What the stimulus bill means for you

Not a day goes by now without some talk about the "stimulus bill" being discussed by very important people in some very important chamber deep in a crevice of the Capitol building. But with so much news on the plan, the details can become muddy and confusing and before we know it we're completely lost and ready to top off our glass of Pinot Noir and take the dog for another walk before we kneel at the doorstep of Thomas.gov, take a deep breath, and start all over in trying to understand it all.

Of course, the most vital info you need to know about the stimulus bill can be boiled down to just five itty-bitty words: How does it affect me? Simple question, but traversing through all the mucky language can be harrowing. Luckily, that's why you read moi, right? ;)

I've found a fabulous article by the New York Times that does the best job I've seen of simplifying the legislation and informing you of how the stimlulus affects, well...you. Most importantly in regards to:

Income Tax: In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income.

Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000.

Unemployment: Normally, you pay federal income taxes on federal unemployment benefits. In 2009, however, you won’t have to pay taxes on the first $2,400 in benefits you receive.

Health Insurance: If you get fired, your company is required, thanks to a law known as Cobra, to allow you to pay to keep your health insurance, generally for up to 18 months.

The problem is, it can cost you $1,000 a month or more to keep the coverage.

Now, the federal government will subsidize 65 percent of the premium for up to nine months. To be eligible, you need to have been forced out of your job between Sept. 1, 2008, and Dec. 31, 2009. Also, your income in the year you receive the subsidy cannot be more than $125,000 for individuals or $250,000 for married couples filing their taxes jointly.

If you lost your job after Sept. 1, 2008, and declined Cobra coverage, you’ll now get another chance. Call your former company in the next two months to find out how this will work.

Social Security: In 2009 a number of retirees and disabled people, including Social Security recipients, will receive a $250 refundable tax credit. The money would arrive within 120 days of the bill’s signing.

First-Time Home Buyer Credit: First-time home buyers are eligible for a refundable tax credit equal to 10 percent of the purchase price of their home, up to $8,000, if they made the purchase after Jan. 1, 2009, but before Dec. 1, 2009. (This gem is for singles who make under $75,000, or a married couples who make under $150,000).

Don't forget the language isn't final, but the above is the gist of it all. Ah, I love the sound of money in my pocket (thank you U.S. government!). [NY Times via CNBC]

Gimme a (tax) break

Continuing in the tax vein, there are specific steps that 20-somethings (especially recent college grads) can take to shelter portions of their income from being taxed, and inevitably save more money! In order to start saving anything, though, you'll need to remember to file your taxes! I honestly can't believe how many 20-somethings I know who feel they can't be bothered to file because they'll only get back a small amount (say $100 or $200). Either that, or they rely on their parents to do their taxes for them -- no joke!

To all the guys out there, if there's one way you can turn a girl off (aside from being unemployed or lacking personal hygiene), it's telling her that your parents do your taxes for you. If you're even reading this blog -- guys or girls -- I assume that you've decided to take some stock in your financial life, which means doing things, such as taxes and the like, yourself and not relying on Mommy and Daddy. (Contrary to popular belief, 21+ should never be the new 16.)

With that out of the way (phew!), do not, I repeat, do NOT use a Form 1040EZ when filing your taxes because doing so prohibits you from taking advantage of the super-tax-payer-saving ways I'll mention in a second. Instead, use the standard 1040 form. I assume that it's a trade-off as to whether you want to fill out a no-muss-no-fuss form (the 1040EZ), or whether you want to get into the more nitty-gritty and wring some cash from your filing form (the standard 1040). Since the EZ is just so......easy.....most tend to file using the former, which is fine if you know you don't qualify for deductions.

Here are some clutch ways to save yourself some greenbacks when filling out your 1040:

• If you're making less than you thought you would after graduation, don't fret! You're automatically eligible for a saver's credit, as long as you're lining any retirement plan you've chosen (401(k), IRA, etc.) with monthly contributions. The catch is you have to make less than $26,000 per year (not horrible, considering the cost of living differs from region to region), but you can save an upward of $1,000 in money that might have otherwise gone to paying taxes. Consider it the government's reward for savers who are thinking ahead.
• Did you know that your moving expenses (renting a U-Haul, gas for the trip, buying packing boxes, etc.) can be tax-deductible if your job out of college is 50+ miles away from your old address?
• The idea of paying off those student loans could give anyone an ulcer, but remember this: you can now claim up to $2,500 of interest on student loans in the form of tax deductions, even if you're parents are paying off your loan interest. Apparently, the government deems any payments from a parent toward their kids' student loan a "gift," which is great news for both parties!

Just remember, you can't garner these savings unless you 1.) file your taxes , and 2.) use the standard form 1040.

A "kinder, gentler" IRS?

Call it a reflection of the times, but the New York Daily News is reporting that the IRS has promised to go easy on the nation this year in relation to filing taxes. Seems like a first, but we like firsts -- especially during the recession. The words "IRS" and "kind" have never been synonymous. The stereotype of the hard-as-nails, unmerciful IRS agent exists for a reason, after all.

It turns out the IRS actually does have a heart, and understands what the majority of U.S. citizens are going through, what with so many layoffs and foreclosures budding on a daily basis. No they aren't forgoing collection of taxes this year (wouldn't that be grand?); instead, they'll be more flexible with tax collection to help easy the fiscal burden that's cloaked the shoulders of so many of us.

The only catch is that you have to ask for help if you need it. Though the IRS may have gone the way of the Tin Man, it doesn't mean it's also gone the way of the all-knowing Oz. Struggling to pay your monthly bills and need a filing extension? Just lost your job and have no savings to pay taxes? Ask and you (probably) shall receive help.

The Mail reports that among the changes this year:

• IRS employees will have greater authority to suspend collection actions — such as tapping your bank account — in certain hardship cases.

• If you already agreed to an installment plan with agency and have been paying on time but now face trouble, the IRS might allow you to skip a payment or pay a reduced monthly amount without voiding the agreement.

• If you thought you weren’t eligible for a so-called offer in compromise — in which a taxpayer and the IRS agree to settle a tax debt for less than the full amount — you may be now. In the past, if you had enough equity in your home to cover your tax debts, you may have been turned down. But given the downdraft in real estate, the IRS is willing to take a second look.

The IRS' website (www.irs.gov) has an excellent list they call the "What Ifs of an Economic Downturn." On the list are many common hypothetical questions posted to the bureau, and their answers to each. Questions include: What if I lost my job? What if my income declined? What if I sell my home for a loss? What if I can't pay my taxes? Scary questions, but the IRS is anticipating them being asked and have answers for all of them. It's an excellent resource to tap in to if you're freaking out about tax season and feel fiscally pinned against a wall.

If these "What Ifs" don't answer your questions though, IRS.gov also has a phone number you can call for help (1-800-829-1040) and a list of tax assistance offices that you can visit in person.

Guess who just got a free iTouch!?

Me! Woot!! Unfortunately, I had to spend $1,200 on a new computer to get it, but it's a free iTouch nonetheless (retail value: $300). I'm not the type to fritter my money away on snazzy electronics, but my 2004 iBook laptop was on its last legs, so Love and I decided we would use our stimulus check (thanks, George!) of $1,200 on a new MacBook for moi. The iTouch just happened to be included in the deal, which is excellent because now I can check how my stocks are doing in the market during the times when I'm not at my computer. On top of the free iTouch, we also got $100 off because Love is a student and, well, I guess Apple wants to reward its buyers for learnin' the 3 Rs! ;) My new laptop is equally fabulous; I can now load webpages in less than five minutes and open multiple applications without my comp freezing. I feel like a whole new woman!

Moral of the story: Now is a GREAT time to invest in a new Mac (if you need one). Not only do you get $100 off for being a student (if you are one), but you also get your very own iTouch, which you can use to further your budget in a myriad of ways (i.e., following the stock market, reading up financial advice, finding the best deals in town, etc.)!*

*(Checking Facebook 12 hours a day on your new iTouch will not, sadly, make you any money).

Back that tax up

Just got my tax rebate (always late, but worth the wait), and was thrilled when I saw the number in my bank account! In total, it's about $2,800, which is a pittance compared to how much I actually gave the government, but I'm glad I at least got something back. Thanks to Love, that number was much higher than what I would've gotten if I had filed as a single instead of joint -- I guess it really does pay to take out humongous loans for higher ed!

But the $2,800 question is: How will I spend this enviable portion of moolah?

Let's start by a good teeth cleaning. Not for me, but for my poodle, Lola Belle Watkins (affectionately dubbed "Lolar Bear" by Love), who's penchant for pancakes and pasta has left a nice patina of plaque on her little fangs. Even though a margarita on the beaches of Cancun would be a nice respite from the daily drone that is my life Monday through Friday, the prescient image of Lola's teeth falling out of her head at the ripe old age of 13 just doesn't strike me as appealing. So, I figure I'll take $400 of my rebate and put it toward her dental needs, effectively ridding myself and her (at least for awhile) of the poodle breath that permeates from her tiny gullet.

That leaves me with $2,400, she says, rubbing her hands together nefariously as a sinister glint takes shape in her eyes. I have two options: Buy that $1,500 leopard Dolce and Gabbana bag I saw on clearance at Nordstroms (hey! it was on clearance) and use the remaining $1,000ish on the pinnacle of any possible purchase I could ever make in my life (ok, besides that giant mansion I want) -- a perfectly tailored Burberry trenchcoat. Fabulous purchases, indeed.

But you know what? What would I have to look forward to and save for if I buy something I've set as a distant goal to reward myself with in the future? What would I use as a pat on the back for "making it," if not with a Burberry trenchcoat? And really, how silly would I look driving my 2000 orange Hyundai Accent with my Burberry trenchcoat on, drowning my financial woes in chalupas at Taco Bell? Almost sillier than Hillary Clinton thinking she still has a shot at the Democratic nomination.

My point is that when life hands you lemons, make your goddamn lemonade (i.e., leverage that baby!). There's no such thing as free lemonade unless you make it all by yourself. If "Mama" really does "want a new Buick," the best thing said "Mama" can do is make her cash work for her. In my case, I'll leave a touch in my bank account (quite possibly to use for summer plane tickets for Lova, Lola and I to fly back to California with), and the rest I'm putting in the stock market.

Voila! No fabulous trenchcoat, but an addition to the downpayment of my future McMansion and a Southern belle of a poodle with no hint of halitosis!