save or spend blogs

Found money

3/2/2007

I took a vacation last month. The result is a lovely memory and some residual credit card debt. One of my major life goals is to pay my debt off quickly (after all, I do work in the credit counseling industry!) Yet, on the off-chance I do receive a tax refund, I’m buying a couch. Foolish? Maybe. I realize getting a tax refund is not the same as finding $2,000 in my pocket. (By the way, if I ever did find $2,000 in my pocket, I most certainly am not wearing my own pants!) I also realize that I am not setting a particularly good example; however, it is so very tempting to take advantage of this unlikely form of forced savings. As my dear friend Jennifer explains, “It may not be smart, but it works!” Fortunately, Jennifer and I don’t have as much company as you might think. In fact, I just read that most surveyed workers who expect a refund plan to do something responsible with the money, like pay down debt (44%) or save or invest (38%). That's according to the latest Principal Financial Well-Being Index. So, if you receive a tax refund, what are your plans? Will you spend it on a splurge or obligation? Will you save the money? Tell us.

I don’t know the meaning of the word ‘save’

3/9/2007

After spending more than 12 years in the credit counseling industry, you would think I have a handle on the basics by now. However, I was recently humbled by the fact that I don’t know the real meaning of the word ‘save.’ The following definitions of the word ‘save’ appear in the Merriam-Webster Dictionary: Save, sAv, verb.
2 a: to put aside as a store or reserve: ACCUMULATE <saving money for emergencies>
b: to spend less by <save 25 percent> I’m on board with the “store or reserve” definition. In fact, until very recently (i.e. this morning), I was convinced that saving money was the opposite of spending money. You know the old saying, “a penny saved is a penny earned”? Well, I believed it. You can imagine my shock to read the “to spend less by” definition. I thought that advertisers were just being clever when they tell you that you can “save big money” on their products. I’m embarrassed to admit that over the past umpteen years, I have uttered the phrase “you can’t save money at a sale” at least a thousand times. Truth be told, I still don’t really accept “to spend less” as a meaning for ‘save.’ I mean, let’s be logical, ‘save’ is the antonym for ‘spend’; how did it manage to weasel its way up to the definition? The definition for ‘spend’ certainly doesn’t include the word ‘save.’ Don’t bother, I checked. Curiouser and curiouser. (Author’s Note: ‘Curiouser’ is not a real word, but at least you know what it means.)

Making taxes fun

3/1/2007

‘Tax’ is one of those words like ‘budget’ or ‘diet’ that no one seems to like. Yet, for millions of Americans, the addition of the word ‘refund’ changes things entirely. You might even say that taxes aren’t fun with out refund (clever, huh?!) With the average tax refund totaling more than $2,000, we can hardly blame taxpayers for the mood swing. After all, that’s a lot of money! We want to know what you plan to do with it. “We” are Money Management International, the nation’s largest full-service credit counseling organization in the nation. To get you thinking about spending and saving, SaveOrSpend.com offers a handy savings calculator and the amazing powers of Tax Time Trisha. More importantly, we need your expertise! In return for sharing your tax refund story, strategy, or solution with us, you will have the chance to win some great prizes. Plus, you will have the chance to inspire your fellow taxpayers with your financial wherewithal (or spread your unbridled passion for splurging!) In other words, whether you are a spender, saver, or ower (yes, I just made up that word), you belong at SaveOrSpend.com.. Click on one of the syndication options to assure that you get all of our helpful (and somewhat grammatically-challenged) tax time tidbits.

Little mistakes can cause big delays

3/5/2007

Before sending your return, it pays to double check the details. After all, even minor errors can delay your refund. Believe it or not, the IRS’s list of common errors includes things like not signing or dating the return.

What would it take?

3/6/2007

The Commerce Department recently announced that US consumers spent more than they earned in 2006. In fact, the savings rate was negative 1 percent in 2006. While many feel that the savings rate in isolation is not an extremely accurate portrayal of our overall financial preparedness, I doubt that anyone would argue that our negative savings rate is great news for the average consumer. So, because I do not believe this is a case where “less is more,” I started thinking about what it would take to tip the scale back in black. And, believe it or not, I came up with something. The IRS will be refunding taxpayers more than $220 billion this year. What if we put our tax refunds into savings? Would that be enough to bring the savings rate into positive territory? The answer is: Yes. If I interpreted the chart correctly, in 2006, disposable personal income was $9,748.1 billion and personal outlays $9,864.6 billion leaving personal savings at negative $116.6 billion. Last year, more than 35% saved their refund. If the others joined them AND if things remain constant (such as our spending!) we’d end up with a positive savings rate! I realize that this still wouldn’t put us anywhere near where we were in the ‘90s, but it is a start. Plus, for the millions of Americans living a paycheck to paycheck, adding the average refund amount of more than $2,000 to a savings account could be the difference between a minor financial setback and a major financial crisis.

Tax Withholdings = Savings Plan?

3/7/2007

MMI’s 2007 tax refund survey found that one of the primary reasons respondents expect a refund is purposeful over-withholding. In fact, 26% of you admit that you knowingly and willingly grant the government an interest free loan! We need to know more. Are you saving for a short-term or long-term goal? Do you plan to splurge? Share your save or spend story with us! Read more tax refund survey results on SaveOrSpend.com.

Reserve refund anticipation loans for emergencies

3/8/2007

Basically, a refund anticipation loan is a short-term cash advance that uses your expected tax refund as collateral. The loans allow you get your money a little bit earlier, but at a hefty price. If it is worth $30 to $300 or so to receive your refund several weeks early, be sure to compare rates and to read the terms of the loan carefully. An estimated 12.38 million taxpayers took out refund anticipation loans in 2004. These mostly low- and moderate-income taxpayers paid a total of more than $1 billion in fees for their easy money. As an alternative, consider e-file and you will have your refund within weeks. The IRS even has a program called Free File that allows taxpayers with an Adjusted Gross Income (AGI) of $52,000 or less in 2006 to e-file their federal tax returns for free. That means 70 percent of all taxpayers – 95 million taxpayers – can take advantage of the Free File program.

Pay down debt

3/12/2007

Nearly half (46%) of MMI’s survey participants plan to use their refund to pay obligations. For consumers struggling with credit card debt, using a refund to accelerate debt payments is an easy financial decision. If you pay the minimum monthly payment of 4 percent on a $6,000 credit card debt with an 18 percent interest rate, it would take more than 13 years to repay. In that time, you would pay $3,515.68 in interest charges. To determine the benefit of accelerating your debt payments, visit Bankrate.com.

The best of both worlds

3/13/2007

Are you a spender and a saver? If so, the IRS has a program for you! As authorized by the Pension Protection Act of 2006, the IRS now offers taxpayers the opportunity to split their refund into two or three checking, saving, or retirement accounts. That means that you can have part of your refund directly deposited into an accessible checking account and the remainder tucked away in a savings account. To take advantage of this program, you must fill out IRS form 8888.

Laundry Lotto

3/15/2007

My college daughter was home doing laundry recently and announced, "Look what I found, a $10 bill in the wash. Wow! Some extra cash." I reminded her that unless we are taking in laundry for others, some one at our house had that $10 in a pocket. While it feels good to "find money" or gather up change and buy a pizza, that money was yours from your earnings or allowance. And that is what getting a tax refund is - it was your money, it just got put some place else for awhile. The tax code is complicated and it is difficult to "break even" at tax time, but don't let Uncle Sam become your banker. A safe variance to either owe or have a refund should be in the $300 range. Make a vow this year to learn more about with withholdings and deductions and that whatever you receive in a refund, share a part of it with a charity (and gain a deduction for next year), pay down a debt, save some in a place that won't be found for Laundry Lotto and yes, give yourself just a little treat. And a word to my daughter - I am checking my pockets from now on!

Tax Time Humor

3/16/2007

Can taxes be fun? We think so. Even the IRS Web site has a list of fun, and sometimes funny, tax quotes. They do make it clear that their inclusion is “not an official IRS endorsement of the sentiments expressed.” Here are some of my favorites from the IRS and other sources (including my Mom): People who complain about taxes can be divided into two classes: men and women. – Unknown Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund. — F. J. Raymond, humorist Whomever said that truth never hurts never had to fill out a Form 1040. – Unknown Children may be deductible, but they are still taxing. – Mom What would a tax form be without rhetorical questions? – Unknown Like mothers, taxes are often misunderstood, but seldom forgotten. — Lord Bramwell, 19th Century English jurist Have one we haven’t heard? Please share it! Some of us need all the humor we can get this time of year…

What to do with a windfall

3/19/2007

When I’m not working on SaveOrSpend.com, I answer an online advice column for Money Management International. Recently, a consumer posed a question about what to do with a windfall. Although the topic of her question relates to wedding gifts, I think the same rules apply for tax refunds. Dear Advice Team: I am recently married and my husband and I are wondering what would be the best thing to do with the money gifts we have received. We have received $4,200 and are vacillating between just saving that sum or paying off our credit cards and then begin saving. I have about a $4,000 balance on my credit card with 16 percent interest and he has $2,000 with 19 percent interest. What do you think would be our best bet? Thank you. Michele Michele, You and your husband are off to a great start! Be proud that you are considering how best to utilize your money instead of running out and spending it on frivolous items. While it is important to pay down your debts, it is also important to have an emergency savings fund. However, the interest on your savings account won’t earn you anywhere near the 16 percent and 19 percent you are paying on the credit card debt. If I were you, I’d pay down a large portion of the debt and immediately begin to make a serious effort at establishing an emergency savings account. Three months income is the minimum this account should hold. Best wishes and congratulations, The Advice Team If you have advice for Michele, please feel free to share.

Can a tax deadline evoke fear?

3/21/2007

This year, you have two extra days to file and pay your taxes. April 15, 2007 falls on a Sunday, and Monday, April 16, is a legal holiday in the District of Columbia. This means the entire country has an April 17 deadline! Personally, I am glad the government moved tax day back instead of forward because the next closest workday falls on Friday, the 13th! Speaking of scary things, I found several phobias that you might watch out for during tax time: Chrometophobia- Fear of money Numerophobia- Fear of numbers Papyrophobia- Fear of paper Peniaphobia- Fear of poverty Poinephobia- Fear of punishment Decidophobia- Fear of making decisions Hypegiaphobia- Fear of responsibility If you feel all of the above, perhaps you have Phobophobia (fear of phobias). If you had to pick a new 2007 tax deadline date, what day would you pick and why?

Accountants Get Questions at Dinner Parties Too!

3/22/2007

Just as doctors, attorneys and other professional seem to get “hypothetical” questions from family and friends, I recently asked two accountants what type of questions they get at dinner parties about income taxes and tax preparation. Mark received the request that a client wanted a second opinion on his return- and if the client received a larger refund than what Mark had calculated, would Mark pay the fee (NOT). Lynn was asked if a pet owner could apply for a social security number for her show dog. The reasoning was the dog earned fees and prize money, the owner would gladly pay taxes and then off set any taxes for all the training (doggie college is expensive), travel, training for the owner and food . Lynn explained the client had things a little backwards, but the pet owner insisted that “Bucks” the dog had told his owner she was to receive all his estate. (Woof, Woof). Lynn sent her on to another firm. While we all have our opinions about taxes and the rates we should pay, it is important that everyone that should file a return does and do so in a timely manner. Tax debts are reported on your credit report. While you may disagree with our income tax system, not filing and not paying income tax has an impact on your credit life. And next time at a party, ask your accountant the doggie Social Security number and see what answer you receive. Bucks is watching his mail box.

What Refund?

3/23/2007

Do you find whole premise of this tax refund site is a bit unsettling? Have you claimed everyone but the dog as a deduction yet you still owe Uncle Sam? Is your hard earned money already earmarked for pesky necessities (like food)? If so, you aren’t alone. Our survey found that more than one third (34%) of those who expect to owe do not know how they will pay. If you find yourself owing taxes and are not sure how you will pay, consider the following: Start saving. Look for simple ways to reduce your daily expenses. For example, by brown bagging your lunch, you may be able to save as much as $100 a week. File on time. The penalty for not filing on time is generally 5 percent of the balance due per month. The IRS recommends filing your taxes even if you are unable to pay. If you truly can’t get it done by April 17, file an extension. Pay on time. The interest charged on late payments is determined every three months. During the last several years the interest rate has ranged from a high of 9 percent to a low of 4 percent. Get Help. There are many institutions – including the government – who will loan you the money for a price. To request a payment plan, complete Form 9465, Installment Agreement Request, and attach it to the front of your income tax return. Finally, don’t compound the problem. If you are tempted to pay your taxes with a credit card, consider the true cost of credit. The last thing you want to do is roll your tax bill into a revolving credit card balance that you will be paying on this time next year.

Blame the Piggy Bank

3/26/2007

Despite the facts that I don’t own anything of significant age and my house does not have an attic, I am a habitual viewer of BBC’s ‘Cash in the Attic.’ Last week, antiques appraiser Paul Hayes educated the viewing audience about the history of piggy banks. According to Paul, the banks were originally made to help children learn to save. They were made of ceramic or pottery and had to be broken to extract the funds. In contrast, today’s banks come with a plug for the easy removal of coins. Sure, removing a plug might be a safer and cleaner alternative to having your children smash and scatter razor-sharp shards of ceramic, but I can’t help to wonder if the purpose has also been destroyed. With our nation’s savings rate at historic lows, do you think it’s time to bring back the plugless piggy bank?

Failing to file is costly

3/27/2007

It’s hard to believe; however, failing to file a return when due a refund is on the IRS’s list of most common mistakes. In fact, the IRS has $2.2 billion for people who have not filed a 2003 tax return. The IRS estimates that half of those who could claim refunds would receive more than $611. Taxpayers will forfeit refunds of withheld tax if a return requesting a refund is not filed within three years of the due date. So, if you failed to file in 2003, you can still get your refund, but your claim be made by April 17. (Of course, if you have some cash coming to you, you’ll want to file for 2004 and 2005 as well.)

Financial security or fire hazard?

3/28/2007

When I met my husband, he kept all his gas receipts and recorded the mileage, date, and cost of his gas purchases in a notebook. After years of biting my tongue, I eventually blurted out “what are we planning to do with this information?!” When he couldn’t come up with an answer (we didn’t lease or expense our mileage), he finally agreed to toss the receipts after reconciling our bank account. If you find yourself knee-deep in receipts this tax season, take advantage of the opportunity to blurt out “what are we planning to do with this information?!” You might find it is time to clear the clutter. But before you bulldoze that pile, you should know that some things are worth hanging on to. What to keep and what to toss: Grocery receipts and other nondeductible expense receipts and statements can be destroyed after they have been recorded for budgeting purposes. Paycheck stubs should be checked against your W-2. If it’s a match, you can toss them. If not, request a revised W-2, called a W-2c. Canceled checks should be saved for three years. Utility bill stubs may be destroyed after recording, however, you may wish to hold onto these for a year to compare monthly costs. Documents pertaining to buying, selling or improving your home should be kept as long as you own the home. Receipts from major purchases should be kept as long as you have the item. Credit card receipts can be destroyed once you have reconciled with your monthly statement. Additionally, credit card monthly statements can be destroyed on an annual basis. According to the Internal Revenue Service (IRS) you should keep your individual tax return documents for seven years. The IRS has three years from your filing date to audit your return if it suspects good faith errors. However, the IRS has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more. (Before taking out the trash, be sure that all identifying information has been destroyed to avoid any threat of fraud.)

Yes, a shoebox is a first-level tax organizer

3/29/2007

In my years as a credit counselor, many clients came to the office with a shoe box tied with string or a shopping bag, all filled with credit card statements. For some, the paperwork was too overwhelming; others did not want to face the amount of the debt or the level of seriousness. Yet, once all the paper was organized, consumers had a clear plan to deal with their debt. The same can be true for taxpayers. A majority of us really only need a few pieces of paper to file our taxes year to year. And they can fit in a shoebox (and I would think most of us purchased pair of shoes in the past year). Step 1: Remove shoes and tissue paper Step 2: Add a copy of last year’s tax return as a reference document Step : As you make donations to various charities or donate items to charity groups, place receipts in the box Step 3½: Place receipts in the box anything you think might help preparing your taxes. (It may not be deductible but better to ask than have to hunt that paper down.) Note any major events, such as college student who is (finally!) is on his or her own. Step 4: In January of the following year, add 1099’s, W-2, and other statements. Step 5: Open the box and be confident that 2007 tax filing will be easier, more accurate, and filed on time.

Putting Taxes on a Credit Card – Yikes!

3/30/2007

If it’s not bad enough to find yourself owing taxes right after the holiday bills came rolling in, consider putting your taxes on a credit card accruing interest. Sounds a little nutty, right? Apparently not - according to the IRS, in 2006, almost 2 million taxpayers paid federal taxes on a credit card, an increase of 36 percent over the prior year. Don’t allow yourself to be enticed by teasers or enhanced rewards from credit card issuers, it won't protect you from high interest rates - of up to 30% - if you don't pay off your credit card bill each month. If you are tempted to pay your taxes with a credit card, consider the true cost of credit. The last thing you want to do is roll your tax bill into a revolving credit card balance that you will be paying on this time next year.

The 10-key workout

4/2/2007

I received this math trick from one of my coworkers whose job it is to keep the Internet busy by forwarding the usual jokes, movies, trivia, warnings, and hoaxes. Give it a try; it’s pretty amazing. PLUS, it might be good to practice your 10-key skills before tackling your taxes. 1. Grab a calculator. (you won't be able to do this one in your head) 2. Key in the first three digits of your phone number (NOT the area code) 3. Multiply by 80 4. Add 1 5. Multiply by 250 6. Add the last 4 digits of your phone number 7. Add the last 4 digits of your phone number again. 8. Subtract 250 9. Divide number by 2 Do you recognize the answer?

Does your DOB impact your 1040?

4/3/2007

"What's your sign?" is not a question you typically hear from your accountant. Yet according to a recent survey by Money Management International (MMI), tax time can be very different for consumers born under different sun signs. For example, the MMI survey found that Libras expecting a refund plan to receive an average refund of $2,200, while Aries are expecting a significant $800 less. Other sign-specific findings include: ries (March 21-April 20) Those born under this Fire sign expect the smallest refunds ($1,400). Their plan of action is to save (46%) or pay debts (32%). Taurus (April 21-May 21) Taurus is an Earth sign, associated with practicality. Those born under this sign are the least likely to expect a refund. Of those who expect to receive a refund, only 6% were born under this sign. Gemini (May 22-June 21) Generally known to be logical, Gemini are the most likely to over-withhold on purpose. Cancer (June 22-July 23) Protective Cancers are not likely to splurge with their refunds. Of those who plan to splurge, less than 1% were born under this water sign. Leo (July 24-August 23) Generous Leos are more likely than those born other under signs to spend their refunds. Of those who plan to splurge, nearly 20 percent are Leos. Virgo (August 24-September 23) Practical Virgos are still deciding how to spend their expected tax refunds. In fact, more Virgos than those born under any other sign were “undecided” about what to do with their refunds (14%). Does your sign influence your tax strategy? We'd love to hear your save or story. Check back tomorrow for stats about Libras, Scorpios, Sagittarius, Capricorns, Aquarius and Pisces.

Does your sign dictate your tax refund strategy?

4/4/2007

Yesterday, I covered MMI’s sign-specific tax refund survey findings for Aries, Taurus, Gemini, Cancer, Leo, and Virgo. Here are some stats for those of you born from September 24-March 20: Libra (September 24-October 23) Known for balance, Libras surprisingly expect the largest refunds (an average of $2,200). Scorpio (October 24-November 22) Scorpios are characterized as being passionate. Of those who plan to splurge with their tax refund, one out of four is a Scorpio. Sagittarius (November 23-December 21) Sagittarians are known for being optimistic and are not likely to save their refunds. In fact, of those who plan to save, only 5% were born under this sign. Capricorn (December 22-January 20) Earth signs, like Capricorn, are associated with practicality. Appropriately, Capricorns are not likely to splurge with their refunds. In fact, of those who plan to splurge, less than 1% are Capricorns. Aquarius (January 21-February 19) Aquarius is an Air sign, associated with thought and perspective. Fifty-eight percent of surveyed Aquarians expecting a refund plan to use it to pay down debts. Pisces (February 20-March 20) Idealistic Pisces are the least likely to save. In fact, of all those who plan to save, less than 5% are Pisces. Speaking of signs, don’t forget to sign your tax return—forgetting to sign is on the IRS’s list of most common mistakes.

Will the Tax man come to visit me? How often will my number come up for Audit?

4/5/2007

As the tax filing deadline looms closer and closer, many people worry that if they file their taxes closer to the deadline, it will increase their odds for an audit. And many keep a watchful eye to the front door- they worry the tax man will come to their house to collect money due. (As if IRS agents want to see your entry hall and the kid’s basketball on the stairs). You stand a better chance of having your Mother-in-law visit or your neighbor returns your long lost power drill than having IRS come to your house to collect taxes. IRS does have a computer generated calculation to figure out who will receive an audit notice. The numbers on your return that might generate an audit are large deductions that don’t match your past years returns or not in line to your income, Please don’t over value the bag of clothing your gave to the local charity! Other “bells” that set off a possible audit are claiming more dependants than you really have, simple errors such as not signing the return, large medical deductions and not claiming income from a 1099. So sit back this week end, take your time to prepare your return, be honest, take time to review everything, sign the return with a pen – you will be fine. But I would dust that Entry Hall table and put away those old coats-just incase the IRS collector does pay you a visit. (remember you claimed you donated that one coat to charity) Promise me that you will start now collecting paper work and receipts for tax time 2008.

Important 2007 Tax Filing Deadlines

4/6/2007

The big one: April 17th 2006 income tax returns due Deadline for 2006 IRA contributions Deadline for automatic six month extensions If you’re not filing an extension, make Keogh or SEP-IRA contributions (if applicable) Pay the first installment of your 2007 estimated taxes If you made taxable gifts, file gift tax return (Form 709 or 709-A) and pay taxes due Other deadlines to remember: June 15th Pay the second installment of your 2007 estimated taxes (if applicable) July 2nd File Form TD F 90-22.1 for financial accounts in a foreign country (if applicable) September 17th Pay the third installment of your 2007 estimated taxes (if applicable) October 15th If you filed for a six month extension, your 2006 income tax return is due and 2006 SEP/Keogh contributions are due December 31st Last day to establish a Keogh plan for 2007 For more, reference the IRS 2007 Tax Calendar.

Where’s Your Refund?

4/9/2007

If you are like many Americans, you are probably anxiously awaiting your tax refund from the Government. Instead of stalking the mailman, try using the IRS’s Where’s My Refund feature. It is free to track your refund through this secure Web site.

Would you like your tax return Paper or On- Line?

4/11/2007

Life is getting easier and easier- you have a choice on how to “send” your tax return- on paper via the US Post Office or do it electronically. Filing on line is secure and simple but consider these points when you make your choice. Using a tax preparation web site saves time since you don’t have to don’t have to go to the store and buy software. It is pretty good at checking the math for you and can find some errors. Paper returns can and have been lost in the mail. And if you are filing your return at the 11th hour and in your PJ’s or your week end wardrobe, then running into the post office to send it certified may not be a good option- Consider your time, additional post cost, gas, the late night trip thru the drive in and the chance the fashion police will fine you! If you have a return- that I know you are planning to save, that refund should arrive faster. You can watch your checking account for that refund in 3 weeks rather than the checking of the mail box for a per check in 8 weeks. Happy 2006 tax year- Now resolve to do better for your 2007 return. Yes taxes are a part of your life, they won’t be going away for a very long time so plan now on how to keep organized and file on time next April.

90210 (and other) expensive zip codes

4/12/2007

Ever wonder how your income taxes (and incomes) compare to that ritzy looking area down the road? This Web site allows visitors to search incomes and income taxes by zip code (granted the statistics are from 2004, but it could still be interesting!) Additionally, Forbes collected the top 500 most expensive ZIP codes in the US.

Music to keep you motivated

4/16/2007

Have you finished your taxes yet? If you’re like many Americans, you will procrastinate as long as you can. In fact, the most popular tax preparation web sites slow a bit from the millions of last-minute tax filers trying to make the deadline. Before you get stuck in traffic, at the post office or on the Internet, take the time now to sit down with your pile of forms and receipts, and bite the bullet. I have compiled a list of tax related tunes to keep you moving. After Taxes Johnny Cash Taxman The Beatles 1040 Blues Robert Cray It’s My Money The Right Brothers Tax Man Max Schoolhouse Rock Rain, Tax (It’s Inevitable) Celine Dion

Tax time nostalgia

4/17/2007

If tax preparation left you knee deep in paperwork, you might be longing for simpler times. Check out this tax form from 1913. On the bright side, we have time on our sides—tax returns were due on March 1 in 1913.

Every day is tax day

4/19/2007

When most people think of tax time, they think of April 15 (or in this year’s case, April 17). However, in reality, every day is tax day—April 17 was simply the day you had to report your actions. While income tax preparation may not qualify as a recreational hobby, a little planning throughout the year can save you time and money. For starters, you can estimate next year’s taxes now by visiting www.irs.gov. If you are expecting a refund of more than $500, you might want to reduce your withholding amount. Getting a tax refund is never a good thing because what you’re doing is extending an interest-free loan to the federal government. During the tax year, taxpayers should also vow to keep organized records. On average, one-third of the nation’s taxpayers itemize their deductions. Costs for things like medical expenses and child care may be deductible, so save those receipts. Want to keep tabs of your spending in style? Midas Printing offers this snazzy black & white gramercy vine cloth receipt organizer.

Didn’t file yet? Maybe you don’t have to

4/24/2007

Whether you have to file a tax return depends on your filing status, age, and income. From the IRS website, listed below are the filing status, age, and amount of gross income that would require you to file. 1. Single, under 65, and your gross income was at least $7,200 2. Single, 65 or over, and your gross income was at least $8,300. 3. Married, filing a joint return, you and your spouse were both under 65, and your gross income was at least $12,950. 4. Married, filing a joint return, one spouse is 65 or over, and your gross income was at least $13,800. 5. Married, filing a joint return, both you and your spouse were 65 or over, and your gross income was at least $14,650. 6. Married, filing a separate return, and your gross income was at least $2,800, regardless of your age. 7. Head of household, under 65, and your gross income was at least $9,250. 8. Head of household, 65 or over, and your gross income was at least $10,350. 9. Qualifying widow or widower with a dependent child, you were under 65, and your gross income was at least $10,150. 10. Qualifying widow or widower with a dependent child, you were 65 or over, and your gross income was at least $11,000. Unless you fall into one of the categories, there no need to worry! If you do fall into one of the categories, I recommend contacting the IRS at 800-829-1040. They are there to help you and can even make payment arrangements if necessary. If in fact you do not owe any past taxes, there are no penalties or fines. On the other hand, even if aren’t required to file, it might be worth your while. If you are owed a refund, the only way to get it is to file.

Tax day is gone

4/26/2007

Yes, for most taxpayers, tax filing day is behind us. We have filed our returns, we might even have a refund, and we have “promise” to do better next year. So what did you get for paying taxes? As Americans, we have the right to “fix” the tax code – if we are so inclined. Our taxes help pay for the government operations, they help pay for the services that we use every day. It funds our day-to-day operation of the Federal Government. I may seem like I am waving a US flag here, but without our system of taxation, we could not live in this great country – and have the right to object, protest, crab, and generally be unhappy about paying taxes. Tax Day is behind us – let’s get on with practicing good money management and appreciate that we live in the greatest county in the world. (And you help create it and support it.) Look for this Web site to be back next year with tips and suggestions on how to make taxes a little less painful and using your refund in the best way possible.

It is costly to access retirement money early

5/1/2007

It can be tempting to tap retirement savings—especially if you want to deal with debt—but most financial experts do not recommend accessing retirement money early. Remember, if you withdraw money from your 401(k), you will have to pay tax plus a 10% penalty on any money withdrawn. This total tax bill will probably come to about 37% of the money you withdraw. Even your credit card companies don’t charge an interest rate that high. As an example, if you withdraw $10,000, you will probably realize only $6,300. You will have to pay the other $3,700 in taxes. Additionally, if you cash in retirement money early, look at the stress you will go through when you are ready to retire but don't have the funds set aside to retire. Let me include an e-mail we received from a consumer who did draw out money from their retirement plan and the consequences they paid. “We made deals with credit card companies to pay off debts. We found ourselves about $50,000 in debt to credit cards. Not wanting to go bankrupt I took out a retirement plan and paid most of the companies 30 cents on the dollar. Now filling for taxes I am slapped not only for a 10% tax on early withdraw but also the credit card companies have issued 1099 forms for the debt forgiven. Now I owe the IRS over $9000 and the state over $2000. I am forced to file now for bankruptcy. I want to claim insolvent for my past debt but I can't find a solid answer from anyone. Can you help?”

Four Simple Pages

5/4/2007

Did the War Between the States cause the Internal Revenue Service? In a roundabout way, yes! President Lincoln and the Congress of 1862 created the Commissioner of the Internal Revenue (no ‘Service’ in the name then) and passed laws to collect taxes on income to pay for the war expenses. The first form was only four pages and covered such things a loss from a shipwreck. Ten short years later, the tax was repealed. It wasn’t until 1913 that Congress had enough votes to pass the 16th Amendment. The form was filled out at the tax office and signed by an officer of the Internal Revenue Bureau (IRB rather than the IRS). And those IRB officers were always men. How our tax lives have changed. For many our withholding statements come to us via email and we file electronically – never seeing a real person. Refunds of the past could take up to 10 weeks- today some refunds arrive in our accounts or are withdrawn with in 48 hours. Take some time to ask an older family member what it was like to file in the past. The tax system will be around for some time to come, just think how much has changed in 94 years.

Six Simple Ways to Boost Your Savings

5/10/2007

Personal saving as a percentage of disposable personal income has dipped into negative territory. In fact, we haven’t saved less since the Great Depression. Yet financial experts agree that an emergency savings account can make the difference between a minor financial setback and a major financial disaster. If you are having trouble establishing a nest-egg, don’t despair. Following are six simple ways to boost your savings: Pay yourself first. Savings is the cornerstone of financial security, so make it a priority. After all, a lack of savings can turn a minor financial setback into a major financial crisis. Make it automatic. Having money automatically deducted from your checking account into a savings account helps to ensure that you meet your savings’ goal. Even better, if your employer has the capability to automatically deposit your paycheck, have some of the funds directed into a savings account. Turn a hobby into income. Many people have untapped talents. Whether you enjoy photography, painting, knitting, or metal work, consider possible ways to earn money by doing what you love best. Babysitting and lawn work are also good ways to earn additional money. Downsize. Most people have garages, basements, and attics full of items they no longer want or need. Holding a garage sale or advertising some of your things online could result in a boost to your savings account. Use gifts wisely. If you receive unexpected funds, do not be tempted to spend them frivolously. Instead, put all money received from tax refunds, inheritances and gifts into an interest-bearing savings account. Pay down debt. If you are making monthly payments to your creditors, make a pledge to pay down your debt. Paying off debt would allow you to reallocate your debt payments to a savings account.

Struggling to save?

5/15/2007

If you are struggling to save, try starting small. The America Saves coalition offers the following examples of how making some small changes can save you an impressive $150 per month. Tip Monthly Saving Save $.50 in loose change $18 Cut soda consumption by one liter a week $ 6 Bring lunch to work $60 Send one free Ecard per month instead of buying a card $ 4 Buy grocery store brands $10 Use fewer phone features $10 Eliminate premium cable channels $20 Borrow, rather than buy, one book per month $15 Hand wash, rather than dry clean, one shirt per month $ 3 Comparison shop for gas (saving an estimated $.25/gallon) $4 In addition to making small changes, resolve to boost your savings by including all of your "windfall" money. This “free money” includes increased income from tax refunds, a pay increase, birthday gifts, insurance settlements, and inheritances.

Planning for periodics

5/31/2007

Some expenses come every year—whether you’re ready or not. For example, both holiday and tax debts are periodic, meaning they are not part of regular monthly expenditures. In that regard, they join the ranks of other expenses such as auto registrations and vacations. Often, we know when these events will occur, but still fail to plan for them. Unfortunately, when these expenses arise, many people rely upon credit to extend their monthly incomes; using credit this way is one sign of pending financial trouble. To avoid this scenario, follow these tips when planning for periodics: Determine what you spent last year for periodic expenses. Assume that you will spend at least this amount again this year. Don’t hide expenses! Just because you don’t list an expense doesn’t mean you won’t have to spend money on it. Don’t forget things like back-to-school expenses, auto repairs, and birthday gifts. Remember that some items, like auto insurance premiums, may occur more than once a year. Expect the unexpected. Cushioning your savings account for those “unplanned” expenses can make the difference between a minor financial setback and a major financial disaster. When you have a realistic idea of what you will need to spend on periodic expenses during the year, divide the total amount by 12 and save that amount each month. Designating a savings account for this purpose may help to organize this process. Check with your financial institution, you may even be able to have the amount automatically transferred. Finally, don’t forget to revisit your overall spending plan several times throughout the year to make sure you are on track. Common sense and flexibility are important keys to financial success.

America’s Cheapest Family Offers Valuable Advice

6/11/2007

I recently had the chance to talk with Steve & Annette Economides, whose family is known as "America's Cheapest." The Economides have been promoting a frugal, debt-free lifestyle for more than 20 years. The couple recently wrote the New York Times Bestseller, America's Cheapest Family Gets You Right On the Money. Here is an excerpt from our conversation: Kim: I understand that you were not always financially disciplined. How and why did you become America’s Cheapest Family? Steve: It started out of necessity when we were first married. I was earning $6.50 an hour as a graphic designer and Annette wanted to learn to manage our home. She made it her full time job and learned to shop smart which resulted in saving money on every kind of purchase. Friends started to ask us questions about how we managed our finances and we ended up coaching them to financial health. Eventually, we started writing our HomeEconomiser Newsletter. In 2004, Good Morning America flew us to New York and dubbed us America’s Cheapest Family. Kim: What are the benefits you experience from living frugally? Steve: What started out of necessity has now become a game and the prize is more than just money in the bank, it’s financial security and peace for our family. Kim: What is the biggest sacrifice you’ve made on your frugal journey? Steve: In the early years of our marriage the sacrifices were tough. Trying to be content with old orange and brown, plaid couches while our friends in the next apartment were having beautiful new furniture delivered made Annette cry. But we kept focused on our goals, kept using our budget system and saved a little money every month. A few years later, we bought new couches — but that was after we’d reached our goal of home ownership. From that point on, the sacrifices have been easier to face and the rewards have been phenomenal. To read more about how to live a frugal lifestyle, visit the Economides’ Web site. Among other useful information, the site includes a practical article about what to do with a windfall.

Every Day is Tax Day

11/28/2007

When most people think of tax time, they think of April 15. However, in reality, every day is tax day—April 15 is simply the day by which you must report your actions. While our Save or Spend tax refund story contest is over for 2007 (read the winning stories), it is smart to start thinking ahead to 2008. For starters, you can estimate your taxes now by visiting www.irs.gov. This time of year, tax payers should also: Research any tax law changes at www.irs.gov. Keep organized records. On average, one-third of the nation’s taxpayers itemize their deductions. Costs for things like medical expenses and child care may be deductible, so save those receipts. Make charitable donations. Most charitable gifts are tax-deductible if made to a qualified organization. But be sure your organization meets IRS guidelines as there may be different tax breaks when you donate certain types of assets to charity. Also be aware that under the new Pension Protection Act, donated items must be in good condition. Check the status of your tax-free flexible spending account. If you have money in your account, you must use it by the end of the year. Plan for retirement savings. Fortunately, you have until April to contribute to an Individual Retirement Plan (IRA). The maximum contribution for 2006 is $4,000. Buy or sell stocks. Investors should meet with a tax advisor to determine whether to sell or purchase stocks. Make any planned monetary gifts by the end of the year. For the 2006 tax year, taxpayers may make gifts of up to $12,000 per person and exclude the amount from the gift tax. While income tax preparation may not qualify as a recreational hobby, a little planning throughout the year can save you time and money.

Truthful Taxpayers?

1/8/2008

According to USA Today, only a fraction of people (12%) admit they have plans to splurge with their tax refunds. Even fewer folks (3%) that we surveyed last year admitted to splurging. But the USA Today reporter also discovered that the rest might be fibbing. As consumers receive their tax refunds, their impact on the U.S. economy begins. According to the Commerce Department, the 2006 tax-refund season helped retail sales to increase 12% to 20% compared with February. In fact, the $230 billion in tax refunds that hit mailboxes during March, April, and May makes such an impact that at least one tax professional has given it a name: the April problem. Come on, tell the truth. What are you going to do with your refund?

Tax rebate tips

1/29/2008

If you are like many Americans, you are already anxiously awaiting your tax rebate from the Government. Retailers, on the other hand, are getting ready to try to part you from that cash. Advertisements will likely try to encourage consumers to splurge with that “extra” money they will receive from Uncle Sam. Before you blow your tax rebate, consider the following ideas of how to spend your rebate wisely. Pay down debt. A $2,000 credit card debt with an 18 percent interest rate could take nearly 12 years to repay (4 percent minimum monthly payment). However, if you applied a $1,200 tax rebate, you could repay that same debt in half the time. Save for emergencies. Americans are currently saving less than one percent of their disposable income. That means that any unplanned expense could turn into a financial emergency. Placing your tax refund money in a savings account could be the difference between a financial difficulty and a financial disaster. Prepare for Christmas early. Too many people get in over their heads during the holidays and being in debt is no way to begin a new year. By using your rebate for holiday purchases, you can take advantage of lower prices and avoid post-holiday debt. Grow your money. The eighth wonder of the world is compound interest. Depositing $1,200 into a savings vehicle that earns 8 percent interest can really add up. After 5 years, your $1,200 could be worth $1,797. After 10 years, it will be worth $2,640. Invest in yourself. You are your most important and valuable asset. Use your rebate to further your education or enhance a skill.

April isn’t only for tricks and taxes

4/9/2008

The month of April is commonly associated with April Fools Day and the far less merry Tax Day. But did you know that April is also Financial Literacy Month? In honor of this, the creators of Save Or Spend have created FinancialLiteracyMonth.com. FinancialLiteracyMonth.com offers a fresh approach to money management with a simple 30 step path to financial wellness. In addition to the 30 steps, the Web site provides access to financial tools, savings tips, and the option to join others in taking the pledge to financial freedom! Visit FinancialLiteracyMonth.com today to take the pledge! While April is the official Financial Literacy Month, the 30 step path will help you create a successful strategy to better your overall financial situation no matter what day or month of the year you begin.

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9/11/2008

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