Category Archives: Taxes

Funniest Tax Return Ever?

I was going through some of my starred emails in Gmail, trying to clear out the old and irrelevant ones, and the last one in my list was from my brother. A few years ago, he filed his taxes and got a funny looking picture that I wanted to share with you.

He was working as a research assistant while pursuing his Ph.D in Computer Science while his wife was a medical student. On tax forms, there are only so many spaces for job descriptions, so when it printed his form, it only displayed the first 12 characters:

(click for large image)

I still think it’s hilarious (it describes them perfectly) and will be keeping this one for awhile.

Tax Tips To Consider Before April 15th

With April 15th looming, Americans look to reduce their tax expenses. They confront a complicated tax code. It is important to note these figures from the IRS:

  • 1 billion – the total amount of hours individuals and businesses spend on taxes
  • 5,000 – the approximate number of tax changes from 2001 until the National Taxpayers Advocate Report in 2013
  • 30% of American buy tax software to help them

Cutbacks in staff at the IRS mean that people have difficulty reaching an actual person to answer their tax questions. This information illustrates what people face:

  • 5 minutes – average wait time in 2004
  • 30 minutes – estimated hold time for 2015

Tax Deductions and Credits Worth Considering

There are well-known ways to reduce your taxes such as the mortgage interest deduction and the child tax credit. Here are some not-so-famous deductions and credits.

  1. Interest on student loans – People paying off student loans can deduct the interest. This deduction can really help people with substantial student loan debt.
  1. Foster Pet Care – That phrase is not a typo. Many people are familiar with charitable deductions for cash and clothing contributions. If a person fosters a pet, he or she can deduct certain expenses such as food and medical bills.

Like any charitable contribution, a person needs to keep his or her receipts. Also, the organization needs to be a qualified charitable organization recognized by the IRS.

  1. Going Back to School – Many people want to finish their degree or go to graduate school. The Lifetime Learning Credit can help those taxpayers.

It is worth up to 2,000 so people who want to continue their education should investigate this credit.

  1. State Income Tax or State Sales Tax – Most states have an income tax, and the income taxes that residents pay throughout the year can be deducted from federal income taxes.

However, residents of states like Texas and Washington (no income tax states) can deduct sales taxes. They will have to save all of their receipts, but it pays to be diligent.

  1. Job Search Expenses – The last few years have been rough on Americans. Deductions exist for expenses such as resume writing services and transportation to and from job interviews.

Note: There is a very important restriction. The deductions are only available for people who are searching for a new job in the same occupation. A person who wants to make a career change from being an Administrative Assistant to a position such as Chef is out of luck.

  1. Kicking the Smoking Habit – People can deduct qualified medical expenses. Smoking cessation programs (prescriptions) fall under this category. When Americans quit smoking, they also save money on other taxes too.

A person must itemize to deduct for medical expenses. Another important fact is that people cannot deduct expenses that were paid using pre-tax dollars.

Be Conscientious

When managing their taxes, people need to:

  • Save their receipts to back up all claims
  • Consider itemizing to get the most deduction and credits
  • Get assistance if they are still confused

Unfortunately, the tax code is still very complicated at this time. None of this information is intended to replace a trained tax professional; however, it can help you.

How to Spend Your Tax Refund This Year

I’m almost ready to file our taxes this year, and it looks like we’ll be earning a nice fat refund. It’s not always easy to know what we should do with the refund money though – do you blow it all or be responsible with it? The short answer is that you should incorporate both options, but be smart and know your limits. Here are some ideas on how to spend your tax refund this year.

Give Yourself Some Spending Money

We all know that the responsible thing to do is to save the money or to pay off debt but you also do need to be able to have some fun. You worked hard all year round, some of that refund money should go towards helping you to blow off a little steam.

Set aside a portion of the refund money to spend on anything that you want and ditch the guilt. It could be 10% or 50%, it all depends on what your financial goals are. If you are always responsible with your money, you’ve likely put off some wants so that you can hit your savings goals. You have to plan for the future but also have to live in the present. You cannot put off having fun forever.

Finance Your Dream

Perhaps you have always wanted to visit Italy or would love to take a cooking course. Using your tax refund as a means of funding your dream is really great for your soul. Think about it for a minute – 10 years from now will you regret not putting more effort into making your dreams come true? If the answer is yes, consider using your tax return accordingly.

That said, you should look at something that has some degree of importance to you – something that you ordinarily would not have been able to do. A trip to Italy, for example, can be a once in a lifetime experience. Who knows what your circumstances will be in 10 years time – you have to live in the present as well.

Improve Your Financial Future

There is something to be said for using your tax refund, or at least part of it, to help build a better financial future. Using it to shore up your emergency fund is a great way of doing this. If you’re behind on your retirement savings, get a head start on your Roth IRA for this year.

There are many good investment options out there. Take some time and do your homework and you’ll thank yourself later when you check your investment accounts.

Use It To Reduce Everyday Living Expenses

Using your refund for maintenance projects that you have been putting off can pay great dividends in the future. Take your car, for example. Having it serviced allows it to run more efficiently overall and this can save you in gas costs and repairs. You can also have an energy audit conducted in your home to identify what appliances are “gas guzzlers” in terms of power. Consider replacing appliances for ones that are more energy efficient in order to save money every single month. A one-time expense now can pay dividends down the road.

Overall, your refund should be used to improve your life – whether that means using it to have fun or using it to bolster your nest egg. Take a few minute to consider what will have the best impact on your life.

How are you spending your tax refund this year?