Essential tax tips and other savvy advice from expert Heather Villa

Heather VillaIt’s tax time again. It has never been more important to be savvy about money and that includes getting your taxes done on time! We decided to rerun our useful tax tips from financial expert Heather Villa. Even though she is American, many of her tips are basic and will apply to most of our readers, regardless of where they file.

Heather Villa is the creator and CEO of IAC-EZ, a service that makes it easier for small business owners and freelancers to spend less money on their bookkeeping and more time on their business. IAC-EZ is an online bookkeeping tool for people who hate numbers, know nothing about accounting and still want an accurate, efficient way to keep track of their business records. For more about IAC-EZ 
Don’t miss a word of this useful interview and start on your taxes this week!
DD: What are the most common deductions single women miss when doing taxes?
HV: There are many tax deductions that are easy to miss. I find that many women who are paying off student loans are unaware that they can deduct all or part of the interest if their earnings were less than $70,000.00.
Secondly, most women know that you can claim medical bills that are paid out of pocket, but may not realize that they can take a deduction on medical supplies that are advised by doctors but not prescribed. Also, you can claim transportation costs incurred due to medical care.
If you are job-seeking, don’t forget to deduct your mileage costs. If you have a job, you may be able to deduct subscriptions to professional journals, your personal computer or cell phone if required by your employer for business-use. It is important to check with an accountant however, because job-related deductions can be tricky.
DD: How do you determine if it’s better to file jointly or separately?
HV: It is generally a good idea to file jointly when you get married because some tax credits are only available on a joint return. Under some special circumstances, including if one person has heavy medical expenses, the couple might want to work it out both ways and submit the return that offers the best savings.
DD: If you want to go back to school are education expenses deductible?
HV: If you are going back to school to increase your job skills, it pays to do some research on the IRS website because there often are deductions available. For instance, there is a U.S. government program called the Lifetime Learning Credit that provides deductions if you are a graduate or returning student. 
DD: Many experts are predicting that credit card debt will be the next big financial crisis. Should people close down credit card accounts? Does that hurt your FICA score? Can credit card companies raise your interest at any time? What do women need to know about handling credit card debt now?
HV: First, while it is good to pay down debt, it’s not a good idea to actually close down credit card accounts because it really can hurt your FICA score. And yes, credit card companies can raise your interest at any time – just check the fine print on your latest credit card bill if you doubt it. 
Paying down credit card debt requires some common sense. Don’t use your emergency funds or tax advantaged IRA, for instance, to pay down debt. Instead, set up a budget and pay down the credit cards with the highest interest rate first. The key to managing down debt is having the discipline to stick to your plan.
DD: You have said recessions can be a good time to start a new business. But what type of savings or other precaution would you recommend a woman take before quitting her job to start her own business.
HV: Historically some great businesses have been launched during depressions and recessions, including Alka Seltzer in 1931 and most recently the iPod in 2001. That doesn’t mean that launching a new business is the right path for everyone… Above all, you need an innovative idea that responds to a need in the marketplace. If you have a job, don’t quit until you are sure that you have a sound business plan, a client base and funding. 
If you’ve been laid off and think you have the makings of an entrepreneur, the good news is that the Small Business Development Center Network (SBDC) offers free counseling to help you get started, while training is low cost. It is funded in part by the Small Business Association. Find the nearest SBDC on the web at .
DD: What is a reasonable emergency fund? What advice can you give women about saving, even on a very tight budget?
HV: The usual rule is to have at least 3-6 months worth of savings that cover all your monthly expenses in a money market fund. Still there is some debate about how much cash should really be on hold­, if it means you are not paying down debt or saving for retirement. Many experts say that it is less important to have a large stash of emergency funds than to have the ability to access funds quickly by making sure you have lines of credit open, either on low interest credit cards or a line of credit against your mortgage. ( Note: Most experts now recommend eight months as it takes that long to find a new job in the current market)
DD: Can you explain why it is important to save?
HV: Emergencies can strike anytime. Obviously job loss during an economic downswing is the worst case scenario, but any unplanned expenses such as a car breakdown or heavy medical expenses can throw finances into crisis.
DD: Can you explain why no one is ever too young or too old to save?
HV: Age may give you wisdom, but it does not make you immune to hard times. Just ask the boomers who have to rethink retirement because of the current economic crisis. Establishing a habit of saving whether the market is up or down when you are young, ensures that you are always prepared for those rainy days. The bottom line is that everyone should make maximum contributions to their 401Ks or other retirement plans while they are able to do so.
DD: Often women, who move in with men before marriage, in an attempt to be equitable and independent, end up paying more than is financially sensible. Women also often pay rent in a property that’s owned by the man or in other ways fail to act self-protectively. Can you give some equitable financial guidelines and suggest financial issues that should be discussed before two people enter into this type of agreement?
HV: A woman moving in with a partner before marriage should arrange a joint visit to a financial counselor beforehand to set guidelines. In order to protect yourself, start by keeping your assets separate, avoiding joint purchases. In particular, never contribute to the purchase of a home, car or other major asset that is held in your partner’s name. In longer relationships, or if you make a considerable income, it is a good idea to hire a lawyer to draw up an agreement addressing what will happen to your assets if the arrangement comes to an end. Send comments or questions to