Most of us don’t think about that, but those taxes may tap into our wallets nonetheless. Here are just a few.

1.  Sales Tax - Unless you live in a state that has no sales tax, you pay this one every day on most of the things you buy. Even goods purchased online are increasingly subject to sales tax.

2.  Sin Tax – Oh wow, there’s a tax on sinners? Well, sort of. The two major taxes dubbed “sin taxes” are alcohol tax and cigarette tax. Every time you take a drink or light up, you are paying a tax that is hidden in the cost of the cigarettes and alcohol you buy. The tax is meant to deter people from indulging in these habits and to help the government pay for the cost of illnesses caused by smoking and alcoholism.

3.  Social Security Tax and Medicare Tax - If you are employed, these taxes are taken out of each of your paycheck, so most people don’t really notice them. If you’re self-employed, these taxes show up on your tax return as self-employment tax.

4.  Telephone Tax -  Did you ever have to pay a luxury tax when you played Monopoly ? The telephone tax is one of those taxes, though telephones have now become a necessity, not a luxury. Originally imposed on landline telephones, it now applies to cell phones as well. And if you have cable television, you’ll find special taxes on your cable bill as well.

5.  Gas Tax - As if gasoline prices weren’t high enough on their own, the state and federal government build in an average of 49 cents per gallon into the price of each gallon. Next time you are filling up, check out the sticker on the pump that lists what makes up the cost of each gallon – you’ll be amazed.

6.  Utility Tax - Check your utility bills for various taxes imposed on gas, water and electricity. That will make you remember to turn out the lights each time you leave the room.

Knowing about these taxes may help you take control of your spending habits and cut down some of your expenses to reduce some of these unknown taxes.

Tax Deductions and Exemptions-  The tax law provides a standard deduction for those who don’t claim itemized deductions. For 2013 the standard deduction increases to $6,100 ($12,200 for married filing jointly), up from $5,950 ($11,900 for married couples) in 2012.

The personal exemption rose as well, to $3,900 in 2013, up from $3,800 in 2012.  There is a limitation on the itemized deductions and personal exemptions for taxpayers with incomes of $250,000 or more ($300,000 for married couples filing jointly).

The maximum Earned Income Tax Credit is also up: in 2013 a couple filing jointly with three or more children can nab a credit as high as $6,044, up from $5,891 in 2012.

Tax Rates-  As inflation drives wages up, the amount of wages taxed may be less. In tax year 2013, for each of the marginal tax rates - 10, 15, 25, 28, 33 and 35 percent – you will continue to see a reduction in the amount you’re taxed since income limits taxed at lower tax rates were increased.  In 2013 individuals were also given a tax break because Alternative Minimum Tax income limits increased allowing less taxpayers to be subject to this additional tax.  Income above $51,900 ($80,800, for married couples filing jointly) may be subject to the Alternative Minimum Tax, up from $50,600 ($78,750 for married couples filing jointly) in 2013.

There are some changes for high-income taxpayers in 2013. A new tax rate of 39.6 percent has been added for taxpayers whose income exceeds $400,000 ($450,000 if married filing jointly).

Gifts – Gifts you give over a certain amount must be disclosed to the IRS by filing a gift tax return. For years, gifts under $10,000 were exempt, and that’s the amount many people remember. But in actuality the exclusion amount has been going up for a number of years. In 2009 through 2012 it was $13,000, but beginning in 2013 you can gift anyone up to $14,000 a year without filing a gift tax return.

Retirement plans -  If you contribute to a 401(k) or other voluntary salary reduction plan such as a 403(b) or a TSA, in 2013 you’ll be able to contribute up to $17,500 to the plan, up from $17,000 in 2012. If you are 50 or older you can contribute an additional $5,500, for a total contribution of $23,000.

If you are self-employed and have a SEP IRA, for 2013 you can sock away 25% of your gross income, up to $51,000 of retirement contributions. That’s $1000 more than last year.

IRA contributions are also on the rise. You can contribute up to $5,500 a year to your IRA (that was $5,000 last year), plus an extra $1000 if you are at least 50. To contribute the full amount to a Roth IRA, your income  must be $188,000 or less if you are married filing jointly ($127,000 for singles), up from $183,000 in 2012.

Remembering these IRS inflation adjustments will help you plan throughout the year and save at tax time.

Ignoring the IRS won’t make them go away. The IRS can assess a penalty if you fail to file, fail to pay or both. Since the penalty for failing to file is usually greater than the penalty for failure to pay, here’s my number one tip for you: file your tax return by April 15, even if you can’t pay the tax. At least that way you aren’t doubling up on penalties you face.

Here are some more facts you should know about possible IRS penalties.

Filing late can increase the amount you owe by 25%. The penalty for filing late is usually 5% of the unpaid taxes for each month your return is late. This penalty will not exceed 25% of your unpaid taxes. This penalty is imposed even if your return is just one day late. So if you file on April 16 rather than April 15, you’ll owe 5% more than you would otherwise.

Even if you don’t owe tax, there’s still a penalty for filing late. If you file your return more than 60 days after the due date, you’ll have to pay the minimum penalty, which is the smaller of $135 or 100% of the unpaid tax. That means you’ll owe the IRS $135 for filing late, even if you don’t owe tax or expect to get a refund.

 Paying late is costly as well. Not paying your taxes by the due date will garner you a failure-to-pay penalty of ½ of 1% of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25% of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5% failure-to-file penalty is reduced by the failure-to-pay penalty. So let’s see, that means that for the first five months you are delinquent, you’ll owe 25%.

Filing an extension may help. If you file for an extension to file until October 15, and you paid at least 90% of your tax by April 15, you won’t have to pay a penalty for failure to pay the remaining balance, as long as your taxes are paid in full by the extended due date.

Tell the IRS why you are late. If you have a really good excuse for why you couldn’t file or pay by April 15, you may not have to face a failure-to-file or failure-to-pay penalty. So if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect, let the IRS know.

So Even if you can’t pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options.

Dependency exemption. In 2012, you can claim a personal exemption deduction of $3,800 for each child and other dependent, and for 2013 that increases to $3,900. Those exemptions reduce the portion of your income that is subject to federal tax. If you are in the 15% bracket this will save you $570 for 2012, and at 25%, $950 in 2012. The higher your tax bracket, the more each dependency exemption saves you.

Child Tax Credit. You may also be eligible for a tax credit, which is even better than a deduction, since it reduces your taxes dollar for dollar. The Child Tax Credit is an additional $1,000 credit you may be able to claim for children under 17. For married couples with income over $110,000 or $75,000 for a single parent, the credit phases out.

Child and Dependent Care Credit.  Child care is expensive, but Uncle Sam can help you out with the cost. If you are working or actively seeking work and you pay child care for your dependent who is under age 13, you can claim the Child and Dependent Care Credit.

This credit is a dollar for dollar reduction of your taxes, based on your child care expenses up to 35% of $3,000 for one child or $6,000 for two or more children. The credit ranges from 20 to 35 percent of your child-care expenses, depending on your income.  Nursery school, private kindergarten, after school programs and day care are all qualifying expenses.

Earned Income Tax Credit. There’s a special credit available if your wages and self-employment income fall below a certain level. How much you can earn and qualify for the credit depends on how many dependent children you have.

For 2012, if you have three or more children, you can earn up to $45,060 and qualify. With just two children, that drops to $41,952. Only one child, your earnings and adjusted gross income can’t top $36,920. The refundable tax credit you can receive ranges from a maximum of $5,891 if you have three children, to $475 if you have no children. Unlike other tax credits, the earned income credit is refundable, so if the credit is greater than the tax you owe, the IRS will send you the difference.

So next time the kids are driving you crazy, remember the tax savings and give them a big hug instead.

Don’t forget that TurboTax will help you get all of the tax credits and deductions you’re eligible for so you keep all of your hard-earned money.

But those tax breaks don’t do much good if they aren’t taken. Here are 6 of some of the commonly missed tax benefits:

1.  Travel expense for reservists. If you are in the National Guard or military reserve, you may be able to deduct your travel expenses. If you travel more than 100 miles from home and are away overnight, you can deduct your lodging, half of the cost of meals, plus 55.5 cents per mile (56.5 cents per mile in 2013), plus toll fees and parking.

2.  ROTC payments. If you are a student in the ROTC, you don’t have to pay tax on the allowance that you receive for your participation in advanced training.  This rule doesn’t apply to any active duty pay that you receive.

3.  Combat pay. The pay you receive for any month that you serve in a combat zone is not taxable to you. If you a military officer your tax-free pay may be subject to a cap. But even though your combat pay isn’t taxable, don’t overlook it. You can take that pay into account to qualify for the Earned Income Tax Credit.

4.  Military uniforms. The cost of military uniforms, including their cleaning and upkeep, are deductible. They must be uniforms that you are prohibited from wearing when off duty, and your deduction is reduced by any uniform allowance that you receive.

5.  Moving expenses. If you are on active duty and have moving expenses in connection with a permanent change of station, those moving expenses are deductible, if they are not reimbursed to you. You may also qualify for a moving expense deduction once you are out of the military, if your move is related to the start of a new job in a new location. The requirements are confusing, but TurboTax Military Edition will walk you through the process to determine if you qualify.  If you have additional questions, you can ask TurboTax tax experts who are CPAs, IRS Enrolled Agents, and tax attorneys.

6.  Filing your tax return. If you are serving in a combat zone during tax filing season, you have at least 180 days beyond the traditional April 15 deadline to file your tax return. If you are hospitalized because of injuries you sustained in a combat zone, similar extensions of time to file apply.

If you are serving overseas in a non-combat zone, the April 15 deadline is automatically extended to June 15 (June 17 for this filing year, since June 15 falls on a Saturday). If you are a civilian serving in a combat zone, the same rules apply, but you need to write the words “Combat Zone” and your deployment date in red across the top of your tax return. Military members do not have to make this notation on their tax return. And if you are serving in the military and so are not available to sign a joint return, your spouse can sign it under a power of attorney.

Are you expecting a tax refund this year? If you are eligible for the Earned Income Tax Credit, one might be coming your way. Though the refunds are greater if you have children, even those without children can qualify, as long as you or your spouse (if married filing jointly) are between the ages of 25 and 65.

The problem for most people trying to claim the credit is that the rules seem complicated, but using TurboTax makes it simple. In addition to TurboTax software making it easy to claim the credit,  Intuit, maker of TurboTax also has the EITC Finder, which is a free smartphone app that makes determining eligibility easy.

Here are the rules for claiming the tax credit:

Your wages and self-employment earnings are the basis for the credit. You also can have interest, dividends and other investment earnings, but not more than $3,200 in 2012. For most of us, with interest rates at rock bottom, that isn’t a problem.

How much you can earn and qualify for the tax credit may depend on how many dependent children you have.

For 2012 if you have:

• Three or more children, you can earn up to $45,060 and qualify
• Two children, that drops to $41,952
• Only one child, your earnings and adjusted gross income can’t top $36,920
• No children? No problem, as long as your income is less than $13,980.

The refundable tax credit can give you tax credits ranging from a maximum of $5,891 if you have three children, to $475 if you have no children.

Here’s the best part: Most tax credits only apply against taxes you owe. If your tax is zero, you get no benefit. But if the earned income credit is greater than the tax you owe, the IRS will send you the difference. For example, if your credit is $1,200 and you owe $800 in taxes, you’ll get a check from the IRS for $400. How sweet is that?

Now for the fine print: If you are married but file separate returns as “married filing separately” you don’t qualify for the earned income credit. And if you share custody and your child has lived in your household for more than half the year, that child can qualify you for the credit even if the other parent is entitled to claim the exemption for the child on their tax return.

If you are eligible for the federal tax credit and you live in one of the 25 states that also has the credit, your benefits may be multiplied. And even if you normally make too much to qualify for the credit, if you lost your job and were out of work in 2012, you may still qualify for that year.

Remember if you have any questions about this tax law, you can call and ask our CPAs, tax attorneys, or IRS enrolled agents your question for free.

       1.  Holiday decorations, flowers and food. If you throw a big extravaganza holiday party with elaborate ornaments and decorations, you’ll likely have food left over after the guests leave. Take the leftover food, flowers and reusable decorations to a homeless shelter, women’s center or similar non-profit organization.  Not only will you have done a good deed, but with a receipt, you’ll be able to take a tax deduction on this year’s tax return for the value of the items donated.

       2.  That special holiday dress. If you bought a dress to wear at a special holiday event, after it’s over consider donating your clothing to a non-profit organization such as Goodwill or a homeless shelter. Or you can sell your special dress on eBay, Craigslist or through a consignment shop, and donate the proceeds to charity.

       3.  Toys.  Many local charities have toy drives this time of year, to obtain gifts to give to children in need. Keep your ears open and drop off the items at the designated spot, or seek out the U.S. Marine Corps Reserve Toys for Tots Program (www.toysfortots.com), or ask for information at your local toy retailer.

       4.  Donate canned and boxed food. If you have boxed or canned food that is languishing in your pantry, each December toss the cans, bottles and boxes into a paper bag and take the bag to the drop-off point at your local grocery store. You’ll be helping a family in need and cleaning out your pantry, all at the same time.

        5.  Clean out your closets and donate to charity the old clothes, sporting goods, books, and other household goods that you no longer use. You will welcome the New Year with new space in your life, and get a quick tax deduction to boot. Document these donations by making a list of the items at the time you donate them. And don’t forget to include those holiday gifts from seasons past that you didn’t use and pushed to the back of the closet.

        6.  Take a tax deduction if you can. To garner a tax deduction for donations the property donated needs to be in usable condition, and establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use TurboTax ItsDeductible to determine the value for most household items.  You’ll also need a signed receipt that proves you made the donation.

Military members and families, we salute you this Veterans Day. So does Uncle Sam, by providing some well-deserved tax breaks. Though as a general rule all income is taxable, if you serve in the military some of your income is excluded from taxation, due to special rules just for you.

Military benefits

Combat pay

If you serve in a combat zone for any part of a month, your income for that month is exempt from federal taxes.

Use that tax break to maximum benefit by taking the money you would have spent on taxes and using it for contributions to an Individual Retirement Account (IRA). Since your IRA can grow tax deferred until you withdraw the money, that will really give you a leg up on creating a secure future retirement.

Want to make it even better? Since you won’t need a tax deduction for the contribution, consider putting the money into a Roth IRA instead of a traditional IRA, and you’ll never have to pay tax on the earnings. You can make a 2012 IRA contribution and a spousal IRA contribution until the April 15, 2013 tax filing deadline, plus any applicable extensions.

Your can also increase your contributions to your federal Thrift Savings Plan. For any period you are serving in a combat zone, you may invest as much as $50,000 rather than the normal $17,000 limitation.

Other pay

If you receive uniforms or a uniform allowance, that isn’t taxable income to you. Neither are moving and storage expenses provided by the government, legal assistance, commissary discounts, professional education, survivor benefit and life insurance premiums, and basic allowances for housing and assistance.

Travel allowances are not taxable, either, including transportation for you and your family during ship inactivation, per diem travel allowances, leave between overseas tours, space-available travel on government aircraft, and round trip travel for dependent students.

Medical and dependent benefits provided by the military aren’t taxable, including medical and dental care and dependent-care assistance program coverage.

You can also exclude reenlistment bonuses, pay for accrued leave and student loan repayments.

Special benefits for reservists

If you are a military reservist, you can take early withdrawals from IRA and 401(k) accounts without penalty if you meet certain conditions. To qualify for this exemption, you must have been called to active duty after Sept. 11, 2001 for more than 179 days, and you must make the withdrawal while you are on active duty.

If you are a member of the reserves, you can deduct your unreimbursed travel expenses in connection with your service as an adjustment to income and you don’t have to itemize your deductions, as long as the travel was more than 100 miles from home.

Reservists  who are prohibited from wearing certain uniforms when off duty can deduct the cost to buy and maintain those uniforms, reduced by any uniform allowance or reimbursement received.

Extension of Filing Deadlines for Those Serving in Combat Zones

Members of the military serving in combat zones get an automatic 180-day extension from the IRS for filing tax returns, paying taxes and filing refund claims. The automatic extension also applies to making qualified contributions to an IRA.

If you are serving away from home, your spouse can use a power of attorney to file a joint return on your behalf.

Hopefully these tax tips will help you understand the additional tax benefits available to you and if you need help or have questions TurboTax has CPAs to help answer your questions year-round.

Election

We all know that donations to charities are deductible. But if you contributed to a candidate or political party or a PAC (Political Action Committee), is your contribution deductible? In a word, NO. Political contributions aren’t deductible even if you are running for office and spending money on your own political race.

You’ll find the official word from the IRS in IRS Publication 529 [Miscellaneous Deductions]: “You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.”

There aren’t many ways to get around these rules. Lobbying expenses you incur trying to influence legislation or political campaigns aren’t deductible. Costs of mailers that you pay directly don’t pass muster. Fundraising dinners and events don’t qualify for tax deduction. And contributions to organizations whose primary purpose is influencing legislation won’t be deductible either.

About the only way to fund a political campaign with funds on which you haven’t paid taxes is to check the box on your tax return that asks if you want to donate $3 to the Presidential Election Campaign Fund. The funds raised are distributed to the two parties and their two presidential candidates during the months leading up to each presidential election. If you decide to make this donation it won’t affect your tax liability or refund.
If you truly want to use your time and influence to make a difference, here’s my best advice: VOTE!

Teacher’s Educator Expense Deduction

As you gather together your paperwork for 2011, don’t forget the educator expense tax deduction. It’s available to teachers, instructors, counselors, principals and aides for grades K-12 who work at least 900 hours during the school year. (Parents who home school their children are out of luck, since the costs for home schooling aren’t eligible for this deduction.)

If you qualify, you can claim up to $250 of your out-of-pocket expenses for classroom supplies, materials, books, computer equipment, software, other equipment, and supplementary materials, as long as you didn’t receive reimbursement. You don’t have to itemize your deductions either.

If you and your spouse are both teachers, you can double up and each claim the deduction for a combined deduction of $500. Of course, you can’t each claim a deduction for the same costs, so be sure to split the purchases between you for maximum tax savings.

Now for the fine print, which affects just a few people:

• If you teach courses in health and physical education, your expenses for those courses must be related to athletics.
• The educator expenses have to exceed any interest on US savings bonds that were used to pay education expenses and excluded from income.
• The expenses must exceed any tax-free distributions from a 529 plan or other tuition program that you excluded from income, including any tax-free withdrawals from your Coverdell Education Savings Account.

Congress decided a few years ago to give teachers a break temporarily. Though Congress extended the deduction each time it was set to expire, it wasn’t extended this year, so as things stand now there is no educator deduction for 2012. But it wouldn’t hurt to hang onto your receipts for 2012 just in case Congress acts to reinstate it later this year.

Things that are outdated or faded and limp or that no longer fit? Don’t pack them away for next spring, give them to charity now. That way someone else will enjoy them and you’ll get a big fat tax deduction for 2012.

Get Organized

The limits for how much you can donate to charity don’t affect many of us. The deduction is limited to 50% of your income, and donations of property to certain organizations, such as veterans’ organizations, fraternal societies, nonprofit cemeteries, and certain private non-operating foundations, or to be used by an organization, are limited to 30% of your income. Unless the stuff in your closets is really, really valuable, those limitations probably won’t impact you.

To get a tax deduction for donations, you must itemize your deductions. That means your eligible tax deductions, must exceed the IRS standard deduction (in 2012, $5,950 if you are single, $11,900 if married, and $8,700 if head of household).

This could be a plus since you have a way to increase your tax deductions greater than the standard deduction and get a bigger tax refund by donating to charity.

To take a deduction for property donated, it must be in usable condition, and you must establish its fair value. For most clothing and household goods, that’s the thrift shop value. You can use TurboTax ItsDeductible to determine the value for most household items.  You’ll also need a signed receipt that proves you made the donation.

Maybe you, like me, are in need of a new car. With interest rates at historic lows and auto dealerships anxious to make a sale, the fall is an ideal time to shop. If the dealer won’t give you much for your car, consider donating it to charity.

Your deduction is limited to the amount that the charity gets when it sells the vehicle, but you will still be able to increase your tax deductions and your tax refund through giving.

Olympics

Olympians seek knowledge. They want to know more about their sport, their competition and themselves, and how they can achieve their personal best. And so should you. Take the time to educate yourself about your money. Read articles and books on managing your money, investments and career success. Attend community college seminars or courses on personal finance. No matter what your level, you can learn to be a better manager of your financial life.

Olympians practice discipline. Olympic training can be repetitive and boring, but champion athletes know it is crucial. The same is true of finances, which are a necessary part of life, boring or not. Do you always feel like working out at the gym? How about doing your taxes each year? The trick is to create an automatic plan to keep you on track.  Pay your bills online on a certain day each week, regularly invest a certain amount in your savings and retirement accounts, and don’t sweat the small stuff.

Olympians aren’t afraid of hard work. How do you get to the Olympics? Train, train, train, then train some more. To apply Olympic skills to your finances, spend some time each day working on your finances. If you dedicate just 15 minutes a day to some aspect of your finances, in the course of a year you will have spent more than two full workweeks improving your financial picture. You will see real progress, and let’s face it, you can do anything for fifteen minutes!

Olympians take necessary risks. As diver Greg Louganis said, “You don’t win gold medals by playing it safe.” There is no such thing as an absolutely sure thing. If you don’t take any risks, you may never be able to achieve the gains you need to fund your short-term goals, your children’s education, or your retirement. If you have had bad investment experiences, try to overcome your fears by figuring out what went wrong and why. Research how other people have succeeded, and take your best shot. If you fail, decide what went wrong and try again.

Olympians pursue perfection. After Gymnast Nadia Comaneci scored a perfect 10 at the 1976 Summer Olympics, she told the press, “I can do better.” Olympians know they will never achieve perfection, but they enjoy the quest and aren’t discouraged by setbacks. That’s important in personal finance. Every successful investor suffers occasional setbacks and losses. The secret to investment success is to win big and lose small. Remember, there are a wide range of right decisions and only a narrow band of decisions that are decidedly wrong. You don’t need to pick the exact right investment, you just need to avoid those that don’t suit your financial needs.

Olympians stay focused. Olympic athletes stay focused on results, motivating themselves to “keep on keepin’ on” by setting clear objectives for each workout. Consistent effort pays off in finances as well. If you tend to procrastinate, grit your teeth and force yourself to face a small financial task you have been putting off, such as organizing your records, reading your employee benefits package, or preparing a budget. Just do it. Next week, do a little more. As you practice, it will become easier to do the hard stuff  so you can truly enjoy the your future without financial worries.

Olympians believe in themselves. They embrace their attributes and abilities rather than dwelling on shortcomings. As swimmer Dara Torres aged, she didn’t become discouraged. In her career she won twelve Olympic medals, many of them as the oldest member of the team, and at 45 she narrowly missed becoming a member of the 2012 US Olympic team. When it comes to money, it’s easy to fall into the trap of self-pity for what you don’t have, but it’s far more rewarding to believe in yourself and your goals. Show your self-confidence by paying yourself first and investing in your future.

Olympians embrace healthy living. They know that the healthier they are, the healthier their life will be, physically, spiritually and financially. Living a healthy financial life means not running up bills and creating lots of debt. To feel good about yourself, you don’t need to give money away that you can’t afford, or invest in risky schemes that you don’t understand. You can prudently save for your future and invest in yourself. Live within your means and give yourself the gift of peace of mind.

Olympians seek success. Instead of worrying about whether they have what it takes, they get busy! If you spend your time worrying about failure, you avoid success and become stuck in fear. Jot down the successes you have already had, no matter how small, and begin to build on them.

Olympians believe in their future. Though athletes train in the present, their focus stays on the future. If you are unable to face the future and live from day to day, you aren’t building a financial foundation for yourself.  To begin your journey toward financial independence, establish some short-term financial goals, such as contributing an additional $50 to your company retirement plan or paying for your next vacation with savings instead of credit. These small goals can inspire you to get started on your future in a big way.

Olympic athletes are amazing, that’s for sure. But they aren’t super men and women, they are people who have honed their natural abilities and strengths.  We are all amazing in our own ways. Apply these Olympic traits to your finances and you will strengthen your financial future. You’ll be glad you did.

Enjoy the Summer Games!

sales tax holiday

The first sales tax holiday was in New York in January 1997, to boost sales during the after-holidays retail slump. Now seventeen states are offering sales tax holidays, though New York is no longer doing so.

The sales tax holiday is usually three days, from Friday through Sunday, during a major shopping period such as just before school starts. The holiday applies to selected items, such as clothing and school supplies, and is often restricted by price, for example, clothing up to $100.

If you want to take a vacation from sales tax this summer, consult the list below to see when one is offered in your state, and then head for the air-conditioned mall to beat the summer heat and take advantage of the savings.

Happy shopping!

Military Family

Though freedom is always being tested, the faith of our fathers endures, thanks to our military personnel. Whatever George Washington said to his freezing, starving troops at Valley Forge convinced them to fight on. Today Washington’s statue looks down on Wall Street, and he is probably still saying, “Hang in there! We are still a country of economic strength, opportunity, and security.”

This Independence Day we are paying a whole lot more than our forefathers could ever have imagined, for everything from the hot dogs, to the watermelon, to the gas for the family car. Our troops perform an invaluable service, but their pay is modest. Fortunately there are many military discounts that they can claim. Here are just a few of the savings that are available if you have a military ID card:

Many movies, concerts, zoos, sporting events, theme parks and museums offer military discounts with a military ID card, so don’t pay full price before you visit the Information Office.

Hotels and car rentals offer discounts too, so when making reservations, always ask the hotel representative if they offer military discounts or government rates for federal employees. Some may also offer additional savings for those military personnel being deployed or returning from deployment.

Check out military tuition scholarships at your local colleges and universities. Many of them offer military tuition scholarships that discount the credit hour cost for its courses to the same amount that is reimbursed through the Military Tuition Assistance Program. That amounts to free education for undergrads with a military record.

Even the post office has gotten on the bandwagon. Priority mail sent to an FPO or APO address is eligible for a substantial discount.

Retail stores off  base also offer military discounts. National retail chains like Home Depot, Lowe’s, McDonald’s, Kmart, Walgreen’s, and Apple offer various discounts to military personnel and their families when a Military ID is shown.

And of course, military exchanges and commissaries offer a variety of goods at discounted prices.  According to MilitaryMoney.com, single service members save an average of $1,000 each year, while a family of four saves at least $3,000 just by shopping at the commissary.

The road ahead is truly what we make it. And that’s exactly what the Founding Fathers had in mind—a chance for all of us to create the future we dream of for ourselves and our families. Being grateful for what we have will help us move forward with confidence and hope.

Have a hopeful and faithful Fourth!

College Savings

1.  Don’t waste money on bank fees. Find a bank or credit union that offers free checking to college students. Be sure your account includes free online banking and debit card transactions. Free checks are nice too, but in today’s electronic age most people don’t write many checks.
2. If you opt for a credit card, get one with no annual fees and the lowest interest rate you can find. Stick to your card limit, pay your credit card bills on time so there are no late charges, and pay more than the minimum so you can minimize interest charges.
3. Reduce food and beverage expenses. Eat in or grab fast food instead of eating out, and when you do eat out order the less expensive items or split something with a friend. Drink good ol’ American beer rather than expensive foreign brews, or gather with your friends for a party with a six-pack at home rather than expensive beer, wine, and set-ups in a restaurant or bar.
4. Buy used textbooks if you can. There are several online textbook comparison sites where you can shop for the best prices. And when you are done with the book, if you don’t need it in your permanent library, sell your used textbooks online.
5. Splurge on a good coffee maker – and use it. Drinking quality coffee at home is much cheaper than buying expensive lattes at your local coffee house. Tuck a thermos full of coffee into your backpack and use it to refill your to-go cup. If you do this stealthily enough, no one will even peg you for a geek.
6. Stock up on snack foods. I know you are pressed for time and need to eat on the go a lot, but crackers, string cheese, cookies, and donuts brought from home are all much cheaper than buying them in coffee shops, and they are just as portable.
7. Skip the bottled water. Get yourself an inexpensive bottle, fill it with tap water, and guess what – you now have bottled water at almost no cost. If the water in your area is crappy, invest in a filter to improve the quality and taste.
8. Look for student discounts. Many retailers and service providers offer student discounts. If you don’t see a discount advertised, ask. The worst they can do is say no, and you may be able to snag a discount that isn’t widely advertised.
9. Buy used if possible. Shop for computers and other electronics at ebay or on Craigslist and you’ll get much more for your money. It may be lightly used, refurbished or last month’s model, but it will still be functional.  And let’s face it, if you bought and used a computer, it would then be a used computer, so why not start there and save some bucks?
10. Free entertainment is, well, free. Watch television through your computer, gather with your friends at free movie screenings on campus, join in a game of touch football or tennis, or go for a swim at the Y. Get creative, get moving, and get involved. There are lots of ways to entertain yourself on the cheap.

Military life can be tough on your pocketbook, especially if you have a family back home that depends on your financial support. Here are some ways to save money before and during deployment, and take advantage of the benefits that the military provides you.

Memorial Day

Eliminate rental expense. Your basic food and shelter needs are taken care of while you are deployed. If you are single, pack up your household items and put them in storage while you are gone, so you won’t have to pay rent. If you are leaving a family behind, government housing or a Basic Housing Allowance may provide assistance for their needs.

Reduce home ownership expense. If you are single and own a home you’ll have ongoing costs, but there are still ways to reduce housing expense. Turn off utilities, or if that is impractical in your climate, adjust the thermostat and turn off your electronics rather than leaving them in standby mode. Empty your refrigerator and prop open the door to prevent odor.

Check your insurance. If your car will be sitting idle, to save money put your vehicle into storage or vacation status with your insurance company. Ask whether there are any other savings that might be available on other policies, such as homeowner or renter insurance.

Get relief. The 2003 Service Members Civil Relief Act provides for an interest rate reduction to 6% for any debt incurred before you enlisted and delays any civil legal actions against you. Until you return home it bars landlords from evicting your family from rental property costing less than $2400 a month, and allows you to break leases and some contracts without penalty.

Take advantage of benefits. As a military member, you get special postage and email rates, and you and your family can save money shopping at the exchange and commissary. There are many medical benefits available for your family, so explore those thoroughly before you go. Families of military members are also eligible for free or reduced childcare.

Save, save, save. While you are deployed, you will receive extra pay and tax free benefits. Use this opportunity to stash funds away for future needs.  That will ease your life when you return, and your eventual transition to civilian life.

Record Keeping

According to the IRS, you must keep the records needed to substantiate all your income and deductions available for inspection. You don’t have to spread them out on the coffee table in case someone from the IRS knocks your door.  But upon reasonable notice from the IRS, you must be able to produce the records for an audit.

Except in the case of fraud, the IRS must audit your return within three years from the due date of the return or the date of filing, whichever is later. That statute is extended by three years if you misstated your income by 25% or more, and indefinitely if you file a fraudulent return, or no return at all.

Even if you filed your tax return on time and reported all your income, you should retain the following records for a longer period of time even though the statute of limitations has expired:

Prior Tax Returns – Keep copies of all tax returns you have filed in the past. These returns are helpful in preparing future tax returns, and they provide an interesting road map of your financial history that may be of interest to you down the road.

Payment of Taxes – Keep canceled checks that prove that you paid your taxes when due. The IRS records are not always what they should be, and sometimes they misplace your payment.

Basis of Property – Records relating to the cost of property and improvements to that property should be retained as long as you own that property or a replacement property. If you sold your residence, but deferred the tax on the gain by reinvesting in a new house under the old rules in effect before 1998, you will need to retain the records for both the new house and the old house.

How Should You Keep Your Tax Records

You should always keep a set of backup records safely away from the original set.  To ease your pain, keep in mind that financial institutions provide documents and statements electronically via the internet and these documents can be downloaded to backup storage devices or burned to a CD.

One of the benefits of using TurboTax is your tax information is safely and securely stored so you can access it and transfer it to the next tax year.  Although your tax information is saved when you complete your tax return, it is best to also save your tax return as a PDF file.  This step can save you valuable time if you need to access information such as your adjusted gross income or if a copy is required to obtain a loan.  In addition, if you use TurboTax Free edition, you need to save a PDF file.

TurboTax apps for your mobile or tablet device also will store your tax return, however you should back up your completed tax files for your records before deleting the apps.

Of course, if you want to keep all your records forever, there’s no rule against it if you have the room. We know many people who like to pore over old records, and seem to derive as much enjoyment from it as some of us do looking at old photographs.

But when the neighbors complain that your burgeoning collection of bank statements, checks and receipts are blowing out your windows and flying around the neighborhood, it’s time for some spring cleaning.

Natural Disaster

If you haven’t already filed your taxes and were a victim of recent severe storms, flooding, or disasters you may have more time to pay taxes and file your tax returns if you were affected and in counties designated as federal disaster areas qualifying for individual assistance.

The extended dates are specified by county and may give you an extension to file your 2011 tax return as late as May 31, 2012 (the postponement applies to the normal April 17 tax deadline for filing 2011 individual income tax returns, making income tax payments, and making 2011 contributions to an IRA if you were an affected taxpayer)

You can consult the FEMA website to see if your area was declared a Federal Disaster Area. That web address is http://www.fema.gov/news/disaster_totals_annual.fema

Who May Be Entitled to Relief

Taxpayers affected by disaster and eligible for relief include:

• Individuals whose principal residence and any business entity whose place of business is located in counties designated as disaster areas.
• Any individual who is a relief worker assisting in a covered disaster area, regardless of whether they are affiliated with recognized government or philanthropic organizations.
• Individuals whose principal residence, and any business entity whose principal place of business is not located in a covered disaster area, but whose records necessary to meet the filing or payment deadline are maintained in a covered disaster area.
• Estates or trust that have tax records necessary to meet filing or payment deadlines in a covered disaster area.
• Any spouse of an affected taxpayer with regard to a joint return of the husband and wife.

Claiming Casualty Loss for Disasters

Whether or not your area was declared a federal disaster, you are entitled to claim casualty losses as an itemized deduction on your tax return.  A casualty loss is officially defined as “the damage, destruction or loss of your property from any sudden, unexpected or unusual event such as a flood, hurricane, tornado, fire, earthquake or even volcanic eruption.”  The loss can be from a natural or man-made disaster.

You’ll claim your loss on Form 4684, which is  filed with your tax return. The first $100 of loss is not deductible, and the remainder of the loss is deductible to the extent that it exceeds 10% of your adjusted gross income. Of course, any losses reimbursed by insurance or covered by federal disaster funds aren’t deductible.  TurboTax walks you through, step by step, and makes all the computations for you.

Though a casualty loss is usually deductible in the year it happened, you have the option of taking the deduction on your prior year’s return so you can reap the benefit quickly.  The deadline for choosing in which tax year to claim the loss is generally the due date of your current-year return.  If you’ve already filed, use TurboTax to amend your return on Form 1040X, writing in red at the top of the return  “Disaster” and the name of your city, county or state that was declared a disaster area.

Other Relief Available

The IRS will also waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Though a tax deduction doesn’t reimburse your loss dollar for dollar, it does reduce your taxable income, resulting in a lower tax bill or bigger refund.

Tax Deadline

• File an extension – Some people automatically are given extensions. If you live and work abroad, you have until June 15 to file, though your taxes are still due April 17. If you are serving in Iraq, Afghanistan or other combat zones, you have until 180 days after you leave the combat zone to file and pay your taxes. If you live in an area recently affected by natural disasters, you may have until May 31 to file and pay.

If you really need extra time to prepare your tax return, file an extension by April 17 to request  until October 15 to avoid nasty 5%-per-month penalties for late filing and late payments. But remember, filing an extension gives you extra time to file, but not to pay, so it isn’t a solution if you can’t pay your tax.  Plus, once you enter your tax information you may be entitled to tax deductions and credits you didn’t know about so you may not even owe.

When you file, pay as much as you can with your tax return to avoid penalties and interest. As for the rest, the IRS feels your pain and is willing to work with you to devise alternate payment options. Here are a few:

• Fresh start for the unemployed – In March the IRS announced a new Fresh Start initiative. If you were unemployed for 30 days or longer in 2011 or 2012, they will waive the late payment penalty for six months. Form 1127-A (Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship), which you can download from IRS.gov, will give you until October 15, 2012 to pay the taxes and interest that are due for your 2011 tax return. If you are self-employed and your business experienced at least a 25% decline in revenue due to the economy, you may also qualify for this Fresh Start.

• Installment payment plan – If you owe $50,000 or less, you can request a payment plan by going to IRS.gov and filling out the Online Payment Agreement you’ll find there, or call  800-829-1040. If you owe more than $50,000, you will need to complete a financial statement to determine the monthly payment amount for an installment plan.

• Hardship cases – If you will become destitute if you have to pay the taxes, you can fill out Form 911, Request for Taxpayer Advocate Service Assistance, to ask the IRS to delay tax collection. This isn’t your best option, since you’ll still be racking up penalties and interest and the IRS can file a lien against you.

• Offer in Compromise (OIC) – You may be able to make an offer to settle with the IRS for something less than is due. You’ll have to fill out Form 656 and show that you are unable to pay, for example, the amount owed is higher than your total assets and income.

If none of these options appeal to you, there are many places you can turn to get the money to pay your taxes, but make sure you find out about the tax consequences for some of them. Home equity loans, 401(k) loans and borrowing on cash value life insurance are possibilities for some. Credit cards can be used, though you will be charged a processing fee.

If you can’t pay your tax, don’t bury your head in the sand — hiding from the IRS is not a successful strategy and may cost you in the end. Failure to work with the IRS may incur stiff penalties, result in enforced collection action, and in extreme cases the end result could be criminal penalties and even jail time.

Bad Investment

The IRS won’t give you back the money you lost, but Uncle Sam will let you take a deduction for the loss. But there some rules you must know.

1. You can’t take an investment until the year the investment becomes worthless, so you’ll have to show that the stock had value at the beginning of the year, but not at the end of the year. If you bought stock in a company that went bankrupt, until the bankruptcy is discharged you might not know whether you can collect anything, so you get no deduction until then.
2. You can deduct losses on the sale of securities. If you believe that the stock won’t ever pay off, but you can’t prove it is worthless, sell it on the open market for a few pennies or a dollar to nail down your deduction.
3. If you can’t sell the security, you can abandon it. You do that by giving up all rights in the security and not receiving anything in return.
4. If you learn your investment became worthless in a prior year, file an amended tax return for that year to claim a refund. Though usually you have just three years to file an amended return, in the case of worthless investments you have up to seven years from the date your original return was due to claim a deduction.
5. You report the loss on Schedule D of your tax return, and list it as though it were an asset sold on the last day of the year.  TurboTax easily guides you through the interview and puts your tax information on the appropriate forms so you can take this deduction.

You are also entitled to deductions on your tax return for ongoing expenses in connection with your investments. These are listed on Schedule A of your return as miscellaneous deductions and are deductible to the extent they exceed 2% of your adjusted gross income. Here are a few of the investment expenses that qualify for deduction:

Investment advice. If you pay a fee to have your investments managed, or consult periodically with an investment advisor or accountant, those fees are deductible. That doesn’t include commissions that you pay to buy or sell a security, though. Commissions are added to the cost basis of the security and reduce the gain when you sell the asset.

Publications. If you are an active investor and subscribe to investment magazines, newspapers and newsletters, the costs of those publications are deductible.

Investment interest. If you have borrowed on margin or against other assets such as your home to invest in stocks or bonds, you may be able to claim a deduction for the interest you pay each year. Your deduction is limited to the amount of investment income you have for the year, which includes interest and dividends. Any investment interest expense you can’t use this year can be carried over to future years.

Other investment costs. You can deduct safe deposit box rental fees you pay to safekeep your stock certificates or other investment documents. You can also deduct IRA and retirement account fees, if you pay them out-of-pocket rather than having them deducted from your retirement account.