Zen Penny

Seeking the Path to Financial Nirvana

A Small Financial Victory

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For the past year or so, I’ve been encouraging my girlfriend to participate in her employer’s 401(k) plan. I’m honestly quite jealous the plan they offer because it is managed by Vanguard and the employer match is fantastic. Much better than mine.

Well, I think the pestering finally paid off. She went to the 401(k) orientation meeting that Vanguard presents every few months at her workplace and decided to sign up. She finally realized that not contributing is like throwing away free money. Plus, she will realize great tax benefits next year too.

This makes me feel good. Not only for her, but for us. Our financial futures will be that much more secure.


Written by Zenpenny

May 4, 2007 at 6:47 am

Automotive Milestone & Crossroad

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My 1992 Honda Accord has reached both a milestone and a crossroad. I purchased it in 2004 from a good friend for a very reasonable price. Before he owned it, it belonged to his grandmother, so I knew the car was very well maintained. Other than having more than my fair share of flat tires, my three years with the car have been relatively trouble free, at least in a maintenance and repair sense.

In March, the odometer hit 200,000 miles. It felt great to drive a car that has been so dependable. I assumed, perhaps naively, that I could squeeze another 50K or even 100K out of it.

About a week ago, I noticed the oil was really low so I decided I might as well change the oil and filters. I try to do the majority of the maintenance and upkeep myself to save a few bucks. (Plus, I am really tired of the shops constantly trying to upsell on stuff your car doesn’t need.) Following the oil change, it was brought to my attention that I had left oil spots up and down the street, wherever I drove. I tightened the plug and the oil filter (which was already covered in oil just a few minutes later) and saw that the dripping had ceased. All well and good I thought.

I thought wrong. when I got home later that night, I noticed a trail of oil leading all the way back to my parking spot. (In fact, my property manager was very quick to assess a $25 fine for it.) Naturally, I didn’t want to assume the worst, so I was thinking that I either had a leaky oil filter or oil pan. I took it to a garage across the street from my apartment to have it checked out.

That’s when I got the news that every car owner fears. It’s much worse than you think and the cost of repairs are going through the roof. The mechanic informs me that there are three major sources for the leak. The cost for repairs will be in excess of $500.

Normally, I’d just go ahead and pay for repairs. But there are a few factors that have left me incapable of making a decision, like a deer in the headlights. First, the car has 200K+ miles on it. It’s reasonable to think that even if I do pay for repairs, something else could go wrong immediately, the transmission for instance. Second, the car recently failed smog. I was in the process of doing a few inexpensive things to improve my chances for passing the retest when this occurred. But let’s say that in order to pass I’ll need hundreds of dollars more worth of repairs. At that point, I could make a decent down payment on another car for what I’ve paid in repairs. Third, there is a possibility that I could get a car for free but it is very iffy at best. My girlfriend’s mom may be moving out of the country and therefore wouldn’t need her car anymore. She is willing to give it to me if she goes. But this is a big “if.”

So for now, my car sits in limbo awaiting a decision. Should I bite the bullet and get it repaired? Should I try a sell it for a few hundred bucks to somebody who is willing to repair it? Or should I just donate it to one of those charities and get the write-off? Stay tuned.

Written by Zenpenny

April 30, 2007 at 3:57 pm

Posted in automotive, maintenance

Have a Cone on Ben & Jerry!

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After you’re done standing in line at the post office, why not cool off at your local Ben & Jerry’s with a free scoop of ice cream?

And for those of you who filed early, what better way to reward your productivity and save all that money you got back in your refund?

The offer is good for today only, from 12 to 8pm. Just head on over to Ben & Jerry’s website and enter your zip code in to find local shops that participate in Free Cone Day!

Written by Zenpenny

April 17, 2007 at 7:21 am

Posted in free

No Need to Stress If You’re Entitled to a Refund

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Five Cent Nickel brings up an excellent point that I’ve forgotten to mention in my previous posts.

If you qualify for a refund this year, you don’t have to file by today’s deadline. In fact, you have up to three years to file your return and still receive all that you’re entitled to.

Why you would want to wait so long for money you overpaid is beyond me. But the option is there.

Written by Zenpenny

April 17, 2007 at 6:42 am

So You Can’t Pay Your Taxes. Now What?

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You’ve finally done your taxes. Then the cold reality hits you. It’s every taxpayer’s worst nightmare; a massive tax bill that you can’t afford to pay. What do you do now?

Don’t panic. You have options.

The most important thing to keep in mind is that ignoring your taxes won’t make them go away. Make sure to file that tax return on time, regardless of your ability to pay. The penalties for failing to file are far worse than failing to pay your taxes in full.

The IRS offers various installment plans: automatic debits from your bank account, payroll deductions, and regular installments by check or money order. To request approval for a payment plan, you must fill out Form 9465 or use the Online Payment Agreement page on the IRS website. If approved, the IRS charges a one time setup fee on top of the interest and penalties, $103 for regular installment plans and $52 for automatic debit. Also, if you decide to go with a payroll deduction, your employer must complete Form 2159. If you feel like you can’t even make payments at this time, call the IRS at (800) 829-1040. You may be able to arrange a deferment until your financial situation improves.

If you feel you are simply unable to pay your total tax bill and your situation won’t change in the immediate future, you may be eligible to file an Offer in Compromise. An OIC is an arrangement between the taxpayer and the IRS that reduces the amount owed. The IRS obviously considers this a last resort and will not easily approve such an offer until it is absolutely sure that you cannot pay the full tax liability. To apply for an Offer in Compromise, you must file Form 656. Within this form is a worksheet that will calculate the compromise amount. Along with the form, you must pay a percentage of the compromise amount as well as a $150 fee.

You will want to explore other options to pay your tax bill in full before making arrangements with the IRS. While they won’t haul you off to jail, they will slam you with some pretty harsh penalties. In any of the scenarios described above, you will owe interest on your balance, as well as monthly and quarterly penalties, even if you make your payments on time. You may even face a federal tax lien. If you can, borrow from family members, get a cash advance from your credit card or even take out a line of credit to pay your tax bill in full. In most situations, the fees and interest you pay will be much better than an arrangement with the IRS.

Written by Zenpenny

April 16, 2007 at 7:24 pm

Posted in 2007, taxes

Getting Taxes Done

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Anyone familiar with the phenomenon of Getting Things Done knows that you cannot “do your taxes.” Filing your taxes is a project that requires multiple steps and action items before it can be considered done. The lack of clarity when it comes to approaching the various steps leads to stress. This stress can cause people to avoid filing their taxes until the last minute, or worse yet, not file at all. Applying some of the methods from GTD during tax time can provide a clear path to getting them done and alleviate some of the anxiety associated with this annual process.

Begin by collecting all of your “stuff” related to taxes; any paperwork or information in your possession that is critical or helpful. Don’t concentrate on organizing this stuff yet. Just make sure you capture absolutely everything you have regarding your income taxes.

Once you’ve gathered all the paperwork you have, take a few moments to take mental stock, brainstorm or do some research to answer a few questions: Do you have all of your income statements? What IRS and state tax forms do you need? What is your filing status? What sort of deductions are you entitled to? Will you e-file or mail your return? Do you need any tax software? Should you hire a tax professional? Is there anything you need that is not physically represented in your pile of “stuff”? Answering these questions will likely lead to other questions that are more relevant to your situation. Being able to address these issue during the planning stage will save a lot of time and trouble later on during the process.

At this point, it will be helpful to process and organize your paperwork. Go through each item and determine whether it is actionable, such as a form that needs to be filled out or a statement that contains critical information, or if if serves as a reference, such as instructions on how to e-file. You don’t need a real elaborate organizational setup, just something that allows you to easily find the documents you need.

Now comes the real substantial part of doing your taxes; crunching the numbers and filling in the forms to determine your tax refund/liability. The steps you’ve taken to this point should greatly ease the process. Be sure to take your time. Rushing only leads to mistakes that can increase the likelihood of an audit. Review your numbers, make sure you enter your social security number correctly, and remember to sign and date your return. If possible, have a fresh set of eyes review your return to help catch any obvious errors.

By now you should know what your tax refund or liability is. If you are getting a refund, seriously consider using direct deposit. You will get your money in a matter of days and it means less work and hassle for you. If you owe money, make your check payable to the “United States Treasury” and include your social security number. If you cannot pay your tax bill, don’t panic. There are options. Just be sure to file your return and send whatever you can towards what you owe. I will cover this issue more in depth in an upcoming post.

E-filing is definitely the way to go when you submit your tax return. It is quick and hassle free. Plus it’s cheap, if not free. If you decide not to e-file, call the Post Office (800-ASK-USPS) or go to their website to find out the hours of the post offices in your area. Certain locations will be open until midnight on tax day for you “down to the wire” filers. Be sure to purchase certified mail and proof of delivery when sending your return, the added cost will be worth the peace of mind.

As of this post, you have roughly 30 hours to file your tax return. If you don’t feel like you have enough time, you can file for a one time six month extension using Form 4868. This form does not grant an extension to pay any taxes owed, so you must still send in payment for your estimated tax liability.

Good luck late filers! I hope this little slice of GTD helped or motivated you to file in time. May your calculators stay true and the wind be in your sails all the way to the post office.

Written by Zenpenny

April 16, 2007 at 3:23 pm

Find The Sweet Spot, Adjust Your Withholdings

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How do you feel about tax refunds? Some say it serves as a great forced savings plan that can give us a nice lump sum in the middle of year. Other decry it as an interest free loan to the treasury. Either way your slice it, it is important to review your payroll withholdings so that you achieve the desired results when tax time rolls around. This is especially true when we have major life changes, such as changing jobs, getting married, buying a home or having children.

The IRS provides this handy calculator that will help you determine the right amount of withholdings to reach your goals at tax time. Be sure to have your last paystub within reach as you’ll need to enter how much tax has been withheld year to date.

Remember, you can adjust your W-4 as many times as you like, so your withholdings can change along with your goals.

Written by Zenpenny

April 13, 2007 at 10:13 am

Posted in 2007, taxes