Budgeting for the rest of us

Author: Georgene

  • Protected: Duties of IRS Agents

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  • How to Set up your Budget for 2023

    Setting up a budget for the year 2023 can be a helpful way to manage your finances and achieve your financial goals. Here are some steps to help you get started:

    • Determine your income: The first step in creating a budget is to determine your monthly income. This can include your salary, any bonuses or commissions, and any other sources of income. Make sure to include any irregular income, such as freelance work or rental income, as well.  (More on this in a later blog post.)
    • Identify your expenses: Next, make a list of all of your regular monthly expenses, such as rent or mortgage payments, utilities, groceries, and debt payments. Don’t forget to include any irregular expenses, such as annual insurance premiums or holiday gifts.
    • Determine your financial goals: What are your financial goals for 2023? Do you want to pay off debt, save for a down payment on a house, or build an emergency fund? Having specific goals in mind can help you make budgeting decisions that align with your priorities.
    • Create a budget: Once you have a list of your income and expenses, you can start to create a budget. Start by subtracting your expenses from your income. If the resulting number is positive, you have some money left over to put towards your financial goals. If it’s negative, you’ll need to find ways to reduce your expenses or increase your income.
    • Track your spending: It’s important to track your spending to make sure you’re sticking to your budget. You can use a budgeting app or spreadsheet to keep track of your expenses. This will also help you identify areas where you may be overspending and make adjustments as needed.
    • Review and adjust your budget regularly: As your circumstances change throughout the year, you may need to make adjustments to your budget. Review it regularly, at least once a month, to make sure it’s still accurate and aligned with your financial goals.

    By following these steps, you can create a budget that helps you manage your money effectively and work towards your financial goals in 2023.

  • Do You Have a Privileged Relationship? Not With Your CPA!

    Do You Have a Privileged Relationship? Not With Your CPA!

    So, have you heard any juicy stories lately? Have you told any? You know, like that income you forgot to report on your tax return, or fake deductions you took on your business?  Do you think you have a privileged relationship with your CPA?

    Whatever you do, don’t tell me! I don’t want to hear it! Yes, even though I am a CPA and am fully qualified to help you with your tax problems, please do not tell me your guilty tax secrets, especially if they involve criminal intent (aka you knew what you were doing was against tax law when you did it, and you did it anyway). Why? Because you and I do not have a privileged relationship, and if the IRS comes and asks me about anything – ANYTHING you told me – I am bound by law to tell them. You and I (or you and **any** CPA) do not have a privileged relationship, even if you hire one of us to help you catch up on back taxes, and I am bound to let you know that in advance.**

    You’ve heard that familiar wording: anything you say can and will be held against you in a court of law? That’s the common Miranda warning, and I certainly don’t have any authority to arrest you (nor desire to do so), but the fact is that you should not tell your CPA anything you don’t want reported to the authorities.

    So, who can help you if you have done something wrong, and you need to get your tax situation straightened out?

    A Tax Attorney, that’s who! There is a concept called “attorney client privilege” which will protect the confidentiality of any discussions, admissions, or anything else you tell to a tax attorney, as long as you do so according to the “rules,” which the attorney can explain to you in a way that you understand. He can legally refuse to answer questions asked by any governmental authority, including the IRS, state taxing authorities, and any court of law. Not only can he do so, he is legally bound by his oath and licensing to do so, as your advocate.

    Tax Attorneys are also better versed on the newer and more technical laws behind taxation (and many are also CPAs as well). Yes, as a CPA, I know the general rules and have the knowledge to help you file a good tax return, but when it gets down to the details of arcane and unusual tax situations, I can’t help you with those. Sometimes even a tax attorney can’t actually resolve the problem, and the situation has to be straightened out in court, and a tax attorney is qualified to do that. Interestingly, a CPA and an EA (Enrolled Agent) are also permitted to appear before the bench in tax court, but if it’s confidentiality you need, the tax lawyer is your guy.

    If the worst happens and you end up in court, or if the IRS starts making demands, your tax attorney also has the ability and training to negotiate on your behalf. And while CPAs take training every year to maintain their license, the training that tax attorneys take centers more on the finer points of the newer laws.

    It’s a good idea to pre-interview your accountant to make sure they are able to do what you need for them to handle. If the scope of the work you need done falls within the category of confidentiality mentioned above, you should go to a tax attorney. If you have a good relationship with your CPA he or she may be able to refer you to a good attorney. Otherwise, ask for references from other attorneys, the state licensing board, other CPA’s and other business owners. Just like you would in any business situation, be sure to ask about fees and expenses before you make any agreements with the attorney. And honestly, find one you like. If you discover you don’t like the tax attorney you are working with, you will never be satisfied with his or her work.

    So, if you ever find yourself needing help with a serious tax problem, before you spill the beans to anyone, including your CPA, head for the tax attorney’s office first and get some confidential assistance.

    Always remember: it’s your name that gets signed on the bottom line of the tax return, and it’s your responsibility to pay all of your taxes, so be sure you understand what your CPA, EA, or tax attorney is doing with your tax return.. If for any reason you feel like you are getting the run-around, request all of your records back -they are required by law to give them to you – and go to another tax professional).

       To Recap:
    1. Your relationship with a CPA is not legally protected
    2. Tax attorneys can provide legally protected confidentiality
    3. When choosing a CPA, an EA, or an attorney, be sure to choose one you like and feel comfortable with.

    **I use the term “You and I” loosely here for an example, as I am not currently in the public practice of accounting. Although I am a licensed CPA, the “public practice of accounting” requires certain permissions that I have held in the past, may hold in the future, but do not currently hold.

    photo credit: omiee via photo pin cc

  • Eating crow – not so tasty!

    Eating crow – not so tasty!

    Well, Mr. BFTROU certainly handed me a wake-up call this morning.  You see, I never, ever ask his permission to post anything, nor would he expect me to.  I don’t send a post to him for editing in advance either.  But after I’ve posted, he generally gets around to reading what I’ve written and commenting on it.

    So, this morning I was somewhat surprised when he greeted me with “that post needs to be entirely rewritten from beginning to end.”  HUH?  So much for being the most supportive husband in the world.

    This morning I was much more likely to call him Mr. Burr Under the Saddle than Mr. BFTROU or Mr. Most Supportive, but I’ve learned – though it’s sometimes hard to admit – that maybe, just maybe, I am not the world’s repository of all knowledge about how to write a blog post that people resonate with.  :-)

    So, I have set the previous post -the one he hated so much -to private and will take his advice by basically starting over completely.  I will make the post sound less like a Master’s thesis in Accounting and more like something that could be helpful to an entrepreneur.

    And maybe, just maybe, if he’s really nice, I’ll consider speaking to him again some day :-)

    Will be back soon!

     

  • Choosing Your Entity Type

    Choosing Your Entity Type

    Self-Employment can be complicated!

    One of the best things you can do for yourself, if you have any sort of side gigs, blogging for money – any type of self-employment income, is to formalize the relationship of your work, by choosing your entity type. As an individual, you can easily file a Schedule C, using your regular 1099 income, deducting the direct expenses, and being done with it.

    If, however, you want a better tax environment, you might want to create a more formal business structure to receive your income and protect your assets.

    There are several entities you can use to help do this; some are more effective than others. The main types are:

    • sole proprietorships
    • partnerships
    • limited partnerships
    • LLC’s
    • Corporations (both C-Corp and S-Corp)

    Depending on your state of residence, and the state where you choose to establish your entity (they don’t necessarily have to be the same), some of these entities may or may not actually be available to you. There are a number of websites that can help you do a proper job of choosing your entity type and they can also help you form it. While they are not going to do this for free, these companies can save the money you spend a dozen times over by helping you avoid some common traps that as an inexperienced person, you might not realize are there.  Keep in mind that there will be state registration fees as well, so this is not a process to be undertaken lightly.

    What type of entity is best?

    Sole proprietorships and partnerships are the simplest of the types, and they are the least protective. That is: you pay taxes on your share of the income, and you are personally liable for the entire amount of any business debt and claims.

    Limited partnerships are expensive to obtain and maintain; I wouldn’t recommend this to the budding entrepreneur. An LLC has a general manager who handles all the details of day-to-day operation; however the limited partners are not liable for business debts or claims.

    Corporations and LLC’s do limit the owners’ personal liability for any court judgments or debts created by the business, but they are a bit more complex and difficult to set up. And in fact, the corporation is an independent entity that survives independently of the owner who controls and manages it. The C-Corporation pays tax on its own profits, and the business owners only pay tax on their personal tax returns for money they receive from the corporation (in salaries, bonuses, etc.). The S-Corporation does not pay tax on its profits (at a federal level, though states laws can easily differ), and the income flows directly through to the individual who reports it on his income tax return.  The C-Corporation files a separate tax return on a Form 1120, and the S-Corporation (even though it doesn’t pay taxes) reports its income on a Form 1120S.

    Observing the corporate formalities

    Today, the President and Treasurer of my corporation, Pro-Count, Inc. observed the corporate formalities. What does that mean? A corporation, being a separate entity with a separate life, must be run by elected officers. The elected officers of my corporation are me (the President) and Mr. BFTROU (Treasurer). We both hold director status, and once a year, the Board of Directors must hold an annual meeting. Since our corporation was formed on approximately this date in 1996, we hold our Board of Directors meeting around this time every year. It’s a good time to plan what we expect for the coming year and make corporate resolutions. So, that’s what we did.

    While this year, our meeting was held at Chili’s, we did set a formal goal to have one of our directors’ meetings not too far in the future, in the middle of the Atlantic Ocean. Sounds good to me! For us, cruising’s where it’s at.  We also decided that we are going to establish a Section 105 Healthcare Reimbursement Arrangement, so the corporation can pay our medical expenses for us.  While this will definitely save us in tax money, it’s not exactly “free” money.  Somebody (mostly Mr. BFTROU) has to actually earn the money before it can be spent on health care or anything else.  We just hope that there’s enough to pay the healthcare costs AND actually, you know, have some left over for us to buy groceries.

    After this meeting, we will draft a document detailing the minutes of the meeting, just as someone would with any formal meeting, we will both sign it, and we will have observed the corporate formalities. This is very important because the IRS takes this sort of thing very seriously. If you are going to obtain the tax advantages of having a corporate entity, they want to see that you aren’t doing it just in name, but in actuality behaving as a business. If, in fact, you don’t observe these formalities, the IRS can perform an act called “piercing the corporate veil” which will change all that corporate protection into personal liability for every aspect of your business.  That is not an appealing thought.

    Due to the vagaries of Mr. BFTROU’s employment, we have always needed a corporation to maintain organization. So, as President and Boss Lady of the corp, I am happy to make sure we Observe the Corporate Formalities every year at this time.

    If you should decide to use a Corporation or LLC to “contain” your business activities, be sure you observe the corporate formalities too.

       To Recap:
    1. Choose an external entity type to hold your business dealings
    2. Set it up according to the rules (and if you don’t know how, find a business to help you get it right)
    3. Observe the formalities required by the form of business you have chosen, to protect yourself against any piercing of the corporate veil.

     

  • Joining the Unemployed – On Purpose!

    Joining the Unemployed – On Purpose!

    I took that big step, and now I’m joining the unemployed.

    Not that that’s a bad thing, but I am not entirely sure whether it’s a great thing yet.

    I don’t think we’ll starve. First of all, neither of us is underweight. Secondly, we have quite a bit of reserve in the bank – else I’d never have taken this step.

    Still, it’s scary. REALLY scary. Because, despite the fact I’ve not used my health insurance in so long I didn’t even know what pharmacy was covered under my plan – you never know, do you?

    So, what brought all this on? Now that I am officially no longer associated with the company, I can say a little, but bad-mouthing isn’t my intent. Honestly, I might want to go back to work there in the future – just definitely, DEFINITELY in a different department. And the skill I have as a result of working for that company makes me highly re-employable there. Despite my unhappiness in the current position, I took care not to burn any bridges.

    I have been reading for months – years, really, about how some people earn enough money through their online efforts to take care of – and in some cases, WAY MORE THAN take care of – their financial needs. I want to be one of those people, because, well, what could be better than working for myself? At home. With no tolls to pay, no gasoline to buy, and all my equipment is high-tech and paid for. Oh, and how could I help but love my boss? But -it’s clear that there are some things I do well, and other things I am not so great at. Which is which? Well, I don’t mind telling you:

    1. I’m a CPA but I haven’t had (nor do I want) recent tax preparation experience. (CPA’s actually DO do other things besides taxes, BTW.)
    2. I can write.
    3. I’m a pretty good editor too. I have learned a technique that makes it much easier to actually see the words I am reading, rather than just glancing over the mistakes and “reading” words that aren’t there.
    4. I have the world’s most supportive husband. NEVER underestimate the value of a supportive spouse, especially when things are bad.
    5. I’m an introvert. (Yes, that goes under the good GREAT side!)

    Oh my. I thought I had a longer list than that of good things!! Maybe I need to work on adding to them. Now for the bad:

    1.  Marketing. I hate marketing. I don’t even know how to do it, but if it involves contacting people and asking them to do something for me (like read my book) I just can’t do it (see item 5, above – the one about being an introvert).
    2.  I’m not all that imaginative. Most of my writing involves factual stuff, rather than stories, though I have been able to string together a coherent story or two. I just can’t do it on a regular basis – or, if I can, I don’t know it yet.
    3.  I don’t join all that well with the rabble (or as Niall Doherty would say: the rabblement*) OK, in all honesty, this is the reason for joining the unemployed.  Just the very idea of sitting in a huge room with no personal space all day, with people milling about, making all sorts of noise (on purpose) and actually trying to concentrate and get something done …I wish I could, but I can’t. Agile, thy name is evil, but in truth, there are people who thrive on this atmosphere. I am (almost) sorry that I am not one of them.

    For the next few months, I am going back to work for the same company (yep, but in a different department) as a contractor. This is the department I originally worked in and transferred out of more than two years ago for what I thought would be a better opportunity. So, I can go in, do the work they ask of me, leave whenever I get good and ready, get paid well, get some real appreciation, and don’t have to participate in office politics. Not a bad deal! I went in for four hours on Friday, and the change in atmosphere was almost palpable. From the warm welcome I received, I have reason to believe the other workers at least tolerate me. It’s good.

    Aside from the issue of health insurance, I’m actually reasonably satisfied with my lot these days. It’s a good thing, too, because who put me there? Nobody but me!

    So my plan from here, other than contract work, is to do the best I can picking up freelance jobs and earning money blogging (see Crystal’s book advertisement in my sidebar – she has many wonderful suggestions for people who are interested in earning money this way.)

    And we’ll see what effect joining the unemployed has on our household budget.  I’ll be reporting here – the good, the bad, and the ugly!

    **Niall Doherty has a wonderful blog, Disrupting the Rabblement, where he exhorts his readers to “think for yourself, live your dreams, piss off some zombies.”  His ongoing story of how he is traveling around the world **without flying** is fascinating.

  • Paying credit card bills? When is the best time for that?

    When is the best time for paying credit card bills?

    If you’re anything like me, you have a credit card or two that you use mainly to amass “reward” points. One of mine gives me points to use anywhere (I normally just have the “points” translated to dollars sent back to my bank account, and the other gives me points to use on Amazon. (I LOVE Amazon, but that’s another story.)paying credit card bills

    I know there are other, fancier credit cards that give you wonderful points that can be redeemed for frequent flier miles and other exciting things, but I prefer to stay with the basics, because it’s more important to me to keep up with exactly how much I owe (and when) than it is to count on some nebulous flight I might take in the future. (That could change if I ever had a job that required travel.)

    I used to definitely be a proponent of paying credit card bills once a month, on the due date, and not one minute sooner. My mother instilled into my brain when I was a child that paying credit card bills – or, actually any bill before the due date, was a terrible idea because I would be passing up the interest I could earn from keeping that money in my bank account until the last possible moment, and what if I ever needed that money for something else, anyway?  Well, so much for the interest, as there hasn’t been any for years!  But you know how we tend to stick stubbornly to the ways we learned many years ago!

    So, for months (since I got my latest card) I struggled with the question “exactly how much money do I have and how much do I owe a few weeks in the future, anyway?)  Note to any future chess opponent: I hereby give the check, the mate, and whatever other spoils of the game are available to you without even pulling out the board, because I am the world’s worst at visualizing future moves and their effect on the overall picture – that translates to “I can’t figure out whether I am going to have enough money at the end of the month to pay this bill!”

    In addition, my newest card – the one that gives me the “best” points – has a reasonably low credit limit, since I haven’t had it long. Although I am certain the limit will be raised, the low limit becomes critical when I am waiting for the due date to pay in full, but my balance is high and I need to buy something else (I say “need” here advisedly because all these purchases are normal living expenses – I am not talking about buying jewels and furs here). Yes, I could just pay cash, but I want those points! The next thing I discovered was that on a recent credit check, I got dinged for having a card that was near its limit. Oops….and the final piece of the puzzle is that I am 100% committed to not paying the bank one red cent in interest.

    So, finally it occurred to me: give up, lady! Do it the right way, and you won’t have to worry about this at all! So, this is how I decided to handle the problem:  I keep track of my credit card charges in the best checkbook/money management program I have ever used: Moneydance.** So at the end of every week, I look at all the charges for the week, and make sure they are legitimate. Then, I do a very simple thing. I am committed to paying credit card bills by the week, and I do just that. Every week, without fail, I pay the entire bill.

    If you follow this simple method, soon you will see several benefits accrue: you will never have to worry about whether you have enough money left at the end of the month to cover all those charges, you will get lots of the rewards you wanted when you chose your card, and you will never have to pay the bank a dime in interest. In addition, unless your weekly expenses are really high, you won’t come near your limit, even if it’s a bit low, and you will show a steady, stable history of payment. And – did I mention: you won’t pay any interest! Win-win all around! Well, maybe it’s not so much a win for the bank – but I presume that’s okay with you – right?

    Now I understand that everyone might not be in a position to just “pay off the bill.” Some people have large amounts of credit card debt and if you are one of those, this post is not aimed at you – at least, not yet. There are dozens of bloggers, including me, that are willing and eager to help you figure out a way to get out from under THAT problem, and when you do – and you will, come back to this post and see about instituting this little method to stay out of that debt which you worked so hard to pay off. When that happens, let me know and I’ll celebrate with you!

       To Recap:
    1. Start off by doing whatever you have to do to get that credit card to a zero balance (I know that’s the topic of another entire series of posts, but this advice is aimed mostly a people who already have their credit cards well under control).
    2. Keep a record in your (preferably electronic) checkbook of every charge, as they are made. This is critical – don’t let the expenses get away from you!)
    3. At the end of the week, on whichever day is best for you, but at least once per week, pay the card off in full.

     

    **http://moneydance.com – this is not an affiliate link, but I love it that much! Moneydance works for Mac and PC (and with my data files kept in Dropbox, I can access the program from any computer that holds the program, which is all of them that I use.) I can use the Mac to interface with it today, and the PC later on today. The hardest thing I have to remember is to close the program on one computer before opening it on the other, and Moneydance even handles that gracefully – I just don’t like to have to mess with figuring out which file I want to keep.

  • Your Mortgage – Does the Mere Thought of the Word Scare You?

    It’s Here! Our very first book – and one we are so excited about, too. Written by my friend,  Y. Patrick Mazor, (and edited by me), this book will open your eyes about what you never knew about mortgages – especially the one that counts – YOUR Mortgage – You Can Save Thousands by Realizing It’s YOUR Money! The book is available on Amazon.com,  (affiliate), and we are proud to announce that this is only the first in what we hope to be a series of helpful and informative ebooks hosted by HowToHackAnything.com.  Already, there are several more ebooks in the planning!

    It has been a real treat working with Patrick to produce this ebook. Having bought several homes in my lifetime and having signed so many papers my head was swimming (such a scary feeling), it’s wonderful to know that there really IS someone out there who not only knows what all those papers are about, but can explain them in words that “real” people can understand.

    Not only can Patrick explain your mortgage in layman’s terms, he can show you how to significantly reduce the amount of money you pay for your home, and he shows you where dangers and the big savings are.  Here is a list of chapters in YOUR Mortgage.

    1. An Inherent Conflict of Interest
    2. The Loan Officer
    3. Transactions
    4. The Application, Credit Report and Upfront Fees
    5. Disclosures
    6. The Process
    7. Yield Spread Premium – Commission
    8. It’s Your Money!
    9. Another Conflict of Interest (and a Bonus)

    Whether you are about to buy a house, refinance your current mortgage, or just want to know what you really got yourself into when you sat down to “sign your life away” at your last home purchase, this is a book you can’t be without!

     

  • Do You Have Shiny Object Syndrome?

    Many of my friends, I have noticed, (and “maybe” I myself am just a little bit guilty of this), is that they — and I- have what my husband calls “shiny object syndrome.”

    So, what is shiny object syndrome?

    Not that anyone’s been noticing, but I haven’t updated this blog in quite a while. Well, there’s a reason for that – a new shiny object has come by. Here’s my history of internet entrepreneurship: I started a blog a couple of years ago on the topic of survival. Then, a new shiny object came by in the guise of a travel agency, and the next blog, all about travel, was born. Third, I realized I was smack in the middle of the baby boomer generation, and there are so many topics to blog about there…and then as a financial professional, I have been wanting to blog about financial topics, too, so I decided to start this blog…and finally, I also write ebooks on my favorite topics, and I have been working on another, expanded ebook about cruising, and working with a friend to help him get a book about Mortgages published – (this one is a true winner – can’t wait to get it published so I can tell you about it)! – and on and on, and you can see I’m spreading my efforts too thin. I have been working willy-nilly on so many things that none of them have been getting the attention they deserve.

    THAT, my friends is shiny object syndrome. You may have heard it laughingly referred to as “Oooohhhhhh, shiny!”

    Shiny object syndrome is a destroyer of productivity. Everything gets started (or at least thought about) but nothing gets completed or even developed properly.

    So, you may be wondering how shiny object syndrome affects you and your life. Well, if you’re lucky, or extraordinarily focused, it doesn’t. But if you’re like me, it can wreak havoc throughout your life, by keeping you from finishing what you started, or even enjoying the fruits of your labor, if you never let your work come to fruition.

    How to get over this? Well, first you really have to recognize the problem and want to get over it. If that is the case, then there are some concrete steps you can take to stop allowing shiny object syndrome to interfere with your life.

    Most of what I am going to suggest takes some list-making, so get out some paper and pencil, or use a productivity-enhancing program like Evernote.

    So, sit down and make a list of all the things you’d like to accomplish in the next, say, year. Take some time thinking about this. Feel free to adjust your timeline to a length that is more meaningful to you. I think a year is a good length of time because it isn’t so long as to lose its meaning, but it’s long enough to give you time to change your circumstances significantly as a result of your actions.

    After you have written down all the goals that occur to you (this isn’t a time to edit in advance), pick the three goals that are most important to you. Think hard before you choose a goal that depends on any of the others to be possible, because then if you fail on one, you fail on the other one as well. Independent goals are better (and don’t fret, because you can always change as you go along.) Hint: don’t allow yourself to be derailed by new technologies – they’ll still be there as you move along, but the idea here is to focus.

    Now, take each goal and write down what needs to happen before that goal can be realized. Do this for all three goals, and this is where you want to add some detail and put them in order. Number two can’t happen until number one is finished. Get as detailed as you can, because this is going to be your action plan. Once you have written down your action plan, it’s time to start doing. If these goals are independent of each other, you should be able to choose an activity from each plan to accomplish each time period (day, week, or month, depending on how far out you are planning) and get moving! The nifty thing about this is that it will give you plenty of shiny object distraction without any NEW shiny objects. All your shiny objects will be things you have already committed (to yourself) to do.

    As you move along, of course you can edit your plan, but this is the time to pledge to yourself that you are not going to allow any new goals to interfere with the ones you are committed to accomplish for the time period you have planned.

    As you move along, mark off each activity as it is finished. That is SO important, because it serves as a visual reminder to you of both what you have accomplished and what you need to do next. Before you know it, you will be so happy about what you are doing that new shiny objects will lose a little bit of their shine.

    At least until the next set of shiny objects comes along….“Oooohhhhhh, shiny!”

    Photo credit: yozza via photo pin cc