• Posts Tagged ‘mistakes’

    No IRS, I Don’t Owe You $7,000

    by  • September 20, 2012 • Tagged: ,  • Comments

    taxes

    I filled it out correctly, I swear.

    To this day, I still love getting physical, tangible, U.S. Letter Carrier delivered mail. Of course, these days that is becoming increasingly scarce (Postal Service shutdowns notwithstanding) as most of my communications arrive via electronic mail.

    However, there’s one envelope with my name and address that I never like to receive: an IRS-sent letter. The IRS never sends anything pleasant like a thank you card for paying  taxes on time or a birth announcement from a random IRS agent. No, it’s always, “Hey you didn’t do something correctly and you should fix it before we send in men in black suits and sunglasses over to your place and garnish your cats for past due taxes.”

    As you can probably guess, I was the recipient of a mailing from the IRS. It came three days after I e-filed our taxes; I was initially surprised that they would respond so quickly, but then I realized that if they are owed money they really want to get it as fast as they can. I guess fortunately for me, the letter wasn’t in regard to the tax returns I has just submitted; it was in regard to a $7,000 bill that they think I owe.

    There wasn’t really anything that explained to me why I owed the IRS $7,000, just a very threatening letter stating that I should pay VERY SOON or have my wages and cat’s kibble garnished. Also included was a table stating the amount due, the amount owed, the interested owed (!), the date from which it was owed (September 2011), and a reference to IRS Form 941. Form 941 is used by business to report quarterly taxes for their employees. The problem? I have never had any employees, EVER, and certainly not in September 2011.

    I spent the next day at work on the phone with various IRS representatives (sidenote: if you ever have to call the IRS, have something else to do because you’ll be on hold for a LONG LONG time). The letter was sent by their ACS department –  Automated Collections System. Getting information from was difficult because none of the information matched up, and I’m not even sure they was supposed to divulge as much as they did. I found out that someone may have transposed numbers somewhere along the way; the EIN (a social security number for businesses) belonged to me, but all of the other information on the account pointed to a business in Buffalo, NY. I’ve never been to Buffalo, NY. I’m in Chicago.

    After I had the proper information, I wrote a letter and sent it via certified mail to the IRS contesting the whole thing. I was relieved to get letter in return from their investigation department stating that they received my letter and that they are investigating the matter.

    But a few weeks later I got another letter from the ACS department, this time telling me WITH GRAVE CONCERN that I need to pay the taxes NOW. Obviously none of the IRS departments talk to each other. I spent another few hours with IRS representatives making sure that they actually did receive the letter and they won’t take my cat’s kibble or my wages. Thankfully, I was given another 90-day “hold” from any more harassment from the ACS department. Hopefully the department investigating this whole thing will tell the ACS department to CHILL THE F**K OUT.

    Today is about halfway though my “hold” period and I still haven’t heard any decision from the IRS. I know that this is a HUGE misunderstanding and I hope that they realize it, too.

    Have you ever been the victim of other people’s mistakes? How did you fix it?

    image: kenteegardin

    My Terrible Start Towards Financial Responsibility

    by  • May 3, 2012 • Tagged:   • Comments

    payday_loan

    Friendly service, indeed.

    When I started grad school, I also decided to start being “financially responsible.” See the quotes? That means that I had not idea what that actually entailed. I thought that the best way to start this new life was to take control of my debts. I owed a few hundred dollars to a friend and a few thousand dollars across multiple credit cards. The plan was to completely pay back the loan from my friend and to consolidate the debts I had on my credit cards by paying off the ones with low balances. Since I didn’t actually have the money to do all of that, I hatched a brilliant plan to pay it all back: Borrow more money!

    Since I had an assistantship, I was paid a monthly stipend; therefore, I thought that I could easily pay back any loan. However, the assistantship paid only about $24,000 gross per year. It was the most money I ever made up until then. I thought I was untouchable so I started getting the plan in action.

    The university that I attended had a short-term loan program that was available to students. As a graduate student, I was allowed to borrow $1,000 without interest for 30 days. Fantastic! I would get the maximum, pay my debts and then pay back the loan, with no real cost to me (other than a paltry $3.00 service fee). But things didn’t work out that way.

    When I received my first paycheck, I realized that after my monthly expenses were paid, I wouldn’t be able to repay the interest-free loan in full. The interest rate on the loan would be a paltry 1.5% per month (18% APR) on the unpaid amount. I didn’t want to pay that interest, so I looked for…another loan. A PAYDAY LOAN.

    If you’ve never had a payday loan (most of you, I hope), it works like this: you present to them your latest paycheck stub so that they can determine the maximum amount that you can borrow. You write a check to them for the loan PLUS the service fee. After 14 days they cash the check. I ended up borrowing the maximum of about $800 as that’s what I needed to repay the remainder of the university loan and get by for the rest of the month. The fee to borrow the money was $12 for a 14 day loan, which meant that the loan was AT A RATE OF 391% APR.

    And that wasn’t the worst part.

    After I got the payday loan, I walked out to my car, which of course was locked. I reached into my pocket to get my car key…

    …but it wasn’t there.

    I patted down all of my pockets, but no keys. I ran back inside the payday loan shop and looked around. No keys. I asked the customer service person. No keys. I went back outside and looked into my car…

    …to see that the key was in the ignition. I had locked myself out. In front of the payday loan shop.

    I was deflated. I needed to call a locksmith, but the payday loan place didn’t have a phone book (remember those? this was before even cell phones were popular). I can still remember the look of pity the customer service person gave me as she handed me the employee phone so that I could call Her (who was my girlfriend at the time [now wife, bless her heart]) to ask if she could call a locksmith for me. She didn’t pick up the first time because after looking at the caller ID, she thought she was getting a call from a bill collector who had been trying to collect debts from the person who previously had her phone number. After I called three times she finally picked up, and upon hearing my voice asked, “Why the hell are you calling me from a payday loan place?” She eventually did call a locksmith for me and even drove to the payday loan place to give me a good ribbing and some moral support. Probably the most disheartening thing was handing over $200 of my newly-loaned money to pay the locksmith. I was so ashamed of myself and embarrassed that this all happened in front of my future wife.

    After all was said and done, I still ended up paying the university loan in installments. And since most of my next paycheck was going to repay my payday loan, I was back at square one and had to use credit cards to get me through the next few months. In the end I did end up “achieving“ my goals of paying back my friend and consolidating my credit card debt, but at an enormous cost.

    Today we’re free from credit card debt and have been since June 2007. Too bad I had to take such a humiliating route to get there.

    This was originally posted on the ImpulseSave blog and an edited version has been republished here with permission. If you want an ImpulseSave account (see my review here), I have two invites remaining in my account, so let me know. 

    image: taberandrew

    Judge Not

    by  • April 9, 2012 • Tagged: , , , ,  • Comments

    Cocktails

    Time Enough for This AND Retirement Savings!

    Image: Kurman Communications, Inc.

    Despite reminding my husband constantly how amazing I am, and how lucky he is to have me, I do, in fact, have a number of flaws that I try to correct (when I can remember them). Besides an anal-retentive need to keep things organized at the expense of the sanity of others, a propensity for nagging, and something of a temper, my greatest flaw is how exceptionally judgmental I am. It’s not something I’m proud of (except for those rare moments when it translates into a useful form of sass that gets things done) – “let he who is without sin cast the first stone,” etc. But it’s a habit that’s hard to break, and it’s one I find largely directed at financial matters.

    When I started writing for “Make Love, Not Debt,” I purported that I wanted to disprove the stereotype of the financially inept millennial. And it’s true! And as a result, there are moments when I want to drop kick some of my 20-something counterparts for their nonsensical financial decisions. An example: a coworker and I were recently discussing a variety of financial things. I mentioned our company’s retirement plan, and their match. “It’s great to have a 403b with a match,” I said.

    “What?” he replied.

    “Our 403b – it’s nice that [COMPANY NAME] puts a match in.”

    “What’s a 403b?”

    Readers, this company sends tons of emails about our benefits. When you start working, at the MANDATORY ORIENTATION, they run through all of your retirement plan options, and discuss the basics of a retirement plan, how to contribute, what the company-specific options are, and how you can make investment decisions. You get gads of mail reiterating all of that information. Not only does this company match – it puts money into your account whether or not you’re contributing. It is FREE MONEY. And this co-worker, who is a few years older than I am, and has been at this company for about a year longer than I, had no idea what I was talking about. He had no idea that he could be contributing to a retirement fund – nay, he seemed to have no idea what a retirement fund is. He had no idea that he has free money sitting in an account, courtesy of our employer. At that moment, I was judging the heck out of him. You’re 28! You work for a company that goes out of its way to explain its retirement fund to you! Why do you have no idea what I’m talking about? Why are you not taking advantage of the pre-tax contribution options? What is wrong with you?!

    Granted, this is the same friend who has upwards of three-digit student loans, and still spends more money on clothing than I do. So I have lots of judgment to go around with him.

    Alas, this is a common theme among my acquaintances. A 29-year old graduate student I know (who has the same stipend as my graduate student husband, and lives in the same rent-free housing that we do) once told me, “Oh, one day I’ll have enough money to put in a retirement fund!” And within the next breath, described the $180 pair of jeans she had just purchased. I realize that this prevailing sentiment comes from a place of procrastination. People think that they’re young, and that there will be lots of time later on to sock money away from retirement, when they “have it.” For now, there are nice jeans and happy hours and trips to spend that money on. I get it! I understand the allure of cocktails and trips and jeans. I’m young, too, and I like having nice things. But how do we get my generation to realize that all of that money doesn’t just appear later on in life – you have to start early. How do I drill into the young minds of my peers that the power of compound interest is amazing, and if you do even a little bit right now, it will make a world of difference? How do I convey the simplicity of designating a pre-tax contribution to your retirement fund? And how can I avoid making my judgment face throughout it all?

    Stupid Mistake: Missed Travel Insurance Deadline

    by  • January 14, 2008 • Tagged: , ,  • Comments

    I just discovered we made a stupid mistake. We missed the deadline to apply for travel insurance. WE are planning to spend a few days of our honeymoon in Turkey, a country that has seen a recent surge in terrorist threats and activity. We’re keeping our fingers crossed that we won’t be affected, but we had planned on purchasing an upgrade to our travel insurance policy that would allow us to cancel that part of our trip in case we feel that the terrorism has become too dangerous. We booked our honeymoon through a travel agent, and she dutifully sent us the paperwork for the travel insurance, along with a nice hand-written note reminding us to fill it out and promptly fax it back to her.

    We didn’t.

    For a month, the paperwork sat untouched on the desk and we kept saying, “We really should send that in soon” but neither of us even bothered to read it. Finally, I decided to start this task. I researched travel insurance and found out that the one our agent had recommended is highly rated and considered the best policy for where we’re going. You can even apply online. Hooray!

    So I start the application, and one of the first questions is, “When did you first pay a deposit for any part of your vacation?” I answer it truthfully, and instantly many of the insurance upgrade options are grayed out. A tiny message informs me that these options are only available in the first 15 days after the first deposit is made on any part of our trip. Oh nos!

    We can still purchase the basic coverage, but not the upgrade that would let us cancel due to terrorism. Now we just have to hope that everything settles down in time for our trip. We did learn a valuable lesson though: book your travel insurance as soon as you put down that first travel deposit!

    Warning: Danger Ahead

    by  • October 18, 2006 • Tagged: ,  • Comments

    A lot of our readers want to know how I got so deep in debt. Didn’t I see the warning signs? Couldn’t I see there was a problem before we had a net worth of nearly negative $100,000? Unfortunately, it’s easy to be blind to what you don’t want to see. To help others who might be heading down that same road, I’ve come up with a list of “warning signs” that I should have paid attention to long before the debt got so out of control.

    1. You treat yourself to something nice on payday because you know you won’t be able to afford it later in the week.
    2. You don’t know the total amount of debt you owe.
    3. You don’t know the exact interest rate on every balance you’re carrying.
    4. You need credit cards to get by.
    5. You know that credit cards should only be used for emergencies…but lately there’s been an emergency almost every day.
    6. You feel anxious or worried about paying your bills.
    7. The financial image you project to friends and family is different than your real financial status.
    8. You hide purchases from others.
    9. You don’t know your net worth.
    10. You’re upset by the amount of interest that accrues each month.
    11. You’re ashamed to ask for help from family or friends.
    12. You would rather not look at the bills.
    13. You need to juggle payment dates and paydays to be able to pay the bills.
    14. You are losing sleep over financial worries.
    15. You can’t imagine life without debt.
    16. You spend a lot of time opening mail and paying bills because you have a lot of accounts.
    17. You can’t afford to save for retirement or plan for big purchases.
    18. You sometimes consider cash advances or loans to be income.

    If these sound familiar to you, check out our “Debt Diet” plan. It worked for us, and it can work for you too. It is very difficult at the beginning but it gets easier, we promise!

    I Un-Heart Merrill Lynch Direct

    by  • March 29, 2006 • Tagged: , ,  • Comments

    A few years ago, I opened a Roth IRA with Merrill Lynch. While this was a bad idea at the time (I used borrowed money to finance the account), over the years the account hasn’t continued to financially hurt me. Until now.

    I did pretty well with my taxes this year – pretty much came out even with Uncle Sam. But I expect to owe some money next year, and have recently been considering opening an IRA to help reduce my future tax burden. So I was wandering around Merrill Lynch’s website looking for information on an IRA when I came across their fee schedule for IRA’s and Roth IRA’s. Having never paid an annual fee, I was shocked to see a $50 annual fee for balances under $20,000. So I called to find out what that meant. The man told me that yes, they have started charging an annual fee of $50, and that it has already been charged to my account. I asked him why I was never notified about the fee. He said they sent out e-mails a long time ago and it was also posted on their website. I never got that e-mail, and told him so. I also argued that it took me 7 clicks to view the fee schedule and didn’t feel it was fair to bury the notice under 7 clicks and then claim it was “posted” on their website. He checked my account and found that the notice had been sent to an inactive e-mail address (which I specifically recall updating last year). Simple enough, I thought: they will see my point of view and refund the fee. I asked him to void the fee. He checked with his supervisor, who said no. I told him I was very upset with their service and would be closing the account if he did not refund the fee. He put me on hold and went to ask his supervisor again. While I was on hold, I was browsing the fee schedule and I saw another $50 fee, called an “Account Termination Fee”. The guy finally came back on the line and said his supervisor would not approve the refund. I asked him about the account termination fee and he said that when I closed the account they would indeed charge me another $50.

    To restate: They take $50 out of my account without notifying me, provide crappy customer service, and then help themselves to another $50 when they drive me away. Is this a freaking JOKE?

    I said as much to the rep and he agreed that this was unfair. He put me on hold again and a while later told me they will have to charge me the termination fee, but that he will refund it later. He gave me his name, city, and extension. I started filling out the paperwork to move the account to Vanguard as soon as I hung up. I have wanted to move my account to Vanguard for a while anyway (I was already unhappy with ML’s customer service and commissions before their final assault). I am going to deposit some extra cash into my ML account before the transfer goes through so they won’t liquidate my holdings (at the cost of another $180 charge) to cover my fees.

    I think I’ll try calling again and argue the same fight with a different rep. Maybe I can get them to refund both fees. In any case, I am pretty confident that it is going to take a LOT more work before I see any refunds!

    Veni’s Debt Diet

    by  • March 4, 2006 • Tagged: , , ,  • Comments

    Yesterday we got a desperate request within a comment on our blog. It was posted by a 46-year-old woman named Veni, who feels trapped by her spiraling cycle of increasing debt. She has watched Oprah’s Debt Diet on TV and wishes someone could help her get her finances under control. We were both struck by her plea…Well, Veni, this debt diet is for you!

    Step 1: Recognize that there is a problem.
    Veni’s has done some soul-searching and she admits that her problems include:
    -Trying to keep pace with friends who earn higher incomes.
    -Losing track of small expenses
    -Losing track of her checking account balances and incurring fees
    -Using credit cards for everyday expenses rather than as an emergency backup
    -Poor credit score

    Chin up, Veni! We were in your shoes just 18 months ago. We got educated, made a plan, stuck to the plan, and now we feel great! Remember, every day you stick to the plan you will improve your finances a little. So every day from now on will be the new best day of your financial life! And we think your whole life will start feeling better once you have your finances under control.

    Step 2: Stop hemorrhaging cash
    This step will cut your monthly expenses so you can free up some cash for debt repayment.

    First, cut your monthly fixed expenses. Call your service providers (cable, phone, internet, etc) and try to negotiate a better deal. Tell them if you’ve seen a cheaper deal with another company, they may match it. If your contract is up and they won’t budge, switch to a cheaper company or plan. Then call your credit card companies. Ask them to lower your interest rates and eliminate your annual fee.

    Step 3: Find cash around the house.
    If you are subscribed to magazines you don’t read, call and cancel the subscription. They’ll usually issue you a check for a portion of your annual charge. If you have the receipts for recently purchased items, return them to the store. If you don’t have receipts, start saving them (every one) so you can audit your receipts and make returns later. If there are unused items around the house, sell them on eBay. Buy a newspaper, clip all the coupons, and sell the ones you don’t want on eBay.

    Step 4: Stop spending.
    From now on, before you purchase anything ask yourself these questions:
    1. Is it absolutely necessary for me to buy this?
    2. Can I rent it or borrow it instead?
    3. Is it on sale? Can I get it for less?
    5. Is this worth ruining my credit for?
    This means no new clothes, shoes, household items, you name it. Approved purchases include food, gas, utilities, and other minimum necessities only.

    Step 5: Increase your income.
    Consider working overtime (if your job allows it), asking for a raise, or getting a second job. If a formal job won’t fit in your schedule, see what you can do to earn money part-time. Can you baby-sit for neighbors, sell crafts on eBay, or do other small chores for cash? Also, check your mail for special offers that give you a cash bonus for opening checking or savings accounts. If you spare the cash for the deposit required, you can reap the bonus cash then close the account.

    Step 6: Get Organized.
    Create a spreadsheet or buy some budgeting software. Enter all your information then update it at least weekly. At a minimum, you need to know: The total amount of debt you owe, to whom, and at what interest rate; the total cost of your monthly fixed and variable expenses; your monthly income. Start saving every financial statement you receive. Buy a file cabinet and folders. Create a folder for each expense and sort your statements. A great book that explains very well how to do this is Smart Couples Finish Rich by David Bach. You also should know your credit score and understand why it is what it is. Get your free credit reports online, and pay the extra little amount to see your FICO score. There should be an explanation on here for why your credit score is low, such as “Too many late payments in past year.” Flip these around and they become suggestions for how to improve your credit.

    Step 7: Set Realistic Goals
    Some of Veni’s goals include having enough money to buy a car and a one bedroom condo within 2 years.
    First, determine if these are realistic goals. It seems like a long reach to stop getting into more debt, reverse your actions, and save up enough for a down payment within two years. We’ve been following our plan for 18 months and have paid off over $6,000 of debt and improved our credit scores significantly. Still, we haven’t even begun saving up for these kind of large purchases. Maybe you’ll need to give yourself a few extra years to reach your goals. These should be your long-term goals, but set some short-term goals too. Some good short-term goals could be: Cut spending by 50%, Pay off $3,000 of debt this year, or Improve your credit score by 10 points this year.

    Step 8: Get educated
    As soon as you have taken these emergency measures to immediately fix your finances, begin getting educated about personal finance. This doesn’t have to be boring or expensive. You could watch Suzi Orman’s television show about personal finance, read blogs like this one, or borrow some books from the library.

    Step 9: Stay Motivated
    Instead of surrounding yourself with the Jones’s (and their shiny new cars and houses), surround yourself with people who respect your financial goals and help you achieve them. The personal finance blog community is full of people like this. Your real-life friends will probably be supportive if you tell them what your goals are, too. You can also use Excel to create charts showing your progress in paying off your debts and saving for your goals. These charts can help keep you motivated as you see your progress increase over time.

    Well, Veni, there’s a fresh start for you! Congratulations on taking the first step and asking for help. We’re not financial experts, but these are the same steps we’ve been following for the last 18 months. We can assure you that taking these steps can only help you! We wish you well on your new financial journey. It won’t be easy or feel very good at first, but in the end you and your FICO score will be feeling HOT. We’d love for you to let us all know how things go for you, so be sure to stick around the blogging community!

    Mistakes We’ve made

    by  • February 14, 2006 • Tagged: ,  • Comments

    We recently heard about the Mistakes Carnival, and we got inspired to have a good laugh at some of our dumber financial moments. Please, don’t try these at home!

    He took out a payday loan at like 200% interest…then locked his keys in his car in the parking lot and had to call her collect to come rescue him. Yes kids, it’s true: She got a collect call from Check Into Cash.

    She bought $500 Manolo Blahnik shoes because Sarah Jessica Parker said they were cool on Sex and the City.

    She took out a student loan freshman year of college, right when she was learning about personal finance. She read somewhere that it’s important to start investing young, so she invested $1,000 of her student loan money in a Roth IRA. Her rate of return over the last 6 years: around 1%. The interest rate on that student loan: around 9%, with a term of 30 years. We refuse to calculate the cost of this mistake!

    She bought a $300 Hermes silk scarf on ebay as an “investment.” As such, it’s un-wearable.

    He got a debt consolidation loan then maxed out his credit cards within 3 months.

    He bought a surround sound stereo system for $250 — then decided it wasn’t cool enough. He sold it to an acquaintance for $100, and then bought another home-theatre-in-a-box system for $700. And spent another $200 for an additional subwoofer.

    We’re lucky we’re not bankrupt.