A Penny Saved

If you purchased or leased a Hybrid Vehicle last year, you may be eligible for a tax credit of up to $3150!  In an ongoing effort by the government to make it seem like they are pushing hybrid technologies, the hybrid vehicle tax credit continues this year.  In fact, if you purchase one before 10/1/07, you can claim a credit next year too.

There are currently 44 different models of cars that are classified as Hybrid vehicles and are eligible for the tax credit.  The highest credit goes to a ‘05,’06, or ‘07 Toyota Prius purchased on or before 9/30/06.  The lowest is a tie between the two 2WD General Motors pickups.  The Chevrolet Silverado 2WD hybrid from ‘06 and ‘07 and the GMC Sierra 2WD hybrid from ‘06 and ‘07.  The credit for either of those if purchased on or before 9/30/06 is only $250.  Better than nothing I suppose.

Another key point is that there are several dates that are important.  Obviously, for full credit, the purchase had to have been on or before 9/30/06.  The credits are reduced again for vehicles purchased after 3/31/07, again after 9/30/07 and the credits are gone if you purchase a vehicle after 9/30/07.

You can see all the eligible vehicles and their respective credits at the IRS website.  It’s a news article so be sure to take a look for anything new if you are reading this after about March of 2007.

Technorati Tags: hybrid vehicle, taxes, tax credit, refund, hybrid, irs

I seem to have missed it, but National Tax Advice Day was last Thursday, January 11th.  Apparently the IRS began taking electronic returns on January 12th.  National Tax Advice Day doesn’t appear on my calendar so it may be a construction of HRBlock, who own the website.  Maybe not.

In any case, the website, http://www.nationaltaxadviceday.com has a lot of very useful tools that you can use to prepare yourself for the coming tax filing season.  Be sure to go over and check it out!

Technorati Tags: national tax advice day, taxes, irs, hr block, h&r block

Remember hearing about the changes to the excise tax that we all heard about sometime last year? You know, the part where they canceled the excise tax that was created to pay for the Spanish-American war. Well, nows the time to claim that credit.

It’s called the Telephone Excise Tax Refund and there are two ways to claim it. You either get a standard deduction of between $30 and $60, or, if you kept your long distance bill from March 2003 to August 2006 you can do an itemized deduction for the total you paid in the excise tax for that period.

For most of us, we’ll just be taking the standard deduction since I don’t know too many people who keep long distance bills for that long of a time.

So, how is the deduction calculated? It’s not clearly evident until you look at the actual forms and read the instructions, but here’s the breakdown.

The deduction is tied to the number of exemptions that you claim on your tax form. The more exemptions, the more the deduction.

So, as you can see, the deduction should help just about everyone a little.  It’s really not much but as most of us know, every little bit helps.  Especially at tax season.

Make sure you claim your credit!

Technorati Tags: telephone excise tax, refund, credit, taxes, filing taxes, 2007 taxes

With the passing of the Christmas Holiday and the eminence of the New Year, one thing will jump out and bite most of us PF bloggers. Tax season is just around the corner. It’s time to start crunching numbers and get those things done as soon as possible for the quickest return and (dare I hope) refund.

Well, in preparation this year, I managed to get my grubby little hands on a complementary copy of the Ernst & Young Tax Guide for 2007(aff).

I haven’t had time to take a really good look at it yet, but I perused it for about 20 minutes last night.  The content of this book is amazing.  I’ll try and do it justice with a in depth review in the next few days when I get a chance to give it a real good once (or twice) over.

So far, it seems like the information has been simplified and concentrated for the ease of use that we all desire in our tax preparation.  But even with all that, it’s nearly overwhelming.  It’s no wonder that even tax professionals sometimes get it wrong.

Technorati Tags: tax, taxes, death and taxes, ernst & young

The IRS begain handing over it’s “less glamorous” collection work(under 25k) to a group of debt collection agencies.

The three companies that will be doing the collections are CBE Group of Iowa, Linebarger Goggan Blair & Sampson of Texas, and Pioneer Credit Recovery of New York. The companies will be paid 25 percent of the amount they are able to collect.

With the move, the IRS sheds some light on a whole category of cases that it hadn’t touched for years - its own agents will continue to concentrate on higher-ticket cases, where there are greater rewards for their efforts.

The first thing that comes to mind when I hear this is the potential security issue.  What happens if one of these agencies loses a laptop?  Granted, the people wouldn’t exactly be stellar examples for ID theft, but the risk is still there.  There are three other risks that the article lists, one of which is the risk of added work in the long run.  The accounts are un-contested accounts, but if any of the fees and interest are contested, the account would have to be returned to the IRS for further negotiation.

Essentially, it seems like the IRS is using the collection agencies as a call center to do the mundane collection tasks.  At 25%, it might still save some taxpayer money in reduced hours on the IRS timeclock.  If it works quicker and more effeciently than current practices, it could mean a little extra cushion for your favorite senator’s porkbarreled project.

Technorati Tags: IRS, collection, tax debt

Taxes are almost back in season. It’s almost time to secure yourself a CPA and get all your paperwork in order and succomb to yet another tax man cometh moment.

I think we can all agree that the current tax system needs a little work. It’s become so complicated that even trained tax professionals can’t seem to keep it all straight. The big question is how do we re-do the tax system. JLP at AllFinancialMatters asked about a Flat tax in his question of the day yesterday. Here are my thoughts.

When speaking of flat tax systems there are two that seem to be popular. The first is a flat sales tax. Basically, the only taxes you pay are sales taxes. Sounds pretty good eh? Especially if you live in a state that already has a sales tax. Well, don’t go voting for it just yet. Experts agree that in order for a flat sales tax to equal the current revenue from taxes, it would need to be somewhere in the range of 24%. Ouch is right.

The second flat tax, and the kind that JLP is speaking of is the flat income tax. A flat % tax on all income. If a flat rate tax system were to be implemented, this is the one I would choose. It does have a few problems. Who gets taxed for what income seems to be the biggest. Take dividends, the example that JLP uses. Currently, the Corporation pays taxes on the dividends. The shareholder receiving the dividends does not. This is very nice for those who receive a large amount of income from dividends. They belong to a class of income called passive income. Passive income is income that you don’t need to work for. It just keeps coming in with relatively little to no work on your part.

If a flat income tax were to be implemented, dividends would need to be counted as income. Corporations would no longer shoulder the burden as it wouldn’t be income for them. In fact, it would be a redistribution of income already taxed.

With and talk of tax code change or even tax system change, arguements break out. I personally do not believe that a flat tax of any sort would work. I think that the current system needs a major overhaul to weed out redundancy and confusion. Any changes to the system or a new system would incite politicians to find or create loopholes that would create new tax shelters for their income. The cycle would start all over again and we end up right back where we left off.

A simpler tax code is needed if for no other reason than it would make it more transparent. If there aren’t any complicated codes, there are less rules to manipulate to create shelters for tax evasion.

Technorati Tags: tax, flat tax, sales tax, tax code, irs, tax evasion, tax shelter

Congressman Ron Paul of Texas introduced a bill (HR 5860) that will add an “above-the-line deduction for State and local, and foreign, real property taxes.”

Currently, property taxes are deductible, but only if you itemize your deductions.  For many Americans that makes the deduction unattainable.  If passed the bill would allow for a “above the line” deduction that all property owners would be allowed to claim no matter what their itemized deductions look like.

Why is this important?  Well, it could mean a $1000+ deduction for every property owner.  Of course, the caveat is that people like Trump who have multi-million dollar homes would get it too.  But enough of the rich getting richer diatribe.  It will help you too!

Take a look at what you paid for property taxes in 2005.  Chances are you’d jump to have a tax deduction that is that large.  Currently, the bill is in the Ways and Means committee.  That is of course the first step in becoming law, so there is a long haul in front of the bill.  If you think it should progress, I suggest you contact the members of the Ways and Means committee and your State representatives and say so.

Technorati Tags: H.R. 5860, tax deduction, taxes, property tax, ways and means, congress, ron paul, texas

This post is the eigth in a series of 10 that covers each point of the MSN Money top 10 mistakes and hopefully will elaborate and add a little new parent thinking to the equation.

Money Mistake 8:

Overlooking tax benefits for parents

As your spending skyrockets, at least you can take some solace in a few tax breaks geared for parents.

The two biggest? The $1000 tax credit which is excellent as it reduces your tax bill by $1000. As opposed to a Tax deduction which only reduces the taxable income. The other is really two different ones, but you can only claim one of the two. There is the child-care tax credit and the Flexible Child Care spending accounts. The Flex account is an employer sponsored account, so check to see if your employer has one. If not, then your choice is obvious. If they do? Well, your choice is not as obvious, but you’re probably better off with the Flex account. The money that you put into it is pre-tax so it can amount to quite the savings. Obviously, my wife and I will be claiming the $1000 tax credit, but have not decided on te flex account yet. My employer does offer one, but we are waiting to see the cost basis on the child care to make a final decision.

Part 7: Overspending your baby costs

Part 9: Saving in a child’s name

Technorati Tags: parent, money, mistakes, child care, flexible, Flex, tax credit, taxes

Many people only adjust their W-4 for withholding when they begin new jobs.  However, if you received a tax refund this year, that means it’s time to make some adjustments.  Many people seem to think that taking more than they need out of their paychecks is good practice and a pretty good savings plan.  They couldn’t be more wrong.

Allowing the IRS to withhold more than you need to is the same as loaning money to someone for 0%.  And it doesn’t take a financial guru to figure out how good of a savings plan that is.  There are several options for much better savings plans.  ING Direct is currently paying over 4%.  Loaning your money through Prosper.com can pay more than 10%.  If your worried about spending that money right away instead of getting it all in lump sum in April, set up a automatic deduction or transfer out of your normal bank account and into a savings.  Make it as automatic as a tax deduction and you won’t notice it.  And it will still be there in April.
So adjust your W-4 already!  You really should do it every year.  Make it a part of your tax preparation eah year.  You’re already working on all the numbers so do that little bit more.  You could net yourself an additional 4% or more!

The IRS has a handy withholding calculator that helps you decide what to put on the W-4.

Technorati Tags: w-4, taxes, deduction, savings, refund

So you managed all your tax papers or had someone do them for you and now your tax refund is here. Now what do you do? Don’t spend it all, whatever you do! Make sure you find the best way to use it that will benefit your bottom line. Build Wealth with it.

• Deposit some in a savings account or open a savings account with it.
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• Continue with your Savings Strategy
• Invest in a DRIP
• Try something new. Become a lender on Prosper

Point is, use the money to increase your wealth. Pay off a credit card and give yourself a 24% bonus on your tax money. Just don’t blow it all haphazardly. If your smart with your money, your money will reward you!

Technorati Tags: tax refund, refund, invest, save, savings, loans, credit