An Early Visit with the Tax Man and Weekend Reading
Yesterday was the deadline to pay estimated federal income taxes. Although I have taxes withheld from my paychecks, we always end up owing money at tax time. Sometimes the amount we owe puts us close to or in the underpayment penalty range. My normal method of solving that problem is to run our basic data through some tax software in early December and then have our accountant withhold extra amounts from my final paychecks. (In some years, that’s been the entire paycheck.)
I ran our numbers through some free TaxAct software that I had downloaded. (Normally I use TurboTax but it did not have a free download. Instead, you were required to use the online version which I did not want to do.) As expected, we owed a big chunk of change to the IRS. For one thing, our mortgage interest deduction was cut almost in half because we had paid off the lake house mortgage in February.
I calculated how much we needed to pay now to get us within the “no penalty” safe harbor range, then mailed a big check to the government. I’m not sure we will entirely avoid a penalty, because the IRS looks at your withholdings for each quarter. But I did the best I could under the circumstances. We will be writing another big check when we file our return in April but I have reserved the cash to do that.
Staying with a tax theme, this weekend I have to prepare for and then take another set of IRS qualification tests to allow me to return as a volunteer tax preparer under the VITA/AARP Program. Some of you long-time readers may recall that I wrote a series of eleven weekly posts last winter and spring reporting on my experience as a volunteer tax preparer. I was invited back this year so you will reading about those experiences again this year. Stay tuned for that.
I have a few suggestions for your week-end reading. First, I stirred things up a bit at the Free Money Finance blog with some comments on his post about “earning” rewards on his credit cards. In my typical not-so-diplomatic style, I tried to make the point that rewards from credit cards are nothing more than a partial rebate of the increased retail prices we all pay because merchants are forced by reality to take these cards. Their costs are passed on to us. FMF and some of his readers accused me of living in a fantasy land occupied by unicorns at the check-out counter. (Everyone is so sensitive about hearing the hard truth.) I understand playing within the system that exists as long as you really understand what the system is doing to you. Full disclosure: We have a rewards card. It gets us the occasional free ticket on Southwest Airlines. But I would rather have no rewards for anyone and lower retail prices. So it’s all good. I haven’t seen any unicorns and everyone gets to enjoy their rewards cards.
Second, I jumped back on the personal finance carnival bandwagon so head on over to Darwin’s Finance and check out this week’s Carnival of Personal Finance.
Third, if you are interested in developments in the annuity field, I wrote a post on my Go To Retirement blog about some new variable annuity products. We don’t own a variable annuity and probably won’t because of their high fees and surrender charges. But I like reading about them, just to be sure.
Finally, if you are on a path to lower your costs for watching television, Boxee has released an updated version of its software. Boxee is sort of like the TV and movie version of Picasa. It goes out and finds video content on the web and on your PC, organizes it, and presents it for your viewing pleasure. The product is not perfect yet but it has promise. And right now, it’s free. You can check it out here. (Be sure to download the recently released beta version.)
Have a great weekend and say a prayer for the folks in Haiti.