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  Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Francis Vayalumkal

Most homeowners would love nothing more than not to have to put that mortgage check in the mail every month. But trying to pay off your mortgage ahead of schedule is not something to be undertaken lightly.

You must make sure you are financially secure, with no other significant debt, and have money in reserve for emergencies. Learn to calculate your Debt to Income Ratio.

There also are compelling arguments for not paying off your mortgage ahead of schedule. If you are inclined to take some risks, you could invest the money instead. Your investment could conceivably earn enough money to offset the benefit of paying off the mortgage.

Or maybe you would just like to enjoy your money now. By allotting less of your income toward your mortgage, you have more money available for vacations and other uses. Or, you could use the money for home improvement, which can make your home more comfortable and valuable when you are ready to sell.

In a haste to be rid of your monthly mortgage burden, you cannot afford to mortgage your financial future.

Make sure you will be able to finance your children's college education and your own retirement.

And finally, there's the matter of the tax deduction that mortgage payments bring. Be sure to factor increased tax liability into your financial projections before you make a decision.

If you are in a debt-free financial position where you can pay off your mortgage more quickly without sacrificing other aspects of your life, there are a few ways to accomplish this. Naturally, you will have to consult your lender to see what you can and cannot do. Here are a few of the most popular options:

1. Increase your payment schedule. Bi-weekly mortgage payments have become increasingly popular as a way to pay off a mortgage more quickly.

2. Make lump sum payments. Depending on the terms of your mortgage agreement, you may be able to make lump-sum payments at specific times. For example, you could earmark your bonus check of $5,000 to pay off part of your mortgage.

3. Shorten the time frame of your loan. You could elect to refinance and change your 30-year mortgage to a 15-year mortgage. Bear in mind, though, that your monthly payments will be considerably higher.

4. Increase your payments. If your financial situation has improved and you are making more money, you may be able to make higher payments or balloon payments. Most loans will allow you to increase your payments in this manner with certain restrictions.

5. Refinance at a lower interest rate, but pay the same amount each month. If you maintain a 30-year mortgage, but the interest rate drops from 6.25 percent to 5.10 percent, the money you were paying in interest can go toward the principal.

Remember, the first step is to make sure you can afford to pay off your mortgage more quickly. If you can, talk with your lender to find out which of these strategies is best for you.

Francis Vayalumkal is a mortgage banker with Regions Bank and can be reached at (813) 719-0303

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Nitesh Patel

After watching the powerful images and later learning about the economic and social impact of recent natural disasters here and abroad, many of us instinctively dug into our wallets and made donations. According to Giving USA, charitable donations rose 6 percent in 2005 to more than $260 billion, fueled by disaster relief giving. (Giving USA Report, Giving USA Foundation - June 2006)

Yet, if you're like many Americans, it probably seems as if whatever you donate won't be enough to make a real difference in these situations. Will your $25 or $50 or $100 really help?

The answer is 'yes'. Although corporate foundations give millions each year, individual giving continues to be the largest single source of donations, accounting for over three-fourths of all charitable giving in 2005. (Giving USA Report, Giving USA Foundation - June 2006). Representatives from most charitable organizations would agree that even the most humble gift is appreciated and does help.

The good news is that you don't need to be wealthy to achieve your philanthropic goals and support a favorite charitable organization or a cause that's close to your heart. One long-term strategy that can effectively reach your philanthropic goals is giving the gift of life insurance. The gift of life insurance is an affordable and flexible way to maximize your contributions to help you to leave behind a legacy for future generations.

There are several ways to structure a gift of life insurance, but the end-result remains the same - the organization benefits. As the beneficiary of a life insurance policy, a charity receives proceeds on a tax-free basis upon the donor's death. Either the charity or a donor applies for a permanent life insurance policy on the donor's life and names the charity as both the owner and beneficiary of the policy. The donor's gift of the annual premium is income tax-deductible since the charity is the owner.

For those who want to maintain control and access to a policy's cash value without an income tax deduction, but still have the charity receive the insurance proceeds at death, the donor may retain ownership of the policy and simply name the charity as a beneficiary. Either way, you're able to leave your mark on a cause you believe in through life insurance.

Another more immediate strategy to support a non-profit organization is to make a charitable distribution from your IRA. A recent tax law change (Sec. 1201 of the Pension Protection Act of 2006 and Sec. 408(d)(8) of the Internal Revenue Code of 1986, as amended) allows tax-free "gift" distributions.

Previously, if an individual wanted to take funds from an IRA to give to a charity, he or she would be required to first take distribution of the funds, which were fully taxable as ordinary income. This could create quite a tax burden. The new law allows IRA owners age 70˝ or older to give up to $100,000 directly to the charity.

For some donors, these gift strategies may be the answer to "what else can I do?" The bottom line is that supporting a charity or organization you believe in -- either through the gift of life insurance or gift distributions from qualified retirement accounts -- is an easy way for you to leave your mark. All it takes is a simple call, a little paperwork, and a heart that wants to make a difference.

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Kamlesh Patel


Suppose you discover a mistake or omission of an item on the 2007 federal tax return you recently filed.

Should you ignore the error? Although it can depend on the nature and significance of the item, the answer is generally "no." But the matter may be resolved by filing an amended 2007 return.

Clearly, you should file an amended return right away if you've paid less tax than the amount you actually owe for 2007. If the IRS eventually detects the mistake, it can require you to pay the difference in tax liability plus substantial interest and penalties. As a general rule, the IRS has three years in which to audit a return, but the statute of limitations is extended to six years if you underreport income by more than 25 percent. And there's no time limit if fraud is involved.

When a change works in your favor, consider all the ramifications. If you stand to receive only a few extra dollars back, it's probably not worth the effort. This also gives the IRS another chance to scrutinize your return. On the other hand, if you expect a sizable refund in return, it usually makes sense to pursue this action.

One of the common reasons for amending a return is to change your tax filing status or dependency exemptions. For instance, there could be some confusion over claiming exemptions for children following a divorce.

Similarly, you may have overlooked special deductions or credits available on 2007 returns. This includes tax breaks for:

- Mortgage insurance premiums

- Teacher supplies (up to $250 limit)

- Hybrid vehicle purchases

- State sales tax (in lieu of deducting state income tax)


There are many worthwhile reasons to lend money to a relative. For example, you may want to help your children or siblings continue their education or start their own business.

The IRS says you must charge interest. Lending money to relatives can have tax consequences. The IRS requires that a minimum rate of interest be charged on loans. The rates change every month, and can be found at If you do not charge at least the minimum rate, the IRS will still require you to pay tax on the difference between the interest you should have charged and what you actually charged. If these excess amounts become large, or if the loan is forgiven, there may also be gift tax implications.

There are some exceptions, though. Loans of up to $10,000 can be made at a lower (or zero) rate of interest, as long as the proceeds aren't invested. Loans between $10,001 and $100,000 are exempt from the minimum interest requirement as well, as long as the borrower's investment income is $1,000 or less. If the investment income exceeds $1,000, you'll be taxed on the lesser of this income or the minimum IRS interest.

Do the paperwork. For the IRS to treat the transaction as a loan and not a gift subject to the gift tax rules, the transaction must look like a loan. The borrower should have the ability to repay the principal and interest. A contract should be prepared which specifies the loan amount, interest rate, the payment dates and amounts, any security or collateral, as well as late fees and steps to be taken if the borrower doesn't pay. Have the document signed and dated by all the parties.

Can you claim a deduction if you're not repaid? If the borrower defaults, you may be eligible for a nonbusiness bad debt deduction. However, you must document your efforts to collect the unpaid balance. This may involve the unpleasant task of taking legal action against a family member. The preparation of a signed contract, though, may make the borrower think twice before attempting to evade his or her responsibilities.


Can you tell which of your products make money and which don't? Surprisingly, many business owners can't. If they could, they might stop carrying low-profit products.

An analysis of your products may reveal that some of your products are contributing more than their share to your overall bottom line, while others are contributing less.

So, how do you do an analysis? Simply identify specific costs with each individual product. The biggest of these costs are usually labor and materials. Other costs include product-specific advertising and research and development. Then there are overhead costs, which are more difficult to allocate.

Matching these costs with your product price will give you your product profitability. You may be surprised at what you find.

For example: Let's say you make pies and sell them to restaurants. You make three kinds of pies - apple, cherry, and blueberry. Last year, you sold 10,000 of each kind, at the same price, and earned a profit of 20 percent on sales.

In analyzing your costs, you found that your cost of apples was much lower than your cost of cherries and blueberries. In addition, you found that making blueberry pies left such a mess that you incurred extra cleaning charges just to get rid of blueberry residue.

As a result, your profit levels were 35 percent for apple, 20 percent for cherry, and 5 percent for blueberry.

Now that you have this information, you may decide to raise the price for blueberry pies or stop making them altogether. Or you may want to specialize in sales of apple pies.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

Finance | Financial advice | Immigration | Special Needs | Accounting | Business | Labor Law | Asset Protection

Satya Shaw

A successful retirement does not just happen; you have got to plan for it. The long ramp toward retirement focuses on saving and investing, but once retirement starts emphasis shifts to spending and safeguarding. Even though the greatest challenge in retirement, and probably your greatest fear, is outliving your money, most people spend less time planning their retirement than they do planning a vacation.

What does retirement planning involve? Here are the steps: First, determine what you would ideally like to do in retirement, and then discuss it with your spouse and other loved ones. Will you spend your time traveling, enjoying hobbies, helping others, working part time, or what? Second, estimate the retirement income you'll have from savings, Social Security, pension and all other sources. Third, estimate your expenses making sure to take account of inflation, taxes and health care costs, which are likely to be an increasing part of your budget.

Steps two and three should be done for each five-year period of your retirement and then revised annually. Fourth, if you have more income than needed, you only need to safeguard your investments to make sure they're not lost or shrunk by bad decisions. If you have insufficient money for retirement (expenses exceed income), then you'll need to postpone retirement, work part-time or possibly use a Reverse Mortgage to access the equity in your home. Either way, it is highly recommended that you minimize your exposure to loss and maximize the full potential of your financial resources by working with a financial adviser. They can help you determine the risk you can afford, investment options and how to position your money for best results without sacrificing safety. Retirement is going to be long, filled with uncertainties, including emergencies, and going it alone is one of the greatest risks you can take.

Be realistic in your planning. For example, be aware that for a couple age 65, there is a 50 percent probability that one will live beyond age 90. Acknowledge that even a low rate of inflation can make a big difference in prices over the 20 to 30 years you'll be in retirement. For example, average inflation of 3 percent means $1 today will be worth only 55 cents in 20 years and 41 cents in 30 years. Since 78 million boomers are entering retirement over the next two decades, the price of everything related to retirement, especially health care, is likely to rise faster than overall inflation. Inflation is a cruel tax for those on fixed incomes, and chances are your income in retirement will increase a lot slower than prices.

The boomer explosion is going to overwhelm government-provided services and benefits. This means that the relative benefits of Social Security and Medicare are going to shrink under the pressure of increased retirees. There will simply be more people receiving entitlement benefits than workers paying the bills. Every study, government and private, indicates there will be a shortage of money to support these programs. To pay for this shortfall, the government must raise taxes of all types. The increased taxes, inflation, relative decrease of benefits combined with escalating medical care costs will be especially burdensome for those in retirement without rising incomes from wages and salaries.

If you haven't evaluated it yet, investigate the risk you're taking with your retirement money. Would you have a loss if the stock market lost ground? You might if your money is still in your ex-employers 401(k) plan, or if you own securities, even mutual funds, whose value is determined by the market. Generally, investments in stock have done well long term, but you may need your money before a long time. From November 1973 to October 1974, the S&P stock market index fell 48 percent, and it took over six years to recover. The last bust in the stock market was 2000-2002, and we have yet to fully recover. In the meantime, inflation marches forward with the shrinking dollar purchasing less. Much of your income in retirement is likely to be derived from your savings and investments, and you simply can not afford risk of loss and the compounding of inflation. If you lose some or all of your retirement money to bad investments, you'll increase dramatically your chances of realizing your greatest fear: outliving your money.

How do you safeguard against the challenge of too many years and not enough money? Like law and medicine, financial planning is best left to professionals. Your job in retirement is to enjoy life free of investment worries.

Satya B. Shaw, CPA, can be reached at (813) 842-0345.

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