Boring (but Necessary) stuff

Tuesday, April 7th, 2009

This is probably going to be a shorter post today because we are at the height of tax season and I am up to my eyeballs in tax return work!

However, here is a non-tax related but important item for Turbo-Moms everywhere. Tax time is also a good time to get thinking about other information that we need to get in order, such as life insurance policies, wills and such.

Here’s why:

• Have you had another child or 2 since you took out that term life insurance policy? Be sure to contact your agent and get a “change of beneficiary” form and add your newest family members to the policy. 
• Do you have a will?  If not, there are all sorts of programs out there to help you along with the process.  The best deal I’ve found is the Family Lawyer software package offered by Broderbund Software (www.broderbund.com), the same company that manufactured “Print Shop” and still does.  For $20, you have a whole suite of documents, including wills, trusts, etc. as well as hundreds of other documents (example: if you need to sell your car or need to complain to someone but aren’t sure what to say).   What I recommend is drawing up your basic will using the software and then taking it to a trusted estate attorney to review it to make sure that it fits your state’s laws.
• Did you have a big refund or owe a lot this year? If so, it’s time to adjust your W-4, i.e. your tax withholding from your paycheck.  Check out www.paycheckcity.com for an easy to use calculator to help you adjust it.

Gotta get back to taxes but have a great week!

Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.

Tags: important documents, insurance, taxes
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Finding a GREAT tax preparer

Monday, February 9th, 2009

So how do you find a GREAT tax preparer?  It can be tricky…do you go with a chain location? Or how about an independent? Or someone doing taxes “on the side” and “on the cheap”?  And how do you figure out if they are any good or not?  Here’s a list of do’s and don’ts when it comes to finding your very own tax preparer:

DON’T go to a preparer who gets paid by receiving a percentage of your refund.  This is not only unethical, but in many places it is illegal.  And what happens if you owe money?  Do they pay YOU for the privilege of doing your return?  I don’t think so. 

DO ask in advance approximately how much they think it will cost to prepare.  Some preparers charge by the hour, some by the form, and some on a flat fee basis.  All are acceptable ways of paying your preparer.  Personally, I prefer to charge on a flat fee basis, because then there are no surprises for my clients when their returns are ready.  If your preparer charges hourly, be sure to request to be contacted if your return takes longer than expected.  This way, you won’t be expecting it to cost $350 and then it ends up being $550 due to a complication.

In addition, if your preparer charges hourly, beware: if you like to chat, it may be considered time “on the clock” and run up your bill.  So if you meet with or call your preparer, be sure to stay “on point” during your conversation to keep your costs down.

DON’T agree to a Refund Anticipation Loan (a.k.a. RAL).  Otherwise respectable preparers and chain tax prep shops offer this set-up that is a losing deal for the taxpayer.  It is a short-term, super high interest loan.  Instead, have your return E-filed and the refund direct deposited in your bank account.  A federal refund handled this way can show up in your bank account in as little as 7 days, though 10 – 14 days is more likely.  The State of CT can be even faster–prior years’ experience has shown me that CT can turn it around in one week or less–but that’s not always the case so don’t hold me to it.

DO choose a preparer who asks you a lot of questions.  One that also provides you a “tax organizer” is even better.  These are preparers who take the time to find out about you and see which well-known and little-known deductions may apply and can save you money.  It will also save everyone time by getting your information organized in and in good order.  You don’t want a preparer who just takes your envelope full of papers and just inputs them.

DO be aware that different tax preparers are held to different standards.  Preparers that have EA (Enrolled Agent) or CPA (Certified Public Accountant) after their names are held to higher professional standards (such as IRS’s Circular 230), including fines, penalties, etc. and also require annual Continuing Education to stay up-to-date on the latest tax law changes.  That doesn’t mean “undesignated” tax professionals can’t be as good or better, but be aware of the differences.

DO ask your preparer what kind of Continuing Education courses they take. You definitely want someone who stays in tune with all of the various federal, state, and tax law changes that could apply to you, no matter what their designations. 

DO use a professional association to find a preparer if you are shopping for one.  The National Association of Tax Professionals (www.natptax.com) and the National Association of Enrolled Agents (www.naea.org) are great places to start. 

Next week, I’ll address some deductions that you’ll want to know about for this year’s tax return…to save you some money and time!

Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.

Tags: NAEA, NATP, RALs, tax preparers, taxes
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DIY Taxes

Monday, February 2nd, 2009

Hi everyone!  We’re covering a weightier topic this week…

It seems like there’s that usual seasonal push/ads for tax preparation these days, including the do-it-yourself software.  In these tough financial times, many people are looking to cut costs in any way they can, including doing their own taxes for the first time by themselves instead of paying a preparer.  Some of you may enjoy keeping up with tax law changes and have been doing your taxes yourselves for a long time–my hat is off to you for following up on all the laws!! 

However, as a tax professional, I think that having a good tax planner in your corner is worth more than the “savings” possibly generated by a DIY software, but it has nothing to do with promoting my industry or keeping myself in business!

There are several reasons I feel this way:

 1. Many of the “box” programs are advertising “Free 5 Federal e-Files and the same product price as last year!” It sounds good until you find out that now you are going to have to pay for the state return itself in addition to the state e-File fee, unless you buy the most expensive of the software’s product line.  So your $30 or $40 DIY will generally end up being around $80 – $90, unless you live in a state wherea you are not required to file a state return.  I hate this kind of false advertising.

(On a side note, I have heard some gripes about, “Well, what am I going to do with 5 Federal E-files anyway?”  which is pretty legitimate.  The only people who will benefit from this are those who have to file returns for their children as well.  And you can’t amend by e-File–that’s only by paper return.)

2. State-related DIY software may be out of date without you knowing it.  DIY software is usually released in the end of December/beginning of January–which is usually before the states have finalized their tax forms for the year.  Thus, if you don’t download a software update, you could be using the wrong forms which will delay your refund and possibly causing you to have to do it over again–wasting a lot of time.  For readers who are CT residents, please click the notification about this problem and how to fix it here: http://www.ct.gov/drs/cwp/view.asp?Q=432034&A=1436

3. DIY software is only as good as the user completely understands the question.  Otherwise, your information can end up in the wrong places and thus generate an erroneous return. Or you could end up missing out on deductions because you didn’t quite understand the question–so you skip it, thinking it doesn’t apply to you. And customer service can be lopsided, a long wait or just frustrating if you are trying to work out a problem.

4. There are a lot of changes in tax law each year. Consciencious tax preparers regularly attend update classes to keep up with changes in federal and state tax law.  My tax association hosts a 2-day, 8 hour/day event to inform us of changes each year so that preparers are up-to-date on the rules.  As a DIY-er, in this case, what you don’t know can hurt you in the form of erroneous returns or missed deductions.

5. Tax planning and tax preparation are not the same thing.  A good tax preparer will ask you lots of questions to figure out how to legally save you money on your tax return.  A great preparer will work with you to plan on saving money in future years and finding strategies to maximize those savings.  A DIY software or a generic customer service center isn’t going to do that for you. 

Money issues are stressful enough these days without adding tax worries to them!  There are plenty of good preparers out there so do inquire around if you think you might want one or are considering changing.  And if you have any tax questions, please do not hesitate to contact me. 

 Next week, we’ll cover how to figure out if your preparer is any good or not.  And where to find a new one if you are ready for a change!

Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.

Tags: taxes
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Taxes and more taxes

Monday, December 8th, 2008

Well, I just spent my Friday & Saturday of last week at an intensive 2-day tax update seminar.  Believe it or not, the speakers are really good and even manage to make federal, CT, & NY updates interesting.  But these meetings are not for the faint at heart!

At this time of year, many newspapers and magazines are running their annual “end of year tax planning” articles which can be helpful if you know what questions to ask.  Here are a few tips you may not have heard that I will share with you:

1. If you are planning on improving the energy efficiency of your home with a big purchase such as a new boiler, insulation, etc., hold off until at least January if you want some of the stingy tax credit benefit the IRS is giving ($500 lifetime credit–I mean really.  Replace 2 windows in your house and you are done.).  The credit existed in 2007 and is being revived for 2009, but for some reason, purchases in 2008 are being left out.

2. Get those charitable donations in.  Books to the library, clothing to Salvation Army or wherever you choose to donate your goods.  The warm clothes will help the less fortunate this year and you’ll free up some space in your closets. And don’t forget your charitable driving mileage–14 cents/mile.

3. Consider refinancing your mortgage if possible.  Okay, so this isn’t directly related to saving on your taxes, but it can save you money.  Mortgage rates have dropped and lending has loosened up a bit so if you have an adjustable-rate mortgage (ARM) or a higher rate, give it a try.  And call your current bank and see if they directly hold your mortgage and ask them for a “rate modification” if they do.  This costs much less and is much less hassle than a refinance and is a great way to save if you can.

4. Take some of those capital losses.  If you had gains (yes, some people actually had these earlier in the year) in 2008, try to offset them.  If you have some losses, might as well use some of them.

5. If you are a first time home buyer, be aware of the pros & cons of the 1st time home buyer credit.  This $7,500 credit looks rather attractive, but be aware it is not a complete government freebie.  It is actually an interest-free loan from the IRS that you will pay back over a period of 15 years each year at tax time if you stay in your house.  If you sell your home before the 15 years are up, you will have to pay back the balance in full when it sells.

If you are a CT or NY resident, feel free to contact me directly with questions.  CT & NY aren’t playing well together these days, so if you work in one state and reside in the other, watch it if you work some days in the office and some from home.  Both states may come knocking on your door for their share.

Copyright 2008-2009 Kristin Delfau, author of Turbo-Mom's Guide to Saving Money Without Wasting Time a womens' personal finance book, and Aji Publishing.

Tags: IRS, taxes
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