Now is a good time to tweak how much money comes out of your paycheck for taxes in order to be surer of getting the refund you want, tax pros say.
With almost half the 2009 tax year still ahead for most of us, increasing our withholding just a few dollars now will help assure a bigger refund later if we want that. It also is a good time to have a bit less taken out to improve cash flow now if you are willing to settle for a minimal refund later.
There's a catch, of course. To make the change, you need to file a new Form W-4 Employers Withholding Certificate with your company's payroll people. Research shows most of us know we can and, from time to time, should do this, but almost none of us ever do that, says Jackie Perlman, a Tax Institute research analyst at H&R Block.
We probably know why too. The simple two-page form - one page of instructions and one with a few blanks to fill in - can be a little intimidating for anyone who doesn't deal with it often. Knowing that the IRS will provide a free 24-page booklet of supplemental instructions in Publication 919 doesn't make you think it gets easier.
There are faster ways to cut through the clutter, Perlman said.
"Start by figuring how large a refund you want," she said.
It can be larger than what you got back last time, smaller, or the same. It doesn't matter which. Each of us has our own good reasons for choosing any of those three. The point is, it is a target and you can manipulate your paycheck withholding to hit it.
Next, don't confuse exemptions - which are those $3,500 dollops of tax exempt income you, your married partner and the kids get every April just for being there - with withholding allowances, which are what you claim on the W-4. Withholding allowances are basically accounting guidelines that IRS and your payroll department work out to help calculate your take-home pay.
Most W-4 calculations start out based on one withholding allowance for each exemption you claim, but you can bump those allowances up or down to fit your circumstances. In fact, you probably should, especially if you or your married partner's incomes have changed recently, because some of the IRS formulas are easily knocked out of whack when life happens, researchers report.
There is an easy way to adjust your calculations for that too, Perlman said. Go online and plug your numbers into one of the good online withholding calculators that tax professionals and others offer for free. Those will ask questions designed to help you get handles on all the tax issues that may affect your refund. Maybe you'll qualify for a homebuyers or energy conservation credit, for example, which could help reduce what you need to withhold now.
Perlman, not surprisingly perhaps, said she's partial to an H&R Block calculator on the bottom half of this page. There's a similar calculator next to it for self employed people facing similar issues.
IRS also provides similar calculators at its site that get high marks from users. Just Googling for withholding calculators fetches up fistfuls others such as this one.
Friday, July 10, 2009
Thursday, July 9, 2009
Who are the worst drivers?
Yikes. Roughly three fourths of the nation's drivers are worse than the ones who headed to work this morning on Kansas City area roadways, according to a new report from Allstate.
The Northbrooke, Ill. insurance giant's fifth annual Safest Drivers surveys ranks Kansas City and selected suburbs in the top fourth of 200 cities and suburbs where it studies a rolling two years worth of accident statistics. Sioux Falls, SD came up as the safest place to drive; Washington, DC came in the worst. Wrong kind of gridlock, I suppose.
We all have our own nominees for the nation's worse drivers. Cable TV is even thinking of making a reality show based on them. GMAC pollsters look at how much we know about rules of the road and puts Wisconsin on top, New York at the bottom. Don't get cocky, though. The auto lender also estimates one in five of us, or 41 million drivers, would flunk a basic road rules test if it were a pop quiz now.
Authorities are divided over why some groups of drivers are worse than others. Where you drive makes a difference. That's why car insurance rates can vary a lot by zip codes. Some focus on age as a factor, though it seems a tossup whether very young drivers or very old ones are most at risk.
One Toronto outfit even looked, tongue in cheek, at zodiac signs. No word yet on whether traffic stops are planned to take offending Libras off the road.
The Northbrooke, Ill. insurance giant's fifth annual Safest Drivers surveys ranks Kansas City and selected suburbs in the top fourth of 200 cities and suburbs where it studies a rolling two years worth of accident statistics. Sioux Falls, SD came up as the safest place to drive; Washington, DC came in the worst. Wrong kind of gridlock, I suppose.
We all have our own nominees for the nation's worse drivers. Cable TV is even thinking of making a reality show based on them. GMAC pollsters look at how much we know about rules of the road and puts Wisconsin on top, New York at the bottom. Don't get cocky, though. The auto lender also estimates one in five of us, or 41 million drivers, would flunk a basic road rules test if it were a pop quiz now.
Authorities are divided over why some groups of drivers are worse than others. Where you drive makes a difference. That's why car insurance rates can vary a lot by zip codes. Some focus on age as a factor, though it seems a tossup whether very young drivers or very old ones are most at risk.
One Toronto outfit even looked, tongue in cheek, at zodiac signs. No word yet on whether traffic stops are planned to take offending Libras off the road.
Tuesday, July 7, 2009
Tax audits - the midyear tax review you don't want
Uh, oh. H&R Block is beefing up its plans to help clients with income tax audits. The world's largest tax service calculates that our individual chances of being double-checked have roughly doubled, to one in return in 99 from one in 202 previously.
That's not a surprise. New IRS Commissioner Doug Shulman has been warning for months that service will be getting more adamant about collecting an estimated $345 billion in taxes we may have fudged on. Now, twin plans to increase compliance and step up enforcement are the twin top priorities for IRS' 2019-2013 strategic plan.
We don't know yet how much pain stepped-up enforcement may cause. Negligence messes up most tax returns, Alvin Brown, a former high ranking IRS attorney told Congress a few years ago. Those mistakes are usually easier to fix than intentional cheating attempts. But either way, Brown already lists a wide array of potential audit magnets on his Web site.
IRS has some pretty explicit procedures for both its agents and audited taxpayers to follow. You need to know them, both to get through the audit as successfully as possible and, increasingly, to avoid phishing and other scams that are expected to perk up as enforcement revs up.
National Taxpayer Advocate Nina Olson vows to step up her office's efforts to make IRS more accessible to taxpayers in order to help reduce unintended abuses. Reconciling the need to collect what taxpayers really owe with the increasing difficulty that many have with everyday bills will be one of the service's biggest challenges this year, Olson predicts.
That's not a surprise. New IRS Commissioner Doug Shulman has been warning for months that service will be getting more adamant about collecting an estimated $345 billion in taxes we may have fudged on. Now, twin plans to increase compliance and step up enforcement are the twin top priorities for IRS' 2019-2013 strategic plan.
We don't know yet how much pain stepped-up enforcement may cause. Negligence messes up most tax returns, Alvin Brown, a former high ranking IRS attorney told Congress a few years ago. Those mistakes are usually easier to fix than intentional cheating attempts. But either way, Brown already lists a wide array of potential audit magnets on his Web site.
IRS has some pretty explicit procedures for both its agents and audited taxpayers to follow. You need to know them, both to get through the audit as successfully as possible and, increasingly, to avoid phishing and other scams that are expected to perk up as enforcement revs up.
National Taxpayer Advocate Nina Olson vows to step up her office's efforts to make IRS more accessible to taxpayers in order to help reduce unintended abuses. Reconciling the need to collect what taxpayers really owe with the increasing difficulty that many have with everyday bills will be one of the service's biggest challenges this year, Olson predicts.
Monday, July 6, 2009
Hunting and gathering, recession style
We bought two $1.59 packages of hot dogs on sale for 97 cents this weekend, but got an even better deal. We used a manufacturer's coupon that knocked $1 off the purchase price of the two packages as well.
Ms. Ktnomics and I have always been coupon clippers. At first we had to, in order to stretch the princely $150a month that the U.S. Army paid back when. We continued because it became fun on those semi-frequent times when the subsequent savings were larger than what we paid the checkout clerk. Now, we're flirting with have to again.
So apparently is more of America, reports Anna Vander Broek at Forbes.com. Coupon redemptions, which it a 2.6 billion milestone last year, are running between 17 percent and 50 percent ahead of a year ago, depending on whose data base you check. KFC has even become the target of a class action suit filed on behalf of disappointed consumers who weren't able to redeem Oprah coupons for free chicken recently.
Most of us use traditional strategies for piling up coupon savings. We look for offers on stuff we buy anyway and clip them either from papers, magazines or online sources. Then we wait for sales on the stuff we want to buy with them to make our money go as far as possible. Sometime we wait a while. I've got fistfuls of old no-expiration-date Wheaties coupons celebrating Mary Lou Retton's Olympic success.
Some of us go further, which alarms the industry when fraud is involved. The industry-funded nonprofit watchdog Coupon Information Corp. reports there were only two coupon fraud cases prosecuted in the U.S. between 1986 and 2001. There have been maybe 93 in the last 18 months now that the stakes are higher and higher-quality and vastly more affordable computer printers are available.
Authorities don't know how much money coupon scammers actually make. But they allege that one group, indicted in a recent major bust in Milwaukee, stole at least $250 million in the last decade. So bear with me if you're behind me in at the checkout and I'm trying to convince a kid at the register that my 25-year-old Mary Lou Retton coupon with no bar codes is legit. It may take a few minutes.
Ms. Ktnomics and I have always been coupon clippers. At first we had to, in order to stretch the princely $150a month that the U.S. Army paid back when. We continued because it became fun on those semi-frequent times when the subsequent savings were larger than what we paid the checkout clerk. Now, we're flirting with have to again.
So apparently is more of America, reports Anna Vander Broek at Forbes.com. Coupon redemptions, which it a 2.6 billion milestone last year, are running between 17 percent and 50 percent ahead of a year ago, depending on whose data base you check. KFC has even become the target of a class action suit filed on behalf of disappointed consumers who weren't able to redeem Oprah coupons for free chicken recently.
Most of us use traditional strategies for piling up coupon savings. We look for offers on stuff we buy anyway and clip them either from papers, magazines or online sources. Then we wait for sales on the stuff we want to buy with them to make our money go as far as possible. Sometime we wait a while. I've got fistfuls of old no-expiration-date Wheaties coupons celebrating Mary Lou Retton's Olympic success.
Some of us go further, which alarms the industry when fraud is involved. The industry-funded nonprofit watchdog Coupon Information Corp. reports there were only two coupon fraud cases prosecuted in the U.S. between 1986 and 2001. There have been maybe 93 in the last 18 months now that the stakes are higher and higher-quality and vastly more affordable computer printers are available.
Authorities don't know how much money coupon scammers actually make. But they allege that one group, indicted in a recent major bust in Milwaukee, stole at least $250 million in the last decade. So bear with me if you're behind me in at the checkout and I'm trying to convince a kid at the register that my 25-year-old Mary Lou Retton coupon with no bar codes is legit. It may take a few minutes.
Sunday, July 5, 2009
Here's a sneak peek at your next income tax form
Ford Motor Co. redesigned its Model T pickup trucks a lot between 1925 and 1927. In the end, the newer ones looked a lot like the older ones.
Same way with the IRS, which recently asked for public comment on its proposed new Form 1040 income tax form, pictured here. It looks remarkably like the 2008 version, pictured here. Mostly, some of the numbers, for standard deductions and the like, have been adjusted for inflation.
Some of your calculations may be way different, though, because of all the economic stimulus changes that are kicking in. You should eyeball your tax situation, and specifically check what's being withheld from your pay stubs against the taxes you paid in 2008, to see if you are on track toward where you want to be at filing time.
And if numbers aren't your thing, try this.
Same way with the IRS, which recently asked for public comment on its proposed new Form 1040 income tax form, pictured here. It looks remarkably like the 2008 version, pictured here. Mostly, some of the numbers, for standard deductions and the like, have been adjusted for inflation.
Some of your calculations may be way different, though, because of all the economic stimulus changes that are kicking in. You should eyeball your tax situation, and specifically check what's being withheld from your pay stubs against the taxes you paid in 2008, to see if you are on track toward where you want to be at filing time.
And if numbers aren't your thing, try this.
Friday, July 3, 2009
The founding fathers cut deals too
Money mavens love our nation's founding fathers.
Many, such as J.D. Roth over at Get Rich Slowly, are particularly fond of Benjamin Franklin. He was pithy, to the point, and always quotable. But as Kiplinger's Tina Korbe writes, many of our most revered 18th century icons have offered advice about handling personal finances that still holds up more than two centuries later.
There is one financial founding father we don't hear as much about. William Duer, a delegate to the Continental Congress and an assistant to the nation's first treasury secretary, Alexander Hamilton, became a financial speculator who ripped off investors so spectacularly in 1792 that Hamilton had to step in, like Tim Geithner today, to stop an economic panic. It was the most aggressive intervention of its kind until modern markets tanked in 1987.
Playing financially fast and loose happened a lot in 18th and 19th century America. George Washington, in addition to his many other accomplishments, was a legendary land speculator. Thomas Jefferson, Abraham Lincoln and fistfuls of less well known historical icons dabbled too.
Many of the schemes failed. Ironically, some of the suddenly worthless shares in those failed enterprises are worth hundreds or thousands of dollars as collectors items now because some of the same promoters also signed the Declaration of Independence and other bits of our historical DNA.
Duer died in debtor's prison in 1799, leaving a legacy that remains with us today. When traders and investors stung by the schemes met under a buttonwood tree near what now is 68 Wall Street to organize what became the New York Stock Exchange, they laid down ground rules to curb insider trading and other abuses specifically inspired by Duer's career. We're still following those rules, some days more successfully than others, Right, Mr. Madoff?
Happy Independence Day, everyone
Many, such as J.D. Roth over at Get Rich Slowly, are particularly fond of Benjamin Franklin. He was pithy, to the point, and always quotable. But as Kiplinger's Tina Korbe writes, many of our most revered 18th century icons have offered advice about handling personal finances that still holds up more than two centuries later.
There is one financial founding father we don't hear as much about. William Duer, a delegate to the Continental Congress and an assistant to the nation's first treasury secretary, Alexander Hamilton, became a financial speculator who ripped off investors so spectacularly in 1792 that Hamilton had to step in, like Tim Geithner today, to stop an economic panic. It was the most aggressive intervention of its kind until modern markets tanked in 1987.
Playing financially fast and loose happened a lot in 18th and 19th century America. George Washington, in addition to his many other accomplishments, was a legendary land speculator. Thomas Jefferson, Abraham Lincoln and fistfuls of less well known historical icons dabbled too.
Many of the schemes failed. Ironically, some of the suddenly worthless shares in those failed enterprises are worth hundreds or thousands of dollars as collectors items now because some of the same promoters also signed the Declaration of Independence and other bits of our historical DNA.
Duer died in debtor's prison in 1799, leaving a legacy that remains with us today. When traders and investors stung by the schemes met under a buttonwood tree near what now is 68 Wall Street to organize what became the New York Stock Exchange, they laid down ground rules to curb insider trading and other abuses specifically inspired by Duer's career. We're still following those rules, some days more successfully than others, Right, Mr. Madoff?
Happy Independence Day, everyone
Thursday, July 2, 2009
Cash for clunkers - you can't just go in and kick the tires
Unloading that beat-up late '90s Ford Explorer or other gas guzzler in the government's new Cash for Clunkers program may be a lot easier if you have a calculator, Internet access and a flexible schedule.
Basic rules are already posted on the program's official www.cars.gov Web site. But some auto industry analysts say waiting until about July 23 might get you the best deal. That's the the National Highway Traffic Administration's deadline for coming up with detailed rules spelling out how auto dealers get paid for fronting us $3,500 to $4,500 and making sure our clunkers actually make it to the scrap yard and not some underground resale market. Some dealers may be more cautious until they know those details
But you may not want to wait too long either. The program is scheduled to end Nov. 1 or sooner if buyers hit a 250,000 sales limit set by federal spending caps.
Meantime, Detroit, its competitors and camp followers are revving up some sales pitches now. General Motors, Ford, Toyota, Nissan and Hyundai already have added Cash for Clunkers sections to their Web sites. Other auto makers and related outfits such as finance companies seem likely to follow.
Financing the new fuel-sipper you buy with your clunker cash gets interesting too.
Lenders to auto buyers are just as antsy about loan quality as home lenders. According to some indicators, it takes maybe a 720 to 760 point credit score now to get the same comfortable interest rates that a 600 to 700 point score fetched six months ago.
700 points is going to be stretch for a bunch of us with foreshortened income prospects. Outfits such as MoneyNowUSA.com, which collects loan applications online and coordinates them with payday and other lenders, offer to seek loans for borrowers with scores ranging as low as the upper 400 to low 500 range. Rates depend on the lender who agrees to actually make the loan, but won't be cheap. Or you may need a co-signer.
Basic rules are already posted on the program's official www.cars.gov Web site. But some auto industry analysts say waiting until about July 23 might get you the best deal. That's the the National Highway Traffic Administration's deadline for coming up with detailed rules spelling out how auto dealers get paid for fronting us $3,500 to $4,500 and making sure our clunkers actually make it to the scrap yard and not some underground resale market. Some dealers may be more cautious until they know those details
But you may not want to wait too long either. The program is scheduled to end Nov. 1 or sooner if buyers hit a 250,000 sales limit set by federal spending caps.
Meantime, Detroit, its competitors and camp followers are revving up some sales pitches now. General Motors, Ford, Toyota, Nissan and Hyundai already have added Cash for Clunkers sections to their Web sites. Other auto makers and related outfits such as finance companies seem likely to follow.
Financing the new fuel-sipper you buy with your clunker cash gets interesting too.
Lenders to auto buyers are just as antsy about loan quality as home lenders. According to some indicators, it takes maybe a 720 to 760 point credit score now to get the same comfortable interest rates that a 600 to 700 point score fetched six months ago.
700 points is going to be stretch for a bunch of us with foreshortened income prospects. Outfits such as MoneyNowUSA.com, which collects loan applications online and coordinates them with payday and other lenders, offer to seek loans for borrowers with scores ranging as low as the upper 400 to low 500 range. Rates depend on the lender who agrees to actually make the loan, but won't be cheap. Or you may need a co-signer.
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