Taxes | Groundhogs
What could the two possibly have in common, you may be asking yourself? They're both steeped in North American and US history. Groundhog Day takes place annually on February 2nd. The yearly federal tax filing deadline is April 15th (except in 2020, when we all got a bit of an extension!). Both occasions call attention to traditions and preparations for what the spring season holds.
Now About Those Groundhogs
Some view Groundhog Day as a rather silly and superstitious event dating back to the late 1800s. Many activities and celebrations revolve around the much-anticipated arrival of Spring. A groundhog affectionately named Punxatawney Phil (after his hometown in PA) supposedly forecasts the arrival of Spring each year based on whether or not his shadow appears when he emerges from his burrow. To see his shadow means there will be six more weeks of winter. If Phil doesn't see his shadow, it means there will be an early spring. We may all wish for that early Spring, but unfortunately, according to Stormfax Almanac, Phil's "predictions" have only a 39% accuracy rating.
Just Wait for Spring to Come
There's so much to look forward to when Spring rolls around. It's like coming out of a hibernation of sorts, just like Phil popping out from underground. We're pleased to know when Spring is on its way. We never know, though, exactly how soon or late that spring-like weather will arrive.
Moving on To Them Taxes
Another event revolving around Spring is the US federal tax filing season. Whether Phil forecasts an early or late spring weather-wise, you can count on April 15th being the designated deadline for those annual taxes. Taxes take preparation and accuracy to complete. This tradition, though, is not generally one people look forward to or celebrate: but rather dread. In 2020 Americans caught a break with the tax deadline extension being moved to July 15th in response to the Coronavirus-pandemic and financial hardships people faced.
Taxes Are Inevitable
From the get-go, figuring out what to do and where to start with tax preparations can be daunting. Filing your taxes can also be intimidating, time-consuming, and quite confusing for many, myself included. But you don't want to wait until the very last minute. Filing your taxes late can end up costing you in penalties. There are over 150 types of penalties the IRS can impose. There are additional penalties and added interest involved with paying taxes late, too. 96% of the penalties individual taxpayers face relate to failure to file and failure to pay. Don't let this dark and heavy cloud loom over your head. There are means and ways to help you pay your taxes when they come due.
There Are Options Available to You
The IRS Can Sometimes Be of Help
You can reach out to the IRS and arrange an individual payment plan at IRS.gov/payments. An aggressive payment plan option is available for 120 days or less. This plan doesn't have a setup fee associated with it, but you'll still have to pay any penalties and accrued interest. The IRS offers another option if you need more time to pay. An installment payment plan with the IRS gives you up to six years to settle larger tax debts, including a few years of back taxes owed. Longer installment plans afford you more time. They can provide you with more manageable and reasonable payment amounts as well, and are expected to be made every month for the duration. Again, all the penalties and accrued interest still need to be paid back on top of the cumulative taxes owed.
Using Credit Cards or "Using" Friends
Neither is ideal. If you don't want to go the route of working directly with the IRS, you can consider a few other ways to find the funds. Surprisingly enough, you have the option to use a credit card, but that's only an option if you have the necessary credit available. You'd pay the credit card interest on top of the penalties and accrued interest on what you owe. Borrowing from a close friend or family member may be another option for you. Mixing money matters with people who are close to you is something some may consider but may not be an option for you. Things can get messy, and you could end up ruining the relationship with a family friend or favorite relative.
Taking Out a Personal Loan
Safe, secure, and no collateral needed sounds like a good way to handle this situation. Take out a personal loan with a financial institution and avoid the penalties, fees, and interest that result from not paying your taxes on time. If you have a good credit history and can snag a low rate with your high credit score,' 'you've done yourself a big favor. Personal loans provide flexible funding that can be used to cover your tax bill at a competitive, fixed rate.
There's Also A Bright Side, You Know
Taxes aren't all gloom and doom. There are a fair share of people who wind up receiving a tax refund. The average individual refund is said to be a little more than $2,000. That's a nice chunk of change to receive as one lump sum. You should use it wisely and consider starting to build a better financial future.
What are some options and smart choices you can make if you're receiving a tax refund this year?
Take time to consider what you might want to do.
- pay down/off credit cards and debt
- build an emergency fund for unexpected and costly events
- use the extra money for big-ticket items and events you'll truly enjoy, like paying for a grown child's dream wedding or taking a family trip overseas
- invest the money or add it into your retirement plan; either way it will be money saved for those retirement days most of us dream of.
- invest in yourself -career development, training courses, higher ed degrees can pave the way to advancement and growth professionally
- fix up and renovate your space -you can elevate its style and value by bringing it back to life and into the current century
- donate and do some good for those less fortunate than you
Whatever your tax situation, make a plan to file your taxes on time. It won't be quite as difficult a situation now, because you've got options available.
« Return to "Money Talk Blog"Go to main navigation