If there's one group of entities that you want to pay on time, it has to be federal, local and state governments. From city hall all the way up to the IRS, governments exert the power of their monopolistic franchise and penalize those who can't pay on time with exorbitant late fees. With penalty rates that can approach 1,000% annualized for being late, governments make the credit card companies look like charities. If you are deciding which bills to pay first this month, make sure that your government bills are at the top of the list.
Here are some of the most common egregious government late fees:
Property taxes are typically levied by your county in one or two installments each year. Miss the deadline by a day and you could get a nasty 10% penalty in some places. That's the way they do it in Los Angeles, the largest county in the country. With a 40 day grace period, it works out to a 139% annualized interest rate. If you are really late in a place like York County, South Carolina you'll get a 15% penalty. Some other counties are more reasonable and charge a seven to ten percent annualized interest rate based on the number of days that you pay late. Word to the wise: pay your property taxes on time.
Property taxes are considered secured first lien obligations - ahead of your mortgage. That means they can take your house away for nonpayment. If you're late on your property taxes, expect a call from your mortgage company.
If you are moving to a new state, you better register your vehicle fast. While many of your friends may flaunt the fact that they have been bucking the system by keeping their low cost Oregon registration while driving around San Francisco for the last two years, they'll pay a hefty penalty for registering late. In California, registering just 41 days after you arrive will add a 60% surcharge to the registration rate. But new arrivals aren't the only victims. If you pay your registration fees 1 day late, you'll have to cough up a 20% plus surcharge. If you show up 10 days later, look for another 15% tacked on for good measure. In Colorado, they just increased the maximum late fee from $10 to $100 which should generate a $13 million windfall for the state.
Although it's not as much money, parking tickets are far more egregious with their penalties. Many cities require payment within 21 days or assess fines that can approach 100%. In the City of Baltimore, the fight over parking ticket fees is a hot issue. The City charges a $16 monthly late fee. The most common parking ticket in the city is $23 for parking at a meter that has run out. If that parking ticket gets blown off your window or you just forget to pay, you'll be saddled with a 665% fine, a figure that would make a loan shark cry with envy.
Water & Power:
With the mercury drops to record lows or the heat of summer kicks the air conditioner into overdrive, power bills surge. Can't come up with the cash to pay within the typical 30 day grace period? Not only will you be charged a 3-10% penalty, you may get a shut off notice within days of your non-payment. With steady rate increases and rising demand, Government owned utilities are one of the most profitable sources of revenues. And utilities have the ability to turn off vital services within days of non-payment. The fees to reconnet services can make that 5% late fee seem like a dream.
Late fees on speeding tickets can be brutal, even when one compares them with penalties for the outrageous late payment fees on parking tickets. If you fail to pay a speeding ticket by a single day, you may get a fine that could be 200% or more of the original ticket value. Of course, anybody who speeds is a dangerous law breaker and deserves to be financially flogged to the fullest extent of the law! But unlike other penalties, you can challenge speeding tickets in traffic court without the benefit of a lawyer. If you get hit with one of these monstrous fees you can typically appeal the cost to a judge who will often reduce unreasonable fees. There's another hidden fee associated with speeding tickets, your insurance rates go up. So, it's worth your while to challenge all speeding tickets in traffic court, regardless of whether you are late. If you have a clean record - you should do your utmost to protect it by appealing to the mercy of the court. A good sob story always helps.
When it comes to interacting with government entities, if there's one creed you need to live by, it would be "Don't Mess With The IRS". When they say April 15th, they mean it. If you fail to file an extension to October 15th and don't submit your return, you will get hit with a penalty equal to 5% of the amount owed....per month! Add to that the interest owed on any underpaid amounts and you quickly exceed the highest credit card rates. Conveniently forget that self employed income for a few years? You'll end up with a nasty surprise if they catch up with you. Spend a little time each April making sure you get your return squared away and avoid the additional tax bite. You can always request a waiver of the penalty for reasonable cause, but why go through the hassle. Even if you don't owe them money, the IRS can levy some brutal penalties for failure to file. If you can't pay your taxes, file a return and tell them you'll owe them and then work it out with your local IRS office. You'll be surprised how pleasant they can be.
Whatever you do, if for whatever reason you can't make a bill to a government entitiy, get on the phone and talk to somebody who can work out the issue in a manner that reduces the penalty for late payment. Never ignore a bill from the government. They know who you are and they know were they can get their pound of flesh. If all else fails, they'll garnish your wages or accomodate you in the crow bar hotel.
If you want to live cheaply, the best thing you can do is make sure that every government institution from Uncle Sam down to your local library gets paid on time. And smile while you're writing that check. If you're paying on time, you're already getting a huge discount.
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