What President Trump’s Payroll Tax Holiday Means to Your 2020 Tax Refund

On the 8th of August 2020, President Trump signed an executive memorandum that directed the Treasury Secretary to commence a payroll tax holiday. The title being used in headlines is quite misleading because it is not a holiday but rather a deferral. The actual title of the memorandum makes this clear. The memorandum is titled “Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster.”  Just like the stimulus check, the payroll tax deferral is a way to ease the economic effects of the global pandemic on the workers. Even though unemployment has dropped to 8.4%, it is nowhere near the 3.5% of February. With that being said let’s get into the details of the payroll tax holiday.

The payroll tax deferral only applies to Americans making less than $104,000 a year, and it deferred four months of taxes (September-December 2020) to January-April 2021. This is just as stressful as it sounds. The tax holiday simply means you’re going to have to pay double the amount from January to April 2021. This means the social security tax percentage will go from 6.2% to 12.4%. The payroll tax holiday is essentially a zero-interest loan (without accounting for inflation).

This memorandum has drawn a lot of criticism because although the President signed it, there are no laws or guidelines that stop employers from continuing to deduct tax from the employees. Employers argue that they would still have to pay said amount even if the employee quits before January 2021. It is also important to note that for most low-wage workers, the tax holiday holds less appeal in the face of the looming payment dates in 2021. Many people would prefer the payroll taxes continue to be removed regularly as opposed to having double the amount removed in the first four months of 2021.

Even though the memorandum directed the Treasury Secretary to explore ways to forgive the taxes of the tax deferral, there have been no bills or legislation to support or discuss this. The memorandum still clearly states that deferred taxes must be paid:

“An Affected Taxpayer must withhold and pay the total Applicable Taxes that the Affected Taxpayer deferred under this notice ratably from wages and compensation paid between January 1, 2021, and April 30, 2021, or interest, penalties, and additions to tax will begin to accrue on May 1, 2021, with respect to any unpaid Applicable Taxes.”

Now you may be wondering what the payroll tax holiday means for your 2020 tax refund. Well, we’re not too sure what’s going to happen. The IRS usually starts accepting tax refund forms by February, and the deferred payroll tax will be paid from January to April.

There is a chance your tax refunds may be lower if you file early. The details aren’t clear yet because the IRS has not released a statement addressing this. We can only assume that tax refunds will be affected by the payroll tax holiday. Perhaps the deferred tax payroll payments will result in a higher 2022 tax refund.

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How to Save Money by Living Off the Grid in a Tiny House

Tiny Houses are the new rave. Videos on them get millions of views on YouTube, and pictures get thousands of likes. It’s easy to see why they’re so fascinating. They look small on the outside, yet livable on the inside. Tiny Houses confront our understanding of minimalism and what we truly need to survive. With that being said, tiny houses are not for everyone. They have quite an expensive initial cost, and some people simply don’t like living in small spaces.

If you’re a fan of tiny houses but get claustrophobic or emotionally attached to items, then a tiny house is probably not for you. On the other hand, if you really like the aesthetic of tiny houses, have a minimalist approach to life, and don’t mind tiny spaces, then perhaps the tiny house lifestyle is for you. It all depends though. Be sure to do a lot of research before making a decision this big.

There are many benefits to living in a tiny house. Some tiny houses can be driven around. It’s cheaper. You can live closer to nature, and it can be a sort of refresh button on your life. With that being said, here’s how to save money by living off the grid in a Tiny House.

1. Find a trailer park

A major problem with tiny houses is finding where to build or park your house. Buying land is expensive and often complicated. Trailer parks are a great alternative to buying a plot or two of land. Trailer parks are temporary or permanent living areas for trailers and sometimes tiny mobile homes. They are low cost; however, not all trailer parks accept tiny houses. Living in a trailer park will save you hundreds of dollars that you could’ve spent on rent.

2. No mortgage

By living in a tiny house, you escape the trap of mortgages. Mortgages can be confusing and downright malicious, especially if you’re dealing with fraudulent lenders. Living in a tiny house saves you the stress as well as the cost of a mortgage.

3. Reduced utility maintenance

Maintenance drops immensely when you move into a tiny house because there is simply less to maintain. In a tiny house, you have less utilities like roofs, extensive plumbing, and other maintenance expenses that add up in a traditional house.

4. It helps you curb your spending

Smaller space means less space to hoard things. Sometimes we purchase things we don’t need because they’re on sale or they look exciting to have. Living in a tiny house will help you curb your spending because there simply isn’t any space to hoard unnecessary items.

5. Reduced bills

In a tiny house, you don’t have to worry about bills the same way a traditional homeowner would. Electricity bills reduce, and it’s the same with water bills. For those who live in apartments prior to moving to a tiny house, you don’t have to worry about paying for parking or any building maintenance.

Tiny houses are a great way to curb materialism, get closer to nature and save some money.

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How to Save for Your Retirement

To some, retirement feels like a far-fetched notion that is simply none of their business. This is a dangerous mindset to have. Retirement is real, and unless you own a company, you’re probably going to have to retire. Ignoring the idea of retirement does not make it go away, so it’s about time you start planning for it.

It is true that the earlier you start the better; however, there are some tips that can give you a jump start regardless of whether you start early or not. Without further ado, here’s how to save for your retirement.

1. Time

How you save for your retirement is completely reliant on how far away your retirement is. If you’re just entering the workforce, then your plan is a lot different than someone who has 10 years till retirement. The general idea behind this is to encourage young people to invest in stocks and take more risks. Stocks really add up after a long time (minimum 10 years). If you’re older, you might not be able to wait 10 years for your stocks to gain lots of profit.

For those sorts of people, you should be purchasing in low-risk investments. These are investments that are steady. They don’t fall too hard, but they also don’t rise too hard. Once you’re in your 50’s you should place your funds in low-risk investments so that you’re safe. If things were to turn south, you may not have enough time to prepare another retirement fund. Another reason why this idea is so widespread is because of inflation. If you have 30-35 years till retirement and you place your funds in low-risk investments, they will hardly bring in any value. Yes, the amount will increase, but it may not be able to overcome the problem of inflation. So you may save for 30 years, but due to inflation, the value of the money stays the same.

Bottom line is if you’re younger, try medium or high-risk investments. If you’re 10 years away from retirement, opt for low-risk investments.

2. 401(k)

401(k) is defined as “an employer-sponsored defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Employee funding comes directly off their paycheck and may be matched by the employer.” Many smaller employers do not offer 401(k)’s, but if your employer does, you should definitely take it. The amount you can save changes every year, and you can keep track of that here. There are other plans like 403(b) and 457 plans that are offered for government employees and non-profit employees. Be sure to ask if your company offers any sort of retirement saving plans.

3. I.R.A.

If your employer doesn’t offer a 401(k), 403(b), or any sort of retirement plan, then you should try out an I.R.A. This is an individual retirement account that you can use to save and earn funds for your retirement. I.R.A.’s have special tax benefits which make it very good for saving.

These are three ways you can start saving for your retirement. Remember,

  1. Low-risk investments!
  2. 401(k)!
  3. I.R.A. where you can deposit ten percent of your monthly salary or more.

The key is to start small so you don’t get overwhelmed.

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