File Your Taxes for Free

Due to COVID, many VITA or AARP volunteer income tax sites are either closed this year or operating at limited capacity, in order to protect the health of all involved. If you have relied on free tax assistance in the past, what can you do now?

IRS Free File is one great answer. It’s an agreement the IRS has made with a number of tax software companies, so that people with incomes below $72,000 can use the software packages to file their federal return (and sometimes their state return) for free. There is no need to be intimidated by the idea of filing your own tax return — these software packages are designed to be very consumer-friendly. If you paid attention last year when your tax preparer reviewed your return with you, and if your situation this year is similar to last year, you are a perfect candidate to do it yourself!

When preparing your own tax return, be sure to:

  • Use a secure internet connection (don’t use public wi-fi at a coffee shop)
  • Read and answer the questions carefully
  • Take your time and double-check the information you enter
  • Remember that you can start one day and not finish – you can come back later when you’ve gathered more information.
  • Save the pdf of your return so you have a copy for next year.

If your tax situation has changed significantly since last year and you are not comfortable preparing your own return, there still are volunteer income tax sites available.  The IRS has a VITA site locator tool to help you find a site near you. NOTE: The site locator tool is not yet active — the IRS plans to have it operational by February 1. Likewise, the AARP Foundation Tax-Aide Locator is expected to come on-line in early February.

If you are eager to get moving now, remember that the IRS will not even begin accepting 2020 tax returns until February 12, due to late December changes in the tax law. We’ll all need to be patient for our tax refunds this year!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Tax Law worth knowing: EITC “Look Back”

If a mention of tax law causes your eyes to roll back in your head, I ask you to snap out of it for a minute, because this one is important to ordinary households. It’s new (and temporary) — part of the new COVID relief bill enacted this past week, and it will be huge for many workers who have been unemployed or had reduced earnings in 2020.

The Earned Income Credit is a powerful tool for helping working families with lower wages. The amount you receive depends on your earned income. Higher earnings (up to a point) means higher EITC.

2019 EITC Chart: Married Couple with 2 children

Here’s a 2019 example: A married couple with 2 children and with earned income between $14,550 and $22,400, was eligible for an earned income tax credit of $5,828 in 2019. That’s an extra $5,828 added to their tax refund. If their income was below $14,550 then their EITC was lower, but even if they only earned a small amount from work, they would receive some EITC. If their income was higher than $22,400 the amount of EITC gradually dropped, but they would still receive some EITC even if their income was as high as $52,400.

Suppose: a married couple with 2 children earned $25,000 in 2019, and received an EITC of $5,785. However, in March of 2020 they were laid off. They did receive unemployment, but that is not earned income. Their actual earnings from work in 2020 was only $5,000, which made them eligible for EITC of $2,010. That’s a loss of over $3,700, in a year when they were already struggling. The “look-back” provision in the new relief bill allows them to receive EITC (and also the Child Tax Credit) based on their 2019 earned income if it would be more beneficial.

By contrast, imagine a married couple with two children who had earned income of $60,000 in 2019. Their income was too high for EITC in 2019. However due to furloughs, their earned income in 2020 was only $40,000. They will be eligible for EITC in 2020 based on their 2020 earnings (assuming they meet other eligibility rules). When calculating EITC and CTC, taxpayers can choose to use either 2019 or 2020 income figures, depending which is better for them.

Tax law worth knowing!

Source: Kitces.com

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Money Guidance via Podcast

graduates

Targeting those in college or planning for college, the U.S. Consumer Financial Protection Bureau recently launched a podcast called Financial inTuition. The six episodes currently available are divided into two categories: three episodes focused on student loans, and three on basic money management skills with a focus on issues faced by students.

Each episode includes an interview with either an expert or a consumer with first-hand experience. It’s always helpful to learn from other people’s experience!

The podcast is available free wherever you get your podcasts, OR directly from the CFPB website. It is part of a broader set of resources targeting students and young adults on topics like paying for college (including information about student loans and the GI Bill), and money management information for economically-vulnerable consumers (which includes most young adults just starting out) on topics like building credit access and finding money to save. They also provide materials for both youth educators and adult educators.

Check out these resources for yourself OR share them with someone you care about!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Beware: Vaccine Scams

Like anything else that is new, the COVID vaccine is likely to be followed quickly by vaccine-related scams as well as misinformation. Likely scams to watch for:

  • Opportunities to “move higher on the list” by paying a fee. Truth: the vaccine roll-out is being carefully monitored, and there will be no way to get the vaccine quicker.
  • Any contact or news suggesting you pay a fee to receive the vaccine. Truth: due to the need to get as many people vaccinated as possible, you are likely to have no out-of-pocket cost when getting the vaccine.
  • Any contact asking for your social security number, bank account information or credit card number in order to schedule a vaccination. Truth: it is NEVER wise to give out personal or financial information when you did not initiate the contact.
  • Alternative “cures,” treatments,” or “preventives” for sale while you wait your turn for the vaccine. Truth: it is never wise to accept health advice or purchase health products from anyone other than a reputable health provider. Contact your own provider before purchasing any product or service.

Along with the potential for scams, the arrival of a vaccine creates opportunity for misinformation. Rely on trustworthy sources. For health information related to COVID-19, consult www.coronavirus.gov or www.coronavirus.iowa.gov. Both of these sites draw information directly from the Centers for Disease Control (CDC) and other reputable sources.

Source: Federal Trade Commission

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Did you give? Take the deduction!

I love the fact that “Giving Tuesday” has become an annual tradition in the U.S. If you have made gifts to charities anytime during 2020, you may be able to take a tax deduction even if you do not normally itemize deductions!

The CARES Act allows people to deduct up to $300 of charitable giving on their federal tax return without using Schedule A, which is the “itemized deduction” form. That’s great news, because even the lowest standard deduction (federal) is more than $12,000; that means that it’s not worth itemizing deductions if your total deductions would be less than that. Due to the special rule for 2020, taxpayers who gave to charity will be able to deduct their charitable gifts up to $300 while ALSO claiming the appropriate standard deduction. Note: the special CARES Act rule applies only to donations of money; donations of goods, such as clothing or household goods donated to Goodwill or Salvation Army, can only be deducted if you itemize.

What to do? if you made monetary gifts to qualified charitable organizations, gather up your receipts and keep them for tax time. Can’t find the receipt? Cash gifts with no receipt cannot be deducted, since there is no evidence of the gift. But gifts made by check can be deducted even without a receipt, as long as they were bona fide gifts and not payment for something. Here are some examples to explain some common mistakes:

  • Suppose you and your spouse ate at a spaghetti dinner that was sponsored by a local non-profit for free will donation, and you put $20 in the basket. That $20 is NOT a charitable contribution because you received a meal in exchange for the money you gave.
  • Gifts to political or commercial organizations are not tax deductible. The charity should tell you if your gift is tax-deductible, but if in doubt, check the IRS database.
  • If you include $30 in a sympathy card after a person’s death, intending it for the charity of the family’s choice, that is NOT tax-deductible, because you don’t know if it was used for charity. However, if you make out a check to a charity in honor of the deceased individual, that is a deductible contribution.

The Internal Revenue Service is the authoritative source for information on charitable contributions and all income tax topics. Click here for information on this special deduction for 2020.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

There’s Still Time to Ask for Mortgage Help

COVID-19 has reduced the incomes of SO many Iowans, making basic survival harder. If you are worried about protecting your home if you are unable to make your mortgage payments, you may have options – but you won’t know unless you ask! Watch this video from the Consumer Financial Protection Bureau for the facts you need to know about mortgage forbearance.

Woman standing in lobby with text "COVID-19 Mortgage Relief: 4 Things to Know"

The CARES Act requires that consumers be offered at least 180 days “forbearance” if their mortgage is backed by a federal agency (FHA, VA, USDA, Fannie Mae, or Freddie Mac). Many lenders are also making forbearance available for privately-backed loans. You will eventually need to make up for the missed payments, but you will have some time to catch up. Beware of any housing relief offers that require you to pay a fee up front – those are likely scams.

For more information about housing relief options, visit cfpb.gov/housing. For help sorting through your options on a wide range of financial issues, request an individual consultation with one of our ISU Extension family finance specialists.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Thinking Out Loud

If being careful with your money is important to you, and if you have children, then you are probably looking for ways to teach your children good money management skills. You probably also hope they will form values and priorities that are similar to yours.

Depending on the age of your children, you may have already learned that “preaching” (that is, telling them what to believe and do) is rarely the answer — if your children are still quite young, you may not have learned that yet, but you probably will! One strategy I learned when my children were young was that it paid to “think out loud”… to let them hear my thought process as I was making decisions.

The simplest examples would take place at the grocery store – decisions about which box of cereal to buy or which can of tomato sauce. If I spoke my thoughts aloud, they would be exposed to the ideas like: unit pricing (comparing price per ounce of different size packages); generic vs brand-name decisions (when it might be worth paying more, and when it might not be); and trade-offs (if I buy pork chops instead of beef steak, I can use the extra money for ice cream). Those are all assessments I make in my head when I shop alone, but when children are present it becomes a teaching opportunity if I say my thoughts aloud.

Similar “thinking out loud” situations could occur when buying clothing – they would be exposed to my thoughts on quality vs price, ease of cleaning (i.e. dry clean or hand wash vs machine wash) and other factors. I remember the purchase of a recliner where they saw me weighing options and they learned that we’re often unable to find the perfect product, so we have to decide what factors are most important to us.

Setting a good example is a powerful teaching strategy in everything from good manners to personal hygiene. With financial decisions, though, children won’t even be aware of what we’re doing unless we let them in on our thought processes. That’s where “thinking out loud” comes in – it makes them aware of why we make the decisions we make.

Money as You Grow: Resources for Parents and Caregivers is a wonderful resource from the Consumer Financial Protection Bureau for those seeking to help their children learn financial management skills.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

Curious Behaviors That Can Ruin Your Retirement

This week, I discovered a fun tool that can help us all be more ready for retirement. I don’t think it’s new, so I am surprised I hadn’t seen it before, because I pay a lot of attention to retirement information. I guess that just goes to show that we always have more to learn, no matter how much we think we already know!

The tool is provided the Center for Retirement Research at Boston College — one of the premiere sources of quality information on retirement. I tell you that because I want you to know it’s trustworthy. They have other great resources too.

The fun (and enlightening) part is that it prepares us to make better decisions about retirement issues by alerting us to natural human tendencies that can work against us. It’s called “Curious Behaviors That Can Ruin Your Retirement.” I enjoyed it — it took about 10 minutes, and explained things in clear language with great examples.

I’d encourage everyone to check it out — at least everyone who wants the best retirement possible, especially if you’re over 50. Personally, I think I might go back to it about once a year, just to keep myself on my toes!

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

EIP Day November 10

If you did not receive your $1200 Economic Impact Payment, it’s still not too late – they delayed the deadline! Next Tuesday, November 10 is designated as EIP Registration Day. Take advantage of this awareness campaign and claim your credit now! NOTE: If you’ve already received your payment, please help us spread the word. If you have ways of reaching people who are homeless, that may be especially important!

The big push at this point is to reach those who do not normally need to file a tax return. The IRS has a special on-line portal just for you folks, where you can enter all the needed information. This video explains how. NOTE: you will need to enter personal information, so be sure you are using a secure internet connection. This will usually take 10-15 minutes.

Iowans who need help with this process are encouraged to contact their local Extension family finance specialist for help. For more information go to the IRS information page on the EIP; to help spread the word via social media, check out the IRS Facebook, Twitter, Instagram, LinkedIn, or YouTube sites.

Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

More Posts

    

Subscribe to “MoneyTip$”

Enter your email address:

Delivered by FeedBurner

Archives

Categories