Archive for July, 2012

A few months ago, my close friend Georgene sent me a link to a blog post and told me the story of how the young site owner had quit her job to blog full time – and was making a LOT of money doing it. Being a writer myself, I was instantly hooked by the story and went to take a look. I left the corporate work force a few years ago to write full time. Fast forward almost two years, and I find myself all over the place instead of on the New York Times Best Seller List, and not nearly as successful as I had planned on being – too many ideas, not enough time in my days.

I took a look at Crystal’s blog “Budgeting In The Fun Stuff” and told myself that I had planned for over two years to get a blog out there on taxes, money, and all things related. If a young woman could do it and make enough money to build a new house, I should be able to do it, too – after all, I didn’t need a new house, I only needed a new car! I moved my “money/taxes site” up a few slots on my business to-do list, resolving to get on the ball and get the blog out there. Sometime tomorrow. Or maybe the next day. Sometime soon.

A few weeks ago, a headline on Crystal’s blog happened to catch my eye:  “How I Make Money eBook is FINALLY LAUNCHED!!!” Since I also write eBooks and I’ve been the eBook launch coordinator for an award winning writer and Grammy winning song writer, I read with interest Crystal’s ebook sales page.

Crystal mentioned that she was looking for someone to volunteer to test out her ebook, follow the steps she had created in building up her blog to replace her income – and see if the process could be duplicated. I sent her an email and very quickly found myself included in a small group of bloggers that will be testing the “BFS Process” and chronicling the journey. I figured what better way to get my blog idea out of my head and onto a page – be responsible to someone else, seek to prove Crystal’s ebook steps were do-able – and just do it. Instead of “sometime soon”, I found myself building a blog NOW!

I’ve got a solid background in small business, taxes, tax prep, bookkeeping, business consulting, and more. Money and finance is an excellent niche to chronicle what my decades long experience has been, and I look forward to talking to you about it. I’ve also got a lot of things going on with myself and my own finances that I’ll be writing about. This old house needs repair, student loan debt needs to be repaid, existing retirement plans need to be liquidated and moved, new retirement accounts set up and funded. My emergency fund was recently depleted over the last few months due to my husband’s job loss – he spent 13 years with the same company and was laid off on Good Friday without a word of warning or inkling the company was making any changes. I need to buy a new car, and soon – can I do it with cash? I haven’t had a car payment for years, and I’d like to keep it that way. The central air unit quit this week. It was repairable, but it was new 22 years ago – can I replace that without resorting to a perennial garage sale? (I think my village might frown on that, in this neighborhood!)

There is a lot to talk about, and I’ll be telling you how I intend to do what needs to be done in my financial world. Will I make the right decisions? Will I do the right things at the right time? I’m looking at a few investment vehicles and am going to write about how I set up those accounts and how they pay off – will I make money or lose money? I used to trade the markets for a living – dare I jump into stock and commodity options or the Forex market again? Subscribe to my RSS feed or follow me on Facebook and find out!

Send me an email or drop a comment and tell me what you’d like to see and hear. Do you have any questions about your taxes? Do you own a small business and don’t understand what is expected of you as an employer? Looking for an accountant or tax professional and need to know what to look for? Let me know, and I’ll be glad to help!

Check back often, as I’ll be posting updates as I follow in Crystal’s footsteps, and I’ll be keeping track publicly of my blog’s stats, traffic, income, and more! Can I do the same thing Crystal did, and make six figures from this blog in a year? Will I be posting this time next year from a private beach? Tune in and find out! Sand checks will be coming regularly!


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IRS Letter in the Mailbox!

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A friend of mine from the West Coast called last night, and mentioned during our conversation that he had received a letter from the Internal Revenue Service. According to that letter, he owes the IRS a tax bill of $942 due to unemployment he failed to report on his tax return – from 2009.

My friend sold his home in the Midwest and moved to the West Coast over a year ago. All of his tax records and receipts are still packed away in moving boxes, and at this point he has no idea if the IRS is correct in their tax assessment or not. It may or may not be a mistake – the IRS does make mistakes, believe it or not.

There is a reason your Social Security number is required when you open any sort of bank account, or when you start a new job, or file for benefits such as Unemployment Compensation, Social Security, or Medicare. Anytime anyone pays you money through the calendar year, whether that be wages, interest on a time deposit account, a check for contract work done as a 1099 contractor, barter exchanges, sale of a residence, unemployment, sick pay, a sale of stock, the closing of a retirement fund (and many more not listed here) that income is reported to the IRS.

The IRS has a record of your income for any given year, and it comes from every source that paid you money and was required to report that income to the government. How does the IRS keep track of all of this money and who it was paid to? By a Social Security Number!

When you file your tax return for the calendar year, it is very important that you furnish your tax preparer records of ALL of the income you received. Err on the side of caution and give your tax gal anything and everything – a good tax preparer knows the difference between types of income and what needs to be reported and what doesn’t.

The IRS selects filed tax returns and compares the income that was claimed on that return against what is showing in the IRS records for that year. If there is a discrepancy and it looks like you didn’t report all of your income, the IRS will calculate the bill and mail it to you. Usually, along with the difference in tax you owe, penalties and interest are also added. If you’re looking at two or three years worth of interest, as my friend is, the bill can add up fast.

When an IRS letter is sent to a taxpayer, it will cover a specific subject and tell you exactly what you need to do to resolve the situation. Maybe you can clear things up with a phone call, or a fax, or a visit to a field office in your area. Perhaps you’ll need to write a check – the important thing is to never, ever ignore IRS Correspondence. Give any letter your prompt attention, and resolve the issue as quickly as possible. Keep all IRS Correspondence in your tax records, even after the situation is resolved. You may need that documentation in the future.

In the case of my friend, he needs to do a few things before he simply writes that check to the IRS.  He should:

  • find his Form 1040 U.S. Individual Income Tax Return for 2009
  • locate the state issued 1099-G showing total Unemployment Compensation paid to him that year
  • compare the 1099-G amount to what was entered on the tax return
  • compare how much Unemployment Compensation was claimed on the return to what the IRS says was reported to them

(Note: In 2009, due to the American Recovery and Reinvestment Act (ARRA), the first $2400 in Unemployment received by an individual was not taxable. Usually, all Unemployment is 100% taxable – in 2009, there was a temporary exemption granted as part of the government stimulus package. My friend needs to take that calculation into consideration when he is comparing those numbers)

If my friend can clearly see that he is wrong and the IRS is right, there isn’t much he can do other than pay the bill.  If his numbers do not agree with what the IRS states in the letter, he will call and speak to an IRS telephone agent.  Hopefully the situation can be resolved with one phone call, but it might not be.  Whatever the case, he will have to follow through and take care of the situation before it  turns into a bigger issue.

This is also a lesson in why it is very important to save all filed tax returns and the supporting documentation.  My friend has no idea what box this paperwork is in, or if that box is in his garage, or his sister’s basement – he may end up paying the bill because he can’t easily find what he needs to prove his case in the timeframe he is allowed.

In 2009, my friend prepared his own tax return using a software program.  If he had used a paid preparer, he may have been able to go back to that person and retrieve copies of the return and the supporting paperwork.  Depending on the preparer, they might have taken over at that point and called the IRS on his behalf.  At the very least, the preparer should be able to look at the IRS letter, look at the return in question, and explain the situation to the client.

If you receive correspondence from the IRS:

  • Don’t throw the letter away.  Open it, read it, and follow through in the time frame specified.
  • IRS correspondence will give you a specific reason why the letter was issued, and tell you what you need to do to resolve the situation.
  • In the case of a bill received, if you agree with the IRS you may not have to reply at all, you may simply need to write a check and mail.
  • If you do not agree with the IRS, call or write to the IRS as soon as possible, and tell them why you don’t agree.
  • Keep copies of all tax returns and all supporting documentation.
  • Keep all IRS letters received, and file them with your tax records.
  • If you receive an IRS letter and paid a preparer to complete your tax return for the year in question, contact the preparer and ask for their help.
  • The IRS will never send you an email.  All correspondence sent out by the IRS is sent regular snail mail.


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Categories : Form 1040, IRS
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Hot Town, Summer In The City

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The last 17 days in my village have been scorchers.  People have been frying eggs on the sidewalks and baking cookies on the dash boards of cars.  12 of the last 17 days the temps were 99 to 110, and the night temps haven’t been much cooler.  5 of those 17 days never saw the temp below 95 during the day or 90 at night.

The central air unit has been running almost non-stop, and when it does shut off, it isn’t long before I’m headed down the hall to kick the thermostat down lower so the air will come back on.  Our lot is heavily treed, but it doesn’t seem to make much difference this summer – once the cool air stops pouring from the vents, the house begins to feel very warm, very fast.

I shudder to think what the electric bill is going to scream at me when it arrives – I may involuntarily scream right back.  Looking at our electricity usage on the last bill received, which had a cutoff date of June 22, we used 1,550 kilowatt hours – and the average daily temp was only 76 degrees.

I wouldn’t be surprised to see the current bill double that, based on how that AC unit has been running.  Every one of those 17 days where the temp was 95 to 110?  Every one of those will be on the bill that will be arriving soon in the mail.

Will the coming scorcher of a bill mean the difference between eating hamburger or Ramen Noodles in August?  No, it won’t.  I am concerned about the total bill, but it won’t affect my monthly expenses right away.  If I want to eat prime filet next month, I’ll be able to.

My local utility company offers a level pay plan, and I’ve been using that option for many years.  Each month, I know exactly what my electric bill is going to cost.  (Sometimes this is also called a Budget Billing Plan)  My electric bill is adjusted once a year, and in the past 5 years or so, what I do pay has gone up three times and down twice.  The utility company will “audit” my account annually, and based on the past 12 months usage, will adjust my monthly budget amount up or down for the coming year.

Level pay is a good thing because it is predictable.  It is easy to budget when you know exactly what your utility bills are going to be.  In addition to taking advantage of the level pay plan offered by my electricity provider, I am also on a level pay plan with the gas company.  The bills I receive from both show exact usage, and it is easy to keep tabs on what I actually owe vs. what I have paid – and by the same token, I can also see at a glance what either provider owes me at any point in time.

If you struggle to pay your utilities because your gas heat is high in the winter and the electricity is high in the summer, check with your provider(s) and see if they offer level pay plans.  Make sure and read the fine print closely – level pay is good, but if you use more than what you’ve paid for during the year, you may find that you owe a larger balance in the month the bill is adjusted – this is known as a “make-up” or “catch up” schedule.  Don’t get caught unawares when that annual adjustment period comes around.  If you have overpaid during the year for services, you will get a refund.  Also, be aware of when those adjustment periods are due; some utility companies audit and adjust more than once a year.

Level pay does not mean you can skip paying your bill or be chronically late with your payment.  Missed payments will get you kicked off of the level pay plan, and most utility companies require any balance be paid in full before reinstatement.  Get kicked off too many times, and they won’t let you participate.

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Categories : Budget, Utility Bills
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