Money Management

A tax extension can give you more time to file. Here’s what you need to know about the due dates and what they mean to you. 

If you asked for a tax extension in 2023, you’re certainly not alone. The IRS estimates that 19 million taxpayers asked for an extension in a recent year and it’s likely that a similar number will do the same this year.

While it might not feel like nearly six months have already passed since Tax Day, that is indeed the case. We’re just a few weeks away from the extended tax deadline, so here’s what you need to know about the deadline and what you should do if you end up owing more than you expect.

The 2023 extended tax deadline

If you filed for a tax extension, you have six extra months to file your federal tax return. In most years, the regular tax filing deadline is April 15, which makes the extended deadline Oct. 15.

However, in 2023, Oct. 15 falls on a Sunday, so the extended filing deadline is pushed to Monday. Therefore, the extended tax filing deadline is Oct. 16, 2023.

It’s worth noting that if you file taxes electronically, your return must be submitted by midnight on the deadline. And if you mail in a paper return (or a paper check to pay a balance), your return must be mailed by the deadline — it’s okay if it arrives a few days after as long as it’s postmarked on time.

What to do if you owe money

It’s important to know that a tax extension gives you more time to file your tax return, not more time to pay what you owe. At the time you submitted your extension request, you were asked to estimate your tax liability and pay that amount along with the extension.

Having said that, the penalties for failure to pay the IRS are significantly lighter than the penalties for failing to file your tax return by the deadline. If you owe the IRS money, you’ll pay 0.5% of the unpaid balance until it’s paid back, but if you don’t file a tax return at all by the (extended) tax deadline, you’ll pay 5% of any unpaid balance. Both penalties are capped at 25% of the unpaid amount, but the monthly penalty for not filing is 10 times worse than the penalty for not paying what you owe the IRS.

So, if you file your tax return by the extended deadline and end up owing a balance you cannot pay in total, it’s still very important to finish and submit your return. Even if you’re still waiting on documentation for a deduction or credit, you can go ahead and file your tax return without it and file an amended return later when you have what you need.

If you can’t pay the entire amount you owe — or anything at all — here are the steps you should take:

First, if you can make a partial payment, go ahead and pay what you can. Interest and penalties are assessed on unpaid balances, so making a partial payment can make a big difference in the long run.Second, consider enrolling in a payment plan with the IRS. A payment plan doesn’t stop interest and penalties from accumulating, but it does give you more time to pay your taxes. You can divide your balance among a series of monthly payments you can afford. Alternatively, you could consider a personal loan to pay your debt to the IRS and avoid penalties altogether.Third, make sure that you don’t end up in the same situation next year. Consider adjusting your estimated tax payments, or modifying your budget in order to make sure you don’t get caught off guard by an unexpectedly large tax bill.

The bottom line is that a tax extension can buy some much-needed time for American taxpayers, but we’re rapidly approaching the final deadline. By knowing what to do (and what not to do) in the event that you owe more than you expect, you’ll be in a position to pay as little interest and penalties as possible and keep your hassle to a minimum.

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Buying a starter home can be a smart move. But read on to see why that starter home might accidentally become your forever home. 

People who are new to homeownership are often advised to purchase starter homes. These homes, which tend to be smaller and less updated by nature, often result in lower mortgage payments, and they commonly require less maintenance. As such, they’re a good option for easing into homeownership.

Of course, finding a starter home isn’t easy these days. Increased land and materials costs have made it more difficult to construct homes in an inexpensive fashion. As such, the supply of entry-level homes has been dwindling and may continue to do so.

But let’s say you do happen to find a starter home. You might assume you’ll stay for a few years and then move on to a larger or more updated home down the line. But here are a few reasons why you instead might end up staying in your starter home for a long time.

1. You’re buying a starter home that needs a ton of work

Starter homes aren’t always the most upgraded. But if you’re buying a home that clearly needs a host of repairs, then you might end up stuck there much longer than expected.

The reason? If you’re forced to spend a ton of money fixing your home up, it might put you in a position where you can’t afford to move for many years. And at that point, you may decide to just stay in your starter home rather than deal with finding a new one after 10 or 15 years.

2. You’re overpaying for your starter home

Because housing inventory is so low, many buyers are raising their bids just to get their offers accepted. But if you overpay for a starter home, you might end up having to stay.

Let’s say you agree to pay $400,000 for a starter home that should really only cost $300,000. What might happen is that the value of that home slowly decreases through the years rather than increases, since it was never really worth $400,000 in the first place. In that case, you might struggle to build home equity, leaving you stuck.

3. You’re buying in a neighborhood that consists largely of starter homes

Some neighborhoods are starter home-heavy. But that might lead to a situation where you end up staying for good.

Once you get used to a given neighborhood, it can become harder to leave. But if there isn’t a larger home in your neighborhood to upgrade to, then you may decide to just stay in your starter home so your kids can have access to the friends and schools they’re already used to.

Staying in a starter home forever is not necessarily a bad thing. It could mean not having to take on a larger mortgage loan and higher costs. But if you’re absolutely certain you don’t want to stay in a starter home forever, then aim to buy a home that doesn’t automatically need a ton of repairs. And also, work with your real estate agent to research home values carefully so you don’t wind up grossly overpaying for your starter home.

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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.The Motley Fool has a disclosure policy.

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The right kind of bank account can be a very safe place for your money. Discover why it’s worth finding an FDIC-insured bank. 

Earlier in 2023, a few big-name bank failures made major news in the world of personal finance. And it’s easy to see why — the thought of your bank going under and your hard-earned cash going bye bye with it is scary. In fact, it’s almost enough to make you close your trusty savings account, put the money in a jar, and bury it in your backyard. But if you’ve got your money in an FDIC-insured bank, you can breathe a little easier. Let’s take a closer look at the FDIC and see why it’s worth taking the time to find a bank with FDIC insurance.

What is the FDIC?

FDIC stands for Federal Deposit Insurance Corporation. This independent agency is backed by the full faith and credit of the U.S. government, and its role is to protect bank account holders from losses that result from bank failures.

If you open a covered account (more on this below), up to $250,000 of the money you keep in it will be protected in the unlikely event that your bank goes under. And you don’t have to opt in or pay extra for this coverage. By virtue of your bank being a member, your cash is protected.

The FDIC was created as part of the 1933 Banking Act, which was signed into law by President Franklin Roosevelt on June 16, 1933. The previous few years had been marked by multiple bank failures caused by a run on banks — which were a reaction to the ongoing Great Depression and severe financial shake-up that began with the stock market crash of 1929. The law went into effect the following year, and initially, the FDIC only protected up to $2,500 of account holders’ money. Times have changed, and over the years, limits have increased. The current $250,000 limit was put in place in 2010 as part of the Dodd-Frank Act.

What kinds of bank accounts does it cover?

Chances are good that you have at least one or two of the bank account types covered by FDIC insurance:

Checking accountsSavings accountsMoney market accountsCertificates of deposit (also known as CDs)Negotiable order of withdrawal (NOW) accountsMoney orders, cashier’s checks, and other products issued by the insured bank

I have two checking accounts and two savings accounts, and all four of my bank accounts are covered by FDIC insurance. None of my accounts are shared, but if you have a joint bank account, it’s important to know that with two people on the account, the protection doubles to $500,000. And if you have money in a brokerage account, that does not fall under the jurisdiction of the FDIC — instead, cash in that account will be covered by SIPC insurance. Oh, and credit unions have their own insurance scheme — the NCUA, which fulfills the same role as the FDIC.

How do you find an FDIC-insured bank?

Thankfully, it’s pretty darn easy to find out if your current bank (or one that you’re considering joining) is covered by FDIC insurance. The agency maintains an extremely useful tool, called the BankFind Suite, where you can look up your bank’s name. Plus, The Ascent is serious about recommending safe banks, so all of our best-of picks for the bank account categories above carry FDIC insurance.

In this world of newfangled online-only banks, it’s easy to wonder how safe your money really is in the bank. But if your bank account is FDIC insured, you can sleep at night with the knowledge that in the event of a bank failure, your cash is protected.

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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.The Motley Fool has a disclosure policy.

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Higher medical costs have been a burden for my family, but we’re making it work. Here’s how. 

It’s quite unfortunate that even with decent health insurance, the cost of medical care can be astronomical. Data from the Kaiser Family Foundation shows that 1 in 10 Americans owes money in medical debt form, and millions owe more than $10,000.

I’m extremely grateful that medical expenses have not driven my family into debt. I’m also grateful that we have cash in a savings account we can dip into if we can’t cover our medical bills outright. But a lot of people aren’t in that boat.

Meanwhile, a confluence of factors has caused my family’s medical bills to triple this year compared to last year — and we’re only in September. For one thing, we moved over to a high-deductible health insurance plan. While the upside is that we now get to participate in an HSA, the downside is that we have a $3,000 deductible we need to meet before our insurer picks up the tab for our medical bills.

And in case you’re keeping score, we met that deductible in full before the midpoint of the year. My daughter’s broken bone and her $850 orthopedist bill sealed that deal for us.

At the same time as our deductible went up, we found out my daughter needs glasses and my son is in the pre-braces phase at the orthodontist. But don’t be fooled — I’ve already managed to shell out thousands of dollars even though my son has yet to have any metal placed on his teeth.

All of these extra costs have been tricky to juggle. But we’ve done two things to try to make it work and leave our savings intact.

1. We’ve cut back on other spending

When you have kids, a mortgage, and car payments to make, there’s really only so much spending you can easily cut back on. But we’ve done our best to spend less on things like household items we don’t need, and we’ve put off larger purchases.

For example, we were going to get new furniture for our daughters so they could potentially go from sharing a room (and a bunk bed) to having rooms of their own. But given our medical bills this year, we decided it wasn’t the right time to spring for a few thousand dollars’ worth of furniture.

We’ve also tried to save in smaller ways, like being mindful of our utility usage. But in reality, it’s the “not buying things we don’t need now” approach that’s made more of a difference.

2. I’ve taken on extra work

This past spring, I told myself I was going to take it easier on the work front during the second half of the year. Then my daughter broke a bone and a series of other events transpired that left us looking at massive medical bills we weren’t expecting.

So now, my plans to cut back on work a bit are not a go. If anything, these days, I’m doing more than expected to try to give us leeway for additional medical expenses this fall and winter.

I’m grateful, however, that my line of work allows for this. And if it didn’t, my husband would potentially look into a side hustle if it came to that.

A tough expense to grapple with

Medical bills are not an easy expense to cover. If you’re struggling to keep up with yours, you may need to reexamine your spending and cut back if possible, or look to joining the gig economy to boost your income.

But it also pays to find ways to save on healthcare expenses. Ordering medications in bulk is something that saves my family money. And we’ve looked into other options for keeping our bills down.

My daughter, for example, needs to wear her glasses all the time, so if she breaks them (which has already happened once), we can’t just wait weeks for a replacement — she needs a spare pair on hand. But I bought her spare glasses from Warby Parker, which was way cheaper than buying a pair through our local optical store. (We got her first pair at the store where she had her eye exam because our vision insurance covered the bulk of the cost, but it won’t chip in for a second pair at all.)

There won’t always be an opportunity to lower the cost of your medical care. But when there is, I’d highly recommend taking it.

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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.The Motley Fool has a disclosure policy.

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