Even when they have a plan for their refund check from Uncle Sam, Americans often don't realize how they actually spend the windfall.
By Allison Linn, CNBC
When it comes to tax refunds, many Americans say they plan to do something virtuous with the money they get back from Uncle Sam, like pay down debt or put it in the rainy day fund.
We're not completely fooling ourselves: Experts say people who plan to save their refund or use it to pay off bills do that — with at least part of the money.
But whether we realize it or not, having a little extra money in the checking account also often leads to a splurge or two, like a new pair of shoes or a nice dinner out.
"You also find significant spending among households who say they're saving it," said Jonathan Parker, a finance professor at MIT's Sloan School of Management who has studied how people spend money they get back from the government.
It's not clear whether people are aware that they are spending a bit more than they otherwise would have. Parker said people may just see that their bank balance is a bit higher, or know that they just deposited that big check, and feel comfortable spending a bit more even a month or two later.
"It actually caused spending, even though you think you saved it," he said.
For many Americans, a tax refund is a significant financial boost. The Internal Revenue Service said last week that it had issued more than 40 million refunds already this year, and the average refund so far is $3,116.
Americans can kill two birds with one stone by filing their taxes and buying health insurance at the same time.
This post comes from Krystal Steinmetz at partner site Money Talks News.
The Obama administration has found a new ally in its quest to help uninsured Americans buy individual health insurance under the Affordable Care Act, also known as Obamacare.
Tax return customers of H&R Block and Jackson Hewitt Tax Service are also getting free help applying for health insurance.
After taxpayers are done with their returns, H&R Block helps them estimate what their premiums would cost if they were to qualify for a premium subsidy tax credit to help lower insurance costs and to calculate how big a penalty they will have to pay if they lack insurance coverage. People who want to shop for insurance are connected with agents from GoHealth LLC, an online insurance broker who can help them compare plans and apply for insurance on HealthCare.gov. …
People who get their taxes done with Jackson Hewitt Tax Service can get help filling out an application for Medicaid and are given the option of calling a broker at GetInsured, a private health insurance exchange, for help filling out an application on HealthCare.gov.
Meanwhile, TurboTax has provided an online tool to walk people through a similar process, it explains in this blog post.
Most couples file jointly. But under some circumstances, separate returns may be the best way to file.
By Alden Wicker, LearnVest
One of the very first things you'll choose this tax season is your filing status, which determines the deductions and credits you can take.
Generally, there are two common filing statuses: married filing jointly and single. But it's a third, less common status that we'll be discussing here: married filing separately.
As with most things tax-related, choosing whether to file jointly or separately as a married couple is a highly individual and complex decision. That's why we consulted two certified public accountants to find out how common it is for a married couple to file separately, what it means for your taxes and in which situations it may apply.
What does it mean to file separately?
If you were legally married as of Dec. 31, 2013, then you have two choices for your filing status this year: married filing jointly and married filing separately.
Married filing jointly means you file one return as a unit, with your incomes and expenses lumped together for the purpose of calculating and paying taxes.
Married filing separately is not the same as filing as a single person. It means that you're married, but you each file your own return. You don't take legal responsibility for your spouse's return, and your incomes and expenses are considered separately. The federal government now recognizes same-sex marriages, which gives married same-sex couples this same choice between filing statuses.
Still haven't filed your tax return? Take precautionary measures to reduce the likelihood of your refund being stolen.
This post comes from Allison Martin at partner site Money Talks News.
Have you already started making plans for this year's tax refund? I hope everything works out as you planned and that your refund isn't snatched up by someone else.
MarketWatch says the Internal Revenue Service's Identity Theft Protection Specialized Unit received about 450,000 cases last year -- 78 percent more than 2011. The IRS also stopped $20 billion in fraudulent refunds in 2012.
Take a moment to reflect on the situation down here in the Sunshine State, where hundreds of millions of refund dollars have been taken by thieves in recent years.
I know personally of at least 10 cases where people went to file their return, only to find out that someone had beaten them to the punch -- collecting a refund to which they were not entitled by using the victim's Social Security number and name. All of the other information provided was false, but good enough to sneak right past the vigilant gatekeepers at Uncle Sam's headquarters.
Wondering if you will fall victim to the stolen refund scam? Here are a few indicators that you may not be adequately protecting yourself.
While nobody expects the 979-page draft to go anywhere, the move is at least sparking some reform discussion in Washington.
For a plan labeled dead on arrival before it had actually arrived, Rep. Dave Camp's proposal to overhaul the bloated U.S. tax code has caused quite a stir both in Washington and across the country.
The 979-page "discussion draft" put out by the House Ways and Means chairman (pictured) on Wednesday has little chance of becoming law, with neither party willing to stick its neck out on such a central pocketbook issue, particularly in an election year.
The fact is, though, that Camp has started a debate that everybody agrees needed to begin, but that nobody else had the guts to initiate.
If you have gotten a 1099-C and you believe it's a mistake, there's a way to fight back, and it will keep the IRS from trying to collect in the meantime.
This post comes from Gerri Detweiler at partner site Credit.com.
An estimated 5.75 million forms reporting “cancellation of indebtedness income” have been sent to taxpayers this year. But how many of these 1099-C forms are correct? Given the complaints we’ve received on our blog, we suspect the number of mistakes is significant. Here are just a few examples of some of the mistakes our readers are battling:
Very old debt. I had a car lease back in 1997 for a vehicle. I received a deficiency letter from the IRS stating that I didn't claim it on my 2011 taxes. I never received the 1099 from GMAC… IRS is asking for a Fair Market Value of the vehicle that it sold for back in 1998. Like I am supposed to know that.
Debt due to fraud or identity theft. A friend for whom I do her taxes just received a 1099-C for $7.5K for credit card debt. She claims that she never applied for the credit card, never saw the card and never used it. She suspects that her late husband who passed away in 9/1999 applied for the card in her name after he trashed his credit.
Debt not owed. I have disputed the debt with the credit card company, in court twice when complaints were filed by attorneys and I maintain that I do not owe the debt. I do not owe the debt. What will happen if I simply ignore the 1099-C when I file my taxes?
Deductions are allowed on some hobby expenses when there's income involved. But only up to a certain point, so be careful.
By Kay Bell, Bankrate.com
Hobbies provide a great way to relax from the daily grind. For many people, they also offer a way to make extra spending money.
Be aware, however, when your hobby produces income, you owe tax on it. You can reduce your taxable hobby income by deducting your hobby expenses, but this tax break is limited.
Allowable hobby deductions
You can only deduct expenses up to the amount of money you make on the hobby. Even then, hobby expenses, along with other miscellaneous expenses you itemize on Schedule A, must come to more than 2 percent of your adjusted gross income before you can deduct them.
If you find you are regularly making money from your hobby, it might be to your tax advantage to turn the sideline into a business.
It's not as difficult as you might think. If you operate as a sole proprietor, you report the income on your Form 1040 tax return and you have more options when it comes to deducting your expenses.
Hobby vs. business
The Internal Revenue Service defines a hobby as an activity you pursue without expecting to make a taxable profit. Basically, you do it because you like it, regardless of the cost.
Every dollar of deductions and credits you uncover can mean money in your pocket. Don't file that return until you've gone over this list.
This post comes from Stacy Johnson at partner site Money Talks News.
Americans love tax breaks.
Everybody knows they can deduct mortgage interest, medical expenses over a certain amount, gifts to charity -- even the cost of preparing your tax return.
But those are just a few of the tax breaks you might be entitled to. Here are 10 commonly missed deductions and credits.
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