Save Money on Your Taxes

Please enjoy this guest post from Hanson So.

Hiding your calendar, turning back the clock, or hibernating is not going to stop the IRS from demanding you to pay your dues. By April 15th of every year, you are required to file your tax returns.

You cannot avoid paying taxes; however, there are many steps that will help you lower your tax bill. Careful planning and implementing the right tactics will lower your tax bill and leave you with more money in your pocket. Here are some key areas to focus on:

  • Reduce taxable income
  • Avoid Fines and Penalties
  • Deal with IRS Debt Wisely

Tax issues are complicated. Make sure that you plan your tax issues together with a CPA or a certified tax advisor.

Reduce Your Taxable Income

Why pay more taxes than necessary? The two easiest ways to save on your tax bill is to make sure that you are utilizing all available income adjustments (reduces your total taxable income), tax deductions, and tax credits.

Here are a few ways that you can reduce your tax bill:

Utilize your income adjustments and tax credits: There are a number of income adjustments and tax credits that can help you save on taxes. Self-employed must keep accurate records of their business expenses. The IRS requires that business expenses be necessary and ordinary. Some common expenses are car, rent, advertising, or even home expenses (if you work from home). Other income adjustments include student loan interest, tuition and fees, moving expenses, bad debt deduction, and alimony.  Some common tax credits are Earned Income Tax Credit, Education Credits, Child and Dependent Care Credit, Adoption Credit, and Saver’s Credit. If you are more adventurous, then check out solar energy and the Federal solar energy tax credit.

Maximize your retirement account deposits: One of the most common ways to reduce your tax bill is the retirement account deduction. There are a number of different accounts, including 401k, IRA traditional, and IRA Roth accounts. The one that best fits you depends on your employment situation, amount of income, and age. It is always best to speak with your HR department and/or a certified tax planner. If you want to save tax money, then maximize your personal contribution and employers matching contribution. For 2015, the IRS allows for a maximum personal contribution of $18,000.

Utilize your full deduction: All taxpayers are offered a choice between a standard deduction and an itemized deduction. The standard deduction for single taxpayers for 2014 was $6,200. However, if you have certain expenses, it might be worth your while to use an itemized deduction. Here are some of the common items: mortgage interest, medical expenses, casualty and theft losses, and charitable gifts. Make sure that you keep good records of all your expenses.

Avoid Fines and Penalties on your Taxes

Filing taxes are a hassle. The whole process of collecting documents, filling out complicated forms and trying to understand numerous complicated laws and regulations is a big headache. Most of us don’t need too many excuses to procrastinate.

However, if you don’t file your tax returns on time and pay taxes that are due, then you are liable to pay unnecessary penalties and interest. One free filing option is the IRS Free File. However, if you have any special issues then consult with a Certified Public Accountant or tax specialist.

Equally important as filing, is making sure that you make your payments on time. A delay in payments will also carry penalties and interest. The IRS has numerous options to make payments, including a mailed check, debit card, online Direct Pay, Same Day payment, and an account to set up automatic Electronic Funds Withdrawal.

Deal with IRS Debt Wisely

According to past IRS research, US taxpayers owe billions of dollars in taxes not paid on time. Taxes not paid on time can be a result of under-reporting, non-filing and underpayment. Under-reporting was by far the largest reason.

For anyone deep in debt, it is tempting to lower their withholding tax rate, skip an estimated tax payment, or fail to file and pay taxes. However, failure to pay your tax bill can have very serious consequences, beyond the penalties and interest. Not paying your tax bill will not save you money. A tactic can be very costly.

One thing that you want to avoid is an IRS tax lien. The IRS can issues an administrative order placing a wage garnishment (IRS wage levy) leaving you with very little to live on. The federal statute that limits wage garnishments to 25% of your income does not bind the IRS. The 2014 limits can leave a single filer with no dependents with a monthly take home pay of $858.23. If paid on a weekly basis that would only be $198.08.

Fortunately, there are ways to deal with IRS tax debt that will both get you debt free and save you money. Here are a few tactics:

  • Installment agreement: The IRS allows taxpayers to pay off your debt in a monthly payment plan. An installment agreement does not eliminate debt, but can save on penalties, interests and administrative fees for setting up the agreement.
  • Partial payment Installment Agreement: This program allows taxpayers to pay over a longer period of time and at a reduced rate. This program requires an updated financial review. In addition, the IRS can require the taxpayer to use equity from certain assets to lower the debt.
  • Offer in Compromise: For people with hardships the IRS offers a program called Offer in Compromise (OIC). The OIC allows a taxpayer to pay-off the IRS debt at a reduced rate. The payments can be a lump sum or a short-term payment plan.

Tax issues are complicated. Whenever in doubt, seek out reliable professional tax advice. However, many of us share common experiences.

Week End Round Up #78

Happy Friday! Welcome to our week end round up #78. There’s nothing like a 12 hour troubleshooting bridge call to 2 AM in the morning to really kill your week. I’m really looking forward to watching some playoff hockey this weekend. Let’s go Rangers!

Enjoy your weekend!

What’s your weekend plans?


Now on to some of my favorite reads from the week:

What I’ve Learned About Money Over 60+ Years @ Budgets are $exy

Will Early Retirement Really Make You Happy? @ Bare Budget Guy

Anything is Negotiable @ Fervent Finance

A Married Person’s Guide To Love And Frugality @

What does Financial Independence mean to you? @ Think Save Retire

Here are some of my favorite blogs:

Prudence DebtFree
The Frugal Farmer
Enemy Of Debt
The Broke and Beautiful Life
Club Thrifty

I continue to featuring Interviews of fellow Personal Finance Bloggers, please consider participating.

Please e-mail me for more details.

Have a great weekend!

Interview Series: Think Save Retire

This is the thirty-seventh in a series of personal finance blogger interviews with fellow personal finance bloggers. Today’s guest is Steve from Think Save

Who is Steve?
Steve: At 33-years-old, I am ready to experience a lifetime of jobless bliss for the remainder of my life. I am married to my wife Courtney who, in addition to being far smarter than me, has been incredibly supportive of our dreams to retire early and, quite frankly, upped the ante a bit with how aggressive to push towards our goal. We are both southwest kind of people who love the outdoors and the warm, sunny weather.

I work for a major player in the enterprise database market full time. My hobby (and my true passion) is photography and my main side hustle that I hope to build into something that will provide some substantial additional income in the near future.

Why did you start your blog?
Steve: My blog is both a way to keep me honest and focused on our goal of reaching financial independence and early retirement…and an outlet to hopefully help others in their journey to reach the same sugary sweet end. It is my little space online where I can postulate ideas and techniques on how to retire from your 9 to 5 job and start to enjoy the virtues that life has to offer. After all, none of us were made to work 8 to 10 hours a day for nearly 75% of our lives.

It is about saying hell no to our finances controlling us rather than us controlling our finances. The blog is about shedding the idea that retirement age is beyond 60 and instead ushering in the fresh air that comes from breaking the rules. Who says you need to retire so late in life? Why can’t you retire, well, now?

But, the blog is also about how we lead our lives as people and how important our minds are in the process of achieving a high level of happiness. This blog is about how to think about your life in a whole new way. Maximize your happiness and minimize your stress. Basically, the aim of the blog is to help us all totally kick ass in every facet of our lives.

What are your favorite blogs?
Steve: I read a wide variety of blogs, like Mr. Money Mustache, Debtless In Texas, Gen Y Finance Guy, Dividend Mantra, 1500 Days, Big Guy Money and, yes, Debt Discipline. I also thoroughly enjoy minimalism blogs, especially Becoming Minimalist.

When did you first become financially literate?
Steve: Believe it or not, I was financially literate at a very early age. My parents taught me the value of a hard-earned dollar in my teen years as a child. Though I definitely made a LOT of mistakes with my finances, I’ve maintained a highly budgeted financial lifestyle, along with a few bucks thrown into an IRA retirement account, since the age of about 15.

My financial literacy truly began to flourish about a year ago when my wife and I decided to retire before I hit 40. Instantly, our routine changed. Our budget got tighter and more detailed, and savings became the absolute highest priority. We no longer let our finances control us. Every day, our money now works for us as we progressively push towards the goal of financial independence and early retirement.

What was the last item you regretted purchasing?
Steve: That would be a brand new Cadillac CTS that I bought back in 2010. I bought the car because I liked the idea of driving around in a Caddy, but once I decided to retire early from the rat race last year, I quickly realized how stupid that purchase was. Cars are incredibly poor investments, and dropping so much money on a car was a huge mistake that I wish that I could take back. First, I don’t need a Cadillac. Second, I don’t need to be buying NEW vehicles. Never again will I purchase a new vehicle. And why? I now prefer not to literally flush my money down the toilet.

If you died today, would your family be okay from a financial standpoint?
Steve: They would be, yes. Over the last year our level of savings has skyrocketed to about 70% of both my wife’s and my salaries. That adds up to piles of cash that we’ve contributed to savings. If something unfortunate happened to me today, my family would be just fine, not only because of our current level of savings, but due to an understanding of how money works and the requisite discipline to keep the money that you earn.

What are you teaching (or will you teach) your kids about money?
Steve: My wife and I are DINKs, and we are planning on remaining DINKs until we retire in a few years – kids are not in the picture at the moment. But, if we do have kids, both my wife and I will teach them the value of maintaining a budget, just like our parents taught us. A dollar spent today ultimately means a dollar that cannot be spent tomorrow. An allowance will not be viewed simply as money that can be spent. Rather, it is a learning opportunity designed to teach just how important saving truly is.

Assuming responsibility for one’s own actions includes the choices that one makes in every facet of life. If you run out of money, it is because you chose to spend it all. It wasn’t the last-minute expense that supposedly hit you unexpectedly. Maintaining an adequate level of savings ensures against running out of money when times are tight or bills come out of the blue. We will teach our kids that THEY are responsible for their own financial well-being, and it all starts with the judicious use of your brain.

What’s your dream job?
Steve: Honestly, no “job” would be a dream of mine. To me, a job implies that I MUST work in order to maintain a living, and that definitely doesn’t remind me of a dream. However, I would love to turn my hobby of photography into a full time, money-making gig. To make this into a true dream, it would entail financial independence first, which would allow me to accept the work that interest me and refuse the work that does not. The ability to refuse work is what would separate this from a typical job.

Why? Why choose to make it harder on yourself now by living frugally? (write in question)
Steve: Living frugally is not tough. In fact, I have found that living a more simplified and frugal life makes the art of living so much more enjoyable, happy and productive. I am not depriving myself of anything that I actually need. Rather, I am simply prioritizing my future self over my present self. The fact is, retiring by 40 is far more important than my ability to buy expensive stuff.

It is interesting how quickly we humans fall into a routine. The parameters of the routine can easily change…perhaps from one that includes a great deal of needless spending on unnecessary luxury items over to a routine that prioritizes frugality. My wife and I are examples of how easy it is to live frugally once your routine gets changed. The longer you live a frugal life, the easier it gets to live that life.

Now, we simply don’t buy stuff. We don’t go out for $100 meals at restaurants. We no longer drop $500 at Home Depot on the spur of the moment cause we want something nice. We downgraded our expense cable package. Neither of us have unlimited data cell phone plans. We spend on nothing that isn’t budgeted for within our budget.
My wife has been crucial in the budget process. She is not only a wiz at math and organization, but she can impressively remember our budget numbers as if they were right in front of her. We always know how much we can spend at any given moment.
And we couldn’t be happier.

interview series

Steve is a 33-year old photographer and information technology enthusiast living in bright and sunny southern Arizona along with my beautiful wife, Courtney, who is a true, bona-fide rocket scientist. My blog,, is my way of getting involved in the financial independence and early retirement community after making the decision last year that working until I’m 60 just isn’t in the cards for me. My goal is to retire by the time that I am 40, which gives me seven years to make everything work.

Net Worth Update: March 2015

Welcome to our extremely late March net worth update. March seems so long ago. It was a great month though, it was the Birthday month for my son and daughter, who turned 16. We celebrated with family and friends on their Birthday weekend. All was cash flowed. Then it was time to get ready for the Birthday vacation. Good news is that we have finally set up the 529 accounts for all three children. I will detail the numbers in our April update as we just got them started.

Here are our March numbers:

net worth

Net Worth Details

Cash ($0.00): Nothing really going on here, other than having a 6 plus month emergency fund in cash on hand!

401K (+2,821.00): I’ll take an almost $3k bump.

Pension (+$221.00): Interest income added this month. The pension contributions are now over as my company ended it in 2014. The good news is that they will be contributed an EOY lump sum into our 401k based on the performance of the company.

529s ($0.00): Coming soon!

Autos ($0.00): Even Steven this month. It’s nice to have two paid for reliable autos in the driveway.

Home ($0.00): Still an estimate, we have no plans on moving anytime soon.

Mortgages ($-323.00): Slow and steady. Still underwater, but we are getting closer to closing that gap. Our mortgage payment remains our biggest monthly expense.

Net Worth

How was your March? How is your first quarter of 2015 shaping up? Are you hitting those goals?