In other financial news, I’m still on track to have my car paid off by June but it’s debatable whether or not I’ll max out my IRA.   I was a bad girl and dropped some loot to go on a ski trip in April.  I also have spent entirely too much money at the hair salon but we won’t talk about that.  There are a couple of other financial decisions in the works but I’ll discuss those later.  We’re one month into the new year.  How are YOU faring with your financial goals?

photo credit: cacophony76

Okay, I’ll confess.  I’ve been a bad girl.  While I PREPARED our taxes back in February, I have yet to file them.  I’ve always wonddered about those last-minute filers and now I am one.  Rest assured,  I won’t be one of those people in line at the post office at 11:55pm though.  I will be e-filing when I get home from work.

Next, the confession of which I’m most ashamed…I spent way more money than I should have for the past few months which means I didn’t max out my IRA as intended.  I made the last deposit this morning for a total of $3785, which was short of my $5000 goal.  Mr. Savvy doesn’t like taking money out of our e-fund and I agree.  As far as we’re concerned, that money doesn’t exist.  So not being able to make the full contribution is paying penance for my bad behavior.  I promise to do better for this year.

What are your money confessions?

Tax season can be somewhat busy for me.  In addition, I recently returned from a long weekend of skiing.  Therefore, I haven’t been doing much with  my personal finances.  I have noticed that mortgage rates are still decreasing though.  A refi is so tempting.

That said, I promise to get back on the bandwagon soon.  If you haven’t filed your taxes yet, you only have eight more days so hop to it!

photo credit: AMagill

The American Recovery and Reinvestment Act of 2009—the new economic stimulus law signed on Feb.17—includes a key provision that impacts tax withholding amounts in employee paychecks. This provision, the “Making Work Pay” tax credit, requires employers to implement the new tax withholding changes by April 1.  So look for a few extra dollars in your next paycheck.  However, I challenge you all NOT to spend it but to SAVE it.  If your check increases by $68/month, setup an automatic withdrawal of $65/month to your e-fund or other savings account.  If your savings account is flush, consider increasing your 401k or IRA contributions.  You won’t miss what you never had.

Here are a few key points regarding this credit -

• New withholding tables may reduce the amount of income tax withheld from your wages. Many higher-income taxpayers will see little or no change in their take-home pay. That’s because the “Making Work Pay” credit is phased out for a married couple filing a joint return whose modified adjusted gross income (AGI) is between $150,000 and $190,000 and other taxpayers whose modified AGI is between $75,000 and $95,000.
• The new tables, prescribed by the Department of the Treasury, reflect the Making Work Pay credit and other changes resulting from the American Recovery and Reinvestment Act of 2009.
• You do not have to submit a Form W-4, Employee’s Withholding Allowance Certificate, to get the automatic withholding change. However, if you do not want to have your withholding reduced (because, for example, you have more than one job or you are married and your combined income places you in a higher tax bracket), you may want to file a new Form W-4. You may claim fewer withholding allowances on line 5 or request additional amounts to be withheld on line 6.
• Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment.

1. You do not have to itemize to take the Tuition and Fees deduction. You claim a tuition and fees deduction by completing Form 8917 and submitting it with your Form 1040 or Form 1040A.
2. You may be able to claim qualified tuition and fees expenses as either an adjustment to income, a Hope or Lifetime Learning credit, or – if applicable – as a business expense.
3. You cannot take the tuition and fees deduction on your income tax return if your filing status is married filing separately.
4. You cannot take the deduction if you are claimed, or can be claimed, as a dependent on someone else’s return.
5. The deduction is reduced or eliminated if your modified adjusted gross income exceeds certain limits, based on your filing status.
6. You cannot claim the tuition and fees deduction if you or anyone else claims the Hope or Lifetime Learning credit for the same student in the same year.
7. If the educational expenses are also allowable as a business expense, the tuition and fees deduction may be claimed in conjunction with a business expense deduction, but the same expenses cannot be deducted twice.
8. You cannot claim a deduction or credit based on expenses paid with tax-free scholarship, fellowship, grant, or education savings account funds such as a Coverdell education savings account, tax-free savings bond interest or employer-provided education assistance.
9. The same rule applies to expenses you pay with a tax-exempt distribution from a qualified tuition plan, except that you can deduct qualified expenses you pay only with that part of the distribution that is a return of your contribution to the plan.
10. IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication is available at IRS.gov

photo credit: TheeErin

No, I’m not talking about my weekend.  On Saturday, March 21, 2009, approximately 250 IRS Taxpayer Assistance Centers and hundreds of community free tax help sites nationwide will open their doors to assist people. People who earn $42,000 or less are eligible for free tax return preparation at either the IRS TACs or the community partner sites.

People who want their tax returns prepared should bring the following information:

• Valid driver’s license or photo identification (self and spouse, if applicable)
• Social Security cards for all persons listed on the return
• Dates of birth for all persons listed on the return
• All income statements: Forms W-2, 1099, Social Security, unemployment, or other benefits statements, self-employment records and any documents showing taxes withheld
• Dependent child care information: payee’s name, address and Social Security Number or Taxpayer Identification Number.
• Proof of account at financial institution for direct debit or deposit (i.e. cancelled/voided check or bank statement)
• Prior year tax return (if available)
• Any other pertinent documents or papers

For more information, go to

 http://www.irs.gov/individuals/article/0,,id=204165,00.html

Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families.  Income and family size determine the amount of the credit.  For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

5. Health Coverage Tax Credit Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

There are other credits available to eligible taxpayers. Since many qualifications and limitations apply to the various tax credits, taxpayers should carefully check their tax form instructions, the listed publications, and additional information that is available on the IRS Web site at IRS.gov. IRS forms and publications are also available by calling 800-TAX-FORM (800-829-3676).

Trained community volunteers can help eligible taxpayers with all special credits, such as the Child Tax Credit or the Credit for the Elderly. Also, many sites have language specialists to assist people with limited English skills.

Nearly 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations performing vital tax preparation services for low-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance Program offers free tax help to people who earn less than $42,000. The Tax Counseling for the Elderly Program offers free tax help to taxpayers who are 60 and older.

As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at nearly 7,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-moderate income with special attention to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 (888-AARPNOW) or visit AARP’s internet site.

The military also partners with the IRS to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. The AFTC consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. Volunteers are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the new EITC guidelines.

Locations and hours of operation are often available through city information hotlines and local community organizations. Local volunteer tax preparation site information is also available by calling the IRS toll-free number 1-800-906-9887.

Links:

• Volunteer assistance program
• Tax-Aide Program

photo credit: mjmalone

New for 2008, there is a Recovery Rebate Credit.  Most taxpayers who received the economic stimulus payment last year will not be able to claim the Recovery Rebate Credit on their 2008 federal income tax returns. A small number of taxpayers who did not receive the full economic stimulus payment last year may be eligible to claim the Recovery Rebate Credit on their 2008 federal income tax return.  Here are four important tips from the IRS in regard to this credit.

• You do not have to pay back your Stimulus Payment and the payment is not taxable.

• Less than an estimated 3 percent of taxpayers are eligible. The vast majority of taxpayers are not eligible to receive the Recovery Rebate Credit.

• Did you have a major life change? If so, you may be eligible to claim the Recovery Rebate Credit. Some of the major factors that could qualify you for the Recovery Rebate Credit include:

- Your financial situation changed dramatically from 2007 to 2008.

- You did not file a 2007 tax return.

- Your family gained an additional qualifying child in 2008.

- You were claimed as a dependent on someone else’s return in 2007, but cannot be claimed  in 2008.

• Any Recovery Rebate Credit amount will be included in your refund. The IRS will figure the credit for you and include it in your refund or put it toward any taxes owed.

For more information, go to the IRS Recovery Rebate Information Center.