I am in desperate need for any and all ideas about to come up with $3,800 by April 15. I'm open to anything that doesn't involve doing anything sexual, selling anything illegal or gambling/lottery.
You may be thinking, "Trillian's unemployed. How does someone with no income amass a $3,800 federal tax bill?"
Set your wayback machine to January of 2007. I was renting an apartment in a building that was going condo. I could not afford the starting price for the condos in that building, which meant I had 9 weeks to find a new place to live. Rent rates were high (still are) in Chicago, yadda yadda yadda I bought a very small, (at the time) reasonably priced condo. In order to make a down payment and pay the tax and moving expense I took out a residential loan from my 401K. It was a low interest loan and since I was "borrowing" my own money, the interest was being paid to me. This is how fund managers spin it, this is how employers spin it. I'd considered and dismissed this option several times in the previous years. I was trying to buy a home for a while but I wanted to do it without raiding my 401K so I wouldn't be tied to that job by a 401K loan ball and chain.
But, I with deadline of 9 weeks looming, a dismal apartment hunt and a mortgage approval, I played out the scenarios, the pros and cons, and decided I could tough out my job a few more years. The problems at work were inconsequential compared to what I could gain by buying a home. It wasn't just a mortgage and a home, it was the first crucial step toward adoption. Besides, I reasonably reasoned, if I left that job I would be going to another company who offered a 401K, I'd rollover my old company 401K to the new one and pay off the balance of the loan. So, I took out a residential loan from my 401K, closed on my condo and I was still
money ahead in terms of the apartment rental rates, plus, woo hoo, I finally owned my own home and wasn't providing income for some slimy slumlord or greedy property management company. And, woo hoo, this allowed me to finally start the steps toward adoption. Buy a small condo, live there five years, then sell it for enough profit to buy a bigger, child social worker approved home so I could show that while I am single, I am capable of providing a home and life for a child.
(Insert: Death of a pet, complications from foot and ankle surgery and death of a parent here.)
Now set your wayback machine to August 2009. Two years and four months into my mortgage and life plans and, oh yeah, that residential loan from my 401K, I was laid-off.
Here's what happens when you lose your job and you have an outstanding loan in your 401K and lose your job: You have 90 days to pay off the balance. If you don't (or can't) pay off the loan balance in that time frame it's considered in default, the loan is now considered an early withdrawal, and you are required to pay the early withdrawal tax penalties.
I'm sure Suze Orman covers this in her seminars, books, DVDs and software. I'm sure there are copious chapters covering this in books titled things like, "Dumb Things Women Do to Screw Up Their Lives." I'm sure a lot of people are tut-tutting me.
Let me remind Suze Orman and those tut-tutting people: I am single. I have always been single. One income. No trust fund. No rich uncle. No monthly "help" from my parents. No financial help from boyfriends or men in general. I earn(ed) a salary on the low end of the average national income and in the middle of low income for the city of Chicago. My company's 401K was a great deal - 100% vesting and 100% match - and it was the most viable (and easy) way for me to turn my meager savings into an actual financial investment. It was my best option. And for a while, there, my 401K was turning into a nice little nest egg. It was definitely the best perk of my job and for more years than I'm comfortable admitting publicly, it was the main reason I stayed. I was embarrassingly underpaid but with the 100% company match, my meager pre-tax deposits were earning more money than a lot of my friends were earning in their 401Ks, even though they were depositing higher amounts of money.
Back to August 2009: I was told to clear out my office and leave my company without so much as a stop in the bathroom on August 3, 2009. But because of the WARN Act and my company's massive staff reduction we were well into WARN Act territory. So, by order of federal law I was kept on the payroll until October 2009.
In that two-month time frame I frantically did everything I could to find a job, assess the worst case scenarios and sort out a financial plan. No matter how I crunched the numbers I couldn't come up with the money to pay off the 401K residential loan in the allotted 90 day time frame. Keep in mind, I was paying off huge (and I mean enormous) medical bills from my ongoing foot and ankle saga, so most of my severance went to paying off: Medical bills, credit cards (also used to pay medical expenses and travel expenses during my father's illness and death). The money remaining was such a meager amount that it would barely cover a couple months' living expenses, and certainly not the full amount of the 401K loan-come-default amount. And in terms of the 401K fund and the IRS, the 401K loan repayment is all or nothing.
Oh. And. For those of you saying, "But wait! Wait! There's usually a hardship clause in early withdrawals!!! Trill, you certainly qualify for hardship!!!"
Nope. I do not. The IRS kindly takes three situations into consideration with retirement fund early withdrawals: Death of a spouse, college tuition for a child, or if you're already losing your home and are facing eviction due to a foreclosure. Since I was not in foreclosure when I took out the loan, and nor would I be in foreclosure within the 90 day repayment time frame, no hardship clause for me. (On the plus side, now that I'm losing my home I could take advantage of the IRS's generous hardship forgiveness to drain the rest of my 401K at a reduced tax penalty. Yay. Unemployment totally rocks.)
The 90 day 401K loan repayment deadline was January 4, 2010. So. I didn't get hit with the early withdrawal penalty on my 2009 taxes. I felt relief for the stay of tax execution. And I thought surely I'd have a full time job soon and I'd sock away every spare penny toward the tax penalty I'd have to pay on my 2010 taxes.
Wellllll, yeah, here it is March 2011 and I'm still unemployed, I've had no pennies to save and that 401K penalty is hitting me...and voila, that is how someone with no job or income can amass a $3,800 tax bill.
Ta dah! I am officially living my worst case scenario. As my unemployment dragged on this tax bill nagged at me. In my worst case scenarios this
is when contingencies and hopes end, the money and options are exhausted and really horrible, nasty things start hitting the fan.
Brace for impact.
Sad to say, in spite of the enormity of this tax bill, it's the least of my problems.
Sure, I can set up a five year payment plan. At the generous 12% interest rate the IRS charges my $3,800 debt will only cost me $5,071.80. Yay. Of course, I still don't have a job and those payments start on April 15, and I can barely pay my phone bill so coming up with $84.53/month to give to the IRS will be interesting.
I'm not asking for sympathy or a handout. I knew what I was doing. Back in 2007 when I first contemplated the loan I knew it was a gamble and I took the chance with eyes wide open about the penalties. I didn't have a crystal ball so I couldn't know what was about to happen to me in the coming months, so I chose "reasonable optimism," meaning, I knew there was a risk but it wasn't bad judgment. I never could have predicted my foot/ankle surgery, my father's death and my lay-off. I never could have predicted my "great" health insurance wouldn't cover a staggering portion of my medical expenses and I would blow through my emergency savings account in one MRI bill and two weeks of physical therapy. Or that the remaining five months of physical therapy, lab fees, prescriptions and tests would force me to nearly max out a credit card. Never, ever again will I choose to be optimistic about my life. Even if it seems reasonable and in good judgment I will now always, always assume the worst will happen. That's the financial lesson I've learned from all of this. So, yes, Suze, yes, I've learned my lesson. So leave me - and everyone else like me - alone. We made the best decisions we could at the time we made the decisions. We are clearly not as smart, savvy or wealthy as you and we never will be, and unfortunately now we're so broke we can't afford to buy your books or DVDs or attend your seminars. (I wonder how much she makes on all of that - and further, what would she say to someone spending money on those products if they weren't hers?)
But, never let it be said that I didn't try everything
possible to generate some, any
, money. I'm taking a page out of Suze's book and hawking merchandise.
I know I'm not the only single/zero out there. I know a lot of people find humor and insult in the IRS status demarcation: Single/zero or married/zero. Me? I've embraced it. It's one of many labels assigned to me, it is who I am. It's the only sure thing about me. It's the only
status I have. Single. Zero. Single in every way possible. Zero in every way possible.
For those who embrace and find humor in their tax form status, that two word label that defines us, Trillian Enterprises Ltd. has launched a line of products for tax season
. April 15 is right around the corner. Stock up on single/zero or married/zero merchandise for your tax day celebration!
Your tax status isn't just an IRS category, it's a way of life! You earned it, declared it and paid for it, why not wear it proudly?! Nothing says, "Proud to be an American" like an IRS tax form designation.
For extra tax season fun I set all prices to an IRS tax form number. Fun and
educational! One of my favorites is the single/zero shot glass
priced at $8.86 which is the number of the "Supporting Documents to Prove American Opportunity Credit" IRS form. Yep. There's a deduction and a form to prove American opportunity. IRS form #886. Sure, pricing the merchandise to tax form numbers eats into my tiny profit margin, but I'd rather list a t-shirt for $10.40 than make an extra 20¢ on it. Marketing baby, marketing.
Also perfect gifts for all those hard-to-buy-for accountants and tax preparers out there! And if you are an accountant or tax preparer or IRS agent, these are fun customer giveaways! Contact me for bulk pricing!
Trillian Enterprises Ltd.
Where your status is the bottom line.®
On a serious note, while you're visiting CafePress check out their Japan Relief fund raising t-shirt. It's $15 which includes a $10 donation to Red Cross Japan. It's a pretty cool design and speaking of the IRS, gives you a $10 charitable tax deduction.