Successful Financial Plan

download-12On the surface, the cost of a financial plan is simple: generally between $2,000 and $4,000, depending on its complexity and where you live.

But dig deeper and you’ll find that the plan’s success also depends on you spending time to implement it.

Consider the case of a young physician who recently came to my office inquiring about a financial plan. His primary issues were cash flow with tax considerations, debt service and investment advice. I suggested he would also need an insurance review and estate planning, since he had none. At the conclusion of our getting-acquainted meeting, my colleagues and I quoted a fee for the financial plan and what it would include. He decided to work with us.

Next we had a goal-setting meeting and collected his pertinent financial documents such as his tax return, investment statements, debt statements and more. We provided risk-tolerance questions and discussed his short- and long-term goals in greater detail. Then there was an interim meeting where we reviewed his goals — to be sure we prioritized them correctly — his risk-tolerance results and his investment analysis.

A couple of weeks later, we had a plan-delivery meeting, where we reviewed the recommendations in all the areas of his financial plan. He took the binder home to review and start implementing the plan.

He returned in a month for a progress meeting. He had made some headway on our list of recommendations, but not as much as I had hoped for. At the conclusion of that meeting he told me: “You were very clear as to what the plan would cost me in dollars. What I did not know was the time it would take me to collect the information on which the plan is based, to meet with you, to read and study your recommendations and then to finally implement them.”

He was correct: It costs both time and money to enact a financial plan that will really help you. Eight months later, I received an email from the doctor, letting me know he’d completed all the recommendations. In the end he said the total cost, in terms of dollars and time, was well worth it.

Beware of additional costs

Keep in mind that with some financial service providers, there could be huge additional costs in the form of fees or commissions. This could also be a conflict of interest if your advisor recommends products that pay him more, rather than the ones that are best for you. So be sure you know exactly what fees are involved when you start working with an advisor.

While my recommendations in the doctor’s plan included specific changes to his insurance and investment holdings, I did not sell him any of the coverage plans that I recommended, nor did I sell him the investment products he needed. That’s because I am a fee-only advisor. I want my clients to know that I have no vested interest in the implementation of the insurance or investment part of the plan.

This is not the case for advisors who provide both a plan for a fee and then sell you the investments or insurance products as well. All too often, the insurance recommendations made by those who sell the products, too, include more and larger policies than what I would recommend. It is a sad fact that the commission may be driving the plan recommendations, rather than what is best for the client.

When you are looking for a financial plan, be sure that you use the services of a Certified Financial Planner and that the planner does not sell any products. To find such an advisor near you, contact Garrett Planning Network or the National Association of Personal Financial Advisors.

Tips for Prepare for Emergencies

images-33Last week Kristen and Julia, our rising high-school senior, visited McGill University in Montreal, Canada.  By all accounts it was a hugely successful trip. Julia is thrilled at the prospect of furthering her education and expanding her horizons. She will be 18-years old soon and “on her own” as a freshman, hopefully, at a college of her choice.

Students may be worried about making new friends, studying, and adjusting to college life. Parents or guardians may share these concerns too, but they should not neglect legal and financial matters. Our 18 year-olds are now adults who can enter into contracts, make their own health care decisions, and are afforded levels of privacy to which we may not be accustomed. Who will make medical decisions on behalf of your child if he or she is unable to do so? What will you do if you need to get medical information in a time of an emergency? Will you be able to have access or make decisions on financial/tuition matters with the bursar’s office? Is it important to have access to your child’s academic record? Consider these items allowing parents/guardians to assist their adult children before they leave for college:

Health care proxy
: This document allows your child to name someone they know and trust to make medical decisions on their behalf, if for any reason, they are unable to make the decision or communicate their wishes. While standard forms may be available on-line through state medical societies, your estate planning attorney can draft this document.

HIPPA release:
 The Health Insurance Portability and Accountability Act (HIPPA), a federal law, protects your child’s privacy even from parents. The act prohibits a health care provider from releasing any health care information unless your child provides the health care provider with a HIPPA release form naming you as an authorized recipient.

Durable power of attorney:
 This document allows your child to appoint an agent in order to manage his/ her financial matters. While parents may be paying the tuition bills, this does not grant authority to discuss or resolve their child’s financial issues with the college’s student accounts office or bursar’s office.

FERPA waiver:
 The Family Educational Rights and Privacy Act (FERPA) governs privacy of educational records and prohibits an institution from discussing a student’s record with anyone unless the student has granted authorization. Colleges may allow students to grant access to one or more individuals via an on-line wavier form. However, remember your children are gaining independence and responsibility. Simply engaging your student may prove an equally, if not a more effective means of communication about how they are doing in school.

It is important to keep signed forms available as you may need them if your child is traveling, and remember that authorizations can be modified or updated as their circumstances change.

This is not legal advice so please be sure to contact your estate planning attorney to address these important issues.  If you don’t have an estate attorney ask your family, friends or financial advisor for recommendations.

How be Mindful About Costs

download-13I’m in the middle of wedding planning right now, and it has opened my eyes to just how incredibly expensive this whole thing can be!


I’m a frugal person at heart so the idea of spending a ton of money on one day seems a little silly to me. But it’s hard not to get caught up in all of it, and I’m finding that the costs are adding up quickly.


So, how do you have a wedding you love without spending more than you can afford? I’ve been thinking about this as I plan my own wedding. I’m fortunate that my parents have been very generous, and here are a few things I’ve learned along the way.


Plan Ahead


Yeah, I know. Big surprise that the financial planner is encouraging you to plan ahead. But there are two reasons why it’s helpful to make a plan before making any final decisions.


First, it’s amazing how quickly even the little costs add up. There are so many different pieces to a wedding that you can make a lot of seemingly reasonable choices and still end up with a big total bill. By planning ahead, you can see that happen before you’ve actually committed to anything and make decisions accordingly.


Second, it’s easier to get good deals when you’re on top of things early. Venues get booked, DJs aren’t available, and prices go up. The longer you wait, the less likely it is you’ll get your first choice and the more likely it is you’ll have to pay extra.


The Knot has a fantastic wedding budget calculator that can help you allocate funds across all wedding expense categories.


Get Creative


Your wedding doesn’t have to be like every other wedding. It can not only be cheaper to do things your way, but it can make for a fun and unique experience.


A friend of mine had a fall wedding and served pies instead of a wedding cake. This option was delicious and at least half as expensive; with pie at $2 per slice and wedding cake at $4 or more. Another one enlisted the help of her friends to make their own floral arrangements. I’m making small ornaments for wedding favors, out of paper (not expensive) and supplies I already had on hand.


Music, in particular a live band, is another expense that can be reduced, involve friends who have musical talents or crowd source a playlist from all your guests. There are an infinite number of ways you can get creative, save money, and make the wedding yours in the process.


Consider Your Guests’ Budgets Too


Your friends and family want to come celebrate with you, but for many of them it’s a big financial commitment. Doing what you can to make it easier for them will be much appreciated.


I have a friend who had a camping option, as one of the accommodations for her wedding. Not only was the price right, but it was a memorable experience. Suggesting accommodation options to guests with a range of prices is always appreciated.


For our wedding, we’re trying to make sure that people know how to enjoy themselves during the weekend without having to spend a ton of extra money, so we’re giving them a map of our favorite hiking trails in the area. Little things like that won’t make all the costs go away, but every little bit helps.

True Value of Money

Why are you tracking your spending, living by a budget, paying off debt, building an emergency fund, contributing to a 401(k), and everything else you’re doing to improve your financial situation? What’s your endgame here? Have you thought about it? I mean, really sat down and thought about why you’re making all this effort?


I’ll tell you what, it’s not about making the “right” financial decisions. That alone won’t make you happy. And it’s not about having more money. A bigger bank account won’t automatically make you happy, and neither will all the stuff you can buy with that money.


What WILL make you happy is the time you can afford to spend because of the money you have in the bank.


True Financial Freedom


True financial freedom is the point at which you’re able to make decisions based on what makes you happy instead of what makes you money.


It’s the point at which you no longer need the next paycheck because you have the savings to cover it. It’s the point at which you can afford to take time off and travel the world or be home with your kids. It’s the point at which you can change careers because the new one is more meaningful to you, even if it’s not as financially lucrative.


Financial freedom doesn’t necessarily mean that you never have to work again. It just means that you’ve put yourself in a financial position where you’re able to spend your time in ways you enjoy.


What Does It Take?


So, what does it take to get to the point where your money allows you to spend your time as you please? First, it takes an understanding of what you actually want to be spending your time on. What excites you? What energizes you? Which people do you want around you? What missions do you want to be a part of?


Second, it takes an estimate of how much money you’ll need to be able to do those things, and when you’ll need it. It doesn’t have to be exact. Just a reasonable guess is enough to get started.


Finally, it takes a plan for how you’re going to save that money and consistent action to make sure that plan gets carried out.


And it’s really that last part that’s the most important. Consistently saving money is the key to giving yourself financial freedom. You don’t need to be a millionaire, but having money in the bank allows you to make decisions based on what makes you happy, instead of what makes you money.


Which one do you choose rent or buy

Have you ever felt pressured to buy a house? Maybe from your friends, your family, your co-workers, or even yourself? Like you haven’t actually made it as an adult until you own your home?


It’s a common feeling, but the truth is that buying a house ISN’T always the right decision. In some cases renting is a smarter move, both for your wallet and your lifestyle. Here are four reasons why.


1. Flexibility


Life changes fast. That great new job you just started might turn into an exciting opportunity in a different city. That big family you planned on having might turn into a smaller one.


Renting gives you the ability to quickly change your living situation to best match the new realities of your life. That flexibility can be the difference between seizing an opportunity and having to pass on it.


2. Cost


Proponents of buying like to say that when you’re renting, you’re essentially paying off someone else’s mortgage. So why not buy and make sure that money is going towards yourself?


There is some truth to that, if you stay in one place for an extended period of time (typically 5-7 years or longer), then buying often results in the lower long-term cost.


In the meantime buying can be really expensive. There’s the upfront cost of the down payment. There’s the cost of handling the fixes and improvements that come with any new purchase. There’s the cost of new furniture. There are the ongoing costs of insurance, taxes, and maintenance.


Renting has costs too, but they’re often much smaller and more predictable, at least in those first few years. And in many markets where housing prices are high, renting can actually be a better long-term financial decision.


You can use this calculator from The New York Times to figure out just how long you would have to live in one place before buying became cheaper than renting.


3. Adjustment


Renting is often a great idea any time you move to a new place.


It gives you the opportunity to figure out which neighborhoods you like and which you don’t so that you can eventually make a buying decision you’ll be happy with for the long-term. There’s no sense in being stuck somewhere you don’t like simply because you felt rushed into buying a house.


4. Stress


Owning a home has plenty of benefits, but it can also come with a lot of stress.


Any time something needs to be fixed, it’s on you to either do it yourself or pay for it to be done by someone else. And of course there’s that big mortgage that can feel like a weight on your shoulders.


Renting comes with fewer commitments and fewer responsibilities, which can lead to lower day-to-day stress.


How to Live Like Your Dreams Now

Many people view retirement as a 30-year vacation, full of leisure and travel. But new retirees often find that retirement isn’t the carefree life they expected. They miss having social interactions, a sense of achievement and daily structure — and as a result, some experience weight gain, marital discord, depression or substance abuse.

And many retirees, especially those who retire early, end up returning to the workforce.

Retirement often looks different today than it has in the past. And as you reconsider how you want to spend your golden years, it’s a good idea to contemplate big-picture life goals and current desires.

Maybe some of those dreams don’t have to wait until retirement.

Rethinking retirement

Rather than leave careers they enjoy, some baby boomers are working well beyond the traditional retirement age of 65 or phasing into retirement over time. Increasing longevity and improving health outcomes also relate to this decision.

But these boomers aren’t necessarily working 40-hour weeks. Companies are growing more receptive to employees’ desires for flexible schedules, including three- or four-day workweeks or remote work. These arrangements free pre-retirees to spend time on travel, hobbies and other goals — and lead to enhanced productivity and job satisfaction.

Work-life balance is the key ingredient to happiness. According to John Wasik’s New York Times article “Facing Retirement, but Easing Your Way Out the Door,” many workers enjoy their reduced schedules so much that they’re extending the arrangements for years longer than they planned.

Figuring out what you want now

In his book “The 4-Hour Workweek,” author Tim Ferriss argues that reduced workweeks are a growing trend for all workers, not just pre-retirees. Technology and the “Uberization” of the global economy allow workers to leverage overseas vendors and virtual assistants and focus on their “highest and best use” skills, in and out of the office. You don’t have to wait for that magical moment in time called retirement.

“Someday is a disease that will take your dreams to the grave with you,” Ferriss writes. “Lifestyle Design is not interested in creating an excess of idle time, which is poison, but the positive use of free time, defined simply as doing what you want as opposed to what you feel obligated to do.”

My favorite parts of the book are the exercises that help you identify what you want to have, be and do within the next six to 12 months. These are similar to the questions I pose to clients when I first meet them. Younger clients often have no problem identifying 10 or more things they want to achieve before they die, but clients who are in their late 50s and older tend to have a harder time completing these exercises and may even focus on their kids’ needs instead of their own.

Here’s a sample of the questions Ferriss uses to get people back in touch with the things that excite them and guide them through the goal identification process :

  • What are you good at?
  • What could you be best at?
  • What makes you happy?
  • What excites you?
  • What are you most proud of having accomplished in your life and how can you repeat this or develop it further?

Financial planners are life planners

Life planning creates the foundation for your financial plan. When I understand my clients’ goals, I can ensure that their money is allocated and prioritized to help them reach those goals. The financial plan then comes to life in a powerful way for clients. They can envision the future — whether it’s 12 months or 20 years from now.

Does your financial planner ask you questions like the ones above? Is he or she more interested in you or your money? Find a planner who provides holistic financial planning services and helps you start working through your bucket list. You don’t have to wait until retirement to start enjoying your time or your money.

Would you like to invest and learn more about it

As a financial planner and fiduciary investment advisor, I work with people with varying goals and vastly different levels of education, income, assets and comfort with technology. I’m often worried by similarities I see among investors of all stripes.

Many people simply have no plan when they start investing. Others follow the latest hot investment tips from a stranger online, on TV or in a magazine. I’m surprised by how many investors think they’ve done well, but don’t know how to measure their true rate of return for the risk they have taken. Few investors even know how much risk is in their portfolios.

These issues arise because investors generally don’t use a consistent methodology — a repeatable, rule-based process — to build or monitor their portfolios. That often leads to portfolios that aren’t well-diversified, don’t have the appropriate amount of risk for the investor and aren’t tax-efficient. What’s more, many investors don’t review their portfolios and haven’t thought much about how their investments fit into a bigger overall plan.

Are you ready to invest?

What can you do to make sure you aren’t in this camp? First, determine whether you’re really ready to invest on your own. Based on my experience, there are a number of essential tasks to complete and issues to understand before you start investing.

Completing the following investing assessment can help you determine how prepared you are and whether you’d be better served by obtaining professional assistance from an objective, fee-only advisor.

1. I have a written list of my short-, intermediate- and long-term financial goals and know how much I need to save and the required rate of return to fund each of those goals.


2. I have completed a trusted risk assessment questionnaire tool (such as this one from FinaMetrica) and understand how my risk tolerance fits in with the required rate of return to fund my goals.


3. I have a written investment plan (investment policy statement) that spells out the asset allocation to be used in my portfolio along with the expected range of returns.


4. I understand the importance of asset allocation (the mix of stocks, bonds and other investments) and follow a methodology to identify and create a portfolio that is designed to provide the highest return for the level of risk that is appropriate for my situation.


5. I utilize a methodology to select the investments for each asset class.


6. I set aside time to regularly review my investments and make changes as necessary.


7. I utilize a methodology to monitor and periodically change the investments as needed.


8. I understand how tax inefficiencies will negatively impact my portfolio; which asset classes are best suited for tax-free accounts, taxable accounts and tax deferred accounts; and have structured my portfolio across these types of accounts to be tax-efficient.


The Power on Investing

Low-cost index investing has become a popular approach to achieve market returns and will continue to be used by more individual and institutional investors. On the other hand, sustainable investing is also a growing trend, as more investors recognize that an “all-of-the-above” index investing strategy conflicts with their worldview. Index investors are accepting the status quo by owning companies as they are. Sustainable investors are driving change by using fund managers who engage with companies to adopt positive changes or by simple divestment (i.e. avoid investment in the company or sector).

I envision three groups of individuals who would find plant power investing attractive – vegans, vegetarians and advocates of a healthy eating / living lifestyle (ironically, HE/LL for short). The majority of individuals in this category, however, are not in a position to take on an extraordinary amount of investment risk. Investing in “pure play” meat or egg substitute start-up companies is beyond their financial reach.

The growth in the number of mutual funds that divest from fossil fuels provides an example that plant-based investors might want to follow. Why not simply avoid companies that are in obvious conflict with your worldview? Truth is, there are sufficient large, established companies to choose from in order to develop an investment portfolio that may satisfy both financial and personal goals.

As I point out in my book, Low Fee Vegan Investing, there are currently no mutual funds targeted to plant-based investors. This is unfortunate since, without this option, most investors are not in a position to take on the effort or cost to implement a strategy that would otherwise meet their needs.

I believe there are two easy steps plant-centered investors can take to encourage the development of a suitable investment tool (e.g., mutual fund, plant-based index fund). The first step would be to contact their investment professional and state an interest in having a portfolio which reflects their worldview. If sufficient demand develops, this will be noticed by financial service providers (again, recall what happened with fossil fuel divestment – many mutual funds and ETFs options were developed in a fairly short amount of time). Second, participate in the short “Plant Power Survey” that I developed to start counting the number of plant-based investors interested in this concept and, equally importantly, develop a consumer preference data set that might help the community of portfolio managers generate a set of filters for use until investor demand warrants the expense of more rigorous research.

Average investors can, collectively, use the tools of sustainable investing to exercise their power and achieve the extraordinary.

Fiduciary Standard for Investment Advice

The typical answer: These issues both seem very complicated to me, I’m already concerned where you are going with this, so let’s change the subject.

My answer: They both have the potential to alleviate human suffering, grow the economy, increase employment, and compel us to choose leaders willing to support policies that are not partisan in nature.

It is no secret that, as the use of fossil fuels has increased, carbon dioxide levels have been increasing at a rate of about 0.5% per year for the past several decades. The economic benefit of converting carbon locked up in fossil fuels for millions of years into instant energy, of course, has provided prosperity to many for the last century (e.g., inexpensive travel, food choices, home/office heating and cooling). Unfortunately, the last several generations have passed the true costs forward to the next many generations. Carbon dioxide traps heat energy in the atmosphere. The resulting disruptive impacts of excess atmospheric heat contributes to increasing human suffering (e.g., droughts, floods, wind damage). It is increasingly apparent that the true cost of burning fossil fuels has not been reflected in its price. Economists consider it a market failure when the true cost of a product or service is not reflected in its price.

If fossil fuels were now priced at their true cost, the fossil fuel age would be brought to a close and allow for a new era of sustainable energy to be established. Technology to make this happen is already in place. Improved policy making is needed to move us forward toward. A good example is the policy offered by the nonpartisan Citizens’ Climate Lobby (CCL). CCL’s carbon fee and dividend proposal was studied by an independent entity, Regional Economics Models, Inc. (REMI). The results of the analysis showed that a gradually increasing fee on fossil fuels at the source, where the collected fees are distributed as dividends to households, would transition society from an unsustainable dependence upon fossil fuels and grow the economy by generating 2,800,000 new jobs and avert 230,000 premature deaths over a 20-year period. Members of congress are aware of the CCL bipartisan proposal and are looking for signs of support from their constituents (surveys show 68% favorability of a fee and dividend approach to carbon pricing) in order to overcome the actions of the fossil fuel industry to delay the needed transition to clean energy.

Prior to 1980, most members of the middle class did not need an investment advisor – you paid off the mortgage, saved some extra cash and relied on a pension and your Social Security benefit to fund retirement. With the advent of 401k plans and the demise of pension plans, the financial services industry grew to a scale comparable to the fossil fuel industry in economic size. It took a relatively long time for policy makers to identify that excess investment management fees are a cause of significant avoidable financial loss to savers. For instance, a retired couple without pensions and a savings of $1,000,000 may expect to draw down $40,000 per year to supplement their Social Security benefits. If their investment advisor charges a fee of 1% or 2% per year over the true (i.e., competitive) cost of the service provided, the couple is getting by with $10,000 or $20,000 less per year –as little as half the amount they expected! Is this suffering? Let’s consider a single retiree who has $300,000 in savings and no pension. This retiree is sold an annuity with a 10% upfront commission ($30,000) and locked into an investment management contract he did not fully understand with an annual fee of greater than 2% per year for 10 years. Excessive, non-transparent, fees benefit few at the expense of many.

The Department of Labor recently published a rule that would require more investment advisors to act in their clients’ best interests (i.e., act as a fiduciary), which involves disclosure of fees and conflicts of interest. Many financial service providers have already shifted their practices and service models in anticipation of this ruling (e.g. one firm stopped selling nontraded Real Estate Investment Trusts with a 12% commission). A June 11th article in The Economist pointed out how informed investors are moving to lower fee investments. Keeping more wealth back in the hands of middle class investors allows for more economic activity and, by economic inference, more employment. A fiduciary standard provides for more informed investors. At the current time, however, a partisan effort is underway to overturn the fiduciary rule.

In a post-Citizen’s United world, it has become easier for established financial interests, such as the fossil fuel and financial services industries, to fund actions that promote their own narrow short-term interest and influence policy-making. The influence of large contributions to political campaigns has made otherwise solvable problems difficult to tackle by fabricating a partisan dimension to them. Without sufficient citizen involvement, progress that leads to benefits for the many can be too easily stifled.

Best on Financial Planner Tips

As a financial planner, my job is to help people make smart financial decisions. That means planning ahead for big purchases, making rational spend vs. save decisions, and generally being purposeful and thoughtful with your money.

It’s a noble endeavor, but the truth is that we’re all human and we all make less-than-optimal decisions from time to time. Myself included. Here are three examples where I made decisions that were frowned upon by my financial planning alter-ego.

#1: The Big Indulgence

My brother got married. It was a beautiful wedding, lots of fun with friends and family, and he and his wife had a great time. It was also a little awkward for me. As the older, single sister at the time, I honestly felt a little self-conscious.

So what did I do? I spent a LOT of money on makeup: brushes, blushes, two types of foundation, extra eye shadows. I went nuts! It was an emotional decision through and through. It was way more than I “should” have spent, and certainly more than I had planned. But I wanted to look good and the makeup helped me feel comfortable. It may not have been the most rational decision, but it was certainly a human one.

#2: The Overextension

A few years ago I decided to start my business. And while I was excited about the possibilities for how it could grow, there was also a lot about it that I couldn’t really plan for. I didn’t know how long it would take to be profitable, how much of my time it would consume, or really anything else about what the experience would truly be like.

So of course I also decided to start remodeling my house at exactly the same time. Another project with a lot of moving parts, a lot of uncertainty, and a big investment of time and money. Tackling two big goals at the same time caused a lot of stress. I was worried about money, stretched for time, and initially couldn’t give either one the attention they deserved.

My financial planner alter-ego should have told me to take one thing at a time. But in this case my impatience got the best of me.

#3: The Impulse Buy

In early January I got a call from a friend. She was heading for the Australian Open in a few weeks and she had an extra ticket. She was calling to see if I wanted to go. Heck yeah I wanted to go! This was the Australian Open! So without giving it too much thought, I said yes.

Of course, I hadn’t planned for this trip. At all. I hadn’t saved for it. I hadn’t carved the time out of my schedule. And it was only a few weeks away. This was a last-second, impulse decision to the extreme.

Now, I had an amazing time and don’t regret a single thing. But money was tighter in the months surrounding the trip and everything was just a little more stressful. In an ideal world I would have planned for this kind of trip months ahead of time. Sometimes life happens and the planning happens in hindsight.

The Moral of the Story

There’s this perception around personal finance that you’re supposed to plan for everything ahead of time and make perfectly rational decisions in every situation. And to some extent that
is the goal. But it’s unreasonable to think that you’ll be able to do that 100% of the time.

We’re all human and we all do things imperfectly. When that happens, cut yourself some slack and move on to the next decision so that you are reasonably on track.

Estimated Tax Payments Online

Did you know it is possible to schedule your estimated tax payments online?  This is a very handy service for people who have to make Form 1040-ES estimated tax payments in April, June, September and January each year.  To make your payments, use the Electronic Federal Tax Payment System (EFTPS®).  The EFTPS® enables individuals and businesses to send their tax payments to the IRS by electronic transfer rather than writing a check and mailing it, or sending an expensive wire.

With the Electronic Federal Tax Payment System (EFTPS®), a free service of the U.S. Department of the Treasury, you schedule payments whenever you want, 24 hours a day, 7 days a week. You can enter payment instructions up to 365 days in advance.  This way when your tax preparer completes your taxes and calculates next year’s estimated payments, you can login online and schedule those payments.  Then you’re done.  The nuisance of mailing in those payments by check every few months has been removed.

Reasons to use the service include:

  • It’s fast. You can make a tax payment in minutes.
  • It’s accurate. You review your information before it is sent.
  • It’s convenient. You can make a payment from anywhere there’s an Internet or phone connection 24 hours a day, 7 days a week.
  • It’s easy to use. A step-by-step process guides you through scheduling payments.
  • It’s secure. Online payments require three unique pieces of information for authentication: an employer identification number (EIN) or social security number (SSN); a personal identification number (PIN); and an Internet password. Phone payments require your PIN as well as your EIN/SSN.

One thing to be aware of is that you can’t wait until the due date to make your first payment!  Payments must be scheduled at least one calendar day before the tax due date by 8 p.m. ET to reach the Internal Revenue Service (IRS) on time.  On the date you select, the funds will be moved to Treasury from your banking account, and your records will be updated at the IRS.

There are a couple of other items to consider.  Obviously it is important you have the funds in the checking account you are transferring from.  The first time you use the system, you will have to enroll.  Also remember that the EFTPS® is a tax payment service.  You’ll need to already know the amount, tax form, and date when you schedule a payment.  This system doesn’t help you calculate your tax due.  If you want to cancel a payment, you must do so by 8 p.m. local time two business days before the scheduled date.