Apr 13 2012

What If I Don’t File My Taxes On Time?

By |April 13th, 2012|Blog|8 Comments|

Here’s a question some of you might be wondering: “What if I don’t file my taxes on time?”

We are all busy people, and tax laws are very complicated. You might not have found the time to complete your taxes and you realize now that the deadline is in five days (April 17th, 2012). You’re gonna need some options.

Luckily you have a bunch of options. Here they are, in order of best to worst.

And before we get into these items, note that if the IRS owes you a refund then you will not be penalized at all for filing late. Just make sure to file at some point. The government isn’t going to hunt you down when they owe you money; they only do that if you owe them money.

Now for your options if you owe the government:

Work Your Butt Off and File Before April 17th

You still have time to get your return in on time. If you really need help you can try an accountant or a tax service place like HR Block. I’ve never used any of these places so I can’t recommend any, but if I were to pay someone to do my taxes I’d personally go to an accountant instead of a chain provider like HR Block.

You can also software to help you file like Turbo Tax or Tax Slayer. I personally use Tax Slayer because it’s cheaper and does everything I need.

If you can get it in on time, great. If not, move onto the next option:

File an Extension and Submit a Payment

Remember when you were in school and you had that one really nice teacher. If you didn’t finish your homework on time you just had to ask her for an extension and she would grant it without even asking any questions.


photo credit: flickr.com/donkeyhotey

The IRS is pretty much the same way. If you ask for an extension (by filing Form 4868), you get a six month extension on paying your taxes.

This will allow you to avoid the 5% per month (max of 25% total) “Failure to File” penalty. This penalty is based off the tax you owe. For example, if you file your tax return late with a total tax bill of $5,000 and you only had $3,000 withheld last year, you will pay a 5% penalty on the $2,000 you still owe the IRS for each month you are late instead of the $5,000 total bill.

However, an extension doesn’t get you completely off the hook. You’ll still have to pay a “failure to pay” penalty, which is 0.5% of what you owe plus interest every month you don’t pay. It’s not a particularly large penalty,but who wants to pay the government any more than you have to?

That’s where the payment comes in. You can submit a payment with your extension for an amount that you think will cover anything you owe. Let’s pretend you’ve already had $3,000 withheld and you think you’ll end up owing another $2,000. You can send in $2,000 along with the extension. Then if you finish your taxes and find you only owe $1,500 more, the IRS will refund you $500 and you won’t pay anything in penalties.

File an Extension Without a Payment

If you don’t have the money to send in a payment then that’s fine. You’re still better off filing the extension so you avoid that hefty 5% per month penalty. Sure you’ll get hit with some interest and failure to pay fees, but those are tiny compared to the failure to file fees.

Once you get the extension, it’s important to finish your taxes as quickly as possible. The longer you wait, the more you’ll pay in penalties. Remember that you can make payments if you don’t have the money to pay your full tax bill right now. If you pay the whole balance within 120 from filing, you aren’t charged a fee for the service. If you don’t get everything paid off in 120 days, you’ll pay a fee of up to $105.

Don’t File Anything

If you don’t feel like doing anything, then don’t file anything. You’ll get hit with big penalties and interest, and eventually the IRS is going to find you and demand their money. If you don’t have the money then they can prosecute you and put you in jail.

This is a really bad idea. If you can’t get your taxes done before the deadline, file an extension and figure out how to pay your taxes.

Apr 11 2012

Protecting Yourself is a Great Investment

By |April 11th, 2012|Blog, Economics / Politics, Personal Finance Tips|16 Comments|

A few days ago in Dallas a 14 year old boy who broke into a man’s home was shot and killed. A few months ago a 24 year old man was shot and killed by an 18 year old mother protecting herself and her baby.

These homeowners were prepared to protect themselves, their family, and their property.

I hate that both of these situations ended with the criminal dying, but you can’t reason with someone who is intent on breaking down your door. You have to be willing and capable of protecting yourself.

You and Your Property Must Be Protected


photo credit: flickr.com/mad_house_photography/

If you’re reading this blog, that means you are either good with money or you are doing your best to get better with money. That means that you either currently have some money saved up or you will one day in the future.

And when you have money and potentially nice things, certain people are going to want to take those things from you. You must protect yourself.

There are police officers that can help keep you and your property safe, but your security is your own responsibility first and foremost. Who knows what would have happened to the 51 year old man in Dallas or the 18 year old mother in Oklahoma if they hadn’t been prepared to protect themselves?

It’s very sad, but there are bad people in this world and they will do bad things if no one stops them.

Protecting Yourself is One of the Best Investments You’ll Ever Make

I hate reading about criminals dying when a homeowner shoots an intruder. More than that, I hate reading about someone who was a victim of a crime who didn’t have the means to protect him or herself.

How you choose to protect yourself is up to you. You can do one or more of the following:

  • Have a gun and be proficient in using it.
  • Have other weapons to be used for self defense
  • Have an alarm system that makes noise when an intruder tries to break in
  • Have your alarm system monitored by a security company
  • Move to an area that has low crime rates
  • Become active in your neighborhood watch program, or start one if one doesn’t exist
  • Have a big, loud, scary, protective dog
  • Hide valuables and keep some outside of your home (like a safe deposit box)
  • Don’t flaunt your wealth publicly
  • Take self defense or martial arts classes
  • More things I haven’t thought of…

A lot of these things cost money, and there’s a good chance you’ll never find yourself in a situation where you are being attacked. But being prepared and never having to protect yourself is much better than being attacked with no way to defend yourself, your family, and your property.

You can go cheap on generic cereal. You can buy a used car instead of a new one, or even go without a car altogether. You can eliminate your cable bill. But don’t cut corners when it comes to your safety.

You’re worth it.

Readers: How do you protect yourself and how much does it cost you?

Apr 10 2012

Could You Go Without a Car?

By |April 10th, 2012|Blog, Personal Finance Tips|27 Comments|

About one year from today I will turn in my 2010 Toyota Camry and complete the terms on my lease. And then I will have a decision to make: should I buy a new car or try to live life in America without a vehicle?

Buying a vehicle is expensive. I don’t have the money to buy a car outright so I’d have to finance something. That means I’ll be paying monthly payments that include interest (unless I find 0% financing). I’ll also have to pay for gap insurance as well as taxes, title and license fees. Once I have the car I’ll continue to pay for insurance, gas and maintenance.

When you add everything together, I’m probably looking at a minimum of $500 a month just for the ability to get from A to B.

But is it realistic to live in a huge city with limited public transportation options (Dallas) without a car? Here are the main considerations I’ll have to take into account if I want to go car-less.

Can I Get to Work?

For most people, the most important factor in determining if they need is car is their ability to get to work. I am lucky because I work in IT and have the ability to work from home pretty often. However, I will need to go in the office and need to find a way to get to work on those days.

ride a bike

photo credit: flickr.com/mikebaird/

I could buy a bike and ride it to work, but my new apartment is 11 miles from the office goes through some rough neighborhoods. It would take some training for me to make that trip twice a day.

I could take public transportation, but right now it would take about an hour each way. They are opening a new section of light rail soon, but I’m still probably looking at a 30-45 minute commute. The nice thing about that is the ability to do work while on the train/bus. It sure as heck would make writing daily posts a lot easier.

Finally, I can borrow a car or take a taxi if I really need to get to work. Remember, I’m probably saving about $500 a month from not having a car, so I can afford a taxi ride very now and then.

Can I Get to Fun?

It’s less important, but a car is also useful to get places for shopping, entertainment, and other activities. These things are usually done in groups, so I’ll usually have the opportunity to get a ride from someone else, although I will feel compelled to give people money for their trouble.

However, between rides from friends and public transportation, there is a good chance I can do most of the activities I want without the use of a personal car.

The Verdict

While it’s definitely possible to go without a car as I’ve just explained, I have a feeling I will still buy a car. I’ll probably purchase an old used vehicle when my lease is up and minimize my costs as much as possible. Saving money is great, but convenience is also pretty awesome and being able to go where I want when I want is probably worth $500 a month to me.

It’s just too bad I’m not willing to get a motorcycle. If you can accept the safety issues, they are cheaper than cars or SUVs and much more convenient than public transportation. It’s just that whole dying a horribly slow and painful death on the side of the road thing I just can’t take a chance with.

Readers: If you have a car, could you give it up? If you don’t have a car, what’s the hardest thing about not having one?

Apr 9 2012

How to Avoid The Underpayment Penalty

By |April 9th, 2012|Blog, Personal Finance Tips|4 Comments|

If you haven’t done your taxes yet, you have exactly one week to get them done if you want to file on time. I already filed my taxes back in February and got my refund in March, so I’m going to be stress-free for the next week (at least as far as 2011 taxes are concerned).

But I’m already looking forward to my 2012 tax burden.

I’ve started making a little extra side money from this website and some other online ventures, and I want to make sure I’m not hit with the underpayment penalty next year.

What is the Underpayment Penalty?

If you owe more than $1,000 when you file your income taxes, you may be charged with an underpayment penalty.

The underpayment penalty for non-corporate taxpayers is calculated as the federal short term rate plus 3%, and applies to money earned in each quarter of the year. Luckily with interest rates currently so low, the total underpayment penalty has been either 3% or 4% for every quarter since the beginning of 2010.

How Can You Avoid the Underpayment Penalty?

If you are making more money this year than you did last year (especially if you’re making money from side businesses that isn’t taxed when you earn it), the best way to ensure you don’t have to pay the underpayment penalty is to make sure you pay at least as much in taxes this year as you did last year.

taxes too high

photo credit: flickr.com/gammaman

For example, let’s pretend you made $50k in 2011 at your day job and paid $7,000 in federal income tax. Now pretend you start a side business as a sole proprietorship (incorporated businesses are different) in 2012 that does really well and you finish the year with $150,000 in income. This will probably give you a tax bill of about $30,000. If you are hit with a 4% underpayment penalty, that can be as much as $1,200. How can you avoid that penalty?

There are a few ways:

  • The easiest way is to make sure you have at least as much in taxes withheld as your tax bill in the previous year. In the example, as long as you have $7,000 or more withheld during 2012, you will not pay any underpayment penalty.
  • When you realize this new side business is making a bunch of money, you can send the government quarterly tax payments. It’s easy to do online and this Money Crashers article gives some great instructions. As long as you owe less than $1,000 or 90% of your total tax bill (whichever is greater), you won’t get hit with the penalty

Plan Ahead for Taxes

As much as I hate the income tax, you have to pay it unless you want to go to federal prison.

It’s important to remember to plan for paying income taxes. You want to make sure you don’t have to pay a penalty, but you also want to make sure you have enough money to pay your tax bill. In the example I listed above, you can avoid a penalty on your taxes if you have $8,000 withheld throughout the year, but you’ll still need to pay the additional $22,000 before April 15th. Avoiding the penalty doesn’t mean you avoid the taxes.

For more specific information about the penalty and how to avoid paying it, you can get information from the IRS website or contact an accountant.

Carnivals This Week

Carnival of Retirement at Tackling Our Debt
Carnival of MoneyPros at Financially Consumed
Fin. Carn. for Young Adults at 20s Finances
Yakezie Carnival at 20s Finances
Carnival of Financial Camaraderie at Step Away From The Mall
Totally Money Blog Carnival at Thirty Six Months
Festival of Frugality at Dewey’s Treehouse

Apr 4 2012

Why I Don’t Drink

By |April 4th, 2012|Blog, Life|60 Comments|

I apologize to everyone who submitted great article suggestions last night. There were some really great ones and I do hope to use some of them in the future.

However, I don’t have a lot of time to write this post because for some reason WordPress hates me. I can’t access the visual editor so I’m stuck with writing this whole post in HTML. Sorry for the lack of obnoxious text coloring I usually do.

I’ve done a lot of personal finance posts in the last two or three weeks, so I wanted to do a personal one today. Luckily I got a great question from Jeff: Why don’t I drink?

Why I Don’t Drink

In case you didn’t know, I do not drink alcohol. I never have.

There was one time when I promised Tag I would try to get drunk with her and her friends. She claims I was drunk; I don’t think I was. But that really doesn’t matter. Either I’ve never been drunk or I was drunk once when I was 24 years old; the bottom line is I don’t drink currently and have essentially never done it.

To best explain why I don’t drink, we have to go back in time.

Why I Didn’t Drink In High School

Most of the kids I grew up with started drinking sometime in high school. Alcohol was definitely available to me at the time, but I never even tried it for two reasons. First, I was fiercely independent and absolutely refused to give into peer pressure. Second, I was convinced my athletic performance would suffer from drinking alcohol.

While both reasons played a big part, the desire to avoid peer pressure was definitely the main reason. Some kids wear ridiculous clothes to “be different” despite the fact that all 15 of their friends wear the exact same stuff.

If you have a strong desire to be “different”, choosing not to drink is the way to go. It becomes something interesting. I can’t tell you how many times people were intrigued by why I didn’t drink. Notice how nobody is asking other bloggers to talk about “why do you drink?” Everyone drinks. Except me.

why i don't drink

photo credit: flickr.com/ell-r-brown/

Why I Didn’t Drink in College

During college, I stopped caring so much about peer pressure and started understanding just how stupid people act when they are completely trashed. I’m talking about college kids who would get so drunk they black out and don’t remember what happened the next day. I’ll admit that some drunk stories are funny, but most are just sad or downright shameful.

Getting absolutely wasted was never anything I wanted to do, and I usually ended up driving my friends home on the weekends. I went to parties, I talked to girls, I hung out at bars and tailgates. I just never wanted to be trashed and everyone else did, so I let my friends drink and I drove.

Why I Don’t Drink Now

I was fiercely independent in high school and I was honestly embarrassed for a lot of the drinking I saw in college. So what’s stopping me from having a few drinks responsibly every now and then as a mature adult?

Well first of all alcohol tastes like crap.

But more importantly, I have a darn good time without alcohol. I don’t need alcohol to get up and dance at a wedding; I dance because it’s fun. I don’t need alcohol to “take the edge off” a bad day; I can talk with my girlfriend or work out or write to make myself feel better. I don’t need alcohol to get loud and obnoxious at a sporting event; I’m already loud an obnoxious at sporting events.

Call me crazy, but I have a pretty sweet life with some pretty incredible people in it. Why would I want to change my state of mind when I couldn’t be happier with the state of mind I’m currently in?

Readers: Why do you or don’t you drink?