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What to consider before lending money to family and friends
When your best friend views your
nest egg as a source of start-up funds for his latest business venture, or your
nephew hits you up for a car loan, your first impulse may be to reach into your
bank account to help. But it's a fact that loans to family and friends often
end up straining both finances and relationships. As Shakespeare said,
"Loan oft loses both itself and friend." In other words, if you lend
money to friends, you often don't get paid back, and the friendship itself may
disintegrate.
It's best to consider a loan to
someone you love as an "arm's length" transaction. If you're
pondering such a loan, keep the following in mind:
* You can just say "no."
It's your money, after all. Do you really want to raid an emergency fund or dip
into your child's college account to finance a friend's business idea? Think
like a bank. It's reasonable to ask tough questions about the person's bank
accounts, potential sources of income, planned use of loan proceeds, and
spending habits before extending credit.
* Consider a gift. If you're
comfortable sharing your resources, you may want to provide a monetary gift
with no strings attached. In many cases, this is the best solution because
neither you nor your friend expect the money to be paid back. Unlike a loan, this
type of arrangement can forestall misunderstandings and hurt feelings later on.
Of course, you should not give money if doing so would unduly strain your own
finances.
* Formalize loans. If you decide to
lend more than a small amount to a friend or family member, it's generally best
to draft a written agreement. This can be as simple as filling out a promissory
note (available online or at office supply stores). Such forms spell out the
basic terms of the loan -- amount, interest rate, payback period -- and provide
some limited protection should you and the borrower end up in small claims
court. Another recent innovation is the use of direct lending (also called
social lending or peer-to-peer lending) websites to facilitate loans between
family and friends. For a fee, such sites can prepare loan documentation, send
payment reminders, issue regular reports, even facilitate electronic fund
transfers. If the loan involves a significant amount of money, check with your
attorney.
Remember: Many personal relationships
have been damaged when loans go awry. So proceed with caution.
Posted in general
Do you know someone who got victimized by a tax scam? I got to tell you, for the victim, it’s pretty scary! Since by the time you figured out that something is not right, the IRS imposter already cleaned your wallet! So how can you avoid it?
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Fake IRS phone call is one of the most common scams. You need to be careful of phone calls or voicemail messages from someone who claims to be from the IRS. Often these criminals will say that you owe money and they will demand immediate payment. Other times, they will lie to you and say you have a refund. They will ask for your bank information over the phone.
So in order for you not to fall for these scams, here are some tips that you can use:
IRS will NOT:
- Call you demanding that you pay them right now. IRS usually correspond via mail.
- Demand payment without giving you the chance to ask question or appeal the amount you owed.
- Ask for your debit or credit card numbers over the phone.
- Require you to pay your taxes with a prepaid debit card.
- Threaten to contact your local police to arrest you for non-payment of taxes.
- Threaten you with lawsuit.
If you don’t owe or think you don’t owe any tax, you should:
- Contact the Treasury Inspector General for Tax Administration or TIGTA. You can go to www.treasury.gov/tigta and use the TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
- Report what happened to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.
To summarize, tax scams usually reach it’s peak during tax season. So, in order for you not to fall for these scams, please review and use the tips that I’ve discussed so you can avoid being a victim.
If you like to learn more, click the link lowermytaxnow.com and sign-in to receive my weekly blog.
Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Last Updated by Admin on 2017-03-22 05:56:47 PM