Money Management

Not everyone gets a tax refund. Here’s what to do if you owe the IRS and can’t pay. [[{“value”:”

Many people who file taxes wind up getting money back from the IRS. But a tax refund isn’t a given. And you may end up owing money on your taxes instead of being due money back.

Having to pay the IRS can be a bummer. But if you have the money, it may be a matter of writing the agency a check and calling it a day.

What if you don’t have the money, though? In that case, you really don’t want to ignore your tax debt. Doing so could get you penalized and result in wage garnishment.

Instead, it’s important to contact the IRS to work through your options. Here are some you should know about.

1. A short-term payment plan

If you think you can pay off your tax debt in 180 days or less, then you may want to set up a short-term payment plan with the IRS. You won’t have to pay a fee to set up a short-term payment plan, though you will accrue interest and penalties on your unpaid taxes until your bill is paid off.

The late payment penalty (also known as a failure-to-pay penalty) is worth 0.5% of your unpaid tax debt for each month or partial month you’re late, up to a maximum of 25%. That fee is in addition to interest. The interest rate, which is adjusted quarterly, is currently 4% per year, compounded daily.

2. A long-term payment plan

If you don’t think your tax bill is payable in 180 days or less, you’ll need to apply for a long-term payment plan or installment agreement. In that case, your fees to set up that plan will hinge on the arrangement you choose.

If you choose Direct Debit, which has monthly payments coming out of your checking account automatically, you’ll face a $31 setup fee if you apply online. Applying by phone, mail, or in person will cost you $107. That fee may be waived if you qualify as a low-income filer. Keep in mind that any setup fee you incur is in addition to interest and penalties (the same rate and 0.5% per month or partial month system described above).

There’s a second option to make your monthly payments directly (but not have them debited automatically) from a checking or savings account, make payments electronically online or by phone, or pay by check, money order, debit card, or credit card. Here, you’re looking at a $130 setup fee if you apply online or a $225 setup fee if you apply by phone, mail, or in person. Plus, you might incur extra fees for paying by credit card.

And again, these fees are on top of interest and penalties. If you’re a low-income filer, you’ll only face a $43 setup fee, and it may be reimbursed.

3. An offer in compromise

With an offer in compromise, you ask the IRS to settle your tax debt for a lower total than what you owe. At first, this might seem like your best route, since it means paying less. But as you might imagine, the IRS doesn’t let people off the hook so easily when they owe money. So if you’re going to ask the IRS to lower or eliminate your tax debt, there needs to be a good reason for it.

Usually, an offer in compromise will only work if you can prove to the IRS that your debt isn’t payable (such as if an injury or disability has rendered you unable to work on a long-term or permanent basis), or if you can prove that paying your tax bill will constitute an undue financial hardship. So all told, this is an option you can discuss with a tax professional, but it’s really not one the typical person who owes money should count on.

It can be stressful and disappointing to owe money on your taxes. But you do have options if you can’t pay right away. The key thing is to reach out to the IRS and get onto a payment plan that works for you. As long as you make your payments, you’ll be considered current, which means the IRS won’t seek to go after your wages to get repaid.

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A high credit score can do a lot of good for your finances. Learn how one writer pushed hers to over 800 — and how you can, too. [[{“value”:”

Keeping on top of your credit score is a basic personal finance move that can do you a world of good. Knowing approximately where your score falls means you can target credit cards and loans that you’re more likely to be approved for, and if you notice a significant drop, you can get to the root of the problem.

I recently signed into one of my credit card accounts that offers free FICO® Score monitoring, and decided to check in and see where I stand. (I’m officially house hunting, and having a solid credit score ahead of proceeding with a mortgage will save me money.) I was pleasantly surprised to learn that my FICO® Score is 830 — the highest it’s ever been. Here’s how I made this happen, and what you should focus on to boost yours, too.

1. Avoiding late payments

This is perhaps the best ongoing move you can make to get and keep your credit score shiny and polished. I haven’t been late on a payment to a creditor (or on any bill, for that matter) in years. After going through a short sale on my first home (which I shouldn’t have bought), my credit score was the lowest it’s ever been. At that point, I recommitted to making all my payments on time, every month — and I credit this move to keeping my credit score over 700, even when I still owed a lot on credit cards.

Payment history is the most significant piece of your FICO® Score, accounting for 35% of it. This makes sense, if you think about it — creditors want to know whether you’ll pay them back if they lend you money. If you’ve got a solid track record of doing so, you’ll be rewarded with a higher credit score.

2. Keeping credit accounts open

It takes a lot for me to close a credit account. I actually closed my oldest active one last year, but this was after I attempted to negotiate with the credit card company to have the annual fee waived — or downgrade the card to one without a fee. This came after I asked the company to raise the limit on the card (which was pathetically low).

After repeated refusals of my request, I decided it was best to just cancel the card. I felt OK doing so because I had another account that is almost as old, but that card has no annual fee and a credit limit five times higher. Plus, my score was over 800 by this point.

Keeping an old credit card open is a good way to show creditors a long history of responsible credit management. But if you’ve got a card you don’t use that charges an annual fee, and your score is already pretty solid, closing the account won’t devastate your credit score.

3. Paying off debt

I started working a side hustle in 2022 and used my earnings (less taxes) to get entirely out of debt, as a first step toward getting ready to buy a house this year. Doing so added 100 points to my credit score. This was a drastic move to be sure, but even paying off some of your existing debt can do good things for your credit score.

Credit utilization is the second most significant factor in a FICO® Score, representing 30% of it. Having too much debt relative to the credit you’ve been extended signals to lenders that you may be overextended and living beyond your means. It’s best to keep your credit utilization ratio under 30% of your available credit (easy to remember, right? 30% of your score, keep below 30% usage). So if you’ve got a total credit limit of $10,000 across a few credit cards, aim to owe less than $3,000 total at any given time.

How does your credit score stack up?

According to research from The Motley Fool Ascent, the average American credit score is 714. This is a respectable number, and firmly in the “good” range for FICO® Scores. If your own credit score is already here, you’ve probably exercised caution with debt and made a lot of on-time payments. Creditors will likely reward you with lower rates on loans, but perhaps not the best rates available.

That said, if you’re sitting around 700 and can make some of the same moves as I have, such as paying down debt and maintaining old credit accounts, you could see marked improvement. Bumping your FICO® Score to 740 will put you in the “very good” range — and getting it above 800 takes you to “exceptional.” As a result, you’ll see a real difference in how much you’re charged to borrow money — and you can worry less about whether your application for a credit card, personal loan, or mortgage will be approved.

Personally, I’m happy that I was able to raise my own credit score to this level, as it’s made the process of applying for mortgage pre-approval a lot less stressful. What can a higher credit score do for you? I recommend going all in on improving it to find out.

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Do you enjoy photography and helping people get organized? See how to start a side hustle or small business as a photo organizer. [[{“value”:”

People are taking more photos than ever before. According to Rise Above Research, an estimated 1.6 trillion photos were taken in 2023, an increase of 7.5% over 2022. But along with the daily fun of sharing food photography or taking selfies with friends, all of these photos are becoming a problem. Many families need help with organizing their photo collections.

Cathi Nelson, founder and CEO of The Photo Managers, started a new business — originally as a side hustle — to help people organize their photos. Cathi’s hobby has become a profitable business and an entirely new industry. She now helps people around the world start side hustles as professional photo managers and organizers.

We interviewed Cathi Nelson to learn more about the world of photo organizing, and how more people could turn their photo organizing skills into a money-making side hustle.

Photo organizing: What it is, how it works, and why it’s needed

Similar to scrapbooking, or professional home organizing, sometimes people need help to declutter and digitize their old family photos. Professional photo organizing services can help people back up their online photo collections, print and share their favorite photos in creative ways, and otherwise make sense of the vast realms of digital photography that have become so important to people’s memories and to everyday life.

Here are a few types of services that professional photo organizers might offer.

Saving, finding, and sharing your favorite photos

Think of how many photos are stored on your phone or laptop. Do you know which photos you’d most like to keep, get printed and framed, or organize into fun keepsakes to give as gifts? Not everyone is savvy enough about technology, or has time and emotional bandwidth, to do this themselves. Photo organizers can help you find shortcuts and talk you through the process.

Digitizing old family photos

What about your old family photos stored in photo albums and dresser drawers — what if you had help to get the best photos saved, organized, printed, and shared with the next generation? Professional photo organizers help people create scrapbooks or photo books, or other digital keepsakes like slide decks and videos, to share their family history and happy memories.

Digitizing old photos can be especially important for older adults, or for people who have had a death in the family. If you are trying to clean out Grandma and Grandpa’s old house, a photo organizer can help you find good options to save, digitize, and print your family’s old photos.

Online backup for digital photos

Sometimes people don’t realize how important it is to back up their files. What if your phone or laptop gets lost, damaged, or items are deleted — are you confident that you have the right online backup for your precious photographic memories? Photo organizers can help with this.

Cathi Nelson got started as a photo organizer after working for a business that sold supplies to scrapbookers. “People in the scrapbook hobby used to buy lots of albums, pens, stickers, and paper, but when digital photography started, people stopped printing their photos and subsequently, stopped using the products I was selling,” Cathi Nelson said. “I was an early adopter of the new digital photo technology and it wasn’t long before people were asking me to help them make an album with digital photos or teach them how to manage all their photos.”

Instead of selling physical products to scrapbookers, Cathi spotted an opportunity to offer professional services — but with the same overall goal of helping people organize their memories and tell their stories.

“I realized that I could start to earn income by charging a fee for my time as opposed to a product,” Cathi said. “So I went from a product-focused business model part-time to a service-based business where people were paying me for my time.”

Starting a side hustle as a photo organizer

One of the most profitable side hustles is working as a professional home organizer, and being a photo organizer involves some of those same types of skills. You need to have strong attention to detail and “people skills” to communicate well with the customers.

Cathi Nelson started her photo organizing business as a side hustle, but she quickly started to make significant income.

“In the beginning, I made $500 a week or so and then that kept growing as I got more clients to the point where I was making $2000 to $3,000 a month,” Cathi Nelson said. “At that point, I switched to a full-time gig and now it is a full-time business and has expanded considerably.”

Cathi Nelson has also written two books on photo management, and founded a professional association for photo managers that has over 700 members worldwide. “We offer courses for hobbyists, a certification program for professional photo managers, and assistance to companies in creating backups and workflows for their images,” Cathi said.

Bottom line

If you have a knack for details and digital photo technology, you could put extra money in your bank account by helping people organize their photos. This is an easy side hustle to start, and you can do it while working from your home office. Many people feel confused and overwhelmed by sorting, saving, printing and digitizing their photos, especially when their photos are attached to precious family memories.

With more photos being created each year than ever before, there are opportunities for diligent, detail-oriented, customer-focused people to start a side hustle. You might even be able to build a successful full-time small business as a photo organizer. Learn more about Cathi Nelson and the photo organizing industry at The Photo Managers.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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A car accident has a huge effect on auto insurance premiums. Here’s what drivers need to know about the best time to shop for new coverage. [[{“value”:”

Car accidents can send auto insurance rates skyrocketing. The average annual premium for a driver with a clean record was $2,389 last year. One accident bumped that figure to $3,370 per year.

Drivers who find themselves at fault for an accident might be wondering what their next move should be. Should they shop around for new coverage right away, stick it out with their current insurer, or maybe just stay quiet about the whole situation? The answer might surprise you.

It’s tough to keep a car accident hidden

Drivers who cause a minor fender bender and pay for the damages out of pocket can avoid filing a claim with their car insurance provider. These accidents won’t affect their auto insurance premium because the insurer doesn’t know about them and doesn’t have to pay for them.

But when a driver files a claim, their insurance provider will automatically update its record to include information about the accident. This data goes into the Comprehensive Loss Underwriting Exchange (CLUE) report where other insurance companies can view it. If a police report is filed for the accident, chances are insurance companies will be able to view this as well.

So there’s really no way to sneakily switch insurers before they become aware of a driver’s recent accident history. They’ll check the driver’s CLUE report and other records before selling them a policy. And even if a driver was somehow able to get a policy using false information, the insurer could later increase its rates or even deny coverage if it finds out.

The best time to shop for car insurance after an accident

It’s best to wait until the dust settles to shop for new car insurance. The immediate aftermath of an accident is stressful enough. Just focus on getting through that and paying any applicable bills, like the insurance deductible.

Wait to shop for new coverage until the current insurance provider quotes a new price for the next policy term. It will most likely be higher than the previous rate, but there’s no way to know how much higher. Some companies penalize drivers more for accidents than others.

Once this quote comes through, compare it to rates from other insurers. Keep the details of the accident handy as online quote tools will ask for this information. Then, see which company offers the best deal.

It might be tempting to focus on price alone, but that’s not the only factor to weigh. Think about coverage options and customer service as well. Choose the provider that offers the best all-around coverage.

If none of the quotes are particularly budget-friendly, raising the deductible is an option. This increases the driver’s out-of-pocket costs in the event of an accident, but it reduces monthly premiums.

Reducing coverage is another possibility, but it should be a last resort. Insurers are only legally required to pay up to their policy limits if one of their drivers causes an accident. If the policy limits aren’t enough to cover the full cost of the accident, the driver will have to pay for the remainder of the damages out of their own pocket.

The good news is that accidents only stay on a driver’s record for three to five years. Over time, they’ll affect a driver’s rates less and less until they’re no longer a factor at all. So keep shopping for coverage once or twice per year to see if there are better rates available.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Contributing to a 401(k) consistently could yield huge results. Read on to learn more. [[{“value”:”

You’ll often hear that saving for retirement consistently is a good way to build up a solid nest egg. But now, Fidelity has a good way to back up that claim.

In a recent report, Fidelity found that Gen X savers who contributed to a 401(k) for 15 years straight had an average balance of $501,000 as of the end of 2023. That’s pretty darn impressive.

It’s also worth noting that Fidelity found that the average 401(k) balance among all savers was $118,600 as of the end of last year. So clearly, Gen Xers are way ahead of the game.

To be fair, Gen Xers have had more time to save — in some cases, a lot more time — than their younger counterparts. Remember, the youngest members of Gen X today are pushing into their mid-40s, while the oldest are nearing 60. So while Gen Xers with a 15-year history or more of saving in a 401(k) may have more than four times as much savings as the average participant, they may also have four times as many working years under their belts as some savers.

But still, there’s an important takeaway here — if you want to grow a large retirement plan balance, then you’ll need to save consistently. There are also a couple of other key steps to take.

Invest your 401(k) wisely

The money in your 401(k) shouldn’t just sit in cash. Rather, it’s important to invest your 401(k) savvily so your contributions grow over time.

Many 401(k) plans default to target date funds. These funds adjust your risk profile based on how close to retirement you are. Target date funds are clearly a popular 401(k) investment, but they often charge high fees and tend to err on the side of investing more conservatively. So you may not see the most optimal growth in your 401(k) if you limit yourself to a target date fund.

A better bet may be to invest in a few stock-focused index funds and mutual funds. Index funds are passively managed, so you’ll typically face lower investment fees there than with mutual funds, where you’re actually paying for the expertise of financial professionals to pick investments for those funds. But all told, your returns might be more favorable with index funds, mutual funds, or a combination of both.

Make sure to snag your full 401(k) match

Many companies that sponsor 401(k)s also match worker contributions to some degree. Giving up even a single matching dollar in your 401(k) is something you should try your hardest not to do.

Remember, when your employer funds your 401(k), you then get to invest their contribution as well as your own for added growth. Over time, the results could be huge.

Your path to a $501,000 nest egg may be easier than you’d think

You might assume that Gen Xers with $501,000 in their 401(k)s got there because they contributed a ton of money every year. That’s not necessarily true.

Over the past 50 years, the stock market has returned an average annual 10%, so your 401(k) may be capable of doing the same. If so, and you invest $500 a month over 24 years, you’ll end up with about $531,000.

But remember, in some cases, investing $500 a month could mean contributing just $250 out of your own paycheck and having your employer put in the rest. So hitting that target may be more than doable.

It’s a great thing that many Gen Xers are sitting on a sum of money for their retirement. But if you play your cards right, you could easily end up in the same boat.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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