Author: Bargaineering.com

This is your friendly reminder to check MissingMoney.com for any assets you may have forgotten about. MissingMoney.com is a website endorsed by the National Association of Unclaimed Property Administrators and the best place to begin your search for unclaimed assets.

Also, in twenty four states, unused gift cards are considered unclaimed property after five years. Depending on the laws of your state, the value of the gift cards, minus maintenance fees, must be turned over to the state government as unclaimed property. Remember, the CARD Act prevents gift cards from expiring for five years so in the coming years you may see more of your gift cards turned over as unclaimed assets. As of late last year, Colorado had more than $13 million worth of unused gift cards, so this isn’t a negligible amount.

I check every state I’ve ever lived in, as you never know when property will be “released” to the unclaimed assets division. Finding out whether you have an unclaimed assets should take you only a few minutes, claiming the assets will take a little longer depending on the process of the state.

Jim writes about personal finance at Bargaineering.com.

If you know someone is cheating on their taxes and your pulse quickens at the thought of the IRS paying you, then then check out the IRS Whistleblower – Informant Award program. It’s a program that rewards you for providing “specific and credible information” that the IRS can use to collect “taxes, penalties, interest, and other amounts” from a cheat.

This isn’t a “my neighbor next door can’t possible afford that new Porsche he bought” type of information, we’re talking specifics and, in most cases, documents. In most cases it’s business related, with the whistleblower being someone privvy to sensitive documents such as a banker or administrative assistant.

How much can you earn? There are two types of awards based on some qualifications, the first of which is dollar amount:

• Amounts in dispute are greater than $2,000,000 or individuals with more than $200,000 of annual gross income – IRS pays 15-30% of the amount collected.
• Amounts in dispute are less than $2,000,000 or individuals with less than $200,000 of annual gross income – IRS pays 15% of the amount collected up to $10,000,000 (if you’re wondering how the math works out, this award can also be discretionary, which accounts for the disconnect).

If you have reams of damaging documents and are wondering where to go, the IRS explains how you file a Whistleblower Award Claim.

With our national debt nearing $13 trillion dollars, we can use all the help we can get!

Jim doesn’t cheat on his taxes and can usually be found writing about personal finance at Bargaineering.com.

Despite how antiquated some of our tax laws seem to be, the IRS itself has truly embraced the internet and provided a great tool for you to check the status of your refund. You can use this tool to track your return 72 hours after you’ve e-filed (which is a good reason to e-file!) or three to four weeks if you filed a paper return. Unfortunately, if you amended your return, you will not be able to use this system.

It’s very easy to check the status of your tax refund online, collect these three pieces of information:

• Your social security number (if filed jointly, either social security number will work)
• Your filing status
• Your refund amount, to the whole dollar amount

Then, visit this Refund Status page (Spanish version), enter your information, and you will be provided the status of your refund.

Even if you don’t care when your refund will arrive, check anyway because this is one of the few times you will be able to get an answer from a government agency in under 5 hours of waiting.

Jim writes about personal finance at Bargaineering.com.

If you’ve been watching or reading much economic news, invariably you would’ve heard of the term yield curve. It refers to the interest rates on Treasury debt and it’s important because it can give us a quick glimpse at the health of our economy. If you’ve ever wondered what it was, here’s a crash course.

Vanguard, in their latest In The Vanguard, has a great explanation of what yield curves are. In short, there are three types:

• Normal – where interest rates rise as you increase the maturity time
• Flat – where interest rates rise in a nearly horizontal line as you increase maturity time
• Inverted – where interest rates fall as you increase maturity time

The yield curve means different things to different people, as we are always looking to invest and save in different products. For economists and talking heads, they are referring to the interest rate on Treasury debt, like notes and bonds. For the rest of us, the yield curve we care about is usually something like CD rates. Whatever the underlying asset, the idea is still the same.

Why are they popular for economics? Inverted yield curves have preceded many recessions. The yield curve inverted in 2000 just before the dot com bust. The yield curve was inverted again in early 2007, which preceded our more recent crisis. Is it a perfect predictor? No, but it’s good enough to keep some people on television.

How does it affect us? When the curve is normal or flat, we understand that we are getting a higher interest rate for locking up our money for a longer period of time. 5-year CD rates are higher than 1-year CD rates and we understand why. When the curve is inverted, we get confused because instead of being rewarded, we are being penalized for giving up flexibility. Fortunately, I’ve never seen a bank’s CD rates form an inverted curve.

While the yield curve has little impact on our daily lives, it’s still important to understand what it means from a broader perspective.

Jim writes about money at his personal finance blog, Bargaineering.com.

Every year around tax time, we can expect a healthy dose of advertising by tax preparers about how they can guarantee the highest refunds, the fastest refunds, and audit protection. One product that makes them huge profits is a refund anticipation loan. After you’ve worked with a tax preparer to finish your return, they will undoubtedly ask if you’d like to receive your refund even faster. Everyone wants to get their money faster right? Just beware the very expensive catch.

Refund anticipation loans are extremely expensive because you have to pay fees, such as application and administrative fees, for what amounts to a very short term, very safe loan. With electronic filing, a tax preparer knows whether there are any problems with a return within twenty four hours of electronic submission. If the return is free from math errors, then the IRS will usually pay out the return within a week or two, barring inconsistencies with other forms like your W-2 or 1099-INTs. If you opt for direct deposit and you electronically file, you can get your return in as quickly as a single week.

In 2004, 12 million people got RALs and the average was an effective 178% interest on a 10 day loan (based on the average refund size of $2,150) according to the NCLC/CFA 2006 Refund Anticipation Loan report. In the current economy, with people strapped for cash, I wouldn’t be surprised if all the numbers in that sentence were to increase.

When you consider that current savings account rates are less than 2%, paying 178% looks even more absurd. Instead of getting a RAL, do your taxes as early as possible! You have almost all the information you need by the time February ends, so if you are due a refund, file immediately. If you are really in a pinch, consider borrowing some money from friends and family before you pay ridiculous fees to a tax preparer!

Finally, even if they don’t say “refund anticipation loans,” you might be signing up for one if they promise to give you your refund immediately. Last year, mystery shoppers exposed deceptive RAL practices at many popular tax preparers.

Beware refund anticipation loans in sheep’s clothing.

Jim writes about personal finance at Bargaineering.com.

One of the nice things about preparing your taxes, and this is probably the only nice thing, is that if you overpaid your taxes then you’ll get your money back. If you’re getting anywhere near last year’s average tax refund of $2700, let me suggest an idea that could give you an even larger tax refund.

If you haven’t made a contribution to an IRA for 2009, consider taking your refund and putting it towards a deductible Traditional IRA. If you qualify for a tax deduction on Traditional IRA contributions, then you will see an even larger refund. The net cash in your pocket will be lower, since you’ve contributed a large sum into your Traditional IRA, but you will pay less in taxes and likely thank yourself when you retire. If you make a contribution, remember to adjust your tax return to reflect this contribution so you get a bigger return.

In addition to lowering your tax liability, you also lower your adjusted gross income and potentially trigger the Saver’s Credit. This may allow you to take deductions that were phased out for you, such as the earned income tax credit. Contributions to a tax deductible IRA will reduce your adjusted gross income but are not factored into your modified adjusted gross income (in other words, the contribution is added back to calculate your MAGI).

There are some big caveats to this idea.

First, not everyone can deduct contributions to a Traditional IRA and the rules for how much you can deduct can be a little convoluted, but outlined in Chapter 1 of Publication 590. Consult a tax professional for your specific case but in general you are not eligible to deduct contributions if you have access to an employer retirement plan and your modified AGI is over $66,000 (single) or $109,000 (married filed jointly). You can read the deduction rules in this part of Pub 590.

The Roth IRA and Traditional IRA share the same contribution limits, which is $5,000 for 2009 ($6,000 if you’re 50+). If you contribute $1,000 towards your Roth, you may only contribute $4,000 to your Traditional. Given the option, I believe that contributing to a Roth is better than contributing to a tax deductible Traditional IRA as I believe tax rates will go up in the future.

Finally, even if you file electronically and get your refund in less than 10 days, you still need to find a way to float yourself the money in the interim. Depending on the size of your refund and how large of a contribution you want to make, this may be a difficult task. If you don’t want to or can’t float the money, you can always file your return, get your refund, make a contribution before April 15th, and then file an amended 1040X return.

Despite all the caveats, this may be an attractive option for some people out there and I’m curious to hear your thoughts on it. Good idea or more work than its worth?

Jim writes about personal finance at Bargaineering.com.

As you finish up your taxes this year, it may be tempting to take all those papers and make yourself a nice little bonfire… don’t. You will want to keep those tax records for at least seven years.

You have three years from the filing to date to file an amended return if you’ve made an error (the IRS owes billions to taxpayers who were due a refund but didn’t file a return). The IRS has three years to audit you if they believe you’ve made a mistake and six years if they believe 25% or more of your income was not reported. If you failed to file a return or you filed a fraudulent return, there is no statute of limitations on initiating an inquiry.

What should you keep? I recommend keeping everything you use to prepare your taxes, you’ll need it to survive a tax audit, but it’s most important to keep documentation of your deductions. If you claimed the standard deduction then you have less to worry about but itemizers should have proof of everything they’ve claimed on their return. If you are audited, you want to avoid having to searching for documentation years after the fact.

Store it electronically. If you prepared it online, save a copy of the return locally and put it with your other financial records. Invest in a scanner, or borrow one from a friend, and scan the supporting documents. You can store electronic files indefinitely but remember to regularly back up these records.

Seven years may seem like a long time to keep a stack of papers but it’s better than scrambling to find proof of a deduction many years later. If you’re going through your records and can’t find a return you filed in the last seven years, you can request a copy from the IRS. Don’t request one unless you have a compelling reason because it takes only two weeks.

Jim writes about personal finance at his blog Bargaineering.com.

The U.S. Treasury currently owes $1.3 billion to taxpayers for overpaid taxes on their 2006 tax return? It’s important because the deadline to file a tax return for 2006 is April 15th, 2010. After that date, those taxpayers are no longer entitled to their refund. With money as tight as it is, you might be pleasantly surprised at what you, or someone you know, could get if you didn’t file in 2006.

Why would someone due a tax refund not file a return? Simple, it’s not uncommon for someone to see that their income falls below the filing requirements (usually you’re in the first or second federal income tax brackets) and just skip it because they’re too busy or think they wouldn’t get a refund. However, if you’re working and your employer is withholding taxes, you are probably due one. 2006 was the year of the telephone excise refund, which was free money in your pocket if you filed, and you could have qualified for a refund that way.

I think that it’s always worth it to prepare a return to see if you were due a refund. Online tax preparation tools like TurboTax will let you prepare your return for free (and even file it for free if you satisfy certain requirements) to see if you’re due a refund. If you are, file, if not, you just spent a little bit of time knowing for sure. Last year, the average tax refund was over $2,600, you owe it to yourself to spend an hour preparing them (which is about how long it should take if you’re situation is simple enough that you’re considering not filing in the first place).

Some additional caveats: