Top Personal Finance Blogs
Tuesday September 26th 2017

Tips for Settling Back Taxes

If there is one inescapable truth, it is that the IRS will always get what is owed to them. Being in debt to the IRS is no laughing matter. Owing back taxes can ruin your finances for years and even decades. The best way to settle back taxes are to avoid them all together. There are a number of different ways to pay off what you owe to the IRS. The best decision you can make is look at all the advantages and choices at your disposal before choosing a path towards repayment.

Partial Payments

The way most people pay off their back taxes is through monthly partial payments. This choice works in your favor only if you can make the necessary payments on-time each month until the period of time you and the IRS agree upon has ended. In some cases, people have been able to get away with paying less than they originally owed the IRS. However, you could face a great deal of trouble should you miss a payment. Be certain you can handle the amount before agreeing to a payment plan.

Offer-in-Compromise

An Offer-in-Compromise is probably the best way to settle back taxes. You simply offer what you can afford to the IRS and they choose whether to accept or reject your offer. The closer you are to the amount you owe the better chance there is the IRS will accept your offer.

If you can offer at least eighty percent of the original amount then you should be fine. The IRS will review your financial standing and liabilities before accepting your offer. Should the IRS find you could afford the full amount they will likely reject your offer even if it is ninety-nine percent of the original debt owed.

Penalty Abatement

There are two other alternatives for those significantly financially strapped. The first is known as penalty abatement. Penalty abatement is a request you can make to have the IRS completely drop all your tax penalties. The IRS will conduct an in-depth search of your financial standing to see if you are as bad off as you say you are.

After reviewing your financial status, the IRS may eliminate your tax debts altogether. Requesting penalty abatement generally knocks off a good chunk of IRS debt, if it is accepted. If you think you have a case for penalty abatement, you should speak to your tax preparer immediately.

Appeal

Lastly, should your tax problems get bad enough for the IRS to threaten seizure, you should file a Tax Collection Appeal. This will allow you to tell the IRS your financial well is dry and you cannot possibly pay your taxes. The appeal will go to an appeal officer who will look at your financial standing and make a decision in about a week.

Now that you understand what some of your options are you should be better equipped to handle the stressful task of settling your back taxes. Hopefully, you will be able to go back to avoiding back taxes altogether in no time.


What You Should Know About Hard And Soft Credit Inquiries

A credit report is the key to your financial security. Credit reports tell lenders all of the information they need in order to determine your creditworthiness. They look at your credit score and base credit decisions and interest rates off of that. There are many components that make up your credit score. Payment history, average age of accounts, debt to credit ratio, and several other components go in to calculating the credit score a lender will see. One component involved in the credit score is the number of inquiries you have. A credit inquiry exists in two forms. A hard inquiry is one that counts against your score while a soft inquiry does not.

Essentially, a hard inquiry is initiated by you. When you apply for a new loan or a credit card, a company will run your credit. Rather you are approved or not, that inquiry will count against your score for up to two years. This means that when you open up a new credit account, your score will lower a bit because of the inquiry and the reduction in the average age of accounts. As you make regular payments, they will outweigh the score impact of the inquiry and improve your credit score.

There are many examples of hard inquiries. Opening a new loan such as car or home loan is one of them. Credit cards also count as hard inquiries. Some banks may also cause a hard inquiry when opening a new account for you. In addition, some utilities and cell phone companies that run your credit may also result in a hard inquiry. One thing you should know is that when you are applying for a car or home loan, you are allowed to rate shop. This means that within a 14-45 day span depending on the credit bureau, all of your auto applications will count as one hard inquiry against your score even though all will be listed on your credit report. The same rule does not apply for credit cards.

In addition to hard inquiries, you will also see soft inquiries listed on your credit report. Soft inquiries are listed on your credit report but have no impact on your score. The most common soft inquiry is when you pull a copy of your own credit report. Also, many lenders will initiate a soft inquiry in order to prequalify you for a loan or credit card. These soft inquiries result in the offers you get in the mail. If you don’t initiate the process, that inquiry won’t hurt you. However, if you respond to an offer you receive in the mail and apply for a credit card through that it will count as a hard inquiry at that point.

Employers nowadays also check credit when screening applicants. When they do it will count as a soft inquiry. Insurance companies and several utilities also use soft inquiries. These are needed services, so you do not hurt your credit by using them. Lastly, if you have an existing account with a company they might check your credit periodically. This is what leads to credit limit increases with a credit card company or a change in interest rates with a bank.


Accounting for the Next Generation: Free Apps for Small Business and Personal Budgeting

Smartphones are everywhere. As the cost of smartphones lowers, more people are using them. For small businesses, smartphones are ideal for communicating via voice or email. For personal use, smartphones allow people to manage many different apps. Currently, there are many great apps available to people that help them with all things financial. You can manage bank accounts, keep records, and make budgets right from your smartphone. Here is a look at some of the apps available to you for your accounting needs.

Shoeboxed

One great app for the iPhone is called Shoeboxed. Shoeboxed for the iPhone is designed to streamline the process for submitting expense reports. You can take a photo of any receipt you have and log it in a file. You can even add a note to it for further details. Shoeboxed allows you to track the total expense amounts in a detailed list that easily translate to an expense report. This is ideal for small businesses so that they can track expense reports instantly. The app takes care of everything once you take a picture of your receipt.

Expensify

Like Shoeboxed, another app that does all the work for you is Expensify. This is available on the iPhone as well as the Blackberry and Android phones. Like Shoeboxed, Expensify eliminates data entry by doing all of the leg work once you take a picture of your receipt. Expensify gives you detailed expense tracking. You can also text an expense to a phone number that instantly uploads all of the details in to your expense account.

Outright

Another free app for accounting is called Outright. Outright provides you with a quick glance at every part of your financial situation. It tracks expenses with great detail so that you can see how your money is coming and going. You can also keep track of money you owe and money owed to you. This app pulls information from bank and credit card accounts as well as eBay and PayPal. You can also scan in receipts to track expenses further. Outright also helps you when it comes time for taxes. It will give you estimates for all of your taxes and even organize all of the w-9 forms you deal with.

Quicken

As far as personal budgets go, there are many great free apps around. Quicken released a budgeting app for the iPhone that is similar to its popular computer program. This app tracks account balances and transactions from all of your bank and credit accounts. You can also create and manage your personal budget and get a clear picture of your real time financial situation.

Mint

Mint also has an app for smartphones. Mint is a free online site that tracks all of your bank accounts, credit cards, loans, and debts. This translates to the Mint app. The Mint app tracks all of your accounts and provides you with detailed breakdowns of what you spent. For example, you can get an exact dollar amount of what you spent at restaurants. Mint will also provide you alerts when your accounts fall below a certain amount. Since all of your accounts or in one place, the Mint app saves you a lot of time by not having to check many different accounts.


Winterizing on any Budget

Winterizing your home not only protects your home from bitter, cold winters, but also allows you to save on energy bills. For those who cannot hire contractors, there are steps individuals can take in winterizing their homes themselves. This does not have to be a costly endeavor, and often times you can spend much less $500 to protect your home from harsh winters.

Man the Cracks

One of the first things you may want to do is seal off any sources of cracks in your home. Cracked areas allow the heat in your home to leak out. You are essentially throwing money away if you do not take this step. Instead of hiring some to do this for you, you can do it yourself by buying some caulk, a basic caulk gun from a hardware store, and sealing off the cracks. The caulk gun will cost you around $20 and a tube of caulk cost around $8 each. It is a sure way to save a few hundred dollars in energy costs.

Dispense with Drafts

Replacing drafty windows in a home can be expensive. A cheaper alternative is to buy a plastic film window insulating kit. The kit will cost around $20. It is designed to go on the inside of your home, and not the outside. The plastic is very easy to apply and can be completed within a day. Door threshold strips can be purchased for around $25 each. They are used to fill air leaks beneath doors.

Tune Ups

Changing the furnace and air conditioning filter is also a great, inexpensive way to winterize your home. This should be done at least every three months. Heating and cooling is reduced when a filter is clogged, and it may shorten the useful life of the appliance. Replacing a filter is a very easy process. A filter will cost around $10.

Thermostat

You can install a programmable thermostat, which will automatically set temperatures to what you desire, at the time you want them set. You can avoid blasting your heater at high temperatures in an effort to quickly heat up your home when you return from work. A programmable thermostat will cost $35 to $100.

Chimney Balloon

Many people lose heat from their home through the chimney. A Chimney Balloon is used to keep heat from escaping and prevents drafts from blowing through your chimney. It will cost around $55.

Audit

For around $250 or less, your utility company can come and perform a home energy audit. An inspector will visit your home and check your furnace, air conditioning system, gaps and leaks, and your water heater and pipes.

Free Ways to Winterize

If you find these things outside of your budget, you still have options that are virtually free. You can roll up a towel to close the gaps between all of the exterior doors, and clean your filters and your gutters.

Claim Your Deductions

New tax laws allow a variety of home improvements to be tax-deductible. Check online to see which home improvements qualify. Winterizing your home is essential to saving money during the winter months.


The High Cost of Divorce

The divorce rate in America is currently around 50%. While many individuals have a variety of reasons for getting a divorce, few people think about the financial implications that result from divorce. Not only are attorney and court filing fees some of the costs to think about, but often times divorce causes a change in lifestyle. This means that costs can potentially span out for years, and it may take a while for some people to get back on their feet.

Legal Fees

One of the most common costs in a divorce is legal fees. The hourly rate for attorneys in America is around $100 to $250. Retainer fees can range from $8,000 to $12,000 depending on your geographical location and case. Another thing to consider is your assets will more than likely be worth less than their value. For example, if a divorce calls for a 50-50 split of assets, this means that your house will be worth 50% less than the market value because you are only entitled to half of the value. In the case that the house is awarded to a one person, this person will be solely responsible for paying the mortgage. This may be more of a financial burden than anticipated for some people.

Split Assets

Other assets such as bank accounts and investments may have to be split up as well. Investments may be liquidated at a loss before being divided between the two parties. Some individuals are required by the courts to pay alimony and child support. This can be a huge financial burden for the individual who is required to make these payments, which in most cases is the man.

Taxes

One of the most substantial financial challenges of a divorce is tax implications. When a couple transfers property in a divorce case, the transfer is usually non-taxable. However, all property received in a settlement will be held accountable for taxes in the future. In other words, when a property is sold for a gain, the individual that received the house in the settlement will be responsible for taxes on the gain from the day the house was purchased jointly, and not the day it was received in the settlement. Income tax laws and deductions are also different for single individuals than married individuals filing jointly. You may need to seek the advice of a Certified Public Accountant to assist you in filing your income taxes.

Bearing the Burden Alone

In addition, along with property acquired within a divorce settlement, comes the sole responsibility of maintenance, property taxes, insurance, and other bills. Individuals typically forget that everything that was handled by two parties in the past will only be handled by one person after the divorce. This often leaves individuals with burdens and responsibilities they were not prepared to handle.

The financial implications with divorce sometimes cause people to reconsider their decision. If divorce is inevitable, individuals should seek counsel from not only divorce attorneys, but financial advisors and tax attorneys as well.


Watch Out for these Newbie Investment Mistakes

While investing is a means of growing money for the future, the business of investing is not a get rich quick scheme. Having little knowledge, but a willingness to gain financial freedom, many newbie investors make mistakes. Individuals should gain as much knowledge as possible before entering any investment choice. The greater the knowledge base, the fewer the pitfalls faced by investors.

Fee Impact

Whether playing the stock market online, employing the expertise of a stockbroker, financial adviser or merely investing in mutual funds, there are many fees involved. Trading fees run around $500 yearly.
These fees do not include expenses charged monthly for managing the accounts. Mutual funds also carry management fees. Shop around; compare rates charged by various brokerage firms and financial experts. Get quotes for investing in different types of long-term funds. Always know the fees involved.

Understand the Difference between IRA Accounts

While some IRA accounts save on current tax expenses, consider the tax burden involved when liquidating or withdrawing money from these accounts in 20, 30 or more years from now. Taxes will more than likely increase at exponential rates. Individuals put taxed money into a Roth IRA account. Down the road when liquidating the account or making withdrawals, the money is tax-free.

A Diversified Portfolio

“Don’t put all your eggs in one basket,” almost certainly typifies investing. Diversification does not mean investing in two dozen different stocks. If the market fails, most these investments would probably crumble. Rather, invest in various choices including bonds, index funds, IRA accounts, and stocks. This way, if one dips, others continue to grow.

Playing Follow the Leader

Investing in the stock market because of the advice gained by someone else might be risky business. Potential investors must find out how much knowledge the other person has, with how much experience he or she has with stock market investments. Why does this person believe the stock is a good investment? Beware of possible scams. Often, individuals provide tips to increase sales of a particular stock and then the tipster sells his or her shares when the market price increases.

Investing Borrowed Money

Borrowing money for investment purposes poses many risks. Getting loans in hopes of getting a quick return on a stock investment is a recipe for disaster. Have a plan in mind for loan repayment if the investment bombs. Some gain large amounts of money for long-term investments. However, consider the interest rate involved with a loan and the rates applied to investment growth. Decide if this method costs more money in the end.

Timing the Market

This tactic involves buying and selling stocks based on predicting market turning points. Experts claim these types of investors must be accurate 82% of the time just to match returns. Wealthy men, the likes of Peter Lynch and Warren Buffett prefer to invest and sit tight method, which follows the advice presented by many. Timing the market does not produce returns, but what matters is the time individuals spend in the market that makes the difference.


Is it Finally Time to Go LED?

LED lights are known by consumers to be expensive, but a new trend of lower prices is making its way to the market. Home Depot is leading this trend by offering LED lights for under $20 online and in brick-and-mortar stores.

These highly-efficient bulbs have turned off some consumers simply because they are expensive, but the costs to run bulbs goes beyond the upfront costs. The total costs depend on a bulb’s lifespan, efficiency, and other variables. With Home Depot leading the pack with greatly reduced prices for LED bulbs, it may be the best time to switch to LED lights.

Advantages of LED

When it comes to preserving the environment, LED bulbs are the way to go. These lights do not contain mercury, and use fewer watts to produce the same amount of lumens as standard and fluorescent bulbs. They are simply more energy efficient. LED bulbs generate little to no heat, which helps reduce the cost for running the air conditioner. The lifespan of LED lights is incredibly long, spanning for 10 to 15 years with normal use.

Costs are Finally Down

With the cheaper cost of LED lights being offered, it is a great time to invest in them. The new EcoSmart LED bulb offered at Home Depot below $20 has a lifespan of around 50,000 hours. In contrast, a standard bulb cost $1.25 with a lifespan of 1200 hours. A fluorescent bulb cost $3.95 and has a life span of around 10,000 hours.

The amount of kilowatts used over a 50,000-hour period is 300 for an LED bulb, 700 for a fluorescent bulb, and 3,000 for a standard bulb. This means that over a 50,000-hour period, individuals would use one LED bulb, 5 fluorescent bulbs, and 42 standard bulbs. No matter how you look at it, LED is leading the way.

LED versus Fluorescent

At a rate of $0.20 per KWh, it would costs $60 to use an LED bulb, $140 to use a fluorescent bulb, and $600 to use a standard bulb. The total costs for the bulb and the electricity costs is $85.95 for an LED bulb, $159.75 for a fluorescent bulb, and $652.50 for a standard bulb. The savings are even more substantial over a 10-year period, averaging around $860 for an LED bulb, $1,597.50 for a fluorescent bulb, and $6,525 for a standard bulb. If you were to consider the costs of using multiple fluorescent or standard bulbs in your home, the difference in costs would be even more.

New LED Regulations

The government passed new regulation requiring LED bulbs to be 30% more efficient than standard bulbs by 2014, and 70% more efficient by 2020. LED bulbs may seem more expensive than alternate lighting at first glance, but when you consider the overall costs of these bulbs compared to alternative lightening, you will save more money in the end. The advantages of these bulbs far outweigh the disadvantages, and many experts in the field believe LED lights will become the wave of the future.