Live Debt Free

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Free TurboTax – Free Returns, Free eFile, and Free Tax Help

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TurboTax – limited free offers

As I mentioned the other day, I have been using TurboTax Online to file my taxes for years and have always been very happy with it.  I gave you my opinion of the software so you could use the info to move forward with your own taxes… I hope it helps out.

Today I wanted to offer DFA readers more tax help by addressing three specific areas of interest:

  1. TurboTax – Free returns

  2. TurboTax – Free efile

  3. TurboTax – Free tax help

Regardless of your situation you will be able to take advantage of some of the free offers from TurboTax this year so make sure you know what you can get and what you cannot.

Does TurboTax offer free returns?

Yes – as long as you use TurboTax Online and only require a 1040EZ form then you can file your federal return for free.  The state is not free.  If your return is too complex for the 1040EZ then you will have to pay according to the following levels (filing a state return is always optional):

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Does TurboTax offer free efile?

Yes – as long as you use TurboTax Online you can file both your state and federal returns free of charge.

Here are the details of what you can efile for free and what you have to pay for when using TurboTax:

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Does TurboTax offer free tax help?

Yes. Actually they offer quite a well of free tax knowledge… a lot of which I refer to quite often to answer questions of my own.  🙂

Here are a few great topics I have found helpful in the past that I’m sure many others will be able to use:

  • Tax Preparation Checklist – Before you prepare your 2009 income tax return, go through the following checklist. Not every category will apply to you, so just pick those that do, and make sure you have that information available. When you’re ready to prepare your tax return using TurboTax software, you’ll be surprised at how much time you’ll save by organizing your information beforehand.
  • 2009 Stimulus Package: What’s In It For You — and When – There’s good news ahead for most taxpayers. On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act into law — an economic stimulus bill that gives tax breaks to a large portion of Americans of all ages and income levels, as well as to businesses.
  • A Stimulus Boost for Some Earned Income Tax Filers – Two recent changes to the Earned Income Tax Credit (EITC) may put more money in your pocket in 2009 and in 2010 if you are married, or if you have three or more qualifying children.
  • The 11 Most Overlooked Tax Deductions – Don’t overpay taxes by overlooking tax deductions. See the most common errors taxpayers make on their tax returns, so you don’t make the same mistakes.
  • Top 10 Oddball Tax Deductions – TurboTax helps you find every deduction and credit you deserve to help you get your maximum tax refund. But just for fun, we’ve uncovered what we think are the weirdest deductions allowed, from pet food to free beer to (we’re not kidding) a girlfriend.

Quick returns quick refunds

If you have an income tax refund due you this year be sure to get your return filed as soon as possible.  The sooner you get your return filed the sooner you will get your refund.

Make sure you use the refund wisely.  Here are a few ideas:  debt reduction, emergency fund savings, other liquid savings, retirement savings, or if you have already funded each of those… go on vacation with your return.  Whatever you do, just make sure you are responsible so you can continue to set yourself up to win financially!

Help Paying Student Loans

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DFA reader Carrie asked

I believe I am eligible for loan forgiveness… but what do I do about monthly payments? The “consultant” at Direct Loans told me that if we file separately on our taxes, my payments will be under $300 per month – otherwise, they could be much more. What are the costs and benefits of filing separately versus jointly? Anything we can do in 2011 to make one or the other more beneficial?

I am married, and my husband and I are 30 years old. We have a two year-old son and just bought our first home in April, 2009. Fair credit scores (in the mid-600’s). I have deferred student loan payments since graduating (in 2007) with my doctorate – an academic adventure that allowed me to rack up about $95,000 in student loans. Payments are coming due – for real – in March, 2011. I landed a job this year teaching at a local community college (public), plus I teach some adjunct classes on-line. I make about $45,000-50,000 a year, and my husband makes around $40,000. He has no student loan debt.

My answer

Hi Carrie, God bless you and your family.  I understand your burden of student loan and mortgage debt, and my heart goes out to you because of it.  Hang in there, focus on living a mission-centered life, and God will be with you.

Can you afford the monthly payments?  Other than your student loan and mortgage debt, what other debt do you have?  If you are making a combined $85,000 we should be able to help you figure a way to afford the $300 student loan payment.

Do you have credit cards?  Cancel them and pay them off before your deferment ends.

Do you pay for cable or satellite TV?  Cancel it.

Do you operate your finances using a budget?  If not, then download this budget spreadsheet and get started.

Read this post on additional ways to save money fast.

If you use these strategies you can save money and make your payments.

As for how you should file?  That depends on the full details of your situation.  After searching around a bit, I was able to find 3 articles that should help you figure out your answer.  In reading them, you may lean toward filing jointly if your son frequently attended day care, if you file separately you lose eligibility.  You also lose the ability to claim student loan interest if you file separately, but it looks like you may not have paid any yet, since your loans are deferred.

Here are three links I found giving some pros and cons of married filing separately.  Please read them and feel free to ask more questions in the comments section of this post.  I will do my best to help answer, and so will the DFA Missionaries and community.  Also, your situation will help others who are searching for similar answers way into the future, so thank you for your question.

If you can offer more advice to Carrie, please leave a comment.  God bless.

Debt Plan – Facing Bankruptcy & Foreclosure

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Have a question of your own?  Ask Matt Jabs for free!  🙂

Should Julianna let her homes go into foreclosure?

DFA Reader Julianna asked:

We are guilt-ridden and full of shame that we have allowed ourselves to get caught up in this lethal debt trap.  Unwise use of credit cards when income diminished due to income drop.  This month we had $1900 income with $7K in debt payments:

$300K unsecured debt, 2 mortgages (one rented) while waiting to sell, 2 auto loans $5K remaining on one and $20K on the other; $24K student loans.  Income drastically reduced due to medical crisis for me; husband employed in real estate, 100% commission based.  RE market is dreadful here.

Against our better judgment, met with bankruptcy attorney and were advised we make too much money to file.  He said only way is to let both homes get foreclosed, give up one vehicle, and find a rental house $700/mo (IRS allowable guideline) As strong Christians, we do not believe bankruptcy is the way.  We want to pay our debts, and have now contacted Consumer Credit.  The repayment plan would reduce interest rates and lock fees, but we aren’t certain if we can meet the minimum payments.  I’m scared of being homeless!  I’ve been reading everything I can — and realize we need an emergency fund right away — but with what?  We are in survival mode.  Please pray for us and give any advice God lays on your heart.  Thank you in advance.  God bless.

Debt and shame

This is an extraordinarily difficult situation, but there is hope.  Release your feelings of guilt and shame.  They will not help you; a firm commitment to paying back what you borrowed will.  That being said, the task ahead of you is neither small nor easy.  You will need to live far below your means in payment for living above.  The process will be all the harder if well intentioned people foolishly say you “deserve to live a little.”  Ignore them, and continue to do what you know is right… and you can do this.

Although this situation is difficult, the way out is no secret.  The principles of sound financial management are the same no matter what amount you are working with:

  • Spend less than you earn and save the surplus.

Here is my recommendation for how to deal with your situation.

Create a Written Budget

This MUST be your first step, your budget is your map.  Without a written budget, it is impossible to know what you have or where you are going.  This is especially crucial because of the variable nature of your husband’s income.  To calculate your monthly income, use his net income from last year (be conservative) and divide by 12.  Never spend more than that in a month, even when you have more.  When creating your budget, follow this simple rule:

  • Give 10% – Save 10% – Live on 80%

Realize that somewhere out there a family is living off 80% of your income.  It is important, as a Christian, that you not neglect your giving when in financial difficulty.  The 10% you save will be used to start building a $1,000 emergency fund (a larger cash reserve only makes your creditors more likely to sue for payment.)  With every check that comes in, before you do anything else, write a check for 10% for giving, and place 10% into a savings account.  When setting up the rest of your budget, eliminate every monthly bill you can: cable, magazines, cell plans etc.  Small bills add up.  Assess the difference between wants and needs and get down to the basics of food, transportation for employment, and shelter.  The excess will go towards freedom from debt.

Debt Reduction

Once your budget is in place, you need to eliminate all the debt you can.  First step is to cut up all the cards.  This prevents you from going deeper into debt slavery.  Next, eliminate as many debts as possible.  Return anything you still can that was bought with credit.  Those that you cannot return try to sell for enough to pay it off.  Try Craig’sList, a garage sale, and friends/church/family.  Finally, do not limit yourself to things you still owe on.  Anything of value you can do without should be sold.  Your goal is to reduce the amount of debt you will have to pay off with earned income.

Downsize Your Vehicles

The car you still owe $20,000 on needs to go.  Try to sell it for enough to eliminate the debt, and adjust your lifestyle to having one vehicle.  The one you owe $5,000 on is another matter.  If you can sell it for enough to cover the debt, you should, but you may already owe twice as much as it is still worth.  If this is the case, make paying off the vehicle your priority.  If your husband’s job allows, consider going car-less for some time and using bicycles or public transportation.

Evaluate Your Housing Situation

You say you have one house rented pending sale.  I hope that it will sell soon.  Add up the total ownership cost of your current home (mortgage, PMI, insurance, utilities, maintenance, etc.).  If the total is more than 35% of your husband’s net income, or more than 40% of gross, the house is more than can be afforded.  Place the home on the market, and begin the search for an apartment that meets the above guidelines.  It may be smaller, but you will feel better knowing that all the bills can be paid.

Final Details

Remember when paying your bills to take care of the important stuff first.  Give, save, pay for your housing, buy food, and spend the money needed to keep your husband working.  Do not spend the money for these things on unsecured debts.  If you are late paying an unsecured debt, the worst-case scenario is a line on your credit report.  That is ok as long as you have a place to live.  Meet your needs, and as you are able, begin paying on the highest interest debt first.  If a consumer credit agency can work out a payment plan, that is a good option.  Stay focused, stay the course, and one day sooner than you think, you can be debt-free without having to go through bankruptcy.

Do you have any advice for Julianna?

Have something to add?  Please share your wisdom and experience and help point Julianna in the right direction.  Thanks!

Have a question of your own?  Ask Matt Jabs for free!  :)

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