I think I’m done waiting for all my W-2s and 1099s to come in (a lot of 1099s!), so here are my fun tasks for today:

1) Make sure I’m not missing anything, as everything should’ve been sent out by January 31st. One sure way to ask for an audit is to forget to include all your income. Many tax forms are also online now.

2) Verify the amounts are correct. Hey, brokerages make mistakes. Make sure you note what interest was supposed to be non-taxable for certain areas, like any municipal bonds or Treasury Bills.

3) Update my emergency list of accounts and contacts, using this thorough and handy Financial Preparation Kit.

Here are more free and cheap tax filing options, in addition to my previous list of free tax-filing options (check those out first!). Note the following are online and Mac-friendly. Links courtesy of Fatwallet.

H&R Block TaxCut Premium Online #1 – Free Federal Return if you print it out, $19.95 to e-file. State Return is $24.95. Thus, best for people with AGI’s > $50k with no state income tax.

H&R Block TaxCut Premium Online #2 – Federal + State Return for $19.95. Free Federal e-file. Best for people with AGI’s > $50k with state income tax. The Premium version offers extra features like extra help for small-businesses and a free tax consultation. I’m most likely going to use this one, to get some help with my Schedule C.

I was doing some business tax research today and ran across this interesting tip for avoiding an audit – don’t E-file. Here’s why. The way the IRS determines if you are to be audited is through a computer algorithm that churns through your numbers for certain red flags, like too many deductions or a difference between what you typed in and what they have on their W-2s and 1099s. Now, 100% of all E-filers are analyzed since it’s all ready to go. But for physical mailed-in returns, the IRS has to hire tons of data-entry people to manually type in each one. This is expensive, so reportedly less than half are actually transcribed. No computer = no audit.

Now, I don’t know if this is true, but it makes a certain amount of sense to me. Of course, this may delay your tax refund. But I’d trade that for a smaller chance at an audit anytime.

Let me preface this by saying that I am not anywhere near an expert on taxes. I haven’t even itemized deductions before, since I don’t have any mortgage interest to get me over that standard deduction hump. Thus, I’m just writing what I think I’m reading, and tax gurus can correct me.

I’m trying to learn more about self-employment tax. Since you’re not splitting your Social Security Tax with your employer (you’re the employer), you get to pay 15.3% tax on your income. This is in addition to your federal, state, and local income tax. You do get to deduct half of your 15.3% tax from your net earnings, since “regularly” employed people don’t pay tax on the part paid by their employer either. Still, let’s see how much out of every gross $100 I make ends up in my pocket. This simplification assumes no business expenses.
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If you don’t know what your federal marginal tax rate is off the top of your head, here ya go. This way you know how much of those bank bonuses you’ll actually get to keep. (I won’t be sending 1099s for my Emigrant Direct bonuses though, don’t worry).

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I forgot to mention that, although tuition is going to be a big expense this year, I will be eligible for the Lifetime Learning Credit. In essence, it is a 20% rebate back on your college-level expenses up to $10,000, with some restrictions. Since it is a tax credit and not an deduction, it’s up to $2,000 cash in your pocket.

You must pay these expenses yourself, not from a scholarship or a 529 plan. Tuition counts, and mandatory fees count, but for me books do not, since they are technically not “required for enrollment”. Very disapointing, sometimes the books cost as much as the class!
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Ok, I’m making a dent in my blog reading. Earlier this week No Credit Needed posted the schedule for State Sales Tax Holidays, a good reminder for those that need to do shopping in the near future, especially for the kiddos.

What are sales tax holidays? They are certain time periods, different for each state, where certain items are exempt from sales tax, either by category or under a certain dollar amount. Targeted at families doing back-to-school shopping, these items are usually things like clothes, school supplies, and electronics.
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Most of us pay taxes as part of our paycheck each month, as Uncle Sam mandates it to be. For many people, this means overpaying a little bit each month “just to be safe”, and getting a nice fat tax refund the following year (We ourselves got $1,046 back this year). But, as others have pointed out, this is the equivalent of giving the government a interest-free loan. I don’t know about you, but I’d much rather take an interest-free loan myself. So instead, why not withhold as little as possible, invest the money you would have paid out somewhere earning interest instead, and in April pay back the government what it’s due. (Similar to taking advantage of 0% APR credit card offers.) But how little can you pay?
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So I had all my W-2s, 1099s, stock trades and dates, etc. ready to do my taxes. I sit down at the computer and… where did my tax software go? I know I took it out of the boxes, cut out the UPCs, and sent off the rebates. I already threw away the boxes, so there should be a little stack of CDs in my office… hours later… nada. Nowhere to be found. I’m seriously losing it.
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I bought my tax software from OfficeMax recently. There seems to be a new sale every week these days, but I got H&R Block TaxCut Deluxe, 1 free e-file, TaxCut State, Microsoft Money 2005 Stanard, and DeductionPro, all for $100 – $80 of mail-in rebates = $20. But wait! You can file for free at this link from the IRS.
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I got my bonus! Well, most of it anyway. After all taxes I ended up with barely more than 50% of the gross amount. For some reason I have been laboring under the false impression that there is a special tax bracket for bonuses. But after some research and this article at TheStreet.com, I realize that’s a myth (for federal taxes at least). Apparently some states also have a special tax on annual bonuses?
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