Beating Tax Debt: Part 3- Prevention


If you’re battling tax debt, make sure you read Part 1 and Part 2 of this series first. However, if you do not have any tax debt, or, you just want to prevent owing in future years, read on.


To say that an ounce of prevention is worth a pound of cure is a gross understatement when it comes to taxes and avoiding a tax bill.

You CAN automate your preventive steps and reduce your tax stress! It’s a lot easier than you thought, and I’ll provide you with some basic tips in this post on how you can do this.

Several small adjustments can prevent you from having tax bills.

Here are a few ideas for avoiding a tax bill:

Learn which deduction category is best for you. There are two types of deductions: standard and itemized. Standard deductions are the amounts set by Congress, which determines the income that is excluded from the tax calculation. Itemized deductions are an alternative that allows a person to use other expenses to calculate the deduction amount. If you pay mortgage interest, have a lot of medical expenses, contribute generously to charity, or have a home office that you use for your job, then itemizing your deductions may be more advantageous than taking the standard deduction rate. IRS has a list of all of the things that can be included as itemized deductions. Check this list to see which deduction category is best for you.

Go back to school. There are tax credits and/or income reductions available to folks that pay for college. Normally, you can get a student loan for the expenses, but it’s better to pay as much as you can out of pocket (that way, you don’t create a new bill). If you want more information about education tax benefits, IRS’s website features an entire section that explore all of the benefits of obtaining an education. Aside from the tax benefit, getting an education could open the door to better job opportunities and more income to be taxed– uhm, I mean, more money to accomplish your goals.

Open a small business. Small businesses can generate income, but, during lean years, can reduce taxable income. The tax benefits of opening a business include being able to write off business related travel, tools, equipment, qualified training, and even the cost of licensure. The point is to always retain a business purpose: you must remain within IRS’s guidelines. IRS has a whole section on small business, as well. If you decide to cheat a little on your taxes, you may find yourself as the recipient of a very unpleasant audit (as former auditor, I can tell you that you DO NOT want this experience)!

Change your W-4. This was briefly mentioned in Part 2 (under planning refunds for subsequent years via increased tax withholdings). Withholdings generally work in the following way: you do the W-4 worksheet and it will come up with a number between zero (0) and ten (10). After that, you put the number on your W-4 form, turn it in to your employer, and that determines how your withholding is calculated. However, if you really want to prevent from having a huge tax bill, you will either reduce that number (if you calculate 5 on the worksheet, put 3 on the form that you submit to your employer) or indicate that you want additional money held out of each check. You are not legally required to use the number calculated on the worksheet, but you are required to reasonably estimate your tax (don’t put down “10” on the form when your worksheet calculated “2”). This is a less drastic way to prevent tax liability, since this involves smaller payments toward the tax.


That concludes the Beating Tax Debt series! I hope you al have enjoyed the information as much as I’ve enjoyed putting this together for you. If you have tax questions or comments, please feel free to comment below. Also, if you don’t already, be sure to follow me on Facebook, Twitter, and Instagram. I’ll talk to you all soon!

Beating Tax Debt: Part 2- Treatment


After figuring out what is causing your tax debt, the next step is to immediately control the issue. There are several ways to handle tax debt so that it is manageable and less stressful on you.

A multi-prong payment strategy will get your tax debt under control quickly and easily.

Before you can resolve the debt, you will want to explore direct and indirect payment options. There are three ways to pay a tax debt directly, and you can weigh which one works best for your situation. Further, there are ways to indirectly pay your tax debt AFTER you’ve gotten a bill.

First, if you have the money, you can send a check for the full tax balance at the time that the tax return is due. Even if you plan on sending your tax return after the due date, you will still want to submit your payment on the due date, which is normally April 15th. If you pay after the return’s due date, you’ll owe penalties and interest, calculated on a daily basis. If you tend to owe every year, and if your balance is over $1000, you may find that you are assessed an underpayment penalty of 10%, even if you pay off your taxes by the return due date.

If you can’t pay the full amount on April 15th, but anticipate you can have the money within 30, 60, 90 or 120 days, then you can request an extension of time to pay (NOT to be confused with an extension of time to file, which allows you to file up to 6 months after the return due date). The extension of time to pay won’t prevent penalties and interest, but at least you will establish with IRS that you intend to pay the balance in full. You will have to call IRS directly in order to

The third option is an installment agreement. These allow you to pay your balance off over a 72 month period, but there is a charge with requesting them (currently $120). Also, if you are late with your payments or end up owing on a future tax year while you’re under the plan, your plan will be cancelled and you will have to pay a reinstatement fee. This works well for those balances that are too large to pay at once. You can fully pay the balance at any time, and you won’t be penalized for paying more than the required amount or for doing a full payoff.

If you’d like IRS’s explanation of payment options, CLICK HERE.


There are a few interesting indirect ways of paying your taxes. These are great because they are usually easy to deploy and won’t put serious cramps in your lifestyle.

One of the least utilized methods for reducing a tax bill is a penalty waiver request. Once upon a time, IRS used to be able to quickly determine your eligibility for waiver when you called them. I’m unsure if they still have this function, but it’s always good to ask. If you are denied your waiver, you can always write to request it. (I have an EASY waiver request template available here!) Allow 30 days for a response, as IRS is required to respond to all written requests within a 30-day period. Pretty much everyone, except the worst tax offenders, probably qualifies for some sort of reasonable cause waiver.

When the penalties are waived, you can expect your balance to decrease. Depending on the type of penalty, you may see as much as 25% vanish from your bill, not to mention the fact that the interest will decrease, since it is calculated on the tax due and the penalties.

Another way to indirectly pay your taxes is to plan for a refund in the subsequent year. So long as you’re under a payment plan, you will be chipping away at the balance, but the quickest way to see a big drop in your tax bill is to have refunds applied from subsequent years. You can increase the likelihood of generating a refund by stopping whatever caused the bill, increasing tax withholdings, increase pre-tax retirement contributions, and by READING about the different tax credits available. Credits can be the difference between paying on a tax bill for 6 years or wiping it out in two or three years.

THIS is why it’s important to file every year, even when you are only getting a small refund. Even tiny refunds can be applied to reduce an existing bill.

If you need to play catch-up and file some older tax returns, feel free to contact me for assistance, or visit your local IRS so that you can get the forms and publications needed to prepare those old returns!

Stay tuned for the third and final part of this series, that addresses how you can prevent owing tax.

Beating Tax Debt: Part 1- Diagnosis


One of the more interesting things that I’ve encountered when I worked at Internal Revenue Service is the confusion surrounding tax debt. For many people that owe taxes, they find it difficult to get out of tax debt and stay out of it. They don’t quite understand how they got into the debt and what they can do to prevent it in the future. No matter how big or small the bill, the steps for resolving the issue remains the same.

In order to STOP owing IRS, you must understand WHY you owe and you must STOP doing whatever is causing you to owe.

Of course, many people are so intimidated by IRS that they won’t even call IRS to get some help with their tax dilemma. Even worse, many paid tax preparers are not very good at understanding and explaining what generates a tax bill. Sorry to say it, but many paid tax preparers only input numbers, without having much knowledge of tax law and its implications. I’m here to tell you: if you aren’t clear on why you owe, you WILL owe again. So, Step 1 of eliminating tax debt is to properly diagnose what caused the tax bill.


The easiest way to figure out what happened with your taxes is to order your return and account transcripts online (these are FREE of charge and available immediately after signing up on IRS’s website; unfortunately, at the time of this post, the online order system is unavailable, though the transcripts can be mailed to you). Then you can compare the numbers on your copy of the tax return to what’s on the transcript. If you don’t have enough prepayments (either tax withholding, quarterly estimated tax payments, or tax credits) to cover your tax, then you will have a bill. If you find yourself owing for one year, after never owing in previous years, you may want to check the transcripts against one another, to see where the difference occurs.

If you look at your transcripts and are still confused, you can visit your local walk-in IRS so that one of the employees can walk you through your transcripts. If that is more time consuming than you would like, feel free to contact me, and I can assist you. After working at IRS for nearly a decade, I’m confident that I can resolve your issue.

However, I’m sure that with a little patience, anyone can figure out what happened with their taxes to cause a tax bill. This is a crucial step in knocking out tax debt. Stay tuned for Part 2 of the “Beating Tax Debt” series, so you can find out the next step needed to handle your tax debt permanently!

Crafting a Prosperity Plan

Last week, I proposed that we take a new approach to our finances. With a clear view of what really matters to you, it’s time to create a plan.

The overall intent is for whatever you desire to progress into recognizable benefits for you. The progression from innermost desire to outward manifestation is something like this:


The acronym PAR (plan, action, result) is nothing new, but I want you to remember the acronym IPAR-it keeps your dreams, your desires, your IDEAS, at the forefront. Without your desires at the helm, your motivation will fade.

There are a lot of great books and websites that can tell you how to create great plans. In fact, I create Prosperity Plans for my clients, who need a little help reaching certain goals. But for the DIYers, I’m going to give you my quick and dirty method for taking an idea and crafting a plan around it.

Crafting Your Prosperity Plan

1. Choose one of your Needs as you listed in your notebook.
2. Answer the Ws (who, what, when, where, why) that apply to this Need.
3. Think of monthly, weekly, and daily tasks to achieve this Need.
4. Start on one of the tasks IMMEDIATELY.
5. Every week, spend about 15-30 minutes writing down your progress

For an example, I’m going to use a pretty common Want and show you how to create a prosperity plan for it (I’ll leave out only a few details, since this particular Want/Need is a future post-in-the-making.)


WANT: I want to be rich.

First step: Redefine it as a Need (and make it specific)

NEED: I need to generate enough supplemental income so that I can quit my job and still provide for my family.

Then use the rest of the Recipe for Success:
5 Ws
Who: Me
What: generate supplemental income to exceed my current income
When: complete by Summer 2016
Where: Wherever I want to live
Why: So that I may quit my job and focus on my other passions

Here are some monthly, weekly, and daily goals that will get you on the right path:

Monthly Goals
-Create (and stick to) a reasonable budget
-Save money in a rainy-day fund
-Explore alternate ways to earn income

Weekly Goals
-Move my savings to accounts that have have higher interest rates
-Review checking, savings, and credit card accounts to monitor spending habits
-Read one book (as much as your time allows) that teaches money management principles

Daily Goals
-Brown bag your lunch instead of eating out
-Read the finance section of the newspaper (or go to the finance section of your AOL, MSN, Yahoo, etc.,.)
-Use coupons as often as possible, and only purchase items that you absolutely need


Your daily goals feed into your weekly goals, which help you realize your monthly goals. Easy, right? Anything can be taken through this formula, in order to create a plan that get you where you want to be.


The month isn’t over yet! Please stay tuned for MORE great offers and informative posts over the next couple of weeks!

Special Offer- FREE 30 Minute Consultations!

I promised you all that this month, you’d see more posts, more tweets, and some special offers.

Today, I’m offering something REALLY special. Normally, my consultations are 15 minutes long, and longer consultations are only part of purchased programs. However, if you request a free consultation any time through May 21, 2015, I will DOUBLE the consultation time! That’s 30 minutes of FREE advice/answers from me! By the way, this offer will apply to any consultations scheduled, as long as you submit your request by May 21st. The appointment period will run from today to August 31, 2015.

In the contact form below, make sure you put your name, email address, and any finance/tax questions you have. I will do my best to answer them as completely as possible.

I look forward to hearing from you!

A New Way to Approach Your Finances

I’ve met a lot of people that had varying financial circumstances. One of the greatest perks of working as an International Tax Specialist was that I got to see how people around the world financed their lifestyles. With the experience I got working at IRS, I found that the biggest thing keeping people from their lifestyles is their own limiting belief systems. They honestly believe that they cannot afford the life that they desire because of cost. Remember, I saw people living abroad and doing very well, earning much less than many folks here in the US.

To be honest, MOST people can live extremely comfortable lifestyles for far less than they think. The main thing that you will need is a new mindset, or a new way to approach your finances. I will write a few posts about this, as I think that it’s important for everyone to understand my personal beliefs as it pertains to finance, and how I guide my clients’ financial plans. I’m not going to spout a bunch of feel-good theory, but I will share how I approach personal finance when speaking to clients.

First, if you want to live a more quality life, you have to really examine your wants and make them high priority. The key is:

**Redefine your Wants as Needs and You Will Increase the Likelihood of Attaining Those Things**

The problem with most people is that they place their strongest desires in the Wants category, which significantly decreases their importance. I propose that instead of classifying a non-immediate goal as a Want, try classifying it as a Need. When you change how you state your biggest goals, it will tell your subconscious mind that your goals are necessary to your survival and, as with anything needed for survival, your mind will work overtime to find a way to secure whatever survival goal you desire. Here are some examples of Wants redefined as Needs.

*I want a new career
*I need a career that will use my talents to the full and keep me inspired.

*I want financial security
*I need to generate enough passive and earned income so that, even during tough economic times, I may continue to live my fullest life.

*I want to travel internationally
*I need to explore the world, because this feeds my soul and keeps me intellectually stimulated.

When Wants are redefined as Needs, it forces your mind to devote more resources and energy to achieving that redefined goal. I think that any long-term desire can be redefined as a Need. When you make your goals a priority, you will see opportunities that may not have been obvious before; you will also find that you’re subconsciously arranging your life to work in harmony with your Needs.

Writing down your redefined Wants is extremely important. The process of writing takes an idea and makes it something more concrete, tangible, and realistic than when the thought resided in your head. I’d also suggest that every time you take an action toward a goal, make notes of things that worked and things that didn’t. You are apt to repeat a successful experience if you can replicate it.


Please check back in the upcoming weeks for more tips on finance, as well as some very special updates from me!

The 3 Pillars of Financial Success

As a rule, I like to keep things simple. One of the principles I share with my clients is that there are 3 things- and ONLY 3 things- that need to be implemented in order to ensure financial success. These 3 pillars are the basis for every budget, long term retirement plan, and customized Prosperity Plan that I create. Would you like to know more? (I see you nodding!) Here is what you need to be financially successful:

Reduce Debt

This isn’t a discussion about good debt vs. bad debt. As far as I’m concerned, ALL debt should be eliminated as soon as you possibly can. Debt that isn’t tied to appreciable assets (like land, businesses, or even education credentials) is especially repulsive. Always aim to pay things off, pay on time, and avoid taking on debt unless it’s for something that retains its value.

So long as you are paying money to others, you will find it hard to have money for yourself and for the things that make your heart sing. Debt reduction is critical to financial success. Less debt is always the better choice.


Earn More

There are lots of arguments made against earning more money. But, those arguments invariably come from people that complain about not having enough money. Not only do those underfunded folks bash those that earn more, but they justify their own scarcity so that they won’t have to make any changes or possibly TAKE ACTION to alleviate their monetary discomfort.

As a general rule, more income, whether it comes from wages, self employment income, or passive income streams, is a good thing. If you have enough money coming in, you automatically have access to more options. OPTIONS are all about freedom: if you have more money, then you are free to choose the things that YOU want, without fearing that you will go lacking in other areas of your life.


Save More

This is, oddly enough, the hardest part of financial success. Putting money aside and resisting the urge to spend it has to be one of the most challenging parts of becoming financially successful. It seems that whenever someone finally gets a nice little nest egg put away, sudden “emergencies” appear, which whittle down those savings to nothingness. It’s depressing and demotivating when those “emergencies” happen, which is why some people seem to always have no “rainy day” money. They are discouraged from saving again, lest those “emergencies” deplete that nest egg once more.

My best suggestion is to put the money in an account that requires an unusual amount of effort to do withdrawal. My federal job has the option for thrift savings accounts, and it takes quite a bit of paperwork in order to do a withdrawal. That, in my opinion, is enough of a deterrent to keep me from going in and recklessly spending my retirement savings.


Those are my top tips for achieving financial success. These are recommendations that I’ve personally implemented successfully. What are some of your favorite financial strategies/tips?

5 Ways to Save Money TODAY!

I’ve spent the past few weeks digging through tax returns (yay for life after April 15th!) and love that I can now turn my attention to overall financial fitness. If we want to live more prosperous lives, we have to watch the habits of those that are living quality lifestyles. Many wealthy individuals use certain techniques to maintain their standard of living; mainly, they focus on keep their expenses low, while simultaneously growing their assets. No matter what you earn, you can always employ the “Reduce Expenses, Increase Assets” perspective.

These tips are in no way original, but who doesn’t occasionally need a helpful reminder?

1. Eat at home. According to the Wall Street Journal, individuals in lower income levels spend more on food than those in higher income brackets. Now, the infographics featured on WSJ are simple snapshots and doesn’t account for everyone’s circumstances, but generally speaking, these hold true. The convenience of purchasing something premade or dining at a restaurant often comes at a higher price, both monetarily and healthwise. So, instead of dining out or buying something prepackaged, eat a healthy, homecooked meal. Make sure that you cook enough so that you will have tasty leftovers for the next day’s lunch!

2. Cancel an unnecessary subscription. Most of us have at least one subscription that we can eliminate, whether it’s a magazine, newspaper, subscription box full of “surprise” items or premium cable television stations. One of my hobbies is genealogy and I had a paid subscription to a genealogical research website. I cancelled the subscription to the website in favor of going to the library. I find that going to the library helps me to focus and use my time more wisely; the monetary savings is just a perk! So, go ahead and cancel that subscription. If you find that you cannot live without it, you can always renew your subscription.

3. Avoid shopping websites and physical stores. This is so obvious, yet how many of us find ourselves mindlessly wandering over to our favorite online stores, perusing the “What’s New” pages and making a mental list of the items we want to get soon? If we don’t visit the websites, then we can’t be tempted. The same thing goes for visiting our favorite shops to see what has been stocked since our last visit: if we want to save money, avoid the places that want you to spend your money!

4. Call a service provider to reduce a bill or get additional perks. This can work for any business with whom you have an account. It works particularly well if you have cable television, credit cards, or even a bank or credit union account. When contacting the provider, mention how long you’ve been a customer and how much you’ve enjoyed doing business with them, then ask if they have any specials or if your account qualifies for any bonuses. The key to this is to be pleasant and not demanding. The customer service representative will be thrilled that you aren’t irate, and they will eagerly share what offers are available to valued customers like you.

5. Plan a free activity. I once knew a person that could not fathom doing any activity that didn’t cost money. In fact, every time his wife asked him to go out and do something fun, his excuse was that he had no money (of course, his wife knew his financial situation; he didn’t lack money, he lacked creativity and originality). Every time he did something fun, it cost him a significant amount of money. As you can imagine, his finances were in shambles because none of his entertainment was free. Do a free activity for a change. Even small towns have lots of free activities available. Try going to a local museum, enjoying a picnic in the park, visit the local library (these often have fantastic free events), joining (or creating!) a book club, or finding a local festival that has no admission costs. If you live in a medium- to large-sized city, there are a plethora of free options. Get creative!

Those are just 5 quick, easy tips to help you save money today. What are some of your favorite money-saving ideas and activities? Please comment below and share some of the ways you’ve reduced your expenses.