Taxes

The best tips and strategies for paying the least amount of income tax you can legally pay, but also processes for working with the IRS if you can’t pay.

3 Steps to Bigger Paychecks You Probably Don’t Know

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bigger paychecks regular sized hand holding a tiny $100 dollar bill Middle Class Dad

Many Americans struggle to get bigger paychecks

Since the economy began to struggle in 2008, many segments of society have lost ground or just tread water.

But it’s not all bad news and there ARE things you can do to change your habits, expenses, income, and yes, even get bigger paychecks.

To get bigger paychecks, 1st, make sure you aren’t paying too much in taxes. If you get a huge refund each year, that means you lent the government money interest-free. Adjust your allowances to get more take-home pay, but also get on a monthly budget & monitor how future raises can negatively impact your tax bracket.

The good news is there are steps you can take today to increase your paychecks tomorrow; without getting a raise. Bright Money can help, finding faster, smarter ways to save and set aside from your paycheck. It can also pay off your cards faster and save you money on interest charges.

In this post, we’re looking at all the ways you can cut expenses & improve your budget. But specifically, we’re looking at the key steps to take for bigger paychecks.

If you’re in the situation where you think refinancing student loans might make sense, the folks over at Next Day Personal Loan make it easy to get the best offers in under 2 minutes.

You could possibly save thousands a year and you have nothing to lose in checking!

The sad truth about the cost of living and salaries

In my own family, while I have changed employers we’ve seen our expenses go up roughly 46% across the board. But we’ve struggled to get bigger paychecks to keep up with the cost of living.

Healthcare alone for our very healthy family of 4 has gone up about 45% since 2008.

Meanwhile, our family’s annual salary has maybe gone up 9%.  And even if we’re not the norm in that regard, as I get into more below, the average salary increase has only been about 2.2%/year.

So if your family was consistently getting those 2.2% increases since 2008 you’d have increased about 19%.  What happens when salaries increase 19% but your costs increase 46%?

That’s right; less money for your family.

bigger paychecks torso shot of a person with one hand facing up an the other pulling out an empty pocket in their pants Middle Class Dad

Bigger paychecks feel like a thing of the past

As I said, even for families that have done better than ours, available cash for purchases has decreased by 27%!

That’s not only affecting luxury purchases like vacations, new cars and appliances but also just the basic operations of the household.

When we as a country spend less, be it at the department store, grocery stores or vacation destinations, guess what?  They cut back on staff and stock.  Plenty of businesses have actually gone out of business.

So what happens to my household or yours affects EVERY household.

Do a monthly budget to feel like you’re getting bigger paychecks!

You know what happens when we do a monthly household budget?  As Dave Ramsey says, “We tell our money where to go instead of wondering where it went”.

If you and your spouse do a written budget together, before the month begins, magic happens.

When you line up your monthly expenses and all sources of income you begin to see where $$ are being wasted.

bigger paychecks one hand holding several ten dollar bills and the other hand about to cut them in half with scissors Middle Class Dad

When you start doing a budget it becomes easier to see . . .

  1. How much are you spending eating out (vs cooking at home)
  2. If you are wasting precious $$ buying coffee (on the way to work each day?)
  3. Do you constantly forget to plan for irregular expenses (like oil changes or annual auto registrations and then forced to put on a credit card?)

These things individually and on a daily basis may not seem like a lot.  But if you buy a grande drip coffee at your local Starbucks 5 days a week 50 weeks out of the year, guess how much you’re spending?

Well over $600!  Not enough to retire on for sure, but what else could you spend that on?

I’m not saying your life has to be without those little perks.  But maybe Starbucks becomes your once a week treat and not a daily habit.

For less than $5.00/week you can easily brew your own and if you really need to feel fancy, just get a handy Starbucks travel cup for less than $10 bucks!

In addition to non-essentials, how much of your hard earned bucks are just going to pay off debt each month?

Need help getting started on a monthly budget?

I have a copy of my Budgeting Spreadsheet available at no charge

– a key step in feeling like you’re getting larger paychecks!!

This is the very same spreadsheet my wife and I have used for about 7 years.

It’s a simple, highly customizable, Excel spreadsheet and you can download it quickly and easily FOR FREE!

bigger paychecks FREE budget spreadsheet banner Middle Class Dad
If your family is struggling with your finances, I highly recommend you take a moment and read about how to stop Living Paycheck to Paycheck.

Our parents had bigger paychecks than we do

Take a look at this chart courtesy of Mybudget360.com.

You can see the actual cost of something in 1938.  The middle column shows what that item should cost as of 2013 if it represented the same percentage of annual average salary as it did in 1938.

Then the far right column shows the actual average US price as of 2013.

bigger paychecks inflation and cost of living chart Middle Class Dad

Thus you can see indisputable proof that our paychecks are not growing nearly as fast as the cost of living.

Bills are getting larger faster than paychecks

Inflation has averaged just under 2% per year since 2008 according to Usinflationcalculator.com.  According to the Social Security office, average wages have increased an average of 2.2% since 2008. A nominal increase for sure, but still an increase.

So why doesn’t it feel like things are getting better?

Well for one, if you look at the 8 years leading up to 2008, the average annual increase was 3.31%.

So right out of the gate, on average, we’ve seen our raises decrease each year since 2008 about 1.11%.  So as your annual expenses continue to climb, your paychecks are actually going down by about $500/year.

Going back to 2008 up to the time of this post, that means the average American has lost around $5,000.

Is your tax bracket preventing bigger paychecks?

Most of us just try and do the best we can and hope for nice raises each year.

Unlike our grandparents, most households these days are 2 paycheck households.  What we don’t always consider is the impact of moving up a tax bracket might have on our paychecks.  For this example I’m using some tax rates courtesy of BankRate.

Let’s say John and Kris are married and currently make $72,000/year combined.

If Kris gets a $4,000/year raise, that bumps them from a 15% tax bracket to a 25% bracket.  Back when they were making $72k, they were paying (using basic numbers and not looking at deductions) $10,800 in Federal income tax each year.

That left them with a net annual income of $61,200.

Now Kris is proud of that raise of $4,000!  But now making a combined $76,000 per year, in a 25% tax bracket, they will now pay a whopping $19,000 in Federal income tax!

Guess what?  That will leave them with a net annual combined salary of only $57,000!

So for all of Kris’ hard work, their combined annual salary will actually GO DOWN by $4,200!

So do the math and double check, but for your family, it just might make sense for one person to work less so you can have larger paychecks!

I recently had a guest post from writer Barbara Delinsky on the 7 most Common Tax Return Mistakes people make.  If you haven’t seen it yet, it’s well worth checking out!

You can get bigger paychecks with just a few simple steps


The first key is to look at the average size of your tax refund each year.

I know it feels awesome to get a refund that is thousands of dollars.  But you know what feels better? Not giving your money to the government in the first place!

Think of it this way.  If you get a refund of $5,000 that means you essentially lent the government $5,000 over the past 12 months and they didn’t pay you 1 cent of interest.

Do you know what happens if you owe the IRS money for 1 year?  That’s right, not only do they demand it, but often you pay interest and penalties and they can even garnish your wages if you take too long to pay.

Still can’t quite get your budget to balance? Consider starting a Side Hustle to Earn Extra Money!

Lots of folks just like you make an extrta thousand or more a month with just a few hours of their prescious time; and many of those jobs can be done from home!

So why in your right mind would you want to lend them money for a year and get nothing?

Now if you routinely pay taxes come April 15th, this section of the post probably won’t help you much.  But for most Americans, according to the IRS, you’ll get an average of over $3,000 back in the form of a tax refund.

If you didn’t get that $3,000 refund, guess what?  Your paychecks would have been $250/month higher last year.  That’s not enough to do a month long vacation in the Caymans or anything, but it’s something.

My family could definitely use an extra $250/month and I bet yours could too.

Interestingly enough, according to a recent poll by Bankrate, the higher the income level the lower the desire to get a large tax refund.

So what do the wealthy know that we don’t?  Flipped a different way, how many of us simply use a tax refund as a way of saving because we lack the discipline to do it ourselves?

So what do you do if you receive a large refund?

The best place to start is by adjusting the withholding allowances on your W4 form with your employer.  I’m sure most of you reading this have filled out a few of those in your day, but if not, I’m talking about this form from the IRS:

bigger paychecks how to fill out allowances on a W-4 form Middle Class Dad

Click on the form to download a copy from the IRS which you can print, fill in and give to your HR person at work.

So first it will be helpful to know how many allowances you are currently claiming.  This will be shown on your paystubs, but when in doubt ask your payroll person. Often people just blindly put down a 0 or a 1 box 5 where I drew the arrow. In most cases, you’ll likely never want to enter anything in boxes 6 or 7.

In truth, you can put down any number you like in box 5.  Of course, if you put a 45 there and end up owing a lot come April 15th the IRS might not like that, so let’s not get carried away.

Just know the smaller the number in box 5, the more your employer withholds for the IRS.

Want bigger paychecks?  Make the number in box 5 larger

Let’s say you currently claim 3 allowances (normal if you’re married with 1 kid).

Come April 15th you find yourself getting a $3,000 refund.  You could probably up your allowances to 5 going forward and most likely come out next year about even.

Even if you owe a small amount next year, isn’t it worth it to have had bigger paychecks each month?

I used to find in my personal experience that each allowance I added was worth about $50/month to my checks.  But since I’m not a professional tax guy and am only telling you what has worked for me, I’d like to recommend a different approach.

TurboTax has a nifty W4 Withholding Calculator you can use to see EXACTLY how much you should be claiming.

So what are my . . .

3 Key Steps to Bigger Paychecks Tomorrow?

1. Do a monthly budget to make sure every dollar counts!

The budget is your key to financial freedom.

Without a budget that changes each and every month, you’re just guessing where your money is going to. On average, when people start to budget, they usually find they spend about 20% less.

2. Make sure your tax bracket isn’t preventing larger paychecks!

Sometimes more is less.

Depending on your current income an tax bracket, a small increase might actually push you into the next tax bracket. When that happens you’ll actually take home less than if you hadn’t gotten that raise!

I’m not, necessarily, suggesting you turn down that raise. But it is crucial that you know your tax bracket and know what the next threshold is so you can plan accordingly.

3. Check your w4 allowances and increase a little if you consistently get large refunds

A big tax refund just means you loaned the government money all year for free.

Trust me; if you owe them money for a year it ain’t free! So do yourself a favor and set your withholding allowances so that you come as close as possible to break even.

That means you don’t owe them much and they don’t owe you much.

A large refund sounds a whole lot better if you just get bigger paychecks throughout the year instead of 1 lump payment!

Did I cover all the bigger paychecks tips and strategies you were looking for?

In this post, we looked at the reality that many of us face; a significantly increased cost of living and stagnant wage growth.

We talked about the proven power of budgeting and exactly how our paychecks have gotten smaller over the decades. Specifically, though, we looked at the steps you can take to bigger paychecks and maximize the hard-earned dollars you’re getting.

What if your biggest financial challenge?

If you like this post, please follow my Tax board on Pinterest for more great tax and income tips from myself and top finance experts!

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Of course in this legal age we live in, I do have to offer the following disclaimer:
While I have years of successful financial & budgeting experience and run several million dollar businesses and handled the accounting, P&L and been responsible for the financial assets of them, I am not an accountant or CPA. Like all my posts, my posts are opinions based on experience, observations, research, and mistakes. While I believe all my personal finance posts to be thorough, accurate and well-researched, if you need financial advice, you should seek out a qualified professional in your area.
Photo credits (that aren’t mine):
Empty Pocket  by CafeCredit.com is licensed under CC BY 2.0
Destroying Money by  eFile989 is licensed under CC BY 2.0


3 Fast Tax Form 4868 Steps to File Your Extension Quick!

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Tax Form 4868 hourglass dropping sand with the words April 15th Middle Class Dad

Don’t have your tax return completed?  NOW is the time to file your tax extension using tax form 4868!

Have you put off filing your taxes? Wondering if you owe or when the IRS might come knocking?

We’ve all been there and felt that fear and panic that drove is into avoiding the whole thing. But I’m here to tell you that avoiding taxes works out about as well as trying to cheat death.

Sooner or later we all have to pay, so why not take charge of it by filing tax form 4868?

In this post, I’m walking you through every simple step to file your tax extension. That way you can avoid penalties while you get your financial house in order.

We’ll explore the reasons to file an extension and the penalties for NOT filing one and filing late.

But most importantly, we’ll break down all the steps involved in filing tax form 4868 so you can rest a little easier.

Looking for an easy, quick and free way to file your taxes online?

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Learn more about E-file today!

Death you can put off, taxes are certain!

Tax Form 4868 claymation tax collectors Middle Class Dad

The origins of tax day go back it’s introduction in 1913 when the tax deadline was originally March 1st.  The April 15th deadline we know and love was introduced in 1955.

During tax time, if you won’t be able to file by April 15th, NOW is the time for action!

The IRS won’t penalize you if you haven’t filed by April 15th, but ONLY if you file a tax extension using tax form 4868 on or before that date.  If you put off filing and miss the deadline, you’re looking at the failure to file fines of up to 25%!

Do note that the deadline is not always April 15th, as the IRS gives us a grace period any time the 15th falls on a Friday, Saturday or Sunday.

Filing a tax extension via tax form 4868 is quick and easy so there’s no reason not to request one if you won’t be able to get your return done by April 15th!  The tax extension gives you up to an additional 6 months to file.  Plenty of breathing room to get your finances in order.

If taxes stress you out, take a moment to check out my 11 Secret Ways to Maximize Your Tax Refund This Year.  Just some simple, actionable steps you can take to keep more of your hard-earned dollars!

The most crucial reasons to file a tax extension

You should file for at tax extension anytime you are unable to complete your return by April 15th.  And tax form 4868 is the way to do it!

There could be a variety of reasons you are unable to complete your return by the deadline.  The following are examples of good reasons to file a tax extension:

  1. Not having all your documentation (maybe an employer went out of business before sending you a W2?)
  2. Perhaps you are active military (serving our country and not in a good position to be able to file on time)
  3. You will be out of town for a period of time around tax time (and will be unable to file on time)
  4. You’ve procrastinated (to the point where you simply won’t be able to get your return ready by April 15th)

Of course, if you can file by April 15th, you should; especially if you will owe money as an extension is for filing, not paying.

Speaking of the active military as I mention above.  If you are in a combat zone, the IRS gives you 180 days after you leave the zone to both file and pay without penalty. They call that a Tax Exclusion for Combat Service, so just check that link if you need more information on that.

The most ridiculous reason for filing an extension

Many people confuse a tax extension as being able to pay taxes late.

In truth, as I mentioned above, a tax extension simply allows you to file your tax return late without a failure to file penalty.  It DOES NOT give you permission to pay what you owe late.

If you owe money and file a tax extension all you’ve really done is incur interest and a penalty for late payment.

If you have undergone certain hardships such as fire, natural disaster or death of an immediate family member, the IRS may grant you Penalty Relief Due to Reasonable Cause, in which case they will allow you to pay late without penalties.  Click the link if you think that might apply to you!

Just know being broke is NOT what they consider a reasonable cause!  If you struggle to keep your finances in order, I highly recommend you check out my most popular personal finance post called Paycheck to Paycheck – 7 ways to stop being broke!  I’ve been there and believe me, it’s not where you want to stay.

Tax Form 4868 Monopoly board Middle Class Dad

Filing late when you owe money will cost you BIG! 

You’ll likely pay some or all of the following penalties and interest:

  1. LATE FILING PENALTY – 5% of what you owe, PER MONTH, until you pay, up to a total of 25%!  If you owe $10,000 that could be up to $2,500 if you don’t file on time!
  2. LATE PAYMENT PENALTY – .05% of what you owe, PER MONTH, until you pay, again up to 25% max.  If you get dinged with both filing late and paying late, you could potentially pay A LOT of money!

If you know you owe, don’t just file an extension and don’t bury your head in the sand.

Those mistakes will cost you thousands of dollars!  You just need to learn how to Set Up an IRS Payment Plan with form 9465.

You’ll be amazed at just how quick and easy that is.  You can thank me later!  Just still plan to file your return by April 15th. The failure to file penalty can be up to 10 times higher than just failure to pay.

The crucial step you must take if you can’t pay but might owe

If you suspect you’ll owe but need to file a tax extension anyway, it’s imperative that you send in what you think you’ll owe by the tax deadline.

Obviously, if you need an extension then you haven’t figured out exactly how much will be due.  In this case, it’s better to estimate than send nothing.

Even if you underestimate you’ll likely just get dinged for the difference between what you really owe and what you paid; hopefully a small amount!

Need a handy tool to do a reasonably accurate estimate?  Check out TaxCaster: Income Tax Calculator by Intuit’s TurboTax.

This video walks you step by step through the process.  It’s not for the current year but everything else is still 100$% accurate and easy to follow.

So what are my . . .

3 Fast Tax Form 4868 Steps to File Your Extension Quick?

1. FIRST STEP

Fill out IRS form 4868, their “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return” and mail it in with your estimated tax payment.

2 SECOND STEP

Alternately you can file that form electronically using by e-filing the form through TurboTax.  Again, this doesn’t give you permission to pay late, but Intuit’s TurboTax helps you estimate if you owe and can allow you to pay an estimated payment electronically.

3. THIRD STEP

Just know that while filing tax form 4868 gives you some breathing room, you still have to get your house in order by October 15th.  So you won’t want to put off getting your return done for too long.

While starting the process of preparing your return, you’ll want to review my post on 7 Common Tax Mistakes  You’ll be amazed at just how some of these simple mistakes can cost you down the road!

As a complete aside, if you do find yourself owing taxes and are unable to pay, a good emergency fund can really protect your family’s finances and future.

An emergency fund is essentially a savings account of 3 to 6 months of your expenses.  You don’t touch it except in cases of emergency.

I wouldn’t exactly call a tax bill an emergency as in most cases better planning could have averted it.

But using your emergency fund is better than going into debt or living in fear of the IRS.  If you don’t have an emergency fund, you owe it to your family to check out my Dave Ramsey Emergency Fund.

Someday your family may depend on it!

Looking for an easy, quick and free way to file your taxes online?

E-file Your IRS Taxes for FREE with E-file in as little as 15 minutes. Get your refund as fast as possible. If you run into trouble, quickly and easily get help with their online support team.

Learn more about E-file today!

Have you procrastinated on filing tax form 4868?

In this post, we took an in-depth look into the world of tax extensions.

Tax extensions don’t allow you to file late, per se, but you will avoid the big penalties of not filing or filing late. We also took a look at all the penalties involved in failing to file an extension as well as the possible reasons you might want to file.

Specifically, we looked at exactly how to file tax form 4868 so you can get back to living your life!

If you like this post, please follow my Income Tax Tips board on Pinterest for more great tips from myself and top tax experts!

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tax form 4868 Middle Class Dad bio

Of course I have to offer the standard disclaimer here: I am not a tax professional and you should always seek the advice of a CPA or other tax professional.  While I do have decades of experience running million dollar businesses and have many years of personal experience with taxes, ultimately, the opinions offered here are mine based on my personal experience, knowledge and research and should not be interpreted as legal or financial advice.
 
Photo credits (that aren’t mine or which require attribution:
Monopoly Income Tax Ver1 By: Chris Potter is licensed under CC BY 2.0


Simple Form 9465 Instructions for Your IRS Payment Plan

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form 9465 instructions 2 people sitting at a laptop Middle Class Dad

Can’t pay the taxes you owe this year? Set up an IRS Payment Plan with these simple form 9465 instructions!

I think you’ll agree with me that worrying about taxes is incredibly stressful. Owing taxes is no fun.  I’ve been there.  Wondering when or if the IRS is going to come knocking is stressful.

Hiding your head in the sand doesn’t really give you peace of mind.

Most people have no idea just how easy it is to set up an IRS payment plan.  And understanding  IRS form 9465 instructions are the key to getting it done.

The media paints this evil, terrifying picture of the IRS.  Not without good reason, but at the end of the day, they just want to get paid.

If you approach them in earnest and want to pay them, guess what?  They are likely to say yes because that’s a whole lot easier than tracking people down, court orders, wage garnishments, etc.

You want to pay and they want to get paid.  They have every reason to cooperate if what you propose paying is reasonable and somewhat timely.

So in this post, we’re diving deep into the world of the IRS payment plan.

We’ll explore the how, when, and why you might need to set one up. Then we’ll walk through exactly how to use their form 9465 instructions so you can get yours filled quickly and easily!

Looking for an easy, quick and free way to file your taxes online?

E-file Your IRS Taxes for FREE with E-file in as little as 15 minutes. Get your refund as fast as possible. If you run into trouble, quickly and easily get help with their online support team.

Learn more about E-file today!

Why an IRS Payment Plan is your best option

Ignoring the IRS when you have a large tax bill outstanding is a BAD idea.

While they do have to give you notice and you can file appeals, the IRS can take your home, car and/or paychecks.

You don’t want the IRS to come looking for you!

An IRS Payment Plan, filed using form 9465, gives you room to breathe.  It means you’re not living in fear of the Internal Revenue Service knocking at your door or (worse) your place of employment.

Now if you make $200,000/year, owe $49,000 and want to take 10 years to pay it back, they’re going to say no.

That’s just not reasonable. But in most cases, if you owe a reasonable amount and plan to pay it back over a reasonable time within the next 6 years, they will say yes.

No penalties; just a simple interest rate of around 5%; likely better than you’d pay taking out a loan and certainly better than putting on a credit card.

So learning exactly how to file your payment plan using these form 9465 instructions is crucial!

Thinking about cashing out a retirement fund to pay the IRS?  Think again!

Why cashing out retirement funds is your worst option

Unless you are age 59 1/2 years of age, when you cash out retirement funds (IRA, 401k, etc) for ANY reason, you’re going to pay your tax rate on that PLUS a 10% penalty.

For many of you reading this, that’s roughly 35%!  Would you go borrow money at 35% interest to pay off debt?  Especially when an IRS Payment Plan would generally charge you only about 5%?

No is the answer you were looking for.

That’s what makes cashing out your retirement plans one of the WORST options for paying off the IRS or any debt. Just follow my proven form 9465 instructions and you’ll be way better off!

Cashing retirement plans before age 59 1/2 should only be done under 2 circumstances:

  1. To avoid foreclosure on your home
  2. Preventing bankruptcy

Any other cashing out of retirement funds is just dumb.  And I say that having done it once myself close to a decade ago.  I was dumb.  Learn from my mistake!

If you need help with your retirement planning and don’t know where to turn, I highly recommend checking out my 9 Best Ways to Save for Retirement & Make Your Dreams Come True! post.  It’s a great place to get started with all the basic info you need.

Why simply filing an extension doesn’t work

An extension simply lets you file late.

If you owe the Internal Revenue Service money, it’s still due by April 15th.  All you’ve done by filing an extension when you owe money (even if you don’t know you owe) is create penalties and interest.

If you know you owe, you need to set up an IRS Payment Plan by April 15th by following these form 9465 instructions.

Aren’t sure you will owe?

Then you need to figure that out before April 15th.  If you don’t know how to calculate that seek out a CPA or other tax professional or use any one of the free or low-cost online options.

Worried about your tax return?  Make sure you check out my 7 Common Tax Return Mistakes post which covers the most common tax errors out there and the easiest ways to fix or avoid them!

What criteria must you meet to set up an IRS Payment Plan?

form 9465 instructions Middle Class Dad a paper house made of a 1040 form

You must owe less than $50,000 in total outstanding taxes (including penalties & interest) to set up an IRS Payment Plan following the form 9465 instructions.

They refer to this as an “online payment agreement”.  However, even if you owe more than that, it is still possible to file a request for installment payments for a shorter term.

You also need to be current on filing taxes so if you are years behind you have some work to do first.

If you are years behind and work for an employer that has been withholding taxes, chances are you don’t owe much.  Otherwise, you would have been tracked down by now.

So file your back returns, take your lumps and then see if you need to set up an IRS Payment Plan for the current year using the form 9465 instructions.

Lastly, you must be able to pay what you owe in 6 years or fewer.

Also be aware that any future tax refunds you may get will go right towards your debt, not to you.  Thus you may want to up your withholding allowances a little to minimize the size of the refund.

That’s a better strategy generally anyway; why let the IRS keep thousands of your dollars all year instead of having larger paychecks?

Looking for more ways to keep more of your hard-earned dollars and avoid giving it to the IRS?  Check out my 11 Proven Tips to Get Your Biggest Tax Refund This Year which details all the simple steps you should take to keep more of what you earn.

What are the costs involved in following the form 9465 instructions?

I get there’s something wrong about the idea of charging people a fee to pay money they can’t afford to pay.

But hey; it’s the Internal Revenue Service.  What are you doing to do?  Pay.  Below is a current chart of their fees as of a few months ago.

form 9465 instructions Middle Class Dad IRS fees

As you can see, for most of you who meet their “online payment agreement” criteria, especially if you opt for the direct draft out of your checking account, you’re looking at a fee of $31.

While I’m not a fan at all of giving most creditors direct access to your checking account, since the IRS can take it anyway, this is your best and cheapest option.

If you don’t meet the OPA criteria but are doing the installment plan option, you’re likely looking at $107 if you do the direct access.

If you struggle with credit issues and past due debt in general, I highly recommend you take a moment and check out my highly shared post about Credit Report Repair Steps.

How do you set up an IRS Payment Plan?

If you owe less than $50,000 simply click the IRS “Apply for an Online Payment Agreement for Individuals and Businesses” page to get started.

You’ll need the following info to get started:

  • Name
  • Valid e-mail address
  • Address from most recently processed tax return
  • Date of birth
  • Filing status
  • Your Social Security Number

If you and your spouse filed a joint return, whoever has their social listed first is the one who will need to apply.

Owe more than $50,000 and need to set up the installment version of an IRS Payment Plan? 

You’ll need to fill out and mail both a Form 9465 – Installment Agreement Request and a Collection Information Statement then call 800-829-1040 to go through the next few steps.

Check out this IRS video that details much of the above info!

What are the specific form 9465 instructions?

First, if you are filing form 9465 with your tax return, just mail the two together.  If you are mailing it separately (more likely), then refer to this IRS list to see where you need to mail it.

Use Form 9465 if you’re an individual:

  • Who owes income tax on Form 1040
  • Who is or may be responsible for a Trust Fund Recovery Penalty
  • Who owes employment taxes (for example, as reported on Forms 941, 943, or 940) related to a sole proprietor business that is no longer in operation
  • Who owes an individual shared responsibility payment under the Affordable Care Act. See section 5000A.

Don’t use Form 9465 if:

  • You can pay the full amount you owe within 120 days (If you plan to pay the taxes, interest, and penalties due in full within 120 days, you can save the cost of the setup fee.
  • You want to request an online payment agreement (see Applying online for a payment agreement above)
  • Your business is still operating and owes employment or unemployment taxes. Instead, call the telephone number on your most recent notice to request an installment agreement.

You can see the complete list of IRS form 9465 instructions here or check out this helpful video.

Looking for an easy, quick and free way to file your taxes online?

E-file Your IRS Taxes for FREE with E-file in as little as 15 minutes. Get your refund as fast as possible. If you run into trouble, quickly and easily get help with their online support team.

Learn more about E-file today!

Do you need help with the form 9465 instructions?

In this post, we took a detailed look at the IRS payment plan.

We explored why you might need one, how it’s different than filing an extension and why you definitely don’t want to just not pay or file late.

Specifically, though, we walked through all the form 9465 instructions on how to get yours filed quickly and easily so you can stop the worry and fear that can sometimes come with not being able to pay our taxes on time.

If you like this post, please follow my Income Tax Tips board on Pinterest for more great tips from myself and top tax experts!

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form 9465 instructions Middle Class Dad Jeff Campbell bio

Of course I have to offer the standard disclaimer here: I am not a tax professional and you should always seek the advice of a CPA or other tax professional.  While I do have decades of experience running million dollar businesses and have many years of personal experience with taxes, ultimately, the opinions offered here are mine based on my personal experience, knowledge and research and should not be interpreted as legal or financial advice.
Photo credits (that aren’t mine or which require attribution:
Considering The Tax Shelter By: JD Hancock  is licensed under CC BY 2.0


11 Biggest Tax Refund Tips You Probably Didn’t Know

by
biggest tax refund pile of 100 dollar bills on top of a 1040 form Middle Class Dad

Looking for your biggest Tax Refund this year?

Avoid the top tax return audit flags!

I’m sure most of us just want to pay our fair share but not a penny more.

We don’t have aspirations of intentionally underpaying or cheating the system.  But even if you follow all the rules, you could still be subject to an I.R.S. audit!

An audit can reduce or stop you from getting your biggest tax refund yet! At best it will certainly delay your refund.

In this post, we’re diving deep into all the legit ways of maximizing your refund from the IRS.

We’ll explore the top audit triggers to avoid and review what you can legally claim on your 1040 return for deductions.

Specifically though, we’re reviewing the top tips to help get your biggest tax refund yet!

Avoid the perils of the top audit triggers!

1. Only reporting part of your income

  • The safest bet is to report all income you received; even if someone paid you in cash and didn’t ask for your social
  • Make sure you’re reporting all interest income such as bank dividents
  • Cash out some company stock options?  Yup.  Claim that too

2. Home office expenses

  • It’s totally legit to claim a portion of home expenses if you genuinely work from home some of the time
  • But make sure you’re claiming reasonable percentages; especially in comparison to industry standards for the type of work you do
  • Correctly claiming all related home office expenses will increase your tax refund
  • Want more info?  Check out the IRS page on Home Office Deductions

3. Keep the salary down

  • While it may be tempting to try and earn millions, just know that your odds of an audit increase by 4 times once you make $200,000/year
  • Once your salary crosses a million, your audit odds go up by over 10%; good thing you can now afford your own CPA!

4. Look for a career path that doesn’t involve tips

  • If you work in the restaurant industry, for example, and claim too much or too little income, guess what?  Audit time
  • Any industry where a high percentage of income is possibly paid in cash or in tips draws attention

5. Keep your finances private

  • Many an audit has been triggered by a work associate or disgruntled family member making anonymous tips
  • If you disclose damaging info or even if someone misunderstands or is jealous of your situation, you can find yourself in the hot seat

6. Make sure your small business really is a business

  • The I.R.S. has no problem with your Amazon Seller account that earns you $500/month in extra cash
  • But your vintage Barbie collection you like to post about on Pinterest is a HOBBY
  • Don’t write off expenses unless it’s really a business

7. Filling a Schedule C

  • If you have a genuine small business you operate, it may make more sense to incorporate rather than filing a schedule c
  • Schedule C businesses are typically smaller Mom or Pop side business which have the potential to really just be a hobby
  • By incorporating you show the I.R.S. you’re more series and the chances of an audit go down

Looking for an easy, quick and free way to file your taxes online?

E-file Your IRS Taxes for FREE with E-file in as little as 15 minutes. Get your refund as fast as possible. If you run into trouble, quickly and easily get help with their online support team.

Learn more about E-file today!

The danger of filing your return too early!

biggest tax refund 1040 form with a magnifying glass and a calculator Middle Class Dad

I have always operated under the assumption that the closer to April 15th you file, the lower the audit chances.

After all, except for glaring errors that will obviously trigger an audit, the I.R.S. just has a certain percentage of returns they audit.

The audits start in early January. Thus it stands to reason that as time goes on, more and more of the automatic audits for no particular reason have already happened.

Once their quota is filled, unless your return looks unusual, you’re much less likely to get audited.

Who gets a tax refund?

As we work a job, unless you are classified as an independent contractor, your employer is withholding federal income tax.

The amount they withhold is simply based on how many allowances you claimed when you filled out your W4 form.  The amount withheld is calculated based on your income.

Thus if you claimed a 1 on your form and you make $50,000/year, they will withhold less than someone who claimed 1 who makes $100,000/year.

So based purely on that, without factoring in things like deductions, you could very easily find that you overpaid throughout the year.  Thus you may well be eligible for a tax refund.

In short, anyone who paid in more than they owe can get a refund. But follow my tips to make sure you get the biggest tax refund possible!

If you aren’t getting a refund or may owe and can’t pay, make sure to follow my proven steps to file a Tax Extension before the April 15th deadline!

What can you claim on your tax return?

Taxpayers often overlook some very simple deductions that would reduce their taxable income.  Get your biggest tax refund by following these simple tips. Unless you are single and childless you probably stand to benefit from itemizing your deductions.

If you are itemizing, the following are MUSTS for your list of deductions!

  • Home Ownership Expenses
    • Mortgage Interest
    • Property Taxes
  • Refinance Expenses
    • If you paid points to refi your home, you can deduct that money
    • The points get divided by the life of your loan (ie: 30 year loan, divide the total point cost by 30)
    • That is your annual deduction for refi loan points
  • Child Care Expenses
    • This isn’t just for traditional day care!
    • This can often include summer camps and other instances where you pay an organization to watch your child
  • Income Tax you paid last year
    • If you wrote the I.R.S. a check last time, guess what?  That’s deductible now!
  • Moving Expenses
    • If you moved for work and they didn’t pay for the move guess what?  You can deduct those moving expenses
    • To qualify you have to have moved more than 50 miles
    • Even if your employer did pay, if you incurred additional out of pocket expenses, you can claim above and beyond what they covered
  • Unreimbursed Medical Expenses
    • In this day and age, it’s virtually impossible to not have out of pocket medical expenses
    • Deductibles, out of pocket costs or premiums if you pay for your own healthcare are all tax deductible
    • Check out the IRS page on Medical Expense Deductions for more info
  • Claim state sales tax
    • If you paid it, you can claim it on your Federal Income Tax

Related: Make sure to avoid the 13 worst Common Tax Mistakes

What is the best thing to do with your tax return?

If you have debt (other than a mortgage), that is the first place I would put my tax refund.

If you don’t have any debt other than a mortgage, you’re doing great!  In that case I would look at how much you have Saved for Retirement. If you have kids and don’t yet have a plan for how to Save for College, that too is a great place to invest that money!

Covered in all those areas?  Great! Set it aside in savings for home upgrades or a vacation later in the year! And the tips here in my post will help you get the biggest tax refund possible!

Get your biggest tax refund quicker by ensuring a complete return

You’re all set to send in your return!

You’re excited about that biggest tax refund you hope to get.  But if you forget any of these crucial steps, guess what?

At best you’ll significantly delay your refund.  At worst you may have triggered an audit.

Just double check before mailing your return that you are doing/including all of the following:

  • Sign your return!
    • This is the #1 most common tax return mistake according to the I.R.S.
    • Forgetting to sign is the equivalent of not filing
    • Once you’ve passed April 18th (the deadline to file for an extension), you’re potentially facing a 25% fine
    • If they don’t notify you that you forgot to sign until after 4/18, guess what: it’s still your problem!
  • Your W2
    • Unless you’re retired or self-employed you will have received at least one w2 form.
    • The state requires one copy (if you have state income tax) and the Federal Government requires a different copy
    • This must be filed with your return
  • Your Direct Deposit Info
    • If you are getting a refund double check the routing number and bank account info you put down
    • Routing numbers are always 9 digits, whereas bank accounts vary in length
    • Being off by even 1 digit may delay your refund or send your cash to someone else!
  • Your Social Security Number
    • This number tells the I.R.S. exactly who you are
    • There are a lot of John Q. Publics, but only 1 with your unique 9 digit code
  • Make sure your name matches your social
    • Check spelling
    • Ensure the middle name is listed the same (full name or initial?)
    • Make sure to use a maiden name if that’s still how Social Security has it
  • Make sure your math is solid
    • If you’re using a web company or program this is less of a concern
    • If using a calculator, double check your math to make sure it’s correct
    • Aside from forgetting your name, this is the most common error
    • The I.R.S will generally catch and correct the errors, but if you owe money and the error means you owe more, you may also generate penalties

Owe a bunch and want to set up an IRS Payment Plan? I highly recommend you take a moment and review my steps on how to get that set up quickly and correctly!

Do you get more tax return if you are married?

The short answer is typically yes; you do pay less income tax if you are a married couple.

But don’t take my word for it.  The IRS says “most couples find that their income tax liability is lower if they file jointly, as opposed to filing separately.”

As a married couple (and this applies to legally married gay and lesbian couples too), you must file as married. However, you have the option to file “jointly” or “separately”.

Personally, as a married man, I have always filed jointly and I believe that allows us to get the biggest tax refund possible.

But check out this page from the IRS on how Getting Married Affects Your Taxes for greater detail.

So what are my . . .

11 Biggest Tax Refund Tips You Probably Didn’t Know?

biggest tax refund guy working on a laptop writing in a notebook Middle Class Dad

1. File Your Return Sometime Between February 15th and April 15th

  • This can reduce your chance of an audit

2. Triple Check Your Return to Ensure It Is Signed

3. Make Sure to Include Your W2 and any 1099 Forms

4. Itemize Your Deductions

  • The US Government Accountability Office conducted a study a short time back
  • That study  is Taxpayers Who May Have Overpaid Federal Taxes by Not Itemizing
  • In that study they found that about 70% of tax payers don’t itemize
  • Of those 70%, about 948,000 may have overpaid by not itemizing
  • Those 948,000 taxpayers overpaid by as much as $945,000,000!!!

5. Deduct any State Income Taxes Paid

6. Claim All Home Owner Related Deductions

  • Deduct Property Tax
  • Claim Mortgage Interest
  • Also claim any points paid on a refi

7. Triple Check to Make Sure Any Math Is Accurate

8. Make Sure Any Direct Deposit Account Numbers Are Accurate

  • Routing numbers and account numbers can look similar
  • Routing numbers are always 9 digits and can be easily Googled if you’re unsure

9. Use a Professional Tax Preparer

  • Sure you can save money by doing it yourself or with a program
  • But a good tax preparer who’s been doing this for years and keeps up with IRS code changes can be worth their weight in gold
  • A professional can often find deduction you might miss
  • Your tax preparer also takes some of the heat in the event of an audit
  • Check out the results of a contest comparing tax refunds by software vs a professional courtesy of CBS Money Watch

Any tips or ideas you have to get your biggest tax refund yet?

In this post, we took an in-depth look into the world of the IRS and income taxes.

We walked through proven tips and strategies to maximize your return and reduce your chances of an audit.

Specifically, we looked at the best tips to get your biggest tax refund so you can put a few extra bucks in your pocket and not sweat the possibility of an audit as much.

Also be aware that with each new President, tax laws can change and the information here could become dated.  I strive to update my factual posts annually, but always double check!

Of course I have to offer the standard disclaimer here: I am not a tax professional and you should always seek the advice of a CPA or other tax professional.  While I do have decades of experience running million dollar businesses and have many years of personal experience with taxes, ultimately, the opinions offered here are mine based on my personal experience, knowledge and research and should not be interpreted as legal or financial advice.
Photo credits (that aren’t mine):
Money and Tax Return by 401(K) 2012 is licensed under CC by 2.0
Tax Forms and Calculator by 401(K) 2012 is licensed under CC by 2.0 – modified by me
Search! (Magnifying glass added to above) by Jeffrey Beall is licensed under CC by 2.0 – modified by me

 

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