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Peer-to-peer Lending Goes Public
Recently the largest peer-to-peer lending company, Lending Club, moved to become listed as a public company. So what is this alternative banking model and what should you know about it?
What is it?
Peer-to-peer lending is an example of using the power of the internet to bring lenders and borrowers together. If you wish to receive a loan you go to a peer-to-peer web site, fill out an application, get approved, and then post your request for a loan. If you have money to lend, you go to the same web site. You become approved as a lender, transfer money into your account, and then select approved loans to fund. The peer-to-peer company receives part of each transaction for bringing lenders and borrowers together.
How is it used?
How is this popular banking model used?
By borrowers: Much of the current activity for borrowers is to consolidate credit card debt with lower interest rates. Others use the service for purchasing a car, financing a home improvement, funding college and financing big events (like a wedding). The approval process versus traditional lending is often quicker and less painful.
By lenders: Individual lenders use it as a way to receive better returns versus their traditional bank savings accounts. Institutional lenders use it as a quick way to improve returns on their loan portfolios without a lot of paperwork.
Things to consider
Is peer-to-peer lending or borrowing right for you? Here are some things to consider.
For borrowers:
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Review the service providers. There are a number of peer-to-peer lenders out there. Research them and choose a company that has a great track record. Compare this option with your other borrowing options before proceeding. |
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Read the fine print. As is true with any lending document, understand the terms of your loan. What happens if you cannot make a payment? What are the penalties? What happens if the note is in collection status? Are there barriers to obtaining future financing from other sources? |
For lenders:
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Understand the model. Prior to investing understand each company's business model. How do they make their money? Read the fine print. Is this option right for you? |
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Unsecured lending is risky. Most of these loans are unsecured. If the borrower does not pay, you lose your investment. |
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Institutions have an inside track. Most of the funding for large peer-to-peer companies is from very large banks and investment companies. Are they getting to fund the best deals? What is left for you? |
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Information to make a good lending decision. The information made available to you to decide whether to make a loan is controlled by the peer-to-peer company. Each peer-to-peer company has different levels of information available for you to make your lending decision. |
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Diversify. If lending money is an option you wish to consider, make sure you diversify and talk to experts to ensure you understand the risk. Even within a single peer-to-peer company you will want to reduce your exposure to any one investment going bad. |
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The environment could change. If we experience a redo of the 2008 recession, a number of these peer-to-peer loans are going to default. Can you handle this risk? |
Currently peer-to-peer lending is a hot and upcoming trend. Most of us will start to see more information on this lending model in the news and via advertising. It is helpful to begin to understand this new banking model and what it means to you.
2015 Standard Mileage Rates
The IRS recently announced mileage rates to be used for travel in 2015. The business mileage rate increases by 1.5 cents while Medical and Moving mileage rates are lowered by one cent. Charitable mileage rates are unchanged.
| Standard Mileage Rates |
| Mileage |
Rate/Mile |
| |
|
| Business Travel |
57.5¢ |
| Medical/Moving |
23.0¢ |
| Charitable Work |
14.0¢ |
|
|
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Here are 2014 rates for your reference as well.
| Standard Mileage Rates |
| Mileage |
Rate/Mile |
| |
|
| Business Travel |
56.0¢ |
| Medical/Moving |
24.0¢ |
| Charitable Work |
14.0¢ |
|
|
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Remember to properly document your mileage to receive full credit for your miles driven.
Now that the tax laws for 2014 have been put to bed, it is time to start gathering your tax records for 2014 and taking steps to get your tax house in order for 2015. Here are some ideas to help you.
Look for your tax forms. W-2s, 1099s, 1098s and the new 1095-A's will start hitting your mailbox. Look for them and get them organized. Create a checklist of the forms to make sure none is missing. If you used the new Affordable Care insurance exchange to purchase your health insurance you will also be receiving a new 1095-A form that recaps this activity.
It is all in a name. If you were recently married or had a name change, file your taxes using the correct name. File the name change with the Social Security Administration as soon as possible, but be aware of the timing with a potential name conflict with the IRS. Any name mis-match could cause a rejection from the IRS and create an audit trigger.
Collect your receipts and sort them. Using last year's tax return, begin to gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Here is a list of the more common tax records in no particular order:
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Informational tax forms (W-2, 1099, 1098, 1095-A, plus others) that disclose wages, interest income, dividends, and capital gain/loss activity |
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Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items) |
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Business K-1 forms |
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Social Security records |
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Mortgage interest statements |
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Tuition paid statements |
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Property tax statements |
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Mileage log(s) for business, moving, medical, and charitable driving |
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Medical, dental and vision expenses |
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Business expenses |
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Records of any asset purchases and sales |
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Health insurance records (including Medicare and Medicaid) |
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Charitable receipts and documentation |
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Bank and investment statements |
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Credit card statements |
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Records of any out of state purchases that may require use tax |
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Records of any estimated tax payments |
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Home sales records |
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Educational expenses (including student loan interest expense) |
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Casualty and theft loss documentation |
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Moving expenses |
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Contribution records |
Remember, if in doubt whether something is important for tax purposes, retain the documentation. It is better to throw unnecessary documentation out, than to wish you had the document to support your deduction.
Clean up your auto log. You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
Review and update your withholdings. Make a quick review of your W-2 and decide if now is the time to have your employer update your withholding amounts. A second check might be in order after you file your taxes.
Coordinate your deductions. If you and someone else may share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.
Review your other information. Do not just focus on tax related items. Review other parts of your financial life for possible organization and updates. This includes insurance, investments, legal documents, safety plans, identity theft protection, credit scores, retirement planning, retirement account contributions and your home's annual budget.
Please give us a call to discuss this or any of our other topics with you, so we can address your specific requirements.
DiSabatino CPA
Michael DiSabatino
651 Via Alondra Suite 715
Camarillo, CA 93012
Phone: 805-389-7300
ww.sharpcpa.com
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. All rights reserved.