JUNE 2014
Khaas Baat : A Publication for Indian Americans in Florida
Accounting/Finance

Get the right auto insurance coverage at the right price

By ADI KHORSANDIAN

Wondering what covers you and your vehicle in case of an accident? Here’s what you need to know.

How are you covered in case of an accident?

You were distracted while backing out of a parking space and didn't see the car behind you until it was too late. You hit the car and you crashed through a fence too. Everyone in the other car seems fine, but the other driver and his passengers go to the emergency room just to make sure.

Liability coverage pays damages due to bodily injury and property damages to others for which you are responsible. If you're sued, it also pays your defense and court costs. Medical expenses, pain and suffering, and lost wages are some examples of what Liability bodily Injury may cover. Liability property damage covers damage to property and loss of its use.

How much coverage do you need?

Every state sets a minimum coverage level. Selecting more than the minimum coverage would increase your cost now but potentially give you more protection in case of an accident. Since it's impossible to know the most you'd have to pay if you were to cause an accident that resulted in bodily injury or property damage, be sure to take some time and consider whether you'd be able to afford any damages that exceed your insurance coverage. The higher your limits, the more likely it is that we'll be able to pay all of the damages for you. Limits higher than the state minimum might be the best choice for you.

How are you covered in case of an accident?

You were stopped at a red light when another car hit yours. You were injured. Medical payments coverage will pay reasonable and necessary medical and funeral expenses for covered persons.

How much coverage do you need?

The coverage is not required by most states, but it provides great coverage at an affordable price. The cost will correspond to the limits you select. There are no deductibles or copays, so this coverage can pay from the first dollar of incurred, covered expenses.

How are you covered in case of an accident?

It's only a fender-bender, but the cost of the headlight, a new bumper, and a paint job can add up quickly. Collision coverage will pay for damage to a covered vehicle caused by the following, subject to a deductible:

How high should your deductible be?

Higher deductibles lower your premium but increase the amount you'll have to pay out of your own pocket at the time of a loss. Ask yourself how much you're willing to pay when a loss occurs to save money on premiums.

How are you covered in case of an accident?

Your car is covered with dozens of dents. This coverage helps pay for loss of or damage to an insured vehicle, not caused by a collision or vehicle rollover. Typically, that's coverage for the following, and it may be subject to a deductible: fire, wind, hail, flood, vandalism, theft and hitting an animal.

How high should your deductible be?

Higher deductibles lower your premium but increase the amount you'll have to pay out of your own pocket in case of a loss. Ask yourself how much you're willing to pay when a loss occurs to save money on premiums.

How are you covered in case of an accident?

It's a sad fact: There are people who drive without any liability insurance. What if you're injured in an accident caused by one of these drivers? Uninsured motorist coverage will pay for damages when you are injured in a car accident caused by another person who does not have sufficient liability insurance. Medical expenses, pain and suffering, and lost wages are examples of bodily injury damages.

Should you get this coverage?

Doing so lets you decide how much coverage is potentially available to pay for your covered damages when you are in an accident caused by an uninsured motor vehicle.

Adi Khorsandian, a State Farm agent providing insurance and financial services, can be reached at (813) 991-4111 or visit www.adikinsurance.com


TAX Talk

BEYOND APRIL 15!

bY SURESH KUMAR, CPA

 

Missed the April 15th deadline for tax return filing? Approximately 10 million people file for extensions.

Filing past due Returns

File all tax returns that are due, regardless of whether or not you can pay in full. File your past due returns the same way/location/address where you would file an on-time return. To avoid interest and penalties file your past due returns and pay now to limit interest charges and late payment penalties. You risk losing your refund if you don't file your return. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as the Earned Income Credit.

Amended Tax Returns

If you discover that you made a mistake after filing the federal tax return - you can make it right by filing an amended tax return. Below are some tips for filing amended returns:

  1. Use Form 1040X.

  2. You usually should file an amended tax return if you made an error claiming your filing status, income, deductions or credits on your original return.

  3. You normally don’t need to file an amended return to correct math errors.

  4. You usually have three years from the date you filed your original tax return to file Form 1040X to claim a refund.

  5. If you owe more tax, file your Form 1040X and pay the tax as soon as possible. This will reduce any interest and penalties.

Payment Plans

You can make monthly payments through an installment agreement if you're not financially able to pay your tax debt immediately. However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full. Before you apply: File all required tax returns;

  1. Consider other sources (loan or credit card) to pay your tax debt in full to save money;

  2. Determine the largest monthly payment you can make; and

  3. Know that your future refunds will be applied to your tax debt until it is paid in full.

IMPORTANT TAX MATTERS:

  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time

The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. You may use the BSA e-filing system at http://bsaefiling.fincen.treas.gov/main.html

Business - Form 1120/1120 S – March 17, 2014 (6 months extensions available – Form 7004); Partnership/LLC – April 15, 2014 (5 month extension – Form 7004)

Individual - Form 1040 – April 15, 2014 (6 months extensions available – Form 4868)

There are various limitations and thresholds for many of the tax deductions. Please consult your CPA/Tax attorney/or tax consultant for proper guidance with the above subject matter.

DISCLAIMER: In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.

Suresh Kumar, CPA, MBA is the Principal of Kumar Consulting, PA, a CPA & Consulting firm licensed in the states of FL, KS, and MO and can be reached at (813) 421-5068, e-mail info@kumarconsultingcpa.com or visit www.kumarconsultingcpa.com


FINANCE

The Sandwich Generation: Dealing With Aging Parents While Raising Kids

By SEEMA RAMROOP

Are you “sandwiched” financially and emotionally between an aging parent and an adult child? According to a recent study, nearly half of Americans in their 40s and 50s have a parent aged 65 or older and are either raising a young child or financially supporting a grown child (age 18 or older).1 Among this group, 15 percent are providing financial support to both an aging parent and a child.

While the “Sandwich Generation” is a demographic trend that has been documented for some time, the financial implications associated with caring for multiple generations of family members has been escalating in recent years, with the bulk of the financial pressure coming from adult children as opposed to aging parents. More than a quarter of respondents (27 percent) provide primary financial support to their adult children, up from 20 percent in 2005. By contrast, just 21 percent of middle-aged adults report having provided financial support to an aging parent in the past year, a number that has not changed since 2005.1

One explanation for the growing need for financial support among the nation’s young adults is the toll that the Great Recession has taken on this demographic group. According to U.S. government data, the percentage of young adults employed in 2010 was the lowest it had been since 1948.2

Despite the added financial resources being directed toward the young, the study found that, in general, the public places more value on supporting aging parents than on supporting grown children. Among all survey respondents, 75 percent said adults had a responsibility to provide financial assistance to an aging parent in need, while only 52 percent believed parents had the same responsibility to help out an adult child.1

What Can You Do?

If you are supporting both a parent and a grown child there are a number of resources and support services you can turn to for help. For your parents, consider the following. For dealing with your grown children, consider the following.

Footnotes/disclaimers:

  1. Source: Pew Research Center, “The Sandwich Generation: Rising Financial Burdens for Middle-Aged Americans,” January 2013.
  2. Source: U.S. Bureau of Labor Statistics.
  3. Source: MetLife Mature Market Institute, The 2012 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, November 2012.

Seema Ramroop, financial advisor, Morgan Stanley Smith Barney, can be reached at Seema.Ramroop@morganstanleysmithbarney.com or call (727) 773-4629.


IT’S NOT JUST YOUR MORTGAGE LENDER – IT’S THE ENTIRE INDUSTRY! (PART II)

By BILL NULL

Mortgage lenders have suffered severe losses and during the Great Recession between 2008- 2010 more than 250 mortgage companies failed in the United States. The primary reason for the losses was the dreaded loan repurchases. As delinquencies dramatically increased during the recession, Fannie Mae and Freddie Mac began to increase the number of loan audits they had purchased and discovered substandard and fraudulent underwriting practices that violated representations and warranties; they determined that many of the loans they bought weren’t the high-quality loans everyone thought. Fannie and Freddie began making demands on originating lenders of these “bad” loans to repurchase them. Lending houses suffered billions of dollars of losses repurchasing loans and began making the same demands from smaller originators.

Private issuers of billions of dollars of Residential Mortgage Backed Securities began following the audit practices and soon the industry was facing deep financial problem on nearly every front.

As a result of all these repurchase demands and billions of dollars lost, nearly every mortgage underwriter who has survived is striving to make the “Perfect Loan.” You don’t need to have perfect credit, a large down-payment; you do however need to meet the profile that meets the credit underwriting guidelines for the loan you are requesting. And more importantly, you provide source-documents to support your profile.

I like the term Source-Document because it depicts what underwriters are looking for when underwriting a loan. For example, if you’re self-employed, you are most certainly going to be asked for a copy of your last two years filed tax returns, but this isn’t necessarily enough. There is also a great chance that behind the scenes, your lender will also request a copy of your tax transcripts directly for the IRS. Another example, you may make car payments or credit card payments from your small business as legitimate expenses. And even though your Profit and Loss statements show these expenses flowing out as expenses, odds are you will be required to provide copies of canceled checks or business bank statements to prove this. “Source Documents” are likely to be required.

Processors and underwriters are the people trained and charged with gathering all the necessary documents, which will be required before your loan will be approved.

The process begins with what I call the filter – The loan originator, loan consultant, mortgage banker. It is here at the front end where the deal is made or broken. The rest of the approval process is just gathering paper (source documents) for the file. Even though most loans are approved by Automated Underwriting Engines (AUS) such as Loan Prospector or Desktop Originator, the underwriters many times ask for documentation beyond what the AUS asks for at their discretion. The underwriters are protecting their valuable skills and reputation, not to mention their employer’s financial well-being against the dreaded re-purchase.

The reason the mortgage approval process is so rigorous is simple. Avoiding defaults and buy-backs has become the primary goal of mortgage lenders. Therefore, consult your mortgage professional early in the transaction!

Bill Null, Senior Vice President of Central Bank, Residential Lending Manager, can be reached at (813) 751-0496 or email wnull@centralbankfl.com NMLS # 841837

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