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.

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.

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.

I had a specific question about the 2009 economic stimulus package.  I hopped right on the Google train and crafted a precise search, sure that I’d find out exactly what I wanted to know.  I didn’t get an answer.  None of the first 20 sites on the list provided anything close to genuine information about my specific question.  Not even close.

Instead, I found myself looking at a collection of extremely opinionated sites and blogs that were more interested in ax grinding than in providing real information about the American Recovery and Reinvestment Act of 2009.  There were those on the far left who decried the bill as an Obama sell-out.  There were those on the right who seemed to think that calling it “porkulus” is so clever and who pepper every other sentence with “socialism” or “communism”.  The mainstream left seemed to be more interested trumpeting imminent success of the legislation than in discussing its actual composition.  The mainstream right wanted to discuss deficit spending–not the actual components of the bill.

It made me wonder.  Where can you actually get information about the economic stimulus in detail?  You know, real information about what’s in the law, as opposed to opinion about the legislation in general terms or specific attacks/praises of a few individual provisions…  There’s plenty of healthy (and unhealthy, for that matter) debate out there about the package, but the actual provisions of the law are drowned out in all of the screaming, smarminess and editorializing.

Don’t get me wrong.  I like opinions.  I have a few myself.  I like sharing them, too.  I enjoy a vigorous debate.  Sometimes, though, you just want a little factual information without all of the hollering.

In hopes of putting folks in touch with a little bit of that, I’ve compiled a brief list of where you can get some relatively straightforward information about the American Recovery and Reinvestment Act.  Here’s where you can learn about the economic stimulus package in detail…without too much editorializing.

The Full Text of the Law. Sometimes, you need to take a long look directly into the horse’s mouth.  You can read the whole law.  It’s provided in PDF form, so make sure you have the latest installation of Acrobat up and running.  If you’re not interested in wading through all 400+ pages of the online version of the bill, you can search the PDF.  The search tool is surprisingly fast, considering the size of the document and seems to work well.

Bubble Chart and Other Graphics. If you’d like to see a breakdown of how the stimulus money is being spent, you can take a look at the bubble chart from Recovery.org.  Obviously, this is coming from the current Admininstration which means that it was drawn up by a supporter of the law.  As such, you have some language choices with which not everyone would agree.  However, the bubble chart breakdown, the per state distribution map and the list of expenditures on a per agency basis are all seemingly solid sources of core information about the law.

Another Graphical Breakdown. Here’s a more detailed graphical representation of where the stimulus money is going.  The overall accuracy seems good, though I’m sure we could argue over details.  The trick here is to scroll to the right as you evaluate the information.  It’s an interesting way of showing how resources are to be distributed.

Read the Stimulus. This site was originally set up while the law was still under consideration.  It called for greater transparency during the deliberative process.  Today, you can still use the site to search the full text of the ARRA.  You can do that with the official government PDF, too, but this does seem a little quicker and may be a welcome alternative for those who don’t like dealing with PDFs.

There are a number of reports available dealing with individual provisions of the economic stimulus package in detail, as well.   Once you pinpoint the aspects of the law using a search of the full text of the law, these become much easier to find.

If you want specific information about the actual provisions and details of the ARRA or just need an overall picture of what it actually contains–not what people think about its politics or the likelihood of its success–you may want to start with the above-mentioned resources.  Sometimes it’s nice to just find out what’s really in there instead of dealing with folks on both sides of the political divide claiming that an apocolypse/massive economic boom are on the immediate horizon!

Here’s a common question:

“When can I take money out of my 401k?”

It’s a question that’s been asked more than usual over the past year.  Many people are watching 401k balances dwindle due to the big stock market dip while others are dealing with new financial stresses.  When times are tight and you’re looking for money, that pile of cash in your 401k looks inviting.

But can you actually start yanking money out of your retirement plan?  In some cases, you might be able to do that.  In others, you could be stuck.  It’s going to depend on your unique circumstances and the 401k policies your employer set up.

You can cash out your 401k when you retire.  At that point, you pay the standard income tax rate on the dispersals.  Obviously, though, most of the folks asking “When can I take money out of my 4o1k?” already know that they can have it once they retire.  They’re more interested in whether or not they can get fast access to that money.

Generally speaking, there are two circumstances that will allow you to actually pull money out of your 401k plan.

First, if you terminate employment, die or become disabled.  If you’re canned or finally scream “Take this job and shove it!”, you can get access to the dough.  Termination of employment, regardless of whose idea it was, qualifies you to play with your nest egg early.  If you die, the funds are available to your heirs.  That probably isn’t part of your plan, though.  If you become disabled, you can also get to the money.  We don’t want that to happen, either, though.

Second, you can often take a chunk of your 401k money if you are experiencing a serious hardship.  Many plans have caveats in them that will allow contributors to withdraw a portion of their 401k money under certain specific circumstances.  The desire for a better television set does not qualify you for a harship exception.  Nor does your bad decision to go on a spending spree with your credit cards.  These early-access opportunities are reserved for those who end up facing serious medical bill problems or who may be waiting for the sheriff to come by with that foreclosure notice.  If you can’t document a serious emergency, don’t expect to get your money out early.  Even if you do, you probably aren’t going to be able to get more than a small percentage of the total funds in the account.

So, if you’re not quitting (or getting laid off) and you’re not staring down the barrel of a financial crisis unrelated to your personal debt obligations, how can you get to your cash?

To be honest, you can’t.  Yes, it’s your money.  However, in exchange for receiving any employer matching funds and the tax advantages associated with having a 401K, you give up some of your control over the money.  It’s yours, but you can’t have it just because you’d like to hit the casinos or pay off the folks at Discover.

You may be able to secure a loan against your 401k, though.  You’ll have to pay it back with interest, though.  And if you happen to lose your job before repaying the loan, the balance will suddenly become due in full.  It’s not a dream scenario to take out a loan this way, but it is sort of a roundabout way of getting your money in your hands.   Oh, and you’ll only be eligible for a loan representing a fraction of your total balance.

So, that’s how you can do it.  The bigger question is if you should do it at all. Generally speaking, the answer to that is a resounding “no”.  They’re going to automatically hold back a percentage to cover the income taxes on your cash out and you’ll also get hit with additional penalties for pawing that cash before hitting retirement age.  Usually, that combination of disincentives is reason enough to leave your money in place until you retire.

(NOTE:  We keep using the word “usually” for a reason–many of the answers to this post’s questions can only be determined with certainty after carefully reviewing the rules of your specific plan.)

“When can I take money out of my 401k?”  When you quit or get fired.  When you’re facing a serious economic hardship or when you retire.  That’s about it, unless you count taking out a loan.

In the end, however, you’re better off not scrambling your nest egg.  Leave your 401k money in place if you can.  As Dave Ramsey apparently said:

QUESTION: Chad and his wife have $35,000 in debt between credit cards, student loans and car loans. They bring home $150,000 a year. They also have $25,000 in their 401-K savings. He wants to (pay off his debt). Should they use that money to eliminate their debt?

I would never cash out retirement savings to pay off debt unless it is to avoid foreclosure.

As much as I’d like to take an income tax sabbatical, I fork over my fair share of cash to Uncle Sam every April.  You probably do likewise.  It’s not a fun annual event, but someone once said that “Taxes are the price of civilization” and I guess I buy into that to some extent.  I’m not willing to call paying more a patriotic act, but I’m not against paying my fair share.

That being said, my fair share is actually much less than I actually pay.  That’s because a lot of folk swho should be paying out the nose are using whatever sneaky means they can dream up to avoid paying their portion of civilizations’ price tag.

I’m not talking about the folks who design theri financial lives to keep taxes low.  Those folks are playing by the rules.  They’re putting forth an effort to stay on the law’s good side even if those efforts tend to involve reducing their tax burdens.  Their existence is justification for an improved tax code as much as it is anything else.

The folks with whom I have a problem are the ones who are cheating their way of out of paying.  Tax cheats screw everyone out of money.

The IRS, as you’d probablly guess, has an issue with those same scofflaws.  They want their coffers full of tax doug.

In order to create that great hypothetical world where everyone pays what they own, happily, the government must find a way to nail all of those cheaters to the wall.  As we all know, that’s not a very likely scenario.  That’s why our buddies at the Internal Revenue Service came up with their Whistleblower Office.

Basically, the government is paying bounties for information material to proving that someon failed to pay their taxes appropriately.  It’s a paid informer program.  It gives us all a chance to become IRS snitches.  If you turn over the goods on someone who’s not paying his or her legal share, you can get a reward.

If you’re the kind of person that feels okay with reporting Tax Code violations and being a paid government tattletale, don’t get too excited too quickly.  Primarily, the feds are trying to catch the big players.  They don’t seem as interested in expending resources to nail your mother-in-law for fudging a few numbers in gray areas.  They have more interest in outfits who are prepared to report on major companies, like the outfit that “found” a $2B tax cheat.

If you can come up with a violation worth $2M or more, you’re going to qualify for 15% to 30% of what the government recovers in taxes.  That’s a healthy sum.  However, if you’re information is on a small-time cheat, rewards are at the discretion of the government.

And speaking of discretion…  Prosecutorial discretion is alive and well in the Whistleblower Office.  These guys are inundated with reports that so-and-so didn’t report this-and-that.  They actually go after only a relatively small percentage of the tips provided.

So, think twice before you decide to become a tax bounty hunter.  Unless you can get a big fish on the line, it probably isn’t going to be the most lucrative endeavor to pursue.  On the bright side, you can stay anonymous unless Uncle Sam needs you to testify in order to prove their case.

As you can probably guess, I don’t necessarily love this little government foray into turning private citizens into rats.  I’m all in favor of decreasing tax fraud, but I’m not sure that encouraging people to snitch for the sake of some reward money is the best way to go about it.

Instead, we might want to consider coming up with a better tax system.  Or paying for more/better IRS employees in the right areas.  In the meantime, we have the Whistleblower Office.

President Barack Obama and a slew of his fellow office-seeking Democrats made a point of campaigning on the idea of tax increases for the uber-wealthy and tax cuts for everyone else.

Part of Obama’s plan to decrease the tax burden on the working class is what’s being termed the Make Work Pay Tax Credit.  It’s not just a means of providing some tax relief for the sake of helping those on the middle and lower rungs  of the economic ladder, it’s also become a component of the hotly-debated stimulus package.

The Make Work Pay Tax Credit is an interesting topic of discussion because it demonstrates how a plan can be tweaked (if not overhauled) in the political process.  It’s also a conversation piece because it reveals a little bit about different potential mechanisms for injecting cash into the economy.

Originally, the President advocated a $1,000 per taxpayer tax credit.  That credit was extended to those who paid and those who didn’t actually earn enough to pay income taxes.  The details in terms of actual implementation were (and remain) a bit hazy, but the basic idea was to give everyone a credit in hopes of allowing them to keep more dough in their pockets.

As the massive stimulus bill has been adjusted, debated and compromised, the $1,000 figure has vanished.  Based on the latest assessments, it looks like the Make Work Pay credit is going to be $500 per person (some say $400 is a possibility).

CNN breaks down the probable format for Make Work Pay:

The credit would essentially work as a payroll tax credit equal to $500 a year for individuals and $1,000 for couples. And the money could be delivered fairly quickly simply by having employers reduce the tax withholding in a person’s paycheck.

The full credit would be limited to those making $75,000 or less ($150,000 or less for couples). Individuals making between $75,000 and $85,000 (and couples making between $150,000 and $170,000) would get a partial credit.

The credit also would be refundable, meaning that even tax filers without any tax liability — typically very low-income workers — would receive one.

So, we’re beginning to get an idea of how much money this is going to amount to, but that’s only part of what’s going on with “MWP”.  It’s also interesting to look at the different implementation options available.

When President Bush wanted to stimulate the economy with a cash injection, the check writers in Washington got busy.  Stimulus checks were sent directly into the mailboxes of those who qualified.  That doesn’t seem to be the plan with Make Work Pay.

Instead, there are two other options.

First, employers could adjust the amount of money taken out of employee paychecks to compensate for the credit.  According to the aforementioned CNN piece, that would put a little less than $40 in pocket of every employee who receives weekly checks.

This kind of “drip system” is criticized by those who think the best route to stimulus would involve an in-whole “payout”, but it’s more likely to produce quick results than the alternative means of implementation.

If the money isn’t “credited” in the form of decreases paycheck reductions, it could be used as a tax credit for the flat $500/person sum at the end of 2009.  In other words, it might just become another credit to offset income tax burdens or to boost refunds next year.

It’s hard to get too excited about the likely success of a $500/individual tax credit to solve our economic woes.  If you believe in the overall approach, this component would seemingly help move things along, though.  If you are an advocate of using tax reduction and cash injections to mitigate the recession, however, it’s hard to be happy at a break that’s been sliced in half and that won’t be administered as quickly as possible.

Disclaimer:  This information is not intended to dispute or replace the advice of a tax preparation specialist, accountant or attorney.   PersonalFinanceAnalyst.com advises its readers to consult with a tax professional to determine the deductions for which they may qualify.

If you don’t already have your W-2s, they should be on their way.  It’s that time again.  Taxes.  And, like most people, you might be wondering what you can do this year to minimize your tax liability.  The search for deductions is underway.

One of the best known deductions is the charitable contribution.  The U.S. government makes the idea of donating to a recognized charity a little more attractive by providing a tax benefit to those who give.  

There are rules associated with donations.  Before we discuss the process of how to value a charitable contribution, it makes sense to revisit a few of those basic guidelines.

• Your donation must go to a qualified tax-exempt charitable organization.  Generally speaking, the charities must qualify under as 501(c)(3) organizations.  If the tax implications of giving are important to you and you’re not sure about an organization’s status, ask before you give. 
• You can only use the deduction if you’re itemizing on your return.  Those with simple tax situations who plan on taking the standard deduction won’t catch a break based on their generosity.  If you’re not itemizing, you’re not going to gain a tax advantage.
• There are different limits on deductions.  You can usually deduct cash contributions up to 50% of your adjusted gross income.  Deductions for property contributions cap at 30%.  You can generally deduct appreciated capital gains assets up to the 20% mark. 

It’s also worth noting that you shouldn’t itemize to claim deductions just because you can.  If your total itemized deductions don’t exceed the standard deduction, there’s no real reason to itemize.

If you make a cash donation, the valuation process is simple.  You can claim the dollar amount donated.  Things get a little stickier, however, when you’re dealing with non-cash contributions.

The Acting Director of the IRS once said that they “want people to be focused on helping these worth groups than worrying about tax issues.”  They’ve tried to accomplish that with respect to charitable giving by creating a very subjective process.  Although there are rules to follow, they leave a great deal of discretion in the hands of the individual taxpayer.  As one expert once noted, “How aggressive one wants to be on a tax return is a very personal decision”.

That discretionary aggression must take place within the general guideline that governs how to value charitable contributions:  Fair market value.

That’s the rule of thumb.  If you donate it, you can claim it’s fair market value.  That doesn’t represent the price of the item “new in the box”, but it’s actual reasonably ascertainable value in the marketplace.  

For instance, those who donate automobiles are often given a high-to-low range of potential values for the make and model given.  The charity will not, however, usually provide any instruction on what exact value to claim.  When it comes to valuing non-cash contributions, you’re left to your own devices to set those numbers.  As MoneyBlueBook noted:

The donation valuation process is generally subjective and you are responsible for assigning the proper value for your charitable donations. There is no exact IRS formula or chart as the agency relies on subjective approximations. 

Resist the temptation to go crazy, however.  If you decide to push the envelope on your claims, it’s like sending the IRS an embossed invitation to audit you.  According to MoneyBlueBook (referencing the valuation process for donated clothing):

When donating clothes for the tax deduction, the worst thing you can do is to drastically overestimate the donated clothing value and trigger an alarm bell. Triggering a red flag will send the IRS man running to your home to request receipts and proof of your donation. Because charitable donation is one of those tax items frequently abused by taxpayers, the IRS closely scrutinizes such claims.

In other words, be honest and accurate.

But just in case, keep good records.  Get receipts and follow the rules regarding third-party valuations for donated items with values in excess of $5,000.  The general rule is “fair market value” but everyone should consult IRS recommendations and heed the advice of a qualified tax professional before filing their taxes.

If you’re going to be itemizing when it comes time to do your taxes, you’ll want to make sure you claim every possible thing you legitimately can from the expansive list of tax deductibles.

While some deductions are obvious (qualified medical expenses and charitable contributions come to mind), others are a little more “out there”.  Consider a few of these deductions people can take–if they can document them and if they have any idea they even exist.

Travel laundry service.  Seriously.  If you’re traveling on business and you need to have your clothes laundered, save the receipt (and keep a currency converter handy).  That dry cleaning bill you rang up in Russia after the unfortunate borscht spill is deductible.  If your white blouse ran into some BBQ sauce in Memphis and you let the hotel cleaners take care of it, you can write it off.  The government is willing to cut a break for your sloppy co-worker who can’t avoid the whole mustard-on-the-tie problem at conferences.

Job-hunting food. If you were out looking for a job and decided that you’d do better interviewing on a full stomach, you should’ve saved the receipt.  You can claim 50% of dining expenses directly related to your job search.  Moral to the story?  You may just be able to afford to super-size that value combo if you’re on a job hunt.

Larger breasts. It’s possible to deduct breast augmentation surgery expenses–even when they’re not anywhere close to being a medically necessary procedure.  Wait–you shouldn’t necessarily book a date with the plastic surgeon for you or a loved one.  The torso receiving the boost needs to belong to an exotic dancer.  Under those circumstances, the enlargement becomes a valid business expense.

Cat food. Don’t get excited.  You’re probably not going to be able to put Snowball’s meal tab on your list of tax deductibles.  It can happen, though.  The IRS gave the green light to this write off when a scrap yard owner claimed that cats were the only way to keep the joint free of dangerous snakes.  He needed to keep cat food on hand to attract an army of snake killers.  Snake-eating cats are a legitimate business expense in some areas.

Clarinet lessons. The late, great Artie Shaw would undoubtedly approve of this one.  At least one family was able to convince the IRS to allow them a deduction for their kid’s clarinet lessons.  No, the IRS agent wasn’t a music lover.  The deduction went through because the clarinet lessons were shown to be a medical expense.  Apparently, this particular woodwind can help alleviate an overbite.

There you have it, a list of five tax deductibles that you probably won’t hear while H&R Block helps you complete your returns.

Interestingly, I learned that there is an urban myths of sorts surrounding a certain tax deduction.  There are many people out there who think they can get a deduction for donating blood.  People ask about this regularly and some off-handedly mention it as if it’s on the first page of the Tax Code.  It isn’t.  Nor is it on page 14 or page 943.  It’s not in there.  Not only is it absent, the IRS is actually up-front about saying you can’t do it.

Whether you like it or not, giving blood won’t improve the bottom line number on your 1040.  The expenses of whaling captains involved in sanctioned whaling activities, however…  Well, that’s a different story.

There are literally hundreds of valid tax deductions hidden throughout the Code.  You probably won’t be able to use many of these, but you and your accountant should check carefully for every break to which you’re actually entitled, even if you’re not a whaling captain with cats on a boat riddled with snakes.