Thanks to my trusty T. Rowe Price monthly newsletter for putting all the information I was wondering about in one place! The 2009 American Recovery & Reinvestment Act, designed and implemented to try to help get America moving forward again, has a bunch of different aspects to it that help out individual taxpayers that you might not know about. (I know I didn’t know the full scope of some of these before I read this in the newsletter!). So without further ado, here are some of the provisions in the American Recovery & Reinvestment Act that could directly affect or benefit you:
Now that we are about 1/2 way through 2009, it’s time to adjust the withholding numbers on your paycheck, says Kiplinger.com Most of us pay the majority of our taxes due in the 1/2 half of the year, which means that if you leave your withholding at the same level for the second 1/2 of the year, you might be overpaying…and then you get a refund come 2010. Personally, I don’t like getting a refund, as it means just that – I lent my money to the government interest-free for at least 6 months! I always aim to either break even or owe a little bit come tax time, which is pretty easy for me to do because I am self-employed and I don’t have any W-4 forms to fill out for employers – I track all my own income and taxes paid. But for someone working for a company, you have to file a revised W-4 form with your employer that asks them to reduce your withholding for the rest of the year. The more allowances you claim on the form, the less taxes get taken out.
I am not talking about income tax – that’s an entirely different subject and one I don’t want to get into here. I am OK with paying taxes; I understand that is how society works and stays in business. But what I want to talk about in this post are the fees, taxes, charges, etc. that are on every single bill or service that we have to pay for, from the smallest little thing all the way to some of the biggest purchases that we make. In order to get a fuller picture of just how much of my money goes out the door each month in these charges, I went back through a month’s worth of bills…and this is what I found out.
And I am paying mine online with a credit card by using officialpayments.com again, in order to get a few more rail miles in my Amtrak Guest Rewards account. Since my estimated Federal payment is almost $3,000, that’s an additional 3,000 miles towards a free bedroom upgrade on Amtrak. In just one year of making estimated payments, I have enough miles for a free upgrade worth upwards of $500 – not a bad trade for $200 in fees over the year.
So, my taxes are being filed this week – and I owe money again. Granted, I would rather owe money than get a refund, for sure, as that would mean I gave the government use of my money interest-free all year long! Being self-employed certainly has its benefits in terms of working when I want and for how long I want, taking time off whenever I choose, and spending afternoons outside in the yard instead of stuck in a cubicle. But in exchange for such freedom comes the responsibility of paying taxes myself all year, as I don’t have an employer taking it out every week automatically. I also have to pay a 15% self-employment tax to cover what an “employee” would typically be paying into Social Security. On a regular old paycheck, the employer pays 7.5% and the employee pays 7.5%, but when you are self-employed you have to pay the entire thing yourself (although you can then deduct 50% of that in your taxes somewhere – I leave that to my brother the accountant).