The Blog Of TL Wall Accounting

Archive for March, 2013

5 Things To Do When You’re Going To Have Problems Paying Your Bills

Everyone has a period where there’s a problem concerning paying bills. It could be for many different reasons but no matter what the reason is, the pressure feels great. A reality most people don’t know is that you always feel worse when you don’t know what to do than once you figure out and start to address the issues. Here are 5 things you need to do along the way towards getting back your peace of mind.

1. Figure out if you’re really in financial distress or not. This involves a word some people think is ugly, budgeting and yet it’s a necessary thing and truthfully not as evil as some people think it is. Trust me, it’s comforting knowing that you have a lot more money than you thought you did if you do it right, and sometimes even if you don’t have as much as you hoped, you find that you have enough to pay everything if you just spend smarter.

2. If you’re close to being in trouble the first thing to do is figure out what you’re allowed to be a little bit behind on. Try to never fall behind on credit card payments because they’ll jack up your interest rate and that adds to your outstanding debt greatly. Services like phone, cable, even your power will often allow you to miss the date of payment and tack on maybe a $15 late fee, and some don’t tack on anything. This is a short term solution if you know you can catch up.

3. You just might have to get rid of some things or reduce other things. Sorry, but comfort just might have to take a minor hit along the way. If you have to turn off or reduce cable for awhile it’s something to think about. Do you really need that big package on your smartphone or regular phone or can you drop something for a short period of time?

4. Pick up the phone and call. Hiding won’t make things go away, but picking up the phone and making a call can help greatly. If you have a car payment sometimes you’ll find out that they give you so many “grace” payments during the course of your loan, which means you’ll get to skip a payment or make a very much reduced payment. Sometimes your credit cards companies will give you a reduced payment rate for a few months as long as you agree not to use the card at all and won’t jack up your interest rate. Many companies in today’s world will accept a one-time smaller payment if you tell them what your situation is. Almost everyone will work with you, but you’ll never know if you don’t try.

5. Don’t panic; get help if you need it. Why are accountants around? Why is there an organization called Consumer Credit Counseling? Why are there other people who can help you with budgeting and planning? Because many people need help with their finances and it doesn’t always get to the point of having to declare bankruptcy. Get help if you need it; if you don’t, then do what you need to do to get out of trouble and regain your peace of mind.

Are You Taking Enough Money Out For Your Taxes?

By now most people should be getting their taxes done. If you knew you were getting a refund you’ve probably already done them and received your money back; lucky you.

At the same time, there are a lot of people, probably half the population, that’s either already received or will be getting the biggest shock of their lives when they find out that they actually owe taxes, and not just a small amount. The main culprit? Your part time job.

This isn’t necessarily true in all states by the way, as a few states don’t have income tax. However, in states like New York that not only has a state tax, but a relatively high rate, people are surprised often because there are a few things they don’t know about.

Even though I said the rate is high, that’s only compared to other states. It’s drastically lower than federal rates. Thus, if you don’t make a lot of money, as in full time income, there’s a possibility that your weekly pay might not be high enough for whomever you’re working for to take anything out for state taxes. As it applies to federal taxes, you’ll have something taken out, but very little.

As it applies to state taxes, when it’s time to file you’ll have this lump sum of income showing that no taxes were taken, which means now you’ll have it applied to the lump sum. The amount you owe will probably supersede any full time taxes that were taken out, thus you’ll end up owing taxes of at least a couple hundred dollars if not more, depending on how much your part time job was paying you.

As it applies to federal taxes, the same kind of thing will occur, even if some money has been taken, because of how low it is. Depending on how much you were making per week, your liability could be in the high hundreds or even low thousands; trust me when I say this, because we see it often.

Does this mean you shouldn’t work any part time jobs? We’re not going to go out on that limb. What we will say is that instead of claiming so many more dependents you have your employer take out a lump sum dollar amount for both federal and state taxes. A general recommendation is to have at least $10 taken out of your weekly check for state taxes.

Federal taxes are harder to figure out, so there’s two responses for it. Either have the employer take out $15 on top of whatever they’re already taking or, if you’re also working a full time job, lower the amount of dependents you’re claiming. Many people don’t know that you can claim a negative number of deductions, which takes more money out of your check. If you’re investing the extra bit by claiming more deductions then you could end up ahead. Since most people don’t do this, you might want to explore whether going -1 to -3 can offer you some benefit.

Unless you’re prepared to pay a bit lump sum tax payment, it’s better to err on the side of caution. If you believe you can’t afford even $25 per paycheck coming from your part time job, you might have to reconsider whether it’s beneficial to you in the end, or whether you need a part time job that pays more money.

At least now you know.