Money Management

A tax extension gives you until mid-October to file your 2023 tax return. Read on to see why waiting that long could hurt you. [[{“value”:”

Tax returns were due this year on April 15. But if you weren’t ready with your 2023 return at that time, you hopefully requested an extension.

The good thing about a tax extension is that it gives you six extra months to get your return over to the IRS without incurring a failure-to-file penalty. And that’s huge, because that particular penalty amounts to 5% of your unpaid tax debt associated with your late return per month or partial month you’re late with your filing, up to 25%.

As a point of clarity, you won’t be penalized for a late tax return if you’re owed money from the IRS. Let’s say you overpaid your taxes by $3,000 and file your taxes two months late. That means the IRS gets to keep your $3,000 an extra 60 days. In that regard, you’re penalizing yourself, so the IRS isn’t going to pile on.

But let’s say you owe the IRS $3,000 and you’re a month late submitting your tax return. The agency is going to tack on a 5% penalty for not submitting your taxes by April 15, forcing you to pay an additional $150. Ouch. So if you’re ever going to be late with a tax return, it always pays to get an extension to take the failure-to-file penalty off the table.

Still, you don’t want to sit on a tax extension you recently got for too long. In fact, if you got an extension last month, you may want to file your taxes in May for one big reason.

Limit the interest and penalties that accrue against you

If you got a tax extension this year, it means you have until Oct. 15 to file your 2023 taxes without having to worry about a failure-to-file penalty. But if you owe the IRS money from 2023, the longer you wait to pay your tax bill, the more interest and penalties you’ll accrue. And you probably won’t know what your tax bill amounts to until you file your return and finalize those numbers.

Now thankfully, the late payment penalty isn’t as harsh as the failure-to-file penalty initially. It amounts to 0.5% per month or partial month your payment is late, up to 25%.

To illustrate the difference between the late payment penalty and the failure-to-file penalty, with the former, if you owe $3,000 and are a month late, your penalty will total $15. With the latter, you’ll owe $150, or 10-times as much.

But still, you don’t want to keep adding to your total IRS bill by letting that late payment penalty accrue. And you don’t want to keep accumulating interest on top of that.

So if you were given more time to finish your taxes, use the second half of May to get the job finished and be done with it. If you wait until October to submit your taxes and pay your bill, you might end up having to send the IRS a lot more money.

There are options if you can’t pay in full

Let’s say you manage to finish your tax return in May and find that you owe the IRS $750. That’s a problem if you don’t have that money on hand in your bank account. But you do have options for paying that debt off over time.

One route you can take is to charge your tax bill on a 0% interest credit card and pay it off over time. However, the IRS will tack on a fee on top of that, so you’ll be paying a bit extra either way. The amount of that fee is 1.82% to 1.98% of your tax bill, or a minimum of $2.50.

Another option is to sign up for an IRS installment agreement to pay off your bill over time. This won’t get you out of interest and penalties on your overdue tax bill, but you’ll be considered current on your IRS payments if you stick to your agreement. This option may be a better one if you already have a lot of credit card debt, since adding to an existing balance could cause damage to your credit score.

You may be inclined to take your time finishing your taxes if you got an extension last month and have until mid-October to get the job done. But it’s really in your best interest to file your 2023 tax return in May if you’re able to do so.

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Business credit cards are a popular financing tool for entrepreneurs. See how to get the most out of them with these helpful tips. [[{“value”:”

Even in the early stages of launching a business, it’s good to have a business credit card. You’ll be able to keep your business expenses separate from your personal expenses, which makes organizing all your finances much easier.

Business credit cards are also one of the more common ways to fund startups. A Forbes Advisor survey found that 8.4% of entrepreneurs initially funded their businesses using credit cards. If you’re planning to finance your startup with a business card, here are a few helpful tips.

1. Get a business credit card with a 0% intro APR

If you know you’ll be paying off business expenses over time, the most important feature to look for is a 0% intro APR offer. You’ll be able to pay off purchases interest-free for as long as the intro period lasts.

For example, some of the best business credit cards have a 0% intro APR for the first 12 months. That gives you a year to make payments on business expenses.

This is practically a must-have, because otherwise, you’ll be paying hefty interest charges. The average credit card interest rate is a whopping 21.59%, according to Federal Reserve data. If you finance $10,000 in startup costs, it would cost you $2,159 per year. A 0% intro APR helps you avoid that, at least during the intro period.

2. Don’t take on more debt than necessary

Card issuers often give out generous credit limits on business credit cards. Business owners tend to need more spending power than consumers.

Even if your card has a high limit and a 0% intro APR, be careful about how much you spend. If you can pay for expenses in full, that’s better than going into debt. And if you need to take on debt, be selective about it.

The larger your card’s balance, the more money you’ll have tied up in debt payments. If you’re using a card with a 0% intro APR, the APR will go up once the intro period ends. At that point, the card issuer will charge your card’s go-to rate on any remaining balance you have.

3. Earn money back on your business expenses with welcome offers and purchase rewards

Another benefit of business credit cards is the opportunity to earn rewards for your spending. Many business cards have welcome offers for new cardholders. For example, a card may offer $750 in bonus cash back if you spend $6,000 in the first three months. If you’re going to spend that much money anyway, you might as well turn that spending into a welcome offer.

You can also earn rewards on all your business purchases. Some of the best business rewards cards earn a flat rate of 1.5% or 2% on purchases. If your business spends $100,000 per year, that’s $1,500 to $2,000 back. There are also cards that earn 3% or more in bonus categories and 1% everywhere else.

There are cash back and travel rewards cards available for business owners. If you know which type of rewards card you want, here are some of the top options in each category:

Best cash back business credit cardsBest business credit cards for travel

4. Make your payments on time and pay as much as you can

It’s easy to forget about your credit card payment, especially when you’re busy getting your business off the ground. But if you miss a payment, your card issuer can charge you a late fee. If you go too long without making a payment, or if you miss multiple payments, the card issuer could also cancel your card’s 0% intro APR.

I recommend setting up automatic payments to ensure your credit card bill always gets paid on time. And while you can keep up on your payments by only paying the minimum, you’ll spend more time in debt if you do. Unless you need to keep cash on hand for your business, pay as much as possible toward your balance.

A business credit card can be an excellent short-term financing option. You can’t do better than a 0% APR, and that’s available with some business credit cards, at least for an introductory period. You can also earn money back on your spending if you get a rewards card for your business. Just be careful about how much you finance, and aim to have your card’s balance paid off by the time the 0% APR ends.

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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.
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Tired of near-zero interest on your savings? Here’s what you could earn on the best money market funds and money market accounts. [[{“value”:”

Americans are sick and tired of getting near-zero yield on their savings. In case you haven’t noticed, APYs are at 5.00% or higher — and that means your extra cash in the bank can actually earn money.

But that doesn’t mean your options are limited just to a typical bank savings account. Along with the best savings accounts, which pay 5.00% APY or higher today, there’s another type of safe, liquid, short-term savings vehicle where you can earn similarly high yields: it’s called a money market fund.

According to research data cited by Bloomberg, during 2023, the amount of cash invested in money market funds increased by more than $1 trillion — the highest one-year increase ever.

Let’s look at what makes money market funds so special, and how you can use this type of account to earn higher return on investment (ROI) on your cash.

What are money market funds and how do they work?

Money market funds are not bank accounts — they are a type of mutual fund, offered by brokerages and investment firms. But instead of investing in stocks or bonds, a money market fund invests in the “money market” — low-risk, short-term securities like cash, CDs, and government debt.

Some money market funds also invest in bank securities and corporate debt; these can be slightly riskier than government mutual funds, but can also offer higher ROI. Other money market funds invest only in municipal bonds, and the yields they earn are exempt from federal income taxes — but the yields on tax-exempt money market funds are slightly lower than the highest-ROI funds.

Because of the special ways money market funds are invested, they can often deliver a higher yield than a typical bank savings account — even some of the best savings accounts. There is sometimes a slightly higher risk of investing in money market funds compared to leaving your cash in the bank. But if you choose a brokerage account that is SIPC insured, you will have a similar type of protection to FDIC insurance with a bank account.

How to invest in money market funds with your brokerage account

If you want to put cash into a money market fund, you can look for this type of mutual fund within your brokerage account. With a money market fund, you buy shares of the fund in the same way you’d buy shares of stock or bond ETFs — but the price of a money market fund is typically $1 per share.

Although the share price of your money market fund will not go up, it should earn a yield based on the performance of the short-term investments held by the fund. Unlike CDs, money market funds do not pay fixed interest rates. Instead, the yield fluctuates constantly as the fund buys and sells short-term securities that pay slightly higher or lower interest, based on market conditions.

The best money market funds today are paying over 5.00% variable APY. Money market funds typically calculate their ROI in the form of “7-day SEC yields” — an annualized percentage based on recent performance. Here are a few money market funds offered by prominent investment firms, with their 7-day SEC yields (as of May 14, 2024):

Fidelity® Government Money Market Fund: 4.95%Schwab Value Advantage Money Fund – Investor Shares: 5.16%Vanguard Federal Money Market Fund: 5.26%

Before you choose a money market fund, pay attention to the fund’s fees, also called the “expense ratio.” Some investment firms charge lower fees than others, and this can make a difference in how much ROI you actually get to keep from your money market fund investment.

Money market accounts: How to get similar yield with FDIC insurance

Money market accounts are not quite the same thing as money market funds, but they operate in a similar fashion. With a money market account, your cash is invested in short-term securities like a money market fund — but you get FDIC insurance just like you’d have with a bank savings account.

The best money market accounts are paying higher than 5.00% APY now. Another benefit of money market accounts is that they sometimes offer check-writing privileges or come with a debit card, so you can use your savings for easy cash withdrawals or to pay occasional bills. You shouldn’t use your money market account for everyday checking, but it can be a nice perk.

Bottom line

Money market funds give investors flexible access to cash with an appealing combination of low risk and 5.00% (or higher) yields. It’s no wonder that people have moved $1 trillion of cash into money market funds during the past year of high interest rates. With the high yield and liquidity of money market funds, keeping some cash in your brokerage account can be a good strategy for your savings.

If the Fed continues to leave interest rates high, money market funds could continue to be a good place to keep your savings. If you want some of the same investment style and high yields of a money market fund, but within a bank account, you can open a money market account — and get 5.00% APY (or higher) with FDIC insurance.

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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.Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Charles Schwab. The Motley Fool recommends the following options: short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.

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This writer isn’t interested in owning an electric vehicle for one key reason. Read on to see what it is. [[{“value”:”

Many people are jumping on the EV bandwagon these days, and it’s pretty easy to see why. Cox Automotive reports that the average price of new EVs has come down significantly in recent months.

In September 2023, it dropped by $14,300 compared to a year prior. As a result, a new EV might cost you just $2,800 more, on average, than the cost of buying a new car.

Of course, putting auto insurance in place might cost more for an EV than a gas-powered car due to the higher vehicle price and the components involved. And while you can anticipate savings on gas with an EV, you might also encounter other costs like a battery replacement that cancel those savings out. So all told, an EV could leave you paying more for a car at the end of the day.

But the higher cost isn’t the main reason I’m not considering an EV right now. Rather, the reason boils down to logistics.

The infrastructure just isn’t there yet

Recently, a friend and I took a day trip in her EV to a town we’d been wanting to explore. We spent a good part of the afternoon window-shopping and having a bite to eat.

When we were getting ready to grab some dessert and wind down before heading home, we drove around looking for a charging station — something the town boasted it had for free. But when we got to the area of those stations, we found that there were only four in total, and that they were already occupied.

Thankfully, my friend’s car had enough charge to get us home without too much stress. But this experience just underscores the reason why I’m not ready for an EV. Based on what I’ve seen, there’s just not enough availability of EV charging stations to make this type of vehicle convenient for me.

When I need gas for my car, I drive to one of many stations in town to fill up. And even when I’m far from home, there are usually plenty of fuel stations to choose from.

With an EV, you might have to go significantly out of your way to find a charging station. In some cases, even if there’s a charging station to be found, it doesn’t mean it’s available.

Filling a car with gas can take just five to 10 minutes, depending on the size of your tank. And usually, you fill up and you’re on your way. But charging an EV’s battery could easily take 30 minutes or more, which explains why it can be so difficult to find an available charging station outside of your own home. That’s an inconvenience I’m not willing to grapple with all the time.

I may consider an EV once the infrastructure improves

Filling up my car can be a pain. So trust me when I say that I like the idea of not having to do it every week. It seems like it would be much more convenient to just charge my car overnight at home and avoid those weekly fill-ups.

But once you drive your EV a decent distance, you have to deal with charging your car. The same holds true if you’ve traveled out of town with your car. And because I’ve seen EV owners struggle in that regard, I know the time isn’t right for me to go the EV route just yet.

However, if the infrastructure improves, I’d certainly consider buying an EV in the future. And who knows? By then, the cost of buying one may end up being comparable to a gas-powered car, or even cheaper, depending on how things shake out.

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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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Heading to Costco for your first shopping trip? Keep these points in mind for a smooth experience. [[{“value”:”

The first time I walked into Costco, I was astounded by the size of the store and the range of inventory it housed. In fact, “astounded” may not be the right word. In reality, I was probably a bit overwhelmed.

These days, shopping at Costco is something I do weekly, so I’m used to the various nuances. But if you’re gearing up for your first Costco shopping experience, you may not know exactly what to expect. Here are a few points to keep in mind that could help you avoid unwanted surprises.

1. The shopping carts are huge

If you’re someone who enjoys getting a good cardio workout, then here’s some potential good news. The simple act of pushing a Costco shopping cart around the store could burn some serious calories.

But kidding aside, because Costco’s shopping carts can house so many items, it’s important to keep your spending in check if you’re used to filling a smaller cart at your regular grocery store. Not only might you risk overspending the first time you visit Costco due to the ability to bring so many items over to checkout, but you also risk getting home and realizing you don’t have the space to store everything. That’s far from ideal.

2. You’ll be bombarded with sales when you walk in the door

One trick Costco employs to get customers to spend extra money is placing sale items at the front of the store, so you’re bombarded when you walk in. Try to resist the urge to grab those items, because they could result in a higher bill than you’re comfortable with.

That said, it’s not just the front of the store that might tempt you with impulse buys. You’ll find a host of seasonal items all over the store.

It’s a good idea to make a shopping list for your first Costco experience and do your best to stick to it. Otherwise, you might come away with a much larger credit card tab than you’re comfortable with. If you really want to limit your Costco impulse buys, bring cash for your first shopping trip.

3. The checkout lines can be long — even if you’re shopping at an off-peak time

One thing I’ve noticed at Costco is that whether I’m shopping there in the morning, the afternoon, or the evening, the lines just tend to be long. That’s something you may want to prepare for so you don’t run into a jam. For example, you may not want to squeeze your first Costco trip into your lunch hour if you’re short on time.

In my experience, I find that the store tends to be less crowded when it first opens and in the hour leading up to when it closes. On the flipside, my local Costco is an absolute nightmare on weekends, and I’ve had friends in other areas say the same. So if you want your first Costco trip to be pleasant, aim to go during the week.

4. You can enjoy as many free samples as you want

When I first joined Costco, it took me some time to feel comfortable accepting free samples — even though that’s part of the membership experience. Not only should you feel comfortable trying a sample of a different food at each station you encounter, but you should also know that you can have as many samples as you want.

Let’s say you grab a bite of cheese on your way to the dairy section and are on the fence about buying a whole block of it. In that case, go back over and ask for a second bite. The whole purpose of sampling Costco’s offerings is to feel more confident that you’re purchasing items you’ll actually use and enjoy.

5. Your receipt will be inspected before you leave the store — but not for the reason you think

At a traditional supermarket, you pay for your goods, take your receipt, and leave. At Costco, you’re required to show your receipt to a store employee before leaving the store. And they may take a minute or two to review that receipt and compare it to the items in your shopping cart.

But don’t assume that the reason for this is to make sure you aren’t stealing anything. Actually, the reason Costco inspects receipts is to make sure you weren’t charged incorrectly for the items you’ve purchased. To put it another way, this policy is meant to benefit customers — even though it might delay your Costco exit by a minute or two.

So there you have it. Shopping at Costco is probably going to be worlds different than the shopping experiences you’ve had before. But with any luck, knowing what to expect going in will make your initial experience a positive one.

Top credit card to use at Costco (and everywhere else!)

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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The IRS gets to tax more than just your primary wages. Read on to see how far the agency’s reach extends. [[{“value”:”

Most of us are resigned to the fact that paying taxes is a part of life. And because of this, we’re generally aware that when we earn money, whether it’s from a full-time job or a side hustle, the IRS is entitled to a cut of our pay.

Now, it’s bad enough having to lose a chunk of your paycheck to taxes. But it’s not just job-related earnings the IRS can go after. Here are three lesser-known income sources the IRS can get its hands on.

1. Savings account interest

If you have money in a high-yield savings account right now, you may be pretty happy with yourself — especially if you’re scoring 4% or more on your money, which is what many online banks are paying these days. But don’t make plans to spend all of that interest income just yet.

The reason? The IRS is going to come after a portion of it, which will factor into your tax return next year. (In other words, you won’t have to pay taxes on your interest income month after month in 2024 — but it’ll factor into your total tax obligation for the year when you file your taxes in 2025.)

Worse yet, the IRS taxes interest earnings as ordinary income, which means that interest is subject to your highest tax rate based on the tax bracket you fall into. If you’re earning a lot of money in interest this year, you may want to put a portion of it aside so if you end up having to pay the IRS in 2025, you won’t have to scramble to come up with the money.

2. Dividends

The nice thing about holding dividend stocks in your portfolio is that you get two opportunities to profit. First, you may be able to sell your shares at a price that’s higher than what you initially paid for them. You may also be able to earn money via dividend payments.

But as is the case with interest income, dividend income is subject to taxes. The only difference — and it’s a big one — is that dividend income is taxed more favorably.

In 2024, qualified dividends (most dividends fall into this category) are taxed at a rate of 0% to 20%, depending on your income. And most people will pay either 0% or 15%, since that 20% rate only applies to tax-filers with an individual income above $518,900 or a joint income above $583,750.

3. Unemployment income

Being out of work due to no fault of your own is stressful. Thankfully, in many situations, you can qualify for unemployment benefits to replace a portion of your missing paycheck while you look for work.

Now, you’d think that those unemployment benefits would be yours to keep in full. But wrong — the IRS will come after a portion of that income, even though the whole reason you’re getting it is due to having been booted from your job despite not having done anything wrong. That may be a tough pill to swallow, but it’s important to know ahead of time for tax-planning purposes.

In an ideal world, certain income sources would be off-limits for the IRS. Unfortunately, that’s not the case with these three. It helps to know what income of yours is considered taxable, so you can prepare accordingly.

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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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