Wilson David Investment Advisors
I fix things. My specialties are financial planning, financial literacy education, taxes, and investment advice, but over my 30-year career, I've been able to help people fix problems with money, construction projects, meetings, sentence construction, culinary disasters, and academic difficulties.
I wish I were like Samantha of the TV show Bewitched and could just twitch my nose to repair everyone's problems. Unfortunately, no magic erupts when I twitch my nose. I help clients using my knowledge, experience, and hard work...although I like to think that our working together has its own magic. My work as a lecturer, teacher, copy-editor, writer, presenter, negotiator, researcher, and office manager in a diverse cross section of business, educational, and government organizations has helped me gain the depth of knowledge needed to advise my clients in all aspects of sound financial planning and investment. I have been described as a fast, cheerful, flexible worker who rapidly resolves unexpected problems and project difficulties. I manage work quality and time based on guidelines provided and use my talents to provide customers with top-notch service.
As a champion for financial literacy, I speak at high schools, libraries, career fairs, churches, businesses and community groups - anywhere I can get a platform! - to raise awareness about financial knowledge and safety. I recently published "Financial Advice for Blue Collar America" which offers guidance on basic concepts of money including insurance and taxes, financial traps to avoid, how to pay for college and tech school, and info about the bright future ahead for blue collar careers.
BA, College of William and Mary
MA, College of William and Mary
MBA, University of South Carolina
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Hi! Thanks for writing. Wow – you have a GREAT credit score….nice work. That’s so hard to do.
You ask a couple of questions, and I want to address them separately to fully explain. Your first question is about a debt-to-income ratio. To calculate your debt-to-income ratio, you add up all your monthly debt payments and divide them by your gross monthly income. Right now, yours is about 25%. What is considered “good” is a matter of personal opinion, but for mortgage lenders they look for that ratio to be under between 36% and 43% depending on the lender. If your income stays steady, your debt to income ratio will increase if you buy a car and commit to making car payment. Let’s assume your new car payment is $300. You new debt to income ratio would increase then to about 38%.
I can’t say exactly how much your credit score would lower as a result of incurring more debt…that complicated calculation is done by the credit bureaus! It is likely, as you say, that your credit score will decrease somewhat because you are taking on more debt and more debt means some lowering of the credit score. It’s interesting to note that the credit score doesn’t take income into account, so income isn’t really a factor in the credit score.
One other thing I want to add is that although the credit score is individual, if you take on any joint accounts with your husband, the actions in the joint account will affect each of your credit scores. For example, your 800+ credit score could decrease if you and your husband bought a house or car together and he failed to make the payments on time or at all. So anytime a person is a joint account holder with another person it’s important to monitor the payments and make sure they are made on time and in full.
I hope that helps – if you get that new car, I hope you enjoy it. Best wishes to you!
Hi! Thanks so much for writing! The tax exclusion on profit from capital gains from a home can be so confusing! It is called a “Section 121” exclusion, and there are several components or tests required. These tests are primarily checking on owner ship and residence. In your case, you have definitely met the residence component of the rule but have not quite met the 2-year ownership part. The IRS rule says you qualify if “You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale.” You need only to make sure that (IRS words) “your home was your residence for at least 24 of the months you owned the home during the 5 years leading up to the date of sale, [so] you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period.” With regard to ownership, the IRS says that “If you owned the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.” (https://www.irs.gov/publications/p523/ar02.html)
So in your case, as I think you are with this particular home, if you and your spouse are co-owners, a year from now you would be able exclude up to $500,000 of your gain from taxes (assuming that you “did not exclude gain for selling another home on your tax returns for the previous two years”). However, if you sold it today, having only owned it 1 year, you would need to pay cap gains taxes. Keep in mind, though, that improvements made to your home can increase your cost basis and thus reduce the amount that is taxed. This following article (https://www.nerdwallet.com/blog/advisorvoices/selling-home-capital-gains-tax) has more info about selling a home.
If you are selling your home now for certain special reasons, you may still be able to exclude some of the gain from tax. There are a number of “unforeseen circumstances” that may allow you to take advantage of the Section 121 exclusion, or either of the two following reasons. Again IRS publication https://www.irs.gov/publications/p523/ar02.html can give more info.
--Work-related move. You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold: You took or were transferred to a new job in a work location at least 50 miles farther from home than your old work location; You had no previous work location and you began a new job at least 50 miles from home.
--Health-related move. You meet the standard requirements if any of the following happened during the time you owned and lived in the home you sold: You moved to obtain, provide, or facilitate diagnosis, cure, mitigation, or treatment of disease, illness, or injury for yourself or a family member; You moved to obtain or provide medical or personal care for a family member suffering from a disease, illness, or injury.
Best wishes to you! Please write again if you have more questions or need more information!
Hi! Thank you for writing! How frustrating…that has happened to me with young people who I do taxes for. In one case, the person forgot about the second W-2, but the fact was the tax return had been submitted, so an amended return had to be submitted. In another case, I just let it go because it was such a small amount earned. The IRS noticed it, sent a letter asking for the difference, and the taxpayer paid it. That may happen in your case. If not, and you want to make it right, you can do an amended tax return. Doing an amended return is not hard and doesn’t take that long.
You've already received your refunds, but other taxpayers needs to wait to do their amended return until after they receive their efund or until after funds clear the bank if they owed money. Another thing to note is that you have to do a paper amended return that you mail in, at least as I write this answer in 2016. I imagine that someday amended returns will be able to be submitted online via e-file, but right now they are not. Here is the link for the 1040X form - https://www.irs.gov/pub/irs-pdf/f1040x.pdf and here is the link for the 1040X instructions - https://www.irs.gov/pub/irs-pdf/i1040x.pdf. Even if you paid someone to do your taxes, you can probably figure out how to the 1040X yourself and save the cost of paying someone to do it. If you make a mistake, the IRS will send you a letter correcting the mistake and letting you know that you owe more money or that you overpaid.
One note – you say in your question above that this is actually 1099 income rather than W-2 income. In that case, if you earned over $400 you may need to pay self-employment tax and probably file Schedule C, but you may have already done that assuming that some of your other income was 1099 income. I better not get into the specifics of W-2 vs 1099 income in the scope of this answer, but you could write back with another question if this situation applies to you. This link will provide some info - https://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/1099-MISC,-Independent-Contractors,-and-Self-Employed/1099-MISC,-Independent-Contractors,-and-Self-Employed-1.
Keep in mind that you will also need to amend your state return, too. Depending on where you live, you might be able to file the state amended return online. We live in South Carolina where an amended return must be mailed, but in New York, where our daughter lives, you can submit an amended return online.
Sorry for the hassle, but hopefully it won’t take you too much time! So glad you wrote, and please write back if you have more questions for us.
I am so very sorry about your mother’s illness and the turn it has taken. That is so upsetting for everyone in your family, and my heart goes out to all of you. During this stressful time, it’s hard to think about practical concerns, but I suspect that your mother, in wanting to clear up loose ends, may be the one who is driving the worry.
From your question, I am assuming that your mom has just two heirs – two daughters whom she wants to treat fairly. She’s given money to one daughter (Daughter A) that she didn’t give to the other (Daughter B) and wants to be sure that things get evened up without difficulty or strife.
The simplest way to solve the problem if your mother has the liquid funds to do it and is able to manage the action is for her to write Daughter B a check for the amount she gave Daughter A for the down payment. If no cash is free, perhaps your mother has a piece of jewelry or other item that is valued at the amount of the down payment that could be given to Daughter B. Alternatively, Daughter A, who received the down payment, could give half of that amount in cash to her sister, Daughter B. That would make it all even, and then when the sad day comes that you lose your mother, her will specifies the even, fair distribution to each daughter. (Note – if the amount of the down payment was greater than $14,000, a Gift Tax Return (Form 709) may need to be filed with the IRS, but unless your mom has already give millions away, no actual tax on that gift would be paid.)
However, neither your mom nor Daughter A may have that kind of cash available. In that case, amending the will if she is able would also work, but there may not be the time and energy needed to get to the lawyer’s office and modify the will. There would also be a cost to doing this. Another possible solution could be for your mom to write up a codicil or additional note to be included with the will explaining the situation and letting the executor know to give Daughter B more than Daughter A in the final distribution, but if this addition isn’t formally incorporated into the will by paying the attorney some amount of money to do so, it may not hold up.
If you mother passes away before any action is taken to remedy this situation, then nothing formal or legal can be done to change the situation after death. It would be up to Daughter A to say “This is not fair to my sister and not what Mom would have wanted,” and then give her sister half of the amount of the down payment after the final distribution of the will is made.
I’m so very sorry for your loss, and I hope that your mom’s end is as peaceful and affirmative as it can be. Best wishes to you and your family.
Hi! Thanks for writing! I am so sorry you didn’t get through those FINRA exams on the first try but don’t feel bad – I think the Series exams are really tricky and capricious, and even if you study very hard and very smart using Kaplan or another professional prep program, it’s really hard to pass. So yes, scores in the 60% level are normal for a first attempt. You will pass next time for sure!
Some thoughts - hopefully you didn’t try to take them both in the same day – for the next attempt, if possible I would recommend that you take them a couple of day apart. Also, did you buy an exam prep program to study from? Those really help – Kaplan, Keir, Wiley, STC and others offer reasonably priced programs and online test banks. My son is also an investment advisor, and between the two of us we have taken Series 65, 63, and 6; the CFP® exam, and the IRS EA exams. We found that it is essential to have an up-to-date, current study program – we had trouble when we tried to save money by using old guides. The test questions and the limits/numbers change. With the exception of the CFP® study materials, we never paid more than $100 for the study guides we bought. Give yourself enough time to study but not so many weeks that you get bored, inefficient and confused. Try to study some amount every day, even if just 30 minutes instead of just concentrating on long periods at one time. Once you study the basic material, concentrate your study time on doing test bank questions.
Hopefully these ideas help. It’s hard to pass those exams, and lots of people take a couple of tries to get through them. Try again soon before you forget what you’ve studied, and then good luck!!! You’ll be done soon.