Investing

The Marvel Cinematic Universe leads the list.

Movie franchises are a cultural touchstone and a lucrative financial opportunity. Film franchises regularly drive billions of dollars of box office revenue and billions more in merchandise sales. If a franchise can reach the pinnacle of financial success, it can benefit its owner for decades. These five franchises, listed by total worldwide gross, have earned a whopping combined $67.52 billion.

Key Takeaways

• The highest-grossing movie franchise of all time is the Marvel Cinematic Universe.
• The top two highest-grossing franchises, the Marvel Cinematic Universe and Star Wars, are both owned by Disney.
• Four of the five highest-grossing franchises are based on either a series of comic books or a series of novels.

Marvel Cinematic Universe

Disney’s Marvel Cinematic Universe, or MCU, is unquestionably the king of lucrative movie franchises. Based on Marvel comic books and superheroes, the MCU is the highest-grossing film franchise in history—the 43 MCU movies have earned over $31.4 billion worldwide—and the franchise has grossed over $20 billion more than the next highest-grossing franchise. Much of this dominance is a result of the extremely popular Avengers movies, which have earned $7.7 billion over four films. An Avengers movie, Avengers: Endgame, also holds the record for second-highest-grossing film of all time at $2.79 billion.

However, MCU’s financial success was not an obvious outcome when Disney first acquired Marvel Entertainment in 2009. At the time, the movie rights to many of Marvel’s most popular characters had already been sold and the Marvel Cinematic Universe was not the mainstream brand it is today. Luckily for Disney, the deal has paid off in mammoth box office and merchandising opportunities as Marvel reacquired many of the characters it had previously sold.

Star Wars

Another Disney property, Star Wars, is the second most valuable movie franchise in the world by box office revenue. After 15 movies, the franchise has grossed a total of $10.32 billion. The highest grossing Star Wars film by nominal revenue, 2015’s Star Wars: The Force Awakens, grossed slightly more than $2 billion worldwide and is the fifth-highest-grossing movie of all time. However, it placed fifth in worldwide gross behind Titanic.

In 2012, Disney acquired Lucasfilm, which owned the rights to the Star Wars franchise, for $4 billion. When merchandise and licensing sales are included with box office earnings, it is clear the investment has paid off handsomely.

Harry Potter

Third on the list of highest-grossing movie franchises, the Harry Potter movie franchise includes both the original eight Harry Potter movies as well as a spin-off series, Fantastic Beasts. The two series make up a movie franchise and shared universe known as the Wizarding World. Based on the popular books by J.K. Rowling, the franchise steadily gained steam over the 2000s; for example, the final Harry Potter movie, Harry Potter and the Deathly Hallows: Part 2, grossed over $1.3 billion worldwide after its release in 2011. With both series combined, the franchise has made a total worldwide gross of $9.6 billion.

Like the Marvel Cinematic Universe and the Star Wars franchise, the Harry Potter franchise has spawned a myriad of related business opportunities. Along with a Broadway play, Harry Potter and the Cursed Child, the franchise is involved in theme parks at Universal Orlando Resort and video games through Electronic Arts.

Spider-Man

The fourth-highest-grossing movie franchise of all time is Spider-Man. While the most recent two live-action Spider-Man movies are included in the total gross of the Marvel Cinematic Universe, the Spider-Man movie franchise includes two earlier series of films and an animated film as well. In total, the Spider-Man movie franchise has grossed $8.9 billion worldwide. The second most recent film, Spider-Man: No Way Home, is the highest-grossing—the film earned almost $2 billion at the worldwide box office.

The Spider-Man film franchise is unique in that, unlike other Marvel properties, the films are not produced by Disney. Instead, Spider-Man films are produced by Sony Pictures. The two companies have managed to come to an agreement over the hero’s inclusion in the MCU, but there are still unanswered questions over the future of live-action Spider-Man movies.

James Bond

Based on the novels by Ian Fleming, the James Bond movie franchise is the fifth-highest-grossing of all time. While the first film in the series, Dr. No, only grossed $59.57 million in 1963, the most recent Bond movie, No Time to Die, grossed more than 12 times as much. All in all, the franchise has made $7.9 billion in total gross over 27 movies. The most successful movie of the franchise was 2012’s Skyfall, which made $1.1 billion worldwide.

The Bond movies are one of the longest-running and most successful film franchises of all time. Over 60 years, eight actors have played the famous spy. While the latest Bond film starring Daniel Craig, No Time to Die, was scheduled for release in 2020, the coronavirus pandemic forced Universal Pictures to delay its release until 2021.

The Bottom Line

When you combine the worldwide total gross of the MCU, Star Wars, Harry Potter, Spider-Man, and James Bond you get a jaw-dropping total of $67.52 billion.

There are rules about how reverse mortgages can be promoted

Fact checked by Vikki Velasquez
Reviewed by Lea D. Uradu

Seniors and retirees who haven’t worked for many years may face the challenge of limited income from savings and investments. Although they own their home outright, they find themselves house-rich but cash-poor. As a result, they might experience financial struggles when they have inadequate cash to meet their financial needs.

A reverse mortgage can help those with limited cash flow by allowing homeowners to borrow against the value of their homes. A reverse mortgage is a type of mortgage loan intended for homeowners age 62 or older with significant home equity.

Homeowners can receive the loan proceeds as a lump sum, fixed monthly payment, or line of credit. Unlike a traditional mortgage, where the borrower makes monthly payments to repay the loan, a reverse mortgage pays the borrower. The loaned money becomes due only after they die, move out of the home permanently, or sell it.

A reverse mortgage can benefit those needing income or cash in retirement. However, troubling issues have surfaced regarding the practices of reverse mortgage advertising. Read on to learn about the federal and state regulations that exist to protect consumers.

Key Takeaways

• Federal laws—including the Mortgage Acts and Practices Advertising Rule (MAPs Rule), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010—control the practices used when advertising reverse mortgages.
• These rules forbid deceptive claims in mortgage advertising and other commercial communications sent to consumers by mortgage brokers, lenders, services, and advertising agencies. 
• Several states have also passed laws to control reverse mortgage advertising.
• Despite these rules, the Consumer Financial Protection Bureau (CFPB) has raised concerns regarding reverse mortgage advertising practices.
• Consumers should be wary of advertisements that present reverse mortgages as a source of income or government benefit; reverse mortgages are loans.

Problems With Reverse Mortgage Advertising

Unfortunately, there appears to be no shortage of fraudsters targeting seniors and their money, including reverse mortgage scams.

That aside, reverse mortgages have inherent risks which every potential borrower must consider. For example, it’s possible that after a homeowner’s death, the remaining spouse or children might lose the family home. Potential fees (closing and ongoing) can also affect your liquidity.

Harmful Advertising

There have been instances in which reverse mortgages have been described or advertised with false claims.

For example, a California-based reverse mortgage broker falsely told potential customers that a reverse mortgage would mean no payments. The broker further claimed that borrowers would not be subject to costs associated with refinancing a reverse mortgage.

On the contrary, people who take out a reverse mortgage incur a range of costs, including fees for closing, appraisals, title insurance, and property, insurance, and maintenance fees.

Because of consumer confusion, some states have passed laws prohibiting what lenders can and cannot say when promoting reverse mortgages. These rules are in addition to federal regulations that control the advertising practices of mortgages.

Moreover, the CFPB has repeatedly raised concerns about the advertising practices used for reverse mortgages. In a 2015 report, the agency stated that after viewing advertisements for reverse mortgages, “consumers were confused about reverse mortgages being loans, and they were left with false impressions that they are a government benefit or that they would ensure consumers could stay in their homes for the rest of their lives.”

Federal Laws on Reverse Mortgage Advertising

Mortgage advertising is a heavily regulated part of the financial services market. In part, that’s because property is usually the single biggest purchase that most people will ever make.

Broad Regulation

Federal laws exist regulating mortgage advertising to prevent unscrupulous lenders from taking advantage of borrowers. The most important of these laws are the Mortgage Acts and Practices Advertising Rule (MAPs Rule), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010.

The MAPs Rule, also known as Regulation N, controls the methods used when advertising mortgage services, making deceptive claims illegal.

Specific FHA Reverse Mortgage Regulation

The vast majority of reverse mortgages in the United States are home equity conversion mortgages (HECMs), which the Federal Housing Administration (FHA) insures.

Specific rules exist that apply to reverse mortgages. The FHA regulates the advertising of FHA-backed loans. For example, lenders must explain all requirements and features of the HECM program in clear, consistent language to consumers.

The Federal Trade Commission (FTC) and the CFPB oversee the federal laws relating to reverse mortgage advertising. Both agencies have taken action against mortgage lenders for false claims associated with reverse mortgage advertising.

Warning

The CFPB urges older Americans to watch for misleading or confusing reverse mortgage advertisements. Customers should remember that reverse mortgages are loans, and without a financial plan, you may outlive the loan proceeds.

State Laws on Reverse Mortgage Advertising

In addition to federal legislation, several states have passed laws limiting the practices of reverse mortgage advertising. Some of these laws, such as those in North Carolina, aim to further restrict the ability of reverse mortgage lenders to misrepresent how these loans work.

Others, such as the laws in effect in Oregon, define and require several disclosures—important pieces of information that the lender must communicate to the potential borrower—and specify that these must be prominent and not just appear in the fine print.

A number of states, rather than prohibiting certain types of advertising, have sought to protect consumers by enhancing the counseling session that all potential HECM borrowers must attend.

The U.S. Department of Housing and Urban Development (HUD) requires that all prospective HECM borrowers complete this counseling session. HUD requires the counselors to detail the pros and cons of taking out a reverse mortgage.

How Does the Government Control Reverse Mortgage Advertising?

Strict controls exist for reverse mortgage advertising, and several federal laws prohibit lenders from making deceptive claims in their advertising. These include the Mortgage Acts and Practices Advertising Rule (Regulation N), the Truth in Lending Act (TILA), and the Consumer Financial Protection Act of 2010.

What Is an Example of Reverse Mortgage False Advertising?

The CFPB has found that reverse mortgage advertisements left consumers confused about reverse mortgages being loans, whether they were a government benefit, and whether they ensured that consumers could stay in their homes for the rest of their lives.

Who Regulates Reverse Mortgage Companies?

At the federal level, the CFPB, the Department of Housing and Urban Development (HUD), and the Federal Trade Commission (FTC) regulate reverse mortgage lenders’ activities. Additionally, some states have passed laws controlling the practices of reverse mortgage advertising.

The Bottom Line

Federal and state laws control reverse mortgage advertising. They make it against the law for mortgage brokers, lenders, servicers, and advertising agencies to make deceptive claims in mortgage advertising and other commercial communications sent to consumers.

Despite these rules, the CFPB has been concerned about the methods used to promote reverse mortgages. Therefore, consumers should be wary of advertisements that present this product as a source of income or a government benefit. Reverse mortgages are loans and should be treated as such.

When initiating a short, sellers expect the stock price to head downward. Traders short sell by borrowing a stock that the seller doesn’t own. The seller must deliver the stock to its buyer at an agreed-upon price.

To make this happen, a broker lends a certain number of shares to a seller from that broker’s inventory. The shares are then sold to a buyer, and the proceeds are credited to the seller’s account. Eventually, the seller must close the short position by buying back the same number of shares and returning them to the original broker. If the price of the stock drops, the seller makes a profit by selling back the shares to the broker at a lower cost. If the stock price rises, the opposite happens, and the seller loses money.

Top 5 Most-Shorted NYSE Stocks
Company	Ticker Symbol	Market Cap	Short Interest
Albemarle Corporation	ALB	$11.48B	13.25%
Builders FirstSource, Inc.	BLDR	$20.19B	11.82%
Dayforce Inc	DAY	$8.78B	11.25%
DaVita Inc.	DVA	$12.08B	10.06%
Campbell Soup Company	CPB	$13.76B	9.78%

1. Albemarle Corporation (ALB)

Founded in 1887, Charlotte, N.C.-based Albemarle engages in energy storage, consumer electronics, automotive, pharmaceuticals, and agriculture. The company is a player in the lithium industry, hoping to benefit from the ongoing transition to electric vehicles and clean energy technologies. The company develops, manufactures, and markets engineered specialty chemicals across three segments:

1. Energy storage: Produces lithium compounds for electric vehicle batteries and energy storage systems.
2. Specialties: Offers bromine-based chemicals, lithium specialties, and other high-end materials for various industries.
3. Ketjen: Provides catalysts and related technologies for petroleum refining and petrochemical production.

In its first quarter of 2024, Albemarle reported net sales of $1.36 billion, down 47% year-over-year. Net income for Albemarle was $2.4 million, compared with $1.24 billion a year earlier. The company cited lower lithium prices as the primary reason for the decline.

The company has said it’s been reducing costs to deal with its near-term cash flow issues.

2. Builders FirstSource Inc. (BLDR)

Builders FirstSource Inc. is an Irving, Texas-based supplier and manufacturer of building materials, manufactured components, and construction services for homebuilders, contractors, and consumers. BLDR has 590 locations across 43 states.

In the first quarter of 2024, Builders FirstSource reported net income of $258.8 million, down 22.5% from the previous year.

Despite higher interest rates impacting its bottom line via the housing market, BLDR is still expanding its market share through acquisitions—with several deals in the first half of 2024.

3. Dayforce Inc (DAY)

Dayforce, formerly Ceridian HCM Holding Inc., is based in Minneapolis, Minn., and provides cloud-based platforms for payroll, workforce and talent management, and benefits.

In the first quarter of 2024, Dayforce reported revenue of $431.5 million, up 16.4% year-over-year. Its net income of $7.1 million was down from $9.9 million a year earlier.

Dayforce has been expanding its global footprint. For example, in February 2024, it acquired eloomi, an education platform, to strengthen its talent management offerings. The company said its drop in net income was due to macroeconomic conditions.

4. DaVita Inc. (DVA)

Founded in 1999 and headquartered in Denver, Colo., DaVita manages a network of outpatient dialysis centers for patients suffering from chronic kidney failure. DaVita’s services include outpatient, hospital inpatient, home-based hemodialysis, and related laboratory testing.

In recent years, DaVita has expanded its offerings to include physician services and acute inpatient dialysis care. With more than 2,600 outpatient dialysis centers nationwide, DaVita is a dominant player in the U.S. dialysis market. In recent years, it’s seen substantial growth—both in revenue and debt. The company’s first quarter 2024 revenues were $3.07 billion, up 6.9% year-over-year, and net income was up 79% to $306 million.

DaVita has faced disruptions from a cybersecurity breach at its claims processing intermediary, Change Healthcare, and at the end of March 2024, it held $9.1 billion in debt.

5. Campbell’s Soup Company (CPB)

Campbell’s Soup Company, a stalwart New Jersey-based packaged food company in business since 1869, made news with its $2.7 billion acquisition of Sovos Brands in March 2024. This acquisition added popular and pricier brands like Rao’s, Michael Angelo’s, and Noosa to its line of household brands.

In its third quarter of fiscal year 2024, Campbell reported mixed results. Net sales rose 6% year-over-year to $2.4 billion, primarily driven by the Sovos Brands acquisition. However, earnings per share dipped to $0.44 from $0.53 a year earlier.

The company’s two main segments diverged in performance: Its meals and beverages segment had a solid 15% increase in sales, primarily because of the Sovos Brands acquisition. By contrast, its snacks division declined 2% in sales. The company holds a debt load of $7.1 billion as of its fiscal third quarter of 2024.

What Is Considered a Heavily Shorted Stock?

A company’s stock is considered heavily shorted when a high percentage of its stock is sold short. Short selling involves borrowing shares of a stock and selling them with the expectation that the stock price will decline, allowing the short seller to buy the shares back at a lower price, return them to the lender, and pocket the difference.

Several indicators that can help determine whether a stock is heavily shorted are the short interest ratio, short interest as a percentage of float, and increases in short interest. These are commonly found on finance and investing platforms.

What Is a Short Squeeze?

A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall to buy it to forestall even greater losses. Their scramble to buy only adds to the upward pressure on the stock’s price.

How Can I Tell if a Stock is Being Shorted?

To determine if a stock is being shorted and to what extent, you can look at several key indicators. These include short interest, short interest ratio or days to cover, short percentage of float, changes in short interest, utilization rate, and the cost to borrow.

Heavily shorted stocks often have increased volatility, especially when there’s a short squeeze.

What Happens if I Short a Stock and it Goes to $0?

If you short a stock and its price goes to zero, that’s the ideal outcome, resulting in the maximum possible profit on the short sale.

The Bottom Line

The most heavily shorted stocks reflect investor sentiment about perceived risks and weaknesses in those companies. These stocks could serve as critical indicators for broader market trends, highlighting sectors or industries facing headwinds or skepticism from investors.

Understanding the reasons behind short positions can offer valuable insights for contrarian investors looking to capitalize on potential misprices in the market. Conventional investors can use the information to avoid potential pitfalls for a stock.

Reviewed by Andy Smith
Fact checked by Suzanne Kvilhaug

What Is Declaring a Dividend?

Companies often pay out a portion of their profits as dividends to the shareholders. Dividend payouts are a way to provide shareholders with a return on their investment. The board of directors issues a declaration stating how much will be paid out and over what timeframe. This declaration implies liability for the dividend payments. The declaration date is the first of four important dates in the dividend payout process.

Key Takeaways

• The board of directors issues the declaration stating how much will be paid out in dividends to shareholders and over what timeframe.
• The declaration date is the first of four important dates in the dividend payout process.
• The three remaining key dates are the ex-date, the record date, and the payment date.

How Declaring a Dividend Works

Before a cash dividend is declared and subsequently paid to shareholders, a company’s board of directors must decide to pay the dividend and in what amount. The board must agree on the cash amount to be paid to the shareholders, both individually and in the aggregate. The board must also set a record date to determine which stockholders are entitled to receive the dividend, decide on the payment date, and notify the stockholders.

When the board of directors makes such a decision and declares a dividend for payment to stockholders, the retained earnings account on the company’s balance sheet is reduced by the amount of the declared dividend. The retained earnings is an account of equity that shows the net balance of a company’s earnings. Since the retained earnings account is an equity account, dividend payments must be deducted from the account, reflecting the reduction in total shareholder equity.

Important

There are four important dates related to dividend payouts. The first, the declaration date, is a commitment by the company to pay the stated amount to shareholders.

The debit to the retained earnings account is balanced by a credit to the dividends payable liability account. The same process applies to declarations of dividend payments for either preferred or common stock.

Key Dividend Dates

There are four key dates involved in the dividend process, of which the declaration date is the first.

1. The declaration date is also referred to as the announcement date since a company notifies shareholders and the rest of the market. The declaration date is the date on which a company officially commits to the payment of a dividend.
2. The ex-dividend date, or ex-date, is the date on which a stock begins trading without the dividend. To receive the declared dividend, shareholders must own the stock prior to the ex-dividend date.
3. The record date usually occurs three business days after the ex-dividend date and is the date on which a company officially determines the shareholders of record, those who owned the stock prior to the ex-dividend date, who are eligible to receive the dividend payment.
4. The payment date is the date the company sends out dividend payments to shareholders. The payment date is usually about one month after the record date.

Fast Fact

Dividend payments must be deducted from the retained earnings account, which is an equity account, to reflecting the reduction in total shareholder equity.

When Should You Buy a Stock to Qualify for a Dividend?

In order to qualify for a cash dividend, you must own that stock on the ex-dividend date. In other words, you should buy the stock on the trading day before the ex-dividend date (or earlier) and sell it no sooner than the day after that date. If you buy a stock on or after the ex-dividend date, you will not qualify for the associated dividend.

What’s the Difference Between Dividends and Buybacks?

A dividend is when a company distributes a portion of its retained earnings to shareholders as cash, while a buyback occurs when the company buys some of its shares on the open market to boost the price. Unlike dividends, a buyback does not incur a taxable event until the shareholder actually sells their shares.

How Do You Pay Taxes on Dividends?

If a company pays you more than $10 in dividends, they should send you a copy of Form 1099-DIV to report income from dividends and distributions. If you receive more than $1,500 in taxable dividends, you will need to report them on Form 1040 Schedule B: Interest and Ordinary Dividends.

The Bottom Line

When a company wants to return some of its earnings to shareholders, the board of directors will announce a dividend date sometime in the future. Anyone who owns the stock on that date will qualify to receive a portion of that dividend. Stock prices typically increase leading up to the ex-date as prospective investors seek a share of the dividend.

Reviewed by Ebony Howard
Fact checked by Suzanne Kvilhaug

The U.S. tax code does not allow taxpayers to deduct penalties assessed by the Internal Revenue Service (IRS). IRS penalties are typically assessed for violations of tax laws, such as misreporting income or claiming false deductions or tax credits. The IRS typically assesses penalties along with interest on the balance owed by a taxpayer, and this interest is not tax-deductible.

Key Takeaways

• Taxpayers cannot deduct IRS penalties on their tax return.
• Penalties are commonly assessed for a failure to file or pay and for dishonored checks.
• Penalties vary according to the type of violation and may accrue until the account is fully paid or until the taxpayer enters into an approved payment plan.
• Extensions filed via Form 4868 extend the tax filing deadline, but do not extend the deadline to pay income taxes.

IRS Penalties

Fines and penalties a person owes to the government for violating local, state, and federal laws are never deductible. The IRS typically sends a notice to a person after a tax audit and assesses both penalties and interest on any unpaid amounts.

Although taxpayers are not allowed to deduct penalties, they may qualify for relief for extenuating circumstances. If approved by the IRS, all or a portion of the penalty may be relieved. However, interest still accrues until the amounts owed are fully paid.

Failure-to-pay penalties are assessed on the tax owed after the due date, for each month or partial month, until the taxpayer’s account is resolved. The IRS allows installment agreements to pay off the outstanding balance and to stop the assessment of failure-to-pay penalties.

Most often, penalties are assessed for dishonored checks, or for failing to file your tax return by the required due date, failing to pay the full amount of taxes owed by the due date, or failing to pay the proper amount of estimated taxes. Penalties vary according to the type of violation.

For example, a penalty of 5% of the tax required is assessed when the taxpayer fails to file on time, and it is charged each month that the return is late, up to five months. The IRS assesses a 0.5% penalty on taxes not paid by the tax filing due date, which is generally April 15. The IRS website notes: “If both a failure-to-file and a failure-to-pay penalty are applicable in the same month, the combined penalty is 5% (4.5% late filing and 0.5% late payment) for each month or part of a month that your return was late, up to 25%.”

Taxpayers have the option to extend their tax filing deadline by filing an extension using Form 4868. However, an extension on filing your return does not extend the deadline for your tax payments.

Important

Any individual taxpayer can request an automatic six-month extension on your tax deadline, until Oct. 15. Interest will continue to accumulate, but you will not owe penalties.

Legal Fees Deductibility

According to IRS Publication 529, legal expenses incurred in attempting to produce or collect taxable income or paid in connection with the determination, collection, or refund of any tax are no longer deductible.

You can deduct expenses of resolving tax issues relating to profit or loss from your business (Schedule C), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule.

However, expenses for resolving nonbusiness tax issues are miscellaneous itemized deductions and are no longer deductible.

Other Penalties

While IRS penalties cannot be deducted, other penalties related to business activities can be deducted by companies on a tax return. For instance, penalties paid by a manufacturing company due to nonperformance on a construction contract are typically deductible as a business expense.

How Do You File an Extension on Taxes?

There are three ways an individual taxpayer can qualify for an extension on their tax return due date. You can use IRS Free File online to electronically request an extension until Oct. 15, or submit Form 4868 in the mail. You should still pay the estimated amount due on the original due date to avoid penalties. Also, Americans who live overseas can qualify for an automatic two-month extension after their normal due date.

What Do You Do If You Get Audited by the IRS?

An IRS audit can be stressful, but it not necessarily an accusation of illegal wrongdoing. In most audits, the IRS requests additional documentation to confirm the deductions and expenses in your return. If that happens, be sure to respond by the deadline or request additional time, if needed. If an in-person audit is requested, you have the right to be accompanied by a tax attorney or professional.

How Much Does It Cost If You Don’t Pay Your Taxes?

The IRS has two types of penalties for unpaid taxes: one for failure to file, and another for failure to pay. If you are required to file a return and do not file, you must pay a penalty of five percent of the amount due each month, up to a maximum of 25%. If you do file, but fail to pay, the penalty is 0.5% of the amount due for each month, up to 25%. However, in certain circumstances, you may qualify for taxpayer relief.

The Bottom Line

The Internal Revenue Service may impose penalties for unpaid taxes, and these penalties grow with interest. Moreover, you can’t deduct those payments from future taxes. For that reason, it’s important to pay your taxes or request an extension to avoid penalties.

Need more time to file taxes? Fill out IRS extension Form 4868

Reviewed by Lea D. Uradu
Fact checked by Vikki Velasquez

Taxpayers unable to file their federal income tax return by the filing deadline can apply for an extension with the Internal Revenue Service (IRS) Form 4868: Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. 

The extension does not extend the time to pay taxes owed but only extends the deadline to fill out and submit the paperwork.

Key Takeaways

• Form 4868 gives taxpayers a six-month extension to file federal income tax returns.
• An extension for federal income tax returns due on April 15 delays the submission until Oct. 15.
• Filing the IRS extension form doesn’t extend the time to pay owed taxes, which are still due by April 15.
• Those who need an extension must submit Form 4868 by the normal April tax filing deadline.

Reasons to Request an Extension

By obtaining the extension, taxpayers avoid any late filing penalties. A late filing penalty of 5% of the amount due for each month or part of the month is incurred if the return has missed the April filing deadline. For returns more than 60 days late, the minimum penalty is $510 or the balance due, whichever is smaller.

Some reasons taxpayers may need additional time to file income taxes include:

• Missing a Schedule K-1 from a trust in which the taxpayer is a beneficiary.
• Self-employed individuals may need additional time to set up and fund a simplified employee pension (SEP) retirement plan.
• Taxpayers who are living or working out of the country.

Note

Certain taxpayers may file their federal tax returns online for free directly with the IRS through the Direct File program. This service is available to people who lived in the following states in 2024:

Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington state, Wisconsin, Wyoming

Tax filers must submit state tax returns separately. Refer to the IRS website to see if you qualify.

Download Form 4868

All versions of Form 4868 are available on the IRS website.

Note

Depending on the U.S. state, filing Form 4868 may also provide an automatic extension for the state income tax filing deadline.

Who May File Form 4868?

Taxpayers who want more time for any reason to file federal income tax returns may use Form 4868, which includes extensions for Form 1040: U.S. Individual Tax Return, Form 1040-SR: U.S. Tax Return for Seniors, Form 1040-NR: U.S. Nonresident Alien Income Tax Return, Form 1040-PR: Self-Employment Tax Return-Puerto Rico, and Form 1040-SS: U.S. Self-Employment Tax Return.

What Information Is Required on Form 4868?

Taxpayers must provide their name, address, Social Security number, and their spouse’s Social Security number if applicable. An estimate of final taxes is required, and if the taxpayer expects to owe taxes, they need to pay the balance with the form.

Does Form 4868 Give Filers More Time to Pay Taxes?

No, a taxpayer’s payment is still due on the original due date, usually April 15. When submitting Form 4868 to the IRS, taxpayers should send in a payment of the estimated balance due. The IRS allows individuals to skip filling out Form 4868 entirely if they pay their estimated income tax due online or by phone using Direct Pay, EFTPS, or a credit or debit card and indicate that the payment is for an extension.

Do Taxpayers Living Abroad Need to File an Extension?

A two-month filing extension is automatically given to a U.S. citizen or resident who lives outside of the U.S. or Puerto Rico, whose place of work is outside of the U.S. or Puerto Rico, and those in the military or naval service on duty outside the U.S. or Puerto Rico.

The Bottom Line

Form 4868 is available to any U.S. taxpayer needing extra time to file their federal tax return. By completing and sending it to the IRS, they will receive a six-month tax return due date extension into October. Although the paperwork deadline is extended, owed taxes are still due by the April filing date.

Reviewed by Charlene Rhinehart
Fact checked by Vikki Velasquez

Tier 1 capital, under the Basel Accord, measures a bank’s core capital. The Tier 1 capital ratio measures a bank’s financial health, its core capital relative to its total risk-weighted assets (RWA). Under Basel III, banks and financial institutions must maintain a minimum Tier 1 capital ratio to ensure against unexpected losses such as those that occurred during the financial crisis of 2008.

Key Takeaways

• Tier 1 capital is a bank’s core capital, including common stock, disclosed reserves, and certain other assets.
• The Tier 1 capital ratio compares a bank’s equity capital with its risk-weighted assets. It is used to measure the bank’s capital adequacy.
• Under the rules of the Basel III framework, banks should maintain a minimum tier 1 capital ratio of 10.5%.

Tier 1 Capital Explained

Tier 1 capital includes a bank’s shareholders’ equity and retained earnings. Risk-weighted assets are a bank’s assets weighted according to their risk exposure. For example, cash carries zero risk, but there are various risk weightings that apply to particular loans such as mortgages or commercial loans. The risk weighting is a percentage that’s applied to the corresponding loans to achieve the total risk-weighted assets. To calculate a bank’s tier 1 capital ratio, divide its tier 1 capital by its total risk-weighted assets.

6%

The minimum Tier 1 capital ratio. 4.5% of that must be common equity tier 1 capital (CET1).

Tier 2 Capital

Tier 2 capital is composed of any supplementary capital the bank has, such as loan-loss and revaluation reserves and undisclosed reserves. Tier 2 capital is considered separately in bank risk analysis because it is usually less secure than Tier 1 capital.

Tier 1 Capital Requirements

The Tier 1 capital ratio can be expressed as all of a bank’s core capital or as the Tier 1 common capital ratio or CET1 ratio. The CET1 ratio excludes preferred shares and non-controlling interests from the total Tier 1 capital amount; therefore, it is always less than or equal to the total capital ratio.

Under the Basel Accords, banks must have a minimum capital ratio of 8% of which 6% must be Tier 1 capital. The 6% Tier 1 ratio must be composed of at least 4.5% of CET1.

The Basel III requirements were fully implemented in 2019, requiring banks to have a mandatory “capital conservation buffer” of 2.5% of the bank’s risk-weighted assets, which brings the total minimum CET1 to 7% (4.5% plus 2.5%). If there is high credit growth, banks may need an additional buffer of up to 2.5% of risk-weighted capital composed of CET1 capital.

Loans are Assets for Banks

Although it appears counterintuitive, loans are considered assets for banks because banks earn revenue from loans in the form of interest from borrowers. On the other hand, deposits are liabilities since the bank pays interest to deposit holders.

Example of Tier 1 Capital Ratio Calculations

Regulators use the tier 1 capital ratio to determine whether a bank is well capitalized, undercapitalized, or adequately capitalized relative to the minimum requirement.

For example, bank ABC has shareholders’ equity of $3 million and retained earnings of $2 million, so its tier 1 capital is $5 million. Bank ABC has risk-weighted assets of $50 million. Consequently, the bank’s tier 1 capital ratio is 10% ($5 million/$50 million), and it is considered to be well-capitalized compared to the minimum requirement.

On the other hand, bank DEF has retained earnings of $600,000 and stockholders’ equity of $400,000. Thus, its tier 1 capital is $1 million. Bank DEF has risk-weighted assets of $25 million. Therefore, bank DEF’s tier 1 capital ratio is 4% ($1 million/$25 million), which is undercapitalized because it is below the minimum tier 1 capital ratio under Basel III.

Bank GHI has tier 1 capital of $5 million and risk-weighted assets of $83.33 million. Consequently, bank GHI’s tier 1 capital ratio is 6% ($5 million/$83.33 million), which is considered to be adequately capitalized because it is equal to the minimum tier 1 capital ratio.

What’s the Difference Between Tier 1 and Tier 2 Capital?

Tier 1 capital represents a bank’s core capital, consisting of common stock and retained earnings. The tier 2 capital consists of supplemental capital including undisclosed reserves, revaluation reserves, and subordinated term debt. When tier 1 capital represents less than 6% of the banks risk-weighted assets, the bank may not have enough capital to absorb unexpected losses.

What’s the Difference Between Tier 1 Capital and CET1 Capital?

CET1, or common equity tier 1, is a subset of tier 1 capital that comprises the bank’s common equity stock and cash. There is also a separate category, additional tier 1 capital, comprising instruments that can be readily converted to CET1 capital. Together, CET1 and additional tier 1 make up the bank’s Tier 1 capital.

What Is Basel III?

Basel III is an international regulatory accord designed to increase the resiliency of the global financial sector. It was established by a consortium of central banks after the 2008 financial crisis, and established minimum standards for capital adequacy in the banking sector to reduce the impact of future crises.

The Bottom Line

The tier 1 capital ratio is used to measure a bank’s financial health. It is calculated by dividing the bank’s core capital—the value of its common stock and retained earnings—divided by the bank’s risk weighted assets. In the event of a financial crisis, this figure reflects the bank’s ability to absorb losses without causing losses to its depositors.

Reviewed by Andy Smith
Fact checked by Vikki Velasquez

Financial Accounting: An Overview

Financial accounting is the process by which an organization’s revenue, receivables and expenses are collected, measured, recorded and finally reported in financial statements.

The objectives of financial accounting are to:

• Accurately reflect business and financial activity
• Help companies meet legal, fiscal and statutory requirements
• Present financial accounts to business owners
• Allow for in-depth financial analysis
• Facilitate efficient resource allocation
• Allow third parties, such as auditors, investors, and financial analysts, to assess the activities and value of a company

Broadly, financial accounting is an important tool that companies can use to avoid financial risks and achieve success.

Structuring Financial Accounting

Companies have two basic ways that they can structure their business’s accounting policy.

Publicly traded companies must use the accrual accounting method which is standardized by generally accepted accounting principles (GAAP).

The accrual method reports revenues as they are accrued as opposed to when they are received. Expenses are reported as they are incurred rather than when they are paid.

Many private companies use GAAP to guide their accounting but they are not required to do so. Private companies also have the option to use the cash accounting method.

Key Takeaways

• The objectives of financial accounting include recording business and financial activities for analysis by management and third parties, such as investors and investment analysts.
• Companies that review their financial statements throughout the year can see their progress and make informed decisions about current and future operations.
• Shareholders and creditors have financial stakes in companies and great interest in their financial statements.
• Responsible financial accounting promotes trust in companies.
• It helps a company meet its tax and compliance obligations, as well.

Understanding Financial Accounting

In a practical sense, the main objective of financial accounting is to accurately prepare a business’ financial accounts for a specific accounting period.

Once the company’s financial activities are recorded, they can be reported by its financial statements. Primary financial statements include the income statement, the balance sheet and the statement of cash flows.

A company’s financial statements serve several purposes:

1. They are used internally by management to manage both the current operations and future activities of the firm.
2. They provide important information to shareholders and creditors, each of which has a financial stake in a company.
3. In addition, investors and analysts use a company’s financial statements to analyze, through the use of financial ratios and other analytic tools, how successful the company has been at earning revenue, building profits, and increasing its value.

The Benefits of Financial Accounting

The work involved in financial accounting has enormous benefits for a company, its stakeholders, and potential investors. Here are some of them:

1. It provides the foundation for accurate financial statements that are available to the public. Supposedly, anyone seeking a transparent view of a company’s financial health can turn to its financial statements.
2. It can build trust for management, investors, creditors, and others in how a company operates and its value.
3. That transparency and trust can open up access to credit opportunities and attract more investors.
4. Data offered by financial accounting can help companies make their operations more effective, increase revenues, cut costs, and build profits.
5. Reliable financial accounting enables companies to meet their tax and compliance obligations.
6. By studying their financial statements, companies can detect and reduce instances of fraud, and other financial risks.
7. Consistent financial accounting can help to ensure a company’s ongoing financial stability and longevity.

Important

Formal financial accounting standards became a focus after the 1929 stock market crash and during the Great Depression when the Securities Act of 1933 and the Securities Exchange Act of 1934 mandated that public companies had to be audited to ensure the accuracy of their financial statements.

Financial Reporting Standards

In the United States, financial reporting standards are set forth by the Financial Accounting Standards Board (FASB) and required under GAAP for publicly traded companies.

The FASB is contracted by the Securities and Exchange Commission (SEC) to control the approved methods and applications of financial accounting.

Following these reporting standards makes it easier for individuals to understand the financial statements of various companies, as they are presented in the same manner and therefore easier to follow.

Financial accounting is normally performed by those individuals who have studied the methods, concepts, history, and laws related to its practice. In the U.S., these individuals are referred to as certified public accountants (CPA).

The SEC requires that public companies annually report their financial statements and that this reporting is done by an impartial third party, which is where CPAs come in to play.

This ensures that the financial statements have been properly created under all required policies.

The American Institute of Certified Public Accountants (AICPA)

The American Institute of Certified Public Accountants (AICPA) is an industry-leading organization in the area of financial accounting. It has over 597,000 members worldwide.

The AICPA is a leading source of research and alerts on topics of interest in the accounting profession. The AICPA is also responsible for developing and grading the Uniform CPA Exam.

In 1973, the AICPA released a study entitled “The Objectives of Financial Statements.” The study was pivotal for the accounting industry, with objectives adopted by the FASB.

The study was also released the same year that the FASB was created, which replaced the work of the AICPA in developing accounting standards for the accounting industry.

Today financial accounting standards and objectives can be found through the FASB’s website.

Who Uses a Company’s Financial Accounting?

The management of the company itself uses its financial accounting. So do lenders, vendors, investors, regulatory agencies, and auditors.

What Financial Statements Report a Company’s Financial Accounting?

Financial statements can differ from company to company. But four main statements are the balance sheet, the income statement, the statement of cash flows, and the statement of retained earnings (also called the statement of shareholder’s equity).

How Do I Know That Financial Accounting Is Correct?

A company’s financial accounting is governed by recognized standards and principles of accounting, such GAAP. Usually, it’s prepared by one or more CPAs who uphold proper accounting standards. And financial statements that report the financial accounting of public companies are audited for truth and accuracy. However, financial accounting can be manipulated to deceive auditors and the public.

The Bottom Line

Financial accounting is meant to help companies track and monitor their revenues, income, and expenses so that they can run their businesses more effectively for their own benefit and that of other stakeholders.

Accurate, transparent financial accounting allows for better decision-making by company management, potential and existing investors, vendors, creditors, auditors, and regulators.

The funds hold special-issue U.S. government securities, redeemable as needed

Reviewed by Ebony Howard
Fact checked by Vikki Velasquez

Social Security trust funds are accounts managed by the U.S. Treasury. The two funds take in Social Security payroll taxes from workers and their employers and pay out benefits to Social Security recipients. They invest any surplus in special issue U.S. government debt securities.

Key Takeaways

• Social Security trust funds receive payroll taxes, pay out benefits, and invest any surplus in special government securities.
• In contrast to publicly traded U.S. government debt, these securities can be redeemed at face value at any time to pay fund obligations.
• The interest rate on new securities acquired by the trust funds is the average of market yields for traded U.S. government debt with terms of more than four years.
• In 2021, Social Security costs exceeded total income, including interest, for the first time.
• A 2024 analysis revealed that the trusts are expected to be able to pay full benefits only until 2035.

What Are the Social Security Trust Funds?

The Social Security trust funds are used by the U.S. government to manage surplus contributions to the Social Security system. They are funded through a withholding tax that deducts a set percentage of pretax income from each paycheck. If contributions made by workers and employers exceed what’s needed to fund benefits payments to retired and disabled workers, the funds invest the surplus in U.S. government debt.

Important

Employees and employers pay 6.2% apiece in payroll taxes on income below an annual cap, set at $168,600 for 2024 and $176,100 for 2025. If you’re self-employed, you pay the full 12.4%.

How the Social Security Trust Funds Work

Social Security relies on two legally separate trust funds: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. The OASI Trust Fund is used to pay benefits to retired workers and their families, as well as to the families of deceased workers. The DI Trust Fund covers benefits for disabled workers and their families.

The OASI trust fund receives 10.6% of employee earnings covered by Social Security payroll taxes, and the DI trust fund the other 1.8%. Otherwise, the two funds work similarly.

Whenever workers and employers pay more money into the Social Security system than it needs at the same time to pay benefits to the current beneficiaries, those “excess” contributions are invested in special U.S. government securities. That allows the federal government to borrow money from the trust funds for purposes other than Social Security, while the trust funds earn investment income with the lowest possible risk.

What Securities Do the Trust Funds Own?

The Social Security trust funds are limited by law to investing their reserves in U.S. government debt. Although the funds have held marketable securities in the past, they typically and currently own only special U.S. debt issued expressly for use by the trust funds. In contrast to the Treasury securities sold to the public, which are only guaranteed to return face value when redeemed at maturity, the special issue debt held by the trust funds may be redeemed at face value at any time if needed to meet current obligations.

The special government securities come in two types: short-term certificates of indebtedness, which mature on the following June 30, and bonds with a term of one to 15 years. The short-term certificates and bonds issued to the Social Security trust funds are not traded in the bond market or available to the public. Like other Treasury securities, however, they are backed by the full faith and credit of the U.S. government.

The interest rate on the special issues is set by a formula established in 1960 through amendments to the Social Security Act. For special issue debt issued to the trust funds in a given month, the interest rate is the average market yield on the last day of the prior month for marketable U.S. government debt securities not due or callable for more than four years, rounded to the nearest one-eighth of a percentage point.

In 2024, the trust funds earned an effective interest rate of 2.5%, while the average of the 12 monthly rates for the debt they purchased that year was 4.3%. In March 2025, the interest rate for new special issue debt bought by the Social Security trust funds was 4.25%.

$2.54 trillion

OASI asset reserves at the end of 2024.

Current Social Security Finances

The 2024 annual report from the Social Security and Medicare Boards of Trustees updated the financial projections for the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund.

Combined OASI and the Disability Trust Funds

The OASI and Disability Insurance (DI) trust funds had combined asset reserves of $2.79 trillion at the start of 2024. For both, the trustees projected 2024 Social Security expenditures of $1.48 trillion, exceeding the expected income of $1.38 trillion. The Hospital Insurance (HI) Trust Fund was expected to increase reserves in 2024.

The OASI Trust Fund

The trustees’ 2024 report predicted the OASI Trust Fund’s reserves will run out in 2033, same as predicted in the previous year’s report. Once the fund is depleted, ongoing payroll tax receipts will cover 79% of the scheduled Social Security benefits for retirees, their families, and survivors.

The Disability Insurance (DI) Trust Fund

The DI reserves are now projected to be sufficient over the next 74 years, with the 2024 report stating DI reserves will be able to pay out 100% of benefits through 2098. The DI Fund is legally separate from OASI, so transferring money from it to allow the payment of full retirement benefits before those reserves were also exhausted would require action by Congress.

Demographics and Taxes

For the 75-year projection period, the actuarial deficit is 3.5% of taxable payroll (down from 3.61% the previous year). In other words, Social Security taxes would need to increase by 3.5% to fix the problem for at least 75 years.

The Baby Boomer generation, whose older members have begun collecting Social Security benefits, is much larger than the cohorts of the youngest workers replacing it in the workforce. With the U.S. population growing older on average and fewer workers left to support each retiree than previously, Social Security’s long-term financial prospects are unlikely to improve meaningfully without reform no matter how well the economy is performing.

182.8 million

The number of people who paid Social Security taxes in 2023. About 58.6 million received monthly Social Security benefits, while an additional 8.5 million received DI benefits.

The Future of the Social Security Trust Fund

Social Security is a pay-as-you-go system, with tax receipts pooled and immediately available to pay benefits to retired workers and others. For many years, the payroll tax income funding Social Security was more than sufficient to cover the benefits being paid out. Over time, the two Social Security trust funds accumulated combined reserves that peaked at $2.9 trillion at the start of 2020.

However, the program’s benefits payouts exceeded tax receipts in 2021, and deficits are expected to widen in the coming years as the ranks of beneficiaries grow faster than the workforce supporting them. The OASI Trust Fund’s $2.6 trillion in reserves at the end of 2023 is expected to run out in 2033 unless Congress acts to shore up the system’s funding.

How Much Money Is in the Social Security Trust Fund?

At the start of 2024, the Social Security trust funds had $2.79 trillion dollars for OASI and DI. This was a decrease in reserves from roughly $2.83 trillion in 2023 due to an annual deficit. Another annual deficit was forecast for 2024 for both OASI and DI.

Who Owns the Social Security Trust Fund?

The Social Security trust funds are owned by the U.S. Department of the Treasury. There are two trust funds: The Old-Age and Survivors Trust Fund (OASI) and the Disability Insurance (DI) Trust Fund. The securities in the funds are all issued by the U.S. federal government.

What Happens to the Money Once It Goes Into the Social Security Trust Fund?

Once money goes into the Social Security trust funds, it is invested in government securities. All funds are on the books of the Treasury. When Social Security benefits need to be paid, these securities are redeemed for cash and paid out to the beneficiaries.

The Bottom Line

The two Social Security Trust Funds—the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund—are managed by the U.S. Department of the Treasury. The accounts are funded through payroll taxes on working individuals, and the money is invested in U.S. securities. At the start of 2024, the funds had approximately $2.79 trillion in assets with the expectation that the trust funds combined would not have enough money to pay out full benefits by 2035.

Fact checked by Vikki Velasquez

Gaining residency and moving to a new country can be the dream of a lifetime and you can do just that in Golden Visa programs available in countries around the world. It won’t be cheap, however.

Golden Visa programs require a significant economic investment into the country where you’ll be living, but they can be a great way to live abroad if you can afford it.

Key Takeaways

• A Golden Visa allows you to gain residency in a country in exchange for making a large economic investment there.
• A Golden Visa investment can be real estate, a bank deposit, investment funds, or government bonds.
• More than 100 countries offer Golden Visa programs.
• President Trump has announced a $5 million Golden Card program for the United States.

What Is a Golden Visa?

A Golden Visa allows you to gain residency in a country after making a large investment in the country’s economy. The amount of the investment varies by country.

Golden Visa investment options include real estate, business development, a bank deposit, government bonds, and investment funds.

Many Golden Visa programs include family members so you’re free to include them on your application.

What Countries Have Golden Visas?

More than 100 countries around the globe offer Golden Visa programs and more than 60% of EU member countries have active programs. Countries with popular Golden Visa programs include Greece, Portugal, Italy, Malta, Canada, the United Kingdom, and Australia.

Important

You’re unfortunately out of luck if you’re looking to obtain a Golden Visa into Spain. The country is ending its Golden Visa program on April 3, 2025.

How Much Do Golden Visas Cost?

The price of an investment into a Golden Visa program varies by country. Portugal’s Golden Visa program comes with a price tag as high as $500,000 Euros, Italy and Greece require investments of 250,000 Euros in their Golden Visa programs.

President Donald Trump announced a $5 million Golden Visa program for the United States in February 2025, called a Gold Card.

How Do I Apply for a Golden Visa?

If you want to apply for a Golden Visa, you must first decide on an investment in the country where you’re looking to gain residency. Will you buy real estate, make a business investment, or purchase government bonds?

You’ll also have to provide several documents, including a passport, health insurance, proof of your investment, and proof that you can support yourself financially. You’ll have to go through a series of background checks.

How long do you have to wait after submitting your Golden Visa application? You’ll receive a response within six months or less from most programs. Some applications are processed as quickly as a couple of months.

Not every country is swift with managing Golden Visa applications, however. Wait time for applicants to Portugal stretches to about two years.

The Bottom Line

An international retirement may be within your reach if you qualify for a Golden Visa and receive residency in the country where you’d like to live. You’ll have to spend a good deal of money, however. Golden Visas require making investments into the country that can range from hundreds of thousands of dollars to millions depending on the country you choose.

The investment can be real estate, government bonds, a bank deposit, or investment funds. A Golden Visa program may be just the way to gain residency in another country if this is something you can financially handle.