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With tax season coming to a close and the IRS having just released information that it plans to issue refunds about as quickly as it did last year (9 out of 10 refunds released in under 21 days (, now is the time to start considering what you’re going to do with your refund. While the promise of a big check from the government always comes with some temptations (a new grill for the summer, a gift you missed out on over the holiday season) you should always make sure you’re investing that money wisely. While it may seem like a gift, and an easily spent one at that, remember that it’s mostly money from your other sources of income that you were never able to collect on. Your tax return should be treated like any other money put away, safe from withdrawals for a long period of time; take your excitement at getting such a big break in the mail as incentive to be smart and save. Here are a few tips to get you thinking about putting some of your tax refund to work.

Save it! Invest it!: The importance of either putting some of your return into a savings account or investing it cannot be stressed enough. A good rule of thumb, at the bare minimum, is take ~10% of every check you get and put it into a savings account or towards your investments. Before you know it, you’ll have a tax return a few times over waiting for you whenever you need it that can be used anytime throughout the year.

It’s too much and you don’t know what to do with it!: If it seems like you’re getting too much back on your tax return, get in touch with either a tax preparation specialist or financial advisor. In this case, you can see if there are any changes you can make to your tax documentation in order to get more of that money throughout the year instead of the one big chunk annually. Chances are if you haven’t already done so, you could be seeing a slight rise everywhere else and a reduction in your tax return check.

IRA?: Alongside the 10% rule for saving/investing, it’s also a good idea to look at doing something long-term with some of the money, namely, putting some of it towards an IRA or other form of guaranteed retirement income (annuities, etc). Nothing is more valuable to someone right now than an investment in future stability. Consider asking your advisor, while you’re trying to shrink your tax refund, about recommended retirement investment opportunities.

The pool at the St. Regis Laguna Beach sounds more fun than an IRA, no?

The pool at the St. Regis Laguna Beach sounds more fun than an IRA, no?


While it may seem like something of a killjoy at first, making sure that the first thing you do with your tax return is putting some of it in a place that will give you access to it in the future is of utmost importance in tax season. Whether you’re saving, investing, putting it into a retirement fund or contributing to a child or grandchild’s education, just remember that it’s better if your short-term desires wait until your long-term stability is taken care of. Before you know it, they will have caught up to each-other, and you’ll have made some hefty gains in the meantime.


IRS_largeEvery year you repeat the same tired task. You collect all your receipts forms, and related tax information and either settle in for a marathon self-preparation session, or you hand it all over (along with a few hundred bucks, give or take) to your tax preparer. When all’s said and done, you’ll see exactly how much money the federal government took from your paychecks, but you certainly don’t see an itemized list of where that money will go.

However, in his 2011 State of the Union Address, President Obama pledged to develop a new online tool that would allow every American to see precisely how the government spends his or her annual tax payments. The resulting and first-of-its-kind public website, “My Federal Tax Receipt,” launched last year and was just recently updated to reflect current spending. The tool is an online calculator, located on the a site called Once there, you simply enter your income tax, Medicare tax Social Security tax, and a detailed calculation of how your tax dollars are allocated pops up on the screen.

But you don’t actually have to do anything at all to satisfy your general curiosity — after all, you could just simply scan the numbers and learn how much of the collective federal income tax is allocated where, as it’s all broken into categories and subcategories and measured by percentage. While the information on the site is incredibly informative, intriguing, and perhaps even a bit surprising, I’d be less than honest if I neglected the site’s democratic political bent, but the information is still interesting, despite the occasional overt partisan prose.

Exploring the site is a fascinating way to see where your national priorities lie when compared to those of the government. How much goes to job development and education compared to health care? How does health care rank when it comes to foreign policy and even foreign aid? Most of us don’t have a clue, let alone how much tax money is allocated to each different cause.

The programs and services funded by your income tax, as well as the percentage of your total income-tax payment they receive, are as follows:

National Defense 24.9%
Health Care 23.7%
Job and Family Security 19.1%
Education and Job Training 3.6%
Veterans Benefits 4.5%
National Resources, Energy, and Environment 2.0%
International Affairs 1.6%
Science, Space, and Technology Programs 1.0%
Immigration, Law Enforcement, and Administration of Justice 2.0%
Agriculture 0.7%
Community, Area, and Regional Development 0.5%
Response to Natural Development 0.4%
Additional Government Programs 7.9%
Net Interest 8.1%

In addition to these statistics, the site offers a great deal of interesting content. Curious about foreign policy issues, for instance? You’ll easily find your way to a cache of information including everything from the National Security Strategy, Obama’s National Strategy for Counter Terrorism, and short pieces describing things such as “Refocusing on the Threat from al Qaeda in Afghanistan and Pakistan,” to other stories that tout presidential achievements such as “Stopping a Massacre and Supporting the Libyan People” or “Promoting Peace and Security in Israel and in the Middle East.”

In addition to these 12 major categories, there are an additional 34 subcategories to break the spending down further into segments such as “Ongoing operations, equipment, and supplies,” which consumes 10.3 percent of the total slice of pie that goes toward National Defense, or “Child care, foster care, and adoption support,” a subset of the Jobs and Family security category that sees only 0.6 percent of its share of your tax dollars.

The site certainly warrants a visit, regardless of your political affiliation. Having a better understanding of what we pay for and how makes us stronger citizens, and let’s face it, it’s information we deserve to know.

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Who doesn’t want to maximize their refund? If you’re like most Americans, when tax time rolls around and you start collecting paperwork like a raccoon building a nest, you start thinking about the deductions you can take to ensure you pay no more in taxes than you’re legally obliged to. And if you earn a refund, it makes uncovering every possible deduction that much more rewarding.

This year, make the most of your tax situation by remembering the following deductions that may be available to you.

Refinancing Points: With interest rates at near-historic lows, odds are good that you’ve refinanced your home a time or two over the last few years. If so, any points you paid to refinanced can be deducted for the life of the loan at a $10 per-month basis. While these deductions aren’t substantial, they do add up over time. For example, if you refinanced your house’s mortgage on July 1, 2011 for a 20-year term, six of 240 months will have gone by before year’s end. Therefore, if you paid $2,400 in points, that’s a $60 write-off. You can continue to take a $120 annual deduction until you’ve deducted all your points in full.

Health Insurance Premiums: If your medical expenses exceed 7.5 percent of your adjusted annual gross income, your health care premiums may be deductible. These health care deductions also can be granted to long-term care premiums (depending on your age) as well as Medicare premiums. If you’re self-employed and have purchased individual health insurance, your premiums are 100 percent deductible. If this is the case, as long as you haven’t included these premiums in other itemized deductions, you don’t have to worry about meeting the 7.5 percent threshold or itemizing these costs.

Noncash Charitable Contributions: If you’ve donated clothing or furniture — in good condition, of course — to Goodwill, the Salvation Army or a similar organization, you can deduct the value of your donations. The trick is to remember to get a receipt whenever you make a donation. If you’ve neglected to get a receipt, you can still deduct these contributions, as long as you understand that if you’re audited and can’t produce a receipt, they won’t allow you to take the deduction. But since you’re unlikely to get audited, most experts agree that you can determine the fair market value of whatever you donated by going to a thrift store to learn the price of comparable items, or you can visit the Salvation Army’s regional websites to help determine the value of donated goods.

Higher Education Expenses: There are two ways to get some money back for your undergraduate or postgraduate education. If you earn less than $65,000 a year (or $130,000 if filing jointly), you may take as much as a $4,000 deduction for each year of your higher education. You may also qualify for a $2,500 credit under the American Opportunity Tax Credit for undergraduate work, or, if you’re working on a graduate degree, you may be eligible for the $2,000 Lifetime Learning Credit. You cannot take both a deduction and a credit, so determine what’s available to you and go with the option that gives you the biggest tax break.

Energy Savings Home Improvement Credit: If you are an environmentally conscious homeowner, you may be eligible for savings under the Energy Savings Home Improvement Credit. If you perform home improvements such as installing skylights, windows, outside doors, high-efficiency water heaters, pigmented roofs, or central air conditioning, you can take a 10 percent credit for these costs, the cap on which may not exceed $500. If you add alternative energy sources such as wind turbines, geothermal heat pumps or solar water heaters to your home, you can take a 30 percent credit on the costs of these improvements, and there is no cap through 2016.

If you do just a bit more exploring, you may discover even more deductions you’ve never thought of before. Be sure to discuss maximizing your tax refund with your tax preparer, and encourage him or her to help you uncover as many deductions as possible. After all, you worked hard to earn your money, so the less of it you must give to the Internal Revenue Service, the better.

Need recommendations for tax professionals? We’ve got a long list and are happy to share it.

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bigstock-Female_executive_filling_out_tax_forms_while_sitting_at_her_desk.-13012826The perennial nature of tax time does nothing to assuage the overall stress, anxiety, frustration, procrastination and general loathing associated with the chore of preparing your income taxes. For those who prepare their own taxes, the strain can seem particularly acute, yet even ensuring you’ve provided all the necessary documentation to a paid tax preparer can be stressful.

This year, countless Americans will labor over mountains of paperwork, hunt for rogue receipts, itemize ad nauseum, and search for every possible deduction to ensure they don’t overpay even a single dime to Uncle Sam’s outstretched hand. And when it comes to deductions, you might be surprised at the creativity — or plain stupidity — of your fellow taxpayers. So, as the dark cloud of the April 15th deadline looms, I thought I’d attempt a little humor by relaying a few anecdotes of ridiculous and outlandish deductions desperate taxpayers have attempted to declare that shockingly, didn’t pass the proverbial IRS muster.

Fur to Foster Conversation

One businessman thought he could get away with deducting the mink coat in which he draped his wife when entertaining or speaking to clients. His rationale? This cunning guy claimed that his wife’s lavish coat served as a delightful icebreaker and conversation piece. Too bad he got skunked by the IRS.

Drug and Prostitution Expenses 

Shocking though it may be, it turns out that you cannot deduct expenses for careers that are, well, illegal. For those who declare “prostitution” as their profession, the IRS won’t be footing the bill for the fancy lingerie or condoms the job requires. The same is true of marijuana growers and dealers, some of whom have tried writing off the cost of everything from potting soil to the plastic baggies in which they package their “product.”

The Doctor’s System

Sure, doctors require all sorts of high-tech and serious-sounding tools and gadgets to practice medicine, but what exactly is a “time monitoring system”? When one CPA reviewed the taxes of a physician who was being audited came across this rather large deduction, he had the same question. When he asked the doc to explain this mysterious “time monitoring system,” he was treated to a display of the doctor’s blinged out Rolex.

Watch for the Fallout 

During the height of the Cold War, one patriot followed the cue of other frightened Americans and constructed a nuclear fallout shelter on his property. Granted, those things aren’t cheap, but none of his other fallout-fearing peers tried to take it as a tax deduction. So just how did he list his new shelter? As “preventative medicine,” of course!

All for Education

One creative Spanish teacher ordered the Spanish-language subscription from his cable provider and, of course, purchased a new television on which to watch his favorite Spanish-language shows. Since he was an educator — and an educator specializing in Spanish, no less — he thought it only appropriate that the IRS reimburse him for these “teaching expenses.” How do you say “Nice try” in Spanish?

Up in Smoke 

This one has to be my personal favorite. A failing and frustrated furniture store owner decided the best way to get out of business was to hire someone to burn it down. And as it turns out, this man was very diligent when listing the expenses he incurred in this calamity. Not only did he accurately report the loss of his building, as well as his payout of $500,000 in insurance money, he also listed a $10,000 deduction as a “consulting fee.” As it turns out, no matter how much you consult with an arsonist, the whole thing is illegal. Imagine that. Both business owner and arsonist/consultant ended up in prison.

The Tax Man Cometh

Tax law is confusing. Unless you’re in the business of waxing poetic on IRS code, it’s like reading Mandarin. And just when you think you’ve figured out how to work with current tax laws, they change. My favorites are the ones they say are “permanent”…until they change them.

Anyhow, our trusted friends at Nationwide have put together a nice summary of what’s changing without too much financial tax nerd speak. I’m not sure I’d classify it as bedtime reading, but if that’s your only opportunity, it’ll have to do. But definitely not if you have a devices curfew. Those are serious for the insomniacs in the crowd.


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