Five Common Insurance Myths

Insurance is only meant for the wage earner of the family: Every family member needs insurance. The need for insurance may differ from person to person but it is important to gauge and analyse this need. It is not just the chief wage-earner’s prerogative to insure himself.

Insurance is mainly for tax saving: Saving tax is just an added advantage of insurance. Governments offer Best Tax Saving Plan benefits on insurance plans so that more and more people feel encouraged to insure themselves. The main objective of insurance is to provide financial protection to you and your family and to build an assured corpus for your future needs.

Benefits of insurance can be reaped only after death: Insurance provides financial protection to you and your family. One of the main objectives of taking insurance is to provide financial support to your family in case you are not around, as in case of term insurance. But that is not the only objective. Insurance helps you to build a corpus for yourself and your dear ones. It provides you with comfortable retired life and even takes care of your needs at various life stages.

Group insurance provided by my employer is adequate: Your group insurance might be adequate but what if you change the job? Once you change the job your group insurance will cease and you will be left with no cover till your new employer gets you covered. So it is always advisable to take insurance other than the insurance offered by your employer. Also the insurance provided by your employer may not be adequate to provide complete financial protection to your family.

Young people do not need life insurance: We live with a common notion that people die when they are old. But knowing about life’s uncertainties, it is best to take insurance early in life. Having the risk of death covered is definitely better than leaving dependents financially unstable in case of an untimely death. Besides, it is useful to take benefit of the lower premium rates offered to the young. The older you grow; buying insurance becomes tougher due to higher premium rates or refusal because of ill-health.

Source: http://blog.hdfclife.com/did-you-know/insurance-myths

Why Save Tax at the 11th hour?

Every year, the month of March springs a wakeup call on many of us. Suddenly, we are rushing at breakneck speed, riffling through financial papers, researching investment instruments, frantically calling the accountant—the deadline to file income tax returns is once again too close for comfort.

There are many reasons why we put off filing our tax returns each year—work, family pressure, and even sheer laziness. We are all wired to procrastinate; blame it on human nature. The point is this: Should we at all be procrastinating about something as crucial as our tax planning?

Last-minute tax savings: Why it is a problem

1.       Higher financial burden – Last-minute tax savers often have to scrimp during the last few months of the financial year because a bulk of their income is now directed into Best Tax Saving Plan  instruments. The problem is compounded by the fact that the largest chunk of income tax is deducted during the final quarter of the financial year—i.e. from January to March.

2.       Greater opportunity for error – Rushing is never a good idea, especially when your financial well-being is at stake. In the hurry to make good on the potential to save tax, you could make poor financial decisions and invest in unsuitable products. For example, a 25-year-old confirmed bachelor with no dependents has little need for life insurance, but he might buy a policy at the last minute in an attempt to save tax.

3.       Dangers of mis-selling – When attempting tax savings at the 11th hour, many people consult agents and blindly take their advice. You should never take an agent’s sales pitch at face value because (a) there is the obvious danger of mis-selling by an unscrupulous agent and (b) even an honest agent may not be sufficiently aware of your financial condition. It is necessary to do your own research, which is not possible at the last minute.

4.       Processing takes time – Note that buying a tax saving investment is not like buying groceries; there are procedures and it takes time. Furthermore, there may be unexpected delays for various reasons. Postpone your tax planning until too late and you run the danger of missing your tax filing deadline.

Tax planning: Why you should start early

1.       Make good investments – You should ideally give yourself time to research tax-saving products so that you are certain of getting a good deal. Starting early also ensures that you benefit from the potentially higher rate of returns than your savings bank account would offer you.

2.       Spread out the burden – If you start planning early, you can spread out the cost of making smart investments. Smart planning ensures that you do not have to adopt austerity measures as January comes around in a bid to do save as much tax as possible.

3.       Look at the bigger picture – The longer you procrastinate, the greater the possibility that you will be looking at tax savings through blinkers: Your main goal will then be to save taxes in that particular year rather than on which tax-saving investment instruments benefit you over the long term. This really is the most important factor in favour of starting early, as it enables you to plan for your financial future in a better and more holistic way.

Source: http://blog.hdfclife.com/early-tax-savings-benefits-532440

Top 10 Small Business Tax Savings You May Be Missing

As the tax deadline approaches it’s time to start thinking about how to minimize that tax bill, or even better—maximize that refund.
Take a look at this list of Top 10 Tax Savings You Have Missed to squeeze a little more out of your return.

Savings #1 – Initial start-up costs

If 2014 was your first year of operation, and if you made your first sale during that period, you can deduct some or all of your business’s start-up costs. As long as your total start-up costs were less than $50,000, you can deduct $5,000 in general costs (things like buying equipment or renting space), as well as another $5,000 in organizational costs (legal fees, professional consultations, etc.).
Savings #2 – Insurance Premiums

Insurance can help give business owners valuable peace of mind since, let’s face it, accidents happen. Luckily you can claim most insurance premiums on your taxes to help make coverage a little bit more affordable. Not all premiums are deductible but most common ones are, such as liability, malpractice or fire insurance.

Savings #3 – Home office

Plenty of freelancers and small business owners believe taking the home office deduction puts you at higher risk of an audit, but that’s not necessarily true. Even if this were the case, the financial impact of taking this deduction correctly would be worth the risk (assuming you have documentation to back up all your claims).

If you do decide to claim your home office as a deduction, be sure to follow IRS guidelines in regards to calculating the space that qualifies. Then, be sure to account for any overall utility costs that contribute to running your space.

Savings #4 – Credit card processing fees

While many consider them an unretrievable cost of doing business, credit card processing fees are still a business expense. Meaning they’re deductible on your small business taxes! Your processor should provide you with a record of the fees you incurred throughout 2014 (if not, call and ask for these records to be provided). So, deduct those numbers from your taxes and make up for any lost revenue.

Savings #5 – Continuing education

Continuing education should be a major priority for all small business owners and self-employed workers (and the IRS wants to help you make it so). If you’ve attended any seminars, training courses or conferences throughout the year, the bulk of your costs will likely be deductible (but keep in mind that deductions for dining costs associated with conference trips are limited to 50% of the total bill).

Savings #6 – Business gifts

Business owners encounter a number of different occasions where giving gifts to clients is perfectly appropriate. Ever sent a fruit basket to celebrate closing a big deal? Or printed up jackets to give away to top customers? Add these items to your deductions list, gifts made to customers and employees up to $25 in value are 100% deductible on your taxes (nice).

Savings #7 – Health savings accounts

If you have a high-deductible health plan or offer this type of insurance to your employees, it’s worth your time to determine whether or not you’re eligible to tie a health savings account (HSA) to your plan. If you are, setting up this type of account will let you put money away for future medical expenses, in addition to letting your contributions grow (tax-free!!) over time.

Savings #8 – Child labor

We’re not recommending sweatshop labor or inappropriate work practices, but if you have a dependant child who handles work tasks for your business, you can employ them without paying the all of the same payroll taxes you’d pay for an older worker—and potentially claim part of their salary as an expense on your tax return.

This break is only available, however, if your business is structured as a sole proprietorship or as a partnership between you and your spouse. If you’re set up as a corporation, you will not be able to claim this deduction.

Savings #9 – Pet supplies

It’s not crazy talk. If you operate a farm and keep a guard dog on premises for the protection of livestock/crops, you may be able to deduct the costs of its care, including dog food, bedding and veterinary care, as a legitimate expense. Note though that deducting pet supplies requires a verifiable business purpose. ‘ol Fido warming your feet while you work on the computer won’t cut it with the IRS.

Savings #10 – Your FreshBooks subscription

FreshBooks isn’t just a great tool for getting a hold of your business’s finances—it’s also a valuable tax deduction. Most tax advisors agree that software-as-a-service (SaaS) products should be included in the “Other expenses” category of your tax saving plans reports, as they don’t involve a purchase that loses value over time.

Source: http://www.freshbooks.com/blog/top-10-small-business-tax-savings-you-may-be-missing/