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I’m sure you all know by now that the gov’ment decided to ship out everyone’s “economic stimulus checks” a little early. In fact, some of you who got your taxes by direct deposit may already be seeing that six hungie in your bank accounts. So here’s my question: what do you plan to do with the money? Pay off credit card debt, go buy a new laptop, horde away some gas or sacks of rice, invest it (maybe by launching a new blog or your own Internet company), or just save up? Are you thinking of spending it at one of the many retailers around the country who are promising incentives if you prove you’re spending your stimulus check with them?

Let’s get some discussion going in the comments section!

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In case you’ve been hidden under a rock for the past several weeks, listen up: Federal and state taxes are due in three days! But, if you haven’t yet shook the collegiate habit of waiting until the last minute to get things done, apparently H&R Block is offering the basic version of their TaxCut software free on their website for anyone who waited until the last minute to file their taxes (see, sometimes it pays to wait…). Click here to check it out.

Not only that, but the H&R Block website features more than 35 personal finance podcasts on issues ranging from overlooked tax deductions to capital gains to last-minute tips.

If you’re one of the ones who waited, or is struggling to get everything filed in time, it might be worth checking out!

(Thanks to RWR reader Jessica for the tip!)

Technorati Tags: H&R block, taxes, personal finance, college, graduation, real world

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I know some of us are a long way off (myself included) from this scenario but let’s say for a minute, hypothetically, that you’ve got all of your high interest debt (like credit cards) paid down, your low interest debt (like students loans or car payments) under control, at least, and you put some of each paycheck away in both a high yield savings account and your office’s 401k.

I know, I know - you’re thinking “yeah right, that’ll never happen” but rest assured some day (soon) it will. And when that time comes, it might make sense to put more money away in an IRA.

photo credit: estherase

An Individual Retirement Arrangement (sometimes called an Individual Retirement Account), is a personal retirement savings plan available to anyone who receives taxable compensation during the year. Best of all, money may be withdrawn from an IRA at any time (but on withdrawal it may be taxed and/or penalized).

While there are technically 11 types of IRAs you will likely choose between the two most common: a Traditional or a Roth IRA. What are the differences?

Traditional IRA:

• The tax breaks for a traditional IRA are tax-deductible. That means that the money you deposit in your IRA isn’t taxed. And regardless, whatever earnings you have on your contributions won’t be taxed until you withdraw that money many years later.
• If you withdraw the funds before age 59 1/2, then in most cases you’ll have to pay both income tax and a 10% penalty on whatever earnings have accrued — but if the funds are used to pay for “qualified higher education expenses” then the penalty will be waived.
• You can put just about any money from anywhere into a Traditional IRA account.

Roth IRA:

• Unlike a contribution to a Traditional IRA, a Roth IRA contribution is never deductible. However, when you withdraw the money from a Roth IRA, none of it — and that includes the earnings — will be taxed (assuming that the Roth IRA has been open for at least five tax-years and you are older than age 59 1/2).
• A Roth IRA gives you huge flexibility by allowing you, in many cases, to withdraw your principal contributions at any time tax-free, without penalty. For instance, first-time homebuyers can pull out $10,000 in profits penalty free and tax-free (again, if the money has been in the Roth IRA for at least five tax years). There are also some breaks for education spending, and others.

So, which is the best option for you? That depends on a lot of different factors. But luckily there are plenty of online calculators to help you through the decision-making. Mint.com offers an easy three-step IRA Advisor and Fool.com has a number of different calculators in their Roth IRA center.

Just remember, whichever you choose, you’d better hurry. The deadline to sign up using your ‘07 taxes is April 15^th! Is it worth it? Well, By opening an IRA today, you could save up to $1,200 on your 2007 taxes. And, without any work or risk on your part, a $4,000 contribution this year could grow to as much as $65,000 in 35 years!

sources: - “Traditional vs Roth IRA: Which IRA Is Right For You?” [blog.mint.com]
               - “All About IRAs” [Fool.com]

Technorati Tags: personal finance, money, IRA, Roth IRA, Traditional IRA, saving, career, college, graduation, real world

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News of the 2008 economic stimulus plan has been all over the media lately, but how much will you actually get back? Well, thanks to a handy calculator put together by the Consumerism Commentary blog, you can figure out the exact amount of your rebate. Just plug your income and other tax info from your 2007 return into the calculator (below) and get back the rebate amount (if you qualify). Just remember, this rebate doesn’t affect your 2007 taxes; instead you’ll get a check this coming summer, completely separate from any tax refunds. Good luck!

“Economic Stimulus Tax Rebate Calculator” [Consumerism Commentary]

Technorati Tags: economic stimulus, taxes, tax rebate, rebate, college, graduation

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Before you go paying for a tax prep service, remember that chances are you qualify for free tax filing. If your household had $54,000 or less of income in 2007 (and if you’re a recent grad & your parents no longer claim you as a Dependant than you probably qualify), then you can prepare and file your taxes online for free using tools that the Free File Alliance — a group of tax software companies which includes Intuit (maker of Turbo Tax), H&R Block and EZTax Return — members provide.

According to the Free File Alliance’s website, only a very small portion of eligible taxpayers take advantage of the Free File program currently. Approximately 3.9 million taxpayers used the Free File program in 2007, though about 95 million are eligible- so why not go ahead and get yours?!

Things to remember:

• The agreement only requires Alliance members to offer federal tax software for free; many charge high rates for providing the tools to do the state returns, so stay alert to what you agree to.
• The only (legit, spam-free) place you can this access the software is on the IRS website (here).

“The Basics on Free Tax-Filing Software” [FiLife]

Technorati Tags: Taxes, filing taxes, federal taxes, Free File, college, graduation

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While there are many things that you can write off on your taxes that often go overlooked, here are some that you, as a twenty-something recent (or soon-to-be) college graduate, probably have but I bet don’t claim:

1. Cellular telephones
2. Contact lenses, eye glasses, and hearing devices
3. Contraceptives (if bought with a prescription).
4. Costs associated with looking for a new job in your present occupation, including fees for resume preparation and employment of outplacement agencies.
5. Depreciation of home computers.
6. Foreign taxes paid (helpful if you’ve studied abroad this year, or went away on Spring Break).
7. College tuition (You won’t find this one on the forms, but you may qualify to deduct up to $4,000 you paid in college tuition for yourself, your spouse or a dependent).
8. Student loan interest paid by mom and dad (If mom and dad pay back your loans, the IRS treats it as though they gave the money to you, their child, who then paid the debt. So, a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by mom and dad).
9. Moving expense to take first job (Here’s an interesting dichotomy: Job-hunting expenses incurred while looking for your first job are not deductible; but moving expenses to get to that first job are. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including 18 cents a mile – and parking fees and tolls – for driving your own car).
10. Collect overpaid Social Security tax if you worked for more than one employer (If you worked for more than one employer – work study while at school, and at a summer camp over vacation, for instance – each took Social Security taxes out of your paycheck based on what they paid you. You may claim a refund of the excess on your return).

And, if you’re not quite ready for the Real World and plan to continue your higher education, H&R Block reminds you,

You could be eligible for tax breaks if you return to school… You may qualify for the Hope credit, the lifetime learning credit, a deduction on your tax return if you itemize, or an exclusion for Series EE or I bond interest. The maximum Hope credit tax break is $1,650 per student ($3,300 for Gulf Opportunity Zone students). The maximum lifetime learning credit is $2,000 per return (up to 20 percent of the first $10,000 of expenses). You may also contribute up to $2,000 per year to a Coverdell Savings Account for your children, but that is a savings plan, not a tax credit or deduction. Tax breaks can make going back to school more affordable, so check with your tax professional and choose the option that is best for you.

(image by curious_spider)

Technorati Tags: college, debt, taxes, tax deductions

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