What Happens If You Make a Mistake on Your Tax Return?

What Happens If You Make a Mistake on Your Tax Return?

What happens if you make a mistake when filing your tax return? Regardless of whether it was an innocent error or a purposeful act of omission, your signature on a completed form attests to its accuracy. While sometimes the tax code has broad interpretations, filings need to be accurate. (Disclosure: I am a Certified Financial Planner and not a tax advisor. See a qualified accountant/tax lawyer for your tax questions.) What should you do if the IRS finds a mistake? The penalties for owing tax to the IRS can be quite severe, ranging from fines to jail time, depending on the problem. If the IRS catches you in a deliberate lie, you are in a very sticky situation. What should you do if you’ve made a mistake on your tax return? Go for the stalemate with the IRS This scenario can be compared to being backed into a corner during a game of chess. Your king is threatened all around and you know that it is impossible to win. What do you do? The answer is to go for a stalemate, as a stalemate is always better than a loss. Rather than hiding a problem or ignoring it, deal with it as best you can. You may still have to pay tax or interest, but this is better going to jail. A stalemate is not always a negative thing. You may not win the game of chess – or chase away the IRS, but at least you didn’t lose. Watch Grandmaster Susan Polgar demonstrate how to use a stalemate in a game of chess in this two-minute video. Page... Click for more
Does a Budget Tracker Really Help Your Bottom Line?

Does a Budget Tracker Really Help Your Bottom Line?

The way you play chess can shed light on how you manage your money. If you are a careful chess player and keep track of your moves, you might find a budgeting tracker a useful tool. In chess, you have a set number of pieces. In order to win, you need to use each piece in the most efficient way that you can. Rather than randomly moving around the board, you need to plan your moves based on the pieces you have available and where they are in relation to your opponent’s pieces. Similarly, when it comes to your monthly budget, you need to look at each dollar you have and use it most efficiently. If you don’t use what you have wisely, you may be left short before you get your next paycheck. If you don’t follow a budget, you won’t know where your money goes. This is why a budget tracker is extremely helpful. It allows you to become organized and methodical with your spending. The best budget trackers help you monitor your expenses, categorize them, and break them down so that you can plan better where to spend your money. Don’t let budgeting intimidate you Sometimes people feel overwhelmed when they first start tracking their expenses. Watching the list of categories where you spend money grow as you go through the month can be quite intimidating. Don’t let this scare you. Once you know exactly where your money is going, you will have a better idea of what you could cut. Budgeting is one of the most efficient ways to make the best use of your... Click for more
How to Make Your Investment Account Management More Efficient

How to Make Your Investment Account Management More Efficient

How can you improve your investment account management? The answer is to consolidate your investments. If your investments are scattered among different companies, it’s difficult to keep track of what you own, and you may even have duplicate investments.  Additionally, you may end up paying more in fees to maintain multiple accounts. To manage your investments more efficiently, follow this chess strategy: Consolidate your assets After a chess team participates in a competition, they review their games and perform a “post mortem” together.  The coach and the players analyze the games so that everyone will play better in the future. This purpose of this is to learn from both the good and bad moves, to make the next game even better. The players consolidate their brain power (their assets), to become more effective. This same teamwork applies to managing your money. Your coach (your financial advisor) and your team (your lawyers, accountants, and other professionals) should all look at your portfolio from different perspectives. Each angle brings a unique view to the overall picture. ​Consolidate your brokerage accounts If your assets are spread out among different firms, your financial advisor won’t know about all of your investments and therefore won’t be able to keep track of them. Without the entire financial picture, he won’t be able to advise you properly. Instead, use one firm – and one advisor – to oversee all your investment or brokerage accounts. Choose one main financial advisor to ACAT (automatic account transfer) accounts from the other brokerage firms into his firm. For example, you could consolidate your IRA accounts, 401(k) accounts, CDs, and bank deposits all into the same firm. This way, all of your assets will... Click for more
Do You Need to Improve Your Financial Literacy?

Do You Need to Improve Your Financial Literacy?

Almost two thirds of Americans today can’t pass a basic financial literacy test. Can you? According to the FINRA Foundation’s National Capability Study, most Americans only got three out of six answers correct on a financial quiz… only 50%! FINRA (Financial Industry Regulatory Authority) is an organization dedicated to, among other things, protecting investors from investment fraud. It regulates stock brokers and brokerage companies, and works to create transparency in the marketplace. So it is especially interesting that FINRA reports that the majority of Americans are financially illiterate. Why does financial literacy matter? Imagine that you’re going to play a game of chess. What would happen if you had no idea what each piece was or how it moved, let alone the rules? You certainly wouldn’t be able to play. Your opponent could easily take advantage of your ignorance at every turn. In the same way, you aren’t going to get very far in the world of investing without sufficient knowledge of financial concepts. You can easily fall prey to scams or make uninformed decisions that can have serious ramifications. This is why financial education and literacy are extremely important, no matter your age or size of your bank account. Test your financial literacy How does your financial knowledge compare to that of the average American? Take FINRA’s five-question quiz to check your financial literacy now. Do America’s poor financial literacy scores mean that FINRA should tighten its regulations (in efforts to protect the innocent investor), or should organizations (the government?) provide more financial education? Financial education doesn’t have to be confined to the classroom. You can also get... Click for more
How Changing Your Spending Habits Can Make You Rich

How Changing Your Spending Habits Can Make You Rich

You don’t have to be a financial genius to get rich – simply change your spending habits. What are the most effective changes you can make to your spending habits? Changing your spending habits can be like changing the way you play chess Look at the way you play chess. Do you keep making the same mistakes on the chessboard? If so, it may be time to change your strategy. Maybe your usual strategy isn’t working because you’ve developed some bad playing habits. The way to improve your skill is to either practice more, or to try a different strategy/tactic. Similarly, if your current financial habits aren’t enabling you to meet your financial goals, try changing the way that you spend money. By budgeting wisely, you can save more. Being good at budgeting is not the ticket to wealth; however, without good stewardship of your money, which starts with careful spending, you’ll be hard-pressed to become a financial success. How? It’s not simple to alter the habits of a lifetime, especially if you are accustomed to a certain lifestyle or have learned bad financial ways. Changing your standard of living and how you handle money needs to be done with “baby steps,” carefully and gradually. Watch this 4-minute video for some easy-to-implement techniques for changing your habits. If you improve your spending habits, you can improve your financial life. If you enjoyed this video, subscribe to get more of my four-minute movies on The Douglas Goldstein Channel on YouTube.   Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of... Click for more