What are Sinking Funds?

A sinking fund is a savings account that you set aside specifically for large, predictable expenses. These can be things like car repairs, home maintenance, or even holidays.

The idea behind a sinking fund is to save up for these expenses over time, rather than having to come up with the money all at once.

For example, if you know that every year your yearly car registration tags are $300 and then are due in June, you would set up a savings account specifically for that expense and keep it until you reach the $300 savings goal. You’d take the $300 and divide it by the number of months you have left to save before that expense is due. That will give you the amount you’d need to save monthly.

Examples of Sinking Funds Categories

• Christmas/Holiday Funds
• Car Registration Tags
• Annual Life Insurance Premiums
• New Furniture
• New Car
• Down Payment on a house
• Birthdays/Birthday Party Funds
• Back to School Shopping
• Vacation Fund
• Tattoo Fund
• Yearly Subscriptions (Netflix, Hulu, Ring Alarm, etc.)

Why You Should Have a Sinking Fund

Avoid Debt: By saving up for large expenses ahead of time, you can avoid going into debt to pay for them. This is especially important if you’re trying to pay off credit card debt or avoid taking on more debt in the future.

Plan for the Future: A sinking fund can also help you plan for the future. If you know you’ll need to replace your car in the next few years, for example, you can start setting aside money in a sinking fund now to cover the cost.

Stay on Track with Your Budget: Having a sinking fund can also help you stick to your budget. If you know you have money set aside specifically for certain expenses, you can allocate your other income and expenses accordingly.

How to Set Up a Sinking Fund

Identify Your Expenses: The first step to setting up a sinking fund is to identify your large, predictable expenses. This could include things like car repairs, home maintenance, or even holidays. Make a list of these expenses and determine how much you’ll need to save for each one and the date you will need to have the full amount.

For example, if you start a sinking fund for Christmas, you know you’ll need the money by December. If you start it in January, you’ll have exactly 11 months to save. Therefore, you’d take your total amount needed to save and divide it by 11 that would give you the monthly amount to save.

Determine a Savings Goal: Once you have a list of your expenses, you can determine how much you need to save for each one. For example, if you know you’ll need to replace your car in the next few years, you might set a goal of saving $5,000 for the new car.

Choose a Savings Account: Next, you’ll need to choose a savings account for your sinking fund. There are several options to consider, including high-yield savings accounts, money market accounts, and CDs. Choose the option that offers the best combination of high interest rates and easy access to your money.

You may even opt to using envelopes labeled with your sinking funds and putting cash inside. Just make sure to store it somewhere safe like a fire/waterproof safe.

Set Up Automatic Transfers: If you choose to go digitally and open up a savings account, you can make it easier to save for your sinking fund by setting up automatic transfers from your checking account to your sinking fund account. This way, you can set it and forget it, and your sinking fund will grow over time without you having to remember to make manual transfers.

Sinking funds are a great way to save for large, predictable expenses and avoid going into debt. By identifying your expenses, setting a savings goal, choosing a savings account, and setting up automatic transfers, you can easily set up a sinking fund and start reaching your financial goals.

The post What are Sinking Funds and Why You Should Have Them appeared first on Debt Game Over.

What the IRS fails to tell taxpayers indebted to them is that there is a 10-year statute of limitations. That means if the IRS hasn’t collected the debt you owe them in 10 years, the debt is wiped clean from their books.

Most taxpayers are not aware of this statute, but if they were aware, the situation could prove even more complicated for them. Given the nuances of the statute, it’s not as simple as it sounds.

In this article, I will help you understand the complexities of the statute, so you’ll be able to better handle the nuances that come with the IRS statute of limitations. Can the 10-year statute of limitations be used in your favor if you owe the IRS? Let’s find out.

When Does the 10-Year Period Start?

Under certain circumstances, the IRS will forgive tax debtors after 10 years. But your 10-year period may not be the same time period as the IRS’ 10-year period.

The reason is there may be lengthy suspensions, the IRS’s date of tax assessment versus your last return, and whether or not you have been keeping up to date with the documentation regarding your tax returns since the debt period began.

The short answer is, the 10-year period starts at the date of the tax assessment or tax bill for unpaid taxes is due. The date of the tax assessment is the date you will find on the document serving as your Notice of Deficiency, and it is the date the IRS filed the appropriate form.

It is not the date of when you sent your last tax return or made the last payment for that year. If you decide to not file your taxes because you know you cannot pay, the IRS will use existing information (i.e., previous returns and information from employers and businesses) to file an approximate substitute return in your name.

This filing will be in the simplest form, without any of the applicable deductions you would typically take advantage of. When you receive a Notice of Deficiency, or bill of your outstanding debt with the IRS, and fail to act on it, the IRS will begin its collection action.

When Does the 10-Year Period End?

For every month that your balance remains due, your debt grows through failure-to-pay penalties and a flat interest rate. The IRS will use all of its firing power against you: liens, levies on your accounts, garnishment of wages, and the seizing of property.

These tactics are used to force you into agreeing to a payment plan, without ever alerting you about the 10-year statute. You do have the option, however, to halt any collection efforts by filing as Currently Not Collectible.

That will pause any collection efforts until your income reaches a point where you can potentially begin to make debt payments.

Also, keep in mind, there are certain actions and agreements that may require signing a waiver that dictates that the IRS can extend the limitations period. When that happens, it means that the Collection Statute Expiration Date (CSED) may be further than you think.

It also means that the 10-year period may not necessarily be absolute. So, if you’re not keeping up with all the various documentation surrounding the debt, the IRS may have the upper hand on you.

What Will Cause the 10-Year Clock to Stop Ticking?

Whenever the IRS cannot currently collect any payments from you and you are in contact waiting for them to deliberate your offer for a payment plan, the 10-year timer on your tax debt is halted.

There are multiple reasons why the 10-year timer can be halted and not allowed to collect payments from you and I’ll share them here:

• When you’re filing for bankruptcy.
• When you’re filing an Offer in Compromise.
• When you’re filing appeals.
• When you’re filing a lawsuit against the IRS.
• When you’re out of the country for at least six months.
• When you’re signing a waiver to extend the Collection Statute Expiration Date (CSED).
• When you’re in the midst of military deferments.

So, knowing your 10-year period isn’t as simple as figuring out your tax assessment date and counting from there. Any of these events can halt the clock.

Proceedings in bankruptcy court alone can take up to a year, and after that, the IRS waits an additional six months after the proceedings have ended to begin their collection efforts (and, consequently, the collection timer).

Whenever the IRS cannot pursue you for your unpaid debt, it stops counting down on the time limit for your debt. Exactly how much time each of these issues adds to the clock on your CSED is different.

What Happens When the Statute of Limitations Expires?

When the statute of limitations expires, the IRS does not feel compelled to notify debtors. The onus is on you as the debtor to track the status of where you are as a taxpayer, on the statute of limitations.

It is also your responsibility to obtain documentation from the IRS that the tax debt no longer exists. Once that is confirmed, a tax professional can assist you in having the IRS issue an official Certificate of Release of Federal Tax Lien or a Lien Withdrawal.

Proof of a lien release or withdrawal is usually needed to present to institutions who determine credit-worthiness. That is the first step in repairing your credit score.

Examining Your Ability to Pay Your Tax Debt

When first getting hit with the tax assessment, the first thing you want to do is examine your ability to pay the debt. Even if you’re not able to pay the debt in full, it may be possible to discuss a payment option such as a monthly payment or other repayment plan.

If you are able to, you are well within means as a taxpayer to pay the full amount you owe. However, not all taxpayers will have this easy option.

If you find yourself in financial hardship, it’s likely you won’t be able to pay the tax debt you owe. You can contact the IRS immediately and explain the change in your ability to pay.

When the cause is reasonable, and you are unable to make monthly payments without compromising your basic living needs, the IRS will work with you to lower your payments or even put your debt into the currently not collectible status.

The best thing you can do to pay the IRS back taxes is remain in contact with them.

When your tax debt is in the currently not collectible status, the IRS will review your situation annually—and if your circumstances do not change, your debt will remain in this status until the statute of limitations expires, at which point the IRS will write off your remaining balance.

What Are My Options When in Debt to the IRS?

When in debt with the IRS, we may know that with the statute of limitations, the IRS has 10 years to collect that debt. After 10 years, the IRS can write the debt off and clear it from their books.

Many people feel tempted to wait out the 10 years to not pay the debt. However, the “waiting it out” strategy is not recommended for all tax debtors. Ten years is a long time.

And within that 10-year period, the IRS will come after you with everything they have. They will attempt liens, levies on your accounts, garnish your wages, and seize your property.

If you’re a business owner, this could impact your business. You may not be able to continue to operate your business with the standard measures enforced by the IRS to collect. You also run the risk of getting into more debt due to wage garnishments; you could lose your home.

In addition, any actions you put in place to stall the efforts will only stop the 10-year count, which will make the 10 years even longer, possibly by years.

Attempting to utilize an imminent CSED as an IRS tax debt strategy should only be considered while under the guidance of a licensed tax expert.

The best course of action when you are in debt to the IRS is to arrange to pay your tax debt in full or negotiate an installment agreement. Of course, which of these options you choose depends on the amount you owe and the specifics of your financial situation.

However, there may be several other options. You or a tax professional negotiate with the IRS to reduce total tax debt. You could also present a hardship case to the IRS, during which time, collection procedures would halt until you are able to pay.

Being in debt to the IRS does not have to mean being in continual financial distress. While waiting it out for 10 years may seem like a smart solution to the average person, hopefully, this post has provided insight on why maybe that is not such a viable solution for everyone.

The post How Does Tax Debt Forgiveness After 10 years Work? appeared first on Debt Game Over.

A new year is the perfect time to make a resolution to take control of your finances and pay off debt. Paying off your debt frees yourself from the burden of interest and opens the door to a new flow of cash. It can also help increase your credit score.

Paying off debt is not an easy task especially when you’re stuck not knowing where to get the money in order to pay off your debt obligations in the first place.

One of my favorite ways to pay off debt, is to manage it using a debt pay off app. These debt reduction apps are easy to use and help you visually see where your money is going, help you create a budget and help you so you can put your money to better use to pay off debt fast.

The 7 Best Debt Payoff Apps for 2022

Digit

Digit is one of the greatest debt payment apps because it helps you track your income and save every penny you can afford to save. The Digit app will track what you make and help you make wise purchasing decisions because of its ability to analyze and respond to your spending habits.

Cost: The app is $5 per month and comes with a month-long free trial, so it’s a great investment to make for little money down. Use Digit to create and follow certain and specific financial goals and help yourself out of debt.

Mint

The beauty of Mint is its connectivity. You can link all of your financial apps to Mint and track your spending from one easy hub. Your loans, investments, expenditures, and income can all be tracked from this one app, which keeps you in the clear about what you’re spending and what you’re saving.

Mint also comes with a handy budgeting tool to help you plan for your month and know if there’s any financial cliffs coming in the near future.

Cost: Mint is completely free to use, so you won’t have to worry about an additional payments, and it’s a great way to help you stay financially solvent. Plus, you can use their desktop or app version for easy access at all times.

Quicken

Quicken is your one-stop-shop for debt relief. It’s an app which works great for both Mac and Windows operating systems and comes with a fantastic and user-friendly app. Tens of thousands of people around the world use Quicken to help them track their financial movements and keep tabs on every expenditure they make during the month.

Quicken is great at categorizing your spending, giving you key information about how you’re spending and where you can improve your financial habits. Like Mint, you can keep all of your spending practices in one place, making it easy for you to put your finances in perspective.

Cost: Quicken starts at just $35 per year ($2.92/month) and they often run promotions and deals to save even more.

Debt Payoff Planner

If categorization is what you’re looking for, Debt Payoff Planner is what you need. This is an app which allows you to categorize your debt and interest into up to eight categories, including auto loans, home loans, and personal loans.

You can keep track of how much you owe in each category and pay them off as you see fit so that your debt never sneaks up on you becomes more unmanageable.

Cost: Debt Payoff Planner is free with ads, though the premium is dirt cheap. It costs only $24 for two years of the app, in which time you should be able to pay off your debt and never look back.

Tally

Tally is one of the best debt repayment apps because of the incredible degree of automation it allows you to take advantage of. Tally will automatically pay your credit card debt for you, using integrated software to choose the appropriate amount to pay. If you feel uncomfortable with the automatic payments, you can also pay from the app manually.

Tally actually offers lines of credit at lower interest rates than the average, meaning you can save for yourself while you’re busy paying off your debt. It also pays off the highest interest rates last, a system known as the “debt avalanche.”

Cost: Tally doesn’t cost anything but it does require you to open a low-interest credit line. Think of it as a personal loan for attacking debt.

Qube

Organization and agency are the key factors to Qube. The app allows you to track your spending and organize your expenditures in any way you like, in order to take control of your own money and spend how you see fit, while saving money.

Qube is also rolling out a new automated debt reduction feature in the near future, meaning you won’t have to calculate the money you need to spend and save for your future by yourself.

Cost: Qube has both paid and free versions of the software, so you can spend as much as you’d like to help take control of your future and organize your debt in the way you best see fit.

Qoins

This is a neat little app to aid you on your journey to debt repayment. The concept is quick and simple. When you install Qoins on your phone, the app will round up every time you make a purchase with your debit card and carry that money over to a debt repayment. So, if, for example, you spend $7.50 on lunch, the app will round up eight dollars and save the extra fifty cents in an account.

The money in the account is used to help you pay off debts every month making it a stress-free way to pay off debt.

Cost: The app is only three dollars per month and automatically applies its functionality to every purchase you make, so you never have to worry about manually saving your nickels and dimes.

Conclusion

Debt doesn’t have to be a way of life. With strategic planning, a steady flow of cash, a solid budget and a payoff debt app, you can be debt free in no time. This means overall financial success and an official win with money.

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