Most Americans want to save for retirement, but most don't know how to start. Putting money into a savings account is ideal for short-term goals and emergency funds. But there are better investment vehicles for long-term savings. One investment vehicle that I've grown to love almost as much as much as I love In-N-Out Burger (key word: "almost") is the Roth IRA.
I know Get Rich Slowly has covered the Roth IRA a lot in the past, but new readers might not be that familiar with it. Besides, even though you might think you know everything there is to know about Roth IRAs, here are some facts that might be new to you.
Charitable deductions can be a complex and confusing area of your tax return. Understanding what you can deduct and what you can't deduct can be confusing. Documenting it properly adds yet another layer of difficulty. To help sort it all out, I talked to Kelly Erb, (a.k.a. Taxgirl), and Kay Bell (of Don't Mess With Taxes).
- Erb is a tax attorney who runs her own tax law firm with her husband. She's also been blogging about taxes for the past six years. Before striking out on her own, she clerked for the IRS, specializing in estate and gift taxes. She also worked for a boutique law firm that primarily handled estates and gifts.
- Bell is the author of The Truth About Paying Fewer Taxes, and the founding editor of Bankrate's tax section. She has worked on Capital Hill with the House Ways and Means committee.
Both women offered great tips for getting the most from your charitable deductions while taking care to avoid pitfalls that could get your return flagged.
Should You Be Taking Charitable Deductions?
Most people give at least some money to charity, but few of us take our charitable deductions. In fact, only about a third of households itemize their deductions. The rest simply take the standard deduction, which for the 2010 tax year is:
The cost to file income taxes can fall anywhere between zero dollars -- as in you do your taxes yourself and file for free -- and several hundred dollars, with an average cost of $273 for using a tax preparer, less if you don't itemize ($159), according to the most recent data available from the National Society of Accountants.
To judge the value correctly, though, those costs have to be weighed against the results you get, your own comfort level with going DIY, plus what could go wrong if things don't work out.
Nobody likes to pay taxes. And I think we all get a little kick out of finding ways to save on our tax bill. We smile when we find a deduction we'd been missing. Maybe we think it's a great deal because we're sticking it to the man. Maybe the tax deduction tricks us into thinking we're getting a discount on buying something that we want. Or maybe the tax deduction leads us to believe we're making a smart decision. I know I get a little tingle inside when I find a new tax deduction. Don't you?
Are All Tax Deductions Good?
The problem is that saving on taxes usually amounts to spending cash, or worse, signing up for debt. That's right, we're all trying to get rich slowly, and it seems like saving taxes would go hand in hand with this, but when it comes down to it, many tax deductions are really a drain on our cash flow or emergency fund. Many tax deductions can increase risk and even can put us a little bit further behind the eight ball. All in the name of saving taxes.
This is a Guest Post by Richard Close. As a former IRS Revenue Officer, Richard "stole" $10 Million for the IRS. Now he works to help American taxpayers and has had a partnership with Tax Defense Network and has offered advice on how to cheat on your taxes legally to GRS readers below.
Ah, tax season. That time of year where people grouse about the greedy government. Some folks are so in need that they start looking for ways to cheat on their taxes. Here's a hint: Never cheat on your taxes. The risks far outweigh the rewards. How do I know? Because I used to work for the IRS, and I saw first-hand what happened to tax cheats.
Tax season is in full swing, and again this year, the Internal Revenue Service is offering a program that allows many U.S. taxpayers to electronically file their tax returns for free:
The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service and the Free File Alliance LLC, a group of private sector tax software companies. Many companies offer free or paid state tax preparation and efiling services. Some companies may not offer state tax preparation and e-file services for all states.
I've shared this service with GRS readers in the past, and will do so every year in the future (so long as the program exists). I think it's awesome.
Most employees have to submit expense reports at some point — be it for out-of-town travel, client dinners, special events, or other expenses you incur due to your job responsibilities. Keeping track of these expenses is important, otherwise you're losing money while on the job and probably not endearing yourself to your company's finance department, which relies on accurate records and timely reports from employees.
It seems straightforward enough to track your expenses, but I've personally known employees who have lost receipts and didn't get reimbursed, failed to get reimbursed because they didn't understand that an expense was reimbursable, or missed the deadline to turn in the paperwork. In all three cases, the employee paid for a company expense with their own money. Not good at all! The situation can easily be avoided with some basic steps to make sure company expenses don't affect your bottom line.
Know the Policies
Request a copy of your company's expense reimbursement policy, and make sure you understand the guidelines about the following: Continue reading...
April 15th may be a few weeks away, but I'm guessing some of you have already filed your tax return. We, as a matter of fact, just finished our tax return last week. For the second year in a row, we are getting a small refund. (As an aside, we have a large nonrefundable tax credit that is taunting me. Our tax liability wasn't high enough to use much of it, so there it sits…)
Whether you are getting a large or small refund this year, you are probably anxious to receive it -- I know I am! Did you know you can check with the IRS to find out what the status of your federal tax refund is?
How? I am so glad you asked….
Apparently you can now use your tax refund to automatically buy I-series bonds from the U.S. government.
As recently as three years ago, I was a huge fan of tax refunds. Despite the arguments against them, I liked getting a tax refund because it was the only way I'd found to save. I'm able to save on my own now, so I no longer aim to get a tax refund every year, but I certainly don't fault anyone else for doing so. If that's what you need to save, then do it!
If you're truly trying to save with the money, the U.S. government has a new option for you starting this year: Now you can buy U.S. Series I savings bonds with your tax refund. Instead of getting a cash refund, you can designate up to $5,000 of your refund to be delivered in actual paper bonds issued in your name.
Note: Although I try to keep GRS a politics-free zone, today's topic is inherently political. I've stayed as neutral as possible in the article, but I know that there'll be some political discussion in the comments. Please keep conversation civil, as always.
Because I was frustrated with my own ignorance about the U.S. federal budget and our tax system, I recently spent twelve hours researching a variety of tax topics. From my research came two articles: last week's short guide to the federal budget and today's post, which answers some of my personal questions about taxes.
Last week, we tried to take a few small steps toward understanding the federal budget. We looked at where the U.S. government spends its money. But where does it actually find the cash to spend?