Mapgirl’s Fiscal Challenge

Basically if you are a single person with student loans and no mortgage, taxes are a breeze. Heck add on an IRA and they are still pretty darned easy.

When you have a blog business and a mortgage and significant things to keep track of, they are still easy. When you have multiple streams of income, that’s when it starts to get annoying for me.

J. Savings of Budgets Are S.e.x.y asked me if I sought help for doing my taxes or if I used a program.

Honestly, as long as you are organized, you don’t need help doing your taxes. I have used Turbo Tax in the past because I am a Quicken user, but I really didn’t like it. I felt like I had to hand-correct or override a great many things with the program. For 2007 taxes, I went back to spreadsheets and Quicken reports for filling out my taxes.

Caveat here is that I make a living writing accounting reports. I am used to looking at the world in monthly and quarterly statements, so I get a kick out of pulling reports for my personal expenses. The main thing is really how you categorize them throughout the year. I pulled my expenses and found that I was really lazy in making categories for myself. I don’t really have ‘Mapgirl’s Fiscal Challenge’ taxable income and expense categories set up, therefore, I had to comb through some of my other categories to get the right numbers.

If you can read, you can do your own taxes. The biggest annoyance for me was having to figure out if I owed AMT. Just doing an additional worksheet was irritating, but the IRS designs the tax forms to be simple word problems a 5th grader could do. “If this, then that”. The challenge is your judgement during the process. Is your home office deductible? What about your dinner bill when you meet a bunch of PF bloggers and talk shop? But don’t fret, the IRS offers you much guidance with Publications about taxes. And if you still can’t figure it out, then go ask a professional. But most of it is pretty straightforward.

PS - The final tally on taxes was ~$1481.00, or about $100 bucks plus change every month. Still not enough for me to feel comfortable adjusting my withholdings. Hooray for procrastination and putting an emphasis on my day job! (There is something else major that got in the way, but I’ll write about that later this week.)

Ugh. I hate doing my taxes. It’s just gotten more complicated over the years since I started taking itemized deductions and deciding to run this blog as an actual business with income. At any rate, I finally started them so I can file them this this week.

Preliminary result? ~$999.00 refund.

I know many folks pooh-pooh getting a refund, but I figure for <$1000 refunds, it's not worth adjusting my witholdings for a measly extra $41.25 per paycheck. The enforced savings does me good, because we all know, I'd just go to dinner with that money in my hand. Start talking $3000 refunds at $125 per paycheck and then we'll talk.

As it is, I should have filed sooner since I could use the money to pay VA state taxes. I dread that I might owe some this year, but I haven't done them yet to find out. I'm lucky. VA has a tax filing deadline a few weeks after the Feds. That's because the VA state return is contingent upon what you report to the IRS. Yippee!

Why did I finally do it? Because I read Tired But Happy’s post about her taxes and saw that I had better file mine if I wanted it processed by April 15th to get the stimulus package. Oh well. $600 bucks slipped right out of my hands. Que sera sera. It would have gone to debt repayment anyway.

Well things have resolved for my friend. She’s going to move back in with her old boyfriend and live as roommates in a little while so she is going to give me back my keys in a few days. Honestly, this is a relief to me since I need to get to my desktop PC and my Quicken! It’s time to do my taxes and my March Net Worth!

She won’t need to borrow any money from me since she forgot that she has a security deposit her ex-boyfriend will buy out her share of their current deposit. That’s good because I had another car repair this month for about $550.00 and miscellaneous wedding expenses, namely advance deposits for a beach rental for the wedding in May. Unfortunately, that means I’ll be putting off a laptop purchase for a few more weeks.

Oh and my girlfriend offered me a few hundred dollars for the last few weeks, but I told her to knit me a nice scarf or something instead. Considering how long it takes to make an item and she has a lot of knitting talent, it’s a pretty fair barter. Hm. But of course, if I took ‘rent’ from her I could take it as a tax deduction…Now there’s a thought!

Crud. I thought I posted this last week.

This is a rare Saturday post, but I feel guilty for blowing off the blog while on holiday this week. (And drinking beer at lunch on Friday with my co-workers. Don’t laugh. I’m still doing server maintenance this weekend. I’ve EARNED IT.)

After the IRS website, I love Kay Bell’s blog, Don’t Mess with Taxes.

Recently, Kay was featured on NPR, but she didn’t say a peep about it on her blog. So I will toot her horn here.

OMG! KAY WAS ON NATIONAL RADIO!

It was a piece on year end tax moves and has 4 other resource links you might want to read while you have three days left this year. (Which are gone now because I spaced out over the holidays.)

I know lately I’ve been micro-focused on my own spending and debt. Don’t think I lack interest in the greater economic forces out there. I just don’t think about them very often.

I would like to point out a great discussion on the Diane Rehm Show that was on this morning. In a fog of a headache, I listened to parts of the show aboutreforming the Alternative Minimum Tax. Fascinating stuff. Even if you aren’t paying it, pay attention. Unless something changes, we all might have to pay it just because of inflation making our income rise.

One of my knitting friends is about to have a child. Her due date is around the end of the year. She’s hoping to have it in 2007 so she can take the tax deduction, but I did advise her that she might want to visit a financial advisor because doing things like having babies makes the AMT kick in.

It’s not directly relevant to me, but AMT effects people I know, which is why I care enough to point it out to everyone.

Should it go away as a revenue stream for the government, we’d have to make up the trillion dollar shortfall in another manner.

Per the commenters on my dental financing post, I needed to look into IRA contributions more carefully. Without getting too specific about what I make in income, I am hitting to the phase out point. Over the last few years, the contribution rules have changed and apparently, I’m behind the times. I needed to do some more research on the rules.

It turns out that my AGI will be well over the 2007 Single Filer limit for IRA deductibility, which is an AGI of $52K. WOW. I have totally not been paying attention. Even if I was maxing out my 401k contribution, I don’t think I’d be under $52K. Investopedia has a nice chart with the 2007 IRA contribution limits. Scroll to the bottom to read the table.

I also found this IRA contribution calculator at Smart Money and when I punch in my info, it tells me that I can no longer deduct Traditional IRA contributions. I am left with ROTH IRA contributions only. Bummer.

Why is this a bummer? Well, I’ve put $900 into a Traditional IRA account for some stock market mad money. Now I know, I can’t keep adding to that account and get a deductible benefit. So there’s no point in having Traditional IRA accounts anymore. Nuts. Welcome the world of great income, Mapgirl. GOOD JOB!

I am now stuck holding two low value Traditional IRA accounts and I think I should consolidate them by closing my stock trading account and roll it into the existing Fidelity account I have. I am going to have to think about this since I would be selling stuff off at a serious loss. I wish I had thought about this earlier in the year, I would have closed the stock account sooner before this summer’s wacky performance.

Everything is a mixed blessing in this world. Now I know. I have to open a Roth IRA.

So I’ve been thinking about reducing my 401k contribution so I could pay my bills off faster.

Then there was this rigamarole about cutting back to 5% just to continue receiving the company match, because that sounded like I was giving up free money. And then I remembered that my company does a 401k true-up. So I called my benefits department to confirm this and they said yes, they do. Therefore, I’m going to cut back my contribution to nothing and let my company pay me the true up amount later. Because I need the cash now.

How does this impact my finances? Well more than I thought. Yes, I will be losing the tax benefit from the 401k contribution, but by paying off the entire bill right now, I may be able to get a couple of items of medical work completed by December 31.

To create a deductible item on my tax return, I need to spend over 7.5% of my salary on medical expenses. Now, I’ve figured out that I need to spend about another $3K to hit that mark. This means I can get my last permanent crown and eye surgery all this year. Yes, it’s spending to save, but I am going to look into it. I get the health benefits immediately rather than later and financially, I think taking the deduction now instead of next year when it won’t be deductible at all. There is a time-value component to these expenditures and I’ll have play with a few scenarios to figure out if the present value of the money is worth it.

Plus if I do all the medical work this year, it means I can put A LOT less into my medical FSA account and I can do four things in 2008:

1) Return my 401k contribution to 20% and max that puppy out.

2) Fund my traditional IRA more quickly than before. (Though I am reaching phase out stages, I think.)

3) Beef up my emergency fund again.

4) Fund a Roth IRA.

I know this dental financing topic has wandered all over the place, but this has been hugely challenging and life changing for me. I admit, I was a bit stung by CleverDude’s post about hygiene and missing teeth. (I think he should buy me a beer next time!) One of the new crowns I need is towards the front of my mouth. It’s not glaringly obvious unless I smile broadly, which is the kind of gross display of happiness I usually avoid, so I prioritized it last. I wanted to put the rear molar crowns in first because it was impacting my ability to eat. (HEY. Wait a minute. I must be getting fat because I can actually CHEW my food now!)

UGH UGH UGH. Tough decisions here. Balancing the want of eye surgery, the need for safety while motorcycle riding, the desire for tax savings and fiscal responsibility. This could be endless scenario planning. I wish this was easier.

I was really worried that my ad revenue and getting a bonus from work would bump me up a bracket this year and put me out of the program for real estate tax relief. However, I just ran some figures and it looks like I will actually end up safely under the wire for the 28% bracket.

Since my ad revenue has fallen off, I don’t have anything to worry about anymore. That’s good.

I’m doing this because I’m contemplating some changes to my 401k contribution and I wanted a better understanding of the tax implications of cutting off my contributions in favor of debt repayment at the suggestion of NCN in an online, off-blog conversation.

It’s not too early to start thinking of your taxes before the end of the year rolls around.

Hat tip to Rob for pointing this article out. It’s been a work-focused week for me and I’m not generating enough story ideas on my own.

The Wall Street Journal Online has a short story about American Home Mortgage Investment Corp. and Freddie Mac.

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company’s Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24….In an interview last week, Ginnie Mae’s senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. “What’s occurred is that we have the money, but AHM hasn’t been able to or willing to pay the taxes and insurance, and they have the loan records,” Mr. Foster said. “Therefore, we don’t know who to pay, and we don’t know how much.”

This is very bad.

1) If you are a borrower of AHM, you may be delinquent on your property taxes because they aren’t paying them through your escrow account. Try to find out what you owe the county by going directly to your Tax Assessor’s office and paying the bill. Same goes for your home insurance or PMI. (I couldn’t figure out what kind of ‘insurance’ was meant by the article.)

2) If you don’t, your local government may seize your property and auction it off at a tax foreclosure sale, even if you are paying your mortgage on time. It’s better here to actually over pay your taxes because at least the county can’t come and get you.

When Rob first sent me this, all I could think was that this doesn’t effect me directly. I don’t have AHM. I don’t own stock in Freddie Mac. (I digress for a deep irony, my friend works for Freddie and he lives out of his van! He’s literally homeless! LOL! By choice. “Strictly by choice.” - Say Anything)

However, the greater implications really frighten me. County governments could have short falls in revenue. It could be a sign of a recession coming. Rising homelessness. Not fun. I have vague memories of the recession of the early ’80’s and I don’t relish the thought of tough times ahead.

It’s posted now, and the graph has changed. It’s been available for a few days, but I didn’t have any time to think about what the numbers really meant.

The bottom line is that I am not making much credit card progress again. The main reason is that I had to charge my Oracle class to my credit card and wait for my company to reimburse me. I am waiting right now to find out if I passed the course. I took the exam on Friday afternoon and the results will hopefully come back to me in 15 days. If it does, I can submit it and get reimbursed before the end of June. But I am not holding my breath on all that. Sorry NCN, my graphs probably won’t be changing much for the next 90 days.

My retirement accounts are making good progress, even though I did cut back my 401k contribution by a few percentage points. That’s primarily due to some IRA contributions I wanted to make for 2006 to reduce my taxable income even further. I am going to have to think about doing that again so that the 2007 numbers are good and qualify me again for the Arlington Count property tax credit. I am lucky that my income keeps on rising. The county has a rising income ceiling on the tax credit, but I have yet to bump into it, so it’s a mixed blessing that I make so much/so little.

I also flushed one of my mutual funds because it was a US bond fund. Because I have some fund minimums I am trying to meet to avoid a fee, I decided to sell off that fund and reinvest into one of two low balance funds I need to bulk up. I realized that the balances were so low that I could be negating all my gains by the fees I was incurring, so I pulled the trigger and flushed the bonds in favor of a small cap fund. (More on this subject later this month, I promise.) (Was that just a bad mixed metaphor? Should I have written ‘pushed the handle and flushed the bonds?’)

That’s it for right now. Not much else to say at the moment. I’m too busy catching up from being out of the office last week.