Money Management

Don’t fall victim to misinformation. 

You could conceivably spend days reading up on taxes while still lacking critical information about the U.S. tax code. And that’s unfortunate.

What’s also not great is that the internet can be home to a host of bad tax information. And if you fall victim to the wrong myths, it could cost you. With that in mind, here are three specific tax myths you’ll appreciate having debunked.

1. You can claim a home office deduction as long as you work from home

Many people are working from home these days in the wake of the pandemic. That’s a perk that may be saving you money in different ways, from cheaper auto insurance to lower childcare costs.

But just because you’re working from home doesn’t mean you can automatically claim a home office deduction. And if you claim that deduction when you’re not entitled to it, your tax return might get audited.

Before you even think about claiming a home office deduction, there’s really just one question to ask yourself: Am I self-employed? If you’re not, then that deduction is off the table — end of discussion.

Even if you are self-employed, it doesn’t automatically mean you can claim a home office deduction. To qualify, that office must be your primary place of work and your office space must be used for work purposes only. But the bigger misunderstanding tends to come in the form of people who are salaried workers thinking they can claim this deduction when it isn’t on the table.

2. You won’t get audited if your accountant signs off on your tax return

Hiring an accountant or tax professional could reduce your chances of getting audited, since that person will know what deductions you’re eligible for and can stop you from claiming tax breaks you’re not entitled to. But hiring an accountant does not guarantee that you won’t end up with an audit on your hands.

There are certain factors that can lend to a greater likelihood of getting audited, like having higher earnings or a large amount of deductions relative to your income. These are things your accountant can’t control. But don’t assume an audit is out of the question just because you’ve brought in a professional — and make sure anyone you hire for tax help is willing to offer audit support should it become necessary.

3. The IRS must let you know if you’ve missed out on credits or deductions you’re entitled to

The tax code is loaded with credits and deductions that could reduce your tax burden substantially. And if you hire a tax professional, chances are, you won’t miss out on any of the ones you’re entitled to.

But if you file your taxes on your own, the same may not hold true. And if you think the IRS is going to come chasing after you to make sure you claim the right credits and deductions, think again.

As Mark Steber, Chief Tax Information Officer at Jackson Hewitt, explains, “The IRS is not in the business of making sure that you got all of your benefits.” If you’re entitled to the Earned Income Tax Credit, for example, and you fail to claim it, that’s on you. The IRS isn’t going to send you a check for that credit if you don’t claim it on your tax return.

Falling victim to these specific tax myths is something you don’t want to do. Now, the good news is that we’ve just gotten to the bottom of them. But there’s still a lot of incorrect tax information floating around, so if you’re not sure what to believe, ask a tax professional. It’s their job to know the tax code inside and out, and they’ll be able to give you good advice so you’re not led astray.

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It’s a strategy worth employing. 

If you’ve effectively been brought up as an adult to focus on retirement savings above all else, you’re not alone. For years, financial experts have drilled into our heads that we need to do what we can to fund our IRA accounts and 401(k)s, even if that means making near-term sacrifices, like traveling less or spending less money on luxuries.

Now, the reality is that unless someone hands you a pile of money every year to contribute to your IRA, 401(k), or a regular brokerage account, you’re not going to make progress on the savings and investing front unless you carve out a portion of your income for those purposes. But you may reach a point where you’re giving up too many immediate goals to focus on future ones. And that’s not necessarily a good thing.

A new approach to investing seeks to change that. And it’s one you may want to adopt.

It’s all about you

It’s natural to focus on long-term financial goals like building a retirement nest egg or being able to put your kids through college. But you may have some shorter-term goals you want to tackle as well.

Maybe you’re eager to purchase a home, or a second home. Maybe you want to start a side business that will require some seed money. Or maybe you just plain want to travel a lot while you’re relatively young and have the energy to do things like sit on a plane for 14 hours or hike various peaks.

If you’re someone who believes that you shouldn’t have to sacrifice your near-term goals and happiness to meet your long-term objectives, then you may want to adopt a strategy called lifestyle investing. In a nutshell, lifestyle investing focuses on helping savers enjoy the present while also working toward future goals.

Say you have the option to hold down a stressful, high-paying job versus take an easier one with a lower paycheck. A traditional financial advisor might tell you to push yourself to stay at the harder job for a few more years so you can bank that money for the future. With lifestyle investing, you might instead think about how to adjust your future goals to make a positive near-term change possible, like being able to take a lower-paying job that offers better balance and a much improved quality of life.

Carve out your own path

With lifestyle investing, it’s up to you, as an individual, to carve out a path that works for you based on your specific goals — both immediate and long-term. That could mean prioritizing your near-term happiness over retirement to some degree — perhaps continuing to contribute to your nest egg, but to less of an extent so you have money to put toward short-term goals as well.

Lifestyle investing also lets you adjust your plans as your priorities shift, which is something that can happen as you age, expand your family, or experience different events. As an example, 76% of U.S. workers said their priorities changed as a result of the COVID-19 pandemic, according to a recent Transamerica survey. The events of 2020 taught some people to focus more on their health and happiness, and less so on climbing the ladder at work.

You might feel similarly. And so it’s important to adopt an investing strategy that accounts for your feelings and priorities.

This isn’t to say that you should throw caution to the wind, stop funding an IRA or 401(k), and decide that when it comes to retirement, you’re just going to wing it. But it’s okay to give your near-term financial goals and priorities just as much of your attention and resources.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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You’ll continue to earn rewards when booking Hotels.com properties but will earn fewer rewards through the new rewards program. 

Travel rewards programs can be valuable for travelers who love a great deal. But the Hotels.com rewards program is about to transition, and travelers should be aware of the changes. While some are positive, Hotels.com customers will find the new program to be less valuable. We’ve outlined what you need to know before booking your next hotel stay.

A closer look at the current Hotels.com rewards program

The current Hotels.com rewards program is value-packed. Members earn one stamp for every eligible night booked. After collecting 10 stamps, members earn one free reward night. The value of the reward night is the average of the cost of the previous 10 nights, not including taxes or fees.

Here’s an example that illustrates how stamps are earned:

Three-night stay in Amsterdam ($180 per night): $540Two-night stay in New York City ($155 per night): $310Five-night stay in Denver ($200 per night): $1,000Total spent: $1,850Value of free reward night earned: $185

In this scenario, you’d earn a free night valued at $185. You’re responsible for paying the taxes and fees. If you’re using the reward to book a stay that will cost more than $185 per night, you’ll also be responsible for paying the difference in price. However, earning a 10% reward is a huge win. It’s no wonder so many travelers loved this rewards program.

Hotels.com will transition to the One Key rewards program

Hotels.com has announced that the current rewards program will soon be no more. Beginning in mid-2023, Hotels.com will unveil a new rewards program called One Key. This program will be available to Hotels.com, Expedia, and Vrbo customers.

One benefit to the change is your rewards can be redeemed in more ways. Members can use earned OneKeyCash to book eligible stays at Hotels.com, eligible vacation rentals on Vrbo, and eligible flights, hotels, rental cars, and more at Expedia. If you value flexibility, that’s a big win.

But that’s not the only change. Rewards will be worth less. You’ll earn 2% in OneKeyCash for every $1 spent on eligible hotels, vacation rentals, activities, packages, car rentals, and cruises. You’ll earn 0.2% in OneKeyCash for every $1 spent on eligible flights. For the stays mentioned earlier, you’d earn $37 in rewards compared to $185 through the current program. Yikes!

Members begin as Blue members and can earn status as they work up to different membership tiers the more they book. Silver, Gold, and Platinum members can earn a rewards bonus of 50%, 100%, or 200%, depending on membership level. That translates to a 3%, 4%, or 6% rewards rate. However, these bonuses are only available when booking select VIP properties.

There’s some good news for those with outstanding Hotels.com rewards. When Hotels.com officially transitions to One Key, existing rewards balances will transfer. That means you won’t lose your unused rewards during the switch. But do expect to earn fewer rewards soon.

What this news means for your wallet

This news is worth knowing if you’ve been using the Hotels.com rewards program to earn free hotel stays. The program will transition in the coming months, and you’ll no longer earn rewards at a 10% value. Instead, you’ll earn anywhere from 2% to 6% in rewards.

Not in love with the changes outlined above? If you’re loyal to a particular hotel chain, it may be a better choice to join their free rewards program. As a member, you can secure the cheapest nightly rates, earn rewards, and take advantage of valuable membership perks.

Travelers can continue maximizing rewards earned by using rewards credit cards. A hotel credit card may be a good fit if you’re loyal to a particular hotel chain. But using one of the best travel rewards credit cards may be wise if you want greater flexibility. You can use your rewards to book free hotel stays or flights in the future — making an upcoming vacation more affordable.

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Take steps to stop thieves taking the money you need to feed your family. 

If you rely on food benefits to feed your family, the idea that thieves are targeting that money is likely to be extremely upsetting. Unfortunately, millions of SNAP dollars have already been stolen from people’s accounts in what appears to be a growing problem. The good news? Not only is the government ready to pay back stolen money, there are also ways you can protect yourself against theft.

SNAP, or the Supplemental Nutrition Assistance Program to give it its full name, is a lifeline for millions of American families. Payments are made to an electronic benefits transfer (EBT) card, which works in a similar way to a debit or credit card. However, unlike other cards that have fraud protection, until recently, if crooks stole from your EBT card, there wasn’t a lot you could do to get it back.

How thieves are stealing SNAP benefits

One of the main ways criminals are stealing people’s food benefits is through skimming or cloning cards. This involves taking someone’s card information and then using it to make fraudulent transactions. For example, when you use your card to pay in a store, a skimming device might copy the card information. Thieves could then either use it to produce a cloned card or use the data to make payments.

EBT cards are particularly susceptible to skimming because they don’t have the embedded chips that most banks and credit card issuers now use to give an extra level of protection. Senator Ron Wyden wrote to the USDA in March asking it to update its EBT cybersecurity measures. He said the organization hasn’t updated them since 2010 and added, “These regulations were hardly cutting edge at the time.”

Another way thieves are targeting EBT recipients is through messages or calls where they pose as officials and ask for confidential data. Known as phishing, it can happen in many contexts. For example you might receive an SMS or email from someone pretending to be your bank asking you to open an attachment that contains malware. Or they might instead ask you to give them personal information. In the context of SNAP benefits, people received fake messages asking them to call a number and share passwords or PINs in order to unlock their EBT card.

How to protect your EBT money

At the end of last year, the government passed a law to allow states to replace stolen SNAP benefits. But it isn’t clear how that will work in each state or how long it will take. There are also limits on how much money you can get back. It’s worth taking steps to protect your benefits. These include:

Use a secure PIN: It’s not easy to juggle lots of PINs and passwords, but try to avoid using codes that are easy to guess. Rather than 1234 or 1111, how about the first few digits of your childhood phone number or another memorable number?Be suspicious if someone calls asking for confidential info: SNAP officials will never ask for your PIN by phone or text. If you get a call or message that doesn’t feel right, don’t respond. Instead, call your SNAP office on an official number.Check your account regularly: You can check your balance online or even via an app, making it easy to monitor outgoings and spot any spending that’s not yours.Look for signs of tampering at card machines: It isn’t always easy to know if a machine’s been messed with, but pay attention before you swipe. If the machine seems oversized or parts of the machine are covered up, don’t use the machine.

If you suspect your card’s been cloned or you notice unauthorized charges, change your PIN immediately. Contact your local SNAP office to report the problem and apply for a new card.

What to do if you’ve been the victim of EBT fraud

At the end of last year, Congress passed a law that allows states to replace benefits stolen between Oct. 1, 2022 and Sept. 30, 2024. Be aware that states are only allowed to replace a maximum of two months’ worth of SNAP benefits. So if thieves stole more than this, you will only be able to get some of the money back.

Each state needs to come up with a plan on how it will cover stolen funds, including how people can apply and what documents they’ll need to provide. So far, only a handful of states have announced their plans. If you’ve had your food benefits stolen, pay attention to any local announcements so that you can make a claim.

Bottom line

It is shocking to think that criminals are targeting funds intended to help low-income families pay for food. The harder you can make it for thieves to take your money, the better. Be alert, especially if people claiming to be officials call you out of the blue. And if you have already been a victim of a food benefit theft, see what your state is doing about refunding that money.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Here’s how to control your spending. 

Shopping is often seen as a form of retail therapy, but what happens when our emotions take over and we end up spending too much? It’s an all-too-common problem these days, especially with the ease of online shopping. Fortunately, there are ways to be more disciplined and keep our emotions in check. Here’s why we buy things based on emotion — and what financial guru Dave Ramsey recommends for controlling emotional spending.

Why we buy things based on emotion

The psychology behind emotional spending is complex, but one thing is clear: it often comes down to simply wanting to feel better about ourselves. It’s easy to get caught up in the moment when we see that outfit or gadget we want. Retail therapy is shopping to reduce stress and make us feel better. It has become an increasingly popular way for us to try and improve our mood when we are feeling down.

By going shopping and purchasing items, we may find a short-term mood boost. This is because shopping releases dopamine in our brains, which helps us experience pleasure and happiness. Shopping gives us a (false) sense of security and we hope for the future by imagining what our future will be like by buying the new item.

However, these feelings are only temporary and often lead to buyer’s remorse as soon as the euphoria fades away. Buying things we don’t need wreaks havoc on our bank accounts if we’re not careful. It can also create a false sense of security that leads us to think that buying something will make us happier than it actually does. We don’t always take the time to consider if we really need it or whether or not it fits into our budget.

How Dave Ramsey recommends controlling emotional spending

Dave Ramsey offers some great advice for controlling emotional spending — starting with creating space between your feelings and your purchases. Before you click “Purchase Now,” he recommends to wait and first ask yourself these three questions:

Why do I want this item?Will I really use it?Does it fit in my budget?

Even if the answer is yes to all three questions, he recommends waiting overnight before buying something big. This helps you gain perspective and think through whether you really need it or not.

Another recommendation is creating a budget that accounts for every dollar you earn each month so that you know exactly where it’s going — including your savings account! Ramsey recommends using budgeting software so you have a better idea of what you’re actually spending money on each month. Sticking to a disciplined budget can help you avoid impulse purchases and falling further into debt,

Additionally, he suggests making a list of wants versus needs. If something isn’t absolutely necessary for survival, then chances are it doesn’t really need to be purchased right away. Finally, Ramsey advises followers to shop smart by looking for discounts, using coupons, and taking advantage of special deals. With a bit of careful planning, research, and patience, you can stretch your budget and get more bang for your buck.

Overall, understanding why we turn to retail therapy and how it affects us psychologically is key in helping us manage our finances more responsibly. We need to avoid impulse purchases that can put us into debt later down the road. With Ramsey’s strategies in mind, we can become more disciplined shoppers who know how to say “no” without giving up what is meaningful in life.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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