Deal Alert: Free Diet Dr. Pepper

OK, so soda's bad for you, I know. And there's those claims that artificial sweetener in the diet stuff possibly causes cancer.... Well, we all do things that are bad for us. For those of you who choose to do so, here's a link for a coupon for a free 20oz bottle and/or a free 2 liter bottle of Diet Dr. Pepper (my personal favorite soda-vice).

Deal Alert: CVS

Save $15 off $60 for any non-prescription online order (free shipping too!) http://tinyurl.com/bqw83s

Also, automatic 30% off all CVS brand products (online).

Review: Mint.com, free online personal finance service

If you haven’t heard of it yet, Mint.com is a free, online personal finance service (and according to their "About" page, “#1 in America”) that organizes all your bank accounts, loans, and investments—including retirement plans, brokerage accounts, vehicles, and real estate—in a place where you can view them all together. You can’t actually conduct transactions through Mint, but it allows you to use one login to view all the transactions, balances, etc. of all your accounts and to categorize your transactions for budgeting purposes. It can make organizing your tax deductions a hell of a lot easier, too, since you can tag your transactions as tax-related so that when you’re ready to file, you can easily find and list them all. And did I mention it’s totally free (and without any annoying ads or pop-ups)? I’ve been using it since November, and for the most part, I’m a fan.

Services
The most valuable service Mint offers is its highly visual budgeting features. It’s quick and easy to set up your own categories and specify spending limits for each category. Once you’ve done that (providing you do a good job of categorizing your transactions), Mint creates a bar graph of your spending for each month and even a date marker so you can see how much of your budget you’ve spent proportional to the time length of the budget. I find this very helpful in preventing the easy trap of overspending early in the month that leaves you without enough budget to get through the rest of the month. If you want, you can also have Mint send you alerts when, for example, you’ve gone over budget, your credit card bill is due, or one of your accounts has a low balance.

There’s also a Flash-powered pie chart you can view under the “Trends” tab that shows how much you’ve spent in each category (even in ones you didn’t list in your budget) relative to the total amount you’ve spent. This is a helpful feature, but it can be misleading because it doesn’t account for returns, refunds, or other income that specifically offsets your spending in a certain area. I’ll talk more about this towards the end of the article.

How can it be free?
Mint makes its money from referrals to banks, investments brokers, and credit card companies through the “Your Ways to Save” bar, which is unobtrusively placed at the bottom of the overview screen. If you’re interested, click on it and see what kind of deals Mint is advocating; they only suggest accounts that are “better” than your current accounts of that type in interest rate, cash rewards, etc. Of course, if you’ve already done your homework and gotten accounts with the best deals for you¹, Mint’s sponsored suggestions might not offer much improvement. Personally, I check the suggestions every once in a while, just in case they’ve found something I haven’t, but for the most part I ignore them.

Room for Improvement
I only have a few complaints about Mint’s services. First and most importantly, there are a few banks/investment companies they don’t connect with. They’re constantly adding connectivity, so hopefully this won’t be a problem for much longer, but at the moment it’s quite frustrating. I have my savings account with Dollar Savings Direct, and while Mint has recently added a link and form with which to add accounts from that bank, the link doesn’t work. (The error seems to have something to do with the way the Dollar Savings login page works, which is fairly complicated.) Not being able to add one of your accounts to Mint really screws up its functionality because you’re missing a big part of the equation.

There are two other malfunctions on Mint that are troubling as well. One is that, in my experience at least, sometimes the category labels you attach to individual transactions revert to default. I don’t know why this happens, and it doesn’t happen often, but when it does it’s definitely aggravating. The second is that there seems to be a fairly sizable delay in the display of transactions; transactions will show up on the online banking pages of my account institutions as much as two days before they show up on my Mint page.

This last complaint is more of a suggestion for added functionality than a gripe about existing malfunctions. As I mentioned earlier, several factors can throw off the pie chart, including returns and refunds. This problem could be solved easily by offering an option to factor in categorized “income” (or have it done automatically). It would also be nice to have an option to view a pie chart of average monthly spending by category and to be able to view or exclude selected categories from the mix.



[1] See the specific suggestions and how-to’s for each type of account on TiredofBeingPoor.net

Another Tip for Tax Season: EZ ≠ cool

For a few years at the beginning of tax season the IRS would mail me the federal 1040EZ form, and for lack of a known alternative I’d fill it out and send it back. And chances are if you’re relatively young and don’t make much money, then the IRS mails you a federal 1040EZ form to file your taxes as well.

The form’s titled EZ because using it to file is just that, easy--the 2008 form is barely half a page worth of accounting. Does the IRS think the cool abbreviation is right up young people’s alley? Who knows? But for young taxpayers--especially college students--who’d rather get tax season over with, with minimal thought, the quicker the better, the 1040EZ might be a little too easy.

Because if you’re using the EZ form by default, you might be overlooking some major tax adjustments, adjustments which could lower your gross income and possibly get you some decent cash.

Take for instance the Student Loan Interest Deduction. Every penny you paid in interest for a year on your student loans can be subtracted from your gross income. But you won’t find that tidbit on the 1040EZ form.

Take, for another example, the Tuition and Fees Adjustment. Every penny you spent on college tuition and college fees in one year can also be subtracted from your gross income, even if that tuition was covered by loans. Again, you’d be none the wiser if you were adhering to the 1040EZ form.¹

Try instead form 1040 or the 1040A. The 1040 is for you if you plan to “itemize your deductions,” as the IRS calls it. Use the 1040 only if your qualified expenses add up to more than the IRS’s standard deduction.² The 1040A, on the other hand, is for you if you don’t want to itemize deductions, i.e., if the IRS’s standard deduction is more money than all of your qualified expenses. And although the Student Loan Interest Deduction and the Tuition and Fees Adjustment I mentioned are certainly deductions from your income, the IRS lets you use them while still claiming the standard deduction, and you can do so with the 1040A. In other words, if you pay tuition or student loan fees, use the 1040A.

So if not paying more in taxes than you owe is worth it to you, and if the possibility of a refund is worth it to you, try researching the different tax forms that are out there. You aren’t required to use the form the IRS sends you, if the IRS sends you anything at all. Most forms can be found at the public library, and all can be found and downloaded online. Compare the 1040EZ to the 1040A and the 1040³. You might be surprised at what you find.


[1] Also see “Hope and Lifetime Learning Credits” in our January 30, 2009 post “Tax Hacks, Part 1: Give yourself some credit,” for more information on tax breaks for educational expenses.

[2] See the 2008 rates of standard deductions.

[3] For an overview of and instructions for all 1040 forms, see the IRS’s “1040 Central.”

Related articles by Zemanta

• What are Itemized Deductions? (personal-tax-planning.suite101.com)
• Income Taxes: What You Need to Know (nytimes.com)

Take Care of Your Sweetheart

Image by Keith Barlow via Flickr

What to say about Valentine's Day? It feels like it's impossible to get it right. Either the gift you get is too much, or too little, too serious, or too playful. The problem is that you're not just giving a gift to your significant other; in order to be successful you have to give them what they would give themselves.

Disclaimer: TAiMH is not a dating website is not liable for any slapped faces or botched marriage proposals.

So, how to do Valentine's Day on a budget? First of all if you're going to splurge, this is not a bad time to do it. I know that's not what you expect to see here, but let's be honest, everyone wants to be treated well. That being said, some of the nicest, most heartfelt moments are the ones that don't cost a penny.

Out on the Town

This year Valentine's Day is on a Saturday, which means that you have the entire day at your disposal. Go out to lunch instead of dinner, go for a long walk in the afternoon, or cuddle up on the couch with some cheesy movies and a bottle of wine.

If the two of you don't get out much, going to a show (concert, play, dance performance, etc.) can be a lot of fun, but a lot of events can be really expensive so think smaller. Community plays, or local bands, are a great, affordable way to have fun and support your community. Or—if you want to send the signal that you'd like to see more of someone, signing up for dance lessons together can be a lot of fun and the cost is spread out over time.

Heart-Shaped Box

If your lover likes sweets make them something yourself. Chocolate dipped strawberries are incredibly easy to make at home, all you need are strawberries, chocolate chips, and a microwave. Even better, make them together; you might need someone to lick that extra chocolate off your fingers.

Roses are Red, Violets are Blue...

How well tuned is your partner's bullshit meter? If they're not likely to laugh at you and you've got a passing understanding of the English language, writing them a poem, or if you're musical, a song can be a sweet romantic gesture.

Diamonds (even old ones) are a Girl's Best Friend

If you want to get out the big guns, there are two kinds of gifts that will make a big impression, both of which are as close to free as great gifts come. First, things you owned as a child. Guys, do you have a childhood teddy bear hanging out in an attic somewhere? That's all I have to say about that. Second, and this can get dicey depending on how crazy your family is, heirlooms. A pair of your grandfather's cufflinks or a grandmother's broach can have much more meaning and sentimentality than something shiny and new. Just be sure to wrap it up in a nice box, and get them professionally cleaned if need be. Almost any jewelry story will clean something for you, some have a nominal fee, but a lot of the time it's free. Don't limit yourself to jewelry—
depending on your significant other, a well-loved cardigan or any cherished item can be a hit.

Remember to have fun and most importantly enjoy whomever you're with, partner, lover, or friend. Happy Valentine's Day!

Blogger Love News

Jane's post "Going Out Without Going Broke" scored a place on a recent roundup over at the Pimp Your Finances blog.

Tax Hacks, Part 3: Self-Employment Taxes

If you are self-employed, whether you have another job or not, you have to pay Self-Employment (SE) taxes by filing Schedule SE with your 1040. SE taxes include social security and Medicare tax, just like those paid by everyone else, but you're responsible for "withholding" them yourself. (For tax purposes, you are only self-employed if your net earnings (profit) from your self-employment are $400 or more per year.)

For the purposes of this post, we're going to focus on sole proprietorships, businesses owned and run by only one person. As a sole proprietor, you can choose to figure and set aside taxes for every "paycheck" or payment you receive for your services. These are your estimated taxes, and they must be paid quarterly. Yes, that's right. If you wait until the end of the year without making quarterly IRS payments, you could get slapped with a sizable tax penalty. If withholding tax from each "paycheck" isn't practical (e.g. you receive many small payments rather than lump sums), you can simply calculate your taxes on your quarterly earnings.

Sole proprietors also need to file Schedule C, Profit or Loss from Business, which is part of Form 1040. Alternatively, you can file Schedule C-EZ if all the following are true:

• your expenses are not greater than $5,000
• you have no employees
• you have no inventory
• you are not using depreciation or deducting the cost of your home

In order to be able to file taxes properly (and get the most $ back), a sole proprietor needs to keep immaculate records and hold onto them for at least four years. (The IRS has this thing called burden of proof. . . .)

New Ventures
If you're newly self-sufficient, i.e. have been self-employed for less than a whole tax year, you'll be operating on a short tax year the first time you file. You can find more info on short period tax returns and other topics relevant to new business owners on the IRS's page on Starting a Business.


More Resources:
Publications and Forms for the Self-Employed
Self-Employed Individuals Tax Center
Business or Hobby? Answer Has Implications for Deductions

Related articles by Zemanta

• Paying for the Self Employment Tax (self-employed-cash-flow-management.suite101.com)
• LLCs, Corporations, Partnerships, Sole Proprietorships and Taxes (cpajohn.com)
• Business License and Permits (smallhomebusiness.suite101.com)

This Just In...California to Pay Debts with Monopoly Money

Ever wish you could pay all of your bills with IOUs? Apparently if you’re the State of California you can do just that. California Controller John Chiang announced last Friday that the state will be suspending payments due to a lack of funds and that if no money is available by March or April California will be sending IOUs in lieu of tax refunds, welfare checks, disability checks, aid for the needy and disabled, and student grants, among other payments.

So, if you live in California that sucks. If you live in one of the other 49, it might be a good idea to file your taxes sooner rather than later.

Source: LA Times http://www.latimes.com/news/local/la-me-budget17-2009jan17,0,4472460.story

Tax Hacks, Part 2: More Credits

Qualified Retirement Savings Contribution Credit aka "Saver's Credit" (nonrefundable, a percentage of up to $2,000 in eligible contributions). To qualify for this one, you have to have been at least 18 years old on 12/31/08 and have an AGI (adjusted gross income) of less than $26,500 (again, assuming you're single). You also cannot have been a full-time student for five or more months of 2008.

Qualified contributions include those to an IRA (traditional or Roth), a 401(k) or 403(b), a 501(c)(18)(D), or a governmental 457, SEP, or SIMPLE. You may not include in this amount any "rollover" contributions.

The amount of your credit is computed by multiplying your total contributions by the percentage corresponding to your AGI. You can find this percentage on Form 8880, which you will need to fill out in order to claim this credit.


Limitations on Nonrefundable Personal Credits
All three of the credits we've covered thus far are types of nonrefundable "personal credits." For 2008, the limit of nonrefundable personal credits is your regular tax liability plus your AMT. This is good. It means that your nonrefundable personal credits can offset both your regular tax liability and your AMT (alternative minimum tax).


Earned Income Credit (refundable, max: $438)
Assuming you are single and have no children, the qualifications necessary to claim this credit are as follows:

1. You must be at least 25 years old.
2. Your total investment income must be less than $2,950.
3. Your AGI must be less than $12,880.

The EIC depends entirely on income. You can figure your EIC using the worksheet in the instructions for Forms 1040 or 1040A, whichever you are filing.

For more information about the EIC, see IRS publication 596.



Alternative Minimum Tax
What is this minimum tax business all about? Basically, the AMT laws exist so that high-income individuals don't get away with not paying their share of taxes even if they find a way to adjust their tax liability to next to nothing. Fortunately, AMT doesn't affect most of us because it only applies if your AMTI (see below) is above $42,500.

After you calculate your regular income tax liability, you should then calculate your tax liability under the AMT system; this amount is called your Tentative Minimum Tax (TMT). Your TMT is determined by a series of calculations (additions/subtractions of certain allowable exclusions, credits, etc.) upon your taxable income to find your Alternative Minimum Taxable Income (AMTI).

If you're concerned you may be subject to the AMT, the IRS has a handy AMT calculator that does all the calculations for you. (You need to have already filled out your 1040.)

Related articles by Zemanta

• 7 Ways Hard Times Can Cut Your Taxes (usnews.com)
• More stimulus money by June... maybe (myventurepad.com)
• A kinder, gentler IRS? (money.cnn.com)
• Your tax savings - stimulus bill (money.cnn.com)

Tax Hacks, Part 1: Give yourself some credit

Before we get into the glory of tax credits, let's cover some basics.

Tax brackets are based on your taxable income only (we'll get to figuring exactly what that is later) and determine how much tax you should pay for that year (called tax liability). For obvious reasons, I'm only going to cover the bottom three brackets here. Also, unless otherwise stated, calculations and figures are for the independent, single, and non self-employed, though I will talk about self-employment tax in a later post.

For a taxable income of $7,825 or less the tax is 10%. So if your taxable income is $5,000, your tax liability is $500. This doesn't mean, of course, that you suddenly owe the federal government 500 bucks. All of these taxes (and likely more) have probably already been withheld from your paychecks. The reason we get those wonderful tax return checks is that we've overpaid, i.e. we've withheld more than our tax liability.

Moving on... for taxable incomes of $7,826-$31,850, the tax is $782.50 + 15% of the excess after $7,825. In other words, 15% of however much you make over the preceding tax bracket plus the assigned base amount. It works this same way going all the way up the tax ladder. For taxable incomes $31,851-$77,100 the tax is $4386.25 + 25% of the excess over $31,850. Say your taxable income from last year was $30,000. You're in what's called the 15% bracket, and your tax is $782.50 + .15 x (30,000-7,825). Remember your order of operations here, kids. That means the tax on your earned income is $4,108.75.

The point here is to reduce your taxable income so that you reduce your income tax. We do that with deductions, exemptions, and credits. And that's where today's hacks come in.

The standard deduction for singles is $5,350; everybody gets that. But there are additional deductions and credits galore. Seriously, there are whole books that do nothing but list possible deductions. I'm not going to go into itemizing in this post, perhaps in a later one; I'm just going to mention a few credits that are particular to people under 30 years old (or thereabouts).

But first, let's talk about the difference between deductions and credits. Deductions reduce your taxable income, but credits reduce your actual tax. For example, say you have $1,000 that you can deduct. Sticking with our original example, the tax you would save would be $150 ($1,000 x 15%) because you'd be reducing your taxable income by $1,000, thereby saving the 15% you would have been charged on it. However, say you have a $1,000 expenditure that qualifies for a 50% credit. You would directly save $500 ($1,000 x 50%). It's the percentage of the credit that's important. If the $1,000 was only eligible for a 10% credit, the deduction would save you more.

Now, credit can be either refundable or non-refundable, which refers to the ability of the credit to count past your tax liability--in other words, if the amount of the credit exceeded the amount of your tax liability, for you to actually get a check from Uncle Sam for the excess credit. For example, if your tax liability is $3,000, but you get a refundable credit for $3,500, you'd get $500 back from the fed. Sadly, the vast majority of credits are non-refundable.

1. Hope Credit (nonrefundable, up to $1,650 of tuition and mandatory fees actually paid in 2008, e.g. not including tuition covered by scholarship money, etc.). This one only applies to those of you who are freshman, sophomores, or juniors now and were enrolled at least half-time in 2008. You can only claim the Hope Credit for your first two years of undergrad.
   
   
2. Lifetime Learning Credit (nonrefundable, up to $2,000). Cannot be claimed in the same tax year as the Hope Credit. It's calculated as 20% of a maximum of $10,000 of tuition and mandatory fees actually paid in 2008. There's no limit to the number of years you can claim this, and you just have to be enrolled in at least one course (credit or noncredit, degree or non-degree, any level) at a qualifying college or university.
   
   Note: If you're eligible for the Hope credit but paid more than $8,250, you'll save more by claiming the Lifetime Learning credit instead.
   
   Both these credits are reduced if your adjusted gross income (a figure somewhere between your net income and your taxable income) is above $47,000. Nothing about taxes is simple; check the links for more details. To claim either of these credits, you will need Form 8863.
   
   
   
   
   Coming Up: Saver's Credit, Earned Income Credit, and more.