What Is a W-2?

A W-2 is a form filed by an employer that shows compensation paid and amounts withheld from an employee’s paycheck. Compensation includes wages, tips, and other forms of compensation. Withholding can include taxes and other amounts deducted from an employee’s pay. If you have more than one employer, you may receive multiple W-2 forms. These forms are essential documents in filing your taxes for the previous year.

The W-2 is generated based on an employee’s income during each calendar year, as well as the information the employee provided on their W-4 withholding certificate. Understanding how to read your W-2 can be helpful in understanding your overall tax liability.

What Information Is on a W-2?

tax time” is in April each year, taxes are essentially pay-as-you-go, according to the IRS. That means that, in an ideal world, April shouldn’t bring a large tax bill or a large refund. For a single person who has only one employer, filling out a W-4 should be relatively straightforward. But those with multiple income streams, including rental income, investment income, or income from side gigs, may need to take some time with their W-4 to ensure they’re withholding an appropriate amount, as well as paying quarterly estimated taxes if necessary.

How do you know that your W-4 is accurate? You can assess based on the refund or bill you receive at tax time. While a refund can feel like a windfall—and people often earmark it to pay off bills or fund a vacation, home improvement project, or other big-ticket purchase—the money represents an overpayment to the IRS. While getting a big check can be exciting, it may make more sense to have that money available to budget with throughout the year. Similarly, a large tax bill can throw your budget off track and may subject you to penalties from the IRS for not having enough taxes withheld from your paycheck or not paying quarterly taxes.

Are You an Employer?

If you pay someone wages of $600 or more in a calendar year, even if that person is a relative, you’re technically an employer in the eyes of the IRS. This means that a person who employs a regular babysitter or housecleaner may need to withhold and pay certain taxes, including Medicare, federal unemployment, and social security.

This is an example of paying someone “on the books” and can be protection from fines and penalties that may come from paying an employee “under the table.” Having a clear understanding of what forms need to be filled out and what steps you need to take as an employer can help avoid a potentially complicated tax situation down the line.

Having Your Paperwork in Order

Because things can change from year to year, it can be a good idea for an employee to regularly check their withholding on their W-4 every year, and make sure a new one is filed if there is a life change, such as having a baby or getting married. It’s also a good idea for employees to keep an eye out for tax-related paperwork, since tax is due regardless of whether paperwork has made its way to an employer’s mailbox.

Checking in with an HR department can help make sure nothing falls through the cracks. Having paperwork ready and available can make filing taxes as seamless as possible when the time comes. Having your paperwork ready and considering any questions you may have can also maximize your time if you work with a tax prep professional.

The Takeaway

While tax time may be met with eye-rolling and stress, it can also be a time to set up financial intentions and systems for the year. This can include submitting a new W-4 to your employer, estimating quarterly taxes, and developing a strategy to ensure that your money works for you in the year ahead. Keeping on top of your finances throughout the year can make tax time more manageable. An account that allows for saving, spending, and earning all in one place, like SoFi Money®, makes it easier to monitor your finances and make sure funds are in place to pay taxes when they’re due.

Learn more about how SoFi Money® can help you at tax time and beyond.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOCO20120

Source: sofi.com

What to Do If You Don’t Receive Important Tax Documents

It’s getting to be that time of year again—tax time. And although it’s (probably) no one’s favorite holiday to celebrate, Tax Day, like any other annual event, does require some preparation.

But what happens if you don’t have all your tax information ready to go for April? While keeping track of everything can be a headache, the good news, most of your tax information is probably recoverable, even if it doesn’t show up on time. Here’s what to do.

What Paperwork Do You Need to Keep for Taxes?

There are many different types of IRS forms that contain the information necessary to file a tax return. Which specific forms you’ll need will vary depending on your personal financial and demographic circumstances.

Employment and Income

For example, if you’re an employee working to earn wages at a company, your employer will need to supply a W-2 form , which shows both your income and the amount of money that has already been withheld for taxes. If, on the other hand, you’re an independent contractor, you’ll receive a different form—the 1099 , which reports self-employment income as well other types of income like interest and dividends earned on investments. Which, yes, means you might get a 1099 even if you’re an employee if you also have an investment account. There’s also such a thing as an SA-1099 , which shows how much has been received in Social Security benefits over the course of the year.

Deductions and Healthcare

Other common forms include the 1098 , which actually occurs in seven different variations and lists certain types of expenses that may be tax deductible, such as mortgage interest or student loan payments, and the 1095, which also occurs several variations and includes information pertaining to healthcare coverage. You may get a 1095-A if you have a healthcare plan off the Marketplace, a 1095-B if you have minimal essential coverage (i.e. Medicare or Medicaid), or 1095-C if you receive employer-provided health insurance.

What Do You Do if You Don’t Get Your Tax Forms?

Form 4852 , which serves as a substitute to form W-2, if the W-2 can’t be located.

What if You Don’t Get Your 1099?

Again, if you’re due to receive a 1099 from an “employer” for independent contracting wages, the first step is to reach out to the individual or entity directly. If you aren’t sure where the 1099 reporting your investment income is, try logging onto your online brokerage account and clicking around. Digital forms are often offered directly to account-holders online.

The good news is, you aren’t technically required to attach your 1099s to your tax return unless taxes were withheld from the payments reported on them. So if you have another record of that income—such as year-end account statements, in the case of investments—you may be able to file your taxes with that information. (That said, it may be worth double-checking your paperwork with a tax professional.)

What if You Don’t Get Your 1095?

If you don’t have your 1095, you can reach out to the source it should have come from to figure out where it is. For the 1095-A, log into your Health Insurance Marketplace account and look for the digital version of the form there; if you are expecting a 1095-B or 1095-C, you can reach out to your Medicare/Medicaid office or employer.

That said, this is another form that you might not have to include on your tax return at all. According to the IRS, you should only wait to file if you’re missing form 1095-A; the other two types, 1095-B and 1095-C, are not required.

What if You Don’t Get Your 1098?

This is another tax document that’s not formally required by the IRS—but it does contain information you probably want to include on your return, since it could translate to a tax deduction.

If you haven’t received your 1098 in the mail, one first step is to log into the account you have with the bank or lender that issued the mortgage or student loan. Again, digital tax documents are often offered directly to borrowers through the online portal. If you can’t find the documents yourself, call the lender’s customer service line. You might also be able to find the necessary numbers on your year-end statement.

If You Just Don’t Have Your Stuff Together On Time

file for an extension with the IRS, which involves—of course—a form: Form 4868 , to be exact. While filing the form gives you until October 15 to get your paperwork in order, keep in mind that it doesn’t give you an extended timeline on actually paying your taxes. Any money you owe to the government is still due on Tax Day.

Finally, if you use a tax preparer service, whether a human accountant or smart software product, keep in mind that they likely still have last year’s information on file, which may help fill in some gaps. Your professional tax preparer can also answer questions you have about properly filing this year’s return.

Organizing Your Finances The Easy Way

Tax time can be stressful even for the most organized among us, but if your money landscape is already a bit of a mess, finding the right financial products can make a big difference. For example, SoFi Money®, a cash management account, can help keep things nice and neat by offering you a bird’s-eye view of your spending habits. Plus, the Vaults feature can help you save for personalized goals, whether that’s an upcoming home repair or your next big vacation.
Learn more about how SoFi Money could help you Get Your Money Right®.


SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOCO20121

Source: sofi.com

Traditional vs. Roth IRA: How to Choose the Right Plan

For many Americans, employer-sponsored plans like the 401(k) are the primary vehicle for retirement savings. These programs allow individuals to automatically defer a certain percentage of each paycheck directly into an investment account, and in most cases you’ll also get a tax break since those wages won’t count toward your taxable income in the year you earn them.

But for those who don’t have access to an employer-sponsored plan, or who simply want to up their retirement savings game by stashing away as much cash as possible, an IRA—or individual retirement account—may be a solution. These accounts allow you to make retirement contributions with special tax benefits, even if you’re self-employed.

Overview of Traditional and Roth IRA Plans

The two most common types of IRA are the traditional IRA and the Roth IRA. It’s helpful to understand the difference between Roth and traditional IRA options when saving for retirement.

Traditional IRAs are funded with pre-tax dollars, while a Roth IRA is funded with after-tax contributions. The same annual contribution limits apply to both types of IRAs, including catch-up contributions for savers aged 50 and older. For 2021, the regular contribution limit is $6,000, with an additional $1,000 allowed in catch-up contributions.

Whether it makes sense to open a traditional vs. Roth IRA can depend on eligibility and the types of tax advantages you’re seeking. With Roth IRAs, for example, you get the benefit of tax-free distributions in retirement but only taxpayers within certain income limits are eligible to open one of these accounts. Traditional IRAs, on the other hand, offer tax-deductible contributions, with fewer eligibility requirements.

In weighing which is better, traditional or Roth IRA plans, it’s important to consider what you need each plan to do for you. Opening a Roth IRA vs. regular IRA can allow you to save money for retirement and invest it in a variety of ways. But you may find one type of tax break (i.e. tax-deductible contributions vs. tax-free distributions) more valuable than another.

The Differences Between Traditional vs. Roth IRAs

When choosing which type of retirement account to open, it’s helpful to fully understand the difference between Roth and traditional IRA options. Specifically, that means knowing:

•  Eligibility rules for making contributions to a Roth or traditional IRA
•  Tax treatment of both IRA contributions and IRA withdrawals, including early withdrawal penalties
•  Required minimum distribution requirements

The IRS has specific guidelines governing who can contribute to an IRA, the amount of contributions you can make, and how you’ll pay taxes on the money you save for your retirement. Navigating the rules can seem confusing, so it’s helpful to look at each guideline individually to get a sense of whether a Roth or traditional IRA is the better fit.

We’ll get into the key differences for these rules below.

Traditional vs. Roth IRA Eligibility

Anyone below age 72 who earns taxable income can open a traditional IRA.

Roth IRAs have no such age restriction—individuals can make contributions at any age as long as they have income for the year.

Roth IRAs, however, have a key restriction that a traditional IRA does not: An individual must earn below a certain income limit to be able to contribute. In 2021, that limit was $125,000 for single people (people earning more than $125,000 but less than $140,000 can contribute a reduced amount). For those individuals who are married and file taxes jointly, the limit is $198,000 to make a full contribution and $208,000 for a reduced amount.

The ceilings are based on modified adjusted gross income, which is basically the adjusted gross income listed on one’s tax return with certain deductions added back in.

SoFi’s Roth IRA calculator lets individuals plug in income and other factors, to see which account they can contribute to and how much they can put in.

Traditional IRA Taxes vs. Roth IRA Taxes

With a traditional IRA, individuals can deduct the money they’ve put in (aka contributions) on their tax returns, which lowers their taxable income in the year they invest. Come retirement, investors will pay income taxes at their ordinary income tax rate when they withdraw funds. This is called tax deferral. For individuals who expect to be in a lower tax bracket upon retirement, a traditional IRA might be preferable.

The amount of contributions a person can deduct depends on their adjusted gross income (AGI), tax filing status, and whether they have a retirement plan through their employer. This chart, based on information from the IRS , illustrates the deductibility of traditional contributions for the 2020 tax year.

Filing Status If You ARE Covered by a Retirement Plan at Work If You ARE NOT Covered by a Plan at Work
Single or Head of Household You can deduct up to the full contribution limit if your modified AGI is $65,000 or less. You can deduct up to the full contribution limit, regardless of income.
Married Filing Jointly You can deduct up to the full contribution limit if your AGI is $104,000 or less. You can deduct up to the full contribution limit, regardless of income, if your spouse is also not covered by a plan at work.

If your spouse is covered by a plan at work, you can deduct up to the full contribution limit if your combined modified AGI is $196,000 or less.

Married Filing Separately You’re allowed a partial deduction if your modified AGI is less than $10,000. You’re allowed a partial deduction if your modified AGI is less than $10,000.

With a Roth IRA, on the other hand, contributions aren’t tax-deductible. But investors won’t pay any taxes when they withdraw money they’ve contributed at retirement, or when they withdraw earnings, as long as they’re at least 59.5 years old and have had the account for at least five years.

For people who expect to be in the same tax bracket or a higher one upon retirement—for example, because of high earnings from a business, investments, or continued work—a Roth IRA might be the more appealing choice.

Here’s a side-by side-comparison of traditional vs. Roth IRA benefits and characteristics.

   Roth IRA Traditional IRA
Annual Contribution Limits (2020 Tax Year) $6,000, plus an additional $1,000 in catch-up contributions if you’re 50 or older $6,000, plus an additional $1,000 in catch-up contributions if you’re 50 or older
Tax-Deductible Contributions? No Yes, based on income, filing status and whether you’re covered by a retirement plan at work
Early Withdrawal Penalties Contributions can be withdrawn penalty-free at any time; early withdrawals of earnings may be subject to a 10% penalty and ordinary income tax Early withdrawals of contributions earnings may be subject to a 10% penalty and ordinary income tax
Good for… Individuals who are income-eligible and want the benefit of tax-free withdrawals in retirement Individuals who want an upfront tax break in the form of deductible contributions

Roth IRA vs. Traditional IRA Rules & Regulations

It’s important to understand how the IRS regulates Roth vs. regular IRAs. These rules exist to ensure that investors don’t unfairly benefit from tax breaks when using an IRA as part of their financial plan.

Specifically, the IRS regulates who can make contributions to IRAs, in what amount, and how those contributions can be withdrawn. There are also guidelines concerning when IRA distributions are mandatory. Becoming familiar with the regulations surrounding these accounts is another key step when weighing whether a traditional vs. Roth IRA makes more sense for you.

Contributions to Roth vs. Traditional IRAs

Contributions are the same for both Roth and traditional IRAs. The IRS effectively levels the playing field for individuals saving for retirement by setting the same maximum contribution limit across the board.

For the 2021 tax year the IRA contribution limit is $6,000, with an extra $1000 contribution for those age 50 or older. Individuals have until the April tax filing deadline to make IRA contributions for the current tax year. To fund an IRA for the 2020 tax year, investors have until the April 2021 tax filing deadline to do so.

With a Roth IRA, investors can continue making new contributions into their account, regardless of age. That might appeal to an investor who plans to delay retirement past the traditional age of 65 or 66 and continue working. As long as a person has income for the year, they can keep adding money to their Roth account.

Traditional IRAs, on the other hand, don’t allow individuals to make contributions indefinitely. As long as a person is working, they can make contributions—but only up to age 72. After that, they can no longer continue putting money into their account.

Withdrawals from Roth vs. Traditional IRAs

Generally with IRAs, the idea is to leave the money untouched until retirement. The IRS has set up the tax incentives in such a way that promotes this strategy. That said, it is possible to withdraw money from an IRA before retirement.

With a Roth IRA, an individual can withdraw the money they’ve contributed (not counting any money earned in appreciation) at any time. They can also withdraw up to $10,000 in the earnings they’ve made on investing that money without paying penalties as long as they’re using the money to pay for a first home (under certain conditions).

With a traditional IRA, an investor will generally pay a 10% penalty tax if they take out funds before age 59.5. There are some exceptions to this rule, as well.

These are the IRS exceptions for early withdrawal penalties:
Disability or death of the IRA owner. In this case, disability means “total and permanent disability of the participant/IRA owner.”

Qualified higher education expenses for you, a spouse, child or grandchild.
Qualified homebuyer. First time homebuyers can withdraw up to $10,000 for a down payment on a home.
Unreimbursed medical expenses. These include health insurance premiums paid while unemployed and expenses greater than 7.5% of your AGI.

Required Minimum Distributions from IRAs

The IRS doesn’t necessarily allow investors to leave money in your IRA indefinitely. Traditional IRAs are subject to required minimum distributions, or RMDs. That means an individual must start taking a certain amount of money from their account (and paying income taxes on it) by April 1 of the year after they reach age 72—whether they need the funds or not. Distributions are based on life expectancy and your account balance.

If an individual doesn’t take a distribution, the government may charge a hefty 50% penalty on the amount they didn’t withdraw.

For those who don’t want to be forced to start withdrawing from their retirement savings at a specific age, a Roth IRA may be preferable. Roth IRAs have no RMDs. That means a person can withdraw the money as needed, without fear of triggering a penalty. Roth IRAs might also be a vehicle for passing on assets to your heirs or beneficiaries, since you can leave them untouched throughout your life and eventual death if you choose to.

   Roth IRA Traditional IRA
Required Minimum Distributions? No Yes, beginning at age 72
Tax Penalty for Missing RMDs N/A 50% of the amount you were required to withdraw

Which IRA Is Right for You?

So which is better, traditional or Roth IRA? A person can have both a Roth IRA and a traditional IRA. But if you’re choosing between them, here’s a recap of the similarities and differences of the Roth vs. traditional IRA.

Roth IRA Traditional IRA
•  Available to those who make below income limits of $125,000 for single filers or $198,000 for married couples filing jointly in 2021
•  Contributions capped at $6,000 per year (or $7,000 per year after age 50)
•  Contributions are taxed immediately, but withdrawn tax-free at retirement
•  Investors can access the funds they’ve put into the account at any time, and investment earnings up to $10,000 without a tax penalty when purchasing a qualified first home
•  No RMDs
•  All earners can contribute, up to $6,000 per year (or $7,000 per year after age 50)
•  Contributions are tax-deferred—investors won’t pay taxes on them until withdrawal in retirement
•  10% tax penalty on early withdrawals (on top of regular income taxes) with certain exceptions
•  Subject to RMDs starting on April 1 after age 72

The Takeaway

For most people, if not all, an IRA can be a great way to bolster retirement savings, even if one is already invested in an employer-sponsored plan like a 401(k).

When it comes to retirement, every cent counts, and starting as early as possible can make a big difference—so it’s always a good idea to figure out which type will work for you sooner than later.

SoFi Invest® offers IRAs (both Traditional and Roth). Find out how our team of financial planners can work with you to create a personalized retirement plan, open an IRA, or rollover an old 401(k) into an IRA.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
WM17128

Source: sofi.com

The Risks of Playing The Stock Market

To the uninitiated, the stock exchange can seem like a casino, with news and social media feeds sharing stories of investors striking it rich by playing the stock market. But while there are winners, there are also losers—those who lose money playing the market, sometimes pulling their money out of the market because they’re afraid of the potential of losing money.

Playing the stock market does come with investment risks. For new investors learning how to play the stock market can be a frustrating, humbling, and in some cases, incredibly rewarding experience.

While investing is a serious business, playing the stock market does have an element of fun to it. Investors who do their research and tune into the news and business cycles can take advantage of trends that might better enable them to earn good returns on investment.

This is what you need to know about how to play the stock market, the risks involved, and what makes the market so alluring.

Playing the Stock Market: What Does it Mean?

Despite the phrase “playing” the stock market, it’s important to make the distinction between investing and gambling up front.

safe investment—in a way each investment can feel like a gamble. However, it’s important to keep in mind that the market is not a casino, and just because there’s risk involved doesn’t mean that “playing the market” is the same as playing roulette.

So what does “playing the stock market” actually mean? In short, it means that someone has gained access to and is actively participating in the markets. That may mean purchasing shares of a hot new IPO, or buying a stock simply because Warren Buffett did. “Playing,” in this sense, means that someone is investing money in stocks.

Playing the Market: Risks and Rewards

Learning how to play the stock market—in other words, become a good investor—takes time and patience. It’s good to know what, exactly, the market could throw at you, and that means knowing the basics of the risks and rewards of playing the market.

Potential Risks

In a broad sense, the most obvious risk of playing the market is that an investor will lose their investment. But on a more granular level, investors face a number of different types of risks, especially when it comes to stocks. These include market risk, liquidity risk, and business risks, which can manifest in a variety of ways in the real world.

A disappointing earnings report can crater a stock’s value, for instance. Or a national emergency, like a viral pandemic, can affect the market at large, causing an investor’s portfolio to deflate. Investors are also at the mercy of inflation—and stagflation, too.

For some investors, there’s also the risk of playing a bit too safe—that is, they’re not taking enough risk with their investing decisions, and as such, miss out on potential gains.

Potential Rewards

Risks reap rewards, as the old trope goes. And generally speaking, the more risk one assumes, the bigger the potential for rewards—though there is no guarantee. But playing the market with a sound strategy and proper risk mitigation tends to earn investors money over time.

Investors can earn returns in a couple of different ways:

•  By seeing the value of their investment increase. The value of individual stocks rise and fall depending on a multitude of factors, but the market overall tends to rise over time, and has fully recovered from every single downturn it’s ever experienced.
•  By earning dividend income. Dividends can also be reinvested, in order to further grow your investments.
•  By leaving their money in the market. It’s worth mentioning that the longer an investor keeps their money in the market, the bigger the potential rewards of investing are.

How to Play the Stock Market Wisely

Nobody wants to start investing only to lose money or otherwise see their portfolio’s value fall right off the bat. Here are a few tips regarding how to play the stock market, that can help reduce risk:

Invest for the Long-term

The market tends to go up with time, and has recovered from every previous dip and drop. For investors, that means that simply keeping their money in the market is a solid strategy to mitigate the risks of short-term market drops. (That’s not to say that the market couldn’t experience a catastrophic fall at some point in the future and never recover. But it is to say: History is on the investors’ side.)

Consider: If an investor buys stocks today, and the market falls tomorrow, they risk losing a portion of their investment by selling it at the decreased price. But if the investor commits to a buy-and-hold strategy—they don’t sell the investment in the short-term, and instead wait for its value to recover—they effectively mitigate the risks of short-term market dips.

Do Your Research

It’s always smart for an investor to do their homework and evaluate a stock before they buy. While a gambler can’t use any data or analysis to predict what a slot machine is going to do on the next pull of the lever, investors can look at a company’s performance and reports to try and get a sense of how strong (or weak) a potential investment could be.

Understanding stock performance can be an intensive process. Some investors can find themselves elbow-deep in technical analysis, poring over charts and graphs to predict a stock’s next moves. But many investors are looking to merely do their due diligence by trying to make sure that a company is profitable, has a plan to remain profitable, and that its shares could increase in value over time.

Diversify

Diversification basically means that an investor isn’t putting all of their eggs into one basket.

For example, they might not want their portfolio to comprise only two airline stocks, because if something were to happen that stalls air travel around the world, their portfolio would likely be heavily affected. But if they instead invested in five different stocks across a number of different industries, their portfolio might still take a hit if air travel plummets, but not nearly as severely as if its holdings were concentrated in the travel sector.

Use Dollar-cost Averaging

Dollar-cost averaging can also be a wise strategy. Essentially, it means making a series of small investments over time, rather than one lump-sum investment. Since an investor is now buying at a number of different price points (some may be high, some low), the average purchase price smooths out potential risks from price swings.

Conversely, an investor that buys at a single price-point will have their performance tied to that single price.

The Takeaway

While playing the market may be thrilling—and potentially lucrative—it is risky. But investors who have done their homework and who are entering the market with a sound strategy can blunt those risks to a degree.

By researching stocks ahead of time, and employing risk-reducing strategies like dollar-cost averaging and diversification when building a portfolio, an investor is more likely to be effective at mitigating risk.

With SoFi Invest®, members can devise their own investing strategy, and play the market how they want, when they want. Whether you’re interested in short-term trading or have your eyes on a longer-term prize, SoFi Invest is a way to dip your toes into the stock market and start investing today.

Find out how to get started playing the stock market with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

How to File for a Tax Extension

This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Depending on your financial circumstances, you might have a lot of paperwork to get in order before April 15. If you feel like you just need more time, it is possible to file for an extension on your federal tax return.

But there are considerations to keep in mind. Most important, filing for an extension on your return does not mean you have more time to pay the taxes you owe. That money is still due to the government on the regular due date, and you may incur penalties if the payment is late.

Here’s what you need to know to file a tax extension for tax year 2020.

What Is a Tax Extension?

A tax extension extends the deadline for filing your federal tax return by six months, making the new due date Oct. 15. All you have to do to get an extension is file IRS Form 4868 by April 15.

Form 4868 from the IRS website, fill it out, and mail it in, along with a check for estimated income taxes owed. The document itself includes information about where to send the document, depending on where you live.

If you’re filing electronically with a tax preparation software product or using the services of a professional accountant, they can help you file for an extension using their system.

Finally, if you use the IRS’s electronic payment system, you don’t need to file Form 4868 to request an extension. According to the form itself, “The IRS will automatically process an extension of time to file when you pay part or all of your estimated income tax electronically.” This applies to both online and telephone payments.

Can I File for a Tax Extension If I Owe Money?

Yes, you can still file for a tax return extension if you owe the government money—but the money itself is still due on the original due date.

Unfortunately, there’s no way to file for an extension of taxes owed. Rather, you should pay as much as you can of your estimated taxes when you file for the extension on the return, and then contact the IRS directly to learn about your options for complete repayment.

How to Know If You Owe Taxes

You may be wondering whether or not you owe taxes to the government at all—and if so, how to find out how much. While self-employed individuals must estimate their taxes and pay on a quarterly basis, those who file using W-2 wage reports may not often do this kind of taxation math.

online tax account system that allows you to see how much you owe in taxes simply by logging in. This user profile also allows you to pay any owed taxes directly and takes only a few minutes to set up.

Finally, you can always call the IRS at 800-829-1040 to confirm any amount of back taxes you might owe.

The Takeaway

Filing for a tax extension isn’t difficult, it turns out—and indeed, many tax time to-dos aren’t actually that hard. It’s all about getting the knowledge you need to get things done right the first time. (And, OK, maybe a bit of Virgo-esque organization.)

That’s why SoFi put together a comprehensive resource portal for all things Tax Season 2021, from understanding how your student loans might affect your taxes to figuring out which of your retirement contributions are tax-deductible.

Ready to turn tax time into a breeze? Check out the Tax Season 2021 Guide today.


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Source: sofi.com

How to Transfer Your 401(k) When Changing to a New Job: 401(k) Rollover Guide

It’s easy to forget about old 401(k) plans when changing to a new job. Some people simply forget about it because the company that manages it never reminds them. Others didn’t forget about their old account, but they’ve been putting off the rollover because it sounds hard.

Many companies don’t make the process easy for customers to roll over their 401(k) accounts from previous jobs. But it can be worth the inconvenience.

By not rolling it over, you might be losing some serious cash. That’s right—losing money, so it’s easy to miss. Here are a few key reasons to prioritize a 401(k) rollover.

3 Reasons to Transfer Your 401(k) to a New Job

There are three main reasons to rollover a 401(k):

1. To reduce fees. If the fees are too high with your previous employer’s 401(k), rolling over a 401(k) can be advantageous.
2. To maximize your money. If you aren’t happy with the investment options in your old 401(k) and your new employer accepts rollover 401(k)s, you might be able to save money while investing in a broader range of investment vehicles.
3. To streamline your investments. If you leave your 401(k) where it is, you may not think about it very often. It’s important to keep tabs on all of your investments so you can make sure they are on track and appropriate for your time horizon and goals.

You May Be Paying Hidden Fees

There are all sorts of fees that go into effect when you open a 401(k), including recordkeeping fees, maintenance fees, and fund fees. Expressed in a percentage, these fees inform the expense ratio of a plan.

Employers may cover those fees until you leave the company. Once you’re gone, that cost might shift to you without you even realizing it.

Fees matter: When you pay a fee on your 401(k), you’re not just losing the cost of the fee; you’re also losing all the compound interest that would grow along with it over time. The sooner you roll your plan over, the more you could potentially save.

You Might Be Missing Out on Better Investments

401(k) accounts grow at different rates depending on which assets you invest in. If the retirement savings plan at your new company—or an individual retirement plan (IRA)—offers a selection of stocks and bonds that better aligns with your financial goals, it might be time to initiate a rollover.

The money that’s sitting in your old 401(k) could potentially grow at a faster rate if you roll it over into a new plan or into an IRA—it’s certainly worth investigating the growth rates of each. Keep in mind that investors can lose money when investing, too, so it always makes sense to consider your personal risk tolerance when deciding how to invest your retirement accounts.

You Could Lose Track of the Account

It’s not your fault, it’s just logistics. It’s harder and more time-consuming to juggle multiple retirement accounts than it is to juggle one. Until you retire, you’ll be managing two (or more) websites, two usernames and passwords, two investment portfolios, and two growth rates for decades.

And if you leave this next job to go to a third (or a fourth, or a fifth), the 401(k) plans could pile up, creating even more tracking work for you. Plus, when you’re no longer with an employer, you might miss alerts about changes that may occur with an old retirement plan.

What to do With Your 401(k) After Getting a New Job

While it’s generally allowed to leave your account in your former employer’s plan when you switch jobs, there are other options.

•  Cash out the account. If you take this route and you’re younger than 59½ years old, you will owe taxes and might also owe early withdrawal penalties depending on how you use the money.
•  Roll over the 401(k) account. You could roll the account into your new employer’s retirement plan (if allowed) or into an IRA.

Cashing Out Early

Should you choose to cash out your 401(k), you will have to pay taxes on the money, and perhaps an additional 10% early withdrawal fee.

That said, there are some circumstances when the 10% fee is waived (but not the income tax), such as when the funds will be used for eligible education expenses, certain medical expenses, or expenses related to a first-time home purchase, among other circumstances.

Rolling Over a 401(k) to Your New Employer’s Plan

The process of rolling over a 401(k) might seem intimidating or inconvenient at first, especially if you’re moving onto your second job and this is the first time you’ll be rolling over a 401(k). In actuality, the actual process of rolling over a 401(k) isn’t too complicated once you’ve decided where your existing funds are going to go.

Advantages of Rolling Over Your 401(k)

Rolling over your 401(k) to a new plan can be advantageous to your overall financial plan. Here are a few ways this transition might be beneficial to your financial well-being.

One Place for Tax-Deferred Money

Transferring your 401(k) to your new employer’s plan can help consolidate all of your tax-deferred dollars into one account. Keeping track of and managing one account may simplify your money management efforts.

A Streamlined Investment Strategy

Not only does consolidating your previous 401(k) with your new 401(k) make money management easier, it can also streamline your investment strategies.

Financial Service Offerings

Some 401(k) plans offer financial services, such as financial advisor consultations, to help employees achieve their retirement goals. If your previous employer didn’t offer this service and your new plan does, taking advantage of this offering may help you achieve an investment plan that meets your exact goals rather than a standardized option.

Access to a Roth Option

An increasing number of employers are offering a Roth 401(k) option in addition to the traditional 401(k) option. With a Roth 401(k), the money you contribute is after-tax—it doesn’t minimize your taxable income. But when you take distributions in retirement, you won’t have to pay taxes on the withdrawal amount. As long as the account has been open for five years and you’re over 59 ½, you can receive tax-free distributions.

A Roth 401(k) option can be appealing if you feel your income in retirement will be higher than your current income. If your new employer offers this benefit and you think it will be advantageous to your financial situation, then rolling over your 401(k) to a Roth 401(k) plan may make sense.

How to Roll Over Your 401(k)

So, how do you transfer your 401(k) to a new job? If you decide to roll your funds into your new employer’s 401(k), you’ll most likely need to:

1. Contact the plan administrator to arrange the rollover. You may need to choose the types of investment you would like before you initiate the rollover. If not, you can take a lump-sum transfer and allocate the funds gradually to different investments of your choosing.
2. Complete any forms required by your employer for the rollover.
3. Request that your former plan administrator send the fund via electronic transfer or a check so you can move the funds directly to the administrator of the new plan.

It’s possible that you might have to wait until your employer’s next open enrollment period to complete the rollover, but you might consider using that time to research the plan’s investment options so you’ll be ready when the time comes.

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Rolling Over a 401(k) Into an IRA

If you choose to roll your 401(k) funds into an IRA that’s not employer-sponsored, a direct rollover is the method that takes most of the guesswork out of the transfer. This means that the funds will be taken from your previous account and rolled directly into the new account.

Doing it this way should avoid your previous lender sending you a check and resulting in any unforeseen early withdrawal tax situations.

Opening a new retirement account online is fairly straightforward, but there are some steps to opening an IRA that might be worth reviewing before you start. Once your funds are rolled over, you’ll be able to choose the investments that work for your retirement goals.

401(k) Rollover Rules

When requesting a transfer, you may either select a direct and indirect rollover. With a direct rollover, the check is made out to the financial institution (for your benefit). Because the funds are directly deposited into the new account, no taxes are withheld.

With an indirect rollover, the check is payable to you, with 20% withheld for taxes. You’ll have 60 days to roll over the funds (80% of your previous plan) into an IRA or other retirement plan. If you want to contribute the full amount of your previous plan, you can add money to bring the lump contribution back up to the balance before rollover. At that point, you’d be able to count the 20% withheld as taxes paid.

The Takeaway

There are many benefits to rolling over a 401(k) after switching jobs, including streamlining your retirement accounts and directing your money so that it suits your individual financial needs and goals. While some may view it as inconvenient, it’s actually a straightforward process whether you want to roll over a 401(k) into your new employer’s plan, or into an IRA.

Not sure which rollover strategy is right for you? SoFi Invest® offers retirement savings plan options. With a SoFi Roth or Traditional IRA, investors have access to a broad range of investment options, member services, and our robust suite of planning and investment tools.

Find out how to take control of your retirement options with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Source: sofi.com

Where to Cash a Check Without Paying a Fee

With the popularity of digital payment apps and credit cards, checks are being used less than ever. According to a Federal Reserve study , for the first time ever in 2018, check payments fell below the number of total ACH (automated clearing house) transfers.

secure form of payment, and they might be the only form of payment some people (like your landlord) accept.

While they might be less popular now, at the end of the day, they’re still money. Don’t make the mistake of cashing a check just anywhere, read further for a few suggestions for where you could be able to deposit a check, fee-free.

How to Cash a Check

Before running off to the bank or ATM around the corner, a person may want to ensure they have what they need to successfully deposit their check. Generally, in order to cash a check, the following information is required:

•  Bank account. You’ll generally need an account to deposit a check. Most banks will allow you to cash a check, but if you don’t have an account with them, they may charge a fee.
•  ID or debit card. Depending on the means used to deposit the check, a person might also need a form of ID or their debit card to successfully complete the transaction.
•  PIN number. Whether banking by ATM or teller, oftentimes a person will be required to enter their PIN number to confirm the transaction.
•  Completed deposit slip. Each bank has a variation in the deposit slip, but most ask for a person’s name, account numbers, and the amount of cash and check the customer is depositing. This typically needs to be completed for the transaction to go through.

Another thing to keep in mind is the timing of the deposit. Personal checks are valid up to six months after they’ve been issued, but it’s generally agreed that they should be deposited as quickly as possible. Otherwise, the issuer might forget about the check, and the person depositing the check could be doing so with insufficient funds in the issuer’s account—leading to high fees on both sides from a bounced check .

The only exception to the above rules is US Treasury checks, traveler’s checks, or USPS money orders. US Treasury checks are valid for a year after issuing. Traveler’s checks and money orders never expire.

Branch Bank

Perhaps the most old-school way to cash a check is going into a bank branch or credit union and depositing the check with a teller in-person. This can be faster because the amount being deposited is confirmed on-site—there’s less likely to be a delay in the funds hitting a person’s account.

To deposit a check at a bank branch, a person will need to complete a deposit slip, and endorse their check. To endorse a check for a teller, a person needs to sign the back of the check, where indicated.

With a deposit slip and endorsed check in hand, customer’s might also be asked for their bank’s corresponding debit card or a photo ID for verification. From there, the check is validated and funds will be available in the account once the check clears, which can take up to two days.

While depositing to a bank branch can be fast, people are limited by the branch’s hours and locality. If a person has an account with an online-only financial institution, visiting a brick and mortar location to deposit a check may not be an option.

Similarly, they might be in an area where there are no nearby retail locations. If that’s the case, there are other methods to cash a check.

ATMs

Depositing a check via ATM has its advantages and disadvantages. Unlike bank branches, many ATMs are open 24-hours and with smaller square footage, they can be more common than brick and mortar ATMs.

Depositing a check by ATM varies by the technology it uses. Older ATM models may ask a customer to fill out a deposit slip envelope before inserting the check into the machine. Other, more modern models simply use on-screen prompts and scanning to verify the deposit amount. Regardless, customers are generally required to endorse the check with their signature before depositing it in an ATM. Using an ATM also typically requires someone to enter their pin number before accessing the account. Reading the on-screen prompts can help clarify the steps at the specific ATM you are using.

On the downside, checks deposited via ATM may take longer to be available in the bank account. This is because ATMs are only serviced at specific times, and while people enter the amount they’re depositing, it often needs to be verified in person by a teller at the bank . Customers are also limited to depositing checks in the ATMs of banks that they are a member of.

Additionally, because the extra step of validation is required, there is a possibility of human error incorrectly validating the correct amount or losing the check altogether . Some ATMs now have scanning capabilities, allowing them to instantly read checks which can alleviate some errors. However, an individual might want to keep a close eye on their bank statements in the days following an ATM deposit.

Mobile Deposit

Using mobile deposit to cash a check is as simple as taking a photo. Some financial institutions, including SoFi, allow the mobile deposit of checks through their app. Customers take an image of the front of the check, then the back so the financial institution can create a “digital copy” of the check. Instead of endorsing the check with only a signature, customers may be required to write “For Mobile Deposit Only” or a similar message on the back of the check.

immediately become available in the customer’s account. However, depositors should keep the check on hand for up to two weeks, or until the amount is cleared. Otherwise, they could end up over-drafting in the event that the funds are pulled.

Mobile deposits come with many advantages. As long as a phone has charge, checks can be deposited. Additionally, money is almost immediately available in a checking account. However, most mobile deposits only allow for one deposit at a time, and some accounts may have daily or monthly deposit limits. And if the handwriting on the check is unclear, the app might not recognize it.

Mail-In

Another option a depositor might choose is to mail the check into their bank. This will likely take the most time to become available in a bank account, but most banks will offer this option.

To mail a check in for deposit, first, check with your bank to confirm its mailing address. Depending on the size of the bank, there may be multiple addresses where the check can be sent.

Before sending the check to the approved address, depositors should generally endorse the back of their check with their signature. Some financial institutions also recommend including a note that says “For deposit only” with the endorsement. Depositors may also be required to fill out a deposit slip to include with the check. Confirm the specific requirements with your bank or financial institution.

To be safe, people might want to take a picture of the check or make a photocopy of it for proof in case it goes missing in the mail. It may also be beneficial to use certified mail so tracking the check is an option. Mailing a check is a relatively safe manner to deposit a check, however, it will likely take longer than the above alternatives.

Fee-Free Deposit with SoFi

Whether it’s a refund, birthday gift, or payment for watching the neighbor’s cat, checks still fall into our hands every once in a while. While you may not get them frequently, there are numerous ways to deposit them, all with their own unique benefits and drawbacks.

SoFi Money® makes accessing your cash easy with fee-free access to 55,000+ ATMs worldwide and online mobile check depositing. SoFi Money makes it easy to manage your finances with a mobile-first experience where members can access their money anytime, anywhere.

Learn more about how SoFi Money® can simplify your money.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Source: sofi.com