Earned Income Tax Credit

When I first started learning about taxes I had heard of the Earned Income Tax Credit (EITC) and assumed it was a way for low income tax payers to reduce their tax liability. 

Then I took a tax class and learned about refundable credits. Both the EITC and the Additional Child Tax Credit are refundable credits. A refundable credit is a credit that allows you to get more money back from the IRS than you had withheld.

It wasn't until I actually began preparing taxes that I realized the magnitude of the EITC. Assume that you and your husband made $16,000 in 2011 and had $1,000 withheld for income tax.

When you file your taxes not only will you get back the $1,000 that you had withheld but you will also receive EITC of $5,751 and Additional Child Tax Credit of $1,950. Your total tax refund will be $8,701.

Last year according to the IRS 268 million tax payers received the EIC for a total of $59.5 Billion!

According to the IRS:

"In tax year 2010, almost 26.8 million eligible workers and families received over $59.5 billion total in EITC. The average EITC amount last year was around $2,200."

Your Time is Valuable so Outsource your taxes to H&R Block

When I was a director at Sun Microsystems I attended a meeting for women directors where the speaker was a woman engineering vice president. This woman grew up and was educated in India. She was highly effective and highly respected. The purpose of the talk was to help other women move into positions of senior leadership.  I will never forget one thing she said. It had a big impact on me.

I think the impact was so big because I really did try to do it all. When my daughter Shannon was about 12 she gave me this sign as a Mother's Day gift. She didn't intend it as a joke. She thought maybe we should start using it.

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I grew up thinking that woman could do it all, have a career,  raise children, nurture friendships, exercise, cook, maintain a clean and beautiful home, maintain household finances…. the list goes on and on. Once I had a family and a career I learned that the reality is that you can't do it all. There aren't enough hours in the day. I came to the conclusion that if I tried to do it all I would be mediocre at everything.

The woman VP who was speaking to us that day said that she didn't understand why American woman tried to do it all themselves. She said that in India woman have help and don't feel guilty when they rely on help to allow them to focus on the important things. She recommended hiring help. She called it outsourcing. It made me realize that if I hired help I could focus on my career, my children and the other priorities in my life.

As I said I didn't follow my own advice very well. I outsourced very few tasks but some of the  things which could be outsourced are cleaning, cooking, laundry, paying the bills, driving the kids around, and doing taxes. I used to think I had to do them all myself. If I was starting over I would figure out a way to have someone else do many of these things. I would create a support organization for me incorporated.

If you are a woman or a man today with a busy life I suggest that you think about hiring help. Instead of spending hours doing your own taxes have H&R Block do them. One of the benefits of doing them yourselves is you learn how taxes work but if you have someone like me do your taxes you will save time and you can still make it a learning experience. Allow me to do the detail work and you can focus on asking questions and understanding how your taxes fit in the big picture of your life.

Another advantage of having H&R Block do your taxes is that for just $35, you can purchase the Peace of Mind® Extended Service Plan. If you owe additional taxes due to our error in the preparation of your return, we'll pay up to $5,500. But more important if you get an audit or an IRS letter you can outsource the handling of it to H&R Block and you can focus on the important stuff.

As I was writing this post it occurred to me that over the years I didn't do a very good job of following my own advice. But I still think it is pretty good advice

As you know I am a tax preparer for H&R Block. Obviously all the opinions in this blog are mine and mine alone. I do not speak for H&R Block.

Financial Advice

I use the Google blog reader to read the blogs I follow and I am way behind. Currently it says have 383 posts unread. I pretty much stay current on my favorites like Ronni Bennett's Time Goes By and Flight Level 390. Of course my favorites also include the blogs of my friends like HD's Soapbox Easier Than Scrapbooking, and Chuqui 3.0. Chuq the author of Chuqui 2.0 also does a great job of using Google reader to share items that he finds of interest and I subscribe to his feed of shared items.

That feed of shared items was one of the things that was contributing to my 383 unread posts. As I was scrolling through the more that 50 unread shared items from Chuq I came across a post on Mark Cuban's Weblog – Blog Maverick, titled How to Get Rich.

Cuban wrote this post back on October 4. What he says is absolutely right. Saving is key, "if you use a credit card you don't want to be rich" and his other advice is not something I always followed but I learned it late in life and I know it works.

I think that the reason that this caught my eye is that with all of the current economic problems I have been thinking a lot about credit and debt lately. It is only in the past 40 years or so that everyone has carried a credit card and assumed that they would always have a mortgage. My Dad still remembers the first time, sometime in the late 60's, when he was traveling on business from his job in Australia and a hotel made him pay for his room every day because he didn't have a credit card. He used to say that paying for things on credit was like paying for a dead horse.

Of course I use credit cards and like the ability they give me to track my spending and there have been times in my life when I didn't pay off my balance every month. But I have to tell you that living debt free is incredibly empowering.

I also think that having a goal of being rich may mean you  want to live rich now which of course is at odds with living debt free.

This is a subject I would love to have a conversation about. As I said I have been thinking a lot about what advice I would give about money and what advice I would have liked to receive. I know that I have some pretty strong  ideas but I haven't figured it all out. If you are reading this I would love to know what your thoughts are. What does it takes to get rich or what does it takes to reach your financial goals?

What I’ve been working on

This is what I have been working on at Intuit for the last 3 months. The week after next I am going to the Financial Planning Association convention in San Diego. I’ll be helping to demonstrate the product.  Right now we are in the middle of beta testing. It has been very interesting to watch planners start to use the product for the first time. If you are going to be at the FPA conference and would like to meet up let me know or just come by the Intuit booth.

Broker Dealers and Clearing Houses

I have been calling financial planners this week to ask them if they would like to help us test some new software . On of the things I ask them is what firm they use as a custodian. I am mainly talking to financial planners who manage their clients assets for them. That means that the planner is able to trade and manage assets in the client’s account. Planners custodian their accounts with companies like Schwab, TD Waterhouse, and Ameritrade. What is confusing is that there is also the concept of a broker dealer, and a clearing house. It is important to know who the clearing house  is because that will be the source of account downloads. If I understand it correctly big companies like Schwab and Waterhouse do both the broker dealer function and the clearing house function. But there are broker dealers who use  a separate clearing house like Pershing. In talking to planners it  is important for me to know the difference  because it will impact our testing. I am enjoying learning all this new stuff.