Category Archives: Money Management

Alternatives to Payday Loans

Super smart alternative to payday loans!

Ever had a car break down with no other way to get to work?

How about an unexpected medical expense?

Want to fly home to help out in a family emergency, but don’t have the cash on hand for a plane ticket?

In all of these instances, you should turn to your emergency fund. Ideally, you already have one that holds enough money to cover 3-6 months of expenses.

Realistically, though? Only forty-one percent of Americans turn to their savings account in a time of financial emergency. That means that over half of us are using alternative methods to get through rough fiscal periods, and all too often we look at high-interest financing as the solution.

In these situations, one of the better solutions is a personal loan. They can be used for just about any expense you may incur and the interest rates tend to be significantly lower than other financing options. Let’s compare.

Credit Cards vs Personal Loans

If you have a line of credit available to you, it really can be a lifesaver. Charging your emergency is only viable, though, if you can pay it off in full before it accrues any interest.

Many credit cards charge 15.99%-24.99% APR. Currently, PenFed Credit Union offers personal loans for rates as low as 9.99% APR.  That’s a major difference in interest rates.

On top of that, when you take out a personal loan, you’re paying a fixed balance. Every month that you pay your fixed monthly payment, your balance will go down and a set portion of your payment will go towards interest.

Credit cards have no fixed monthly payments. While minimum payments are required, these amounts are dependent on your balance. If you can pay your balance off quickly, you’ll pay less interest than if you only chipped away via minimum payments. But if you could pay it off quickly, you probably wouldn’t be charging an emergency in the first place.

Cash Advances vs Personal Loans

Sometimes you may not be able to charge your next big expense. Let’s say you spent $1,000 on your latest emergency, but now you need to pay rent. It is also $1,000, and because of your own series of unfortunate events, you don’t have the cash on hand to write the landlord a check.

In these situations, there is a common temptation to yet again pull out the credit card—this time for a cash advance. This is even less advantageous than charging your card. Cash advances typically come with associated fees.

They also charge interest. While the rate is usually the same as for traditional purchase, you don’t have the luxury of waiting for your statement to close and become due before interest accrues. On cash advances, interest starts building up the day you make your purchase.

So to review, with a cash advance, you’ll start incurring interest right away, making it more expensive than charging something to your credit card as a purchase. In many situations, you’ll also have to pay cash advance fees, making it even more expensive.

Because the personal loan in our example is cheaper than purchasing on a credit card with minimum payments, it is most certainly cheaper than doing the same with a cash advance.

Payday Loans vs Personal Loans

If it is ever at all humanly possible, stay away from payday loans. Their interest rates are usually significantly higher than personal loans offered by credit unions or banks. Also, the computed interest rate could be triple digits.

For example, you may see rates advertised as a “low 15%”, but what these companies don’t advertise is that the interest is charged weekly. That makes your effective APR 400%.

Four hundred percent.

Exhaust the personal loan option first. Remember in our example that the effective rate on a PenFed personal loan is as low as 9.99% APR, and the payment structure is far more reliable than payday loans, which often balloon even higher with excessive fees that are unfortunately easy to accrue.

Note: If you need to borrow less than $500, you may not qualify for a personal loan. That does not mean you should turn to a payday lender. Check out this alternative.

Build Your Emergency Fund

If you don’t have an emergency fund, you’re obviously not alone. But that doesn’t mean you can’t start to improve your financial situation today.

Even if you live paycheck-to-paycheck, you can start socking small amounts of money away quickly. If 3-6 months’ worth of expenses sounds like too big of a number, set a lower goal. Maybe $500. Maybe $1,000.

Once you’ve reached your goal, by all means keep going. But by setting something achievable from the start, you’re more likely to stick with it.

Fun fact: If you set aside $25 every other week, you will have a $650 emergency fund after twelve months—not bad!

This post is in collaboration with PenFed Credit Union.

To receive any advertised product, you must become a member of PenFed Credit Union

Rate and offers current as of April 21, 2017 and are subject to change. Federally insured by the NCUA.

 

How to Invest in ABLE Accounts

In honor of Autism Acceptance Month, Femme Frugality is running a series of Monday articles focusing on the triumphs and challenges those diagnosed with autism conquer as related to their finances and careers.

Joining us for the third post in our series is Tara Falcone, CFP®. Falcone is a CERTIFIED FINANCIAL PLANNER™, former Wall Street analyst, and founder of ReisUP LLC.

ReisUP is an early-stage financial services company dedicated to increasing investing education and access for everyday investors. Her mission is to empower people to “rise up” and play a more active role in achieving their financial goals. 

Totally sending this to my sister! How to invest in ABLE accounts.

A couple of weeks ago, we kicked off our Autism Acceptance Series by looking into a new financial vehicle: ABLE Accounts.

ABLE accounts allow individuals with disabilities, or their guardians, to stash away some money without having to worry about failing an asset test when they go to apply for state or federal benefits. These accounts can also be used to grow your savings tax free.

There are currently nineteen states that offer ABLE accounts. For simplicity’s sake, we’ll be looking at only Pennsylvania’s investment options today, though the same concepts can be applied in generality.

What are ABLE investment options?

The PA ABLE account has the following seven allocation options:

  • High-yield checking account
  • Conservative Investment Portfolio
  • Moderately Conservative Investment Portfolio
  • Moderate Investment Portfolio
  • Growth Investment Portfolio
  • Moderately Aggressive Investment Portfolio
  • Aggressive Investment Portfolio

“The Conservative and Moderately Conservative options invest 70-90% of their portfolios in cash and bonds, with the rest (10-30%) invested in a variety of stocks,” says Tara Falcone, CFP® of ReisUP LLC.

“The primary goal of these investment options is to preserve your principal, which is the money you deposit into your ABLE account, while offering limited to small returns on your investment. Small potential risk equates to small potential reward.

“The Moderate and Growth options’ portfolios are split roughly 50/50 between bonds and stocks. These investment strategies focus less on principal protection and more on generating a slightly higher return on the invested assets. Moderate potential risk means moderate potential reward.

“Finally, the Moderately Aggressive and Aggressive options are invested primarily in stocks (75-90%) with a small portion of the portfolios invested in bonds (10-25%). These options’ primary goal is to achieve the highest growth possible with little regard for principal preservation.”

Figure Out Why and How to Invest

Before making any investment, it’s important to identify why you’re investing, and what limitations your specific life situation may impose. Falcone advises looking at the following factors before choosing your allocation strategy.

Risk Tolerance

Investments are not stagnant. At times they’ll go up, and at others they’ll go down. Your risk tolerance is how much sleep you’ll lose over that fact.

“Generally, more conservative investment options are less volatile, meaning your account balance fluctuates less,” Falcone explains. “However, that also means it’s unlikely to grow as much since less risk yields less reward.”

“Meanwhile, aggressive options typically generate larger investment returns, but also subject your account balance to bigger positive and negative swings. This could put you at risk of not having sufficient funds to cover expenses when you need it.”

Time Horizon

How long can you let your money sit without touching it? That’s your time horizon.

“If a beneficiary needs to access a large portion of his or her ABLE account every year to pay for qualified expenses, a conservative investment strategy is likely more appropriate,” explains Falcone. “If someone in this situation were invested more aggressively, they may discover that their account balance has decreased in a market downturn, leaving them unable to pay for current expenses.”

If, however, you’re saving to provide for your child after you’re gone, you may have a longer investing horizon.

“Someone with a longer investing horizon who doesn’t need to withdraw a large portion of their account for five or more years may want to consider a moderate or aggressive option,” says Falcone.

“The larger growth potential inherent in these investment strategies could allow that person to take greater advantage of the tax-free growth nature of ABLE accounts. In this case, the beneficiary should consider reallocating to a more conservative strategy as the time when they will need to withdraw money from their account approaches.”

Savings Ability

“In theory,” Falcone continues, “the more someone can deposit into their ABLE account every year relative to their expected expenses, the more aggressive they can afford to be from an investment perspective.”

Check out this example with Ella and Ari:

This article is PACKED with helpful info for people deciding how to invest in their ABLE account for people with "disabilities."

 

Overall Goal

There are two basic reasons ABLE accounts are so attractive. The reason you were drawn to it probably says a lot about your overall goal.

Reason #1: Savings isn’t counted for asset tests.

If you’re applying for government benefits like Medicaid or SNAP, savings in your ABLE account will almost never count against you. This is important when you’re trying to build up savings for medical equipment, therapies, or even just a basic emergency fund that you will need in the near future. In these cases, Falcone notes that a conservative approach is probably the best fit.

Reason #2: You’re taking advantage of the tax-free growth.

If you’re saving for your child’s future but don’t have a large enough nest egg to justify a special needs trust, ABLE accounts are particularly attractive due to their tax-free growth. Falcone notes that any time you’re making a longer-term investment, you can afford to be more aggressive.

It is possible that you’re taking advantage of both perks. You’re saving large sums of money for a date far off in the future, but are only able to do so because that savings won’t count against you in an asset test. In these cases, Falcone says you can yet again afford to be more aggressive.

Risk Capacity

While risk tolerance is how you feel about the volatility of your investments, risk capacity looks at the risk you can take on from a concrete, objective perspective.

“Due to the assets test that owners/beneficiaries of ABLE accounts must pass in order to qualify for Medicaid and other social programs, risk capacity is arguably the most important factor to consider in these unique circumstances,” notes Falcone.

“Asset tests often prevent families with disabilities from building substantial emergency funds that could cover expenses temporarily should the ABLE account balance drop in a market downturn. Therefore, even though someone may be comfortable with more investment risk, he or she may not be able to afford being exposed to such risk due to lack of other cash sources.”

If you have friends and family who want to contribute, but you also want to extend your investment time horizon, you may want to direct them to specific bills that they can pay rather than making contributions to the ABLE account.

Falcone points out that this keeps your money in your account as a long-term investment while keeping it out of your regular checking account where it would be counted in an asset test.

How should I invest with my ABLE account?

Wondering what you should do in your specific situation? Below you’ll find Falcone’s recommendations for some common circumstances individuals or families may find themselves in.

While this advice speaks to generic situations, it’s always advisable to talk with a professional about your own, unique set of circumstances before making any investment.

High-Yield Checking Account

  • Someone with no risk tolerance. They are not willing to put any of their funds at risk to earn even a small return.
  • Someone who needs the ability to withdraw funds immediately. Otherwise, withdrawal proceeds can take 3-10 days to reach the beneficiary in Pennsylvania, per the Program Disclosure Statement.
  • Someone who is already the beneficiary of a special needs trust or has some other fund/account/support to help pay for future expenses. They don’t need the benefit of the tax-free growth nature of an ABLE account, but want to shelter more funds from the asset test.
  • A disabled adult with current cash need, desire to shelter some assets from the asset test, and/or desire for some financial independence to purchase/pay for things on their own.

Conservative Investment Portfolio

  • Someone with very low risk tolerance.
  • Someone with no or insufficient emergency fund (i.e. low risk capacity.)
  • Someone with potentially large unexpected expenses.
  • Someone with a present need for cash (i.e. short investing horizon of less than 2 to 5 years.)
  • Someone whose primary goal is to shelter funds from the asset test, not earn a substantial return on those funds.

Moderately Conservative Investment Portfolio

This investor will display similar criteria to Conservative, but is willing to give up some principal protection for slightly more current income.

Moderate Investment Portfolio

  • Someone with moderate risk tolerance and moderate risk capacity.
  • Someone with high risk tolerance and low risk capacity. They’re comfortable with volatility, but can’t necessarily afford to lose money in the short-to-medium term.
  • Someone with low risk tolerance but high risk capacity. They’re not as comfortable with investment volatility, but can afford to take on some risk to earn a potential return.
  • Someone with infrequent but potentially large unexpected expenses.
  • Someone with a medium-length investing horizon of 5 to 20 years–perhaps a parent saving for their child’s future expenses, including education.
  • Someone who wants their money to earn a slightly higher return.
  • Someone who has access to other cash sources or temporary support in the event of a market downturn.

Growth Investment Portfolio

Will display similar criteria to Moderate, but is willing to take on slightly more risk for slightly more capital appreciation potential.

Moderately Aggressive Investment Portfolio

  • Someone with a high risk tolerance.
  • Someone with a high risk capacity (i.e. sufficient emergency funds or other cash/support sources.)
  • Someone with a long investing horizon and desire to benefit most from ABLE’s tax-advantaged growth. This could be parents who want to set aside funds for their child’s future needs and want those funds to earn a substantial return.
  • Someone who already has a special needs trust or is seeking an alternative to a special needs trust. One example is parents with a young disabled child or young adult.
  • Someone who has a low savings capacity now, but a large future capital or income need. One group that may fit this profile is parents wanting to establish a fund to pay for their child’s needs upon their death.

Aggressive Investment Portfolio

These investors will display similar criteria to Moderately Aggressive, but to a larger extent for each point. Even more comfortable with risk, even longer investing horizon, even greater future income or capital need, even more sources of additional support, etc.

Evaluate, but don’t mix and match.

Falcone advises against investing in multiple different portfolios at one time.

“Allocate 100% of your account balance and future contributions to whichever investment option you choose,” she says. “Mixing them changes the overall allocation and therefore the resulting investment strategy. For example, allocating half of your account to the Conservative option and half to the Aggressive option results in a combined portfolio similar to the Moderate investment option.”

She says the only exception would be if you needed some cash on hand in the high-yield checking account, but wanted to invest the surplus.

Falcone leaves us with these final words of wisdom:

“No matter which option you choose, make sure to re-evaluate your choice every year and make appropriate adjustments if your circumstances and/or goals have changed.”

How to Write a Goodwill Letter

I never knew you could do this! Get bad line items removed from your credit report with a goodwill letter. This article includes a template and everything.

I first heard of goodwill letters on Personal Find Nancys, a blog that sadly no longer exists.

Essentially,  a goodwill letter is something you write to a past creditor requesting that they remove a blemish on your credit report. Here’s the catch: while you were missing payments, you must have been going through some trying personal circumstances or have some worthy excuse.

Blemishes will be removed after seven years of the report date regardless, but if that’s too long for you to wait, writing one of these letters is a good way to attempt fixing the problem fast.

Before I wrote my own goodwill letter, I had a serious blemish on my report. When I first started going to school, there was some confusion about who was paying.  It resulted in me unknowingly defaulting on a payment plan. As soon as I was aware the money was due under my name, I paid it off.

But apparently that didn’t keep it from creeping up on my credit report. I figured writing a goodwill letter couldn’t hurt.

Good news!  Not only did it not hurt–it worked!

They sent me a return letter confirming that they’d remove the item. I checked my credit report, and it’s no longer on there.

Here’s how to get your credit report for free.

Goodwill Letter Template

Before I wrote the letter, I did a little bit of research. I picked and chose my favorite parts of each example I saw, and created a template. I thought I’d share it with you today since it was successful for me.

It’s not guaranteed to work, but it’s worth the cost of a stamp to try! Keep in mind that you may need to change it up a little depending on your personal situation. If you fail the first time, you can keep trying every six months.

 
[Your full first and last name]
[Your Address Line 1]
[Your Address Line 2]
[Your phone number]
 
[Name of month Day#, Year]
 
Dear Sir or Madam:
 
This letter is in reference to a paid collection under account number [your account number here].
 
[State how much the debt was, when it was due, and when you paid it in full.  Point out if you paid it off quickly.]  [State the hardship you were going through and why it kept you from paying your debt.]
 
[Restate what kept you from paying the debt in a summation/transition.]  [State your regret that you did not pay it on time, mentioning that you strive to be financially responsible and honor all debts.]  [State that this debt, recorded on your credit report, is causing you financial hardship.]  [If the hardship is specific, briefly outline it here.]  I am kindly hoping that [insert creditor here] will consider removing this collection from my credit report as a gesture of goodwill.  [State how much it would mean to you and the opportunities that would open to you if the collection were removed in a professional manner.]  
 
 
Sincerely,
 
[leave room to sign your name in cursive here]
 
 
[your name printed]

Sample Goodwill Letter

Here’s an example with some Jane Doe data plugged in. Yours should not be italicized.

Jane Doe
123 Main Street

Middleof, Kansas 12345
(555) 555-5555

April 6, 2017

Dear Sir or Madam:

This letter is in reference to a paid collection under account number 948312909832489.

Five hundred seventy-five dollars was owed on my account due October 8, 2016. It was paid in full on November 12, 2016—just over 30 days later. On October 6th of the same year, we had an electrical fire and my house burned down.

In the ensuing chaos, I struggled to keep on top of due dates as we found a new place to live and replaced all our worldly possessions while dealing cooperatively with our renters’ insurance company. I deeply regret that I was so late with my payment, as I am financially responsible and have never been late with a payment since we started our business relationship. My family and I are considering purchasing a new home, but are worried about applying for credit now that this new negative line item is included. I am kindly hoping that Western Pony Bank will consider removing this collection from my credit report as a gesture of goodwill. This gesture would merit our upmost gratitude as we rebuild our lives.

Sincerely,

 

 

Jane Doe

 

 

 

This article originally went live on July 6, 2012.

ABLE Accounts for People with Autism

In honor of Autism Acceptance Month, Femme Frugality will be hosting a series of Monday articles that focus on the financial challenges and triumphs that people with autism face and achieve. When they are children, these things also tend to affect their family’s finances, as well.

Great way to save money with tax-free growth. ABLE Accounts for adults with autism or families with children with autism.

If you are on the autism spectrum, or your child is on the spectrum, it’s likely that you incur some costs that neurotypical people simply don’t. There may be therapies, adaptive equipment, nutritional supplements or even legal fees related to autism that end up in your budget.

Fortunately, in recent years these financial burdens have been acknowledged. With the passage of the ABLE Act, people with qualified “disabilities” or their guardians now have the ability to open an account built specifically to deal with these added expenses.

I was incredibly psyched when an advisor let me know Pennsylvania was rolling out theirs recently. Since PA is the state I’m most familiar with, the PA ABLE account will be the one we dissect today, but other states have similar options. You can view them at the end of this article.

What is an ABLE account?

An ABLE account is a tax-advantaged investment account. It serves as a way for those with “disabilities” to save for expenses related to their condition–in this case, autism. Families are also able to save for their minor children in this way, or through a power of attorney if their child is an adult in need of assistance.

It’s a 529 account, which means the money you put in there is invested. If you’re familiar with these accounts for college savings, it’s a very similar thing except the scope of qualified expenses extends beyond just post-secondary education.

ABLE accounts are also advantageous because they don’t count against many state or federal programs that require asset tests, allowing people on the spectrum to save for future costs without worrying about losing their healthcare or other necessities.

How do you qualify for an ABLE account?

If you live in Pennsylvania, you’ve likely gone through the rigamarole of applying for SSI so you can get on Medicaid. If your income is low enough, you get SSI payments. If it’s too high, you don’t get the SSI payments, but SSI confirms that you have a disability so you can get state-sponsored insurance.

If your autism has been confirmed by SSI, you qualify. Other ways you can qualify are through entitlement to SSDI or a signed confirmation of disability from a physician. They must also certify that you had autism before age 26, which shouldn’t be difficult.

Invest in an ABLE account for your child's autism expenses and watch your savings grow tax-free.

What is a qualified expense for an ABLE account?

In Pennsylvania, qualified expenses are any expense related to the “disability.” That includes:

  • Tuition for school–Pre-K through post-secondary
  • Books and other supplies related to education
  • Mass transit expenses
  • Purchase of a vehicle
  • Modification of a vehicle
  • Moving expenses
  • Job training
  • Expenses related to gaining/maintaining employment
  • Health expenses across the realms of mental, physical, vision and dental
  • Health insurance premiums
  • Durable medical equipment
  • Respite care
  • Therapies
  • Communication services/devices
  • Personal assistance
  • Nutrition management
  • Financial management
  • Legal fees
  • Funeral and burial expenses

In addition, you can use it for these housing-related expenses tax free, though withdrawing money for any of the below may impact your SSI benefits:

  • Primary residence expenses
  • Rent
  • Mortgage payments
  • Property taxes
  • Home improvements or modifications
  • Utilities

This is by no means an exhaustive list. You can use the money for anything related to the associated “disability,” and it doesn’t necessarily have to be deemed medically necessary. Just remember to keep good documentation about what you’ve spent the money on. If the IRS ever audits you, they’re going to want to see receipts.

Check out other qualified expenses under PA ABLE.

How much can I save in an ABLE account?

You can save $14,000 per year. If you have family or friends that want to contribute, their generosity counts towards that $14,000.

The max amount you can have in an ABLE account at any given time is $511,758 in the state of Pennsylvania. This max number will vary from state to state. If you are a parent or guardian who is saving for a child, once you reach this point you may want to talk to a professional about a trust or even a special needs trust.

What are the tax advantages of saving in an ABLE account?

You contribute money after you’ve already paid taxes, so contributions won’t lower your AGI on your taxes. However, the money is allowed to grow tax-free, and as long as your withdrawals are made for qualified expenses, you won’t have to pay taxes when you take the money out.

If you spend the money on an unqualified expense, though, you will be hit with a penalty.

You don’t necessarily have to live in a state to purchase its plan. For example, PA ABLE is available to people in all 50 states–not just Pennsylvania. On this particular plan, you might end up paying state taxes on your gains if you’re from out of state. Pennsylvania residents are exempt, and also won’t pay state taxes upon a qualified withdrawal.

Pennsylvania residents also benefit from exemption from the PA inheritance tax. Check with your state to see what benefits may be available.

Stop worry about asset tests and start building savings with an ABLE account.

Will an ABLE account mess up my state or federal benefits?

ABLE accounts are not considered for SNAP benefits or any other federally-distributed benefits with means-based tests, save for SSI.

Typically, SSI limits your assets to $2,000, but ABLE accounts are a little different. They won’t count the first $100,000 in your ABLE account against you for SSI qualification or the determination of your dollar-amount benefits.

Separately, the state of Pennsylvania has passed legislation that prohibits your ABLE balance from being used in any asset tests related to health or disability. They’re also not allowed to use it for SNAP per the USDA’s issued guidelines.

What about financial aid for college?

In the state of Pennsylvania, PA ABLE savings will not count on applications for state-based financial aid.

Because ABLE accounts are not supposed to be counted on federal means-based tests, the general assumption is that these savings should not be included on the FAFSA. However, as far as can be told the US Department of Education has not issued any guidance on this to date. You may want to call the Federal Student Aid Information Center to get the most up-to-date information.

Do not count ABLE savings on other children’s FAFSA applications.

What are the fees?

You can avoid all administrative fees by getting your documents delivered electronically. Investment fees are between 0.34% and 0.38% depending on which option you pick.

Picking an option–from conservative to agressive–is something we’ll be tackling in a future post. Saving for college with a 529 is one thing, but saving for expenses related to autism that come up as a part of your daily life is quite another all together.

Rent isn’t something you’ll be paying in 30 years–it’s something that’s due now. If you need an iPad to communicate,  you’re not going to wait for 15 years of appreciation on your investment before you start to exchange information with the world.

But that isn’t to say the most conservative option is the best choice each and every time. It’s complex, and something we brought an expert in to cover.

functional fashion modern frugal mom

Are ABLE accounts worth it?

While the fees may not be the lowest, the account is tax-advantaged and allows you to use your money before retirement age. It also allows you to save for future expenses without disqualifying yourself from certain federal and state means-tested benefits.

If you’re a parent, you may not be sure if your child will go to college or not. An ABLE account gives them the flexibility to pursue whatever occupational or educational path they want and are able to when they get to that point in their life.

Or, if you come up against a financial emergency between now and then because of your child’s medical, communication or educational needs, you have the money there to save you from financial distress while still providing the best for your kid.

Overall, it’s a much-needed solution that many individuals and families will be able to use to their advantage. With so many frustrating lines of red tape around every corner, it’s good to see that this issue is getting some recognition and legislation.

Other states with ABLE accounts

Note that not all state plans are created equally. Don’t pick a plan simply because it is based in your state or think that because your state doesn’t offer a plan, you’re not eligible. Fees, residency requirements and state tax advantages are all going to vary. Do further research before opening any financial account.

Cheap and Free Tax Preparation Options

Totally surprised! I qualify for the third option on here and I think most of my friends do, too! So many free tax preparation options...

This year, taxes are due on April 18, 2017. That seems like it’s far away, but it definitely sneaks up on you quicker than you’d think!

Beside avoiding procrastination, filing your taxes earlier helps you reduce the odds that you’ll be a victim of tax identity theft. That’s because the IRS only accepts one return for each social security number, so if an identity thief files a fake return before you get to your real one, you’ll have more than a headache on your hands.

If you’re looking to file and don’t want to do it yourself, but also don’t want to drop a ton of cash, check out these four cheap and/or free tax preparation options.

VITA

VITA is a free tax preparation service for low- and middle-income Americans. Trained volunteers help you get your information straight in person, and then run it by the supervising volunteer, who has even more training. Once you’ve made it through all of your interviews, which can take about one to three hours depending, they e-File your return for you, and you’re good to go!

You do have to make less than $54,000 to qualify for this program for the 2016 tax year. Those income limits change based on your geographic location, and specific life circumstances. You’ll have to run all of your family’s specifics by the organization that runs VITA in your area before being granted an appointment.

Free File

Free File is another IRS-sponsored way to get free tax preparation. They’ve partnered up with some tax preparation software companies to allow households with income under $64,000 to use that software for free. In many states, you can even file your state return for free using this method. Just be sure to check out this wizard tool that will show you which software is best for your specific situation.

Transparent Software Options

If you don’t meet those income requirements, you can still file your taxes affordably with guidance from tax software. There are really expensive options that come with a big price tag and hidden fees, and then there are affordable, transparent options like FreeTaxUSA.

The Federal returns you file with them are always free. Even if you’re self-employed or own a small business. Even if you’re a homeowner. State returns are $12.95, and, if you want, you can pay an extra $6.99 to file amended returns, get audit assistance or access their live chat with front-of-the-line privileges. Right now you can get 10% off your entire order using promo code FREETAXUSA10.

Big Box Tax Preparation

This is my least favorite option. The biggest reason is that in my experience, I haven’t found it to be affordable at all.

One year, I took my taxes into a big box store. I had multiple state returns because of frequent moves. Income tax for one state was supposed to be waived because of military status and state law, but this guy refused to listen to me, and wanted me to pay additional taxes erroneously. And then pay him $300+ just for doing a bad job.

I walked out the door. These people aren’t CPAs. They’re seasonal workers who receive some seasonal training. I called up my state to make sure I wasn’t totally screwing up, and they confirmed that the big box store guy was wrong.

In my opinion, the best way to use big box tax preparation is as a free consult if you’re preparing your taxes yourself. Otherwise, especially if you’re a contractor and have lot of schedules and forms to attach to your 1040, they can be a big money suck.

Cheap and Free Tax Preparation Exists

If you’ve been putting off filing your taxes because of cost, worry no more. There are ways to get your return filed for free or moderate costs, without taking the risk of DIYing it.

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