Monday, April 5, 2010

What saved us $800 on taxes

Even before I married Michael I claimed, as a single and childless woman, multiple deductions when filling out Form W-4, which explains is "completed by an employee so the employer can withhold the correct amount of federal income tax from your pay." also has an interesting explanation on How to Fill Out Form W-4 that includes a link to an IRS Withholding Calculator. Although the number of withholding allowances claimed are, for most people, the number of personal exemptions they claim on their tax return we have a different system in our household. We like to have as much money as possible from the monthly paycheck and, for us, it is worth having to pay up in April instead of expecting a refund. Along with taxes due there is also a fine calculated from what is owed, but the fine is small in our case.

In the past we've received a couple hundred dollars refund from our state tax return (that, of course, gets mailed as early as possible so we can use the refund to apply to what we owe Uncle Sam on April 15th). For 2009, however, it was less than a hundred and we donated half of it back to causes/charities that we checked off on the tax return. Such a paltry state refund wasn't going to be of much help when it looked like we owed over $2100 in federal taxes for 2009 (a considerable increase from years past)..........

Then, last week, I was having pita bread and hummus for breakfast while reading our local newspaper and I saw an article our paper had reprinted from USA Today titled
Take time to avoid costly tax mistakes.
Glancing quickly I saw mistakes we would never make, such as "incorrect Social Security numbers," "overlooking charitable contributions," and "forgetting to sign your return."

However, #5 grabbed my attention: Missing the 'Making Work Pay' credit. You can read the full article at the link above, but here is the text of #5 (highlighting is mine):
Last year's economic stimulus package provided a tax credit of $400, or $800 for married couples. Most workers who have taxes withheld from their paychecks received the credit throughout the year through an adjustment to their withholding. But when you file your tax return, you will still need to claim the credit. Otherwise, your refund could be delayed. The IRS says more than 2 million taxpayers have made errors in connection with the credit.
Did we? Miss this? I wondered.....

Well, yes, we did. Michael woke me on Easter morning with the happy news that I had saved us over $800 on what we owe the feds. That would be the $800 tax credit for married couples, plus a smaller fine.

This is probably a boring post for those of you who use the services of tax accountants or even Turbo Tax. But I think I would still check that work against the list in the article!

Here is an old cartoon from HarpWeek that was originally published in Harper's Weekly on August 7, 1886. Click on the link to read the full -- and fascinating   -- explanation. I've included the first two paragraphs below the cartoon.

In response to congressional passage of a federal tax on oleomargarine, cartoonist Thomas Nast suggests that Americans ask Congress for relief from other taxes.  Here, a citizen covered in taxes knocks at the door of the U.S. Senate, while a wall poster informs readers that the margarine tax was enacted “to please the dairymen” who resented the economic competition.
Butter was considered a nutritional supplement to the daily staple of bread, as well as a cooking oil and flavor enhancement.  The price of butter, however, rose in Europe nearly 100% from 1850 to 1870.  At the 1866 World’s Fair in Paris, Napoleon III agreed to sponsor research aimed at developing a substitute for butter, and three years later Hippolyte Mège-Mouries, a French chemist, produced the first oleomargarine by mixing beef fat with milk and salt.  Later, other animal fats or vegetable oils would be used.



kj said...

hee hee lydia, not everyone will enjoy a post on tax preparation, but i found it fascinating and good for you!

i'll be sure to check myself. we have an accountant but i am always sure something gets left out. myself, i like a refund, even a few hundred $. i don't like to pay.

i consider it forced savings even though it rarely works out that way.


Vagabonde said...

I am not sure if we can claim this tax saving as we are retired but I will check with the return prepared by our accountant, as we owe money. Now about oleomargarine, I am sorry to say that I did not know a French man invented it and I am truly sorry. It is very bad for your health and your heart….unless you drink a lot of red wine I guess.

Looking to the Stars said...

I always enjoy reading about taxes because we are self employed I try to get myself informed. We cannot take advantage of this because of the self employment but I was able to take a $1500 deduction this year because we put in a new furnace. Every little bit helps :)

I wish we would go back to the 1800's as far as taxes. They didn't start taxing indivuals till 1912. It would have been nice not to file tax returns :)

Lydia said...

kj~ Thank you for being here today. :) I hope you get a big fat return (and save most of it!).

Vagabonde~ Best to double-check the work even of experts!
Yes, how about that? If someone had asked me to guess what country the person who invented margarine was from France would have been at the bottom of my list!

Looking to the Stars~ Good for you on that great savings on the new furnace. My husband and I really got screwed a few years ago when we had all new windows installed in our house. The Lowe's salesman mentioned the write-off, the installer handed me each and every sticker off of each window as he removed them from his truck, and we were absolutely cold-cocked when it came time to prepare the taxes and found that it was the one recent year that the program wasn't in effect. What a bummer!

naomi dagen bloom said...

Proving that I think the world is orbiting around moi, till reading this was sure that oleo had been invented during WWII. That's when I recall first seeing it, kneading the little orange button to make it look like butter. Was that another requirement of the dairy industry or a marketing ruse on part of the oleo folks?

Lydia said...

naomi~ You were in the same orbit as my mother, because I distinctly remember her telling us that was the origin. I wonder if maybe the orange food coloring came out during WWII to make it more appealing...wasn't butter banned from the American table during the war? All this makes me curious about the word "oleo," why it was used in front of "margarine" and when it was dropped from usage....

francessa said...

Hi Lydia,

a little late in reading your posts, as so often - but I'm catching up! I didn't understand much of the details - our tax system seems to be different - but the message is clear! I'm happy for you!

Lydia said...

Francessa~ I just realized I had not replied to your comment! Sorry to be late.
O, who can ever really understand taxes? Maybe tax lawyers and tax accountants. :)



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