Make Filing Less Taxing
It’s that time of year, and we’ve got tips to keep you and the tax man on good terms.
By Deborah A. Wilburn
If your tax return is pretty simple (no home business, for example), you can probably save a few bucks by doing your taxes on your computer, rather than heading to an accountant. But these days, when stolen data and compromised computer systems make headlines all too frequently, you may be concerned about how safe it is to file returns over the Internet. You needn’t worry, according to tax experts who have been doing it themselves for several years. And to sweeten the deal, sending an e-return means cutting the wait for a refund to about 7 to 10 days.
If you think you’re ready to file electronically, there are two ways to go about it: Buy the software from a store or download it from the company’s Web site (for a fee), complete your return, and then send an e-file to the IRS; or create an account with a company’s Web site, complete your return online, and then send it electronically to the IRS. Many companies offer both options. “The main difference is that if you buy the software, you can use it to do lots of returns,” notes Eva Rosenberg, whose Web site, taxmama.com, features the latest in tax information. “You could do yours, your child’s, your best friend’s.” You may also want to purchase the software if you have a slow Internet connection. At this time of year, many retailers offer rebates on tax preparation software.
When filing online, just make sure the URL of the company changes from “http” to “https” once you click that you’re ready to buy the program. That indicates a secure connection. Rosenberg recommends that consumers stick with brand-name companies as an added precaution.
Many educators can prepare a federal return online and file it without incurring any fees. Free File, a partnership between the IRS and the Free File Alliance coalition, lets qualifying taxpayers—including active duty military and taxpayers who earn $52,000 or less—complete their returns online free of charge. To find out if you qualify, go to www.irs.gov and type “free file” into the search box.
Rosenberg points out that when filing online, you may be asked if you want a Refund Anticipation Loan if you’re due a refund. She and other experts say it’s best to avoid such loans because the banks that provide them charge high interest rates, and your refund should reach you within a couple of weeks anyway.
Do you have an ARM?
Read this if you’re not sure.
That’s adjustable rate mortgage. With this type of mortgage, the interest rate you pay can periodically move up or down, based on your loan agreement and the financial index to which it’s attached. When an ARM rate changes, it’s said to “reset.” Two trillion dollars’ worth of mortgages are scheduled to reset nationally over the next 24 months. If you’re unsure if yours is one of them, now is the time to find out. If interest rates inch upward, it could mean a substantial hike in your mortgage payment. Here are some steps to make sure you’re not caught short:
First, check the terms of your mortgage. If it’s an ARM, ask a finance professional or attorney to review the paperwork and advise you on how much the interest rate is set to change. Simply contacting your mortgage-holder’s 800 number for this information may not be sufficient. “Typical customer service reps may not have the training or experience to give you an accurate answer,” says Patrick Gavin, a certified mortgage planning specialist at CFS Mortgage in Phoenix.
If you learn that your payment is set to increase to more than you can afford, plan ahead. Consider refinancing to a more predictable fixed-rate loan or another mortgage that would better suit your needs. Your ability to refinance will depend on the current value of the property, your debt-to-income ratio, and your credit score.
Next, call your mortgage-holder to discuss refinance options, then shop around to see what other lenders might offer. If refinancing isn’t possible and you find yourself financially strapped, consider contacting a nonprofit Consumer Credit Counseling Service for assistance. Go to www.debtadvice.org to find a reputable agency.
Learning More About Money Just Got Easier
If you resolved to get more financially savvy in 2007 but now find yourself foundering, help is on the way. This month, NEA Member Benefits launches a series of free, online mini-classes about financial education. Topics will include setting goals, budgeting, debt management, retirement, saving, and insurance. Called Investing in Your Future, this new education program is available for NEA members and their families thanks to a partnership with national non-profit group BetterInvesting. “Given the current climate surrounding Social Security and both private and public pension plans, such education programs are even more critical for our members,” says NEA President Reg Weaver.
Beginning in March, members can access the classes online, at www.neamb. com/investinginyou, or call (800) 637-4636 for more information. The program, funded by a grant from the NASD Investor Education Foundation, will also provide classes on stock and mutual fund investing, including diversification, asset allocation, and risks and rewards. All topics are geared to help members feel more confident about managing their own investments, such as 403(b) plans. The program even includes a game that lets players create and manage a stock portfolio—without, of course, the risk of losing any real money. Teachers and education support professionals can use the site to learn more about what it takes to secure their financial future. Log onto www.neamb.com and check it out today.
Is It Worth It? Travel Insurance
With so many things that can potentially go wrong when taking off for some valuable R&R, consumers are increasingly looking to travel insurance to provide a cushion of financial and emotional security. But are all of the protections available really necessary? Not according to Madelyn Flannagan of the Independent Insurance Agents & Brokers in America. “If you have standard levels of homeowners or renters, auto, health, and life insurance, as many people do, you are already protected for a large number of travel-related incidents that may occur,” she says. Skip the following after confirming you’re covered on those existing plans: baggage loss, rental car insurance, supplemental medical coverage, and flight insurance (onboard life insurance that is unnecessary if you already have life insurance.)
Trip cancellation insurance is a good idea though, she says, especially if you’ve got an expensive, nonrefundable travel package such as a cruise or all-inclusive vacation with airfare, car rental, and hotel room. This insurance is also a good idea for travelers with small children or elderly parents. You can expect to be reimbursed for otherwise nonrefundable expenses if you need to cancel your trip because of illness, death, or a family or weather emergency. Cancellation insurance also covers rebooking fees if you reschedule. As with any insurance policy, it’s important to read the fine print and learn what is and isn’t covered (like acts or threats of terrorism at your destination.)
Expect to pay 4 to 8 percent of the total trip cost for all family members. While that can seem pricey, some policies provide extras, such as medical evacuation insurance—a good idea if you’re staying in a remote area. Comparison shop for the best deal and coverage. But don’t dally. Trip insurance typically needs to be purchased within 10 days of booking your getaway.
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