positions. Employers may believe that if they can’t keep their financial life in order, asking them to manage a client’s file or money-related tasks might not be a good idea.

The Kinds of Jobs That Check Credit Reports

Not all jobs will require credit checks. Typically, this kind of background check is only needed in certain scenarios.

If a job requires a security clearance, a credit check is more likely. Similarly, if the role means handling large sums of money, directly accessing financial accounts, working with sensitive customer data, or using confidential information, one may be part of the hiring process.

What Information Do Employers See?

When an employer runs a credit check, it’s not the same report that a bank may receive when trying to determine if you’re eligible for a credit card. For employment, a credit report usually won’t contain information that could indicate certain kinds of statuses or belonging to specific demographics.

Account numbers also aren’t displayed. However, your payment history, amount still owed, and available credit amount are visible.

Will an Employment Credit Check Hurt My Score?

Generally, no, an employment credit check doesn’t hurt your credit score. Usually, it is listed as a “soft inquiry,” which is different from the hard pull most lenders use when determining if you qualify for credit.

Further, it won’t necessarily hurt your chances with other employers, either. Your report doesn’t show any other soft inquiries. If you apply to multiple companies, and they all require a credit report, they won’t know that other employers are also taking a look.

A Job Seeker’s Legal Rights

There are rules governing when and how an employer can use a credit check as part of their hiring process. Above all else, you must be notified that one is going to take place, and you have to give your written permission. Additionally, the company must tell you in advance how the information impacts its hiring decision, as well as give you a pre-adverse action notice, where they outline that information as well as cover any rights you have legally.

You also have to be given adequate time to explain any potential red flags or have errors corrected with the credit bureau that provides the data. Usually, that’s about three to five business days.

Additionally, if there is an adverse action, you have to be given a notice. Within that document, the contact information for the credit agency and your rights to get a copy of the report have to be outlined.

It is important to note that some states and cities bar the use of employer credit checks entirely, or highly restrict how any discovered information can be used. If you’re interviewing for a job that requires a credit history check, review your local laws to make sure it is being done correctly and in accordance with any mandates.

How to Prepare for an Employment Credit Check

If you know a credit check could be on the horizon, it’s wise to review your reports first. You can head to AnnualCreditReport.com to get a free copy from each bureau every year. That way, you can review the content and dispute any errors if the need should arise.

Otherwise, good financial habits can help you ensure your credit report is strong. Pay your bills on time whenever possible, use your available credit responsibly, and only take out new credit when absolutely necessary.

You may also want to use a free credit monitoring service. Whenever someone accesses your report or opens a new line of credit, you’ll be notified. If the activity is legitimate, you’ll know that it is now on your report. If it isn’t, you can act quickly to remedy the issue, increasing the odds you can preserve your credit.

Finally, if you put a freeze on your credit reports, you’ll need to lift them (at least temporarily) when your employer runs their check. Many people put freezes in place after the major Equifax breach in 2017. Those prevent anyone from check your credit report, even if you give permission. If you froze your reports, make sure to temporarily lift the freeze, or the prospective employer won’t be able to complete the check.

Has your credit history ever impacted your job search? Share your thoughts in the comments below.

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Is There Any Recourse for an Eviction Due to Job Loss?

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Due to COVID-19, millions of Americans lost their jobs. While moratoriums were put in place to protect them from eviction, time is running out. The protection offered by the CARES Act ended on August 24, leaving many renters vulnerable if their state didn’t extend protection beyond that date. Additionally, the CARES Act requirement didn’t apply to all properties, meaning some renters were experiencing trouble before that help came to an end. As a result, it’s normal to wonder if there is any recourse for an eviction due to job loss. If you’re concerned about being forced out of your home, here’s what you need to know.

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How to Make a Legally Binding Promissory Note

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A legally binding promissory note is used when lending money. It’s a document that states the parties involved, how much is being lent, any pertinent financial information, and signatures by the involved parties.

The agreement must be clearly defined so that no argument can be made.

Four parts

There are four integral parts to a legally binding promissory note.

  • Parties – individuals or entities involved in the transaction. A party must be of legal age and of sound mind capable of entering into a transaction.
  • Promise – Defines what is agreed upon. It defines the amount to be paid and should also include a paid off date.
  • Sum certain – Specific financial information including, exact amount, pay off date, interest, amortization, penalties, and when those penalties must be assessed.
  • Signatures – to be signed by all parties involved.

These four parts must be included and clearly defined, otherwise the agreement might not be enforceable.

Once the promissory note is signed and has all the necessary parts in it, it becomes legally binding. Once legally binding, all parties involved must meet their part of the agreement.

Promissory Note Uses

Essentially, a promissory note is used when lending/borrowing money. Mortgages, car loans, student loans, personal loans, and business loans all use promissory notes to legally enforce that the borrower must pay back the loan, plus interest, in a specified period of time.

Different kinds

There are two different types of promissory notes, simple and demand.

A simple promissory note is one scheduled, lump-sum payment on a specified date.

A demand promissory note is when the lender asks for payment to be made. Normally, there is a reasonable amount of time needed between ask and delivery.

Collection

More often than not, the borrower will abide by the terms of the promissory note and pay on time. If they don’t, however, there are a few things you can do.

Talk to them. Make sure they are doing okay. Send them a written reminder. If need be, you can send one at 30, 60, and 90 days. If they’re in a tight spot, see if they can make partial payments.

A legally binding promissory note is a very important document. Make sure you include all four parts to make it enforceable and legally binding. Might not be a bad idea to have an attorney take a look at it before you enter into the agreement.

Related Reading:

What You Need to Know About Bankruptcy

How to Answer a Civil Summons for Credit Card Debt

Should You Add Your New Spouse to the Deed of Your Home?

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add new spouse to deed

When you get married, it’s common to merge the majority of your financial lives. After all, when you live together, it’s normal to both be involved with handling expenses and planning for the future. However, if you owned your home before you wedding. Figuring out if you should add your new spouse to the deed of your home isn’t always easy. Ultimately, there are advantages and disadvantages to adding them. As well as leaving them off. If you’re trying to decide which option is right for you. Here’s what you need to know.

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Down Payment, Rainy Day, Be Prepared

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During the month of June, I wrote an article Down Payment or Investment Opportunities. It was my perspective on what to do with my savings, as I want to buy a home as soon as possible, but I also saw incredible opportunities to make money in the stock market.

Review a previous post

I thought I would revisit this topic, but my mindset shifted a little bit. That’s not to say that I’m proceeding in a different way than I thought I would, but now I’m thinking about it differently.

In that post, I said that I wanted to save $25,000 (I think) for a down payment, and wanted to do it in 4 years.

That meant that I would have to set aside a decent chunk each month to make that a possibility. The caveat to that is I would forego many chances to put money to work in the stock market.

Saving money for a down payment versus actively participating in the market is not the smartest financial decision (in my opinion), but in terms of what’s best for my family and for my psyche, this is the right move.

Because I have conviction in my decision now, my “regret” for not participating in the market has gone away.

When I first made the decision to save for a home instead, I often felt regret because the opportunities to make money were so great. Just from when I wrote that post (June 17) to now, the S&P 500 index ETF (SPY) is up 7.5%.

But I know this is the right choice, so I’m better able to focus my efforts on this goal. I’m eating out much less, I reviewed my budget to see where I could save more, and I’m finding bargains or buying second-hand items where I can.

Rainy day

While we are on the topic of saving money, I want to stress the importance of having some set aside for a rainy day.

As we’ve seen over the past few months, life can get pretty ugly. Now economic and humanitarian events of this scale don’t happen very often, but that’s not the point.

What I’m trying to convey here is that life is unpredictable. You don’t know what’s going to happen, or when. You don’t know how bad it’s going to be, so it’s important you have something set aside if things do get bad.

What’s more, it’s clear that the majority of businesses and corporations don’t have hardly any money set aside when disaster strikes. We like to think that if we put our time and energy working for a company, that they’ll take care of us when the time comes, but it’s clear now that most businesses won’t do that. They’ll protect the bottom line, and that’s that.

Obviously, not every company is like that, but I think it’s safe to say that the majority of organizations operate in this fashion.

Now, I do believe that this event will change how businesses operate. They’ll back away from the lean and mean operations, and start focusing on supply chain redundancy, as well as paying a little more for the security of their products and their people.

Be prepared

What I’m trying to say here is you need to look out for yourself and your family first. Sometimes, it’s necessary to forego big vacations, big expenses, or take out.

I think there’s room to be optimistic but also plan for the worst. I think it’s necessary to do both.

Living a life full of optimism is great, but you become a deer in the headlights when something bad happens. Taking the other side of things, being pessimistic, turns you into a cynic, and that has to be a depressing way to live.

Find room for both. Expect the worst, hope for the best, and save for a rainy day.

Related reading:

Everything You Need to Know to Set Up Your Own Emergency Fund

Why the Supreme Court Banned Robocalls to Collect Federal Debt?

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Last month, the Supreme Court held up a ruling made by a lower court that banned robocalls. The ban was set forth in 1991 under the Telephone Consumer Protection Act (TCPA) to protect individuals’ privacy.

In 2015, the Obama administration created an exemption. This exemption allowed debt collectors, specifically for debt guaranteed by or owed to the federal government, to make robocalls.

Backstory

This all came about when political groups and non-profit organizations sued because they felt the debt collectors were getting unfair treatment. They wanted the TCPA removed altogether.

The lower courts upheld the decision to keep the TCPA in place as well as the exemption for debt collectors due to their “responsibility for collecting on government debt”.

An appeals court saw the case and overturned the ruling. Claiming that the TCPA should be kept in place, but the exemption for debt collectors should be removed.

Which brings us to the Supreme Court taking the case. Of the 9 justices, 6 agreed with the Appeals Court – keep the TCPA in place, and remove the exemption for debt collectors. The other 3 justices wanted to remove the TCPA altogether.

What this ruling did

It leveled the playing field. The Supreme Court banned robocalls, no matter what organization you work for, no matter what purpose.

It was a great win for consumer privacy, as well. Justice Brett Kavanaugh was quoted saying, “Americans dramatically disagree across many different policies, but they’re all sick and tired of robocalls.”

That’s not to say that robocalls won’t happen. I can attest, as I’m sure you can as well, to getting robocalls since I got my first cell phone.

Organizations across the board shouldn’t be actively robocalling, but they do. Regulation and policing of these activities are very difficult, which is why it still takes place.

Be that as it may, the Supreme Court’s decision to keep the TCPA in place, but remove the exemptions for federal debt collectors was a big win.

Related reading:

Robo-Advisors: What I Like and What I Don’t Like

Debt Collectors with Attitude

What to do About Debt Collectors

How Do I Cancel My Gym Membership?

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Gym memberships are notorious for how challenging they are to cancel. Even during the COVID-19 pandemic, when many fitness centers were barred from welcoming customers due to social distancing requirements and health concerns. Some gyms tried to hold members to their contracts. But even if a person was eligible for cancellation. Fitness centers typically don’t make quitting easy. If you need to cancel your gym membership, here’s what you need to do.

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How to Utilize Rewards

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On this site, we talk about credit, investing, and how to pay off debt. One thing that’s often missed around the debt subject is rewards.

Rewards are incentives to keep going. It’s something we can use to motivate us on our journey, no matter what that journey is.

Whether we are trying to pay off debt, lose weight, or just, straight up, improve our life. You need to reward yourself, otherwise, it’s go go go, all the time.

In this article, we’ll talk about when it’s a good time to reward yourself, how, and things to look out for.

Habits

A reward should be centered around two things. Habit formation or commitment, and goals.

If you are trying to make an improvement on something, whether it’s your health or your finances, you have to develop good habits.

If you want to exercise more, do it six days in a row, then take a break. That break can be your reward. If you want to eat better, do it for six days and then take a little break with a cheat meal.

The first step is creating the habits to get yourself to that better place.

Goals

The next reward will come when you hit goals. You want to get to a certain place, say saving $20,00 for a down payment, eliminating your debt, or losing 20 pounds.

Those are great goals, but you should put in place incremental ones to help you get there. That could be a reward for every $5,000 saved, every $5,000 paid down, or every 5 pounds lost.

It’s a lot like Dave Ramsey’s “Snowball Method” with applications in different areas of life. The goal with that method is to give you small wins to keep you motivated.

How to reward

If you put those habits in place and hit those goals, it’s time for the reward. The great, but the challenging part about that is everyone defines reward differently.

So when you create a reward for yourself, you should keep two things in mind. Make sure it’s good enough to release some dopamine, but small enough that it doesn’t set you back on what you are trying to accomplish.

If you’re trying to lose weight, your reward should be a little cheat meal or a day off from working out. Not a day of binge eating or a week without breaking a sweat.

If you’re trying to save money or pay down debt, don’t let whatever the reward is negate you from saving that month or add to your debt.

Large enough to make you feel good, but small enough so you stay on course.

What to watch for

The biggest thing to watch for is the size/duration of the reward. It mustn’t be too big or too small.

It’s a fine line and may require a little trial and error before you get it right. Start small and work your way up.

As I mentioned, it shouldn’t detract you from the pursuit of your goals, but it should also make you feel good about the progress that you’ve made or the habits you’ve created.

How I handle rewards

I won’t lie to you, rewards are a challenge for me. I’m very much a black and white type of person.

I keep junk food out of the house because I can’t be tempted with it. I make regular transfers from checking to savings in order to keep “discretionary money” out of my bank account for fear of spending it away (mostly on take-out, honestly).

It’s hard for me to put the pedal to the floor and take it off for a day. I’m either all on or all off, but I’m starting to figure it out. It really just takes some practice, a little will power, and some self-awareness.

Related Reading:

The Psychology of Money

Diving Deep into Debt

Money Anxiety

My Life and How I Manage Stress

Can My Savings Account Affect My Financial Aid?

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will my savings account affect my financial aid

Many households do their best to save up for college. Their hope is to set aside enough in savings to avoid student loans. Debts that can often take years, if not decades, to pay off in full. Plus, having a hefty emergency fund is often considered wise. Ensuring a household can navigate the unexpected. However, many worry, “Will my savings account affect my financial aid?” If you’re wondering whether it has an impact. Here’s what you need to know.

Will My Savings Account Affect My Financial Aid?

The short answer to that question is yes. Savings account balances will impact your financial aid. Money held in a savings account is considered an asset. And it does affect a student’s expected family contribution (EFC) calculations when they complete their free application for federal student aid (FAFSA).

However, the impact of a savings account may not be as dramatic as you’d think. It’s only part of a larger equation. Students aren’t expected to hand over their entire savings account balance to cover tuition.

What Has the Biggest Impact on Financial Aid?

While your savings account balance may have a slight impact on your financial aid package. Your income level is a bigger factor. It’s given the most weight when it comes to calculating college affordability.

If you are low-income, you’ll usually qualify for a substantial amount of support unless your assets are high. It would take a considerable amount of savings to completely wipe out your financial aid. Though technically wouldn’t be impossible.

It’s also important to understand that the cost of your chosen college plays a role as well. After completing the FAFSA, your EFC is compared to the estimated cost of going to that college. Thus, influencing the amount of aid that may be available.

How Much Does Savings Impact Financial Aid?

Generally, about 20 percent of a student’s savings account and other cash-oriented assets are counted on the FAFSA as being eligible for use when it comes to covering the cost of college. That means 80 percent is essentially protected from the equation.

For dependent students who are worried about the value of their parent’s saving, the math is even more in their favor. Less than 6 percent of those assets are viewed as potentially useable by the FAFSA.

Generally speaking, savings will potentially reduce how much you receive in financial aid. However, precisely how much of an impact it will have depends on a range of factors, including the total value of your assets, your income level, whether you’re a dependent or independent student, whether the savings is in your name or your parent’s names, and more. Often, the reduction is fairly minimal, as income level is the biggest determiner when it comes to how much a student receives in financial aid.

Making the Most of Your Savings

If the money you have set aside in savings is for college, then do put it toward your education. As that balance shrinks each year, it will have less of an impact on your EFC. As a result, if your income either remains largely unchanged or falls while you’re in school, you could qualify for more financial aid over time.

For dependent students who have money in savings but whose parents also set money aside for college, it’s best to spend your own money first. Personal savings has a bigger impact on your EFC than what your parents have in the bank, so it makes sense to spend the cash that’s saved in your name first.

Did your savings impact your financial aid? Did you decide to change how much you had in savings to secure more financial aid? Share your thoughts in the comments below.

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