With April comes spring and tax time.
In 2018, you'll need to file by April 17 or face fees. But don't sweat too much if you can't afford to pay all your taxes at once. The Internal Revenue Service, or IRS, is often willing to work with you to help you pay your taxes without being penalized. That said, it's best not to avoid filing or paying. This bill won't just go away, and you'll accrue more and more late fees and interest the longer you let it sit.
Option 1: Pay by credit card or get a personal loan
The IRS allows several types of payment for your taxes, including a credit card. This isn't the best solution overall. You're essentially trading debt for another type. But if your situation is that you are able to pay, but don't have all the funds right now, a credit card is probably your fastest solution. (Unless your tax amount is too much for your card, then you'll need to consider another option.)
Pay your taxes with your card, and then pay off as much of the balance as you can until you're paid again. You'll still accrue interest on your card, but this amount might be lower than what the IRS would charge if you failed to pay or entered into an installment plan. The same may go for a personal loan from your local bank.
The stress of tax season can be overwhelming, but there are a few options to consider undsgn.com
Option 2: Set up an installment plan
As long as you meet certain requirements, you can set up an installment plan with the IRS to pay over time. And depending on how much you owe, you can even apply without having to talk to a person. If your bill is less than $50,000 in individual income tax, penalties and interest, you can apply for an installment plan online. You can also apply with federal form 9465. If you owe more than $50,000, you'll have to talk to an IRS agent to find out your next steps.
You'll be charged associated fees for entering into a plan, but these will be less if you sign up online. And even less if you agree to direct debit each month. You have to file all your tax returns before you apply for an installment plan. You'll usually be notified within 30 days if you've been accepted.
If it were only so simple... assets.pcmag.com
Option 3: Ask for additional time
Based on your particular circumstances, you might be granted additional time to pay in full. You can make a request like this online, by calling, or by talking with an IRS agent in person. If you're insolvent or unable to pay due to circumstances beyond your control (like unemployment or disability), the IRS is willing to work with you on your payments. You might be eligible for an officer in compromise, which will let you pay less than the actual amount you owe. These options are completely dependent on your unique situation and you'll be able to determine your next steps by communicating with the IRS.
Taxes are never fun, but they don't have to be a financial strain. The IRS has several payment and financing options if you're unable to pay in full by April 17. In extreme situations, you can talk to an IRS agent about reducing the amount you owe or setting up a payment plan. The key is: don't let your taxes sit. If you fail to file by the deadline, your interest and late fee penalties will be more than if you do file and request a different financing option.
When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.