January 31, the deadline for employers to mail out W-2s, has come and gone and by now you should have all of yours. That means, let the calculating begin. And, tax advice columns and articles begin to appear everywhere. But there are a few changes for the 2010 tax year that you need to know about. The Wall Street Journal has summarized them nicely in this article. Some highlights include that ALL unemployment compensation is taxable for 2010, this is a change from 2009. There are also new adoption credit guidelines if you adopted a child last year.
The IRS has changed it’s Direct Deposit procedures to allow for multiple bank accounts. You must e-file, but when you do, you can choose up to four accounts to have it delivered to. You can even use the refund money to purchase bonds if you wish. Only you & your spouse can decide which investment options are best for you-I don’t give investment advice, just smarter spending tips.
Are you due for a big refund? Then undoubtedly you’ll hear “You need to change your deductions! You just gave the government an interest-free loan! You should be investing that!” In fact, I’ve already seen that posted on several blogs. Yes, it’s true, you did give the government an interest fee loan, technically. And, you could look at the entire amount, divide it by 12, and change your deductions to have that extra money each month.
But that is not for everyone. Maybe you don’t have the discipline to save that money each month. Maybe you lack self control around the holidays and really need that money every tax season to regroup and rebound. Maybe you really look forward to getting that check every year and either taking a vacation or doing a home improvement. And, if you’re not struggling paycheck to paycheck throughout the year, I wouldn’t beat yourself up over it. I once had a coworker, and they did have trouble making ends meet, and one year she told me they were getting $6000 back. That’s $500 a month–that was a lifestyle changing amount for them, and this certainly was a case where they really could have used that money monthly and avoided putting some things on credit cards. But you have to decide what is best for you, and for some families, it’s getting a nice check every spring.
Because it doesn’t grow on trees, right?
