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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
Have you ever visited the IRS website? I have to tell you, I was pretty impressed with the online tax features. And as the tax filing season approaches, the IRS encourage you to visit IRS.gov first for tax tools and online resources to address any of your issues before calling.
Hello, this is Noel Dalmacio, your ultimate CPA at LowerMyTaxNow.
Here are the top seven online reasons to visit the IRS website
- Check your refund status. You can go to irs.gov/refunds so you can check your refund status 24/7.
- Get your transcript. You can access various transcript types online. You may also ask the IRS to mail a tax return transcript to you by requesting it online or by calling 800-908-9946. Please allow 5 to 10 days for delivery. Go to https://www.irs.gov/individuals/get-transcript
- Make a direct payment. You can make tax payments directly from your checking or savings account. You can also view your account balance if taxes are owed. Go to https://www.irs.gov/payments
- Online Payment Agreements. You can pay your taxes by easily setting up a monthly payment plan. Go to https://www.irs.gov/payments/online-payment-agreement-application
- Answers to Tax Law Questions. The Interactive Tax Assistant takes you through a series of questions and provides the answers. Go to https://www.irs.gov/help/ita
- Forms, Instructions and Publications. You can download and view popular tax forms, publications and instructions anytime. Increasingly popular eBooks are available as well. Go to https://www.irs.gov/forms-instructions
- Where’s My Amended Return. Taxpayers can track the status of an amended return. Go to https://www.irs.gov/filing/wheres-my-amended-return
So I encourage you to try it and check out my top seven reasons why you need to visit the IRS website this upcoming tax season.
Last Updated by Admin on 2017-11-29 08:14:57 PM