http://www.taxact.com/products/all_efcycle.asp

You can also access specific information on the status of your return from the IRS website here using your social security number, filing status, and refund amount.

The first pitfall I’ll discuss is homestead exemption filing services. Especially first-time homebuyers may know what a homestead exemption is and that it can save them money, but will be under the mistaken notion that getting a homestead exemption is a difficult process. Preying on that notion are homestead exemption filing services that mail offers to file the papers for a homestead exemption on your property for a modest fee of $35 to $100 in most cases. Filing for a homestead exemption is not hard, and paying someone else to do it is a complete waste of money.

First off, let’s discuss what a homestead exemption is. A homestead exemption is simply a portion of the value of your home that is not subject to property tax. The amount that is covered under a homestead exemption will vary based on the rules of the various tax jurisdictions you are subject to (i.e., for us in Texas the county exemption amount is different than the School District exemption amount). You will ultimately pay property tax on the appraised value of your property less the homestead exemption amount.

So how do you file for a homestead exemption? Generally you file a short form, usually to a tax assessor’s office or county appraisal district, on which you provide your name, the location of the property, your contact information, and a certification that the property is your primary residence. For our home in Texas, the form is a single page that took less than five minutes to complete. You can likely find instructions online for filing a homestead exemption by just Google searching the phrase “homestead exemption” and your county’s name. If not, find a phone number for your local tax assessor or appraisal district and they can point you in the right direction.

In the episode, the host Jack Spirko is discussing some of his philosophies about why he believes in this modern survivalism and makes an observation that while we are seemingly taxed at every turn we are making a choice to be subject to these taxes by our actions. We make the choice to buy the useless crap that we buy on which sales tax is collected from us, income taxes are collected on the profits made by the retailer, the manufacturer, and everyone in between, employment taxes are collected from the businesses and employees that made and sold us this crap, fuel taxes are collected from the shipping companies that transported the raw materials to the manufacturer and the finished product to the retailer as well as from us as we burn fuel to go to the store and buy this stuff, and the list goes on and on and on. And then on top of that our inability to stop buying useless junk (and even seemingly useful items we really can’t afford) requires us to work as hard as we can to earn a paycheck, which is subject to income and payroll taxes. Ultimately our consumerist ways continue to enslave us more and more to the government in the form of taxes, giving government even more power to run our lives and make us even more dependent on what the government is willing to provide for us.

But what if more and more Americans realized that what is now promoted as the American dream is nothing more than a giant hamster wheel in which we work for our government for about half the year, and that with certain changes in their lifestyle they can effectively get off the wheel? By eliminating our worship of stuff we would spend less money and pay less sales taxes, as well as eliminating the taxes that were generated as the stuff made its way through the manufacturing, distribution, and retail channels. By spending less money on stuff we become less dependent on traditional income, meaning we can live on a lower level of income which in turn lowers the amount of income taxes we must pay. The key is a return to a more self-sufficient lifestyle like the one our grandparents and those before them lived. We lessen our dependence on the trappings of modern life and save money as we:

• Use our land to build gardens that can produce at least some of our own food.
• Learn to take care of and fix the things we already have instead of just throwing them away and buying new stuff.
• Distinguish between the things that we need and those we merely want.
• Live what many would call a frugal lifestyle, using our resources wisely to build long-term peace and happiness rather than short-term pleasures.

More and more people throughout the world have made the decision to depend on themselves, as is evidenced by the exponential growth of The Survival Podcast and other venues like it. In working towards this more self-sufficient lifestyle, these people are also making the decision to be less dependent on the government whether they realize that or not. The interesting thing from a political perspective is that as these people do more for themselves presumably their activity in the traditional economy lessens, and with it so do the taxes generated by their economic activity. This results in lower government revenues meaning government is either forced to reduce spending or to delay a reduction in spending through enacting even more taxes on those still running in the hamster wheel or by issuing more debt. The government could just issue more debt as it always has, although as the world markets slowly recognize that this debt is becoming less likely to ever be repaid the market for even more debt offerings is limited at best, reducing the likelihood of this being a viable option. In this scenario increased taxes will further disenfranchise those still on the hamster wheel and encourage more of them to make the migration to the self-sufficient lifestyle to escape the ever-growing tax burden, which will ultimately come to a head in a demand from the populus to reduce the size of government as the base of taxpayers shrinks to the point they can’t possibly support the high level of government spending. The result is a taxpayer revolt ultimately leading to a smaller government more in line with the libertarian ideal. Of course the politicians could save us the trouble and just reduce the size of government now, but doing so reduces their power and is thus unlikely. But fret not, as at some point common sense will return.

So there is why I believe that frugal living and self-sufficiency is the fuel for a libertarian revolution. As we make decisions in our lives to become more self-sufficient, use our resources more wisely, and reduce our dependence on the government and others, we demonstrate that we don’t need Big Brother to take care of us and can do just fine if government will just get out of the way.

As can be expected after last year’s big decrease, the appraisal district tried to recoup some of the lost valuation by unreasonably upping the assessment. My assessment went up over 8%, while my immediate neighbors each went down 4.4%. Harris County allows you to file online and request a settlement offer, and I did so with the reasons that the “value of the property was over market value” and “value is unequal compared with other properties” and with the following pithy argument:

The properties adjacent to mine had assessment reduced by 4.4% each, however mine was increased 8.2%, which proves unequal assessment. Subject property is not a magical place shielded from the economic realities of the world around it as the Appraisal District appears to believe. Considering the falling properties values in this neighborhood and across the county, the assessment of this property should be no more than prior year level, if not reduced a similar percentage to adjacent properties.

I submitted my protest with my opinion of property value at around $129,000 (versus their $146,000), and earlier this week got my settlement offer back at around $130,000. The reduction of $16,000 in market value represents a tax savings of about $400, all for about 15 minutes of work in looking up my neighbors’ properties and filling out the form. Plus since I did this myself, I get to keep all the savings!

I’d advise everyone to protest their assessments and do it yourself. You can find some good information in my post on last year’s protest here.

An aerial view from an adjacent building in downtown Houston. I think that is definitely higher than the 2,000 the NY Times reported.

Concerned citizens look on during a speech discussing the actions of the Federal Reserve.

A good crowd – I wonder why no one in the press gave it any real coverage?

One of the best protest signs I saw. If you can’t tell, it is Obama holding a lighter and setting fire to the US Constitution.

The sign in the upper right corner reads, “Republican Leaders: Where are your cajones?!”. But didn’t the press tell us it was the Republican Party promoting these tea parties? I’m confused…

A scroll listing out all of the Congressional earmarks is unfurled. It went from one end of the plaza to the other (the plaza is a full city block) and I’m not sure anyone ever saw the end of it. I hope that poor girl isn’t still rolling it out.

Protesters take their voices down the street to  surround the Houston Chronicle building. Based on the story in the paper this morning, I don’t think the noticed that our group wrapped completely around their offices.

Unless you are watching Fox News or reading some blogs, you may not have even heard about these, so let me give you a quick introduction. Taking cue from CNBC commentator Rick Santelli’s famous “rant heard ‘round the world”, groups of concerned citizens around the country used social networking and the internet to organize modern-day tea parties to protest the current direction our government and our country.

I had never attended a political protest before in my life. For people I talked to in the crowd, most of them never had either. Some were there for a specific reason like the size of government, deficit spending, high taxes, states’ rights infringement, or lack of government accountability. Some were there out of a general discomfort of the actions of our government and elected officials. All of us are sicked and tired of a government and politicians that seem to have no regard for our wishes and whose actions we seemingly have no control or influence over.

Contrary to some media reports, we are not all a bunch of Republican Party operatives. I am just your average 30-year old accountant, working for a living and would almost certainly be classified as middle-class. I have never run for elective office or worked on the campaign of anyone who has. I have never volunteered for any political party or donated money to any party or candidate. Although I am registered to vote as a Republican, I am generally disgusted with both parties and would by no means be considered a party loyalist. In other words, the idea that I am just a tool of the Republican Party is utter crap.

Most of the people there were just average working class folks. I got there about 2 hours into the protest and the plaza was absolutely filled with people. The organizers said on their blog that a total of 8,532 people signed in at their registration table, and there were likely many that didn’t sign in (myself included) that puts their estimate at 10,000. As the rally went on from 4pm under after 8pm, there were likely significantly fewer than that number there at any given time as some early birds left as others just getting off of work arrived. I’d say while I was there there were probably about 5000 people there at any given time. Considering so many people have to work to pay their taxes making it difficult to attend, I think this is a great turnout.

So what did I find interesting about the protest? A few things…

·         When you hear the word protest, you often think of an almost violent affair of unreasonably angry people. That certainly wasn’t the case in Houston. Everyone was incredibly polite, and when the protest was done the discarded signs were all placed in the trash bins so we probably left the plaza cleaner than we found it. This certainly wasn’t an angry, destructive, unruly mob that you would normally associate with a protest.

·         Thankfully there wasn’t a whole lot of representation from the Tin Foil Hat Brigade (conspiracy theorists). Other than one woman who was ranting something about Obama controlling the internet, the closest thing to a fringe position was one guy holding up a sign promoting Texas secession, which in Texas isn’t really a fringe position (heck, even our governor has alluded to the idea in the last week). Not that it is wrong to be suspicious of your government, but spouting off unsubstantiated allegations of the government conspiring against us detracts from the real message and undermines its credibility.

·         I was kind of annoyed by the Fair Tax proponents latching onto the protest. Fair Tax is the concept of replacing the income tax with a national consumption tax. As much as I dislike the current income tax structure, I generally think a consumption tax is a very bad idea, which may be why those people annoyed me.

It was really a great experience, and I would certainly do it again. I will post a few pictures after while.

Before I end this post, let me say a few words about the political nature of many of my recent posts. I realize many of you visit this blog looking for personal finance advice and couldn’t care less about politics. However, what many people don’t realize is that for many middle-class families taxes are your biggest expense. Remember that this includes income taxes, property taxes, social security and medicare taxes, sales taxes, fuel taxes, and many other levies we are forced to pay to support our government. The more our government spends, the more it will likely have to raise taxes to pay for that spending, either now or by issuing debt and shifting the burden to some point in the future. The other alternative is that the government could devalue the currency by putting more dollars into the money supply, leading to high rates of inflation. Either of these scenarios would have deep impacts on the finances of the average family, which is what makes it in my mind a personal finance issue. As I mentioned a few weeks back, there is so much uncertainty in the current environment I have trouble giving traditional personal finance advice just because it seems the rules of the game could change at any moment, making what could seem like a good decision now an absolutely horrible one in the future.  I will work to give personal finance advice that I think could be beneficial no matter what may come, however I will avoid posting advice based on the notion that we live in a static environment and that the rules will be the same in the future as they are today. If you wish to stick your head in the sand and seek out such advice, there are many sources for it online. If you want to hedge your bets a little in case tomorrow isn’t quite what everyone expected, you are in the right spot.

I was initially confused. I haven’t ordered anything I remembered, and my name was on the package so it wasn’t my wife’s. I didn’t recognize the return address. Did the scammer founder of FreeNEzy.com finally track me down and send me a bomb for all of my posts criticizing his business practices? No, that’s even too conspiracy theory for me.

When I opened the box, I found a brand new Neat Receipts mobile scanner, compliments of the fine folks at the Neat Company and our friend Kay at Don’t Mess With Taxes (I love the name, too). Kay had run a drawing on her blog for the scanner and a copy of TurboTax Deluxe. You simply had to email her your mailing address and specify which of the prizes you wanted, and she would randomly draw from all submitted entries. Turns out I was the lucky winner. Yippee!

I had just been talking to one of my coworkers about these things. It is a small portable scanner designed for scanning receipts and business cards, but is wide enough to scan letter and legal size documents as well. I haven’t opened it up yet, but it seems like a great way to organize and save receipts before I lose them or the print fades. As I noted in a prior post, organizing receipts has been an issue for me.

You should certainly check out Kay’s blog if you haven’t already. Don’t Mess With Taxes provides tax-related news and tips in a surprisingly entertaining way. Kay is also the author of a new book, The Truth About Paying Fewer Taxes. Don’t Mess With Taxes is a regular stop in the blogosphere for me, and I can’t wait to see the tax commetary when Texas secedes from the union and is under the leadership of President Chuck Norris! <BIG GRIN>

Anyway, thanks again Kay!

“We live in a free-market economy” – Do we really? The role of government keeps expanding, and the taxes to pay for that expansion are almost inevitable.

“Stocks may be volitale in the short-term, but in the long-term the market always goes up” – This “wisdom” is built on the assumption that we are basically a free-market economy and that the private sector will be relatively unencumbered to operate and create wealth. If the events that are unfolding in the political realm are indeed a fundamental shift in the role of government in our economy, I’m not sure we can consider this to be a certainty.

“It is best to put aside some money for a rainy day” – While I don’t think we should live paycheck-to-paycheck, I am beginning to question whether having excess cash in the bank is a good idea. As our official national debt is already over $10 trillion (and under GAAP would be $65 trillion), it is a very real possibility that the government could “monetize the debt” in an attempt to cover its debt obligations. That basically means that they will just print more money to pay off the debt, which would increase the supply of dollars in the economy leading to runaway inflation, eroding the purchasing power of your savings.

“If you’re money is FDIC insured, you have nothing to worry about” – Considering the recent news that the FDIC is funded at the lowest level in nearly a quarter-century, I don’t think we can take FDIC coverage as a certainty. Especially when they say that they have set aside $22bn to cover expected 2009 bank failures and have an additional $19bn left over. So at this point the FDIC holds $41bn to cover all of the insured deposits in the US? That’s a drop in the bucket! Considering that Bank of America alone had nearly $883 billion in deposits as of year-end and you can see how insignificant the insurance fund amount really is.

“If I invest in a Roth IRA or 401(k), I won’t have to pay taxes on the earnings since I put in after-tax dollars” – OK, I’ve actually questioned this one for a while (see my original post on this subject from July 2007), and my point is still the same: why are we so certain that just because the government currently allows tax-free withdrawals from these accounts in retirement that this will continue to be the case in the future? As the government grows more hungry for tax dollars, the money in Roth accounts represents an easy and ample target.

There are many other pieces of “convention wisdom” that are now called into question, but these are the biggest in my mind. This doesn’t mean that I am cutting myself off from the financial system and buying gold with all my excess cash, but I am looking to hedge my bets. My thought process is that whether my gut is completely right or completely wrong, I want my family to be in as good of shape as possible.

So going forward you will see fewer posts on investing and financial planning topics on this blog, as most of those post would be based on this same conventional wisdom that I am now questioning. Likewise, I would encourage anyone reading this blog and prior posts on these topics to read with a critical and slightly distrustful eye. Future posts will likely focus more on making your money go farther and things that can help you in the short-term.

Yet another example of our government rewarding bad behavior. While Houston Police are so underfunded they cannot respond to an active alarm call until 45 minutes later, our brilliant mayor wants to give away money to let deadbeats pay off delinquent debts so they can get a mortgage that they’ll probably default on as well. Yet another reason I’m glad I aggressively fought my property tax appraisal so I would give as little to this useless government as possible.

Thankfully word of this program got picked up on the Drudge Report and mentioned on Rush Limbaugh, leading to a deludge of calls to Houston City Hall and the announcement that the program has been pulled from consideration. Not to worry though, as I’m sure they’ll find some other way to waste our money. 

Here’s the rundown: losses on a 529 are deductible to the extent they exceed 2% of your adjusted gross income. To be able to claim the loss, you would have to close all of your 529 accounts (the IRS views all of the accounts of a particular type as being one even though they may be held with different institutions) and withdraw the money and not reinvest it for at least 61 days.

Example: a married couple with an AGI of $100,000 has a $30,000 loss on their 529. $28,000 of that would be deductible ($30k less $100k*2%), resulting in a tax savings of $7,000 assuming a 25% marginal tax rate.

The idea works because 529s are funded with after-tax dollars (unlike 401ks and IRAs), and taxes and penalties only apply to withdrawals of EARNINGS not used for qualified purposes. If your account has taken a loss, there should be no earnings to tax. Because the contributions were previously taxed, you are allowed to deduct the loss on those contributions if they are realized.

Of course if you live in a state where you can deduct contributions from your state income tax return, this becomes a lot more complicated and you should consult a good accountant. You should also consult an accountant if you may be subject to the alternative minimum tax, as this would not qualify as an AMT deduction.