Make tax filing easier; be organized

This was originally published on Monday, February 19, 2018, in the Pacific Daily News. Click here to subscribe to the PDN.

 April is around the corner and that means tax season will be here soon. By now you should have received all of your tax documents. It all can seem overwhelming, but getting a head start on your taxes will eliminate a lot of the stress.

Filing taxes does not have to be a big ordeal. By being organized, you will cut back on a lot of the frustration and become more efficient.

According to the Internal Revenue Service, we have until April 17 to file for 2017 and pay any taxes due. The filing tax deadline is later this year because the usual April 15 deadline falls on a Sunday. Usually that would normally give taxpayers until at least the following Monday. However, Emancipation Day, a Washington, D.C., holiday, is observed on April 16. This gives taxpayers nationwide an additional day to file. By law, Washington holidays impact tax deadlines for everyone in the same way federal holidays do. For those taxpayers requesting for an extension, you will have until Oct. 15 to file.

Identification numbers. Remember to include all your dependents’ Social Security or tax ID numbers. This includes infants and elderly parents you may be claiming. If your kids don’t have an identifying number, contact the Social Security office as soon as possible. You will also need the tax identification number of the person or business that takes care of your children during the work day if you are filing for the child care credit. If you use an accountant, be sure they have all this information as well. A missing Social Security or tax ID number could cause a delay in the processing of your filing.

Form W-2. By the end of January, you should have received your Form W-2 from your employer. Your W-2 shows how much you earned and how much of that income was taxed. It also breaks down what taxes were withheld from your pay. If you work more than one job, you should receive a Form W-2 from each employer. If you are self-employed, gather all your business-related receipts and documentation. This includes office supplies and mileage for work-related trips.

Other income. Your income you receive from work isn’t the only earnings the IRS taxes. Interest earned on most savings accounts is taxable. Just like your W-2, you should receive statements from each of the financial intuitions with which you have accounts that earn interest. Interest earnings are typically documented on Form 1099-INT. If you invest in stocks or mutual funds, you should get Form 1099-DIV for each stock, mutual fund or money market account. If you use a broker, reports on your transactions will be sent to you on Form 1099-B.

Child support payments are neither deductible by the payer nor taxable to the recipient. When you calculate your gross income return, don’t include child support payments received. According to the IRS website, “Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it as income.” There are some requirements that must be met, you can find them on the IRS website,

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 25 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


Don’t miss deductions and credits

This was originally published on Monday, March 27, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

As the tax deadline quickly approaches, be sure that you are getting all of the deductions and credits for which you are eligible to help lower your tax bill. Many deductions are overlooked because people are unaware of them or don’t want to take the time to see if they qualify.

Here are some tax tips for the 2016 tax year:

  • Charitable contributions. If you attended a charity benefit or event, you may be able to deduct the dollar amount. The benefit or event must have taken place in the tax year. The type of donation and the type of organization can limit your charitable deduction. Donations to assist victims of natural disaster can be included.

If you donated clothing, toys, furniture, or other household items to charity, you can use the fair market value of the items donated. If you contributed to a church, use the Schedule A form. The IRS requires that you keep a written acknowledgment or receipt from the church for any contributions.

  • Estate and gift taxes. You can generally give money or property to another person without any tax consequences, provided the amount does not exceed $14,000 per year. If this amount is exceeded, it must be reported on a gift tax return.
  • IRA and retirement. There is no additional 10-percent tax on early withdrawals up to $10,000 in your lifetime from an IRA if you are buying a first home for yourself, your children or your grandchildren. There is also no additional 10-percent tax if you are paying higher education expenses for yourself, your spouse, your child or your grandchild.

You can contribute up to $5,500 to your IRA (or $5,500 to your spouse’s IRA if married filing jointly). Each taxpayer age 50 or older is eligible to make an additional $1,000 “catch-up contribution.” Learn more about IRA and retirement accounts at the IRS website.

  • Real estate property. Your home purchase can be a wonderful tax advantage. You may be able to benefit from itemizing your deductions. If itemizing, you can deduct payments such as mortgage interest, real estate taxes and most points paid by you or the seller in the year of purchase. The earlier in the year you purchase your home, the more months of mortgage interest you will have by tax time. Mortgage insurance premiums will be allowed as deductible interest on Schedule A, Itemized Deductions.
  • Military. If you are an eligible member who served in a combat zone, the IRS can exclude your income from taxation. Excludable income is your basic pay, re-enlistment bonuses, school loan repayments, imminent danger/hostile fire pay, discharge benefits and awards and other financial incentives. Non-excludable taxes are military pay earned while in combat zone, but they are are subject to Social Security and Medicare taxes.

The exclusion is for the months you served in the combat zone. Military members serving in a combat zone may qualify for a deadline of 180 days after returning for filing taxes. Contact the IRS and inform them of your situation.

The IRS excludes retired military receiving Department of Veterans Affairs education benefits as taxable income. Payments you receive for education, training, or subsistence under any law administered by the VA are tax free. Don’t include these payments as income on your federal tax return.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Child-related tax deductions, credits

This was originally published on Monday, March 20, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

No matter what your children’s ages are, raising them can definitely be expensive and stressful. As parents, we focus on the raising the children and often have to weigh the cost of money versus the cost of time.

With life’s everyday hustle, we tend to lose sight of financial shortcuts that may make life a little easier. But sometimes it’s worth taking the time to find ways to make your dollar stretch. Tax time should be no different.

If you meet certain criteria, you could be eligible to claim tax deductions and credits. Some of these deductions and credits could save you money that can ease some financial shortcomings of raising children.

Adjust your withholdings. Did you have a baby recently? If so, don’t forget to get with your employer and adjust your tax withholdings. Adding a new child to the family can give you more tax deductions when filing.

Your employer deducts taxes based on the number of allowances you claim on your W-4. When you have too much withheld from your paycheck, you basically are giving the government a loan on your money. You can be using that money to invest, save, or to reduce debt.

On the other hand, having too little withheld from your paycheck could mean you pay at tax time rather than get a refund.

The goal is to balance out to zero, so you don’t pay extra tax or receive a big tax return. You can calculate your withholding easily by going to the Internal Revenue Service’s tax withholding webpage, or go online and look for a free tax withholding calculator.

You can adjust your tax withholding at any time if you or a spouse get a second job, change jobs, were unemployed, got married or divorced, or had a baby or adopted a child.

Earned Income Tax Credit. Many qualified taxpayers may overlook this tax credit, but it can save them thousands of dollars. The eligibility is limited to low- to moderate-income earners. You must be 25 years and older, but younger than 65. Your dependents must have a valid Social Security number. According to the IRS, for tax year 2016 the maximum credit you can obtain this year is $6,269.

If you are self-employed, you may still be eligible for this credit. Unfortunately, if you receive more than $3,400 of income in 2017 from investments, stocks, rental properties or inheritance, you will be disqualified from the credit.

Higher Education Credits. Did you recently send a child to collage? Parents can claim two credits for higher education:

The American Opportunity Tax Credit: An eligible student can’t have completed four years of schooling, must be enrolled in at least one academic semester, and must maintain at least half-time status in a program leading to a degree. For more on eligibility, visit the IRS website. Only one American Opportunity Credit is available per eligible student each tax year. The maximum annual credit per student is $2,500.

The Lifetime Learning Credit: You must have made tuition and fee payments to a post-secondary school (after high school) during the year. The Lifetime Learning Credit has no limit, as long as your child participates in an eligible degree program.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Claim job-related expenses at tax time

This was originally published on Monday, March 6, 2017, in the Pacific Daily News.  Click here to subscribe to the PDN.

The holiday season has gone and now we are preparing for a new season – tax season. April is next month and by now we might be scrambling to get our paperwork together. We are all looking for ways to reduce our tax bill.

Deducting business expenses is not just for the self-employed. If you are classified as a salaried employee, you may be surprised to learn that you can claim work related expenses. Remember all expenses must be incurred during the tax year, business related, cannot be reimbursed by your employer, and is helpful and appropriate for your business.

If you qualify, here are some job-related tax tips:

  • Auto expenses: Traveling for business is one of the most frequent work-related deductions. Some deductible auto costs, include visiting clients, going to meetings away from your regular work location, or traveling between two work places — whether it is the same employer (as long as it is not a home office). Gas is deductible if you use your vehicle for work-related trips, but not for regular transportation to work. For the tax year of 2016, the standard mileage rate is 54 cents per mile.
  • Travel expenses: If your employer does not pay or reimburse you for your travel expenses, you can deduct some of your expenses. Costs for transportation, baggage fees, telephone expenses and meals can be deducted. Even the cost of your passport for a business trip may be a deduction.
  • Computer and cell phone: If your employer requires that you have a cell phone and/or a computer as part of your job, you may be able to claim a depreciation deduction. You must keep a record of the personal and business use of the devices and determine the percentage of time that is used for business related work.
  • Entertainment: If you provide entertainment to potential clients you may be able to deduct 50 percent of the amount. You must have records to prove the business purpose and the amount of the expense. Entertainment generally includes any activity considered to provide entertainment, amusement or recreation to potential business clients.
  • Start-up costs: Did you start up a business in 2016? You may be able to deduct up to $5,000 for organizational and start-up costs. Some start-up costs include paying for a survey or analysis of you market, advertisements, or travel for securing prospective distributers, suppliers, or customers. If you cannot deduct all your costs in the first year,you can amortize the costs over 15 years.
  • Moving expenses: If you had to move off island in 2016 because of a change in your job or business location or to start a new job or business of your job, you may be able to deduct the cost of moving. You can consider moving expenses incurred within one year from the date you first reported to work at the new location. Some of the expenses include household goods and travel costs. There are some deductions for those that move due to a permeant change of station for members of the Armed Forces.
  • Tips: If you receive tips as part of your income, you must claim them. This includes tips you receive directly, charged tips by your employer and tips you receive from tip-splitting or tip-pooling. You must keep a daily tip record and report your tips to your employer.
  • Miscellaneous expenses: Deductions that are unreimbursed employee expenses such as union dues, tax preparation fees, job-related books or magazines can be claimed. Some of the expenses that you claim may be limited to “the 2percent floor” — it requires that you may only deduct the part of the expense that exceeds 2 percent of your adjusted gross income.

Other expenses:

  • Home office costs if it is your principal place of business.
  • Job search expenses.
  • Legal fees to keep your job.
  • Work clothes and uniforms costs that are not normal everyday wear that are a condition of your employment (work shoes, special gear, etc.)

There are many other deductions for business. If you are not sure that your business expenses are deductible go to the IRS website,, or seek the help of a professional tax preparer.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at


It’s only December, but not too early to discuss taxes

This was originally published on Monday, December 21, 2015, in the Pacific Daily News.  Click here to subscribe to the PDN.

It’s only December and we are talking taxes. Taking time to review your year can help you when tax time rolls around. Reviewing your information that affects your taxes now will save you a lot of stress in April. It also gives you time to make changes that may affect your finances for next year. Be expecting your W-2 by mid to late January.

Review last year’s tax return. Did you get a large tax return last year? A large tax return is an indication that you may be withholding too much of your income. Many people look for a large refund at the end of the year and use this as an opportunity to save money. In fact you can put that money into a savings account and earn the interest. If you had to pay the government at the end of the year, you are underpaying your taxes. Try to balance your W-2 so that you are almost breaking even on the amount of taxes you pay.

Retirement account. Retirement funds are an excellent place to store your income. Most retirement plans tax the money when you with draw from it. When you place more of your income into your retirement plan you can defer the tax till a later time. Adding more to your retirement is never a bad idea.

Deferring taxes. This is a legal way that lets you pay taxes tomorrow on what you earned today. This lets you hold on to the money you make a little bit longer. You can invest the money, pay off debt, improve your home, or build your emergency fund. You can use that hard-earned money and make it work for you now. You can place your money in certain types of retirement accounts or investments or into real estate. You should consult a tax accountant to help you defer your taxes.

Itemizing. Itemizing on your taxes can work for most. Itemizing takes a little more time, but for some it can really pay off. Prepare your taxes using the standard and itemized forms and compare which can save you the most.

Investment losses. Did any of your financial investments lose money this year? These losses can be used to help offset any capital gains you had this year. Your financial adviser should be able to direct you when claiming it during tax time.

Charity. It is the season for giving. If you gave to charities this year be sure to claim it on your taxes. Charity can be monetary donations or goods. If you donated goods such as clothing, toys, furniture, or any kind of household goods, ensure that you receive a receipt. At tax time you can claim it to lower your tax bill.

Taking time now to review your tax information will give you a preview on how your tax bill may look in April. Making small tweaks now may save you a significant amount of money in the end. If you come to the conclusion that there is not a lot of changes to be made, take comfort in the fact that you are almost done filing your taxes. When your W-2 arrives, it’s a matter of making small adjustments and you can file your taxes early. There will be no waiting and no stress. What a way to start the New Year.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Check your tax status, financial goals halfway through 2014

This was originally published on Monday,August 25, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

Believe it or not we are past the mid-year mark. It is hard to believe that 2014 is closer to being over than it is to the beginning. At the start of every year I write about setting personal financial goals. We are almost through the year, so it is time to review how well you are reaching those goals.

Sometimes we get caught up in the hustle and bustle of life and forget to modify financial issues that can change when our personal circumstances change. Think about what has happened during the first half of the year. Think about what is coming up for the last half of the year.

Have you had any life-altering events? Did you get married or divorced? Is there a new member of your family, or did one graduate and go off to college? Did you have a career change or a promotion? The answer to some of these questions will affect your taxes, wills, power of attorneys, your retirement fund and even your budget.

April has come and gone and we really don’t like having to think about taxes so soon. Now is the best time to start looking at how your taxes are performing. Take a look at your 2013 income taxes and compare them to your current income tax withholdings. You can find how much taxes have been withheld by looking at your current pay check stub or leave earning statements.

If you ended up paying the government last year, you may want to adjust your W-4 allowances so that you have more of your income withheld. On the other hand, if you received a rather large income tax refund, you may want to adjust your W-4 allowances to lessen the amount of income held. Talk to your employer about completing a new W-4. Doing this now instead of waiting till the end of the year could prevent a costly surprise, especially if you have to pay taxes.

Now is a good time to start looking for those receipts you need to file for next year; the holidays will soon be on us and our time will not be as free.

Review your portfolio; is it on track to meet your year-end goals? Contact your financial advisor and see if there are any changes that can be done if your portfolio is not performing up to par.

Are you saving to put a down payment on a house, to buy a new car, or to go on a vacation next year? Take a look at how close you are to that goal. If you need to boost your savings, now is the perfect time to add a little more before the holidays start.

If you have had a major life change, review your will or trust and power of attorney. You may need to revise them if a family member passed away, you went through a divorce, or had a new addition to your family.

Don’t forget to look at your budget; have you been staying on track? Review your spending over the last six months. What area of your budget needs to be worked on? How can you cut back on those expenses?

If you received a pay increase or a promotion, you can use that surplus money in several ways. You can use it to pay down debt. Even if it is a small increase, it will make a big difference and could save hundreds or thousands of dollars. You could also use the surplus money toward your emergency fund or to increase your contributions to your retirement fund.

Don’t be discouraged that you are behind on your yearly goals. You still have time to get back on track. If your goals seem too far out of reach, consider revising your goals and stretching it out over a longer period of time.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at

Save money by balancing W-4 allowances

This was originally published on Monday, August 11, 2014, in the Pacific Daily News.  Click here to subscribe to the PDN.

According to the Internal Revenue Service’s website, the average 2012 Federal tax refund was $2,985. If you divide that by 12, on average, those who received refunds overpaid their total tax amount by $248.75 a month. In other words, those taxpayers could have increased their take home pay by nearly $250 a month. Instead, that income is going to the government in the form of an interest-free loan.

Your W-4 determines how much income tax is withheld from your paycheck. The W-4 allows you to select allowances based on your life situation such as marital status, dependents or how many jobs you work. The more allowances you claim, the less tax is withheld from your paycheck. The more you withhold, you take home less and you will receive a smaller refund. The opposite applies if you choose to claim more allowances.

The minimum allowances you can claim is “0”. If you claim zero, the maximum amount of taxes will be withheld. Meaning your paycheck will be smaller, but you will probably receive a large refund check. If you are claimed on someone else’s taxes, you should claim zero.

If you are the head of a household, you can claim each dependent as an allowance. If you have a second job, you can also claim that as an allowance. Your goal should be to balance out your payments so that you are neither paying nor receiving a large amount at the end of the year. The Internal Revenue Service’s website has an IRS Withholding Calculator to help you find the right balances of allowances: Have your most recent pay stub and your most recent income tax forms that you filed available to help you answer the series of questions. In the end, the withholding amount is computed for you.

If you determine that you are overpaying or underpaying the IRS, you can make changes to your W-4 at any time. You can ask your employer for a new W-4 form or go to the IRS website,, to download a new form. You will turn in the newly completed form to your employer, not the IRS. The changes should take place in a month or two.

You should review your W-4 yearly, especially when you have a major change in your personal life. Some of these changes may affect your income or entitle you to other deductions or credits on your taxes. Here are some other reasons why you may want to revise your W-4:

• Marital status: Getting married or divorced will change your taxes. Married persons filing jointly usually qualify for lower taxes and possibly other deductions. If you get divorced, you are once again counted as single.

• A new addition: If you have a gained a new dependent or adopted one, you can claim an additional allowance. Your child may qualify for the Child Tax Credit. If you adopt a child, there are other tax credits you may qualify for.

• Employment: Getting a new job or a second job is definitely a reason to update your W-4. If your income increases, so does the amount of taxable income. Even if a side job or your home business does not require a W-4, you can always make adjustments to your main job account. If the opposite happens and you become unemployed for part of the year and get a new job, you may need to adjust your withholding to make up for the time you were not employed. The same goes with your spouse. Any changes in your household’s income should prompt you to review your withholdings.

If you fail to adjust your W-4 allowances, you may be inaccurately calculating the amount of withholdings, which could change the dynamics of your finances.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at and read past columns at the Money Matters blog at