Counting My Pennies » taxes

The tax man is here!

Megan — Thu, 15 Apr 2010 14:11:15 +0000

I am amazed at how many of my friends are still working on their taxes. Guys, don’t you realize what kind of lines you will have to wait in to get things mailed? I’m especially amazed at the people who are hoping to get everything done over their lunch hour today. Seems like a bad idea to wait that long.

I know a number of people who mailed them off yesterday. After all, if you owe money, why pay it any earlier than you have to? Of course, in my opinion, I just want my taxes done. Maybe I owe money, maybe I’m getting it back, but I just like having them done and not having to worry about forgetting or losing the paperwork or some other disaster.

So what kind of a tax person are you? Did you do your taxes the moment you got your last form? Did you put it off as long as possible? Are you planning to be in line at the post office after work tonight? And did you make your decision on when to file based on whether you owed money or would be getting money back?

Almost tax time!

Megan — Tue, 06 Apr 2010 16:19:54 +0000

Anyone dreading April 15? Not me! I have a dinner date with an old friend that night. But maybe more importantly, I finished my taxes weeks ago.

I am in training this week, hence the lack of blog posts. But I did have an interesting financial conversation yesterday. A guy in my group is foreign and here on a work visa. He has been working for this American company for a few years, but rather than drawing from his salary, has been letting it accumulate tax free in a bank account here. Now, when he moved, he had to put it into some fund to keep the tax free status, but now he’s worried about paying taxes in general. He’s used to a system where the money you owe in tax is just taken. The end. No later payments, no tax refunds. It was interesting to learn a little bit about another system and to hear just how crazy our system sounds to a foreigner.

One good thing came out of it. He just got here in February and was told by a coworker that when he files taxes, he will owe from the date of his move. True, but he thought that meant that when he files now, he will owe for that period, not realizing that we’re filing for 2009. Of course, we encouraged him to call his company’s relocation division and maybe the IRS helpline for clarifications about other reasons he may need to file.

Just goes to show how ridiculously confusing our system is, even on the simplest level.

The tax man paid me!

Megan — Mon, 15 Feb 2010 16:48:26 +0000

So I finally got back to work on Friday. It was an insane commute, and of course, maybe 15% of my coworkers were there. So I chatted a lot, cleared out e-mail, did a few tasks, and then sat around. When you go on vacation, it’s normal to come back to a lot of work, but so many of my projects are collaborative, which means that since no one was at work (our office doesn’t really allow telework – who wants to bet that changes!) there wasn’t a whole lot to do.

Today’s a holiday. And it’s supposed to snow again. I’m hoping that it’s not too bad.

Over the weekend, I discovered that my federal tax return was deposited. Fast! My state return arrived last week, which means that my dealings with the tax man are done for the year! And it’s not even March!

I’ve been reading blog posts about what people are doing with their tax returns, and I’ve decided I must be boring. I’m having a little bit of fun with it, I guess! Just delayed fun. I put most of it into savings, and a chunk of it went into my vacation fund. I’ve got two trips planned for the year – a wedding in May and a half-marathon in September. Unfortunately, the flights for both are going to be fairly expensive.

I also decided to put some into my running fund. In cleaning out my drawers and closets, I’m realizing that a lot of my running gear is more worn out than I thought. It still has some life left in it, but as I have to start replacing things, it will be nice to have the money set aside for those purposes.

As I have mentioned, I decided not to mess with my withholding to try to get less money back. I think this year was a bit of a fluke with the markets not being so great. I don’t have a whole lot of money invested, but those dividends add up come tax time. I’m hoping that 2010 is a much better year - which would lead to owing more taxes.

Plus it does feel good to get money back as opposed to owing a chunk. It’s not ideal, and if I could figure out how to break even, I would. Sadly, I can’t see into the future. I will work on that skill for next year.

Taxes? Done!

Megan — Mon, 01 Feb 2010 11:00:31 +0000

Thanks to TurboTax, I finished and submitted my tax returns this weekend.

Final result?

Well, on the up side, I didn’t owe any money, a significant change from last year.

But in trying to balance that, I ended up paying too much in taxes, so I’m getting back around $2000. So I need to make some adjustments.

The state tax will be easy to adjust. After I owed so much last year, rather than adjust my allowances, I just had an additional $30 withheld. $30 was an estimate and it turned out to be too much. So I just need to reduce that amount a little bit. I can do that very easily online, so it’s not a big deal at all.

Federal tax will be a little bit more confusing. I did find a really helpful site though. TurboTax has a chart that estimates approximately how much each allowance is worth per year. So as a single filer, if I make $50,000 a year, each allowance is worth about $913. Since my tax refund was more than $913, I should be able to take one more allowance, get an extra $76 a month (according to the chart), and still be fine for my 2010 taxes.

The question is whether or not I actually want to do that. I always say that I want to break even. But I much prefer getting money back to owing money. The smart thing to do would be to take that extra allowance and put that $76/month into a separate savings account and let it grow. Even if I do end up paying money back to the government, once I’ve finished my taxes next year, I can take all that money and treat it like my own personal tax refund.

So I’m going to sit down and think about what my financial situation is going to be over the next year and then make a decision. I am pretty excited to see this year’s tax refund though – I think it’s all going to go into my vacation fund.

Don’t forget, today’s the last day to enter the contest! So far, the odds are pretty good!

Tax Time, Baby!

Megan — Fri, 29 Jan 2010 15:53:35 +0000

What are you doing this weekend?

I’m doing my taxes! Yay!

(No, that wasn’t sarcasm.)

My last tax form is now available online, so this weekend, I will be doing my taxes and finding out just how well I estimated. I’m really hoping I estimated poorly and I get a chunk of money back, but I’m just not sure what’s going to happen. Mid-year, I sold off some mutual funds that I owned for a few years, and then repurchased them a month-ish later, per the recommendation of a broker. As he explained it, that meant I could take the capital loss on my taxes. It makes sense in theory, but we’ll see how it works out in practice. It would be nice, that’s for sure!

If I do get money back, it’s going straight into the vacation fund. A friend is getting married this summer in a place that will cost me around $500 to get to – and it’s not even a beautiful island paradise. I don’t want to miss her wedding, so I better start planning for that expense now. I’m also running the Disneyland Half-Marathon in September – more spending. But that should be a really fun trip, so it’s money well spent.

Hoping for a tax refund? What are your plans for that money?

Tax time!

Megan — Tue, 19 Jan 2010 11:00:10 +0000

Am I the only one excited that it’s time to do my taxes?

Probably not, but I’m sure I’m in the minority. I love tax time. It’s a bit of a game to me – to see if I can get the numbers just right so that I have a small refund. No tax free loans to the government for me! I mean, if I suddenly got a huge refund, I wouldn’t be upset, though I would change around my withholding for 2010. But in an ideal world, I will come very close to zero.

If I’m honest with myself, I’m probably going to owe money. One of the downsides to being a saver with no mortgage (yet). That interest income starts to hurt, even though it’s not all that much. I do a good job of tracking everything and taking every single deduction I can, but ultimately, I end up owing money. It’s just a question of how much.

I’m pretty good on the federal tax side. It’s the state taxes that tend to throw me off. So we’ll see how things go! I use TurboTax and my copy arrives tomorrow. Of course, I don’t have any of my paperwork yet, so I can’t really get started, but it’s still exciting.

How do you feel about tax time? Do you dread it? Put it off til the last minute? Do you use your tax refund as a savings method? I know people who purposefully have a chunk of money withheld because if they tried to just save it, they would end up spending it. Thus, even with the interest-free loan to the government, they have more money than they would otherwise. If that’s what works for you, then it makes sense to me. Just make sure that if you’re supposed to pay your taxes, you’re paying them. Breaking the law is never good.

How much money do I really bring in?

Megan — Mon, 11 May 2009 10:00:10 +0000

As much as I love spreadsheets and tracking my finances, I realized recently that one thing I don’t know is how much money I bring in every month.

Sure, I know what my paycheck is and if I have any alternative income that month (blog checks, Ebates cash back, etc), that gets tracked in detail, but I don’t ever think about my gross salary or interest on investments and savings accounts. I think this is because I try to not think about my savings accounts too much. I put away a set amount of money each month and let it grow. Sure, when I update my net worth spreadsheet, I can see these increases, but I’ve never sat down and figured it all out.

I started thinking about it while reading about Roth IRAs and the difference between AGI and MAGI, and realized that I don’t have any sort of idea what my AGI is. It’s my gross salary, plus all those extras, minus a few things. I should at least have some clue of these numbers, right?

So I sat down and put together a spreadsheet. It’s very simple and tracks my gross salary, what I contribute to my pre-tax retirement account, health insurance payment, how much tax I’m paying, and how much I’m earning through blogging and investments (including interest on savings).

I was pleasantly surprised by many of the numbers, and distraught by others (such as the amount of tax I pay). I think tracking this will be helpful as I start to look at my 2009 taxes, plus I think it’s just good to be aware of what money is coming in and where it’s coming from. Just because my investments are “set it and forget it” doesn’t mean I shouldn’t still be aware of them, especially in non-retirement accounts where I’m responsible for paying taxes on any gains!

I’m sure some of you hate spreadsheets and are cringing at this idea. But it only took me a few minutes to track everything from the beginning of the year and I am very pleased with the results.

Do you know exactly how much money you bring in every month, or do you focus more on your paycheck and your spending money?

Victory is Mine!

Megan — Mon, 16 Feb 2009 11:00:15 +0000

Well, sort of.

My taxes are done! Unfortunately, no breaking even for me. No big refund either. I owed a chunk of money to the feds, as I mentioned before. W-4 problem has been fixed, however, so I’m crossing my fingers that next year is significantly better.

I did discover another perk to TurboTax, however. After telling me that hey, I should check out my W-4, TurboTax also calculated estimated tax payments for my 2009 taxes, should I choose to not change my W-4 (or not be able to do so). I was a little scared when I saw those payment receipts print out though. At first, I was worried that I had to make estimated tax payments because I had screwed up this year and owed so much money. TurboTax doesn’t bother to explain that little detail.

A little bit of research and I had it all figured out, though. The internet knows everything. No estimated tax payments for me. Somehow, it’s less painful to never see that money, rather than have to hand it off to the government every few months. I know, I’m weird.

Whoops!

Megan — Fri, 06 Feb 2009 11:00:15 +0000

I’ve been working on my taxes for a few weeks on and off as paperwork comes in. I use TurboTax, so it’s easy to enter some numbers, close the program, and then enter more numbers as I get more information. One great feature of TurboTax is that as you enter data, it updates how much you’re going to get back (or owe) as you enter numbers.

I almost always owe money, so I’m never surprised to see that number in the red, but this year, it seemed awfully high. I got my last numbers earlier this week, and was shocked when I entered them. I owe a solid chunk of money to the federal government (but my state tax bill was where I expected it to be). I couldn’t figure out what was going on… then I checked out my tax paperwork. For whatever reason, my number of allowances was significantly higher than it should have been. I’m not sure when or how that happened, but I have a feeling that the number was calculated when I started the job in September of 2007, should have been changed for 2008, and I completely forgot about changing it.

Conveniently, that’s something I can do online, so it’s done and should take effect sometime around mid-month. I have to admit, I’m very apprehensive about this. I’m scared to see what my new paycheck is going to look like! Of course, I would rather not have a huge tax bill to pay at the end of the year, so this is a good step, but I still feel like I’m taking a financial hit because I will have less money to budget every month.

Of course, I wasn’t budgeting for such a high tax bill, so my pseudo-emergency fund will be taking a hit. But that’s what it’s there for.

Here’s to hoping next year’s tax season is an improvement!

You got back how much?

Megan — Tue, 04 Mar 2008 12:46:00 +0000

In today’s Express, there is a little blurb that states that 47 million tax returns have been filed so far this year, 38 million of them filed electronically. The shocking part of the blurb? The average refund was $2708! That is an amazing amount of money to be overpaying in taxes. Of course, I’m sure the refunds are in large part due to various deductions, but I was delighted to find out that I was getting nearly $500 back (to counter the nearly $800 I paid to two states).

I know that a lot of people like the idea of a refund, but personally, I’d rather have to pay the government at tax time. Ideally, I’d break even (which I feel I got very close to this year). But I would prefer to have the money when I earned it to do with it what I want, rather than get it back later and have given the government that large of an interest free loan.

Just my opinion though, and I know there are strong proponents of large refunds. I bet it is fun to find that amount direct deposited in your account one morning.