Tax Refund Loans – Costs & Alternatives

Tax refund loans, also known as refund anticipation loans or fast tax loans, can be a tempting option if you’re in need of money and expecting an IRS refund.  However, these tax refund loans can be a very expensive option due to the fees and interest charges that typically accompany them.

Refund Anticipation Loans

The official name of these loans is refund anticipation loans, or RALs. The Consumer Federation of America lumps RAL loans in with their more notorious cousin payday loans due to the high fees associated with them.

A February 2009 report indicated that RAL loans generated an estimated $900 million in fees from 8.67 million taxpayers who used them based on 2007 figures alone. These services promise your refund money immediately or in a few days (less fees and costs), but if you’re willing to wait an extra couple of weeks, the Internal Revenue Service will pay back your refund without fees or interest charges when you file IRS Form 8888 with your return.

The IRS option also makes it relatively simple to divert your refund into an IRA contribution or the purchase of U.S. Treasury securities or U.S. Savings Bonds.

Costs of Tax Refund Loans

In 2007, the Consumer Federation and the National Consumer Law Center reported that RALs cost the average borrower from about $30 to more than $125 in loan fees. Some tax preparers also charge separate fees on top of those amounts for the “application.”

In their study, both agencies reported that the effective annual interest rate (APR) for a RAL can range from about 40 percent to over 500 percent, and if application fees are charged and included in the calculation, the effective APRs range from about 57 percent to over 1,100 percent.

Tax Return Tips

The real point is that it’s important for you to try and plan your finances and tax strategy so that you’re hopefully not scrambling in need of a tax refund in April. Most financial planners will you that the best way to put cash in your hand is through tax planning, not overpayment of tax so you can get a check later.

Want to put extra money in your pocket all year round, not just at tax time? Consider the following steps:

Tax planning:

Qualified tax professionals such as certified public accountants (CPAs), enrolled agents (federally licensed individuals who have passed a comprehensive IRS exam) or a tax attorney can help you devise a strategy so you and Uncle Sam don’t owe each other anything at tax time.

You’ll do this through smart withholding and finding legal deductions that might create tax savings. Many individuals can get by with the help of an enrolled agent or CPA, and while there are many tax attorneys who do individual returns, they are typically used for business returns or more complex individual tax situations.

Restructure your spending:

Understanding your spending will prevent you from looking desperately for cash at other times. A financial planner can give you some critical advice in building a budget that fits you and your income and spending picture.

You can also buy a financial tracking program like Quicken and start typing in your daily spending (that could be a real eye-opener). Once you know what you’re spending, you can figure out how to afford essentials and extras in a way that will prevent a panicky search for money around tax time.

Make smart money choices:

Quit thinking about your refund as an excuse for a trip to Home Depot. Why not use an unexpected tax refund to fund an IRA or some other savings or investment vehicle? If you finish your taxes early enough you might be able to deposit that overage directly in those accounts. 

To help you understand why tax refunds call out to you to be spent check out the parts about mental accounting in the book “Why Smart People Make Big Money Mistakes”. If you understand the reasons why our brains like to use mental accounting it can help you overcome irrational money behavior and make better money choices.

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How to Make Extra Money with Your Brain

There are so many different ways to earn extra money with your brain, the best question isn’t how can you earn extra money but how can you earn the most money the fastest. The place to start is determining which of your skills or specialized knowledge you have that you could turn into extra income.

In this article we’ll look finding a market for your skills and determining whether what you’ll earn will be worth the time and effort you’ll have to put in. Then we’ll finish up by taking a look at some resources for making extra money with your brain.

Your Brain is Money

Over the years, you’ve probably picked up special skill sets or valuable bits of knowledge that other people would pay to tap into if you could make your expertise available for sale.

It seems the challenge for most people when going through this exercise is figuring out what it is that you know that is valuable and unique enough that people would be willing to pay for it.  Of course it’s different for each of you but we can look at some scenarios and maybe those examples will get your brain going.

Shopping Expert – If you know where/how to always get a good deal when buying a popular product, you can buy it cheap and re-sell it on a site like eBay.

Digital Creator – If you know how to write software, layout web pages, design databases, or build mobile apps you can sell your services on sites like eLance or oDesk.

Handmade Creator – If you know how to create things with your hands (knitting, sewing, etc) you can make clothing, decorations, or other crafts and sell it on a site like Etsy.

Math or Science Whiz – If you understand & can explain calculus, chemistry, physics, or statistics you help tutor others on a site like Tutor.com.

Marketing Your Brain

Of course, having the knowledge isn’t any good for generating income if you can’t turn it into money. You have to decide if you want to market your expertise yourself (which typically takes longer to get going) or find an existing marketplace.

For example, my wife tutored kids one summer in our neighborhood.  She put up signs, passed out flyers, and worked her network of school teachers to find parents that wanted tutoring for their kids.  She wasn’t busy every day, all day long because it was her first year. If she’d have continued tutoring, over time she’d have built up her network and word of mouth and become more and more busy.  She probably would have been a lot busier that first year if she’d have signed up as a teacher on tutor.com.

If you don’t want to take the time to market your brain yourself, there are many websites available that have already created an online marketplace where you can find people in need of your information or skills.  The trade-off is that they’ll usually take a cut of your earnings, but they can start sending you customers right away.

Effort vs. Reward

When you’re selling your brainpower, one thing to consider is whether the work you’re putting in is worth the money you’re making.  The whole reason you’re leveraging your brain is to earn “extra money”; extra implying that it’s more money than you already make.

Of course this means you’re probably still doing all the things you normally would in a day, and working extra in your spare time for more money. Since you only have 24 hours in a day be sure that the time you spend is worth the money you’re making. 

Opportunity Cost

An important concept here is opportunity cost.  Let’s say you’re spending two hours a night and on average earn $30 for your efforts.  The extra money will be nice, but if there’s something you could be doing that would earn you $50 a night for two hours work; then by taking the lower paying gig, you’re missing out on the opportunity of earning an extra $20 a night.  The best way to avoid this is by researching the opportunities for all your skill sets before you commit to one.

Create Once, Earn Multiple Times

One last thing to consider. If you can make money more than once off the effort that you put in, then your earnings can increase without you having to put in as much time.  Take the Digital Creator scenario I discussed earlier for example.  If you find a client on eLance and write them some software for $100, then once the work is done you have to write another program for another client to make more money. 

On the other hand, if you write a useful program that a certain type of person or business would need and sell it for $25, then you do the work of creating software once and can sell it multiple times for $25.  There will be marketing involved but that will take less time than the work of creating, testing, documenting, and packaging the software.

Guides to Making Extra Money With Your Brain

As I mentioned earlier, coming up with ways you can sell your brain power is challenging for a lot of people.  I thought it might help to look through some examples, just to get the wheels turning.  Phil Taylor, from PT Money, has gathered together a free resource of 52 ways that you can make extra money.  Not all of them are focused on leveraging just your brain power but it’s a good starting point.

One way that you can build a platform from which you can sell your brain is to write regularly about your area of expertise online.  This approach can help people find you on the Web and allows them to get to know more about you and your expertise.

Peter Anderson, from the site Bible Money Matters, offers a resource, called Blueprint For How To Make Money With A Blog, that is a good overview of using a blog to make extra money.  Peter has personally used the approach to earn money writing about personal finance but you can apply the concepts to most any area of expertise you might have.  I got a review copy for free before Peter made it available for sale but I’d say it’s definitely worth the price if you’re thinking about getting started with this approach.

So there are some tips and tactics for earning extra money with your brain.  If you’re looking to make extra money, take a few days to let the concepts simmer and start coming up with a list of skills you have that people would be dying to get their hands on.

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Flexible Spending Account Deadline

The flexible spending account deadline is one that you don’t want to miss if you still have funds from last year in your FSA.  As you’re probably well aware, you lose any money left in your flexible spending account that’s not spent by the FSA deadline.

Flexible Spending Account Grace Period

A few years ago the IRS created a grace period so that you can spend money from your FSA into the first few months of the following year.  It seems like our family always uses this FSA extension, spending our money through the Spring of the next year.  It’s hard to forecast exactly how much money you’ll spend on qualifiying expenses for the entire next year so the grace period does offer a little flexibility in the whole FSA system.

Flexible Spending Account Contributions

If you underestimate what your medical expenses will be the upside is that you don’t leave any money sitting in your account at the end of the year; and the downside is that you pay tax on more of your income.  If you overestimate what you’ll spend then you pay tax on less of your income BUT you have money in your FSA account in danger of being lost. 

That’s where the grace period comes in handy, you can still spend your flexible spending account contributions into the following year.  Since we haven’t qualified for medical expense income tax deductions in years past we’ve tended to overestimate our FSA contributions to help bring down our income and then spent the remaining amount January & February of the next year.

Flexible Spending Account Deadline

The time has come this year, the deadline to spend your FSA money from last year is Monday. You earned that money so don’t let it go to waste!  Here are some flexible spending account strategies if you still have a lot of money left to spend. 

If you’re not sure if you still have money from last year, most FSA adminstrators allow you to access your balances by phone or online, so check them out today.  Spend what you can on eligible expenses this weekend and fax in your claim forms on Monday. You typically have until sometime in May to actually submit your reciepts but it’s better to send them in right away so you don’t forget.

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H&R Block at Home Software

H&R Block at Home is some of the best tax software available for consumers who want to prepare their own taxes.  I was able to ask Julie Markey, a Vice President at H&R Block, some questions about the software via email.  Julie’s the managing director of digital tax solutions so she’s very familiar with the software’s capabilities and features.  I asked her five questions about H&R Block at Home; hopefully her answers will help if you’re doing your taxes yourself and still trying to decide on tax prep software.

1) What are some of the most useful new features of H&R Block at Home?

Our software leverages H&R Block’s 55+ years of tax expertise to ensure taxpayers are getting the most of the tax credits and deductions available to them.  This year in particular, we have worked hard to simplify the language so it’s easy to understand no matter how complex your tax situation. 

The H&R Block At Home products  offer a personalized customer experience and a Smart Import service that allows for easy import of W-2 and 1099 data as well as prior year tax data from TaxCut® and TurboTax®.

2) If someone’s trying to pick the best version of H&R Block at Home for them, what are some of the things they should consider?

There are four different variations of H&R Block At Home – and each variation appeals to different taxpayers based on the complexity of their tax return:

1. Free and Basic for taxpayers who have very simple tax situations. 
2. Deluxe for those taxpayers who own homes or have investments.
3. Premium for those who are self-employed or have rental property.
4. Premium & Business for those who need to file personal taxes and also own their own businesses. 

That said, with H&R Block At Home products, taxpayers can access a tax professional for additional support.  And for DIY taxpayers who want even more confidence that their taxes were done correctly, our Best of Both offering allows the taxpayer to start his or her return online then hand it off to an H&R Block tax professional who will review the return, correct any errors if necessary and e-file the return.

3) H&R Block has been working with clients in person for a long time, how has that experience helped improve the H&R Block At Home tax software?

As the No. 1 retail tax preparer, H&R Block understands tax laws and wants to ensure DIY taxpayers know they’re receiving the benefit of more than 50 years of tax expertise and the ability to access tax professionals for additional assistance when they purchase an H&R Block At Home product. 

Because, we’ve been doing taxes for over 50 years, we understand more about the taxpayer, the tax code, and the tax preparation process than anyone. This year, we’ve honed our digital products to improve the experience for our customers  to help ensure them they are getting it right.

4) If someone is filing their taxes with your software for the first time what options do they have for support when they run into questions?

With H&R Block At Home, you get the support of real, experienced tax professionals, ready to help if you need it. It’s something no other do-it-yourself tax solution can offer. H&R Block At Home products include:

• Live tax advice from an H&R Block tax professional in case you get stuck or need extra help.
• Live chat support, so it’s there whenever you need it.
• Audit support with guidance, plus an H&R Block-enrolled agent to represent you in the event of an audit .

In addition, H&R Block launched the Get It Right community where 1,000 tax professionals answer tax questions for free online.

Questions can be submitted via computer or iPhone through the H&R Block Tax Answers App. Most will be answered within 24 hours. Tax calculators, an office locator and access to useful widgets and other tax preparation tools are also available through the Get It Right Community.

5) Which is the most popular version of H&R Block at Home?

H&R Block At Home Deluxe is the most purchased version as it is designed for taxpayers who own homes or have investments.

Thanks to Julie for taking the time to answer some questions about the H&R Block at Home tax prep software.  Stay tuned because we’ll be giving away a few copies of H&R Block at Home Deluxe version and the giveaway will start in the next few days.

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Medical Expenses & Income Tax Deductions

Your medical expenses can be income tax deductions depending on how you file your taxes and how high your medical bills are. We all know that health care costs just keep going up, lets take a look at how you might be able to get tax deductions for these expenses.

Tax Deduction Requirements

In order to be able to claim medical expenses as income tax deductions, your health care costs for the past year must be greater than 7.5% of your adjusted gross income (line 38 of tax form 1040).  If you are eligible you can claim all of the covered expenses in excess of the 7.5% of adjusted gross income threshold.   The other requirement is that you have to itemize your deductions.  If you use form 1040 EZ and claim the standard deduction then you can’t deduct your medical expenses.

The idea behind using a percentage threshold as opposed to a dollar amount was to prevent wealthier tax payers from claiming expenses that they can actually afford while assisting less wealthy taxpayers who could get in serious financial trouble due to medical expenses.  Of course, 7.5% of your AGI is still a lot of money for most people so many of us won’t be able to claim these expenses as deductions.

If you are able to claim them, the expenses would are calculated and included on Schedule A of your tax returns, when filing IRS form 1040.

What Medical Expenses Can You Claim?

In the eyes of the Internal Revenue Service the term medical expenses should be thought of in more of a health care expenses frame of mind; meaning virtually any expenses that you incurred throughout the year to provide for the health of you, your spouse, your children and anyone else that would be considered your dependent for tax filing purposes.

Health care would include the costs for some health insurance coverages, dental care, eye care, as well as physical and mental health care costs. The list includes doctors’ visits, tests, surgery, therapies and medications. If it is not covered by your insurance and if you are not reimbursed for it, it can be claimed as one of your expenses. Essentially anything that is medically necessary to restore you to good health can be considered deductible medical expense, from abortions to x-rays.

Also included are things such as capital improvements to where you live like a wheelchair ramp, elevator or special bathroom fixtures. You can include medical expenses for transportation; to and from appointments, bus fare, cab fare, ambulances, as well as special modifications or equipment to make your vehicle handicap accessible.

Which Medical Expenses Can’t Be Claimed?

Of course, there are things that you can not include when adding up your total medical expenses. For an understanding of what types of things cannot be included as deductible expenses you have to consider whether it is something that could be considered voluntary or cosmetic as opposed to medically necessary.

Simple examples of items that are not deductible would be: cosmetic surgeries, non-prescription treatments of any kind, health club memberships, hair transplants, maternity clothes, and funeral arrangements.

For a complete list and explanation of all the medical expenses that can and cannot be included check the U.S. Department of the Treasury, Internal Revenue Service, Publication 502.

Flexible Spending Accounts

One alternative to using medical expense deductions to offset your health care costs is to check if your employer offers a section 125 plan, frequently known as a flexible spending plan or cafeteria plan.

A flexible spending account (FSA) allows you to put a portion of your salary into a special account that can later be used to pay for medical expenses.  That money comes out of your salary pre-tax. This means that it lowers the total amount of your paycheck subject to federal income tax, and in doing so lowers your tax bill.

If you decide to use an FSA you have to carefully manage your receipts for medical expenses and submit them to the plan administrator, who reimburses you for qualified costs out of your FSA account balance.  Here are some tips for getting the most from your flexible spending account payments. 

The most important thing to remember is that you lose any unspent balance in your FSA at the end of the period so you need to estimate as closely as you can what your expenses will be in the coming year.  Since this is so difficult to do, the IRS now allows you to spend money from your FSA balance through the middle of March of the following year. Make sure that your FSA plan administrator offers this option in your flexible spending account.

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Should You Automate Your Finances?

As you might know I’m all about automating our finances. I make every effort to make our transactions live in the digital realm so they can happen automatically without us having to worry about them:

– We pay our bills with online bill pay. I setup exception checkpoints so that if bills are larger than normal I get an email or if a payment isn’t made I get a voice mail.

– Our paychecks land in our bank accounts via direct deposit and our investments are made automatically as well.

– My wife and I put most of our purchases on our American Express Blue cash card to help organize and categorize our spending, plus earn credit card rewards.

– We don’t spend a lot of time budgeting, our spending doesn’t vary that much from month to month so we don’t spend a lot of time focusing on how we’re spending our money.

Is this the smartest way to do things? It’s what I’m most comfortable with but a new book from Baker at Man vs Debt called Unautomate Your Finances takes an alternate look at this approach.

Why Not Automate?

I think the line that best sums up Baker’s approach is that “the more you simplify your financial life, the easier it is to take back control”. He and his wife have been battling consumer debt and have the used the methods he describes in his book to pay it down. Their approach has been to have as few accounts and as little automation as possible so they can focus all their attention on the money they have, and the money they owe.

Here are some of Baker’s arguments against automating your finances:

• Automatic payments mean that you don’t notice as much what you’re spending your money on
• Automation makes your bad habits harder to change by pushing them to the back of your mind

Credit Cards vs Cash

Baker’s not a fan of credit cards and believes that paying in cash can make a real difference in the way you spend your money. As he says, paying with cash “lowers the time between when you make the purchase and when you ‘analyze’ your spending. ”

I’m in the middle of reading a book on behavioral economics called “Why Smart People Make Big Money Mistakes” and research has shown that Baker’s theory is correct. People do spend their money differently when they’re paying with plastic vs paying with cash.

Spending Exorcism

The useful thing about “unautomating” your finances is that you get in touch with every penny you’re spending and come to terms with how you’re using your money. It’s almost like a debt intervention, or a spending exorcism, or like basic training for your budget. You get down in the mud and track every cent that comes in and out of your possession and ask yourself, “am I really spending money on the things I want in life”?

Why Unautomation?

I didn’t ask Baker why he wrote the book but you get a good feeling for why he might of from one of his early quotes:

“We’re living in upside-down homes, driving upside-down cars, and now even watching upside-down t.v.s on upside-down couches”

I can tell he’s astounded by the enormous amount of consumer debt we’ve accumulated in our country and wants to do his part to help people out with it.

So What’s the Answer?

So how exactly do you unautomate your finances? Baker goes into a lot of detail about emotion vs. numbers and how to pay off your debt by fighting small battles; not getting overwhelmed by everything at once. He offers an alternative to Dave Ramsey’s debt snowball called the debt tsunami; which gives you more flexibility about how you pay off your debt.

Baker offers lots of very specific actions and offers worksheets and instructions for:

• Creating a budget
• Following a envelope budgeting system
• Creating an emergency fund
• Deciding whether you want to use credit cards

Taking Action

So would an automation proponent like me consider taking Baker’s approach of buying everything with cash and tracking my purchases with paper and pencil for 30 days? It makes me squirm to think about it but perhaps that’s an indication that I should take another look at our current process.

I love the automation because it means I don’t have to mess with the recurring bill payments, fund transfers, and trips to to the bank. But I imagine going through those steps would make me look a little closer and think a little harder about how we spend our money.

I’m not committing to “going native” with my finances but I like Baker’s book because it makes me think about how aware we are of what we’re spending. It also offers tons of action steps we can take to make sure we’re staying on top of our money and Baker does a good job of getting you fired up to take action when you read it. If you’re looking to get out of debt or get a better handle on what you’re spending then you might want to check out Unautomate Your Finances.

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QuickBooks Accounting Software = Small Business Relief!

QuickBooks is the best accounting software for procrastinators like me!  I spent part of Sunday working on my business financials for last year (which I should have done sooner) and QuickBooks made it easy for me to get my business accounts up to speed. 

When I sat down yesterday morning I was dreading the process of creating all the ledger entries and entering all the transactions but by the end of the day my bookkeping for the year was done and I was reminded of why I love Quickbooks for accounting software.

I’ve been using the QuickBooks Pro version for a few years now and unfortunately I always seem to put off entering my data much longer than I should.  Typically I set aside an afternoon to work through months and months of getting my small business information in order.  QuickBooks makes the process much less painful than it would be otherwise; here are three of my favorite things about the software.

Transaction Imports

Entering data stinks. It not only opens the door to entry errors but it also takes up time that I could spend doing other things.  I was able to download information from my bank accounts (WebConnect format) and PayPal (IIF format) and upload them right into QuickBooks.

Unfortunately, Chase only lets you download the last 90 days of credit card transactions and I needed data from all of last year so I had to manually input those ledger entries those myself.  Note to Chase, please provide more than 90 days of credit card data download, everyone else is doing it : )

Import File Examples

Not all vendors offer the option of downloading WebConnect or IIF files but most allow you to download csv or Excel files and QuickBooks can accept those as well.

If you’re wondering about the file types, QuickBooks WebConnect usually has a .qbo extension and contains your transactions in an OFX format.  You’ll probably never need to look at the contents of the file but if you’re curious, an entry from your bank might look something like this:

     <STMTTRN>
      <TRNTYPE>CHECK
      <DTPOSTED>20090303120000.000
      <TRNAMT>-305.45
      <FITID>4021400009
      <CHECKNUM>1569
      <NAME>CHECK
     </STMTTRN>

An IIF file stands for Intuit Interchange File. A transaction in IIF format for a payment you made would look something like this:

TRNS “4/13/2009” “Paypal” “US Postal Service” “Payment Sent” -6.12 
SPL “4/13/2009” “Shipping Expenses” “US Postal Service” 6.12
ENDTRNS

As I mentioned above, QuickBooks can also handle csv and Microsoft Excel files if your vendor doesn’t offer IIF or WebConnect.  You can import a range of business data, such as:

• Vendor bills
• Cash sales
• Cash refunds
• Checks
• Credit card transactions
• Deposits
• General journal entries
• Invoices
• Payments from customers
• Purchase orders

Business Reports

Once you upload or manually enter your transactions you can use QuickBooks to generate whatever business reports you need by selecting Report Center from the top menu.

There are many different types of reports available, as you can see in the graphic to the right, but the ones I use it for are the Financial reports.  You can generate the standard financial statements shown below:

• Profit & Loss
• Income and Expenses
• Balance Sheet & Net Worth
• Cash Flow
• Balance Sheet

The reports can give you insight to help you make business decisions and are also great come tax time.  QuickBooks defines these standard financial reports for you and then also lets you customize them as well.

What I love is that once you import/enter your data, you can slice it and dice it how you want and generate summary reports for interested parties, such as your accountant.

QuickBooks Support

Every business has a variety of needs and different types of data.  This means that we also run into a variety issues when trying to wrangle that data into something meaningful. For example, I had a problem importing one of my IIF files because the data in one of the records was funky.  What’s great about QuickBooks is that I was able to search online and find an answer to my problem right away.

In another example, in years past I had been using a convoluted method to tell QuickBooks that I had transferred money from one account to another but a web search revealed a much simpler way of doing it (Using the Banking -> Transfer Funds menu).

Although I usually start with the Quickbooks built in help reference, I typically end up searching online for answers to problems.  Many times those searches lead me to the Quickbook forums, where other users have run into the same issue and other users have shared their solutions.  Here’s an example of some of the topics covered in the QuickBooks forums.

If you’re really stumped, you can always turn to other people that have extensive knowledge of QuickBooks.  Since it’s so widely used, there are tons of people that have a lot of experience with the software and will solve your problem for a relatively small fee. Of course, no one likes to spend money but if you’ve been hassling with an issue for a while and need to get back to work, getting help may be worth the money.  Intuit’s created the QuickBooks ProAdvisor® Program where users can become QuickBooks certified so you know that if you hire with them they should be able to get you sorted out relatively quickly and easily.

QuickBooks Software Versions

Anyhow, in case you can’t tell, I’m really pleased with QuickBooks and how it helps me in my business.  I’m glad to have my financial reports all finished up in time for the tax deadline. Don’t forget the tax filing deadline for corporate tax returns (Forms 1120, 1120A, and 1120S) is coming up, March 16^th!

If you’re interested in testing out QuickBooks, you don’t have to use the Pro Version like I do. Intuit offers QuickBooks Online that you can try out for a month for free to see if you like it. 

They also offer the more basic QuickBooks SimpleStart which is cheaper, although it doesn’t have all the same import and transaction download features as QuickBooks Pro and only offers about a 1/10th of the reports. 

I’ve never used QuickBooks Premier so I can’t speak to it’s benefits over the Pro version but from what I’ve read the Premier version offers business planning, the ability to forecast sales & expenses, and industry specific reports.  Here’s more information on the different QuickBooks versions:

• QuickBooks Online
• QuickBooks SimpleStart
• QuickBooks Pro
• QuickBooks Premier

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Money, Money, Money

We covered money from a few different angles here on Money Smart Life last month.  As you’re probably aware, the primary focus was on taxes; however we did touch on some health insurance, retirement, and career topics as well.  Here’s a look at some of the articles from last month and after that I’ll talk a little about what you can expect this month.

Taxes

• Online Tax Software Success
• 2010 Federal Tax Brackets
• Common Income Tax Problems
• How to File Taxes Online
• Tax Credits for 2009
• Turbo Tax Review
• Turbo Tax Free Trial

Health Insurance

Health insurance is a major issue for all Americans because we all get sick or injured at some point and costs of dealing with these issues continue to go up.  We’ve realized this more since we’ve added a few more dependents onto our health insurance plan and I talked about the cost of sick kids. 

I also looked at how high deductible health insurance plans are not for everyone.  If you’re young and healthy you can build up a nice bundle of pre-tax money but if you have a lot of health issues it can really suck your wallet dry.

Retirement

This year brought some new Roth IRA rules that we go int a little more detail on. Mike Piper from Oblivious Investor warned us about IRA mistakes, specifically 9 sneaky ones that you’ll want to avoid.

Career

Referrals are often the best way to get your foot in the door, especially when not many companies are hiring. I shared some tips on how to refer a friend for a job when you don’t know a whole about their qualifications.  I had some changes in my job so I dug into the difference between exempt employees vs non-exempt employees.

Personal Finance

Then there were a few more that span a number of topics such as kids and money, marriage and money, paying for graduate school, and a credit card scare that left my heart racing!

Coming Soon…

Taxes

So what’s next?  Well taxes are due in a little over a month so we’ll touch on more tax topics.  Next week we’ll hear from the people at H&R Block talking about their H&R Block at Home software.  We’ll be giving away a few copies of the software, so be sure to get updates so you can put your name in for one of them.

Health Insurance

I’ll also have a follow up on the high deductible health insurance plan post from last month. A reader named Ted left an interesting comment that I followd up on and he’s going to share his health insurance experiences with us.

I also have a LOT to talk about in terms of health insurance.  I’m still going back and forth between the hospital and our insurance company on bills for our daughter’s birth, almost a year later. Right now, we’ve been stuck with over $11,000 of bills that should have been covered by insurance. 

I’ve been fighting to get the issues resolved and thnink it will be in the next few weeks. I’ll share some tips on how I’ve dealt with being stuck between the insurance company and the hospital.

Have a great weekend!

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Tax Refund Status

How can you check on your IRS tax refund after you’ve filed your taxes and are waiting to get money back?  Below is a tax refund schedule from TaxACT that shows an approximation of when your refund check should be mailed or direct deposit put into your bank account based on the date range that you filed your taxes.

Federal Income Taxes Filed	Direct Deposit Tax Refund Sent	Tax Refund Check Mailed
Jan 15 and Jan 21, 2010	29-Jan-10	5-Feb-10
Jan 21 and Jan 28, 2010	5-Feb-10	12-Feb-10
Jan 28 and Feb 4, 2010	12-Feb-10	19-Feb-10
Feb 4 and Feb 11, 2010	19-Feb-10	26-Feb-10
Feb 11 and Feb 18, 2010	26-Feb-10	5-Mar-10
Feb 18 and Feb 25, 2010	5-Mar-10	12-Mar-10
Feb 25 and Mar 4, 2010	12-Mar-10	19-Mar-10
Mar 4 and Mar 11, 2010	19-Mar-10	26-Mar-10
Mar 11 and Mar 18, 2010	26-Mar-10	2-Apr-10
Mar 18 and Mar 25, 2010	2-Apr-10	9-Apr-10
Mar 25 and Apr 1, 2010	9-Apr-10	16-Apr-10
Apr 1 and Apr 8, 2010	16-Apr-10	23-Apr-10
Apr 8 and Apr 15, 2010	23-Apr-10	30-Apr-10
Apr 15 and Apr 22, 2010	30-Apr-10	7-May-10
Apr 22 and Apr 29, 2010	7-May-10	14-May-10
Apr 29 and May 6, 2010	14-May-10	21-May-10

Where is Your Tax Refund?

There are two ways to get your tax refund, through direct deposit or as a paper check in the mail.  As you can see from the table above, you’ll get your refund much faster if you eFile and choose the direct deposit option.

Here are the general time frames that it takes for you to get your refund once the IRS recieves your tax return:

• Paper File – 6 Weeks
• eFile – 3 Weeks
• Amended Returns – 8 to 12 Weeks

If your refund is taking longer than expected it could be because you made a mis-calculation while computing figures on your tax form and that you may get less back than you’d expected or nothing at all.  Or you might have made an error on your tax return such as accidentally switching digits in your social security number or some other typo.

So how do you know if there was a problem with your return or if it’s just taking awhile to get your refund back? The IRS has a number of ways that you can check on the status of your tax refund.

Tracking Your Tax Refund

IRS Website

Regardless of whether you filed electronically or not, you can use the IRS website to check the status of your refund.  The IRS has a tool called Where’s My Refund? that asks for your social security number, filing status, and the refund amount from your tax return.

If your refund has already been sent, you’ll get back the date it was mailed or deposited into your account.  If it hasn’t then the IRS will basically just tell you that they got return and are still working on it.  If they already tried to mail you the refund but it came back undeliverable they’ll indicate that as well.

If the Where’s My Refund tool doesn’t recognize the information you enter, it’ll then ask you for the specific date you filed and whether it was a paper or electronic filing.  If they still can’t find your information the Where’s My Refund tool will give you a reference number and ask you to call them at 1-800-829-0582, extension 362.

The IRS suggests that you wait to use Where’s My Refund at least 72 hours after electronic filing or 3 weeks after paper filing.  You can try it earlier but chances are your return is still being processed and won’t have status information to report.

IRS Phone Number

If you don’t have access to the Internet, you can also check the status of your tax refund by phone at one of the two numbers:

• IRS Refund Hotline: 1–800-829-1954
• IRS TeleTax System: 1–800-829-4477

Are Tax Refunds Taxable Income?

If you got a tax refund last year, will it be taxed this year?  The answer, as is the case with most personal finance questions, is that it depends. If you recieved a federal refund it’s not considered taxable income on your federal tax return.

However, if you itemized your deductions on your federal return and claimed a deduction for state and local taxes last year, then you may have to pay taxes on a portion of that refund.  There will be a tax refund worksheet as part of your tax form 1040 that helps you determine the how much of your state tax refund is taxable. The good news is that if didn’t itemize and you claimed the standard deduction on your federal tax return last year, your state tax refund is not taxable.

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Overtime Exempt Employee vs Non-Exempt Employee

I’ve been an exempt employee ever since my first job out of college.  For a long time I didn’t really know the details about the labor laws behind exempt vs non-exempt; all I knew is that it meant I wasn’t paid overtime wages for all the late nights and long weekends that I worked.

Once we started a family I became less and less satisfied as a salaried employee, consistently working long hours without overtime pay in the hopes that someday I’d get a promotion.  The late nights at work stopped seeming like a challenge and instead became time away from our new baby and my stressed out wife.

I started searching for a new job and after a relatively short job hunt I was able to find a company that offered a much improved work situation than the one I was in.  I couldn’t belive my ears in the interview when they told me that it was a salaried position but also paid overtime for any hours worked over 40 a week!  At that point I went home and did a little research on the exempt vs non-exempt topic.

Fair Labor Standards Act

The Fair Labor Stanards Acto (FLSA) is a federal law that determines minimum wage and overtime pay guidlines and is enforced by the Wage and Hour Division of the U.S. Department of Labor.

The FLSA allows employers to exempt employees from certain parts of the Act; for example, minimum wage and overtime pay regulations. This is where the term exempt and non-exempt comes from, certain types of jobs are exempt from some of the rules laid out in the FLSA.

Exempt Employees

So how do companies determine which of their employees can be considered exempt?  Although there was general language describing who is exempt in Section 13 (a)(1) of the FLSA, it wasn’t specific enough for the Department of Labor as they tried to enforce the Act so Congress more provided more detail with 29 CFR Part 541.

The main determining factors for whether you’re exempt has to do with the specific tasks that you do in your job and how those full under 29 CFR Part 541.  They also look at whether you’re hourly or salaried and the level of your salary for the work you do.  The typical exemptions have become known as “white collar” exemptions and cover people in these roles:

• Executive
• Administrative
• Professional
• Computer Employees
• Outside Sales

Clear as mud, right? I guess that’s why corporations pay human resources specialists the big bucks to interpret the laws around FLSA and determine who is exempt. There is an additional exemption for “highly compensated” employees who are paid at least $100,000 a year.  I guess they figured if you earning that much then you don’t need to be paid overtime : )

Benefit of Being Exempt

One of the benefits of being an exempt employee is that your company is supposed to pay your salary even if they don’t have work for you to do:

“If the employee is ready, willing and ble to work, deductions may not be made for time when work is not available.” –  Salary Basis

I’m not familiar with all the labor laws but if weeks went by and my employer didn’t have any work for me then I’d start worrying that my job might get cut. However, for cases where you’re in between projects or clients and don’t have much to do for a week, if you’re an exempt employee then you still get paid your agreed upon salary.

Non Exempt Employees

So who are non-exempt employees?  The simplest answer is obviously anyone who doesn’t qualify for exemption under the terms described in the previous section.

Most of the time, jobs for non-exempt employees are hourly positions and typically follow a routine, with set standards and rules.  If you’re a non-exempt employee then you should be paid overtime, which is generally one and one-half the your regular pay rate for all hours worked over 40 in a week.  State law takes precedence over the federal law if it benefits the employee, so be sure to check your state employment laws to see what overtime rates should be.

Hybrid Employee

As I mentioned earlier, in my current job I’m classified as an exempt employee. However, the human resources department actually created a type of hybrid situation where my job title was also eligible for overtime pay.

It turns out I wasn’t required to work the late nights and long weekends necessary in my old job so I didn’t see any increase in pay from this policy when I started with the company.  This was fine with me because my whole point in quitting my job and getting a new one was to spend more time with my family.

Just last week, I found out that human resources had done a study of other companies and job titles in our industry and determined that making my group eligible for overtime pay wasn’t necessary. So the policy will be be changing in the future and I’ll no longer be a hybrid, exempt employee that gets paid overtime.  However, it’s something to keep in mind as you look for jobs.  It may not be widespread but there could be other jobs out there where you can have your cake (salaried employee) and eat it too (get paid overtime if you work more than 40 hours a week).

Hopefully this look at exempt vs non-exempt employees has been useful and I hope that no matter your job classification you don’t have to work overtime!

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