The Blog Of TL Wall Accounting

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Archive for May, 2015

Are You Someone Who Doesn’t File Your Taxes On Time?

This is an interesting phenomenon we come upon every once in a while. It seems that there are a high number of people who don’t file their taxes on time. Not only that, but they might go 2 or 3 years before filing them.

While this seems odd to us, it turns out that there are two schools of thought on this.

The first is that some folks pay extra on their taxes from their paychecks. They know they’re going to get a refund back but, for some reason, decide they don’t need it immediately. So they “let it ride” and don’t worry about it.

The second are those folks who work for themselves. Some of them pay quarterly taxes, some don’t. Some of them send the letter for an extension while some don’t bother. Those folks just don’t care; it’s not that they’ll never pay their taxes, but for whatever reason they’re not in the mood to deal with it at the time taxes are due. It doesn’t matter whether they’re getting a refund or not; they have other things they feel are more important.

One of the strange things that happens is that many of those people don’t get a notification from the IRS or the state asking them where their statement is. This is probably for two reasons.

First, unless there are indications that they’ve been receiving payment for services, the IRS might not even think about sending them anything. This can happen if someone is self employed and gets paid mainly cash. It also helps if no one paying them files a 1099.

Second, if taxes have been paid, it’s possible that either state or federal taxing agencies, both of which have been reducing staff over the past few years, deal with what they already have on their plate without trying to add more work to it.

In either case, there are a few things each type needs to consider.

There will be penalties, whether you’re owed money or not. Sure, the interest rates are fairly low, so either way the penalties might not amount to much. But they might; it’s worth considering.

Second, if you owe money, not only could it be seen as tax evasion but it might trigger an audit on past years. Of course if you haven’t filed anything for all those years it might make it a bit more difficult for them, but they may have enough bodies to get into it. Also, they can go back 7 to 10 years if need be; why go through all that grief?

Whether you’re getting a refund or might owe the government something, this isn’t a good practice to continue doing. You never know what could happen and, as some people like to say, “the government doesn’t play”. Even if you owe and can’t pay, it’s better to file and wait for them to contact you. That could be a while on its own, but at least you won’t look like you’ve been dodging them.

Have You Started Budgeting Yet?

One of the earliest posts we wrote on this blog concerned budgeting. We started with the topic The Basics Of Budgeting as a baseline on how to get started. It’s still a pretty big deal to us, as it should be for you, which is why we’re revisiting the topic again.

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Our bet, if you did start back then, is threefold:

* your bills are under control

* you have more money in your checking or savings account

* you have more peace of mind because you’re not as worried about paying your bills

Budgeting works for everyone if they have an income. It works better if you have more money coming in than you thought you did because you end up with more choices for how you want to handle the extra money.

Many people will see the extra money and spend indiscriminately; that’s their choice. Other people will set financial goals where they’ll either try to increase their wealth by investing or just watching it grow in their checking account, feeling comfortable in knowing that they can access it whenever and however they wish.

We have the account of someone we know who helps people set up budgets. When he met with one client she literally was 43 cents in the hole; things don’t start much worse than that.

They went through the process of seeing where she stood realistically. It turned out that, though it wasn’t much based on what she owed, she actually came out ahead. He put her on a pretty restrictive budget, which had to include buying food for her pet, and set up one goal; getting one credit card paid off fairly quickly to start reducing her debt and help her cash grow.

Things worked better than expected that first year, mainly because the client now knew where she stood. She not only stuck to the budget but got a part time job so she could have more spending money to supplement the strict budget. She stopped using the credit cards, paid the bills when recommended, and after the first year she ended up with around $900 in the bank and that particular credit card paid off.

Over the course of 10 years many other changes have taken place. She now sits with nearly $10,000 in her checking account, has a CD and a money market account, was able to buy a new car and put some extra money down on it to reduce the payments and actually have the cash to take two vacations out of town.

The idea of a budget isn’t to restrict you; it’s to help you figure things out and make managing your money easier. Take a look at the first link above regarding budgeting and think about starting today if you haven’t already done so. Trust us, it’s for your own good.