Sunday, February 15, 2009

Taxes done!

I just finished filing my 2008 taxes. As I did in the last year, I took advantage of free electronic filing of my 1040 form via TaxAct. My state has its own electronic filing site. My federal form took one hour to fill out and my state about 45 minutes. Total time invested: 2.5 hours. Much of that extra time was due to the changes in my state's electronic filing method, which included downloading third-party software and getting it to play nice on my iBook. All tax-relevant paperwork was filed in one location throughout 2008 and 2009 so it took me a few minutes to pull out the various envelopes and sheets to confirm I had all the papers I needed for filing.

I am my mother's daughter because I save all my tax paperwork in a single slot in my multicompartment file folder. Since I needed to refer to my 2007 tax forms to deal with my 2007 state tax refund, this file folder kept my earlier tax forms handy. Even with electronic filing of my taxes, I print out a paper copy of my forms and place the sheets in my file folder for easy reference and a backup to the electronic forms.

While tax refund was not as large as last year, my combined state and federal refund will be over $1,000. All of this money will go to fund my Roth IRA as a 2008 contribution. However, I am still over $100 short of the $5,000 maximum contribution limit so I will pull some money from my savings account fully fund my Roth IRA for 2008.

I received less money back from the government compared to 2007 for one large reason: the energy tax credit expired. In 2007, I put in a new energy-efficient picture window in my living room for which I could take a tax credit. Since that program lapsed at the end of 2007, the new windows I installed in 2008 had no effect on my income tax bill. However, the program has been reinstalled for 2009 so I am looking forward to the credit on when I file this year's taxes since I plan on replacing the remaining four single-pane windows on my home.

Looking at my 2008 tax form compared to 2007, I had less mortgage interest to deduct (more money going toward principle!), more interest income and a higher AGI (Adjusted Gross Income). I donated more cash to charity, but had no noncash donations. This year I may not give as much cash as 2008, but I will likely have more noncash donations to add to my itemized deductions in light of my desire to declutter. Since I did get a refund from the US government, I plan on adjusting my withholding so I get more money in my pocket now rather than giving the feds a tax-free loan.

I am one of those people who enjoys filing her taxes as soon as possible. I get it done, pay what I owe or get any refunds quickly and use my money to forward my financial goals. If you are getting a tax refund, how are you using it? If you owe the government, will it be easy to pay them the money?

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