Death & Taxes

I completed my 2009 tax return just this week.  Pretty quick, right.  The last couple of years I have done them as soon as I had my W-2 and my interest information from my bank.  It is true that doing my taxes is VERY simple, which is part of the reason I do them so early.  It has never made any sense to not take the standard deduction as we are not homeowners and have no mortgage interest to deduct.  We have very few other deductions and they never even come close to the standard deduction.  So this makes calculating our taxes relatively straightforward.  I might as well get MY money back from the government as soon as possible, if there is any to get back.

Since 2004 I have used the same program to do my taxes: H&R Block’s Tax Cut.  And the cool thing is that I have NEVER paid for it.  The first couple of years H&R Block would let you file for free if you fit their restrictions and went through the IRS website’s Free File page.  Their basic restriction was that you could not make too much.  Depending on how you look at it, I either fortunately (or unfortunately) met their requirement.  I think your adjusted gross income had to be less than $50,000.

Then a few years back they got rid of that restriction and now offer their software for free and just bombard you with offers to “soup up” the product for a fee.  This year the program asked me about 5 times, at different points, if I would like to upgrade and give them some money.  I just say no every time.  To me its not even that much of annoyance.  I pat myself on the back each time for how frugal I am to get a necessary service for free.

Also the last couple of years I really didn’t have to “load” any software onto my computer.  I just use the H&R Block Website.  It asks me all the relevant questions and works very smoothly in my opinion.  It will also handle tax situations that are more complicated than mine.  And it only takes me about ½ hour to do both my federal and state taxes 🙂 .

At the end of each session the program electronically files my taxes.  I also save a copy of my return as a PDF on my computer.  If it is one thing computers are great it is organizing and storing things like this.  It is so easy for me to find financial information since it is all stored on my computer.  When we were applying for a loan to make offers on houses the loan guy was so impressed that I was able to email him all of the documents he needed.

Now H&R Block will not to your state taxes for free.  But the State of California lets you do that right on their own website and we have done that for the last couple of years.

One thing that did stand out this year as I did my taxes was the disparity  between the tax policies of California versus the federal government.  I guess I am a nerd, but I find it interesting to analyze my financial information.  This year it seemed like my state tax bill was really high and that may federal tax bill was substantially lower than usual.  So I decided to dig into my suspicion using the new version of Microsoft Excel on my new computer.  I actually really like Excel and use it to record and compute my students’ grades rather than using a dedicated grading program.  You should see some of the wild formulas I’ve created so that the program will give me exactly what I want in determining and presenting my students’ performance.

In any event I plugged in some information and even designed a chart to display it here is what I got.  (If you click on the chart, you will see a bigger version.)

Parenthetically, I really like all the new options on Excel 2007 (the one with the ribbon).  The version of Excel on my old computer was from 2000 and I can say they’ve come up with some good features in 7 years.

Anyway in interpreting the graph above, which shows the percentage of our income that we have paid to both federal and state taxes, it would be important to remember that there are quite a few variables that go into what one gets charged for taxes.  There is how much you make (the more you make the higher the rate some of your income is taxed), changes to the tax code (tax cuts, tax increases, changes in deductions/credits), and the number of children you have (this one is big; you get a deduction and a credit) just to name a few.  All of these things and more combine to determine just how much the government takes from you.

With that said, a lot of these variables are exactly the same for both federal AND state taxes.  How much you made, how many children you have, etc. are all the same.  So if you look at the graph, it does highlight that while federal taxes, in my case, went down substantially, they went up substantially for the state.  More than doubled!  Please note that my income was only $3000 higher than in 2009 compared to 2008.  Pretty big deal.

By the way if there are any other nerds out there, I would be happy to share the simple Excel worksheet file I made with you via email.  You can simply plug in your own numbers and everything will automatically be generated, even the chart 🙂 .


4 thoughts on “Death & Taxes

  1. Cool graph, send the spread sheet to me, I am interested to see what it looks like for us self-employed people– thx By the way– Microsoft has come out with a new office suite series– Office 2010– looks like you need another upgrade– this year i was diligent on using Quicken, i am excited to find out if this will help me do MY taxsd in half and hour instead of half a week– we have used TaxAct– a web based tool that charges you like ten bucks to do state and Fed in Free. we might end up using Turbo Tax this year– i believe it integrates with Quicken really well. if anyone has any experience with Turbo Tax let me know

    • Well, seeing as how my last office suite lasted 7 years, I think my “new” suite will last at least a little while.

      I’ll send you the file.

  2. Forest:

    Are you nerdy enough to track sales and use tax data as well? I have been wondering for a while how much taxes we pay in total: Income, Property, and Sales/Use taxes. I haven’t, but just wondering if you have an App for that. Anyhow, please send me a copy.

    Also, I think Office 2010 is still a free Beta download. But I may just be cheaper than you as I have been using Office 97 but will finally upgrade to 2007 (only because MS made it available through our Agency for $9.95). The sad thing is, I still thought long and hard about spending $9.95 to upgrade something that works perfectly well.

    • I guess there is room to grow in my nerdiness because I’ve got nothin’ for sales or use tax.

      It looks like you do have me beat for frugality. I didn’t buy Office 2000 until I got some student edition at Cal State Fullerton for like $10 too. But I paid more for 2007…

      I doubt either of us will ever meet at a compulsive spenders anonymous meeting.

      I’ll send you the file.

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