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This category is for posts that will appear on the front page, but not in any feed. Ie “welcome Globe & Mail readers”.

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How Long Before I Get My Income Tax Refund?


There are two ways for a taxpayer to get back their federal income tax refund. They can opt to have the refund amount direct deposited into their bank account or they can request a paper check be mailed. The option you choose will affect the amount of time it takes to receive your refund. It also matters how you have filed your tax return and if the return was accurate.  Using a tax software program to do your tax return such as TurboTax will help speed up the process and should increase accuracy as well.  There are various factors to consider between efiling your return or mailing it.

Tax Refund for Electronically Filed Income Taxes

Generally, if you complete an accurate tax return, filed electronically, and requested a EFT (electronic funds transfer) where the refund amount goes directly into your bank account, your refund should be available within three weeks of your return being acknowledged and processed by the IRS.

Tax Refund for Income Taxes Filed Through the Mail

If you requested a paper check, the three week time period still applies but it may take a bit longer to receive via regular mail. If you filed a tax return by mail, your refund will be issued within six weeks from the date the return was received by the IRS, whether or not you opted for a paper check or an electronic deposit.

Incomplete Income Taxes

Taxpayers who file a return that has been deemed incomplete or must be amended can expect to receive their refund within 8-12 weeks after the confirmation of filing is provided. If you file a Form 8379 (Injured Spouse Allocation), expect your refund to take even longer depending on the situation.

Check Status of Tax Refund

All taxpayers can check the status of their refund money via the Internet or by calling a toll-free hotline. Taxpayers must wait at least 72 hours after an electronic tax filing before they can check their refund status. Individuals who have filed via mail will need to wait at least 3 weeks after making in the form. The refund information system is automated. You will need to know your filing status, Social Security number and the exact whole dollar amount in order to access refund information via the automated system. Internet users can visit the ‘Where’s My Refund’ page at the IRS.gov website. Callers can contact the toll free hotline at 800-829-1954 begin_of_the_skype_highlighting              800-829-1954      end_of_the_skype_highlighting. Taxpayers can access the date of the approximate arrival of refunds and will also be advised as to any tax preparation errors or delays in processing.

Verify Tax Refund is Correct

Once a refund is received, taxpayers should check to ensure the amount is correct. If a check or electronic deposit arrives for more than the amount listed on the tax return, the check should not be cashed. A notice will be sent out from the IRS explaining the discrepancy in amount. If no letter is received in a timely manner, taxpayers should contact the IRS office by phone or via their website. In the even a refund arrives for an amount smaller than expected, the check can be cashed. A check in the amount of the difference will be mailed at a later time. All inquiries should be made by the filer directly to the IRS office at 800–829–1040 if a notice or follow up check have not been received within two weeks. If refund checks do not arrive at all and are expected to be lost or stolen, contact the IRS office who can help issue a replacement check.

More resources

Popular tax software – TurboTax review

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How To Organize Your Tax Paperwork

Filing your taxes each year is not always an easy task, especially since you spent the last 365 days saving receipts, paperwork, and other tax-related documentation. Tax time comes around before many people are prepared, leaving many to scramble for the appropriate documents and paperwork. Misplacing the important items you need for taxes can also cost you valuable tax deductions as well.  Learning how to organize your tax paperwork can save time and stress during tax time.

If you thinking about buying tax preparation software then consider software programs such as TurboTax.

Developing a system for storing your documents year-round can be accomplished by starting out on the right foot this year when you prepare for your taxes.   Whether you plan to use tax software or do the forms by hand or if you are deciding between efiling or mailing your tax forms – here is a simple guideline you can use to keep all your information ready and allow you to prepare more accurate tax forms. You’ll need three manila folders or an accordion-type folder with at least three pockets.

Preparation File #1 INCOME

Gather all of the documents that shows proof of income to the IRS so you’ll need your salary documents like a W-2 or 1099. You will also need to account for any other proof of income documents from other sources like gambling wins, freelance work, jury duty pay, and transactions from investments.

For next year: In this first folder, you will save throughout the year any record of money you earned. Whether it be from salary, bonuses, dividends, interest earned, you’ll need to keep a record of what you have made.

Preparation File #2 EXPENSES/DEDUCTIONS

Check with the federal and state tax deduction allowances to see where you qualify. If you use an accountant, request a list of deductions that you are eligible to receive and include the documentation in this folder.  Keep up with any new tax changes or new tax deductions.

For next year: You’ll need to retain any and all expense receipts that are deductible for your taxes. You may need a divided folder to sort individual receipts into categories, especially if it is for a business. Save documentation for the year that entails what you spent on things like utilities, medical expenses, travel expenses, charitable donations, and child care costs. Mark a notation on each receipt as you file them about what category they apply to and what was the purpose of the expense.

Preparation Folder #3 INVESTMENTS

You will need to collect all paperwork and statements related to your investment activity such as purchases, loss, dividends, sales, interest, stocks and the related 1099’s.

For next year: Don’t rely on just annual statements as enough documentation. Save all quarterly and monthly statements too. Any related receipts, sales confirmations, or dividend notices should also be filed in this folder.

As the year progresses, it should get easier to make organizing your financial documents a regular habit. The folders can also be implemented with a check list that you can use as a reference to ensure you have everything you need at tax time. Keep files or envelopes in your car, briefcase or at the office so when you are away from home saving paperwork is still easy. Always remember to ask for and collect receipts, even for the minor expenses. Over the course of a year those little expenses can add up to big deductions.

More resources

Income tax software – online version or download desktop version?

How to handle losing your W2 form.

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Obama State of the Union 2010 – Stimulus Check No – Tax Credits Yes

Several new tax credits aimed mainly at the middle class will be announced tonight in the 2010 Obama State of the Union speech.  Unfortunately, it looks like there will be no stimulus checks issued in 2010 but the year is still young.

The health care reform issue should be addressed but no specifics have been released as yet.

Here are some proposals with the more significant ones appearing first:

Student loan payment cap

Federal student loan monthly payments will be capped to 10% of gross income minus a basic living amount which appears to be $6200.  For example, if you are earning $35,000 and have student loans of $30,000 then the annual payments will be ($35,000 – $6,200)/10 = $2,880 which means $240 per month.  This will benefit a large number of people who have big student loans – especially if they are not making a lot of money.

The Child and Dependent Care Tax Credit

The Child and Dependent Care Tax Credit will be increased to 35% from the existing 20% credit now in place.  This applies to families making less than $85,000 (AGI) per year.  If you make between $85,000 and $115,000 then this credit will be prorated back down to 20% which is the amount applied if the family makes $115,000 or more.  If you make more than $115,000 then there will be no impact.

A maximum of $3,000 of child care expenses can be claimed for each of 1 or 2 kids.  The maximum tax credit for a family with 2 kids will increase from $1200 to $2100.

Child care funding will also increase by $1.6 billion.

Saver’s Tax Credit

The Saver’s Credit will be increased to match 50% of the first $1,000 of retirement account contributions for families earning under $65,000 (up from $55k).  A partial credit will be available for families earning between $65,000 and $85,000.

Mandatory Workplace IRAs

This proposal calls for all employers to provide automatic direct deposit IRAs (Individual Retirement Accounts).  It won’t be mandatory for employees to take advantage of these accounts but they will always have the option.  Small firms will be exempt.  This proposal is interesting since IRAs are already available from other institutions (unlike 401(k) plans).

More support for caregiving families

Families caring for relatives will benefit from increased funding to the Department of Health and Human Services caregiver support programs.  This extra funding should make it easier to get more free help if a family or individual is caring for an aging relative.

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2010 Income Tax Deadline for 2009 Taxes

Every year millions of Americans have to file their tax return in order to make sure that they have paid the proper amount of tax to the government.  The last date you can file your 2009 taxes without risk of any late penalties is Thursday April 15, 2010.

If you are filing electronically then the return has to be filed by April 15, 2010.  If you are sending your tax return by mail then the postmark date cannot be later than April 15, 2010.

If you thinking about buying tax preparation software then consider software programs such as TurboTax or TurboTax Canada (for Canadians).

For some people this might be a happy time, especially if they are expecting a large tax refund.  For others, it might be a bad time if they owe money at tax time.  Regardless of your situation, preparing and organizing your tax paperwork and then completing your tax return can be a lot of work.

In order to avoid late tax payment penalties it is important to start your tax preparation early. Right now would be a great time to start preparing.

Here are a few suggestions to help with the tax filing process

1)  Assemble all your tax paperwork into one place.

This can sometimes be the hardest step.  The best way to handle this is to organize some sort of system for your tax paperwork ahead of time and then file each document when you receive it.  You also have to know which paperwork you will be receiving so that you don’t get any surprises after you have filed your taxes.

2)  Organize your paperwork into envelopes.

Arrange your paperwork so that different types of paper work are in the same envelopes ie all the income statements should be together, all the business expenses (if applicable) should be in another envelope etc.  Some suggestions on organizing your tax paperwork.

3) Complete the tax return yourself or hire an accountant else to do it.

Completing the return yourself can be time consuming and frustrating and increases the possibility of errors but on the other hand it is cheaper, a good learning experience and it can really help you understand your finances better.  You have to realize that hiring someone to do your return doesn’t mean they will find and organize all your paperwork.  You will still have to do some work.

4)  Tax software or by hand?

If you are doing the return yourself will you be using tax software or doing it by hand?  Using tax software can be a godsend if you aren’t all that familiar with tax rules.  It can be much quicker to use a good tax return software rather than doing it by paper.  Of course not everyone is comfortable with using software so it might not be the best option for everyone.  Cost is a factor as well.
I strongly recommend looking into tax software.  Many of them have free trials or money back guarantees so you can test them out and make sure they are right for you.

5)  If you prepare your return using tax software will you then file electronically or print it out and mail the return?  This is a no brainer to me.  I can’t understand why anyone would mail a return that was created by tax software unless maybe they are worried about security.  Efiling is easy and cheap.  Just do it!

More resources

Popular tax software TurboTax review

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Why You Might Need A Tax Attorney Rather Than A CPA


Tax accountants are used by many businesses big and small, as well as individuals.  Another option which is quite a bit more expensive, is to use a tax attorney instead of an accountant.

This option won’t be available to most small businesses and individuals because of the higher cost but if a tax attorney fits into your budget then it might be worth consideration.

If you thinking about buying tax preparation software then consider software programs such as TurboTax or TurboTax Canada (formerly QuickTax).

Some advantages of using a tax attorney over an accountant

A tax attorney has attorney-client privilege which accountants do not have if you are facing a criminal tax case from the IRS.  Accountants also don’t have client privilege for state tax audits or an investigation by another federal agency even if they are not criminal cases.

If you owe back taxes you can’t pay or are seeking some sort of tax relief from the IRS then a tax attorney should be better qualified to deal with this sort of scenario rather than an accountant.

If you are facing a criminal action from the IRS or are planning to bring a suit against the IRS then a tax attorney is necessary.

Some disadvantages of using a tax attorney over an accountant

The main disadvantage is the cost.  The rates for tax attorneys and CPAs vary quite a bit so the best way to determine potential costs is to interview some attorneys and accountants and compare the costs directly.
If you are honest with your accounting then you shouldn’t have to worry about major problems with the IRS but sometimes paying more money for a tax attorney could be a form of insurance for your business.

Summary

Hiring a tax attorney vs a CPA is not a clear cut decision for a lot of firms and individuals.  If your taxes are very complicated, involve overseas law, have problems with the IRS then an attorney might be the best choice.  For most small businesses and individuals a good accountant will probably suffice.
Keep in mind of course that within any group of professionals there will be a large range of competancy so it is important to interview possible hires and check all references.

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Roth IRA Contribution Limits For 2010

It is a brand new year which can only mean one thing – it’s time to start tax planning for 2010!  That’s right – the Roth IRA contribution limits have been released for 2010 and it is never too early to get this information.

As expected the 2010 Roth IRA limits have not been changed from the 2009 Roth IRA limits which is good and bad.  It is bad because the contribution limits didn’t increase but it’s also convenient since if you know the 2009 limits then you also know the 2010 limits.

If you thinking about buying tax preparation software then consider software programs such as TurboTax or TurboTax Canada (for Canadians).

This article covers all the contribution limits and rules for Roth IRA. This retirement account is a very useful retirement tools since you don’t pay any taxes while the money is in the account or upon withdrawal so there isn’t any uncertainty about tax rates when you are retired.  The contribution limits are much less than the 401(k) plan but it’s good to diversify your retirement savings into pre-tax accounts (401k) and after-tax accounts (Roth IRA).

Here are the limits for 2010 and previous years:
[table id=19 /]
The “over 50” rule is applied to allow older people to “catch up” on their contributions.  Sometimes people find themselves just around the corner from retirement with little or no savings.  Having a different contribution category for those folks is a way to allow them to salvage a decent retirement.

Roth IRA income phase out ranges

[table id=20 /]

The phase outs are graduated which means that if you make less than the bottom end of the range then you get the full contribution room ($5,000 or $6,000).
you make more than the high end of the range then your contribution room is zero.  If your income is somewhere inside the range then you will only get part of the maximum contribution room.  See this post – 2009 Roth IRA contribution limits for a detailed example of how the phase-out works.

Roth IRA rules

All Roth IRA contribution room has to be used by Apr 15 of the following tax year.  The contribution room cannot be carried forward indefinitely.  Any contributions made between January 1st and April 15th in 2010 can be designated either 2009 or 2010 so you have your choice as to which tax year to apply the contribution to.  Generally speaking applying to the previous tax year makes sense since that gives you more opportunity to use the current tax year contribution room later on in the year.

The Roth IRA contribution limit applies to all Roth IRA accounts you own as well as any other type of IRA accounts such as Traditional Roth account.

More information

2009 Roth IRA contribution limits and phase out numbers.

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SmartyPig Review – Online Savings Account

SmartyPig is an online, high-yield savings account which is offered by West Bancorporation, Inc.  It launched in April of 2008, so is still fairly new to the bank All money deposited in a SmartyPig account is held by West Bank of Des Moines, Iowa, and is FDIC insured up to the normal $250,000 limitations.  While it all probably sounds like your average online savings account so far – there are some differences in how SmartyPig allows you to save money.

The SmartyPig Difference

SmartyPig requires that you create specific goals for saving before you can start adding money to the account.  For example, you could use SmartyPig to save for your next vacation.  You figure out how much you need and by what date, and then decide how often you want to contribute.  SmartyPig will calculate how much your contributions should be to reach your specific savings goal, based on the information you provide.

The other main difference between SmartyPig and other savings accounts is that it encourages account holders to share their savings goals and their progress on social media sites and blogs.  In fact, it even allows your friends and family to contribute to the savings goals you’ve created.

Signing Up for SmartyPig

Creating an account with SmartyPig is fairly painless.  You have to enter your basic identification information, social security number, date of birth and driver’s license number.  The bank will run a soft pull of your credit to verify your identity.

Next, you connect your SmartyPig account with your main bank account which you’ll use to fund your savings goal.  The money will be automatically transferred according to the schedule you select when establishing the savings goal.  You can connect more than one account, if you like.

Set Up a Savings Goal

Once your account is established and you’ve linked your SmartyPig savings with your regular bank account, you can create your savings goal and contribution schedule.  Your minimum savings goal must be at least $250, with a maximum of the FDIC limit of $250,000.  The initial deposit must be at least $25 to start your savings goal, and each automatic contribution must be a minimum of $10.

Withdrawing Money

While the point of SmartyPig is to keep your money in the account and keep contributing until your goal has been reached – you can withdraw your money at anytime if you need to and without penalty.  There are three methods for withdrawing money from your SmartyPig account:

  • ACH Transfer – you can transfer the money right back to your bank account.
  • Debit Card – if you choose, you can have a MasterCard debit card attached to your SmartyPig account.  This allows you to withdraw money from your account from ATMs or by using the card to make purchases.
  • Retail Gift Cards – a unique feature to SmartyPig is the ability to withdraw your savings directly to retail gift cards.  When you choose this method, you can get up to 12% more than you’ve saved thanks to partnerships with major retailers.