Archive for June, 2009
April 15 has come and gone. Another year of paying Uncle Sam his due (or of getting yours back out of his coffers) is behind us. This year’s tax day will always stand out to me. Why?
First, I finally became one of those people who gripes about taxes. For a few years leading up to this one, I have been a quiet, happy, check-cutting taxpayer. I was a true believer in the maxim that “taxes are the price of civilization” and didn’t mind paying my federal and state taxes. I didn’t even write anything hateful in the check memo. Prior to that, I was a grateful refundee and had nothing about which fell upset. This year, however, I joined the ranks of grumpy old men who sit around the breakfast table raving on and on about taxes as he eats his oatmeal (with flax seed to help the cholesterol numbers) while his wife nods politely on cue. It was a quick transition.
Second, I noticed something that’s undoubtedly been around for awhile but that somehow managed to stay under my personal radar until now. Tax day discounts.
American business love to find any excuse they can to offer promotional sales. For some reason, we’ve developed a tradition of tying better-than-usual sales offers to holidays. I’ve never understood what Memorial Day has to do with futons or why I should suddenly need carpet on President’s Day. The notion that I should purchase a new pickup truck just because it’s Martin Luther King, Jr. Day escapes me, too. But these holidays inevitably lead some marketing wiz to invent a special sale. Now, having run out of holidays, companies are offering special discounts on tax day.
Interestingly, the carpet outlets seem to be taking a rain check on this one. In fact, most of the tax day specials are food-related. Restaurants are the ones striving to make the 15th America’s top “go out and buy your supper so you can gripe about your taxes while eating something other than your flax seed-riddled oatmeal” night!
I suppose I can understand the thinking behind tax day discounts. Those who are awaiting refunds may be no worse or better off on the 15th, but those who must pay the government probably aren’t in a buying mood. Nothing makes you less excited about a dinner out than scooping into your cushion to pay your taxes. A sale, then, might just help to inspire a little purchasing action in the aftermath of April 15th filings.
Plus, I’m convinced that part of it is simply a desire to come up with something to do on a recognized day. It’s a lot like peddling new hot water heaters right before Thanksgiving or convincing people that their Arbor Day won’t be complete without upgrading their cable package. It’s an excuse.
The fact that the idea of these discounts stems from either desperation or the twisted need to convert every major life happening into an excuse for consumer spending doesn’t mean that the deals aren’t good. Some of them are.
Some, like the gimmicky $10.40 menu at McCormick and Schmick’s is a whale of a deal for those who might want to enjoy a little seafood. They also doubled the tax day love by handing out a coupon for $10.40 off your next trip. They’re good at this stuff. That’s, in part, because they’ve been at it for seven years. (By the way, I don’t know if the almond encrusted trout was on the bargain menu, but you really should try it. Good stuff). PF Chang’s took the Ginsu to the price tag, lopping every bill by 15%.
Meanwhile, those experiencing a Big Mac attack had the opportunity to double their pleasure and/or indigestion with a “buy one, get one for a penny” offer. As tax day doesn’t fall on a Sunday, Chik-Fil-A got into the action with an offer by which you could come back and eat again free within a month. Taco Del Mar reminded us, “Taxes suck. Tacos don’t” by giving away a freebie to everyone who signed up for a special coupon.
Those are just a few examples. This year, it seemed like every restaurant around was doing something on tax day.
One food-related business, Whole Foods (a fine source for multi-grain hot breakfast cereals featuring flax seed, by the way) was planning on running a deal wherein they’d allow you to purchase your groceries without paying the sales tax. They were going to pick up the tab. Apparently, that led to some potential legal issues and the 15th was just like any other day at the chain. I don’t know why they couldn’t just advertise a discount equal to individual store’s sales tax rate, but I’m not an attorney specializing in the sale of organic produce and multi-grain cereal products.
So, keep your eyes open next year for more tax day discounts. You might find a good deal if you just can’t bring yourself to cook due to taxpaying-related depression.
Here are some Blog Carnivals that we participated in over the last week. Enjoy!
– Carnival of Personal Finance #208 (The Lobster Roll Edition) was hosted by Money Under 30 and you can find our post entitled The Economic Stimulus Package in Detail… Without the Editorializing listed there.
– Money Hacks Carnival #68 (The Stanley Cup Final Edition) was hosted by Financial Highway and you can find our post entitled Raiding the Roth: Using a Roth IRA as Your Emergency Fund listed there.
I think I do a pretty good job of keeping politics out of my posts here at Personal Finance Analyst. Occasionally, I slip a bit and provide some clues regarding my personal outlook, but I really do try to keep my posts out of the nasty and generally ineffectual back-and-forths that too often pass for blog-based political debate.
I’m going to try to maintain that with this post, although the subject matter makes it tough to remain “above the fray” or non-partisan.
Here’s the deal. President Obama and a Democratically-controlled Congress ran, at least in part, on the idea that it was time to pump some bucks into the economy in hopes of staving off a deeper and nastier recession. Since his election, Presiden Obama has signed into law provisions creating more spending than anyone can truly comprehend as means of turning the economy around.
The economy isn’t turning around. The stimulus doesn’t appear to be stimulating. After reading a recent Associated Press article about the White House’s approach to the not-so-stimulating stimulus, I thought people might be interested in trying to figure out why it isn’t doing the trick.
Instead of giving you my personal take on why this is happening, I thought it might be nice to share a few possibilities.
It needs more time. Only a fraction of the money planned for stimulus spending has been pumped into the economy at this point and some supporters of the stimulus package will tell you that it will start working once the circulation of the cash begins to grow. More of that money is supposed to be in action this summer, so if you take this position, you’re probably expecting progress soon.
It could be worse. You don’t hear this a lot, but I think that it might be fairly persuasive. It’s possible that the stimulus hasn’t pulled us out of recession but that things would be a heckuva lot worse if we hadn’t done anything at all. The President sort of hinted at that when he recently stated:
“Now, I know that there’s some who, despite all evidence to the contrary, still don’t believe in the necessity and promise of this recovery act.”
“And I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and, in fact, decided to hire employees. Tell that to the Americans who received that unexpected call saying, ‘Come back to work.'”
Rose-colored glasses have limited the stimulation. This seems to be a developing theme among those who are speaking on behalf of the stimulus package and the White House. Basically, they’re telling us that the original plan was created based on estimates that were later shown to be a little too optimistic. That’s why we’re not back down to 8% unemployment and it’s why the economic graphs aren’t yet showing an up-tick. The apparent solution to this error in estimation would be a little patience and/or more stimulus spending.
It’s not going to work. Period. While the other explanations assume that the core thinking behind the stimulus package is sound, maniy will argue that it was doomed from square one and that the programs and spending aren’t going to do solve any economic problems but will instead exacerbate them. As you’d probably expect, most of these arguments seem to be coming from free marketeers and the loyal GOP opposition. The fact that they’re biased doesn’t mean they’re not potentially right (that holds true for the previously mentioned takes, too).
So, if you’re trying to figure out why you’re wallet isn’t being stimulated and are questioning the whole shebang, you can take your pick from those explanations. Regardless of which one(s) you choose, the fact of the matter is that things aren’t yet looking up. Until they do, it behooves all of us to do our part to back the approaches we feel offer the greatest chance for success and to do our best to keep our own financial houses in order throughout this downturn.
I know I promised to try to keep my politics out of this, but I don’t want to be accused of surreptitiously spinning the issues here. So, I’ll come right out with it. While my vote is always in play, I vote with the Democrats more often than with the Republicans. I voted for Barack Obama and would do so again against the same competition. That being said, I am not convinced of the stimulus package’s wisdom and an unimpressed with the unwillingness of Americans to accept the temporary pain of market adjustments. I’m hoping I’m wrong, though. I’m hoping that we’ll start to see and feel that stimulus package kicking in soon. Misplaced or not, I always hope for the best after something’s been done, even if it’s not what I would’ve done.
Keep your fingers crossed.
If you’re still waiting on your tax refund for this year, wondering “when will my tax refund be mailed?”, it should be relatively easy to get a correct answer. Don’t sit around hoping that it’ll show up in time for whatever big plans you’ve made–find out when to expect that government repayment!
The IRS generally mails out refund checks within six weeks of receiving a traditionally-filed, paper return. Based on my quick, estimate-y calculations, that would mean that the last of the checks for on-time (April 15) filers should’ve gone out at the end of May/the first few days of June. It’s June 11 now. Thus, if “the check is in the mail”, it’s been there for more than a week.
If you haven’t received your refund yet, it should be showing up very, very soon.
If you filed electronically, you should already have your check. Uncle Sam claims that all of those checks go out within three weeks of return filing.
If you are still waiting for your refund at this point, you’d be right to wonder whether they may be a problem with your filing or the processing of the refund. After all, there are a few things that can slow or prevent delivery of an income tax refund check.
First, your return may have had something about it that picqued the IRS’ interest. The IRS pays extra attention to about a half-million returns indicating a refund every year. If that’s the case, though, you should know about it. The government’s policy is to send a letter advising the taxpayer that his/her/their refund is “delayed for further review“. They then follow up every three weeks until the matter is resolved.
Second, tens of thousands of refunds are undeliverable, often due to a taxpayer address change or an error in providing accurate information on the return. It’s too early to know this year’s numbers for this particular phenomena, but in 2008 “more than 104,000 regular refund checks totaling about $103 million…were returned by the U.S. Postal Service due to mailing address errors.” If you’ve moved, this might be something to consider if you’re still wondering “when will my tax refund check be mailed?”
Third, if you have an outstanding tax obligation or are in default on those annoying student loans, the IRS can just keep you refund, applying it to the outstanding balance. That shouldn’t be a surprise, though. They do contact taxpayers when that happens.
Fourth, some say it’s possible to experience delays in refund receipt due to a poorly-completed return. One online commenter remarks, “For a speedy return, make sure to double check all information provided when filing on paper. Filing the wrong status, using sloppy handwriting or the wrong math can seriously delay your refund”.
Luckily, it’s not that tough to find out what’s going on with your refund. The IRS website has a handy feature, “Where’s My Refund,” that allows you to determine exactly what’s going on with your dough. It’s pretty easy to use. In order access your status, you’ll need your Social Security Number, the exact whole-dollar refund amount shown on your return, and your filing status.
A few keystrokes and mouseclicks later, and you’ll know if your refund has been mailed, if it’s waiting to be mailed, or if there’s something else afoot.
I like sticking up for the little guy. I really do.
So, when it came to taking a look at Wells Fargo Auto Finance, I was prepared to join the chorus of dissatisfied customers who have nothing but bad things to say about the company. Seriously, I was ready to lash out at those Wells Fargo bums with all my might. After all, they must be a horrible company–so many people hate them. Plus, recent news of predatory lending practices in Wells Fargo’s mortgage outfit gave me reason to believe they were probably bad in the auto field, too.
Well, when I started taking a closer look at the litany of complaints about the company, I realized that many of them weren’t the kind of thing I could get behind. Note even close.
I did find at least two areas in which Wells Fargo has REALLY blundered. I also found the kind of half-assed customer service we’ve all regrettably learned to expect from a big ol’ company these days.
Overall, though, it doesn’t seem as though Wells Fargo Auto Finance is owned and operated by Satan. It’s certainly not the best outfit in history, but it isn’t monstrous, either.
Let’s start with the criticisms.
When you buy a new car with a loan, the lender requires that you carry appropriate insurance. That makes sense. What doesn’t make sense is a company that fails to appropriately log who has provided proof of adequate insurance and who has not. That seems to be a Wells Fargo problem.
A complaint at ComplaintsBoard.com is a good representation of what’s been happening. People provide the proof of insurance, Wells Fargo fails to note it correctly, Wells Fargo bills the individual for the price of insuring the vehicle. Then, the person provides proof of insurance again. That’s followed by Wells Fargo again billing the customer. The process repeats itself until the beleaguered car buyer either gets lucky or screams at enough people.
I wouldn’t put too much stock in a complaint like that most of the time, but it’s a recurring theme with Wells Fargo Auto Finance. It’s bad enough that at least one lawyer is trying to drum up enough annoyed, frustrated and overbilled people to start up a class action lawsuit.
The other aforementioned problem is the fact that Wells Fargo doesn’t offer the kind of customer service people would like. I’m not talking about those who want the company to double over backwards for them, either. I’m talking about folks who’d just like to see an error corrected or who need a little basic information. If you scan the complaints about the lender, you’ll find people with sorts of issues (major and minor) having a hard time getting the right information from the right people. That’s not unique to WF, of course, but the overall miserable state of customer service elsewhere doesn’t justify it. And it’s particularly true when a company couples bad CS with very aggressive collection practices.
So, I’m not ready to say that Wells Fargo Auto Finance is a super-duper wonderful company. Not by a long stretch. However, I found that many of the criticisms levied against the firm were about as close to baseless as you can get. For instance, you have people who are up in arms over the way WF is “not customer oriented” reached that conclusion after it took awhile for the lender to agree to allow the customer to defer a loan payment due to a layoff. Not to sound like Ebeneezer Scrooge or anything, but I don’t see why letting people out of their obligations for the sake of being nice (and losing cash flow in the process) should be a component of good customer service.
People who fall behind on their payments after agreeing to loan terms suddenly expect the lender to do whatever it takes to make their lives easier, without displaying much interest in taking personal responsibility.
My conclusion: Wells Fargo Auto Finance is a big company that has a hard time getting the details right the first time. They have questionable customer service skills and are a little too quick to turn up the heat when it comes to collections, considering the likelihood that the apparent billing issue could be due to their own error.
However, many of the more pointed gripes about the lender are closer to being whines than legitimate reasons to do business elsewhere. I don’t know if they deserve the A+ rating you can find at Better Business Bureau sites, but they’re not bad enough to hate.
With baseball season in full swing, we decided to tear a page out the sports section for this installment of The Festival of Frugality.
Here’s a look at our roster. I think you’ll agree that this team would be a favorite to win any championship!
On a baseball team, the catcher is an on-field leader. The catcher calls the pitches, corrects infield alignments and occasionally calls the team together on the mound for a conference. These posts discuss individuals in the world of personal finance and frugality who serve similar functions.
In most cases, teams want a heavy-hitting first baseman. Defense is secondary to the ability to put the ball into the bleachers. These posts did a great job of hitting their subject matter square on, hitting the sweet spot by making a great argument or providing valuable information.
Alex goes deep with Best Auto Insurance Companies in the United States Top 10 posted at Home Life Weekly.
Pamela is “pumpin’ Citgo” by supplying 10 Tips for Financially Struggling College Students posted at Creative Dubuque.
plusEV elicits does her “shot heard ’round the world” impression with With Pensions, Do You Even Need RRSPs? posted at Colourful Money – Helping Canadians Achieve Financial Independence In Any Economic Climate.
Your second baseman needs to have graceful feet, capable of doing that “dance and hop” necessary to turn a double play. A little offense and speed is a bonus. It’s one of those positions that requires an all-around talent and a steady presence. These bloggers aren’t about to get bowled over by an advancing base runner.
One Family flashes some leather with Kids Video Game Software and Consoles – An Introduction for Frugal Families posted at One Family’s Blog.
Darwin is in position for the cut-off throw from right field with 40 Year Mortgages – And 50 & 60 Year Mortgages While We’re at it posted at Darwin’s Finance.
They call third base “the hot corner”. That’s because the balls hit in that direction come hard and fast. You need great reflexes and a willingess to confront the tough stuff to play there. These bloggers demonstrate a willingness to deal with that tough stuff.
Credit Shout justifies a spot in the starting lineup with Closing Credit Card Accounts: Can It Lower Your Credit Score? posted at CreditShout.
Some people will tell you that the shortstop is the most important player on the field day in and day out. In recent years, we’ve seen shortstops become offensive powerhouses, as well as defensive wizards. These posts exemplify that by demonstrating an all-around soundness–the kind of thing upon which you could build a team.
Money Saving Advice makes a run for team captain by giving us Payment Premium Insurance (PPI) to be axed by the big banks posted at Money Saving Advice.
Wealth Pilgrim shows some offensive clout by hitting us with Let Uncle Sam Boost Your Retirement Savings And Fund Junior?s College Costs Too posted at Wealth Pilgrim: Money Management Advice, Financial Stress Management, & Resources.
Most managers want corner outfielders with “pop” in their bats and decent defensive mobility. These bloggers made a strong statement, demonstrating their ability to contribute to the offense in a meaningful way.
Investing School lines one into the gap and gives us TradeKing vs Scottrade – Online Stock Trading Comparison posted at Investing School.
Jason goes 4 for 4 with Why Cash for Clunkers Will Hurt Low-Income Drivers posted at Automatic Finances.
If you’re in center, you need a good set of wheels and the ability to flash some leather. It’s great to have an offensive force out there, but it’s essential to have someone who can chase down those fly balls. These posts exemplify that kind of speed by covering a lot of terrain.
Silicon Valley Blogger tracks down 55 Best Ways To Save Money: Frugal Ideas From Our Readers posted at The Digerati Life.
Nancy Miller will be on ESPN’s “web gems” thanks to 25 Simple Tricks to painlessly cut $100 /mo from Your Spending posted at Online University Lowdown.
Most teams would love to have someone in right who could bat clean-up–someone with the ability to drive in runs and to clobber home runs. It’s also been home to some of baseball’s greatest characters, ranging from the Babe himself to outspoken Reggie Jackson. We’ve decided to put a few of our most opinionated blogs out in this critical position.
Curt may not claim to be “the straw that stirs the drink”, but he does give us The Folly in Believing the Government Can Fix the Economy with Quick and Thoughtful Action posted at PennyJobs.com.
Money Saving Advice makes a statement with Credit crunch means talking about money and the lack of it posted at Money Saving Tips.
The DH only does one thing–hit. That means he has to do it well. There are generalists and there are specialists. Here are a few bloggers who made their case as true offensive specialists by tackling precise subjects in some detail.
Make it from Scratch gets its average over .300 with Firsts on the First – Making a Purse from Jean Legs posted at Make It From Scratch.
Craig Ford works the count like a professional hitter with Fifteen Ways to Save Money When you Fly on your Family Vacation this Summer | Money Help For Christians posted at Money Help For Christians.
You need to have pitchers you can rely upon on to start every game. These solid posts exemplify the kind of consistency and writing skill necessary to take the mound with a pennant on the line.
The Smarter Wallet knows how to keep a team in the game with posts like Managing Debt Wisely: Should You Give Up Credit Cards? posted at The Smarter Wallet.
ABC takes the mound and gives us Stock Prices Do Not Represent Stock Value (or Company Value) posted at ABCs of Investing.
When the going gets rough, the manager makes a call to the bullpen. The fireman takes the mound in hopes of providing his team with a way out of a tense situation. These bloggers earned spots in the bullpen because they offer the kind of actionable advice that can get you out of a jam.
Jim DeSantis works out of a bases loaded situation with Don’t Be A Sucker! Avoid These Debt Consolidation Scams! posted at The Money Matters Blog by Jim DeSantis.
Tom Drake earns a save with 10 Ways To Reduce Your Water Bill | The Canadian Finance Blog posted at The Canadian Finance Blog.
Philadelphia has the Phanatic. San Diego once had the chicken. The Mets have a weird face on a baseball, Mr. Met. The Royals have Sluggerrr the lion. Youppi disappeared with the Expos, but Bernie the brewer is still making beer in Milwaukee. Every team needs a mascot–someone to keep the fans motivated. That’s exactly what these bloggers do–they provide that motivation.
Baker gets the crowd personally involved with May’s Budget Recap, Net Worth Update, & Future Battle Plans | Man Vs. Debt posted at Man Vs. Debt.
I’m one of those guys. You know the kind. Someone tells them about a great idea or a seemingly wonderful approach to something and they start thinking about why it couldn’t possibly work. I’m not negative, really. I just like to test other people’s notions before taking them for granted.
Anyway, when I heard about The Grocery Game I instantly started coming up with reasons why this “coupon and sales tracking” system for saving money on groceries couldn’t really work. I came up with a series of objections to “the Game”, thinking it was probably one of those “more effort than it’s worth” propositions.
Something interesting happened, though. As I continued researching The Grocery Game, many of my objections melted away in the face of new information. By the time I sat down to write this post, I was ready to give this thing a shot.
Here’s how it works, in a nutshell. You pay The Grocery Game, which is a for-profit website, a nominal monthly fee. In return, they supply you with what basically amounts to a database to help you go grocery shopping. It tells you what coupons you need and where to get them. It also tells you what stuff is on sale at a great price. Best of all, it merges that information so that you know what to buy to get really rock-bottom deals.
The folks who run The Grocery Game, namely a woman by the name of Teri Gault, apparently have the right connections to get all of the necessary data and the way they organize the information makes it appear to be very easy to put the plan into effect.
Now, I’m not a big coupon clipper, generally speaking. I’ve always felt that it would encourage me to buy expensive stuff at a marginal discount when cheaper alternatives were available. I also felt like I would spend more time sorting through cereal coupons than the savings could ever be worth.
The Grocery Game, however, only advises using coupons when their net effect produces a truly hellacious bargain. Additionally, it gives you a good idea of what coupons you actually need to bother with. Yes, one could come up with this information by himself or herself, but for the price it makes more sense to me to have someone else do the dirty work. Quite frankly, I don’t have the time, energy or interest to do that kind of homework and I doubt most other people do, either.
It appears to me that “the Game” rests on a few fairly solid premises. It advocates stockpiling essential items when they’re dirt cheap so that you have them when you need them at a fraction of the price you’d otherwise pay. It encourages coupon use only at optimal moments.
But the proof is in the pudding, as they say. So, I started looking for some anecdotal evidence from real-life folk who have tried this system. Some of the report some pretty amazing results. Most everyone seems to think they come out ahead after paying for the data. Even more critical assessments stop way short of considering the Grocery Game a non-starter. After all, you’re looking at a few bucks per month–it doesn’t take much to justify the expense.
The more I read, the more I liked it. Although some of my objections to the idea are still valid for those with certain consumption habits, etc., most of them just vanished as I learned more.
So, after years of eschewing coupons and believing in my own well-honed abilities to spot a good bargain, I have decided to give this thing a shot. We just finished a heavy-duty round of grocery shopping, so it will be a few weeks before I can enter the store in full Grocery Game mode, but when I do, I’ll be sure to report back to you on the results. I doubt I’ll experience 90% savings or anything, but I have a strong feeling that I’ll end up considering the nominal investment extremely worthwhile.
Here are some Blog Carnivals that we participated in over the last week. Enjoy!
– Money Hacks Carnival #76 (The Land Down Under Edition) was hosted by Man vs Debt and you can find our post entitled Tips for Finding Applebee’s Coupons… Though I Question Your Judgment! listed there.
Unless you put in for an extension back in April, there might not be a lot you can do with respect to claiming a recovery rebate credit. That ship has sailed.
However, it’s worth taking a quick look at this unique 2009 tax wrinkle. It’s an interesting little twist to the way taxes are usually calculated and it created some headaches and confusion for taxpayer and professional preparers alike.
Let’s start with a brief explanation of what the credit was all about. We’ll take that straight from the horse’s mouth. The IRS put it thusly:
The recovery rebate credit is a one-time benefit for people who didn’t receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.
Generally, a credit adds to the amount of your tax refund or lowers the amount of taxes owed. Therefore, the amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return.
That makes sense, right? Well, sort of. In order to understand why it worked that way this year, you need to understand the way the original stimulus checks were issued back in 2008. It was a predictive system, which created the potential for those who didn’t appear likely to qualify to actually do so after the year’s dust settled. BankRate.com explains:
The checks issued last year were based on individuals’ 2007 tax data, but the money technically was an advance credit against 2008 taxes. Congress and the president decided to hand out the cash early in the hopes that individuals would spend it and help lift the economy out of the doldrums.
Okay, now you know what the recovery rebate credit is/was and why it existed in the first place. Right now, you might be wondering whether or not you actually did what was necessary to check your own personal eligibility and to stake your claim to a credit if you qualified.
There were four different groups of people eligible for the credit.
First, those who experienced a dramatic change in their financial situation between ’07 and ’08 may have qualified. As you’d guess, the IRS’ definition of “drastically” is, well, pretty drastic.
Second, you could qualify if you didn’t file a 2007 return and your 2008 numbers indicated eligibility.
Third, if you had an additional qualifying child during 2008, that could entitle you to some more loot.
Fourth, those who were “claimed as a dependent on someone else’s return in 2007, but [could not] be claimed as dependent in 2008” got a shot at the recovery rebate credit.
So, did you remember to check your eligibility? You can start by pulling out your tax return and looking at Line 70 of your 1040. That was the spot to do it (there were similar lines on 1040A’s and 1040EZ’s). There was one of those oh-so-much-fun worksheets in your instruction manual to help you pin down whether and/or what you were owed. If you used TurboTax or some some other program, it probably prompted you for the information necessary to determine eligibility.
You could qualify for a little extra “stimulation” via the recovery rebate credit. It would then stand to reason (and be wholly consistent with our expectations for the IRS) to assume that you could also have your already-issued stimulus money cut down to size if you were overpaid, right? Well, that’s one nice thing about this whole deal. You could ask for your fair share if you were underpaid but the government didn’t ask for a dime back from you if you were overpaid. Don’t blink. You’ll miss it. And it will be the last time you ever see something like that happening!
Have you ever wondered what would happen if the IRS decided to give out credits based on predictions of future financial situations and then had to deal with those who had inaccurate predictions? Now you know. They cut one check, were willing to cut another and didn’t ask anyone of the overpaid folks to pay anything back.
The recover rebate credit definitely wasn’t the norm when it comes to tax preparation or IRS behavior!
The Civil War had many regrettable elements, the massive bloodshed chief among them. Atlanta burned, Andersonville became a horrible chapter in our nation’s history, Lincoln suspended habeud corpus, people were willing to die and kill in order to preserve a way of life that was said to necessitate the worst forms of human bondage. A lot of ugly stuff.
You can add a federal income tax to the list. Under Honest Abe, the United States of America passed its first federal income tax legislation in 1861 in an effort to fund the war. After the war’s conclusion, it was repealed.
In 1894, the federal government tried to implement a national flat tax, but the Supreme Court ruled the act unconstitutional, because it wasn’t levied in a manner proportionate to the number of citizens in each individual state. The 16th Amendment to the Constititution provided legislators with the room necessary to impose an income tax as of 1913.
That didn’t herald a return to the flat tax plan, though. The United States opted to engage in a progressive income tax approach that involved the use of tax brackets. The rate one paid in taxes on his or her earnings was based upon the marginal rates outlined in the annually-released tax brackets. That’s still how we’re operating, too.
The number of brackets has changed over the years. We’ve had nearly twenty and in 2009 we were down to six. The marginal rates encapsulated in those brackets have changed over time, too.
Tax brackets have set rates as low as 1% in the past. That honor goes to the initial 1913 scheme. It was shortlived, though. By 1916, the lowest rate had doubled to 2%. Today, the lowest tax bracket is pegged at 10%.
Now people love to gripe about how much they’re paying in taxes these days, but no one has much room to moan when they compare their situation to the big earners during World War II. While today’s top-end bracket sits at 35% (which is definitely NOT a small sum), World War II years featured a marginal rate that went as high as–get this–94%.
War years have a tendency to boost the numbers on those federal tax brackets. During the first World War–and remember that was only a few years after the income tax came into being.–the numbers topped out at 77%.
To put all of this in the right context, though, it’s important to understand something that escapes a lot of people. We use marginal tax rates. That means that the tax bracket applies only to your “last dollar earned”, as they say. It doesn’t mean that every buck you earned gets taxed at that same rate. Those folks who were making big bucks during World War II weren’t sending 94% of all their income to Uncle Sam. That rate was only for the portion in excess of the upper limit for the previous bracket all the way down the line.
If you don’t really understand the way marginal rates work and are more interested in the effective tax rate you pay than you are on any individual number on federal bracket, I strongly recommend that you take a look at this page from Howstuffworks that does a good job outlining exactly how we use tax brackets in the U.S.
When you take a broad, historical look at federal tax brackets, you find one thing that’s really surprising–inconsistency. You’d think that the percentages would just slowly but surely move up and up over the years, but they haven’t we’ve seen large increases and massive reversals throughout history. Check out this chart to see what I mean.
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