Fair Debt Collection Practices Act - How to Deal with Debt Collectors

Fair Debt Collection Practices Act - How to Deal with Debt Collectors
It can be quite nerve racking when the bill collectors are
calling and sending demand notices, however you can handle
it. There are ways you can protect yourself and also ways
to properly handle your debt collectors.

There is an act that was designed just for individuals that
are trying to cope with the overzealous bill collectors.
The Fair Debt Collection Practices Act is a guideline that
must be followed when a debt collector is attempting to
collect payment on a debt. It is illegal for a debt
collector to call a residence before 8 a.m. and after 9
p.m.. They are also not allowed to threaten the garnishment
of wages or harass you with phone calls after you have
asked them to stop calling you. For more information go to
=> www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#801.

If you have an answering machine, you can screen your phone
calls before you answer them. Adding anonymous call
blocking to your phone line can also help from receiving
the unwanted collection calls. Well, at least from having
to talk with the person on the other end. However, if you
decide to answer the phone you can request that the
collector no longer call you. Once you have stated to them
that you don't want any further phone calls, legally they
have to stop the phone calls to you.

Before you take some of the more drastic measures, you
should consider making arrangements with the company to pay
off the debt. In many cases, the collector is authorized to
reduce the amount owed in order to collect the money.
Usually, if you make payment arrangements on the debt, the
collection calls from that company will stop.

Keep a log of all calls between yourself and the collection
agency. If you have agreed to any payments be sure that you
write it down as well as the person you made the agreements
name with. Try your best to keep the agreement you have
made, if you are unable to keep it notify the company as
soon as possible. If you have requested the collector to
stop calling you, you can record any phone calls with them.
Just make sure you notify them that the phone call is being
recorded. This is usually very effective in making them
cease the harassing phone calls.

In most cases, you will be able to negotiate the amount of
money you will be paying off. The collection agency gets a
commission off of the amount of money they successfully
collect. So, in many situations they will accept a smaller
payment in order to collect any money. In their eyes, any
money is more than nothing.

If you agree to a smaller payment, be sure to request that
there should be no further negative marks placed on your
credit report. Also, be instant that they promptly report
the payments made as well as adjusting the amount that is
owed on your credit report.

After you make an initial good faith payment, you should
receive an agreement. In this agreement it should state the
amount that is owed as well as the terms of the agreement.
Send as little of a first payment as possible. This will
insure that they will keep their end of the agreement and
hold true to the contract.

----------------------------------------------------
Moses Wright provides more helpful information on debt
consolidation help, and loan facts on his website for free:
http://www.bulletpedia.com/

Three (3) Things You Can Do To Be Prepared For An Audit

Three (3) Things You Can Do To Be Prepared For An Audit
The number of IRS audits increased in 2007. See my recent
article "IRS Ramps Up Audits" to read more about what is
causing this increase and who is targeted. What can you do
to be prepared?

#1 Build a defense for your rental real estate losses.

While the IRS has not specifically targeted returns that
deduct rental real estate losses, if you are selected for
audit, your rental real estate losses will be questioned.
If you claimed real estate professional status, the IRS
will ask you to prove that you qualify. If you claimed the
$25,000 loss exception, you will be asked to prove that you
meet the "active" threshold.

Here's what you can do:

First, make sure you clearly understand the rules for
taking your rental real estate losses. You can deduct
rental real estate losses to reduce you taxes but the rules
are very specific. Knowing these rules inside and out will
increase your chances that your audit will result in no
adjustments to your rental real estate losses.

Second, document your real estate activities. Proper
documentation is the number one defense you have. The IRS
wants to see not only the number of hours but also the
activity you were doing and for which of your properties or
businesses. Need help? I'm here to help you!

#2 Clean Up Your S Corporation

The number of S corporation audits jumped in 2007. The IRS
is looking at specific items; here are a few of those items
you need to be aware of:

- Your salary -
How much did you receive as salary and when did you receive
it? As an owner, if your salary is too little, you could
be in trouble. But from a tax planning standpoint, if your
salary is too much you will be overpaying your taxes!
There is a balancing point to master here.
The timing of when you receive your salary is important as
well. Big lump sum payments made once or twice don't look
like salary and could be drawn into question.

- Your distributions -
How much did you receive as distributions and when did you
receive them? Smaller distribution amounts that are paid
more frequently than quarterly don't look like
distributions. These amounts will be scrutinized!

Here's what you can do:

Your #1 defense is documentation. How did you come up with
your salary amount and your distribution amount? How did
you determine when you would pay your salary and when
distributions would be made? Once you have this
documented, you need to make sure what your S corporation
is paying is reasonable. So, take another look at your
salary and distributions and ask yourself if it makes sense
for a business to pay these amounts.

Not sure what your S corporation should be doing? Then you
are in the majority, that's why the IRS is having a field
day with these audits! I can help walk you through the
exact steps you need to take to determine your salary
amount, your distribution amount and how to document both
so you are ready for an IRS audit.

#3 Support Your Expenses

There are certain expenses the IRS will always look at in
an audit. These expenses are travel, meals and
entertainment.

The #1 thing you can do is to make sure you can support
these expenses. The IRS will want to see the who, what,
when, where and why of each of these expenses. Who was
there, what was the business purpose, when was it, where
was it and why was this an ordinary or necessary expense
for your business.

Not sure if your documentation will pass an IRS audit? I
can help!

By now, you realize the key to surviving an audit without
any adjustments is proper documentation. If you are among
the many who do not document as you should, it's not too
late! Even if your documentation has not been ideal in the
past, make a new start right now! Understand what you need
to document and then on a daily, weekly or monthly basis,
make sure your documentation for that day, week or monthly
is in order. Once you have the hang of it, go back and
start to document what you didn't in the past. Remember,
the IRS can audit a return 3 years after it has been filed
(and 6 years if the tax return filed was considerably
incorrect).

----------------------------------------------------
Tom Wheelwright is not only the founder and CEO of
Provision, but he is the creative force behind Provision
Wealth Strategists. In addition to his management
responsibilities, Tom likes to coach clients on wealth,
business, and tax strategies. Along with his frequent
seminars on such strategies, Tom is an adjunct professor in
the Masters of Tax program at Arizona State University. For
more information, please visit
http://www.provisionwealth.com

Why I Feel That Debit Cards Are Evil

Why I Feel That Debit Cards Are Evil
The widely popular Debit card/check cards offered by almost
all banks have become the standard way to pay for
everything from itunes music to rental cars. Where the
government states that debit card transactions have grown
more than 20 percent a year and have out grown more than
all credit card transactions.

As there appeal is very understandable. As Debit cards are
quick and easy to use. But using a debit card can cost you
hundreds and even thousands of dollars a year, no really.
So I will show you why you should never carry the evil
debit card.

More Risky than Carrying Cash

First you must understand that all U.S. banking
institutions lost an estimated $662 million to debit card
fraud in 2005. So guess what these banks trying to do?
They are trying to recover this money that is being lost.
You would probably be safer to just carry cash.

Although you don't have much support if your card is lost
or stolen, but at least your loss is limited to the amount
of the missing money. With having a debit card you will
put your entire bank balance this is in your bank account
at a high risk. If you link your checking account to your
savings account to avoid overdrafts, you put the balance in
both accounts at risk, as you will face ridiculous
overdraft charges.

Now think about this, where if a thief gets a hold of your
credit card, the federal Truth in Lending Act will limit
your liability for any fraudulent credit card charges to
only $50 yeah that's right only $50. You may not even have
to pay that much, as many credit card companies or banks
will not impose any charge on their defrauded customers.
And while the case of fraud is being investigated, you can
refuse to pay any part of these unauthorized charges.

But the evil Debit cards fall under a very different set of
laws, known as the Electronic Fund Transfer Act. To limit
your liability to $50, you have to notify your bank within
two business days after discovering that you're debit card
has been lost or stolen. And if you wait longer than that,
but if you wait to give your bank notice of the fraudulent
transactions within 60 days of when your bank statement is
mailed to you, then your maximum liability jumps to $500.
Now if you miss that deadline and you could lose all the
money in your account.

Because the debit card accesses the fund directly out of
your bank account, you can be left without your grocery
money while the fraud claim is being investigated.

Now this is stupid!

A single trip to Burger King was enough to send Tom
Martin's checking account into absolute freefall. Where
Tom had made the mistake of paying for some fast food with
his debit card. He thinks he spent only about $3 more than
he had in his bank account. But unfortunately, by the time
he had realized that there was a problem, the bank had hit
him for about $350 in overdraft fees. So at $35 per charge,
it's easy to rack up hundreds of dollars in needless NSF
fees.

The Center for Responsible Lending, a consumer group,
estimates that overdraft charges from debit cards cost
people about $8 billion each year. I still remember when
banks used to refuse any debit card transaction that would
overdraw a depositor's account. But not any more. As
banks could warn depositors when their accounts are close
to being overdrawn. But they don't.

Instead most of these financial institutions will
automatically enroll their depositors in a program that
loans their customers the amount of the overdraft—but
at a steep price. The Center for Responsible Lending
estimates that Banks that offer these lending programs can
expect an drastic increase in overdraft revenues, as much
as 200 to 400 percent per year.

With it being calculated as an interest rate, rather than a
fee, the cost of these loans is ridiculous. The average
amount of a point-of-sale purchase that overdraws an
account is $14.75. But the average over draft fee is more
than double that amount. According to the agency, most
consumers only use these loans for a few days. So on an
overdraft loan, the annual percentage rate can be as high
as a WOPING 20,000 percent.

In defense of this practice, I consider to be financial
rape, the bankers like to point out that it's the
responsibility of the account holders to monitor their
account balances and avoid overdrafts. Which is ridiculous
but, of course, that requires the account holder to know
how much money is in their account. Which is the reason why
we trust banks to hold our money for us but instead the
choose to take us for every hard earned dollar that we
have. I think that I will just stick to carrying cash

----------------------------------------------------
Export author Keishon Martin is the owner of KeyWorldWide
Inc. which owns and operates http://www.GetRichinMusic.com
http://www.NewMoneyCredit.com and
http://www.getmoneymoney.com visit their websites for more
info

How To Become A Millionaire Within Five Years - Part 3

How To Become A Millionaire Within Five Years - Part 3
In this third part of the article on how to become a
millionaire within five years, I'm going to cover

LANE #4 - THE INTERNET

I'm not going to tell you that making money online is easy,
but like all wealth creation, it's simple when you know how.

I created a six-figure turnover business, The Money Gym,
using a very simple marketing plan, online, but I had to
work at it. But every month the passive income element of
that business grew and grew and I built it one block at a
time.

The most wonderful thing about the internet, is the low
level of intial investment required. If you have time and
no money, you can learn to do it yourself (I did) or if you
have more money than time, and know what you want to
achieve, you can outsource most of it. Making money online
is a bit like becoming a millionaire in five years - simple
but not easy! You can make money online by:

1. Promoting your real world business more effectively
using the internet - using an EFFECTIVE website to generate
more leads, building an ezine mailing list, Search Engine
Optimisation, and Google Adwords to explode your traffic.

2. Creating spin off automated products from your real
world business - like our client Paula Gardner did with
www.DoYourOwnPR.com.

See the section below for ideas.

3. Creating a series of one page websites, each to sell
one ebook (or other product) - either your own, or as an
affiliate.

4. Creating traffic flow and then recommending good
products and service to them via affiliate links and an
ezine. Other instant income sources for this business model
include Google Adsense links.

5. Creating a free/paid level membership site (just
think.....17,000 people paying you #5 a month is #1.02
million PER YEAR)

Which of these you decide on will depend on whether you
have a real world business or expertise or not. I like to
recommend people work through these in order, starting from
the quick and simple routes to more income immediately and
building up to the bigger projects.

However, and this is the most important element for synergy
and focus between all your projects, and the part that many
novice (and even more experienced!!) internet entrepreneurs
get wrong.

Always choose and then working around a niche topic/subject
- hobbies, leisure activities such as rowing,
rock-climbing, obscure cuisines or knitting for example.

Or choose a broad topic (business building for example)
ideally one in which you have some expertise, but offer it
for a really tight niche of people (reiki healers as
opposed to holistic therapists) or female accountants, for
example.

IS MY WEBSITE WORKING?

As soon as someone asks me this, we ask them to find out
the following:

1. Number of unique visitors to this page per week

2. Number of unique visitors to the sales page per week

3. Number of sales if any

4. Number of new additions to existing database / mailing
list per week

5. Average value of sale (so if you sell a t-shirt for $20
and one for $10, the average value of sale would be $15)

6. Average profit per sale

These figures will enable us to work out

1. Conversion of unique visitors to leads in %

2. Conversion of unique visitors to sales in %

3. The value of each subscriber

4. The Value of each visitor

We would also be asking you to look up the main referring
key words that people are using to find your page. Most
website stats packages give this info.

Then I would be asking you how much (i.e. what percentage)
of your income do you want to come from which potential
income producing activity around your niche.

Potential other income streams include:

a) 101 tips - free b) ebook - 17.50 - 27.50 (but do it in
dollars not pounds) c) one-off teleclasses 27.50 - 27.50
but record it and resell later d) membership site - 17,000
people giving you 5 a month = 1.02 million per year e) one
day workshops - sell for 147 discounted to 97 for early
birds d) group coaching programme - 79.50 a month - how
many can you handle? e) 1:2:1 premium coaching programme -
279.50 - 379.50 per month - how many can you handle? f)
associate fees - say 5 new associates per year paying XXX
each to become your associate g) physical product - XXX -
dropshipped ideally from manufacturer/supplier to customer
h) any other ideas?

Ok. so we have chosen our business model, decided on our
products / services and honed down our topics and even
decided which niche of people we are aiming at. Even when
you are affiliate marketing with other people's products
and services, it's made easier by knowing who you want to
attract to your internet business.

SO WHAT DO YOU NEED, AND IN WHAT ORDER?

I have seen many types of websites come and go, many tools
and bits of software, and we have finally honed the Money
Gym site into a finely tuned money making and client
attracting machine. This is our business model for The
Money Gym for new (cold) traffic.

1. Blog gets us indexed in search engines and attracts new
visitors. We Also use PR/SEO/Google Adwords

2. Welcome / Squeeze page to convert visitors to mailing
list.

3. Offered chance to win good value prizes by referring
friends - choose yes or no

4. If yes, refer friends, get prize, jumped to ebook sales
page. If no, jumped to ebook sales page

5. Ebook sales page, bundled with free month at Silver
level of membership site

6. Decide to buy ebook / trial membership and click "buy
now" button

7. Offered chance to buy ebook / paperback version / 3
months free trial of site

8. Decide yes (click to buy) or no (just buy ebook) or
join mailing list

9. If just click to close page, popunder box offers free
Wealth Tips (101 x tips & ezine)

The most exciting thing of all is that, since putting in
the above system and getting all the elements right, we are
now looking at a systematic conversion of traffic to
subscribers, to sales of the ebook, of sales of the upsell
offer, to trial memberships, to retention of memberships.
We have just done the figures for the last quarter of 2007
and worked out which percentage of visitors will do what,
at every stage.

And you know what that means, don't you? More traffic =
more visitors = more conversions = more revenue = more
profit.

We are looking at an automated, predictable money machine,
and what's more all of that is just the FRONT END.

SO WHERE DO I START NICOLA?

Here's my guide to getting started, quickly and
inexpensively. what to do, in which order.

1. Set up a blog. Used Typepad or Wordpress (outsource
the latter)

2. Attach it to a mailing list via a good shopping cart
(you will need it later)

3. Use a "refer a friend" script at the point of signup

4. Set up a private Google Group, put signup box on blog

5. Blog every day, or at least once a week (and get your
blog fed onto your MySpace/Facebook profiles via an RSS
feed)

6. Set up profiles on MySpace, Facebook, Squidoo, Ecademy
as a minimum, and link to your blog

7. Send even more traffic using Google Adwords, learn how
to make video for YouTube

8. Set up Google Adsense on your blog

9. Find some GOOD products and services with affiliate
schemes (sell our ebook, earn #12.50 per sale) and
recommend on blog side panel, social network sites. Use a
good affiliate link cloaking service.

10. Start creating a community / membership site - free
membership until you get to 1000, then set up next level,
under #5 / $10 a month

And my final tip, just make the decision that 2008 is the
year that you will make a passive income online. If you
just make enough to take two holidays a year, wouldn't that
be worth turning off the TV occasionally?

Have fun and send me your stories of success - even if it's
just about making your first $1 online, I love those best!

And the best thing of all is that internet businesses are
even more attractive to potential purchasers than
real-world businesses as they are largely automated, so the
multiple of turnover / profit that you can sell an internet
business for, is even higher.

CONCLUSION:

I hope that I've shown you here that it's not only possible
to become a millionaire in five years, but given you some
ideas on which Wealth Highway Lane would be the most
easiest for you to use, to achieve that. The great thing
is that by laying out the numbers like this, it makes it
less of a mystery and more like a plan.

----------------------------------------------------
Nicola Cairncross
Wealth Coach, Author, Speaker &
Founder of The Money Gym
http://www.TheMoneyGym.com/Blog

The Risks of Banking Offshore

The Risks of Banking Offshore
If you are looking for a way to keep your money safe, keep
your transactions private and lower your tax burden, you
may be considering opening an offshore bank account. An
offshore bank account can be a good idea for some people,
but there are some things you should know before you set up
your account.

Unlike what you see in the movie's, offshore bank accounts
are not illegal on their own. If, however, you set up an
offshore bank account for an illegal reason, like tax
evasion or money laundering, you could still be in a lot of
legal hot water if you get caught. Even if your offshore
bank account was set up for illegal purposes, your money
could still be protected, depending on the laws of the
country where you have an offshore bank account.

For all of the benefits in having an offshore bank account,
there are some risks involved. If you keep you money in a
U.S. based bank account, your account is protected by the
FDIC. Offshore banks offer no such guarantees. If your
offshore bank account is in a country that is hit by a
natural disaster, strife or civil war, your money could
vanish and you would have no recourse to recover your money.

Even though you don't have to be a millionaire to have an
offshore bank account, you should have enough cash to
deposit to make your time and trouble worthwhile. There is
no one minimum amount for an offshore bank account.
Different banks have different rules, but if you want to
get the most out of your account, plan on depositing at
least $10,000.

The Internet has made managing your offshore bank account
easier than ever, but even with secure websites and
excellent security, it is still possible for someone to
hack into your system or to gather your personal
information through a phishing scam.

If your account information is compromised, you could lose
your entire investment and there would be little you could
do to get your money back. To minimize this risk, never
access your account with a wireless connection, especially
in a public place. Stick to accessing your account at home
with a protected wired network. Never respond to an email
from your bank asking for your password or other account
information. Reputable banks will never ask for account
information in an email.

If you have decided that an offshore bank account is for
you, do your research and select a location with laws that
are the most favorable for your situation. You can move
your money fro country to country, but each time you move
your money, you take a risk that you account information
will be compromised and your money will be lost.

An offshore bank account provides many benefits, but before
you open your account, you should carefully weight the
benefits versus the costs and risks involved. If you decide
to open an account take steps to protect yourself to
minimize the risk.

----------------------------------------------------
For more information about offshore banking and asset
protection in Panama please visit:
http://www.offshorelegal.org/

Don't Screw Yourself By Not Checking Your Credit

Don't Screw Yourself By Not Checking Your Credit
I have several web sites that allow readers to submit
questions about mortgage guidelines and loan options. I
received this question from Donald in Toledo, OH., Sunday
morning.

"What would happen if someone else used my social security
number for a utility bill and I never lived at that
address? This happened about five years ago when I found
out about it. Will this hurt the underwriting of the house
I am trying to buy"?

During our conversations it turned out that this "utility
bill" turned into a collection. Fortunately it was five
years old. I also learned that his credit scores are: 615,
625, and 652.

Answer:

The first thing you want to do when you find out something
like this is dispute it with all the credit bureaus:
Equifax, Trans Union, and Experian. This process is much
easier than it use to be years ago thanks to the Internet.
Each of these company's have a web site full of information
you should understand about your credit, credit scores, and
how to improve them. You can file your dispute on line
from their web site.

The Government mandated a few years ago that every person
be entitled to one free credit report each year, ...from
each bureau. This is a wonderful thing because years ago
you were not allowed to even look at your report. You were
really up that well known creek and just guess who had the
paddles. Get your report once a year from each company and
take the time to review it. There is only one web site you
can get these reports from and that is
annualcreditreport.com.

If your credit scores are high enough this 5 year old,
small collection should not prevent a loan from being
approved. Since most underwriting is now performed on an
automated system you may be required to provide an
explanation and supportive documentation or you may even be
required to pay the collection.

In this particular case the credit scores are not really
bad but they are not really good either. In fact, they are
a little low compared to the average. This is a great
example as to why you should monitor your credit every
year. Don't wait till you are applying for a loan.

I don't have a clue what Donald's employment history is or
what his debt to income ratio is or how much he is putting
down. These factors all play a part in loan approval and
could be considered compensating factors if all three are
very strong.

However, knowing what I do know, my recommendation would be
that a conventional loan with a high loan to value (small
down payment) would be difficult and the interest rate, if
it were approved, would reflect the low scores. I would
recommend an FHA loan. The interest rates are excellent
and require only a small down payment. Again, this is
assuming the other factors are in line.

FHA mortgages are wonderful. They are very forgiving about
credit, require a low down payment, and they have some of
the best rates on the market. I might add one thing here
about the interest rate. At this point in time the par
rate is equal to or lower than a conventional loan
(depending on the lender) so if the company you are working
with is charging you a much higher rate they may be taking
advantage of your situation thinking you don't know any
better. Please, shop interest rates.

Fannie Mae has just announced additional pricing tiers
based on credit scores and loan to values. This pricing is
effective June 1, 2008.

----------------------------------------------------
Connie Sanders owns several web sites where she teaches
mortgage guidelines and receives questions from consumers
and mortgage professionals. Visit her site today at
http://www.mortgageunderwriters.com

Make Money From Property Rentals

Make Money From Property Rentals
Buy To Let Property The Current State of the Market and How
to Profit From It

Everything is Doom and Gloom, Property prices are falling,
Interest rates are still too high, mortgage lenders are
acting tough and first time buyers are hard to find. As
many have been predicting, The Bubble Has Burst!

Or has it? The property market is just like the Stock
Market, or any other market for that matter. The major
influence is still supply and demand.

With an increasing population and family groups becoming
smaller, the demand is still very strong and won't go away.
People have to have somewhere to live and if they can't
afford to buy a house or flat, the main alternative is to
rent.

So, you're not covinced. Let's look at a few statistics. I
know, there are lies, damned lies and statistics! So
instead, let's look at a few facts.

The Sunday Times Rich List for 2007, shows that 20 of the
top 50 richest people in Britain are in Property or
property allied to other interests. Thirty three such
people are in the top hundred.

The Office of the Deputy Prime Minister states that the
housing market has gone up by 11.74% per year, in the last
35 years.

If you think back, it's quite easy to understand. Just
remember what your own house was worth way back in 1970.
The house we lived in in 1970 was worth about £7,000 and
now it's worth well over £200,000.

If you've moved house in the last 10 years, what did you
pay for it then, compared to its current value? We bought
our present house nine years ago and it is now worth almost
two and a half times what we paid for it.

Back in March 2007, the Daily Telegraph reported that the
average house price was predicted to reach £200,000. If you
apply that average yearly increase of 11% then in 10 years,
the average will have reached £567,000 and will exceed one
million pounds in just under 16 years!

Here is the most basic reason of all why land (and
therefore stuff built on it) will always increase in value:
THEY'RE NOT MAKING IT ANY MORE!

Now do you believe that property is a good investment?

BUY LOW, SELL HIGH! Isn't that a basic tenet of good
business? The opposite approach has never made anyone
rich. So, now is a good time to buy, when the market is
sluggish and fearful. Having said that, it is certainly not
the time to rush in blindly. Good advice, at a time like
this, is priceless.

Granted, raising a Buy to Let mortgage, finding the right
property, negotiating with agents and builders can be a
minefield - but not with the right advice.

Finding the Right Property:

You may feel that the mortgage should come first, but No!
You will have far more success with your application if you
can present a viable financial plan (albeit a small and
simple one) which demonstrates your own financial stability
and your ability to make the payments on the specific
property you have in mind.

The right property has to have the right location; the
right size; the right price; the right potential for
improvement; and the right rental income. There is a small,
simple mathematical calculation which will easily determine
the right price for any individual property.

Armed with all the above information, getting the mortgage
should be quite straightforward. Mortgage lenders are wary,
in the current economic climate because their main fear is
that you will be unable to make the payments on the loan.
If you have all the right information and are able to raise
a small deposit, then success is much more likely. These
mortgage lenders (and there are many out there) are all
looking for your business, provided you can prove you're a
safe bet.

In the UK, there is a small group of people who operate a
simple strategy, whereby:

* They aquire a buy to let property with current rental
income,

* in which they have a significant equity,

* with none of their own money invested,

* all within a few months.

----------------------------------------------------
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Coverdell Education Savings Accounts (ESA)

Coverdell Education Savings Accounts (ESA)
There are several opportunities and strategies for
education incentives and credits available in the US tax
code. The one I will discuss in this article is the
Coverdell ESA, formerly the Education IRA.

Code Sec.530 authorizes the Coverdell ESA as an education
savings account and can be set up as a trust or custodial
account for a designated beneficiary. In 2002 this program
was expanded so that it can now be used to finance
elementary and secondary education expenses.

You can open a Coverdell ESA for any designated beneficiary
child that you wish. The child only has to be under the age
of 18. So you could designate your child, a relative or
just anybody, it does not matter.

There are contribution limits in place though. There is a
$2,000 aggregate contribution limit per year on behalf of
any designated beneficiary. This means that if more than
$2,000 is contributed per child, the amount over $2,000 is
treated as an excess contribution. So if you contribute
$2,000 and someone else contributes $600, then $600 would
be treated as an excess contribution. There is a 6% penalty
if the excess contribution amount is not withdrawn from the
designated beneficiary's account by the due date of the tax
return.

One other important note here is that all contributions
must be made in cash. Property such as stocks is not
allowed.

In addition to the above-mentioned rules, there are
contribution limits on the contributor. You may make a full
contribution only if your modified adjusted gross income
(MAGI) is not more than $190,000 on a joint return, and
$95,000 if you file a single return. If your MAGI is above
these figures, then the contribution limit phase-outs for a
joint return are between $190,000 and $220,000, and for a
single return between $95,000 and $110,000.

Now that we discussed contribution rules for Coverdell
ESAs, let us move on to the taxation rules.

The earnings of Coverdell ESA investments are not subject
to tax when earned and distributions are excludable form
income of the beneficiary, but only to the extent that they
do not exceed qualified education expenses incurred during
the year the distributions are made. The definition of
qualified education expenses would be tuition, fees and
room and board if the beneficiary is enrolled on an at
least half-time basis. Room and board would mean the posted
rate by the school, or if the student lives off campus (but
not at home), then the amount is fixed at $2,500. As far as
tuition goes, even part time attendance would make tuition
a qualified higher education expense.

As I mentioned earlier, even elementary and secondary
education expenses are include. This would include
parochial school tuition and other expenses such as
uniforms, transportation and extended day care programs.
Also included is Computer technology expenses such as
Internet service. On occasion a beneficiary might take a
distribution for reasons other than education. If this
should happen, then the portion of the distribution that
represents earnings that have accumulated tax-free in the
account would be taxable. A 10% penalty would also apply to
such nonqualified distributions, with the following
exceptions; disability, death or receipt of a scholarship
by the beneficiary. Also an exception applies in the case
of military service academy appointments.

Distributions may also be rolled over tax-free to another
Coverdell ESA for the same beneficiary, or for certain
other designated beneficiaries such as step-children,
parents, siblings and their children, children of the
beneficiary, step-parents, grandparents, and spouses of
these people. There is a 60 day rollover period that
applies.

If the earning portion of a Coverdell ESA has not been used
for qualified higher education expenses by the time the
beneficiary reaches the age of 30, and the earnings portion
has not been rolled over to an eligible designated
beneficiary, then at that time the earnings portion would
be treated as a distribution.

Coverdell Education Savings Accounts can be used as an
important part of your strategy to help with education
expenses. They work best when used in conjunction with
other opportunities and strategies allowed. I encourage you
to educate yourself and then use all the available
opportunities that fit your situation.

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Steve Jackson is a professional income tax preparer with
over twenty years experience, helping clients with their
individual tax situations. Steve offers tax services and if
you file online, he can be here to help you with your tax
situation, and will provide you with free updates during
the year. Contact Steve at http://www.jjackson328.com