Tags Posts tagged with "Taxes"

Taxes

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Gov’t Rebate CheckSince it was first announced that we’d all be receiving an Economic Stimulus Payment in the mail back in January, I’d been hearing varying numbers. For us, at first, it sounded like we’d automatically receive $1200…

I was pretty excited about that news.

Then the media made it out like it would be only $600 or perhaps even nothing, because of our income. More recently, I read elsewhere that it would be $1000 based on our situation. There didn’t seem to be a real concrete number — a hazy gray area.

Don’t get me wrong, even on the lower end, $600 for nothing is pretty nice. $1200, though, is a totally different game.

Our plan is (was?) to use the $600 to buy my wife a new computer. She’s never had a new computer — always one of my hand-me-downs, overloaded and customized with all of my personal crap.

We’re going to get her a new one and she can set it up as she likes. It can even come with a pink keyboard and fuzzy mouse if she likes — this one won’t be mine.

So this morning, I ventured on to the IRS’s website to see if they’d posted any new information on the stimulus checks…

I’d visited before, but all they had was a bunch of hard to understand legalese. Even their “rebate calculator” was a hassle (and for the first few weeks, it would error out).

Now though, it appears they’ve got some pretty solid info with easy to understand examples:

Examples of ways the Economic Stimulus Act of 2008 may affect taxpayers who are married, file a joint return and are either childless or do not have children who qualify for child tax credit payment:

1) Married couple with no children, wages of $4,000, no federal income tax liability.
Rebate is $600

2) Married couple with no children, no wages, veterans’ payments of $2,000, social security benefits of $2,000, no federal income tax liability.
Rebate is $600

3) Married couple with no children, no wages, no social security benefits, veterans’ payments of $4,000, no federal income tax liability.
Rebate is $600

4) Married couple with no children, no wages, no social security benefits, no veterans’ payments, AGI is $20,000, federal income tax liability is $250.
Rebate is $600

5) Married couple with no children, AGI is $25,000, federal income tax liability is $750.
Rebate is $750

6) Married couple with no children, AGI is $60,000, federal income tax liability exceeds $1,200.
Rebate is $1,200

7) Married couple with no children, AGI is $160,000, federal income tax liability exceeds $1,200.
Rebate is $1,200
Phaseout reduction is ($500)
TOTAL is $700

If I’m reading it right and I’m sure I am because, for once, they give real life examples in plain English, we’re going to receive the originally advertised $1200 sometime during the first week of May. That is uplifting news.

Even with payout to be double what we’d expected and planned on, I think the plan is still to buy a new computer — maybe with a few more bells and whistles than originally thought.

And I’ll probably blow around $200 on myself for something short-sighted and stupid (hey, I want something shiny and new too!) with the remainder likely going into savings.

Or perhaps we should save it to pay our property taxes in July?

Nah…

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Property Taxes - Good Grief!When it comes to taxes, Connecticut is by far the worst state to live in.

I know, I know, everyone knows it’s expensive to live in New England, but Connecticut takes it up a notch from Massachusetts and Vermont.

Did you know that if you live in Connecticut, you have to pay local property taxes on your automobiles?

 It’s called a personal property tax. Roughly half of the country has a similar tax.

Making matters worse, in Connecticut, is that the tax on identical vehicles can swing wildly from town to town, based on the communities’ relative wealth. It’s not a state tax, it’s a local tax.

So my BMW may leave me with a yearly tax bill of $350 right now, but if I moved one town over, it would only be $100. One town in the other direction, my bill could be $500.

In the past I’ve seen figures for a generic car, like a Ford Taurus, where one owner will have to pay around $75 while another will have to pay in excess of $200. For the *exact* same car. Hardly a fair tax.

This is the main reason you see so many illegal Florida license plates up here. Tax fraud is rampant. And it’s not enforced, much to my dismay.

With three cars in our household, each July, the city comes looking for between $850 and $1000 dollars from us. Hardly chump change.

Now word comes in that our regular property taxes will be going up this year:

The Board of Finance is briefed on the city’s fiscal situation Monday in City Hall.

Most homeowners will see a property tax hike of at least $150 this year if the proposed budget eyed by the city’s Board of Finance is approved.

The $171.5 million spending plan that fiscal overseers appear poised to endorse this month would drive the mill rate up by 6 percent, officials said.

The City Comptroller said spending requests were up more than 8 percent to $177.3 million. But revenues, he said, are flat.

His department recommended cuts totaling $5.8 million that bring the increase to a more manageable 5 percent level.

But revaluation makes the pain greater.

Because almost all the property in the city is worth more than it was in 2002, up an average of 42 percent, the mill rate could drop from today’s 34.71 to 24.95 to bring in the same amount of money to city coffers.

The budget, though, requires a mill rate of 26.45 to bring in the necessary revenue to cover anticipated costs.

The Comptroller said that means most homeowners will pay more than $150 extra this year and some will pay much more than that, if their homes rose in value by significantly more than 42 percent.

Condominium owners are going to take some of the largest hits because their assessments generally rose much faster than single-family homes.

The finance board plans to adopt a budget April 22. A joint session of the City Council and finance commissioners will put the final seal of approval on a new budget in mid-May.

The budget takes effect July 1, when a new municipal fiscal year begins.

Thankfully it won’t break the bank for us, but I have a feeling, based on our 2007 tax assessment that jumped well over 50% from the 2002 assessment, we’re going to get hit with a big increase.

Hopefully next year as a result of the proposed lower mill rate and the fact that our cars will have depreciated another year, the city won’t tax them as high. If we could only be so lucky.

Even so, we’re looking at between $5000 and $6000 in property taxes alone next year.

Good grief.

I just hope the city uses the piles and piles of extra money wisely instead of building a “skate park” for skater dude thugs — which is actually the plan. Ugh…

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    So I got this email from the IRS late last week regarding a tax refund for $268.32 that I’m apparently due to receive in 3-9 days if I respond to this email…

    IRS Tax Refund Scam Email

    I think I’ll pass…

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    Well… that was quick!

    I filed my taxes on Sunday morning.

    Monday was a holiday.

    Tuesday was, well, a Tuesday.

    By Wednesday, the State had already direct deposited my refund. How about that?

    That’s a 1 business day turnaround! Amazing what can be done when it’s 100% online. Mmm…technology…

    Now let’s see if the the federal side still takes a few weeks…

    2 2154

    Gov’t Rebate CheckOkay, so yesterday I mentioned that we filed our taxes over the weekend and we’re due $2643 Federal and $801 State. Not too shabby.

    I know, I know… That’s like giving the government an interest free loan.

    But we have our reasons.

    It’s the patriotic thing to do.

    No, actually, the primary reason is that we don’t pay taxes on our income from the side business.

    That’s not such a big deal when you’re bringing in a couple thousand dollars per year, but over past 3-4 years, we’ve been bringing in around $5k more per year each year.

    Do the math and you can see the tax bill could get pretty ugly in just the span of a few years. And with the income having the potential to be very inconsistent, one year we could bring in $10k, the next we could bring in $30k…

    That makes a huge difference when the 1099-misc’s start to roll in during tax season and you realize, oh crap, we didn’t pay taxes on $30k worth of income?!

    So to compensate, we increased the amount withheld from our paychecks from our “real” jobs to cover much, if not all, of the difference. Make sense?

    For 2006, I didn’t do such a great job on the calculations (or maybe we just had a lot more income than expected) — we owed the state. So for 2007, a slight adjustment on the W-4 resulted in an $801 refund.

    That worked out to be $21 dollars more than I’d calculated when I did the math 10 months ago. (As luck would have it, we made almost exactly the same untaxed amount in 2006 as we did in 2007.)

    With the math having come out as I’d expected, and the two consecutive tax years being so easy to compare, I now feel I have a pretty good grip on how taxes work and how to make the most of my money.

    But now, we’re in the process of shutting down the business, so the untaxed income won’t be anywhere near what it’s been in the past.

    So really, we should readjust our tax withholdings — reduce them — but not yet.

    And while I’m not really a fan of giving the government an interest free loan, I’m also not opposed to a nice check each February/March.

    As for this year’s check? Well, let’s just say that credit card debt that’s been a thorn in my side will be gone sooner than you know it…

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    IRS LogoI filed my taxes yesterday. The past few years I’ve flip-flopped back and fourth from TaxCut to Turbotax and back again.

    And each year I’m convinced that I’ve made the wrong decision.

    The 2007 tax year happened to be a TurboTax year in my house. I like TurboTax.

    I like how it has neat little icons.

    I don’t like how they make impossible to back out of things.

    Now, I don’t live on a farm. But the cute little deduction icon they had was irresistible. It was, I *had* to click on it.

    The first question in that part of the interview obviously didn’t apply to me, so I backed out of the section and moved on to more pertinent areas.

    Problem was, on the final error check, they’d partially filled out the form that appilied to farmers, so I couldn’t file until I answered how many sheep I had in my backyard and the date I slaughtered them (not the actual questions). Backing out didn’t actually back or blank anything out. The form was incomplete.

    A frustrated half hour later, I figured it out, but it’s one of those things that makes me switch products each year — even though both TurboTax and TaxCut have the exact same problems?!

    They aren’t simple.

    If I weren’t a nerd (and my wife didn’t steer me in the right direction), I’m not sure the average casual computer user could have figured out how to fix this problem — other than by retroactively moving to a farm.

    Anyway, the title of this post came from the very of the end of the tax filing process. The “fast” and “convenient” e-filing option they brag about on the box is missing at least one more starburst — and that would be “expensive”.

    It came out to $17.95 for federal and $17.95 for state. Eh, whatever… That’s up only a few dollars. I think the first time I ever e-filed it was around $14.95 for each.

    But the real kicker was when the screen popped up to pay the fee:

    TurboTax: E-Filing Service Fee

    Wow — they offer not one, but two options for paying the e-filing fees! Now that’s convenient!

    Let’s see, option 1 will cost me… $17.95 + $17.95 + $29.95…

    That’s $65.85 assuming they don’t hit you up for the $29.95 service fee once for federal and again for state.

    Either way, tack on the price of the software (around $75) and it might have been cheaper to go to an accountant.

    My favorite part is how they default the selection at the bottom of the screen to option 1, so if you’re like me and you install programs all the time, you’re accustomed to clicking, “Next, next, next, agree, next, next, finish” in rapid succession.

    I didn’t get caught this time.

    But the whole thing is just another reason to hold on to a credit card.

    I feel bad for those who don’t have the ability to have a credit/debit card (and are usually poor) — it’s just another example of them getting screwed over again.

    (Of course, I *could* always print and mail the forms for much less, but that’s too old fashioned for me…)

    For the record: $2643 coming back for Federal; $801 coming back for State.
    I’ll explain these high numbers later…

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    taxes.jpgGood news on the horizon for business owners in Connecticut it seems!

    I’ve read numerous places that the best way to become wealthy is to own your own business.

    Well, I’ve done that, and while I have earned a lot of additional income over the years, there have always been drawbacks. In Connecticut, the biggest drawback has been the “Business Entity Tax”.

    Back in March of 2003, out of the blue, right in the midst of tax season, I received a bill from the Secretary of State for $250 for a Business Entity Tax.

    At first I had no idea what this was all about. I’d been in business for six years at that point and had never had to pay the state a dime since incorporating.

    I sucked it up and paid it thinking it’d be a one-shot deal and chalked it up as one of those losses you have to classify as a “cost of doing business”.

    In 2004, I got the bill again. That’s when I did some research and learned that it was a tax for the sake of a tax. Huge companies in the state like Aetna, Northeast Utilities, ESPN, and even the WWE have to pay the state $250 just for, well, existing.

    But so do little guys like me – where, on occasion, $250 is more than we bring in any given month. Chump change for the big guys, but a huge expense for super small business.

    One of those great examples where the little guy gets screwed by a flat tax.

    With March fast approaching, I’ve budgeted out the expense for 2008, but the news today indicates that I may just be able to hold on to that income this year.

    Lawmakers Seek To End Business Entity Tax
    By JANICE PODSADA | The Hartford Courant
    3:49 PM EST, January 17, 2008

    The secretary of the state and a bipartisan group of state legislators said Thursday they will seek to abolish Connecticut’s annual $250 business entity tax during this year’s legislative session, which begins Feb. 6.

    “This is an onerous tax. It’s really just a tax for existing,” Secretary of the State Susan Bysiewicz said. The tax was created six years ago as a stopgap measure to balance the state budget, she said.

    “In 2002, we had a $96 million deficit. For the past four years we’ve had surpluses,” she said. “Before we get too used to this tax, let’s get rid of it.”

    More than 118,000 businesses pay the annual business entity tax, which brings the state about $30 million a year. The amount represents about one-sixth of 1 percent of the state’s annual $18 billion budget. Bysiewicz said making up the $30 million difference should be relatively easy.

    Republican policy makers attempted to abolish the tax last year, including the proposal as part of a budget amendment package. But it was defeated.

    This year, abolishing the tax will be in a separate bill, which should increase the odds of its passage, both Democratic and Republican legislators said.

    Small businesses, which create many new jobs, are unfairly burdened by the tax, said Bonnie Stewart, vice president of government affairs with the Connecticut Business & Industry Association.

    Business registration fees are relatively low in Connecticut. For example, it costs $60 to register a limited liability company or limited liability partnership in the state. Corporations pay more. But at the end of the year businesses, regardless of size, must pay the $250 tax whether or not they made money or even launched their enterprise.

    “I hear from many people who say they formed a company, but didn’t pursue it. And then they get this bill in the mail,” Bysiewicz said.

    “While $250 may not seem like a lot, for our members, all of whom are small businesses, it can mean a month’s electricity bill or a month’s insurance,” Frank Alvarado, director of the New Haven and Willimantic offices of the Spanish American Merchants Association said.

    “When we get that bill, it’s the one time we think about doing business in another state,” Theodore C. Hsu, owner of Horizon Services Co., a cleaning and supply business in East Hartford, told participants. “I talk to many other business owners, and they see this as being gouged. It stops their spirit.”

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    IRS LogoBeing the end of the year, it’s time to start thinking about taxes…

    In some ways, I’m looking very forward to February when we’ll file our taxes and get our nice big refund like we do most years but right now, I’m looking to change my filing status for 2008 on my Form W-4 so that I don’t have so much taken out of my regular paycheck.

    In the past, I’ve filed single with zero exemptions, with an additional $50 taken out of each paycheck. This was due to the fact that I was earning more than $1000 per month from the hockey team without having taxes taken out so I was trying to cover that through overpaying from my full-time job. It worked out, or more accurately, I still over paid because I’ve received a large refund each February shortly after I filed my return.

    But with that job done and gone now, it’s time to reassess things for 2008.

    PayCheckCity.com has a nifty calculator, and one that I’ve been seeking for a long time, that calculates what your net pay will be based on how you file. Best of all, for me, it was accurate to within $0.74 for the 2007 tax year.

    I plugged in numbers for 6 different scenarios for the 2008 tax year just to see how each change would affect my bottom line — the net pay that I’d take home.

    Filing single, married, zero exemptions, one exemption, two exemptions, 10% for 401k, maxed out 401k, that sort of thing…

    I settled on the most conservative option (because I still have a fear of owing money to the IRS) by switching my federal filing status to married (from single), and switched from zero to one for the federal exemptions.

    I also maxed out my 401k. It was just under 10% — as of my next paycheck, it will be 15%.

    Bottom line? Well, it’s one of those wacky scenarios where by saving more, I’m giving myself a raise.

    My net pay increases $85.78.

    It’s not a huge increase, but the 401k increase is quite large.

    Best of all, it’s not even 2008 and I can already cross off one of my goals for the year. How about that?

    Can You Dig It?

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