Monday, June 16, 2008

Don’t Let High Fuel Prices Stop You From Volunteering

Author: Nick
Category: Money
Topics: , , ,

comic 36 - volunteering

If it seems like every article here is related to gas prices lately, that’s because the price of gas influences so much of what we do with our puny American lives. Want a vacation? Need gas. Want to work? Need gas. Want to drive downtown and pick up a few hookers? Need gas. Well, here’s another one: want to volunteer to help others in your community? Need gas. And unfortunately for a lot of those on the receiving end of volunteer work, high gas prices are pushing some people to reduce their hours spent volunteering or to stop altogether.

While every type of volunteer—from scout leaders to soup kitchen operators—are feeling the pinch at the pump, there are many less fortunate folks out there who need the help of unpaid, unreimbursed volunteers just to get by. And when volunteering includes lots of driving—perhaps taking patients to required medical treatments, or delivering food to shelters—the price of fuel can greatly impact a person’s ability to be generous. Worse yet, with the price of everything going up, more and more people who have never needed a helping hand are finding themselves in positions of need. Put together, that translates to more needy, but fewer volunteers to serve them.

Having driven over 1,000 miles this year alone to perform volunteer work (including 450 miles this past weekend), I have a great appreciation for the hardships volunteers are enduring due to high gas prices. What I don’t have is a lot of sympathy for their excuses if they choose to cut down or quit their volunteering. That’s because Uncle Sam is more than happy to help you pay for your gas that you use in the course of your volunteer work.

In case you don’t already know, mileage incurred that is directly related to volunteering for qualified charitable organizations is tax deductible. For 2008, you are allowed to deduct 14 cents from your taxable income for every mile you drive for charity. So if you drive, say, 2,000 miles a year for charity in a vehicle that gets about 30 miles per gallon, you’ll pay $280 for gas priced at $4.20 a gallon. But if you take the time to carefully log your mileage each time you take a trip for volunteering, you could deduct 14 cents for each of those 2,000 miles, or $280. Isn’t that nice how that math worked out!

While I’ve tried to convince others I volunteer with to log their mileage for the tax deduction, many of them choose not to—even if they itemize their deductions anyway—because it’s “too much trouble.” On the contrary, logging volunteer mileage is incredibly simple:

  1. Create a mileage log book. Take a small notebook, and throw it in your glove compartment along with a pen.
  2. Log your miles for each trip. Record your starting and ending mileage for each trip you make to volunteer for qualified charities.
  3. Add ’em up. Whip out the old calculator (or use a spreadsheet like me) at tax time and take a deduction for your charitable miles driven.

Of course, you’ll want to be careful whenever you try to tell the IRS you don’t owe them tax on every dime you make. You may wish to consult a tax accountant or attorney before deducting your charitable driving, and you’ll want to confirm that your volunteer work is being performed for a qualified charitable organization. But as long as you document your volunteer driving well, you should have nothing to worry about.

On a side note, I will mention that the Federal government has not seen fit to increase the deduction rate for charitable work mileage in over a decade. While deductions for business, medical, and moving mileage have all risen steadily (and are all at rates higher than volunteer work), volunteers have been stuck at the same deduction rate since 1998 despite rising gas prices. I think news of waning volunteerism will finally help to spur a rate bump for volunteers soon.

Thursday, May 8, 2008

Stimulus Rebate Payment Schedule Is Racist Against Awesome People

Author: Nick
Category: Money
Topics: ,

comic 23 - social security number

As of tomorrow, about 75 percent of people who filed their last tax return specifying a direct deposit account should have received their stimulus rebate-a-ronis in their bank accounts. This is based on the schedule of payment on the IRS website. According to that schedule, tax filers with Social Security Numbers ending in the digits 00 through 20 would receive their directly-deposited stimulus rebates by May 2nd. Assuming a proportionate allocation of SSNs, that means 20 percent of direct deposit rebate recipients have their cash in hand right now. The majority of rebate-kateers—those with SSNs ending 21 through 75—will get their payments by tomorrow, May 9th. And an unfortunate few with SSNs ending 76 through 99 will have to wait until May 16th to get their rebates credited to their bank accounts. (As for people getting their rebates by paper check, some with unluckily high SSNs may not see their checks until mid-July.)

I wasn’t too upset about this payment schedule until I realized a few things:

  1. My SSN falls between 76 and 99.
  2. That means I won’t get my $1,200 rebate until May 16th.
  3. Two weeks worth of 3% APY interest on $1,200 is almost $1.40.

Thus, the Federal government, by staggering the payment of these stimulus rebates, is cheating millions of people out of their $1.40. By my calculations, that’s about $140 trillion dollars people like me are being cheated out of, more than the entire economic stimulus package amount!

The reasons for the staggering payments have been cited before: the IRS and U.S. Treasury just can’t send out tens of millions of electronic and paper payments all at one time due to the fact that the entirety of the Federal government is still run on Apple IIe computers from the 1980s. So splitting the payment distribution into chunks by Social Security Numbers—which are more or less randomly assigned and evenly allocated by geography, financial status, ethnicity, etc.—seems to make some sort of sense.

Well guess what—it’s inherently biased against a really swell group of folks. That’s right, I’m talking about awesome people.

You see, just about everyone I know who is awesome has a Social Security Number ending somewhere between 76 and 99. For example, me. Here’s a list of just a few of the really awesome people whose SSNs fall in that pitiful 25% range of taxpayers who’ve been shunned by the IRS and the government:

  • Most New York City firefighters
  • That nun you see in the grocery store buying food for the homeless
  • 90% of orphans
  • Vietnam and Iraq War veterans
  • Almost every Starbucks barista east of the Mississippi
  • Santa Claus
  • Spiderman
  • All of the good living former U.S. Presidents

And if it isn’t bad enough that all of these amazing people are being punished just because they showed up too late (or too early) at the Social Security office, it turns out that a lot of terrible people were assigned SSNs with last digits between 00 and 20. Here’s just a sampling of the kinds of scum who are getting their rebate money before fine people like me:

  • 67% of prostitutes
  • 39% of convicted rapists
  • The guys who canceled Star Trek
  • Unwed teenage mothers
  • Zombie Hitler
  • The person you asked to the prom who turned you down because you were a nerd

Just how did so many losers end up with lower-ending SSNs while we monuments to humanity got the high ones? There are many theories, ranging from DNA profiling to covert behavioral analysis. But whichever school of thought you buy into, there’s little arguing that something is amiss with the way we’re being numbered.

By now you’re probably as outraged at this blatantly obvious conspiracy as I am. While the minions of evil are out there purchasing new cars and big-screen TVs with their rebates, people like you and me are stuck at home eating leftover lima beans and reading last month’s Reader’s Digest for the third time. And I bet you wish you could do something about it.

Well, there is. To be precise, there are three things you can do about it:

  1. Write your local Congressman and let them know just how irate you are over the supposed “random” rebate payment schedule. Tell them that you’re just as awesome as, if not more awesome than, people with lower Social Security Numbers. Suggest that the next time there’s a stimulus rebate that payments be issued according to some more noble metric such as number of volunteer hours performed or number of homeless kittens adopted.
  2. Write to the IRS and the U.S. Treasury demanding your $1.40 in interest. And if you’re getting a paper check in July, you should demand as much as $7.00. Be sure to let them know you’re a Punny Money reader so they understand right away just how awesome a person you are.
  3. Refuse to stimulate the economy. The best way to say “screw you” to a government that has wronged you is to do the exact opposite of what they want you to do. For the stimulus rebates, that means not injecting that money into the economy. Put it in savings, stuff it under your mattress, burn it—just don’t spend it. That’ll teach those government number-crunchers to piss off the awesome people.

Finally, if the wait for your stimulus rebate is too painful to bear, feel free to print out the following simulated stimulus check and hold it in your hands for as long as you like.

fake rebate check

Just don’t try to cash it at the bank or you might end up in Federal prison where the only stimulation you’ll receive will be of the surprise-from-behind variety, probably from someone with a low Social Security Number.

Wednesday, April 30, 2008

Search and Ye Shall Receive: Audit Freedom, Paperless Statements, and College Superstars

Author: Nick
Category: Money
Topics: , , , ,

comic 19 - tax return

You search for it, you get it here at Punny Money with our not-too-frequent feature Search and Ye Shall Receive. Today we look at three search engine queries that brought some people seeking financial enlightenment to this humble quadrant of the internet.

Since the IRS Gave Me a Refund, Will They Not Come After Me For Deducting My Hair Extensions?

If you get your tax refund, will you not be audited? (via Google)

Oh if only it were that easy. No, my friend, when you get that delicious little refund check in your hands, your IRS worries are only just beginning. Uncle Sam has three years from the day your tax return is filed (or the April 15th deadline, whichever is later) to audit your return. If it establishes that you owe money, it has up to ten years to come after you for it. And if it determines that you filed a fraudulent return (i.e. you claimed your weekly visits to the local brothel as a “medical expense”), there’s absolutely no statute of limitations.

So always live in a state of paranoia because you will get audited and chipmunks are waiting to steal your car keys when you go to work tomorrow.

What Benefit Is There to Not Having My Account Information Sent By Pieces of Paper Anyone Can Steal?

What are the benefits of paperless statements? (via Google)

Well, I kinda gave away one of the answers to this question in the snarky headline; getting your bank and credit card account statements sent to you online is about 83 thousand times safer than having them molested by half the U.S. Postal Service before being deposited in a mailbox that’s about as easy to break into as a papier-mache ATM machine. But there are other benefits than just security to keeping stacks and stacks of statements from hitting your home:

  • It takes up less room in your trash can.
  • It saves you time spent weeding out junk mail from important account information.
  • It’s easier to store electronic statements for years than shoe boxes full of papers.

I Can Has College?

Can I go to college? (via Yahoo!)

Without knowing anything else about your situation, and basing my answer solely off your question, I would say no.

Oddly enough, someone else searched for the phrase “I can go to college” shortly after this query was received. To this person, I say congratulations and I look forward to having my Big Macs served by you in the future.

Tuesday, March 25, 2008

The Top 10 Things You Should Do With Your Tax Refund or Rebate

Author: Nick
Category: Money
Topics: , ,

comic 5 - how americans spend their tax refund

It can be very tempting, even for a cheap-skate savings freak like me, to blow that massive tax refund or economic stimulus rebate on stupid crap. Sadly, that’s just what millions of Americans are doing this time of year when those big checks come rolling in from the IRS.

But for those of you out who aren’t content with merely saving that four-figure tax refund for the future, there are several less idiotic ways you can spend that money and derive both an immediate satisfaction payoff and long-term benefits. Here’s a look at some of those ways, starting with the most least stupidest.

  1. Save it anyway, dingus. Okay, I’ll make a deal with you. Even though this is supposed to be a list of smart ways to spend tax refunds, I’m still gonna top the list with saving it. But on the flip side, everything else on the list will be pure spending. So this item includes every possible way to save your money including long-term savings, retirement savings, emergency savings, investing, paying down debt, and sticking it under your mattress.
  2. Start a home-based business. If you’ve been itching to start a part-time business in that empty room upstairs but the only thing keeping you from doing it is the startup cost, devoting some of your tax return to getting it going can pay off big down the road.
  3. Make money-saving home improvements. Switching to new, energy-efficient windows is a smart home improvement that can pay for itself over time. Having your toilet bronzed—not so smart.
  4. Fix your car. Bad idea: using your tax refund to buy a new car you can’t afford. Good idea: using your tax refund to fix your existing car so you don’t have to buy a new one for a while.
  5. Get cultured. Grab yourself some tickets to a Broadway show, a symphony, or something else entertaining and sophisticated. Or make the trek to Burning Man. Totally your call.
  6. Invest in your health. There are a variety of small purchases you can make that won’t necessarily exhaust your whole refund but will help your body and mind in the long run. For example, if you sleep on a bed of straw, upgrade to a decent mattress. Or if your jagged teeth are digging into your brain, go to the dentist. Or if your last vacation was that weekend you spent in jail in Vegas, go on a mini-getaway to a nearby destination to recharge your internal batteries.
  7. After much consideration, purchase entertainment equipment with long-lasting appeal. This does not necessarily mean to rush out the door and buy the first giant TV you see. Nor does it mean to buy a 12-speaker, surround-sound, sub-woofing, flux-capacitator sound system. It does, however, mean to buy a Nintendo Wii because it is awesome and everyone should have one, even homeless people. Which leads me to the next item…
  8. Give it away. Handing a chunk of your refund or rebate to a worthy charity will not only help someone who might not be getting a refund this year, but it’ll also make you feel really good. And don’t forget to take the tax deduction on next year’s return.
  9. Stock the cupboards. Over the course of a few weeks, keep an eye out for incredible bargains at your local supermarket—sales that are designed to draw you into the store to get you to buy other stuff. Then go buy only those bargains… in enormous quantities. Cereal 10 for $10? Buy 100 boxes! Steak for $2 a pound? Buy the cow! You’ll save money as well as time you won’t have to spend looking for deals on those items for a while. Just make sure your family can consume what you buy before it goes bad.
  10. And for the eternally single folks out there who, through no fault of their own (*cough*incredible-unattractiveness*cough*), have not found the right person for them, I have just two words: Russian brides. This works for the ladies too; simply request one of the “strong, big-boned” types.

Monday, March 24, 2008

Nick’s Adventures in Tax Land, 2007 Edition

Author: Nick
Category: Money

comic 4 - tax telepathy

After an adventure-filled first quarter of the year full of Wii hunting, economic stimulation, and financial apocalypses, it was finally time to sit down this weekend and sort out my tax situation for 2007.

For the last few years, tax time has been pretty much the same picture: do them the first week in February, go the cheap route and pay $0 for Tax Act’s software, and have my painfully large refunds in the bank in time to bet it all on Duke in the Final Four. And yet here it is, the last week of March, and I’m just now getting around to filing my taxes for 2007. Was it clever strategy on my part, designed to lull the IRS into a moment of weakness so I can sneak in my deductions for gold-plated toilet paper? Or was I just a lazy bum who just didn’t want to dig through that shoe box full of receipts which was at least 10 times bigger than before this year?

A little from Column A, a little from Column B.

Unfortunately, as I found out rather quickly, going with el cheapo Tax Act wasn’t going to cut it for Nick Tax Year 2007. That’s because, believe it or not, I somehow made money from operating this and other websites. And as I quickly discovered, America’s tax system rewards you for your entrepreneurial efforts by burying you in 86 pages of tax paperwork. While there are business versions of Tax Act, I couldn’t tell if I should get the 1065, 1120, or 1120S package. On the other hand, Intuit (the makers of Quicken, to which I am a slave for life) sells a Home and Business Edition of TurboTax which very clearly spells out that it’s for me because I have (1) a home, and (2) a business. Home and Business. Very nice. If only everything were that simple.

Of course, simplicity has a price, and this time it cost $61.99 to download the tax software I needed, whereas the non-business edition of TurboTax that normal people will want to use only costs $40. So you better believe that, come next year, I’ll be deducting $21 for the business portion of my 2007 tax return. (Crap, now I have to haul out my expenses spreadsheet just to enter that. One second…)

So for those of you still undecided as to how you will file your taxes this year, or if you’re just really bored, or if you’re hoping I’ll use exact figures so you’ll find out just how much I make for writing crap like this, here’s a quick little recap of how things went down during my Adventures in Tax Land.

Welcome to TurboTax, Now Take Off Your Clothes

It took me a good day to sort through my shoe box of receipts to separate the business, education, charity, and volunteering receipts (that’s what I get for being a slob the other 364 days of the year). I also downloaded a lot of 1099s and other files that were available online and organized them into folders on my computer like you see below.

my tax folders

Installing and loading TurboTax Home and Business was as easy as deducting prostitute expenses on a gubernatorial tax return. I was expecting to have to enter a lot of personal and prior-year information, but TurboTax rather surprisingly located and imported my tax file from last year—the one from Tax Act, its competitor! Kinda freaky if you ask me, but it only got freakier later.

Skipping ahead a bit, TurboTax also imported my W-2 from who-knows-where, and it even offered to scour through Quicken to locate possible tax deductions. I passed on that offer as well as a later offer by TurboTax to automatically download information from my banks. Sure, it could’ve saved me from having to enter that data manually, but all of this automation was making me feel a little naked. After putting on some pants, I proceeded to the next section.

Fun Fact: Internet Publishing is the Same IRS Business Code as Atlas Makers

TurboTax directed me to complete my business tax return first—something I thought was a little weird, but it ended up being the right choice in the end. It guided me through a series of expense and income calculations in the classic question and answer format. I had expected the business part of my taxes to be long and painful, but it turned out to be relatively straightforward.

Of the five business income and expense categories, I only had to fill out items in the first, Business Income and Expenses, which turned out to be just a fancy interface for inputing the IRS Schedule C and my various 1099-MISCs.

turbotax business screenshot

TurboTax and other tax software regularly advertise that they can help you find deductions you wouldn’t normally spot. I was hoping TurboTax could find some bizarre tax laws to let me deduct my ceramic rooster collection as a business expense; alas, deductions for rooster collecting are limited to porcelain only. In the end, I did save a good bit of money with deductions for things like:

  • My home office (a room upstairs I use exclusively for business work). You can deduct all sorts of regular home expenses—utilities, whole-house repairs, homeowners insurance, and some other things—based on the percentage of your home that is used only for business. TurboTax walked me through calculating the area of my home office and determined it to be about 9% of the total area of our house. This ended up saving me a ton on business taxes, so I’m glad I put that tiny room upstairs to good use.
  • Business startup fees. I started a Limited Liability Company (LLC) for this and several other websites last year, and Maryland charged me $150 for the honor. Every penny was deductible as a business expense.
  • Web hosting. This is the only expense for a lot of personal finance writers I know, but it didn’t turn out to be that big of a deal to me. Still, it saved me about $30 in taxes.
  • P.O. box. Boy are these things expensive, but at least I recouped some of the cost at tax time.
  • Various other small expenses. Legal fees, subcontractor expenses (from back when I experimented with paying writers), and some light travel for business purposes rounded out my business deductions.

About thirty minutes later and a few offers to “purchase QuickBooks to make your taxes easier next year” later, TurboTax displayed a number in red letting me know I owed some tax money for my business. Since I didn’t file quarterly taxes like many business owners do, this didn’t come as a surprise. But I purposely didn’t file quarterly taxes in 2007 due to various complicated tax rules that I half-understood then and 3/4-understand now. I finished the business part of my tax return hoping that the personal side would cancel out that red number (but not by much! no tax-free loans to no gubberment from Nick!) so I didn’t have to write my first check ever to the IRS.

Personal Taxes: The Hard Part

The fact that TurboTax has eight categories for personal income…

turbotax personal screenshot

…and ten for deductions…

turbotax personal deductions screenshot

…(versus just five categories for business income and expenses) just goes to show you how screwed up U.S. tax law is. It also took me three times longer to complete the personal section than the business section. And while the business component of TurboTax was nothing short of awesome, I had several gripes with the personal part.

For one, the donations section is more a commercial for Intuit’s ItsDeductible service than it is useful for calculating your charitable contributions. This section did not address a huge deduction area for me: expenses incurred while performing volunteer work for a qualified organization. I had to look up tax law and IRS publications myself to determine what part of TurboTax I should squeeze these numbers into.

Another big problem area for me: I received a corrected W-2 form from my employer after I uncovered a big error on its part, but TurboTax’s way of letting you input the changed values is simply to run you through the whole W-2 input process from start to finish again. This wasted a good amount of time I could’ve saved if TurboTax simply presented a checklist from which I could choose the one or two values that needed to be corrected.

Perhaps most importantly to me was the Educational Expenses section which I was accustomed to being very simple to complete from my experience with Tax Act. TurboTax presented it in a completely bass-ackwards manner that forced me to double-check my own math a few times. It’s important that this part be easy to understand because my wife typically has tuition expenses that translate into a $1,000+ tax credit.

I finally limped away from the personal section, whizzed through a section simply called “Other”—only to be trapped in Retirement Deduction Optimization calculations for another 15 minutes. TurboTax encouraged me to open all sorts of lettered things—IRAs, 401(k)s, and the NAACP—for tax benefits, to which I said “thanks, but no thanks for now.”

What, You Thought You Were Done Spending Money?

I was coming down the final stretch, and only a few obstacles stood in my way.

TurboTax performed its ominous-sounding “error checking,” which makes me wonder what the hell it was doing for the last four hours that it didn’t spot any errors as I was making them. Sure enough, I had two errors: the residency section for my wife and me were blank. Apparently these parts get filled out at the beginning, but I skipped that section because TurboTax imported most of that data from last year’s Tax Act file. I don’t know how TurboTax didn’t conclude automatically that we were Maryland residents seeing as the only state I had referenced in the whole damn return was Maryland. Why can’t you import that, stupid software???

Next TurboTax assessed my audit risk. I suspected it would be high simply due to my business and volunteer tax deductions, but I was pleasantly surprised when TurboTax showed me this:

my audit risk level - irs can bite me, a.k.a. low

To help me feel even better about my audit risk, TurboTax allowed me to download its free Audit Support Center software. I was instructed not to install or run it now; just to put it in a safe place in case I’m ever audited. It’s sort of like a birthday gift someone gives you a few weeks ahead of time, except in this case birthdays are bad.

The state tax component of TurboTax was a breeze. Time to download and install to completion was less than 15 minutes, mostly because TurboTax simply used all of the numbers from my Federal section to complete the Maryland state forms. I did have a few extra questions to answer though, but as soon as I confirmed that I had not received any reparations from Nazi Germany for my experiences during the Holocaust, I was done with the state return.

TurboTax tried to sell me a few more products near the end—professional audit support, tax advice from a real person, and Girl Scout Cookies in the shape of Form 1040. I passed on all of them, but that didn’t mean I was done giving Intuit my money. Indeed, I had to cough up $17.95 for each of the Federal and State returns to file electronically. I could have filed on paper for free, but as I later discovered, I would have needed to print and mail 86 pages of tax documentation. As easy as business taxes were to compute, it apparently takes 53 pieces of paper to do it.

So I gave in to TurboTax’s extortion and paid the $35.90. For comparison purposes, Tax Act charged me nothing to file my Federal return last year and just $7.95 for my state return. When it came time to enter my payment information, TurboTax offered to take its fees out of my tax refund—for about $30 more. Having sat in my chair for four hours, I almost relented because I didn’t feel like getting up. I think Intuit plans this, but I was tired of dirty tricks, so I asked my wife to grab my wallet for me.

Did You Say “Refund?”

Yes, even though I often cry “interest-free loan to the government” on tax refunds (though sometimes I don’t), and even though I adjusted my W-4 numbers again this year, we’re still getting back over $5,000 from Uncle Sam and his Maryland cousin, Aunt Susie. I’m going to have to spend some serious time with my W-4 this week because I’d rather get higher take-home pay now than a refund later. I think.

That $5,000 should hit our bank account in a couple of weeks, and our $1,200 economic stimulus tax rebate shouldn’t be far behind. We’ve decided that the $5,000 will go straight to savings; and after some discussion, my wife and I have agreed to spend all of that $1,200 to help stimulate the economy. We’re not sure yet if that money will go to a vacation, a giant TV, or maybe just barrels of delicious, tax-ridden booze.