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New 1099 Rules for Freelancers, Class Action Deadlines, and Who Pays a Parent's Debt · Becoming Financially Confident

• 0:07
  Today we're answering three questions from whether it's worth moving money out of a low interest savings account, what to do when the IRS sends you a CP 2000 notice, and whether you have to pay your parents credit card
• 0:19
  debt after they die.
• 0:21
  Before that, we'll first look at a few headlines, including some money you may already be owed.
• 0:26
  And before the show ends today, we'll let you know what this week's money move is.
• 0:32
  Becoming Financially Confident.
• 0:39
  Welcome to Becoming Financially Confident, where we are breaking free from money shame, one conversation at a time.
• 0:45
  We're live every Monday through Friday from 11:30am to 12:30pm Eastern.
• 0:50
  And good morning, everybody.
• 0:51
  I'm Ralph Defrog.
• 0:53
  Dealing with a little bit of a head cold here, but I'm Ralph Estep Jr.
• 0:56
  I'm a licensed public accountant with 30 years of experience and a head cold that doesn't seem like it wants to go away, but I certainly have a great voice for audio right now.
• 1:06
  Oh, yeah, you do.
• 1:06
  You do.
• 1:07
  And I'm Juliet.
• 1:08
  I'm just a regular person who's going to be asking Ralph all the questions that I have and that you have, too.
• 1:13
  Yeah.
• 1:14
  We're two very different people having conversations about the things that affect our money and your money.
• 1:18
  Now, I just want to remind everybody we have two house rules, and these are really important for the show.
• 1:23
  On this show, there's no shaming anybody about money.
• 1:26
  We've all made mistakes.
• 1:27
  We've all done things that when we look back and say, you know, why did we do that?
• 1:31
  And also, we don't judge anybody on the show for what you didn't know.
• 1:34
  Our goal is to help you make a better decision today and not worry about what happened in the past.
• 1:40
  Yes.
• 1:40
  And so if you have a question that you're thinking about and you want to have a conversation with us, send it to us@becomingfinanciallyconfident.com no question related to personal finance is off limits.
• 1:52
  Yeah.
• 1:53
  Because wherever you are on your financial journey, I want you to know this, you're not alone in that journey.
• 2:02
  There are several class action settlements with filing deadlines coming up this month, and some don't require proof of purchase.
• 2:10
  Ralph, how do you know if there's like a class action that you're part of and that's actually worth filing for?
• 2:16
  And how do you avoid those scams?
• 2:18
  Yeah, this is a really interesting thing.
• 2:19
  When I saw this come across the newswire, like this would be a great thing to talk about because I see these promoted, I get these little postcards every once in a while.
• 2:28
  And the interesting thing is when you dig into this, I do a little research for this.
• 2:32
  Almost nobody files for these things.
• 2:35
  And I think the reason they don't file for them, I think there's really two reasons.
• 2:38
  I think, number one, it sounds like a scam, and we've all got our scam radar up all the time, and it sounds like it's something for other people.
• 2:46
  And then I think the bigger issue, though, so maybe there's three.
• 2:50
  The third thing is we look at it like, oh, it's $12 or it's $6, or I'm going to have to do all to get to that.
• 2:57
  So I want to talk about first, though, is what exactly is a class action settlement?
• 3:03
  Because if you don't know what that word is, and on this show, I always try to break down the jargon.
• 3:08
  So let's talk about what a class action settlement actually is.
• 3:12
  And they really come about when somebody files a claim against a company.
• 3:17
  I'll give you an example of this.
• 3:18
  There's one out there right now for a cookware company.
• 3:20
  I think it's ironclad.
• 3:22
  Don't quote me on that.
• 3:23
  But it's one of these things.
• 3:24
  And basically what it looks like is someone filed a lawsuit because there might have been a manufacturing defect, maybe somebody was hurt by these things.
• 3:33
  So a court at some point says, you know what?
• 3:36
  This affects more than just the person or the plaintiff.
• 3:39
  That's the person who brought the case to court.
• 3:41
  It affects more than them.
• 3:43
  And oftentimes the court will say, listen to the company, will say, here's what we're willing to do.
• 3:48
  You need to put X number of dollars into a settlement bucket, and you've got to come up with a plan of how people can go and get that money from you.
• 3:58
  Now, sometimes you don't even have to have a proof of purchase.
• 4:00
  You just have to sign up for this thing and make some nuanced ovation of, hey, I use those pans.
• 4:07
  Like, for example, this cookware settlement is really interesting.
• 4:10
  They'll give you $6 per pan or $12 per household, and you don't even need a receipt for that.
• 4:18
  Now, in this particular one, it's for California and Colorado buyers.
• 4:22
  Again, they can be very, very limited to the state.
• 4:26
  Right, but you asked the question a little while ago.
• 4:28
  You're like, well, how do you avoid getting scammed?
• 4:31
  Let's talk about that, because that's the biggest issue.
• 4:34
  One of the things you definitely want to look for is make sure you're going to what they call the official administrator's own website.
• 4:41
  What happens with all of these administrators?
• 4:43
  Okay, yeah.
• 4:44
  So there's always.
• 4:45
  The court is going to appoint an official administrator of this.
• 4:49
  And is it never the company?
• 4:51
  Generally not.
• 4:52
  Because what the court is doing is they're saying to the company, hey, you did a bad thing, so you need to go hire this administrator to go and yes, correct.
• 5:01
  A third party.
• 5:02
  Right.
• 5:03
  So there's always, there's.
• 5:04
  I shouldn't say always.
• 5:05
  I'm not an attorney, I can't give you legal advice.
• 5:07
  But there's usually an administrator.
• 5:10
  Got it, Got it.
• 5:10
  They're not going to send you a text.
• 5:12
  They're not.
• 5:13
  Now I say they're not going to send you an email, but I've actually seen some emails go out if you have an email address.
• 5:20
  Yeah.
• 5:20
  So here's the big things.
• 5:21
  Couple things to look for.
• 5:23
  They're never going to charge you a fee to apply.
• 5:26
  Nope.
• 5:26
  So if you're trying to get.
• 5:28
  Take advantage of a class action settlement, don't pay a fee.
• 5:33
  Second thing, they're never going to ask you for your full Social Security number.
• 5:38
  Right.
• 5:38
  So if you get an email or a text or something like that that says, oh, this looks really great, they're going to give me $1,000.
• 5:45
  Be careful, number one, they're usually not that much money.
• 5:48
  Number two, they're not going to ask you for your full Social Security number.
• 5:51
  But I think.
• 5:52
  Enjoy.
• 5:53
  Let me ask you this question.
• 5:54
  Do you think it comes down to people are just not willing to be bothered for $12?
• 6:00
  Yeah, I think, I think it's.
• 6:02
  People are not going to be bothered for $12.
• 6:03
  And the high likelihood of it being a scam is higher than the amount that they'll get.
• 6:10
  Sorry about that.
• 6:11
  I had to, I had to bail out of the audio there for a second because of this cough.
• 6:14
  And now I sound even worse, like froggy.
• 6:16
  Hold on.
• 6:18
  Yeah, yeah, yeah.
• 6:20
  But I mean, that was, what I was saying is like, I don't think people are going to be very much bothered for that $12.
• 6:26
  Also, it's like really hard if you don't really pay attention.
• 6:28
  I will say that I have gotten.
• 6:32
  I'm going to call it invites to be a part of a class action lawsuit through email.
• 6:38
  And I think something that you said that's really good, you know, in order to protect yourself from any potential scam is to always go search up the official administrator.
• 6:46
  That way, you know, okay, is this a scam?
• 6:48
  And then you get to decide, okay, am I Gonna go through with the $12 or $14 I have gotten.
• 6:53
  I think it's like $3 before I'm like, okay, sure, why not?
• 6:58
  Yeah.
• 6:58
  And I'm gonna go through and highlight a couple of these.
• 7:00
  So there's a couple out there that are outstanding right now.
• 7:02
  One of them is Google Play.
• 7:05
  So Google Play has.
• 7:08
  Sorry, there's another one with O'Reilly Auto Parts.
• 7:12
  Both of those have September deadlines.
• 7:14
  September 14 and 28.
• 7:16
  Yeah, but just be careful because once the window closes, you're out of luck.
• 7:21
  Yeah.
• 7:21
  So aware of that.
• 7:22
  Yeah.
• 7:23
  So I guess this is for the audience.
• 7:25
  If you have purchased anything from O'Reilly Parts or Google Play, maybe in the last year or so you could be part of a class action lawsuit and just get some extra change money or something.
• 7:35
  So take a look at that.
• 7:37
  Absolutely.
• 7:42
  Everybody keeps saying rates are about to fall, mortgage rates are about to fall.
• 7:46
  But the 30 year mortgage just climbed to 6.71%, the highest in more than a year and up again from the week before.
• 7:54
  Ralph, if you are buying a house or waiting to refinance, what does this number mean for you?
• 8:01
  Well, this is really interesting because a lot of people thought that rates were going to actually come down.
• 8:07
  Excuse me, I'm battling this voice today.
• 8:09
  I'm going to be your translator today.
• 8:10
  And it was funny because up to the point of recording today, I was fine.
• 8:14
  I had like this deep, like sultry voice.
• 8:16
  But now it's just gotten weird.
• 8:18
  Oh, there.
• 8:18
  I think I'm good now.
• 8:19
  So what this really means is that in general, interest rates are on the way and a lot of people don't want to hear this.
• 8:27
  They're on their way up.
• 8:28
  I think we've already hit the bottom.
• 8:30
  I don't think we're going to go any lower.
• 8:32
  Does that mean.
• 8:33
  I'm sorry, go ahead.
• 8:34
  I was going to say, does that mean the only way to come for the housing rates to come down is for another housing bubble burst?
• 8:41
  Yeah, I think that's what it's going to come down to because now it's going to become a factor of the cost of the home.
• 8:46
  So what this really does.
• 8:47
  Let's just break this down to what this means to the average person.
• 8:50
  When interest rates go up, that means that your affordability goes down because your payments go up.
• 8:58
  So I'll give you a simple example of this.
• 9:00
  Okay.
• 9:00
  Most mortgage lenders will lend you up to 28% of your monthly gross income for a mortgage.
• 9:08
  Okay?
• 9:09
  So if your mortgage payment is based on a 6% interest rate, then you can afford X value of house with that interest rate goes up to 6.5%, then what happens?
• 9:21
  Your mortgage payment goes up.
• 9:23
  If your mortgage payment goes up, then the amount of house you can actually afford to buy goes down.
• 9:28
  Goes down.
• 9:29
  Correct.
• 9:30
  So this is what got us into housing trouble in the past, where they took that 28%, what's called a front ratio, and they said, well, you know, we're going to be a little bit more relaxed and we're going
• 9:39
  to make it 35%.
• 9:41
  And then what happened is a lot of people got into mortgages they frankly couldn't afford.
• 9:46
  Right.
• 9:46
  So when you see interest rates going up, what that does is it makes the.
• 9:51
  And also the other.
• 9:52
  The positive thing to this potentially is if you're a buyer looking to buy a house, it might soften the market a little bit because now all of a sudden you're out there shopping for a house, and if your
• 10:05
  house, if the value, if you're trying to buy a house and the amount of the payment just went up, then you're not going to qualify for that house as easily.
• 10:15
  When interest rates are lower, the seller can basically what they call, set the market.
• 10:21
  Right.
• 10:21
  Right.
• 10:22
  Because interest rates are lower, they're more affordable.
• 10:24
  When interest rates start to creep up, that's where you might see.
• 10:28
  Because right now, I mean, prices have been going through the roof.
• 10:30
  Like, I was talking to a realtor friend of mine over the weekend, and she said, right now, she said, man, if you want to sell a house, this is a great time to sell, she said, because there's very
• 10:40
  low inventory and people are, you know, getting their, their asking price in a couple of days or a week, which is absolutely amazing.
• 10:48
  Yeah.
• 10:49
  But I think what this is going to do, Juliet, is it's going to.
• 10:51
  Number one, it hurts people because now all of a sudden, that house that you thought you could afford, maybe you've had your, your mind set on it and all of a sudden you can't afford it and that.
• 11:00
  So let's just talk about fixed rate.
• 11:02
  So that 6.0 is up from a year ago, which is really interesting.
• 11:08
  So a year ago it was at 6.04%.
• 11:13
  So it's gone up quite a bit.
• 11:14
  And, you know, a lot of people have been sitting on the sidelines and saying, well, you know, maybe we shouldn't buy a house right now because interest rates are going in the wrong direction.
• 11:22
  You know, I think another thing you need to remember too about this, that rate is the average for a person with great credit and a 20% down payment.
• 11:30
  So you got to understand that your rates are going to vary.
• 11:34
  It depends on your particular circumstance.
• 11:38
  Another thing you need to understand also, every mortgage lender gets what's called a daily rate sheet.
• 11:44
  Daily rates.
• 11:44
  And I did say daily, because these rates change daily.
• 11:49
  Wait, even if I have a mortgage, I technically still have a daily rate sheet.
• 11:53
  No, once you've locked into your mortgage, that's different.
• 11:56
  But let's just say you're out in the.
• 11:58
  Let's use a real simple example.
• 11:59
  Let's say that Juliet decides today that she is going to go buy a home.
• 12:04
  Okay?
• 12:04
  So she goes out and she shops, and she finds the most beautiful house that she's ever wanted her entire life.
• 12:10
  Ta da.
• 12:11
  And let's just say now Juliet's in California.
• 12:13
  But I'll use numbers that all of us can understand.
• 12:15
  Let's just say she finds a home for $300,000.
• 12:18
  Okay.
• 12:19
  Okay.
• 12:19
  So she's been saving.
• 12:21
  Juliet does good things with her money, and she's able to put the 20% down payment on it.
• 12:26
  So she's going to finance $240,000.
• 12:30
  300,000, minus the 20%.
• 12:32
  Correct?
• 12:32
  Yep.
• 12:33
  And she goes out to a mortgage company.
• 12:35
  Hopefully, she's going to take my advice.
• 12:37
  I'm going to talk about here in a second.
• 12:38
  She's going to go out to a mortgage company and she's going to shop the rates with several different lenders.
• 12:43
  Maybe she'll work with a mortgage broker.
• 12:45
  And they're going to say, you know what, Juliet, here's the great news right now.
• 12:48
  Because of your stellar credit and the fact that you're putting 20% down, we will approve that loan.
• 12:55
  And your interest rate is 6.5%.
• 12:58
  Okay, here's the thing you need to understand.
• 13:00
  That's today's rate.
• 13:02
  Then what they might do is say to you and Juliet, guess what?
• 13:05
  We think rates are going to go up, but if you're willing to pay us, we will lock the rate in for a certain period of time.
• 13:13
  Correct.
• 13:13
  You can lock in that rate.
• 13:15
  Now, this is a tough decision because, you know, you don't pay the money right then and there.
• 13:21
  Generally it's added to the settlement costs.
• 13:24
  Right?
• 13:24
  But it could be a percent, it could be 2%.
• 13:27
  The question is, and when you see data like we talked about today, then you have this feeling.
• 13:32
  Now you could also let the rate float, which means that it just floats every day.
• 13:37
  And whatever day you go to settlement, whatever the rate is that day, you can lock it in a day before settlement, there's a whole lot of different things you can do.
• 13:44
  You can also do a thing called buy down the rate where you pay interest up front and it reduces the rate moving forward.
• 13:51
  Now sometimes they have to do those if you're real tight on your ratios and you're not quite qualifying for it.
• 13:57
  I know we've talked about a ton of things, but big picture here.
• 14:00
  Yeah, Big picture.
• 14:02
  What this is telling us is that the idea of interest rates going back into the four, five percents.
• 14:08
  Yes.
• 14:09
  I don't think we're going there.
• 14:11
  Okay.
• 14:12
  I just don't think we're going there.
• 14:13
  I think the reality on the ground is that interest rates are about where they're going to be.
• 14:18
  The Feds are going to be meeting again middle of September.
• 14:22
  Right.
• 14:23
  We talked about this on the show before.
• 14:24
  A couple of the federal governors, they're called, their Federal Reserve governors have indicated they actually want to increase interest rates.
• 14:31
  So it wouldn't shock me and I don't have a crystal ball, it wouldn't shock me if we actually got into a period of where interest rates are going up.
• 14:40
  So I guess the lesson here right now is just like keep in mind that especially for mortgages, if you're going to refinance, you're going to buy, purchase a house, this might be one of the, the lowest of the
• 14:52
  rates for a while until we get our next housing bubble burst or something like that.
• 14:56
  So just keep that in mind as you navigate those money conversations with yourself, with your partner, anything related to a house.
• 15:04
  Absolutely right.
• 15:05
  I don't want to sit here and say to you that I know the best answer, it depends on your circumstance.
• 15:10
  But just I don't believe that we are going to go lower in the short term.
• 15:15
  So if you're right out there, right now you're thinking, ralph, the mortgage lender just called.
• 15:18
  Should I go ahead and lock it in?
• 15:20
  It might be a worthy discussion to think about because if we see another increase then that 20, even what they call basis points, like even if it goes up by a quarter of a point, 25 basis points.
• 15:30
  Yeah.
• 15:31
  That could cost you a lot of money on a 30 year mortgage, you know, so you got to really pay attention to that for sure.
• 15:36
  Yeah.
• 15:41
  A client now only has to send a 1099 if they paid you $2,000 or more, up from $600.
• 15:49
  Ralph, what does that actually change for someone who freelances or does gig work?
• 15:54
  What this is going to do is it's going to confuse the hell out of everyone and I'm going to Be very blunt about that, because for the last, ever so long that I can remember, we've always heard this
• 16:04
  rule.
• 16:05
  If you pay anybody more than $600 a year, you got to give them a 1099.
• 16:11
  Yes.
• 16:11
  So people have become accustomed to that, and now they've changed the rules.
• 16:17
  And basically, if you're paying someone.
• 16:19
  Here's the new rule.
• 16:20
  If you're paying someone who is not a corporation, general way of saying it, you can now pay them up to $2,000 per year per person without giving them a 1099 at the end of the year.
• 16:33
  So then question.
• 16:34
  If I am somebody who should be receiving a 1099, whether directly or indirectly, do I still go to the.
• 16:43
  What is it the payer like?
• 16:45
  And I should still be able to find a form whether they actually explicitly send it to me or not, Right?
• 16:51
  Well, that's where it gets complicated.
• 16:53
  Because if they don't have to send them to you, people like me, accountants who represent businesses.
• 16:59
  Yeah.
• 17:00
  I'm not going to say to a client, send a 1099 to every single person you paid.
• 17:04
  Okay.
• 17:05
  Only those who are over $2,000.
• 17:08
  Okay.
• 17:08
  So if you are a freelancer, a gig worker or something like that, don't expect to get a 1099 from every person you've worked with, only those that you've made more than $2,000 with.
• 17:21
  This is what's going to confuse people, because then what's going to happen is when that gig worker, like you, if you were the gig worker, goes to file your tax return, you're going to say, wait a minute, I
• 17:30
  never got a 1099 from this person.
• 17:32
  I guess I don't have to claim that income.
• 17:35
  Wrong answer.
• 17:35
  Wrong.
• 17:36
  Yeah.
• 17:36
  Correct.
• 17:37
  So whatever you collect, whatever it could be $10, it could be $3, you have to claim that on your tax return, regardless of whether you get a form or not.
• 17:48
  So this is where I think it gets super confusing.
• 17:50
  It's great for the business owners because now we don't have to be so worried about sending one of these out to everybody that we paid who only made $600 or more.
• 18:00
  Now we've moved that threshold up to $2,000.
• 18:03
  Right.
• 18:03
  But I think it's going to cause a lot of people to under report their income.
• 18:09
  And I don't see where this helps the IRS or the Congress either, because I think what you're going to have happen is now fewer people are going to claim their income.
• 18:18
  Yeah.
• 18:19
  But I think what, but I think what's happening here is the reality is so Many of these people are paid through these third party apps.
• 18:29
  They're paid Venmo and Cash app and all those different things.
• 18:33
  And the IRS already is aware of those.
• 18:36
  Right.
• 18:36
  I think that's what you're going to find.
• 18:38
  I think that's where they're going to start to say, okay, you know what we're going to do here?
• 18:41
  We're going to focus our efforts on that.
• 18:44
  Okay, so my takeaway from this.
• 18:46
  Go ahead.
• 18:46
  I was going to say, like, what is the takeaway specifically for the, the freelance worker?
• 18:51
  So for the freelance worker, number one thing you need to do is you need to set up a separate bank account for your freelance work.
• 18:59
  Every single dollar that you collect in revenue, big dollars.
• 19:04
  I say big dollars, meaning before expenses, gets deposited to that account.
• 19:08
  That's number one thing.
• 19:10
  Second thing, every single expense for that gig work for that freelance worker gets paid through that account.
• 19:18
  Right.
• 19:18
  So now what you've done is you created what we like to call an audit trail.
• 19:22
  You can go and look at it.
• 19:23
  Super simple.
• 19:24
  Here's how much I collected, here's how much I paid out.
• 19:27
  The third thing I'm gonna recommend you do is set aside separate money in a tax account.
• 19:32
  So you're really creating two accounts here.
• 19:34
  Number one, a business account.
• 19:36
  Even if you're not an S corp or an LLC or a fancy dandy business, you could set up a separate personal checking account, but just make sure you're driving those things.
• 19:45
  But then set up another account, which I call the tax account.
• 19:49
  Depending upon your situation, put 25 to 30% of every single dollar you collect into that account.
• 19:57
  That way you don't get to the end of the year and somebody like me calls and says, hey, Julia, it's fantastic.
• 20:03
  You had a great year in your side hustle business.
• 20:06
  Now the IRS wants their share and the state wants their share.
• 20:09
  And because you work for yourself, you have to pay self employment tax, which is another 15.2%.
• 20:16
  Now, a lot of people have said to me over 30 years of doing this work, but Ralph, they didn't even send me a 1099.
• 20:24
  Do I really need to claim this income?
• 20:27
  The answer is yes.
• 20:29
  And I think this just makes it more complicated.
• 20:33
  Yeah, yeah.
• 20:34
  Keep your books clean, everyone.
• 20:36
  And this is a good reminder for myself too, as I start on my entrepreneur journey.
• 20:41
  Yeah, because you're in this journey right now, so you're living it.
• 20:43
  You know what the audience could be thinking about now too.
• 20:46
  So just understand that you may not get as many 1099s, but it's not the responsibility.
• 20:51
  Even if you made more than $2,000.
• 20:53
  Let me just say that too.
• 20:55
  And it's $2,000 per employer.
• 20:57
  Like just in case, if you have multiple people, it's $2,000.
• 21:01
  Yeah.
• 21:02
  So from the business, person has to give it to anybody.
• 21:04
  They paid more than $2,000 in a calendar year.
• 21:08
  Right.
• 21:08
  Okay.
• 21:09
  Yeah.
• 21:09
  But here's the thing.
• 21:10
  You need to understand, many businesses don't bother.
• 21:14
  So don't assume that you're going to get one.
• 21:16
  Well, I'm not going to keep track of this because they're going to give me a 1099 at the end of the year.
• 21:20
  Sometimes they go out of business, sometimes they forget.
• 21:22
  Sometimes they don't have a very good accountant like me that reminds them, hey, you better do this because there are fines for this.
• 21:28
  Yeah.
• 21:28
  So that's the big takeaway from that one.
• 21:30
  Yes.
• 21:31
  All right, well, let's get into our question here.
• 21:33
  Let me ask you a question, Julia.
• 21:35
  Yes.
• 21:36
  What did you spend last month?
• 21:38
  Last month?
• 21:39
  I actually don't know.
• 21:41
  Yeah, we add up groceries and gas, the kids, cleats, all the different pieces of the puzzle.
• 21:47
  We ask ourselves, what do we actually spend?
• 21:51
  And what I found is when you ask that question to most people, they don't have the answer.
• 21:56
  And the reason they don't have the answer is because money doesn't leave in just one piece.
• 21:59
  At least $9 at a time.
• 22:00
  $14.
• 22:01
  There.
• 22:02
  Those forgotten subscriptions you forgot about, well, we have a better solution for you.
• 22:06
  It's called Quick and Simplify.
• 22:08
  And what Quick and Simplify does, it connects your accounts, it tracks what's moving, and it shows you it's actually safe to spend for the rest of the month after your bills and savings are set aside.
• 22:17
  And we've got an affiliate relationship with them where you can test out their software.
• 22:21
  It's a paid subscription, it's billed annually, and there's a 30 day money back guarantee.
• 22:26
  If you're interested in that, go to becoming financially confident.comquicken Again, that's becoming financiallyconfident.comquicken.
• 22:42
  We're moving on to our segment called Community Mailbag.
• 22:46
  So just a quick reminder before we get into today's Community Mailbag, if you have a question you want us to have a conversation about on air, please send it to us@becomingfinanciallyconfident.com Are you ready for today's first letter?
• 22:59
  I'm ready.
• 22:59
  Let's hear it.
• 23:00
  Yeah.
• 23:01
  So this one is from Dana in Ohio.
• 23:03
  Dana says Ralph and Juliet I have about $15,000 sitting in a savings account at the same bank I've used since I was 19.
• 23:12
  I finally looked at the statement last month and it is almost paying nothing.
• 23:17
  Something like 0.4%.
• 23:19
  Meanwhile, I keep seeing ads for accounts paying 4%.
• 23:22
  And now everybody is saying the Fed is going to cut rates again in a couple of weeks.
• 23:27
  I do medical billing from home on contract, so my income moves around a lot.
• 23:32
  And that $15,000 is the reason I sleep at night.
• 23:35
  I don't want it locked up somewhere I can't get to it.
• 23:38
  But leaving it where it is feels dumb, too.
• 23:41
  Should I put it in a CD before the Fed meets Ralph, let's hear your take on this.
• 23:47
  Well, this is a lot of interesting things here, and I want to highlight a few things.
• 23:51
  Number one, having $15,000 in a savings account, I want to give you a round of applause because a lot of people just don't have that.
• 24:00
  And that's amazing.
• 24:02
  So first of all, on this show, we are going to celebrate victories.
• 24:05
  That's a huge victory.
• 24:07
  Yes, it is.
• 24:08
  $15,000.
• 24:09
  But then I'm going to make a little judgment.
• 24:11
  I promise.
• 24:11
  I wouldn't judge.
• 24:11
  This isn't a judgment, just being funny.
• 24:13
  But she's been with the same bank since she was 19, so that tells me she hasn't really shopped this around.
• 24:19
  The good news is she's looked at her statement and she's right.
• 24:22
  Most savings accounts, traditional savings accounts, are paying almost nothing.
• 24:28
  0.4% is almost nothing.
• 24:31
  That's an issue.
• 24:33
  And then she says, I'm seeing ads accounts being 4%.
• 24:36
  Also true.
• 24:37
  There are what call high yield savings accounts.
• 24:39
  There are CDs, all of those type of things.
• 24:41
  Now she says something that I'm going to contradict a little bit.
• 24:44
  She thinks the Fed is going to cut rates again.
• 24:46
  I don't think that's going to happen.
• 24:47
  I think rates are going to actually go up.
• 24:49
  That's something we'll talk about in a second.
• 24:51
  She is a gig worker, which is amazing.
• 24:54
  So she's doing the right thing, setting aside money.
• 24:57
  And she says, I feel like I'm being dumb here.
• 25:00
  You're not being dumb.
• 25:01
  You're just doing what you were probably taught.
• 25:03
  Your parents probably had this same banking relationship.
• 25:06
  I know when I met my current wife.
• 25:08
  We've been together.
• 25:09
  It'll be 26 years this Wednesday, believe it or not.
• 25:11
  Wow.
• 25:12
  And her and her family been banking with the Same bank for 50 years.
• 25:16
  Wow.
• 25:17
  She went in to do some stuff for her mom's account.
• 25:18
  Her mom has dementia and she's not doing great and she had to move some stuff around.
• 25:22
  And the teller or the lady at the bank says, you know, your mom's been a customer here for over 50 years.
• 25:28
  Right.
• 25:29
  The problem with that is if you don't shop it around.
• 25:31
  Yes.
• 25:32
  So that's the issue.
• 25:33
  So a couple things I want to break down.
• 25:34
  Yeah.
• 25:35
  Number one, if it's just in a regular savings account, that's a big issue.
• 25:40
  Yeah.
• 25:40
  But you shouldn't be embarrassed about that.
• 25:42
  You're saving.
• 25:43
  Saving is great.
• 25:45
  And we're having the conversation right now, too.
• 25:47
  Right.
• 25:47
  And a lot of people are in the exact same situation that you are in.
• 25:52
  Right.
• 25:53
  So don't flex too much worried about that.
• 25:57
  But the percentages are the whole point.
• 25:58
  I'm going to show some slides and we'll send these out in our school community if you're interested.
• 26:03
  Right.
• 26:03
  But I want to show you the differences here between the different types of things you can pick.
• 26:08
  I'm going to start with the first slide here, what you see on this first slide.
• 26:11
  And if you're in the audio, I'm going to talk you through this.
• 26:13
  So right now, the average bank savings account rate is 0.38%.
• 26:19
  So almost exactly what this particular listener said that she was making.
• 26:25
  Let's do some quick math.
• 26:27
  So if you've got $15,000 invested at 0.38%, that means in a year, you're going to make $57 in interest.
• 26:37
  That's what they're paying you to keep your money in.
• 26:40
  Which says, well, you think to yourself, okay, that's great.
• 26:42
  I made $57.
• 26:43
  I didn't have to do anything for it.
• 26:45
  However, the top online savings account right now, if you look in the community, the different things that are out there is 4.20%.
• 26:55
  Now, that's what they call an annual percentage yield, which basically is a fancy way of saying this money compounds on itself.
• 27:01
  So money grows on money.
• 27:02
  But here's the thing that's going to knock your socks off, Julia.
• 27:05
  What is it at 4.2%, that $15,000 earns you $630 a year in interest.
• 27:14
  That's such a huge jump.
• 27:15
  Yeah, it's huge because if you think about it, you've gone from $57 to $630.
• 27:23
  Yeah.
• 27:24
  And it's got the same level of safety.
• 27:27
  It's got the same level of all those things most of the time.
• 27:30
  But see, the banks don't want to tell you this.
• 27:32
  No, they want to Keep your business with them.
• 27:35
  Yeah.
• 27:36
  And that's a huge thing.
• 27:37
  So you got to understand that that's the first place is go see what's available.
• 27:40
  Now she also ment I want to just take a look at the CD rate.
• 27:44
  So I'm going to throw this slide back up again.
• 27:45
  If you're watching this or if you listen to this on audio, what I did here is.
• 27:48
  Go ahead, Juliet, question here.
• 27:50
  I think you ought to break us down.
• 27:52
  What is a cd?
• 27:52
  I believe it stands for certificate of deposit.
• 27:56
  Yes, correct.
• 27:56
  So thank you, by the way.
• 27:58
  Yeah.
• 27:59
  A CD is not the thing you pop in and listen to K pop music.
• 28:01
  That's not what we're talking about here.
• 28:03
  So a CD is a certificate of deposit and it works like this.
• 28:06
  You basically have an agreement with the bank, with your bank or whatever bank you want to work with.
• 28:12
  They are going to pay you a percentage of interest if you're willing to lock your money in for a certain term.
• 28:20
  These can go anywhere from three months to six months to five years.
• 28:24
  Yes.
• 28:25
  But here's the thing you need to understand with the cd, once you lock that money in, you can't get to that money without paying a penalty.
• 28:33
  So you have to be wary of what that looks like.
• 28:36
  So in this particular case, what this lady is really telling us is that she's got $15,000, which is her savings account.
• 28:44
  Some of those monies.
• 28:45
  I'm going to get to this a second.
• 28:47
  She needs to keep liquid.
• 28:48
  In other words, she needs to be able to get to those right away.
• 28:50
  They are her true emergency funds.
• 28:53
  Right.
• 28:53
  Like if you get into, you know, an accident, you have something, a car, medical, you need to have money like available immediately.
• 29:02
  Absolutely.
• 29:03
  And it's not something you can have locked up in a cd.
• 29:06
  So the benefit to a CD is that it's locking the money in.
• 29:09
  So I'm gonna go back to the slide here.
• 29:11
  So if we're comparing apples and oranges here, by locking it into a cd, we're able to push that interest rate up a little bit right.
• 29:18
  Now that 18 months.
• 29:20
  So basically you're locking money in for 18 months.
• 29:23
  Right.
• 29:23
  Is 4.25%.
• 29:26
  So instead of earning a little bit.
• 29:27
  Higher than the top online savings.
• 29:29
  Absolutely.
• 29:30
  So Instead of earning $57 in the standard savings account or $630 in the high yield savings account, you're earning $637.50 by locking that money in to that 12 or to 18 month CD.
• 29:47
  But understand what you're doing because we just said the Fed is going to meet again in September.
• 29:52
  If the Fed decides to increase interest rates, the net CD you just bought might have been a bad deal because now all of a sudden that interest rate on the 18 month CD is going to go up because
• 30:04
  interest rates have gone up.
• 30:05
  Now if they go down, you made a great deal because now you've locked that money in.
• 30:09
  Right, right, right.
• 30:09
  But I don't think interest rates are going to go down.
• 30:12
  Something that you mentioned though is that CDs, you can basically lock it up anywhere starting from three months to 18 months.
• 30:19
  Did I hear that right?
• 30:20
  Yes, you've walked me into the next term.
• 30:22
  I want to talk about.
• 30:24
  Now we've talked about CDs is generally like a novice, somebody who's just getting started.
• 30:28
  This is an option.
• 30:29
  So you have your regular savings account, we commend you for that.
• 30:32
  The next step would be go into your high yield savings account, which there's no lock on that you can take the money out whenever you need it.
• 30:38
  The third thing, if you get into a cd, we're going to talk about what's called laddering.
• 30:43
  And laddering basically means that you have a certain amount in different CDs maturing at different points in time.
• 30:51
  Now I'm going to get them to go to a slide which if you're watching the audio, I apologize.
• 30:55
  We'll send these out though.
• 30:56
  But I'm gonna give you a basic ladder that this particular listener can use.
• 31:00
  Here's my recommendation.
• 31:02
  Number one thing, put into that regular savings account, or even a high yield savings account, one month of your total expenses.
• 31:11
  Whatever you would normally spend for one month, don't lock that up in a cd.
• 31:15
  Don't put that in anything that you can't get to right away.
• 31:18
  So basically, whatever your monthly costs are, assume you get zero income in, you're hurt in an accident, you can't work whatever that looks like, whatever your total expenses are, your rent, your car payment, your mortgage, your utilities, lock
• 31:31
  that up.
• 31:32
  Excuse me, don't lock that up.
• 31:33
  Put that in a regular savings account.
• 31:35
  Then what I want you to do, if we're going to take the latter approach, is take a third of each of the remaining dollars and buy a 3 month CD, a 6 month CD and a 12 month CD.
• 31:49
  So now what you've done is you've laddered those interest rates together.
• 31:52
  So now what you've done is you've got the money locked up in a regular savings account, the money that you could need for one month.
• 31:59
  Then you've got a three month CD, a six month CD and a 12 month CD.
• 32:03
  The reason I'm doing that is that every three months you're going to get a third of that money back and you can decide what to do with it.
• 32:10
  So if interest rates go up, you can take advantage of that.
• 32:14
  After three months you can buy another CD at a higher rate.
• 32:17
  If interest rates go down, you've done a good job because you've locked it in.
• 32:21
  But basically what you've done is you've now every three months you've got something coming that you can use.
• 32:28
  Or every six months, three, six and 12.
• 32:30
  Yeah, it's a very common strategy for people who don't want to get into the capital markets, who don't want to go out there and get a stock portfolio.
• 32:38
  You feel like, look, Ralph, I'm really, I'm really cool with banks.
• 32:41
  Banks are safe, they're FDIC insured.
• 32:44
  But I also don't want to have my money sitting at 0.38%.
• 32:47
  That's why laddering is such a huge strategy.
• 32:51
  Okay, so let me see if I can repeat this back to Dana and you know, and for anybody else who's in a very similar situation.
• 32:58
  So Dana has $15,000 in a savings account that is giving her 0.4% interest, which we've done the math, we've seen.
• 33:06
  Go shop it around.
• 33:07
  There's a lot of high yield savings account that you can get a lot more interest and definitely no matter what, have at least one month of savings liquid.
• 33:18
  Now if you're not comfortable with one month, yeah, you can go to two months or three months, like whatever you're super comfortable with.
• 33:23
  But the whole point, like strategy there is like at least something will be liquid in case of emergency.
• 33:29
  And then you're going to try to grow the rest of your money as much as possible.
• 33:35
  And so today we talked a lot about cd, which stands for certificate of deposit.
• 33:40
  And it's just, it's a transaction between you and your bank of choice.
• 33:45
  And you can do this laddering method which the example that Ralph gave was say you have one to two months of liquid, liquid from that $15,000, you can take the rest and divide it into three or however many
• 33:58
  different buckets and then you can put it into different CDs that mature at different rates.
• 34:04
  So the example that Ralph gave 3, 6, 12 months.
• 34:08
  The key for that is once you, you know, your, your three month CD comes out, that becomes, turns into liquid money.
• 34:15
  And then you can decide, what do I want to do with this money now?
• 34:17
  And you're just growing it and growing it and growing it.
• 34:20
  Is that right, Ralph?
• 34:21
  Absolutely.
• 34:21
  And the other thing it does is let's say that you have a bill that you know is coming in a certain amount of time.
• 34:27
  Let's say, for example, you've got a young daughter and you know the young daughter has to get braces.
• 34:32
  And you know those brace payments are going to be due here in a certain amount of time.
• 34:38
  What this will allow you to do is to set that up as a cd.
• 34:41
  You could say, well, I'm going to have to pay for that in a year.
• 34:44
  Well, let me put that money into a CD so the money can grow at a better rate until the point that I need it.
• 34:50
  So that's the other place where laddering really comes in.
• 34:53
  But you have to be strategic about this and intentional about this.
• 34:56
  You want to make sure that you're doing things based on the timeline and when you're actually going to need money.
• 35:02
  If you're going to need money a month from now, don't ladder that into 3, 6 and 9 month CDs or 12 month CDs.
• 35:08
  Good point.
• 35:09
  So, Dana, I hope this is super helpful to you.
• 35:11
  Please keep us updated.
• 35:13
  And I just also learned a lot about how to think about money strategically and grouping it in different ways.
• 35:19
  So I hope I learned a lot.
• 35:21
  I hope other listeners also learned a lot, too.
• 35:24
  Yeah, I just want to leave with this.
• 35:25
  I mean, this particular.
• 35:26
  The difference between an average bank and a good one on the same $15,000 is about $573 a year.
• 35:34
  And the best part of that is you don't have to predict the Fed to fix that.
• 35:36
  You just have to move the money.
• 35:38
  That's what it really comes down to is can I move the money to make this work for me?
• 35:43
  That fits the best of what I'm trying to accomplish.
• 35:45
  And I really think that's what it comes down to.
• 35:47
  Yeah.
• 35:49
  All right, So this next mailbag came from Marcus in Pennsylvania.
• 35:59
  Hi.
• 35:59
  I got a letter from the IRS dated August 24th.
• 36:03
  It says CP 2000 in the corner and it says I owe $3200 for my 2024 return because of a 1099.
• 36:11
  I did not report it was from a company I did contract work for that spring.
• 36:16
  I honestly forgot about it.
• 36:18
  The letter says I have 30 days.
• 36:19
  I've never been audited, I don't have an accountant.
• 36:22
  And I have read this letter four times and I still cannot tell what it is actually asking me to do.
• 36:27
  Do I need to pay it?
• 36:28
  Do I need to find a lawyer.
• 36:31
  Ralph, first off, is Marcus being audited?
• 36:34
  No, that's the first thing I'm going to say.
• 36:37
  This is not an audit.
• 36:38
  Let me break down what a CP 2000 letter actually is, because I see these all the time.
• 36:44
  Basically, what a CP 2000 letter is an automated notice that the IRS is sending you.
• 36:50
  And here's how they get it.
• 36:52
  When you file your tax return, you tell them what your income is.
• 36:56
  You're basically being on the honor system.
• 36:59
  That's the easiest way I can explain it.
• 37:01
  But all of the people that report your income are sending copies to the irs.
• 37:06
  For example, when you work for someone, your employer sends a copy of your W2 form to the IRS.
• 37:13
  If you have a bank account, your bank sends a 1099 int form to the IRS.
• 37:20
  If you do 1099 work like this particular person, the person who's paying you sends a copy of that 1099 to the IRS.
• 37:28
  So then what happens?
• 37:29
  Usually the following year, usually summertime after a tax season, the IRS crunches all these numbers and it goes and looks at all the stuff that was reported under this person's Social Security number and what was reported by employers
• 37:44
  and banks and third party people and it compares the two.
• 37:48
  And then it generates a.
• 37:50
  A list of anomalies, for lack of a better word.
• 37:54
  And it creates these CP 2000 notices and it says, hey, you know, you forgot to report, Marcus, you forgot to report this 1099.
• 38:04
  And Marcus, let me just tell you, dude, you're not the only one that's done this.
• 38:07
  I deal with these things all the time.
• 38:09
  It happens all the time.
• 38:10
  Because you forget about this little savings account you have over here that paid $10 in interest or you forget about this, you forget about that.
• 38:17
  Yeah.
• 38:17
  When you get this notice, number one thing, it doesn't mean you have to pay.
• 38:22
  What this notice really says to you is, hey, I need to take a look and see what's going on here.
• 38:29
  Right.
• 38:29
  So you're not being audited.
• 38:31
  And it's also not a bill you have to pay right now.
• 38:34
  So that's the first thing.
• 38:35
  But all those things said, you have to pay attention to this.
• 38:39
  This isn't the letter.
• 38:40
  You go put in the juncture and say, you know what?
• 38:42
  I'm going to pretend like this never happened.
• 38:44
  Because if you do that, the IRS is going to take your silence as a judgment and they're going to say in 30, 60, 90 days, well, because we didn't hear from this person, we assume that we are right
• 38:56
  and you're wrong.
• 38:59
  So that's the first thing.
• 39:00
  So, Marcus, if you got this letter, you want to respond within 30 days.
• 39:06
  Okay?
• 39:07
  Like I said, it's coming from an automated what they call under reporter program.
• 39:11
  No one at the IRS has looked at this.
• 39:13
  No one at the irs.
• 39:14
  We're going to go get Marcus.
• 39:15
  No, not at all.
• 39:17
  So that's the first thing.
• 39:19
  Don't get trapped in silence.
• 39:20
  Because if you don't respond, then what's going to happen?
• 39:24
  At some point, the IRS is going to issue another letter called a statutory notice of deficiency.
• 39:29
  Whoa.
• 39:30
  Okay.
• 39:30
  Intense.
• 39:30
  At that point, they're going to tell you that this is a proposed amount.
• 39:34
  And at that point, that number is real.
• 39:36
  Okay?
• 39:37
  Whenever they send out a CP 2000 notice, they send a form along with it that says, do you agree with this?
• 39:44
  Do you partially agree with this, or do you object to this?
• 39:48
  What happens if you say, I partially agree?
• 39:51
  So if you partially agree, then you need to be more explicit about what that is.
• 39:55
  Now, let me give you an example.
• 39:56
  When this happens all the time.
• 39:58
  Okay?
• 39:59
  Let's say that you had some investments.
• 40:01
  Let's say you had a Fidelity account and you sold some stock.
• 40:05
  Let's say you bought some Disney stock or somebody gave you Disney stock, and you're like, you know what?
• 40:10
  I'm just gonna sell this stock.
• 40:12
  Well, sometimes when the IRS gets a report of stock sold, they have no idea what you paid for that stock because maybe you inherited it from somebody.
• 40:22
  It was gifted to you by somebody, so you may have forgot to report it.
• 40:25
  You probably think, oh, I didn't know I had to report that.
• 40:27
  So the IRS might send you a CP 2000 notice and say, hey, Juliet, by the way, Fidelity tells us you stole $2,000 worth of stock.
• 40:37
  Oh.
• 40:38
  Now when you get that notice, you go, oh, that's right.
• 40:41
  I did sell $2,000 worth of stock.
• 40:44
  But the IRS is saying that you owe them tax on $2,000.
• 40:48
  What the IRS doesn't know is that you have what's called basis in that stock, meaning there's value that you brought into that stock, meaning that you paid something for it or it was gifted to you or you inherited
• 41:00
  it.
• 41:01
  So that's a situation where you might say, oh, I agree with the irs.
• 41:06
  I didn't report this.
• 41:07
  But the amount of income is not correct.
• 41:10
  That could be like a partial.
• 41:11
  Yeah, correct.
• 41:12
  So let's just say that particular circumstance, you inherited that Disney stock from your great grandmother.
• 41:18
  Okay.
• 41:18
  And what the way that works is, on the day that your great grandmother passed away, you get what's called stepped up basis.
• 41:23
  And I don't want to lose everybody in that.
• 41:24
  But whatever the value of that stock was on the day that your great grandmother passed away becomes the value that you have.
• 41:32
  Okay?
• 41:33
  Yes.
• 41:33
  So let's just use that Disney stock example.
• 41:35
  Let's say when Great Grandma passed away, that stock was worth $1,000.
• 41:39
  Okay?
• 41:40
  So that is your carrying basis in that stock from grandma to me.
• 41:44
  Correct.
• 41:45
  So when you sell that stock, you don't have a $2,000 capital gain, you have a $1,000 capital gain.
• 41:51
  Bought it at 1,000.
• 41:52
  Correct.
• 41:53
  But the IRS doesn't know that.
• 41:55
  So that's where your response might be, hey, irs, you're right.
• 41:59
  I forgot to report this.
• 42:00
  But what you don't know is that I actually had basis in this stock because I inherited this from Great Grandma.
• 42:07
  So you may just have to prepare a response to this and say, yes, I agree, or no, I don't agree.
• 42:12
  Now, there are some times where it's just flat out wrong, okay?
• 42:16
  The other thing that can happen is it might trigger you needing to file an amended tax return.
• 42:21
  And this fouls people up all the time because on that CP 2000 notice, it says you may not have to file an amended tax return.
• 42:29
  What is an amended tax return?
• 42:31
  An amended tax return is basically you saying to the irs, I need a do over.
• 42:37
  I send in my tax return and oops, I forgot this or oops, I forgot that.
• 42:43
  What confuses people is the IRS wording on the CP 2000 notice says you may not.
• 42:48
  You may not need to file an amended return.
• 42:52
  What I would do in this particular circumstance.
• 42:55
  Let's talk about Marcus.
• 42:56
  Now, let's get back to Marcus's direct question.
• 42:58
  Marcus says here that he got a 1099.
• 43:02
  Excuse me.
• 43:02
  He owes $3200 for 2024, which makes sense to me.
• 43:06
  I said it's about a year ahead, a year back.
• 43:08
  This is why we're.
• 43:09
  Yeah.
• 43:10
  He says he got.
• 43:11
  He owes money.
• 43:12
  They said he owes him $3,200 because of 1099.
• 43:14
  It didn't report.
• 43:15
  So, Marcus, your big issue is how much 1099 income was there.
• 43:20
  And did you have expenses against that 1099 income because you could take expenses out.
• 43:26
  Correct.
• 43:26
  He might have mileage.
• 43:27
  He might have office supplies.
• 43:29
  He might have all kinds of things.
• 43:30
  The IRS again, doesn't know that.
• 43:32
  Right.
• 43:33
  So if I'm representing Marcus, I'm going to file an amended return, and I'm going to say, hey, Mr.
• 43:38
  And Mrs.
• 43:39
  IRS, all right, I didn't report.
• 43:41
  This here is a schedule C showing what you said I didn't report.
• 43:46
  You're right.
• 43:47
  I didn't put that 1099 on there.
• 43:48
  However, I also have these expenses.
• 43:52
  I have to take that out.
• 43:53
  Right.
• 43:53
  So you might not actually owe them $3,200.
• 43:56
  You might owe them something because you didn't report the income.
• 44:00
  That's distinctly possible.
• 44:02
  Do you need a lawyer?
• 44:03
  Absolutely not.
• 44:03
  This isn't a law thing.
• 44:05
  I do think it makes sense at this level to get somebody like me, get an accountant involved with this.
• 44:12
  Right.
• 44:12
  This has gotten past the simple ability to file your tax return.
• 44:15
  We've now reached a new level where you need somebody that understands and to negotiate this stuff.
• 44:21
  So that's the case where.
• 44:22
  But again, the big takeaways here don't just forget about this letter.
• 44:26
  It's not going away.
• 44:28
  They're going to come keep on coming at you.
• 44:29
  So make sure you respond to it.
• 44:31
  If you are really in a spot where you can't afford to hire an accountant or you've tried to work with the irs, there's an organization out there that's a part of the irs, but not part of the irs.
• 44:43
  It's called the Taxpayers Advocate Service.
• 44:46
  It's an independent.
• 44:47
  Yeah, it's really great, actually.
• 44:49
  It's an independent organization that the IRS set up.
• 44:53
  It's free.
• 44:54
  And they will help you with situations like this.
• 44:57
  Now, here's the caveat to this, and you get to it by going to taxpayersadvocate.irs.gov that's taxpayeradvocate.iris.gov but here's the thing about this.
• 45:07
  A lot of people, they get this CP 2000 notice and immediately they call the Taxpayer's Advocate and the advocate is going to tell you you need to try to work it out with the IRS first.
• 45:20
  So that's the thing.
• 45:21
  If you're going to use the advocate, that's great.
• 45:23
  But understand it's once you've tried to work things out through normal channels with the IRS first.
• 45:30
  So, Marcus, big question here or big, big answer here?
• 45:34
  Read the notice.
• 45:36
  Make sure you put on your calendar, you got 30 days to respond.
• 45:38
  Put that deadline somewhere, pull the tax return, find the income and go see what the IRS is missing.
• 45:46
  Yeah.
• 45:46
  If you do owe them money, it's not the end of the world.
• 45:50
  You can set up a payment plan with them.
• 45:52
  If you disagree with them, attach the documents that prove what is going on with that stuff.
• 45:56
  If you need more time, call the number on the notice and ask them for more time.
• 46:02
  Generally, what will happen is they will say to you, how much more time do you need?
• 46:08
  I need another 30 days.
• 46:09
  I need another 60 days.
• 46:11
  In general cases, they don't have a problem with that as long as you're doing something to move the needle forward.
• 46:18
  Right.
• 46:19
  Here's the big takeaway for this.
• 46:20
  A CP 2000 notice is a proposal with a 30 day clock.
• 46:27
  It's not a bill and it's not an audit.
• 46:31
  Answer it on time and you can control the outcome.
• 46:33
  If you ignore it, then some computer in Washington or somewhere else in the country is going to decide for you.
• 46:39
  Yeah, that's not a fun situation to be in.
• 46:42
  So just pay attention to that.
• 46:44
  Now, Julian did a good job of explaining that, I think.
• 46:47
  So this is my first time hearing about CP 2000 and I feel like, okay, now I kind of know what are the different.
• 46:54
  Different outcomes, potential outcomes.
• 46:56
  Whether it is saying, yes, I completely agree with you, irs, I partially agree with you, or I don't agree with you at all.
• 47:04
  And then I also know what to prepare for when having those conversations with the irs, which is the thing is,.
• 47:12
  Do not ignore that.
• 47:14
  Don't ignore.
• 47:15
  So many of my clients over the years have said, yeah, I just didn't get to it, Ralph.
• 47:18
  I didn't think about that, pay attention to it, because once they get past that, then it becomes something you have to unwind and that gets really, really ugly.
• 47:25
  Yeah.
• 47:26
  Well, let me get on to the next thing and I want to talk about this.
• 47:28
  And it's very relevant to what we just talked about.
• 47:31
  We've all got that stack on the edge of the desk, those things we need to mail out.
• 47:35
  Maybe it's a CP 2000 notice, a response to that, or maybe it's an insurance form of that rebate that we talked about earlier, whatever that is.
• 47:44
  We live in a time right now where most people just don't have stamps because we do everything electronically.
• 47:50
  We do email, we do texts.
• 47:52
  Well, one of the best services that I found to handle this is stamps.com.
• 47:57
  Stamps.com kills that post office errand.
• 48:01
  And you're able to print real stamps right from your home.
• 48:04
  You can also ship UPS and FedEx right from your desk and you can schedule a free pickup so the carrier takes it right from your door.
• 48:13
  And here's the best part.
• 48:14
  You can try it free for 30 days and they've got a basic plan.
• 48:17
  It's just $14.99 a month afterwards.
• 48:20
  Or if you need to send more mail than that, $29.95.
• 48:23
  After that, if you're interested in taking a look at that, go to becomingfinanciallyconfident.com stamps again.
• 48:31
  Like with the CP 2000 notice.
• 48:33
  Don't let that sit on that desk.
• 48:35
  Get that thing mailed out.
• 48:36
  And stamps.com is a great way to get that postage going again.
• 48:39
  That's becoming financiallyconfident.com stamps.
• 48:51
  Our last letter today is from Yvonne in Michigan.
• 48:54
  My mom died in June.
• 48:55
  I'm the oldest, so I'm the one handling everything.
• 48:58
  Two weeks ago, a collection agency started calling me about her credit cards.
• 49:02
  About $9,000 across two of them.
• 49:05
  The first time the man was polite.
• 49:07
  The second time he called me the responsible party and asked if I could start with $50 to show good faith.
• 49:13
  I was an authorized user on one of the cards to years ago, back when I was helping her buy groceries.
• 49:18
  There is almost nothing in her estate.
• 49:21
  Did I say that right?
• 49:22
  Estate.
• 49:22
  Yeah.
• 49:23
  I am not sleeping over this.
• 49:25
  Do I have to pay this?
• 49:27
  Ralph, let's.
• 49:28
  Let's talk about this.
• 49:29
  It's.
• 49:30
  We have apparent death in the family.
• 49:32
  We have somebody who is an authorized user and interaction with a man that is becoming a little bit more hostile each time.
• 49:41
  Yeah, there's a lot to unwind here.
• 49:42
  And you use the word estate and I'm going to get to that in a minute.
• 49:45
  Estate, basically something I need to explain, but I want to go a little bit deeper here.
• 49:49
  Yvonne, Number one thing, sorry for your loss.
• 49:52
  That's what I want to start first.
• 49:53
  You're dealing with grief and you don't need grief from some stranger on the phone telling you you owe something.
• 49:59
  That grief you're going through is real.
• 50:01
  But most of the time the obligation isn't.
• 50:04
  Here's what we need to talk about.
• 50:06
  As an authorized user, you are not responsible for that debt.
• 50:12
  So the whole question, number one is whose name was on the debt in the first place?
• 50:18
  Authorized users are not the same as a joint account holder.
• 50:21
  So if Ivon.
• 50:22
  If you are only authorized user.
• 50:24
  Now be careful here because you might have been a joint account holder depending upon how this was set up.
• 50:30
  But in general, if you're just an authorized user, you're not responsible for that debt.
• 50:36
  Now, there are exceptions to that.
• 50:39
  I'm not going to get into those on the show because there's a half dozen of those things.
• 50:42
  Okay.
• 50:43
  I was going to say.
• 50:44
  So I think it sounds like the first thing Yvonne should make sure of is are you actually an authorized user or are you actually a joint account holder?
• 50:52
  Yeah.
• 50:52
  So when someone passes away, the Best thing to do is pull all of their bills and look to see who is actually responsible.
• 51:00
  If there's joint account holders, they are responsible.
• 51:02
  It's what's called joint and severely liable, meaning that the IRS or whoever it is, they can collect from either or both of you.
• 51:09
  Okay.
• 51:10
  In general, what happens is a person, when they pass away, an estate is created.
• 51:15
  Now, you might not have a technical attorney create this thing, but estate basically means that whatever is left over after a person dies away should pour into what's called an estate.
• 51:27
  That would be any cash accounts they have, any stuff.
• 51:30
  They have cars, furniture, all those sort of things, not things that were assigned to somebody.
• 51:36
  Because I'll give you a great example of this.
• 51:38
  Let's say that your mother passed away and she had an IRA account.
• 51:43
  That IRA account has a named beneficiary.
• 51:47
  Those things go directly to the named beneficiaries, not to the estate.
• 51:52
  Oh, okay.
• 51:53
  But then I guess for this ira, does it technically mean it came from the estate or like it came from.
• 52:02
  No, it came directly from the decedent.
• 52:05
  So it passes without going through the estate.
• 52:07
  That's why this is such an important thing.
• 52:09
  If you have any kind of accounts, to the extent you can do it, name a beneficiary so that they go directly to that person.
• 52:16
  Like life insurance goes that way, all those type of things.
• 52:19
  Got it.
• 52:20
  Other things that don't are what is called in the estate.
• 52:23
  And generally creditors can collect money from whatever money is in the estate.
• 52:29
  Okay.
• 52:30
  Most of the time, family members are not responsible to pay with their own money.
• 52:36
  In the end, if the estate can't cover it, guess what happens?
• 52:39
  The debt doesn't get paid.
• 52:41
  Yeah.
• 52:42
  So that's the thing you need to understand.
• 52:43
  If you're just an authorized user, even if you were using the card till the day before she died, if you've never signed an agreement for that debt, you're not responsible for that.
• 52:54
  And you can tell that guy to go pack sand.
• 52:55
  You can say, ralph told you that.
• 52:58
  Again, if you co sign for it.
• 53:00
  If you're a joint account holder, if you're the executor, if the state law imposes a duty, if you live in a community, a community property, state, all those things are the nuances to this.
• 53:10
  Those things would change this.
• 53:12
  Okay.
• 53:13
  In general, you're not responsible for it.
• 53:16
  So how does she handle this guy who is becoming more and more hostile?
• 53:21
  I would certainly, I would just say to them, listen, dude, I am not the executor of the estate.
• 53:27
  I am an authorized User.
• 53:29
  I'm not responsible for this.
• 53:31
  If there is an executor to the estate, you can give them that person's information.
• 53:35
  You could also say to them, look, there's nothing left here.
• 53:39
  Whatever, good luck.
• 53:41
  Yeah, I mean, it really comes down to we can spend an hour talking about this.
• 53:45
  But it's really pretty simple.
• 53:47
  Yeah.
• 53:47
  If there's enough money.
• 53:49
  My grandmother used to say, you can't get blood from a turnip, I think is what she said, or something like this.
• 53:53
  And you just can't.
• 53:55
  Yeah.
• 53:56
  What if the person keeps on pressuring Yvonne?
• 53:59
  Well, then you can get into what's called the Fair Debt Collection Practices act, and you can actually report it to the CP or cfbp, which is basically Consumer Protection Bureau.
• 54:10
  So you can actually say to them, this is a level of harassment, stop calling me.
• 54:15
  You got to understand, the collector just wants to get paid.
• 54:17
  I'm not blaming the collector.
• 54:19
  They see you as an authorized user.
• 54:21
  Probably a lot of times they call and the authorized user goes, I guess I'll just have to pay it, even though they don't.
• 54:27
  So that's the first thing.
• 54:28
  Second thing, there are a lot of state legal aid societies you can call to deal with for free.
• 54:34
  Because a lot of people ask the question, does a person's debt go away when they die?
• 54:38
  It just depends.
• 54:40
  So here's the big takeaway for this.
• 54:42
  You did not sign for it.
• 54:44
  So in most cases, you do not owe it.
• 54:48
  The debt belongs to the estate, not to you.
• 54:50
  Don't let a phone call in the worst month of your year talk you into paying something that was never yours.
• 54:56
  That's really the whole key to this.
• 54:58
  Good to know.
• 54:59
  Good to know.
• 55:00
  Yep.
• 55:00
  Which leads me to one more thing I want to mention here today, and that is 70% of people don't have a will.
• 55:07
  And this particular question really highlights this.
• 55:10
  And it's not because they did decided not to have one.
• 55:12
  It's because Tuesday showed up in 10 years, flew by, you just didn't get to it.
• 55:16
  And when that absence lands on a family, it turns into frozen probate money and massive headache for the people left behind.
• 55:24
  One of the things that we found is a company called Easy Will and Trust.
• 55:28
  And Easy Will and Trust closes that gap online in just one sitting.
• 55:32
  For $149, you get an attorney reviewed will, a durable power of attorney, and a healthcare directive built for your state.
• 55:39
  If you're interested in finding out more of that information and this is a great service, go to becoming financiallyconfident dot com.
• 55:46
  Easywill again, that's becoming financially confident Dot com easywill.
• 55:52
  Take a look because these bring out the ugly in a lot of situations.
• 56:00
  We are going to get into this week's Money move before the end of the show.
• 56:04
  So every Monday we give you one thing to do for the entire week and I'll do it right alongside of you guys.
• 56:11
  This week is something that is super important.
• 56:14
  It's not specifically related to your finance, but it is about security and keeping up what you already have.
• 56:20
  So Ralph, what is this week's money move?
• 56:23
  So the money move this week is we're going to ask you to do a couple things.
• 56:27
  And the reason we're going to ask you to do that is because fraud is at a ridiculously high level.
• 56:33
  There's a couple things that we're going to recommend you do.
• 56:35
  Number one thing, most people have a phone in your pocket.
• 56:39
  There is a PIN number that you can add to your carrier so that no one can swap your sim.
• 56:44
  Basically we're gonna get real complicated here.
• 56:47
  But what happens if someone can swap your sim?
• 56:49
  They can take over your account.
• 56:51
  Then you could have the best two factor authentication set up like where you're getting texts and all that kind of stuff.
• 56:56
  But if somebody can rob your phone number from you, guess what?
• 57:00
  They can get those texts set up for them.
• 57:02
  So that's the thing we're gonna ask you to do is go contact your carrier if it's Verizon, AT&T, whatever those T mobile and give them a PIN number.
• 57:12
  And that PIN number will make it so that no one could call in and change the service to you.
• 57:18
  They have to go through you first.
• 57:20
  Got it.
• 57:21
  It's a big number.
• 57:21
  We don't have time to get into it.
• 57:22
  But that's where a criminal moves your phone number onto their device and catches the one time codes for your bank.
• 57:28
  Big deal.
• 57:29
  Second thing we're going to tell you to do so that's number one, add two factor authentication to your bank and to your email account.
• 57:36
  A lot of people don't think about that email account.
• 57:39
  These things are going to take 15 minutes at the most and they don't cost you a dime.
• 57:46
  So here it is, here's our money move of the week.
• 57:48
  Add a PIN or passcode to your mobile phone account and turn on two factor authentication on your bank and your email.
• 57:55
  And here's the homework.
• 57:56
  It's gotta be done before Friday.
• 57:59
  Sounds good.
• 58:00
  I think I'm already halfway there, but I do want to double check on my phone.
• 58:04
  I'm Assuming, Raf, you already have all this done.
• 58:07
  Okay.
• 58:07
  So full transparency.
• 58:10
  I do actually do have this set up because someone actually tried to steal my cell phone number from me.
• 58:16
  I'm on Verizon and they caught it and they made a phone call to me and they said, well, Mr.
• 58:21
  Ralph, you can prevent this by adding a PIN number.
• 58:24
  But here's the problem, Juliet.
• 58:26
  What?
• 58:26
  I forgot the PIN number.
• 58:28
  And when I went to go upgrade my phone the last time, they're like, well, we need you to put your PIN number.
• 58:32
  I was like, I don't know what it is.
• 58:34
  Oh.
• 58:34
  That became a whole hassle.
• 58:35
  They had to do this and I had to stand on one foot and wave and it was crazy.
• 58:40
  But anyway, it's a great thing to have.
• 58:42
  More secure is better than not secure, I would say.
• 58:44
  Yeah, absolutely.
• 58:45
  I mean, is it.
• 58:46
  It's something else to prevent your account being overtaken.
• 58:49
  Having your account overtaken is not a fun situation because all of us use these multi factor authentication.
• 58:54
  You used to get those text codes all the time.
• 58:57
  If somebody can take over your phone number, that means they can get access to your text codes, which means that your security has a huge hole in it.
• 59:05
  Yes.
• 59:06
  Well, that is it for today's show.
• 59:09
  Becoming financially confident.
• 59:11
  I hope you guys had a good Labor Day and joined us on this relatively eventful.
• 59:17
  I feel like we learned a lot today.
• 59:19
  I think we did.
• 59:20
  I want to tell you a little about tomorrow's show.
• 59:21
  Tomorrow on Becoming Financially Confident, we're defining what it truly means to be financially confident.
• 59:26
  Juliet asked me this the other day.
• 59:27
  She said, ralph, we have this show called Becoming Financially Confident.
• 59:32
  What does that mean?
• 59:34
  And so tomorrow we're going to start talking about.
• 59:35
  I'm going to introduce what I call the dollar job framework.
• 59:38
  Because it's really going to tie into this.
• 59:40
  It's a seven step plan where I'm going to talk to you about what that looks like.
• 59:44
  So join us tomorrow, 11:30am Eastern, as we break free from money shame and tackle those vital money headlines, including, listen to this one.
• 59:53
  I'm going to tell you a headline for tomorrow.
• 59:54
  Upcoming streaming price hikes and key changes to college age.
• 59:59
  So I'm Ralph Estepp Jr.
• 1:00:01
  And I'm Juliet.
• 1:00:03
  And we will see you on tomorrow's show.
• 1:00:04
  Thank you so much for joining us today,.
• 1:00:12
  Sam.