How to Organize Your Freelance Taxes

The following is a post by MPFJ staff writer, CJ, who blogs at thesingledollar.com about personal finance, budgeting, frugality, and debt repayment.

Disclaimer: I’m not an accountant or tax professional!

I used to absolutely dread tax season as a freelancer. I worked on movies and plays; they usually only lasted a month or six weeks, so at the end of a year I would have had many employers. One year I had ten W-2s and 1099 forms to deal with, not to mention income from a few jobs that didn’t send me a form at all!

Getting organized makes all the difference in a situation like this. Don’t be a stressed-out mess by April 15 this year; instead, give these steps a try now.

1) Collect incoming paperwork.

Hopefully most or all of your employers will send you an official statement of your income from the previous year. In the United States they are legally required to do this by January 31. As each form shows up in the mail, put it into a folder marked “Tax Forms 2015” (or whatever year).

2) Check your income paperwork.

In early February, make a list of all your employers and other income sources for the year. Ideally you can check a calendar, budget, or other record you’ve been keeping — but if you haven’t done this, look at your bank statements online and look for large deposits to jog your memory. If all else fails, visualize each month of the preceding year and try to remember what you were doing! When you have the best list you can get, check to make sure that you have a tax form from each employer and that the total income numbers on it are accurate.

• If you see a mistake, call the employer (their number will be on the form) and ask for a corrected form. If you are missing a form, try to get in touch with the employer and ask about it.

3) Check Your Expenses.

If you’re a freelancer, you will also need a list of deductible business expenses. Ideally, you can make this list from a folder of receipts you’ve been keeping all year…but if not, you’ll need to figure out what you can claim. There are a lot of special rules about what is claimable, so it’s a good idea to consult a CPA who specializes in freelance workers (ask your friends who they use.) You will need proof of the expenditure to claim most expenses.

4) Research Which Forms You Need to File.

Many freelancers have both W-2 income and 1099 income. You can deal with your W-2s on the basic federal and state forms (1040 for federal). However, 1099 and other miscellaneous freelance income typically needs to be reported on at least one other form. The federal forms are Schedule C and Schedule SE, but your state will probably also have a separate form or three. An accountant or good tax software can help you with this, of course. The IRS has a site for self-employed/small business filers and your state department of revenue website should also have information for you.

5) Set Up a Better System for Next Year.

It’s too late to go back in time and keep really good records in 2015, but it’s not too early to start getting ready for next year’s taxes right now. If you’re a freelancer, I want you to go directly to your desk and label three folders:

•  Business expenses/receipts 2016
• Credit card statements 2016
• Paystubs 2016

Then, on your computer, make a spreadsheet labeled “Income 2016.” Every time you get freelance income, list it in this spreadsheet, and file any relevant paystubs in the right folder immediately. Then, when January 2017 rolls around, you’ll know exactly what happened in 2016!

Special Note: Quarterly Taxes. If you are a freelancer, you may be required to file quarterly taxes during 2016. (Your accountant can advise you about this.) If you have to file quarterly in 2016, your first payment and form will be due April 15 — the same day as your full tax return from 2015! If you think you might need to file quarterly taxes, it’s especially important to be organized now so that you’re not scrambling to do two sets of paperwork at once.

Good luck with tax season, freelancers! Do you have a freelance tax-filing horror story? Can anyone beat my record of 10 official employers in a year?

***Photo courtesy https://pixabay.com/static/uploads/photo/2015/02/23/20/12/taxes-646512_960_720.jpg

Using Forex to Make Extra Money

The following is a guest post. Enjoy! 

The global forex market boasts over £2.64 trillion in average daily trading volume, making it the largest financial market in the world. Forex’s popularity entices traders of all levels, form complete rookies to seasoned traders, due to its ease of access and simple format. Its around-the-clock sessions, access to significant leverage and relatively low costs make it an interesting prospect, however it also means it’s very easy to lose money trading forex.

Forex is fast becoming a way for people to make a little extra cash on the side due to its ease of use and access. However, venturing into unknown territory and putting your money on the line is unlikely to end well, so we’ve put together the top 5 tips for any novice trader looking to get off on the right foot at the start of their forex journey.

1.Practice
The vast majority of trading platforms will come with a practice account, sometimes called a demo or simulation account. These type of accounts allow traders to place hypothetical trades without risking any real money. This will allow you to get to grips with the basic format of trading along with getting a feel for the software. Making silly mistakes when trading with real money can lead to potentially devastating financial implications so it’s of paramount importance that you do enough practice.
2. Research
Just because forex is easy to get to grips with doesn’t make it easy to master. Learning about the platform is crucial to success in the markets. While the majority of learning comes from experience, a trader should learn everything possible about the market along with the geopolitical and economic factors that drive currency values. It’s important that you have a basic knowledge allowing you to make decisions and adapt to changing market conditions whilst achieving the optimal end result.
3. Start Small
Once you’ve done your homework and spent some time with a practice account it’s time to put your money where your mouth is. No amount of practice will prepare you for the real thing so it’s vital to start small when jumping in at the deep end. It’s a completely different ball game once real money is at stake, simple decisions become much harder as risks have true consequences. By starting small, a trader can evaluate his or her performance and strategy before putting their whole account on the line.

4. Record Keeping
Maintaining a trading journal is a great way to learn, both from your losses and successes. Recording dates, profits, losses, your performance and emotions can be incredibly beneficial to becoming successful. Without a journal and good record keeping, traders are likely to continue making the similar mistakes, minimizing their chances of become profitable and successful traders.
5. Trade Like A Business
Treating your account as a business is a great way to remember that individual wins and losses don’t count for anything, it’s how you perform over time that is key. Traders should avoid becoming over thinking either wins orlosses, and treat each as just another day at the office. Like any business, trading incurs expenses, taxes, risk, losses and uncertainty, along with the fact that like a small business your account will take time to grow and mature. Planning, setting realistic goals, staying organized and learning from both successes and failures will help ensure a long, successful career as a forex trader.

Conclusion

Forex trading presents a great opportunity to generate a little extra income for anyone who does their homework and approaches it sensibly. When viewed as a business, forex trading can be profitable and rewarding. Staying focussed, organised and determined are all key to a successful career.

Alternative Ways to Fund your Child’s College Education without a 529 Plan

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

Paying for college for a child is a long-term expense and goal a lot of parents strive to achieve to reduce the amount of student loans their son or daughter has to take out. Student loan debt is a big issue in today’s society and it’s no secret that without it, young adults can get further ahead financially during their mid and late twenties.

When I was ready to attend college, my parents didn’t have any money set aside to help me pay for my education, but as a first generation college student of a low-income household, I took advantage of many scholarships and financial aid options to lower my out-of-pocket costs and loan amounts. Even though I accumulated some student loans during college, it’s nowhere near what I could have taken out.

Now that I’m a parent, I know my son will not have the same government benefits that I had when it’s time for him to attend college and with inflation, tuition will most likely increase over the next 10-15 years.

While a state 529 savings plan is always a superb option when it comes to saving up to fund your child’s college education, not everyone can take advantage of this option for various different reasons. Here are a few alternative ways to save for college.

Coverdell Education Savings Account

While 529 plans are a great way to build your investment portfolio and provide some nice tax benefits while allowing you to set aside money for your child’s college education, they have limited investment options and promote high-cost mutual funds.

On the other hand, Coverdell Education Saving Accounts have very little restrictions on what type of investments you can make and they allow the same tax-free educational benefits that 529 plans provide. Even though Coverdell accounts have a lower limit on contributions, it could be ideal for parents who don’t have a lot of extra money to contribute but still want to set aside something for their child.

Roth IRA

Roth IRAs are popular tax-advantaged retirement savings vehicles that can also be used as a college savings account. The money you contribute to a Roth-IRA gets taxed so that you can withdraw it tax-free. While there are income and contribution limits, you don’t have to wait until you are 59 ½ to withdraw funds. You can withdraw funds for educational expenses in as early as five years after you begin contributing. With a Roth IRA, it’s best to start setting aside money early and maxing out contributions each year.

Real Estate

Can’t set aside much now but still want to help your child cover expenses? If you are interested in real estate, you can attempt to rent out a property to help cover your child’s educational expenses in rapid amounts.

I’ve heard of some parents who deliberately purchase an investment property with the intent of paying off the mortgage in time for their child to attend college so they can rent out the property and receive passive income to contribute each month. If you have extra space in your home, you can also rent out a spare room as well for extra money.

Prepaid College Tuition Plans

If you are sure without a shadow of a doubt that your child will attend college, you may want to look into prepaid tuition plans. Prepaid tuition plans is a type of 529 plan that allows you to lock in tuition rates from state colleges now to avoid having to pay increased tuition rates in the future.

Prepaid college tuition plans are only available in a select number of states and vary from state to state with their own pros and cons depending on where you live, but if you are willing to save money on your child’s education now by locking in a payment and tuition rate, you just need to have your child attend a specific state school that participates in the program to reap the benefits.

Gerber Life College Plan

The Gerber Life College Plan is like a high-yield savings account for your child with a guaranteed positive growth rate. Parents can choose to contribute anywhere from $10,000 to $150,000 and contribute monthly until their child is ready to attend college. When you open an account, Gerber Life discloses how much money it will have at the maturity date.

The one downside of this option is that once the balance in your account grows, the income it generates can become taxable. On the flip side, what’s nice about this option is that your child doesn’t have to use the money for educational expenses if they choose not to go to college and start their own business or choose another path. Nothing is worse than sacrificing to set money aside for your child to attend college only to find out that they have a different opinion on what they’d like to do.

Start Small and Contribute What You Can

Saving for college takes a lot of time and persistence. It may be difficult at first to squeeze extra money out of your budget to contribute to investing in your child’s future but getting them off to a good start upon adulthood should always be the end goal.

Consider which option will allow your money to grow safely and generate a nice return. Then, start making small contributions and gradually increase them overtime. If your child receives monetary gifts or allowance from time-to-time, take a portion of their earnings and contribute it to college savings. Every little bit counts and what you save now will allow your entire family to carry less of a financial burden in the future.

How about you all? Have you started saving for college for your child(ren) yet? What are some of the ways you are saving?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/68751915@N05/6629054127/

Set Your Financial Goals for 2016

The following post is by MPFJ staff writer, Jeff. Jeff has been writing online about finance related issues since 2009, and after a lot of soul searching in 2015 has crystallized his goal of financial independence and blogs about his journey to freedom at zerotofi.com

Now that the New Year has come and gone, have you set any financial goals? If you did, 1 month later how are you doing on them? If you’re anything like me (and lots of other people) your motivation to pay off debt, start saving more, eat out less or anything like that is probably beginning to wane. If you’re looking for new goals or just never got around to setting some for 2016 yet, here are a few you should shoot for.

Pay off credit card debt

This is a popular one, and for good reason. Many credit cards have balances on them because of overspending or because they were used an emergency situation for a car repair or something similar. When you’re using credit cards and not paying them off in full every month, you’re racking up huge interest charges (typically >15%), making it tough to get ahead. To accomplish this you’ll need to be steadfast about not adding any new charges and trying to find any extra cent that you can use to pay above your minimum. If you have more than one card, look into the debt snowball method and see if it suits you. I was able to pay off my debt using this method in 2010, and have not carried a balance on a credit card ever since. It was certainly not easy, but looking back it has allowed me to do so many things.

Build An Emergency Savings Account

Many people get stuck with high interest credit card debt that they cant pay off because they dont have any cash for emergencies or unexpected events, like a car repair or home repair. If you find yourself in this situation, you’ll want to have a bit of money saved as a backstop so you dont return to credit card useage. While there are many plans and amounts, I think the following one would be easiest to follow, and would give you a savings balance of >1,300 by the end of 2016. You’ll be saving a certain amount of money each week, so you’ll need to find it in your budget.

Start off saving 52 the first week, then 51 the next week, then 50 and so on. By the end of the year, you’ll have a good amount saved up. Bonus part is if you get to July or August and want to save more than the required amount, just do that! A bigger savings account never hurt anyone.

At the end of the year, you should have money to help you weather most emergencies, and wont need to fall back on credit cards again.

Start a Side Hustle

If there’s one thing thing related to earning income that has changed my perspective, it is starting a side hustle. Paying off debt was an awesome feeling and very, very freeing, but being able to earn even a little bit of income on my own, outside of my day job is incredible. Just about anyone has some skills that they can trade for money in their spare time. You can mow lawns or shovel snow, fix things around the house for seniors, change oil in cars for your neighbors, help people move, start an online business and the list goes on and on. There are so many people who would rather just pay someone to deal with something than spend the 15 minutes to do it themselves! Step up and be one of those people making extra money! You can use the extra money to fund your savings account, or pay off debt!

How about you all? What money goals do you have for 2016?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/pictures-of-money/17123254699/

Are You Frugal or Just Strange?

The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

Frugality is a much revered and time honored trait. Search the Internet and you’ll find quotes about frugality from greats such as Plato—“The greatest wealth is to live content with little,” or Warren Buffet—“Do not save what is left after spending, but spend what is left after saving,” or Thomas Jefferson—“We make ourselves rich by making our wants few.”

Yet, if we’re to look at ourselves and our generation honestly, we aren’t not nearly as frugal as previous generations. I’m thinking of women during the Great Depression and earlier who used the material from feed sacks to make dresses, or the pioneers who threw nothing out and always found a use for everything. Use it up, was their motto.

Now, many of us struggle to implement frugality because we just don’t know how. We’re so used to our disposable society that many of the frugal skills of previous generations have slowly disappeared.

However, thanks to the recession a decade ago, frugality has made a comeback. It was during the recession that my husband and I learned many frugal techniques that we still use today.

My family and I do a lot to live a frugal lifestyle, including:

• rewashing sandwich and freezer baggies,
• hanging up clothes to dry on our indoor drying racks (yes, that we asked for as gifts for Christmas one year),
• cooking at home from scratch,
• owning just one car,
• using that car until it dies (our current vehicle is 11.5 years old and has 163,000 miles on it),
• keeping our heat on 63 and our air conditioning on 81,
• shopping for clothes at thrift stores and garage sales,
• making minor fixes to clothes such as replacing elastic waistbands and sewing knee patches so we can continue to wear them,
• making some homemade Christmas presents,
• buying discounted or clearance food at the grocery store,
• cutting our own hair,
• gardening,
• collecting rain water in buckets to use in the garden, etc.

A search for frugal living strategies on the Internet and Pinterest reveals that we’re doing most of the things people recommend. However, when I dig deeper into frugality, I find another frugal segment that doesn’t get much attention—the uberfrugal.

When I read about the uberfrugal and their techniques, I find myself wondering, are they clever and smart stewards of their money, or are they just. . .strange?

Many people believe that those who are uberfrugal are instead just cheap. But sometimes they’re also just called weird or gross. Consider these practices:

Using Family Cloth

Family cloth is a polite, albeit it misleading name, for using cloth, reusable toilet paper. People simply sew flannel squares of cloth (or recycle old t-shirts), use them, and then wash them in the laundry. The squeamish are grossed out just by the description, but the people who use family cloth insist it’s really no different than using cloth diapers and cloth wipes for babies.   In fact, they argue that family cloth is much gentler and better for your nether regions.

Only Flushing the Toilet Once a Day

I visited a family that had a pretty sign posted to the wall above the toilet bowl tank, which read, “Please, if it’s yellow let it mellow, if it’s brown flush it down.” And that’s just what they did. The toilet was flushed only once at night if it was just full of, um, shall we say, liquid excrement.

Sure, they saved on their water bill, but I have to wonder how sanitary the routine was. And besides, by the end of the day, the bathroom smelled pretty ripe.

Canceling Garbage Service

Honestly, I didn’t even know this was possible until I read that one of my favorite bloggers is doing this. Her goal is to shave off extra expenses so she can pay down her house quicker, which is an admirable goal. She plans to reduce her garbage load by repurposing and reducing her waste creation—i.e. using recyclable bags at the grocery store, composting produce scraps, etc.

Still, she must be generating a small amount of garbage, and she hasn’t addressed what she plans to do with that. Use a neighbor’s garbage? Bring it to a public garbage can?

Eating Food Passed the Expiration Date

We all know that food that is marked “sold by” does not necessarily have to be eaten by that date. However, how loose are you willing to go with the “use by” date? Some frugal people will pay no heed to use by dates. Other people will eat leftovers that are over a week old, way passed what is generally considered safe to eat.

These people often remark, “I’ve never gotten sick eating food this old before. Why should I start now?”

Or, if they see a spot of mold, they’ll just cut it off or pluck it out and go on eating the food.

While I’m generally pretty frugal, I’m also very cautious about eating old food. The freezer is my friend, so if leftovers have been in the fridge for a few days, I put them in the freezer with a note to eat them the first day I thaw them just to be safe.

Dumpster Diving

People who dumpster dive target apartment, restaurant, or grocery store garbage bins, and, as the name implies, go into the dumpster looking for treasures. Those who dumpster dive claim that, for those who are brave enough to try, there is a bounty of goodies including unopened boxes and cans of food as well as other items that are still in their wrappers.

However, many others are grossed out completely by the idea of entering or even going near a dumpster with the idea of removing an item to use rather than putting something in the garbage. There is also a real concern that you could be threatening your own safety either due to sharp objects like broken glass or animals that may be in the dumpster looking for their own treasure, not to mention consuming food that has been in the dumpster.

Furnish Your Home with Curbside Treasures

Reportedly, if you live near a college campus and cruise by near the end of the semester, especially near the end of the academic year, you can find all sorts of furniture. Apparently, many college students who go home for the summer have to empty out their dorm rooms or apartments, and the quickest way is to toss everything to the curb.

Also, if a neighborhood is having a large trash pickup day, you can frequently find furniture and other home goods.

But would you take those items and bring them into your home? Many people do and claim that they are getting very high quality furniture for free.

Those who aren’t so frugal, including myself, worry about the sanitary issues. What if the furniture is infested with fleas, cockroaches, or bed bugs? True, you may be saving yourself a lot of money by not having to buy the furniture, but what if you bring home some nasty creature that you have to spend weeks trying to eradicate?

How about you all?  If you’re frugal, where is your line in the sand? What practices are too frugal for you and instead, just seem unsafe or unsanitary?

Share your experiences by commenting below.

***Photo courtesy https://pixabay.com/en/dumpster-trash-bin-garbage-trashcan-100909/

How We Nickel and Dimed Ourselves into Massive Credit Card Debt

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

Many people who’ve gotten themselves into massive amounts of debt have a pivotal moment when they made a decision to take on a lot of debt. Maybe they went back to school for their Master’s degree. Or maybe there were medical expenses from a surgery or other incident.

Our case was different: we literally nickel and dimed ourselves into huge amounts of debt to the tune of tens of thousands of dollars.

How it Happened

I can honestly say looking back that we’d never really been concerned with managing money properly during the first fifteen years or so of our marriage. We’d get into debt, get out of debt, not really ever having a plan for our money.

Instead, we spent as we wished and when things got too tight we’d panic and pay off the debt in one way or another, usually by cashing in an investment or a retirement account.

In 2010 my husband got laid off due to the recession and our one-income family of six officially became a no-income family. As usual, we didn’t panic; after all there was a three-month severance package and unemployment to help us along after that.

Seven months later Rick got a job offer that left us with a tough decision: the job was with a major company that he’d always wanted to work for, however the pay they offered was 20 percent less than what he’d been making at his old job.

In our “wisdom”, we decided that he should take the job and that we’d simply use credit cards to cover the salary difference until he worked up to the salary he’d been paid at his old job. Looking back, I’m amazed that we talked very little of cutting expenses or changing our lifestyle. In our uneducated opinion, we “really didn’t spend that much money.”

At the time we lived in an affluent suburb, and since we spent “much less than most people” we knew and lived by, we accepted our expenses as reasonable, even though we had very little idea what those expenses actually were.

Our Financial Wake-Up Call

Two years after Rick started his new job, we sold our home in the suburbs and moved to a small hobby farm, eager for a more quiet life with our children. The move to the country was a real eye-opener for us. We felt as if we were viewing “normal” life from the outside looking in. In the country, no one cared about what we drove, what we wore or what activities the kids were in.

They simply cared about the content of our character, to quote MLK Jr. As we pondered this new way of living where the Joneses didn’t matter, we sat down to take a real look at our finances. When we added up all of our credit card debt, we were dumbfounded at the astronomically high numbers.

Searching for answers, we went back and looked at our bank statements for 2012, writing down all that we spent on groceries, entertainment, clothing and the like. The numbers were shocking. Even though we thought we “never” went out to eat, we were spending nearly $300 a month on drive-thru runs, occasional restaurant meals and trips to the snack bar at the local big box store.

The grocery numbers brought similar shock. In our vague attempt at budgeting, we’d set our grocery budget for our family of six at a reasonable $600 a month. In reality, we were spending $900 a month on groceries due to a lack of good menu planning and runs to pick up random “stuff” here and there at the grocery store.

Suddenly, it became all too clear why we were in so much debt. In a panic, I began googling terms like “how to get out of debt” and found the wonderful world of personal finance blogs. I’d never read a blog before, but I was soaking them up now as I read about dozens of others who had found themselves in massive debt but worked their way to debt freedom.

For the first time in our lives, we began living off of a real budget and tracking all of our spending starting in January of 2013. While budgeting had always seemed invasive and restrictive to us in the past, we decided to give a real go at it and fell in love with being in control of our money. For the first time in our marriage, we knew where our money was going and we had a plan for what we wanted to do with it.

There have been many ups and downs for us financially in the three years since we first began living with a plan for our money and working to pay off debt. Major home repair expenses and other unexpected costs, combined with a super high debt-to-income ratio (we started at 65%), have made our journey to debt freedom a “one step forward, two steps back” kind of a journey.

But we are winning our battle to dump debt. If all goes as planned, our tens of thousands in consumer debt will be paid off by the end of 2016.

If you’re feeling overwhelmed by your debt, or wondering how you got in debt in the first place, don’t give up hope. With a solid plan and a commitment to persevere, you too can become debt free.

How about you all? Have you ever struggled with debt? Have you ever had a financial “wake-up” call?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/armydre2008/2969764323/

What to do if You Can’t Pay Your Income Taxes

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a freelance professional personal finance blogger for hire, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

It can be a real panic situation if you can’t pay your income taxes. But even if you can’t, panic is an emotion that you need to resist. The IRS offers a number of ways to pay your income taxes, so the best strategy is always to take positive action.

File Your Income Tax Return By the Due Date

If you can’t pay your income tax bill, at least make sure that you file your income tax return when it is due. This will start the process that will enable you to make a payment arrangement with the IRS.

It will also reduce the amount of penalties and interest that you will ultimately have to pay. That’s important, because the penalties for late filing your tax return – or not filing it at all – can actually be more severe than what they are for late payment of income tax.

File for an Extension of Time to Pay Your Tax Bill

If you have ever filed an extension to file your income tax, you may be surprised to learn that there is also an extension available to pay your income taxes, if the non-payment is due to temporary factors. If you don’t have the money to pay now, but you expect that you will a few weeks or months, this is a good strategy.

The extension to pay will get you up to 120 days to make a full payment. Just remember that you must file your income tax on time in order to begin this process.

You can make the request for an extension of time to pay by calling the IRS directly at 800–829–1040 (there are no forms for you to complete). Using this payment option you will not have to pay any type of upfront fee, but interest and penalties will be assessed on the unpaid tax balance until it is fully paid.

Set Up an Installment Agreement

If you have a larger tax liability, one that you will be unable to pay within 120 days, you can set up an installment agreement. The IRS will allow you to set up a payment agreement that will extend as long as 72 months (6 years), and require equal monthly payments until the liability is completely paid. Penalties and interest are added to the amount of your tax liability due and there is a small setup fee ($50 to $120) to initiate the process.

You can use this method for a tax liability up to $50,000, however you may be required to submit personal financial statements in the event that the balance due is higher than $25,000.

There are three ways that you can set up an installment agreement:

1. Contact the IRS by phone, again at 800-829-1040, or by calling 800-829-4933 if the liability is for a business tax return
2. Complete an Online Payment Agreement Application, or by filing IRS Form 9465 and file it with your income tax return
3. Complete an Installment Agreement Request, and mail it in to the IRS

Here’s the general sequence involved in requesting an installment plan:

• You can complete and file Form 9465, or a written request for a payment plan (include all details of the plan, including the monthly payment amount and due date) and attach either form to the front of your return.
• If you have filed your tax return, and the IRS hasn’t contacted you with a bill, you can request a pre-assessment installment agreement on current tax liabilities.
• If you received a bill from the IRS you can request an installment agreement using the Online Payment Agreement Application, or you can submit Form 9465 or attach a written request for a payment plan to the front of your tax bill and return it to the IRS.
• You can also request an installment agreement by calling the toll-free number on your bill or if you do not have a bill, call the IRS at the phone numbers listed above.

Your installment agreement request will generally be processed within 30 days of your application or phone call.

The IRS provides several payment methods, including:

• Direct debit from your bank account;
• Payroll deduction from your employer;
• Payment via check or money order;
• Payment by Electronic Federal Tax Payment System (EFTPS);
• Payment by credit card via phone or Internet; or
• Payment by Online Payment Agreement (OPA).

The IRS usually charges a $120 fee to set up a payment plan, but if you make your payments by direct debit, the fee is only $52. The fee for a request to restructure or reinstate an existing installment agreement is $50.

The amount of your monthly payments should be an amount that you are able to pay comfortably. If you can’t, you may be setting yourself up to default on the installment agreement, which will bring a host of complications. The IRS will allow you to request a specific monthly payment amount, as long as it is sufficient to satisfy your liability within 72 months.

There is also flexibility in regard to the date of the monthly payment. The IRS will allow you to choose a due date between the first and the 28th of each month. If you plan to submit payments by mail, it is recommended that you send them at least 10 days before the due date, that way they will arrive on time.

You can also use payroll deductions to make your monthly installment payments. This can be done by completing and submitting IRS Form 2159, Payroll Deduction Agreement. The form must be completed by your employer since it is an agreement between you and your employer.

Offer In Compromise

So far we’ve been talking about what to do when you actually have the ability to make installment payments. But what happens you can’t do that either?

The IRS offers a solution. It’s referred to as an offer in compromise, or OIC.

You can apply for an OIC if your inability to pay your tax liability is due to permanent financial difficulties, such as a business failure or job loss. The IRS doesn’t completely waive your tax liability, but they may agree to accept a reduced amount as full payment of the debt.

To receive consideration for an OIC you must make sure that all returns have been filed and that previous year’s tax liabilities have been paid. It’s important to understand however that you will not be eligible for an OIC if you’re in bankruptcy proceedings.

You can determine in advance if you are eligible for an OIC by checking out the IRS’s
Offer In Compromise Pre-Qualifier. That won’t represent a formal request for an OIC, but it will help you to know if it is worth pursuing.

Be aware however that applying for an OIC can be a complicated process. You will almost certainly be better off hiring a CPA or tax attorney to handle the process for you, particularly if you have a substantial tax liability.

Using Non-IRS Sources

Applying for what are essentially debt arrangements with the IRS can be a complicated and intimidating process, particularly if you’ve never done it before. For that reason, you might be better off trying to cover your tax liability using other resources. You’ll still be in debt as a result, but at least you won’t be in debt to the IRS.

Sources you might consider to satisfy your tax liability include:

• Credit cards
• Home equity line of credit
• Personal loans
• Family sources
• Selling a major asset or a group of assets

One common source of funds you may want to avoid is liquidating funds from retirement accounts. That may get you the funds you need to satisfy your tax liability, but it will generally result in additional taxes (and often penalties) due as a result of liquidating a tax-sheltered savings plan.

If you owe the IRS money that you can’t afford to pay right now, arrange to satisfy the debt either through an IRS plan, or through alternative resources. The worst strategy is to do nothing. Not only will that make the debt go even higher, but it could result in ugly collection efforts by the IRS that will hurt your credit and disrupt your income. Being proactive is always the best strategy with the IRS!

How about you all? Have you or someone you know ever been in a situation where you couldn’t pay your income taxes? How did you handle it?

Share your experiences by commenting below!

Photo courtesy https://www.flickr.com/photos/jakerust/16836483201/sizes/n/

Five Ways to Warm Up Without Breaking the Bank

The following is a post by MPFJ staff writer, CJ, who blogs at thesingledollar.com about personal finance, budgeting, frugality, and debt repayment.

So, the weather outside is frightful! But since our electric heat is expensive, we’re trying to keep the house between 60 and 65, depending on what time of day it is. This is…chilly, at least if you’re me. If I had the money and didn’t care about the environment, I would totally keep the place at 72 all winter. What can I say: I’m old before my time. Besides the ol’ “put on another sweater” trick, here’s what I do about it:

1) I use a rubber hot water bottle.

I’ve had it for several years and it shows no signs of slowing down, cracking, etc. I fill it up with the hottest tap water we get and rest my feet on it under the covers. Delicious. In fact, I’m doing that right now as I write. It’s often still even warm when I wake up in the morning.

2) I get the oven going.

Typically, what I do is bake bread. Granted, this also uses electricity (for the oven), but at the end of the process, I’ve heated up the kitchen and I have fresh bread, so I think I come out ahead overall. As a bonus, I have to move around and knead dough and whatnot, and it gets the blood flowing and seems to warm me up a little! You could make a casserole or something else that requires long baking if you don’t want to do bread.
3) As long as we’re on a domestic track: try taking frequent breaks to clean as well as to cook.

Anything to get you up and moving around! Before you sit back down to work or watch TV or whatever, make a cup of hot tea and breathe the steam in.

4) We make sure to close vents in any room we won’t use for a while (like the office over the weekend) and to keep closet doors closed.

In November, we also did some basic weatherproofing — putting the storm windows down, most notably — but our primary effort here is to try to keep unused areas of the house from sucking up extra heat. That leaves more for the bedrooms and living room and kitchen!

5) OK, fine, I put on another sweater. Actually, a really really dorky fleece-lined hoodie. It’s pepto-bismol pink and I can’t wear it out of the house because it’s just embarrassing. However, there are certainly classier options available (try LL Bean, REI, Patagonia, or other outdoor-oriented retailers for gear like this).

How about you all? What’s your best tip for handling a cold house?

Share your experiences by commenting below! 

***Photo courtesy of https://upload.wikimedia.org/wikipedia/commons/9/9a/Modern_Masonry_Fireplace.jpeg

Starting A Side Income Stream: Selling On Amazon With FBA

This is a post by staff writer Jeff. Jeff blogs about finances and going green at http://sustainablelifeblog.com and has started a new project detailing his efforts to earn money online at onlinesideincome.com

There are plenty of ways to earn extra money and a lot of ways to do it solely online as well. You may need it for more security, perhaps work from home to watch your child(ren) or some other reason. The reality is that no matter your situation, a little more income every month never hurt.

If you spend your time reading online a lot, you may have heard about various ways of making money on Amazon. There’s the popular Pat Flynn interview with Jessica Larew, talking about how she buys things at clearance sales in department stores and places like CVX/Walgreens and resells them on Amazon for a profit.

There’s another way, sometimes called “white labeling”, which essentially involves creating your very own product, having it produced in China and then selling it on Amazon FBA (Fulfillment by Amazon). While this takes a lot more capital than the other method, you “own” the buy box (meaning you’re not competing on price with anyone because your item is original) and you can decide the margins of your product. This is very much a capital-intensive business, but as you can see from these few posts about Amazon FBA, the potential for returns are huge.

If you’re interested, here’s what you’ll need to do.

First, you’ll want to select a product. This is without a doubt the most important step. You need something that you can buy in China (look on alibaba.com for suppliers) and sell for 3-4x on Amazon.com. You’ll need to make sure your product idea is profitable, which you can do with one of 3 tools: Primeseller.com, Unicorn Smasher, or Jungle Scout. With these tools, you can filter out some lower priced product and find something that you can sell on Amazon.

Second, you’ll need to find a supplier on Alibaba. I was lucky and had a group to reach out to and got a recommendation from someone who has been manufacturing in China and selling online for almost 10 years, so I greatly trusted his recommendation, and it did not disappoint. The product was high quality and made with high-quality materials, and I was very lucky. This probably took a few weeks off of my total product to Amazon time because many need to try out 2-3 suppliers to find one they like.

Once you’ve found a supplier and a product, you need to go through and look at competing products and see what other people who own the product like or do not like about it. There are plenty of reviews online (and on Amazon.com) and there are great ideas in there. For instance, one of my competing products did not have the ability to do something that I (and many others) thought was a requirement, so I easily adapted the product and added that feature. This differentiated my product from the others in the category and allowed me to charge a higher price point.

What’s important here is finding the right product and making your product better than what’s already on the market. If you can nail those 2 things, you should be fine with your product.

If you’re looking for a few more resources on Amazon FBA, this 17 part series is very through and helped me quite a bit when I got started.

Readers – are you interested in Amazon FBA as a side income source? Or would you prefer something else?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/emmajane/65585561/in/

Places to Earn A Little Extra Money in 2016

It’s hard to believe that we’re already almost finished with January 2016. Have you been able to lay out your financial resolutions and/or goals for the year?

Personally, I am a little bit behind on my financial planning and goal setting for the year, as my wife gave birth to our first child on January 7^th. However, I have put together a plan to contribute to our pre-tax accounts in order to lower our taxable income so that we’ll be in the 15% marginal tax bracket for 2016.

If you’re looking for some ideas on financial resolutions for 2016, a great place to start is to organize your finances to earn a little extra cash for a rainy day. To bring in the dollar bills in 2016, here are a few places/financial accounts available to help get you there:

1. Online Savings Accounts

You never know when a rainy day is going to hit, so setting aside money in a savings account is a great way to reserve your cash in case of an emergency. In my personal finances, an online savings account is one of the most important tools I use. I employ online savings accounts to park my emergency fund savings, as well as my savings for life values and dreams based financial planning.

2. Certificate of Deposits

Another place to earn a little extra money in 2016 (and beyond!) is with a CD, or certificate of deposit. Often, CDs have a few more restrictions/requirements than the online savings account discussed previously, such as a minimum opening balance and minimum investment term. However, if you have more flexibility in your finances, CDs can be a great way to earn slightly higher interest rates in a very secure manner.

3. Money Market Accounts

If you want to earn high yields but still have frequent access to your cash, then a money market account is for you.

4. Cash Back Credit Cards

Of the various types of rewards cards out on the market today, cash back rewards cards are my favorite. This is because I get cash back from my purchases, which of course, can be used in a variety of ways instead of being restricted to purchases from a single industry or vendor. When you are shopping around for a cash back card, it is good to have a minimum expectation for the cash back you receive. First, you should get a minimum of 1% cash back on ALL purchases, regardless of category. Second, in today’s competitive market, the card should have opportunities to earn a higher percent cash back either from a specific vendor or in rotating categories of purchases.

How about you all? What are your favorite ways to earn a little extra side money?

Share your experiences by commenting below!