We Went to Our Accountant to Get Our Taxes Done

This past Saturday we bundled everyone up and went off to our accountant to have our taxes done. (Yup, we brought the kids. They’re tax deductions after all).We go to a CPA that was recommended to us a few years back. He’s great to visit. He takes his time to go through our paperwork, asks us questions, and doesn’t rush to get us out of there. In fact we were there for about an hour.It ends up we’re getting back a decent-sized return this year. We have the little guy (our now one-year-old) as a deduction which also includes his daycare. On top of that it seems that when my wife went back to work her tax with-holding was changed. There was too much taxes being taken out of her paycheck. We’ve basically been giving the government a free loan!

One thing we need to do immediately is change the tax with-holding for both my wife and I. Getting back a tax refund is nice but it would suit us better to have the money in our pockets every paycheck rather than every April or so.

An interesting thing our accountant told us is he would like to see us contribute more to our 401(k) and 403(b) plans. I told him we were planning on putting money in our Roth IRA. He said it would be better to take advantage of the tax savings of the 401 and 403 plans. His rationale is that we are probably in our highest tax rate right now but when we retire we’d be in a lower tax rate. The 401 and 403 plans allow us to contribute $15,500 each in 2008 (not that we could afford to do that). One way to look at the tax break is $100 contributed to my 401(k) would only cost me $80 (assuming a 20% tax rate). For $80 I get $100 invested.

If you remember my Roth IRA goal for 2008, my wife and I were going to contribute $4000 each to our Roth IRA’s for ’08 ( a total of $8000). Well now I’m revising that goal. Since my 401(k) plan at work is pretty diverse I’m going to increase the percentage I contribute rather than put the money in my Roth IRA. Since my wife’s 403(b) isn’t as diverse (it’s something like either real stable or high-risk; about two choices) we’ll continue to invest her share in her Roth IRA. We’re also going to make sure both of our tax with-holdings are adjusted.

What are we doing with our tax return you’re asking? We’re getting some work done on our co-op so the refund will help replenish our savings. (We weren’t counting on our tax return for this expense so the return is a nice bonus). Also, if you’ve been reading Free From Broke you know that our garage was upset with us and jumped out and attacked our car recently. The return will help buffer those expenses too.

Are you getting a tax refund? What will you be doing with it?

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7 Credit Card Tips From ING Direct

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I was just on the ING Direct site checking out my savings accounts and decided to check out their tips. They list seven great credit card tips. Check them out (descriptions are mine):

  • Make your payments on time – Very important! Late fees can be very expensive on credit cards and can negatively affect your credit score. If you have problems with the due date you may be able to change your credit card due date.
  • Try to pay off the full balance every month – Pay off the full balance to avoid any interest charges.
  • Avoid cash advances – Cash advances on your credit card have different rates than normal credit. Yeah, it’s gonna be more expensive than if you just charged it.
  • Shop around – Compare rates and services from different credit card companies to get the best credit card offers.  Find one that fits your spending habits.  Make sure to read the fine print as well.
  • Use savings to pay off the cards – It’s great that ING Direct exists offering high interest rates on savings but that high rate doesn’t compare with the interest on your credit card (unless you have a low introductory rate).
  • If you’d like a better rate, just ask – If you have been a good customer you can call the credit card company and ask for a better rate. Try telling them that you received an offer from another company with a better credit card rate; odds are they can lower it for you. Make sure you understand what the new rate is though. It may only apply to new purchases not your outstanding balance.
  • Don’t be left holding all the cards – If you have a lot of cards it means you can do a lot of spending damage. This is bad for both you wallet and your credit score. Get rid of credit cards you hardly use or ask that the credits limits be lowered (a high credit limit can hurt you for some credit card companies).

Of course you should also watch your spending as well.  Don’t abuse your card and know what you can really afford.

Do you have any credit card tips to share?

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