Author: Donohoo Accounting Services

Managing Student Loan Debt

The first step to attaining the career of your dreams is going to college. However, more Americans than ever are leaving their universities in a tremendous amount of debt, uncertain as to how they might pay it all back.

If you find yourself in this situation, know that you are not alone. With a little expert advice and savvy financial planning, you will be on your way to managing your student loan debt like a pro.

Step 1: Understand How Much Debt You Actually Have
Many students take out a variety of public and private loans to pay for their college expenses. Because these debts are paid to different creditors, it may be challenging to determine the total amount of your current debt. Contacting each of these creditors to determine the principal amount of the loan, as well as your interest rate, will help you to create a management plan that works best for you.

In some cases, consolidating your debt can be a good financial option. This helps keep things streamlined, and prevents you from missing any payments. However, the interest rates on consolidated loans are usually much higher, so be sure to explore all of your options before committing to consolidation.

Step 2: Make A Plan For Paying It Back
After determining your monthly loan payments, it’s time to integrate your loan payments into your monthly budget. Though it may seem like it makes sense to pay the exact minimum payment on all your loans, there are advantages to paying more per month on your loans with higher interest.

You’re losing the most money over time by not paying these back, so focus on paying them off, first. Additionally, if you have substantial credit card debt, you may want to pay that back before paying any extra on your student loans, as the interest rate is likely to be much higher.

Step 3: Apply For Other Repayment Options If Necessary
If your current monthly income doesn’t allow you to pay the required monthly payments on your student loans, you may be eligible for graduated or extended repayment. These options allow you to pay smaller monthly payments over a longer period of time.

Additionally, if you have federal loans, you can apply for forbearance. This is a process that allows you to stop payment on loans for a specified period of time. However, your loans still build interest during this time that is added to the principal amount you owe, so forbearance is by no means a permanent solution.

Step 4: Consider Public Service Forgiveness
Many public service jobs, like teaching, provide forgiveness for employees after working in the job for a certain number of years (usually three to five). This can be a good option for recent graduates interested in the education or public service field who have debts to pay.

Need help managing your student loan debt? The experts at Donohoo Accounting Services are standing by ready to help. We can help you make sense of your student loan debt, and answer any other financial or tax question you have for yourself or your business. Schedule a free consultation with us today! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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Payment Options If You Owe The IRS

Owing money to the IRS is a stressful predicament, but one that many Americans find themselves in each year. Being indebted from years prior can put a strain on your present-day budget, and make it challenging to plan for future purchases. So, if you do owe the IRS money, what are your choices? Thankfully, there are many options for taxpayers out there, each with its own pros, cons and protocol.

Option 1: Pay Your Balance In One Lump Sum
If you are able to, paying your taxes in one lump sum before the annual tax deadline is your best option for avoiding any penalties or interest. For each month your debt remains, you incur compounding 5 percent interest, which will increase to as much as 25 percent after 6 months. This means that if you don’t pay a $3,000 tax bill, you could owe as much as $2,250 in interest, in addition to the balance, after six months.

Option 2: Settle Your Balance In Two Payments
If you can make half of your payment now and half within 45 days of the tax deadline, you can send a partial payment using the Form 1040-V. The IRS will contact you to let you know how much of your balance is left over, and any other fees you owe. Pay your second amount (either by check, direct deposit or credit card) within the 45 days.

If you decide to pay with your credit card, be sure you will be able to fully pay the balance on your card. The outstanding balance may impact your credit and, depending on where you are at with the IRS, your interest payments may be even more coming from your creditors than the IRS.

Option 3: Petition The IRS To Enroll In An Installment Plan
Know you won’t be able to make your payment this year, but anticipate being able to pay it within six years? An installment plan may be the right option for you.

The IRS does not give this option to everybody, so be sure to make your offer sound. Most first-time applicants are accepted, and as long as you fulfill your promise to the IRS, this can be a great option for many taxpayers.

Option 4: Apply For An Offer-In-Compromise
For those who owe more than they will ever be able to pay, the IRS offers an offer-in-compromise option. The IRS will evaluate your unique situation, and determine if you qualify to pay less than what you owe. They will forgive an agreed upon amount, which can be negotiated between you and your tax representative.

Regardless of which route you take, know that you are not alone. Many people find themselves indebted to the IRS, which is why they have created these options for you.

Interested in talking to a tax expert about which option is best for your situation? Donohoo Accounting Services has been preparing tax returns and helping small businesses with their financial needs for more than two decades. For questions or more information, contact Donohoo Accounting Services today for your free consultation. For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

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6 Financial Steps To Take Before Starting A Business

The thought of starting a business is exciting. For many, it’s the American Dream. Entrepreneurs want the freedom of setting their own hours, being their own boss and leaving a legacy for their children. It’s important to note that while exciting, starting a business also can be stressful. According to the Small Business Administration, one-third of all businesses fail within two years, and two-thirds of all businesses fail within 10 years. Considering these stats, it’s important to have a plan in place to be successful. Here are six financial steps we think you should take before starting a business.

Do Your Research
Make sure you thoroughly understand the industry you are entering and the need for your products or services. Do a complete market analysis or feasibility study to determine who the major players and competitors are. The Southwest Ohio Small Business Development Centers are a great resource for help with this.

Know Your Purpose
Spend some time reflecting on why you want to start your business. There will be bumps in the road, so it’s important that you have a mission and purpose to ground you during trying times. What goals are you trying to accomplish? What does success look like? What are you willing to risk?

Identify Your Target Audience
Understand who needs the products you sell or the services you provide. You can’t earn a profit without your customers, so know them well. What is their age, geographic location, income or profession? What are their pain points?

Choose A Legal Structure
Determine which business structure is right for your business. Will you be a sole proprietor? An LLC or an S Corp? You may want to consult with an attorney or the Small Business Administration for advice. And while you’re thinking about the legal aspect of your business, make sure you know the laws that apply to your business. Will you need a permit or some type of license?

Decide How You Will Finance
You will need money to start your business because you probably won’t make a lot of money right away. Will you be self-funding? Applying for loans or grants? Seeking out angel investors or venture capitalists? Research all of your options and determine the one that’s best for you.

Create A Working Business Plan
A business plan is your business’s roadmap, and will include such things as your mission statement, description of your business, market analysis, key players, budget and more. It should be a working document, not just an exercise that is filed in a drawer. One of the first questions most consultants will ask you before working with you is if you have a business plan.The Southwest Ohio Small Business Development Centers can also help with this.

Once your business is up and running, you’ll need a partner to help handle your payroll, tax help and other concerns. Donohoo Accounting Services is here to support you. From financial issues to tax concerns, we can answer your business questions that will help to make you a success. If you would like to learn more about the services we provide, schedule a complimentary consultation with us by calling 513-528-3982. For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!

8 Tips To Help Your College Student Budget While At College

College life is full of opportunities and experiences, and your child may be tempted to indulge in all of them. While it’s important to make the most of the college years, you don’t want your child going broke or buried in debt while doing it. Fortunately, there are a few budgeting strategies and tips you can teach your kids that will help them manage their money now and in the future.

Have The Money Talk
Keep the lines of communication open so your child knows how her education is being paid for. Whether it’s a 529 plan, scholarships or loans, make sure your student has transparency as to how much money they have and the approximate expense.

Anticipate Your Expenses
Make a list of the expenses your student can expect to have during his years in college. Tuition, room and board, and textbooks and not the only things to consider. There is also transportation, clothing, rent and utilities (if she is living off campus), and spending money for items including her cell phone, dining out with friends, travel, gym memberships or entertainment purchases.

Determine Fixed Versus Variable Expenses
Help your child understand that his fixed expenses are those he usually can’t avoid, such as room and board and tuition. Variable expenses are typically wants instead of needs, and can be reduced or eliminated if money is tight. 

Establish An Average Monthly Cost For Each Expense
Take a look at your child’s past bills to help her figure out how much each expense costs every month. If a particular expense fluctuates from month to month, calculate the average and plug that into your student’s budget.

Track Your Spending
Encourage your child to set aside some time each month to record his spending and compare it to the money he has coming in.

Adjust As Needed
If your child is outspending his income, he will need to adjust those variable expenses to keep everything in line. That may mean reducing spending on fun activities, like dining out with friends, concert tickets, or other entertainment. It’s not pleasant to pass on those things, but it’s good self-discipline for later in life. If he complains, explain how he can work additional hours at his job or apply for additional scholarships to cover unnecessary expenses.

Use An App
Have your child research free budgeting or money-management apps. These tools are an easy way to track his spending.

Take Advantage Of Student Discounts
Many businesses will provide special pricing and deals for college students, such as discounts on computer software, shipping, food, clothes and more. Always ask a business if student discounts are available.

If you have questions about saving for college or helping your child budget, contact Donohoo Accounting Services. We are dedicated to helping our clients with their financial and tax issues, and would be happy to get your child on the right financial foot. Contact us today to schedule a free consultation! For more tips and our latest updates, check us out on Facebook, Twitter or LinkedIn!