Tax Info 2013 Made SoMe Easy from IRS

Love the new IRS Tumblr blog! 

Maybe it's because the IRS headquarters is in Austin, TX, home of the the SXSW digital media and music festival and thousands of young tech savvy workers?  All I know is that the IRS is now using social media to deliver easy-to-digest filing information beyond just www.irs.gov, and it worked for me -- so I know you will probably find it to be simple and useful as well. 

For example, I found out that I can e-file taxes for free, even if I make more than $57,000 -- just by watching a minute and a half video!

And a graphic on the Tumblr blog links you directly to a site that gives you an online application to order historical tax information necessary for your federal student aid application (FAFSA).   It only took 3 minutes for me to   read, digest, follow and order.  Wish I'd had access to that when I was filling out my daughter's FAFSA forms (i.e., spending a Saturday in paperwork misery justified by motherly love).

Lost your W-2?  Or didn't get one?  There's a quick video on the blog on that as well.

Definitely good news from the government - glad to see my tax dollars at work in Social Media! 

Your Mortgage Interest Deduction Isn't as Great a Tax Savings as "They" Claim

I will pay $4,320 in mortgage interest this year. 

And it will only save me $60 in Taxes.

The tax savings touted for mortgage interest is a terrible myth -- one of those that also convinces us it's okay to buy bigger houses and helped get us into this housing mess.


Yet financial gurus like Ric Edelman in his latest book  "The Truth About Money," try to mitigate the pain of paying mortgage interest each year by saying "oh, you really aren't paying all that much interest -- because you are saving 25% of it in taxes, if you are in the 25% bracket and itemizing on schedule A."  

In real life, this is ot necessarily true and certainly not true for a lot of single people!  You must do at least a simple analysis (see example below) before you really know.   I used Quicken and the IRS tables for back-up and checking.  You can do the same in about an hour and if you don't have Quicken, the IRS 2011 tax tables will do.

Even if you file as a single person - one of the least favorable tax statuses --  you can get a standard deduction of $5,800.  You don't need mortgage interest and schedule A itemizing to get that deduction

Standard Deduction Table for 2011 rates can be found here or on http://www.irs.gov. 

Templates for Comparison

  (using Quicken 2010 Tax Planner software)

My 2011 Taxes Using Standard Deduction Only

Adjusted Gross Income             $56,364

Standard Deduction                     $5,800

Exemptions                                  $3,650

Taxable Income                          $45,695

Taxes owed =                             $7,605

(with Schedule A - itemizing mortgage) 

My 2011 Taxes Using Schedule A Deductions

Adjusted Gross Income     $56,364

Itemizing Schedule A 

     Mortgage Interest                    $4,320

     Real Estate Taxes                        $780

     State Taxes                              $1,861

     Charitable Deductions                 $250

Exemptions                              $3,650

Taxable Income                         $45,495

    Taxes Owed                             $7,555*

If you have a jumbo mortgage and a whole lot more interest on your loan each year than I do, I can see why you would spend time focusing on how your tax bill isn't quite as large as it might be.  But for those of us who are single and scaled down in terms of housing needs and debt -- this argument for borrowing money on a mortgage is downright wrong. 
         
*Based on 2010 tax tables.

Mint Wins with the Envelopes Method

Hallelujah!  Mint.com has edged out Quicken with a new budgeting development in the software -- the ability to track expenses a la the Envelope method.  I'm freed from the Quicken annual subscription fee shackles ...and you could be too!

I've been comparing Quicken and Mint for some time and reporting about it on this blog.  Just recently I noticed a Mint upgrade that promised to "roll over" a monthly budget category, so I tested it for the month of May, 2011.  

As you may know, the Envelope budgeting method, espoused by Dave Ramsey and all manner of other financial gurus, is really pretty sweet.  What doesn't get used in one envelope (or category), can be shifted to another.  What isn't used in one month in your category (i.e., groceries), can be rolled over to the next month.

In my May 2011 grocery budget, for example, I underestimated my monthly $200 alotment by $8.  (Maybe it was all those coupons I used!).   In any case, those $8 are now sitting in June 2011 budget line item as a (-$8) for a total amount available to spend of $208.    Don't be mislead by the negative sign -- I wish Mint hadn't used that in their visual display of your envelope.    It just means that you have $8 dollars left over from last month and those $8 will be used up first in the budget tracking, before you get to the newest monthly funding.

Love, love, love the new update to Mint.com.  I'm able to use a software that is Free (yep, that's a capital F) and doesn't stick me with annual upgrades that must be taken or else the software doesn't work on my computer anymore.  (Tricky, Quicken, but not a good way to win customers/friends).  Mint.com is also Web-based, so I'm not chained to my Quicken desktop software application.  

I know not everyone is a Mint.com fan, and it doesn't track my tax issues as well as Quicken.   Do you have a favorite?

Other posts you might like:

Pear Budgeting Software Review
Original Mint.com Review
You Need a Budget Software Review