Category Archives: Taxes

Buying New Windows, Insulation or Central Air? Use the New Home Energy Tax Credit

Thinking of buying new windows or installing central air? The new economic stimulus plan offers some financial help in terms of affordability.

30% Tax Credit on Eligible Energy Saving Materials

This credit has been around for a few years but it has typically been limited to a maximum credit of $500. The new stimulus plan has increased the maximum credit to 30% of the cost of installing certain energy saving materials or $1500, whichever is smaller. Here is a list of things that qualify for the 30% credit:

  1. Insulation
  2. Storm Windows
  3. Central Air Conditioners
  4. Water Heaters
  5. Furnaces
  6. Other Energy Improvements

Of course the IRS and the Government had to put ‘other energy improvements’ into the bill. Don’t ask me what that means because I have no idea.

So, if you were holding back on purchasing new windows or that much needed central air, this new credit may help speed up your decision. I know my mother has been holding off on purchasing windows and this new credit may just encourage her to go ahead and purchase them. The credit will be for purchases in 2009 and 2010.

If the cost of the windows are $5000 for the whole house, you can get a credit of $750 on your 2009 tax return. That’s like getting a 30% discount on your window purchase. Combine the 30% tax credit with your ability to get a good deal and you can turn this purchase into a GREAT deal!

Will this new credit encourage you to purchase any of these items?

2009 Economic Stimulus Plans Effect on Taxes Now and Beyond

As most of you know, President Obama signed the American Recovery and Reinvestement Act into law on Tuesday. Supposedly, millions of Americans will benefit from the plan in more ways than one. Here are a few highlights from the plan and how they will affect your taxes now and in the future.

Making Work Pay Credit

The making work pay credit will be heading to a paycheck near you in the coming months. The employed will get up to $400 per individual and $800 per married couple. Sounds like quite a good amount. However, you will not see all of this money at once as it will be used to reduce your weekly federal taxes on your paycheck. Every little bit helps in these economic times.

What about retirees, veterans, or people on disability? These individuals on Social Security will get a one-time $250 check in 2009. That should help give a small boost to those individuals on a strict fixed income.

What if you are unemployed? The bill has added several things to help those who are unemployed. It has exempted the first $2,400 in unemployement benefits from federal taxation. The bill has also increased the payout by $25 a week, extended the time period for benefits, and it gave a 65% break on COBRA premiums. I just hope this helps incourage individuals to seek work and not just keep them on unemployement longer.

Help For Individuals With Low Incomes

The bill also provides a larger Earned Income Credit (which is refundable) for families with 3 or more children. For those of you that fit into this category it will not affect you until you file your 2009 taxes. However, you may be able to get EIC advance payments by talking to your HR representative at work.

There was also a part of the bill that lowered the threshold for the child tax credit. This will help lower income families due to the lowering of the threshold from $8,500 to $3,000 for the current tax year.

Making Home Ownership More Affordable

The bill included the long awaited (and widely talked about) 1st time homebuyer credit. The original $7,500 credit needed to be paid back over several years. The new credit is refundable (meaning you can get the money even if you have no tax due) and does not need to be paid back. The nice thing about this credit is that you can take it on your 2008 tax return. If you have already filed your return, you may want to consider an amendment.

What are your thoughts on some of these measures? Will they work or will they come back and bite us later down the road?

How Long to Keep Those Pesky Tax Documents

Well, it’s Friday the 13th and I figured what’s more scary than taxes? One of the most frequently asked tax question is how long you must keep tax documents. You want to know the answer? It depends. Isn’t that the answer to everything these days? Anyway, here are some general rules for keeping your records straight with the IRS.

Three Years Might Be Enough

Most tax documents can be shred after three years. Why? Three years is the statute of limitations for tax audits at the IRS. That means that come April 15th, 2009, the IRS can no longer audit you for your 2005 tax return. Why don’t you invite your friends over that day and have a shredding party? You can even have them bring over their papers! However, don’t shred them if you filed for an extension for your 2005 return. You must hold onto those papers until three years after the due date of the extension.

Things to Keep Beyond Three Years

Wait! Step away from the shredder! There are some things that you should keep beyond three years. First, you should keep any records you have on appreciable assets that you currently own. That would include stocks, bonds, antiques, real estate, land, jewelry, etc. Chances are, you will sell these one day and having these documents will be crucial in making sure you are paying the right amount of tax. For example, if you do improvements to your home, it adds to the basis of it. This will end up helping you in the end and may lower your tax on the asset. Make sure you keep all of the documents that shows the costs of the improvements. The IRS is all about showing the appropriate documentation backing your calculations.

Another thing to remember is that if you “forget” to report income, the IRS can go back up to six years. Also, if you plan committing tax fraud, you might as well get used to metal bars because the IRS will find you and they can do that whenever!

Where to Put Your Documents

Now that you know what to keep, where should you keep it? The best place to keep your files is a bank safe deposit box (which is tax deductible if you itemize by the way). If there is no way you can have a safe deposit box, invest in a fireproof safe. Make sure the fireproof safe can take a few hours of heat that way you know it will survive almost anything.

I know it’s a pain to keep all of these records, but believe me, it’s much better than having to pay penalties and interest on taxes that you have to pay due to not having proper records.

Do you have any particular tax questions? Submit them here. As I stated before, I am studying to become an enrolled agent. Answering your questions will be a great learning experience for me!

Taxpayers May Have to Cover Octuplet Mother’s Costs

The mother of the octuplet babies has been in the news for a few weeks now and the news does not seem to be letting up. The Associate Press has a great story on how taxpayers are more than likely going to cover the costs of raising these children (she had 6 BEFORE the octuplets). The brunt of the taxes are going to come from California taxpayer’s where the mother lives. California is already billions of dollars in the red, so I can imagine how this is going to infuriate some. Here are some highlights of the article (in red) and my opinions (in black):

“Even before the 33-year-old single, unemployed mother gave birth to octuplets last month, she had been caring for her six other children with the help of $490 a month in food stamps, plus  for Social Security disability payments for three of the youngsters.”

OK. I can understand the need for food stamps and disability payments if you really need them. I can imagine that she did at the time too (she was on disability from a job-related accident for several years). However, I do not understand how she could want to bring additional children into this world knowing what she knew.

“Also, the hospital where the octuplets are expected to spend seven to 12 weeks has requested reimbursement from Medi-Cal, the state’s Medicaid program, for care of the premature babies, according to the Los Angeles Times. The cost has not been disclosed. The Suleman octuplets’ medical costs have not been disclosed, but in 2006, the average cost for a premature baby’s hospital stay in California was $164,273, according to the U.S. Department of Health and Human Services. Eight times that equals $1.3 million.

That is a big chunk of change for the government of California to be paying. I think I would put her on a nice payment plan. Just kidding!

“In California, a low-income family can receive Social Security payments of up to $793 a month for each disabled child. Three children would amount to $2,379.”

Wow. That is some pretty good assistance from California. No wonder they are in so much debt! I imagine there is a cap on the amount that she can receive but if there wasn’t, she could receive upwards of $11,000 a month! Not to bad for being unemployed!

Now, after seeing all of that, what is your opinion? I know there will be many different views on this, especially since we are in a recession. However, I read somewhere that when other families had multiple babies they received praise and gifts. They received a lifetime supply of diapers, TV shows, shopping sprees, etc. What makes this woman different? I know she shouldn’t have had eight babies, but isn’t that what in vitro fertilization is all about? Don’t you get as many eggs as possible to up the chances? I mean, Jon and Kate (from Jon and Kate Plus Eight) had six babies and they received all kinds of support.

Your opinion? Please keep it clean or I will delete your comment.

Need a Professional to Do Your Taxes? How About a Virtual CPA?

Beyond Paycheck to Paycheck wrote an interesting post today about the state of today’s tax preparation. Personally, I’ve always completed my income taxes myself. That is mostly due to the fact that they were not complex. I imagine if my blogging income picks up or I start my own business, they will become more complex and I will need some help. I would not like to go to a chain or use a box if they are that complex. I know I/they would miss something and it may end up costing me. The only other choice would be a CPA and they can be rather expensive. But, with technology changing the way it is, a virtual CPA makes a lot of sense. Why pay for the whole CPA when you can get the tax expertise you need for much less?

Of course, if you can do your return on your own (and maximize deductions), that’s ideal. But there are many individuals who can recoup their tax prep fee (and then some) by getting a real professional involved. Furthermore, given the free 30 minute phone consultation with a Certified Financial Planner, Total Candor Tax Prep seems like a great idea. He seems to be growing his practice by word of mouth, which seems like the right thing especially since it’s a repeat business.

Michael has plenty of discounts available for his services. You can get money off for sending in your returns early, being a full-time student, referring other customers and more! Want to be my referral? Head over there and check it out!

What about you? How will you get your taxes done this year?