IRS Estimated Taxes Due Date Calendar 2013

Reminder for last quarter of 2013. If you’ll earn income outside of your W-2 paycheck this year, you may need to send the IRS some money before the usual tax-filing time. Here are the due dates for paying quarterly estimated taxes in 2013; they are supposed to be in four equal installments. This is for federal taxes only, state and local tax due dates may be different.

Tax Year / Quarter Due Date
2013 First Quarter April 15, 2013 (Monday)
2013 Second Quarter June 17, 2013 (Monday)
2013 Third Quarter September 16, 2013 (Monday)
2013 Fourth Quarter January 15, 2014* (Wednesday)

* You do not have to make the Q4 payment due January 15, 2014, if you file your 2013 tax return by January 31, 2014.

Who needs to pay estimated taxes?
In general, you must pay estimated tax for 2013 if both of the following apply:

  1. You expect to owe at least $1,000 in tax for 2013, after subtracting your withholding and credits.
  2. You expect your withholding and credits to be less than the smaller of
    • 90% of the tax to be shown on your 2013 tax return, or
    • 100% of the tax shown on your 2012 tax return. Your 2012 tax return must cover all 12 months.

If you forget to pay (like I’ve done before), then you should make a payment as soon as possible even though it is late. This will minimize any penalty assessed. This is all taken from IRS Form 1040-ES [pdf].

How do I pay?

  • By check. Fill out the appropriate 1040-ES voucher (last page) and send to the indicated address. If it is postmarked by the due date, the date of the U.S. postmark is considered the date of payment.
  • By online bank transfer. You can link your bank account and pay via electronic funds transfer at or call 1-800-555-4477. No convenience fees. It takes a little while to set up an online account, so plan ahead.
  • By debit or credit card. Here is page of IRS-approved payment processors. Pay by phone or online. Fees will apply.

I usually pay online at for both convenience and to avoid fees. In rare cases with the right credit card promotion, it can be worth it to pay the credit card processing fee. For example, last year I paid taxes with my Chase Ink Bold card. I paid $189 in fees, but earned $500 of bonus points.

TurboTax vs. TaxACT vs. H&R Block at Home: 2012 Lightning Review

According to a reader poll taken last year, 52% used TurboTax, 18% used TaxACT, and 14% used H&R Block at Home to prepare their tax returns, which agreed with the most popular software overall in the US. The remaining 16% either used an accountant (10%), filed on paper (4%), or used another software (2%).

Last year, I used each of “The Big 3” to do my taxes in order to compare and contract in detail the three software programs. (As an example, my TurboTax 2011 review talks about comma-insertion as a feature…) I plan to do the same thing this year, but to help you early-birds, here’s the highly-condensed version of my reviews:

Accuracy and Maximum Refund Guarantees
In terms of accuracy and interview style, I think all three are comparable if not nearly identical. In fact, I’m certain they all dissect each other’s products annually to ensure this. As such, all three offer a “Maximum Refund Guarantee” as well as a “Accuracy Guarantee” that states that they will pay any penalty and interest assessed by the IRS or your state due to calculation errors on their part (though H&R Block limits this to $10,000).

In my opinion, the remaining major differentiating factors are price, time-saving features, and audit support. Now, there are various discounts and sales that pop up, but here I’m just comparing regular sticker prices.

TurboTax Online

  • The most popular and most polished-looking user interface.
  • Federal Deluxe regular price is $29.99. State return price is $36.99.
  • Best import support from payroll providers and financial institutions for automatic import of W-2 and 1099 forms.
  • Moderate audit support (you get help, but no in-person representation)

Bottom line: The time-saving choice if you have a lot of brokerage and/or bank 1099s to electronically import, or a lot of details to import from last year’s return and you used them last year. For those like me that would pay extra to avoid all that tax lot data entry.

TaxACT Online

  • Cheapest overall with Federal Deluxe regular price at $9.99. Many can get by with Federal Free version. Cheapest state return at $8.00.
  • Again, just as accurate as the others.
  • Limited import support (worst of the three).
  • Limited audit support (worst of the three).

Bottom line: The value choice if you just want reliable DIY tax return software and don’t need any extras.

H&R Block at Home Online

  • Federal Deluxe regular price is $29.95. State return price is $34.95.
  • Moderate import support for 1099s and W-2 (not as broad at TurboTax, better than TaxACT)
  • Best free audit support, as it includes an H&R Block Enrolled Agent actually attending your audit in-person. Neither TurboTax and TaxAct not offer representation. However, you must think about whether you would hire your own representative in the actual event of an IRS audit (probably depends on severity).

Bottom line: The sleep-well-at-night choice if you want the assurance that a federally-authorized enrolled agent will guide you for free through a potential albeit unlikely audit.

2013 401k, 403b, 457, TSP Contribution Limit Increases – Historical Chart

The IRS recently announced increased contribution limits for various qualified retirement plans for tax year 2013. The limitations are indexed to increases in cost-of-living (inflation) as per section 415 of the tax code. In particular, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500. However, the additional catch-up contribution allowed for those age 50 and higher remains $5,500.

The limits are the same for both Roth and “Traditional” pre-tax 401k plans, although the effective after-tax amounts can be quite different. Employer match contributions do not count towards the $17,000 elective deferral limit. (Although technically the total annual defined contribution limit is $51,000 for 2013… let me know if you have an employer that is so generous!) Curiously, some employer plans set their own limit on contributions. A former employer of mine had a 20% deferral limit, so if your income was $50,000 the most you could put away was $10,000 a year.

Here’s a historical chart and table of recent contribution limit increases:

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2013 IRA Contribution Limit Increases – Historical Chart

The IRS recently announced the Traditional and Roth IRA contribution limits for tax year 2013. The limitations are indexed to inflation, but only in $500 increments (as of 2010) which are triggered when the cost-of-living calculation reaches a certain threshold. The threshold was finally met, so the limit on annual contributions to an Individual Retirement Arrangement (IRA) increases to $5,500, up from $5,000. However, the additional catch-up contribution allowed for those age 50 and higher remains $1,000.

The limits are the same for both Roth and Traditional IRAs, but each one has their own unique set of eligibility requirements. IRAs are “individual” accounts by definition, so the limits are per person. The deadline for 2012 tax year contributions is the same as the 2012 tax return filing deadline: Monday, April 15, 2013. Tax return extensions won’t apply to this cutoff.

Since I like visual aides, here’s a historical chart and table of recent contribution limits. I’m proud to say that we’ve both done the max since 2004. Have you been taking advantage of your potential IRA tax break?

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Your Job Search Expenses May Be Tax-Deductible

Help Wanted Sign; image credit: underbid.comHere’s a friendly reminder for those on the hunt for a new job. Many job-search expenses may be tax-deductible, so knowing the rules can save you money at tax time. As you might expect from the IRS, the rules aren’t straightforward:

  • You have to be looking for a new job in your present occupation, even if you never get one.
  • There cannot be a “substantial break” between the ending of your last job and your looking for a new one. Vague? Yep.
  • You cannot be looking for a job for the first time. Sorry, recent graduates.
  • Job search expenses are lumped in with many other “miscellaneous deductions”, such as the home-office deduction, union dues, work-related education expenses, bad business debt, tax prep fees. These are only deductible from your income if you itemize deductions and only to the extent that taken together they exceed 2% of your adjusted gross income. But if you’re out of work, 2% may not be a very high hurdle.
  • If you get reimbursed for any your expenses, then it’s no longer deductible. At least that one makes sense.

What qualifies as an expense?

  1. Employment and outplacement agency fees. This includes “career consultants” and the like. I don’t know if paying these are necessarily a good idea in the first place, but they can be deducted.
  2. Resume preparation costs.. You can deduct amounts you spend for preparing and mailing copies of your resume to prospective employers. These include paper, postage, envelopes, and printing/copying costs.
  3. Travel and transportation expenses. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area if the trip is “primarily” to look for a new job. In other words, you need to spend more time looking for work than doing any personal activities. Roundtrip airfare, car rental, and hotel stays can add up quickly. If you drive, you can deduct the standard mileage amount (55.5 cents per mile in 2012).

    Keep good records of your efforts and any meetings and/or interviews with prospective employers. Write down the time, date, and place of any event, and keep business cards and food receipts.

Things you can’t deduct include services like residential home phone service, cell phone plans, and high-speed internet.

This is all taken from the notoriously vague IRS Publication 529 – Miscellaneous Deductions. Look under Unreimbursed Employee Expenses > Job Search Expenses. Keeping great records for everything is key. If you have an accountant, be sure to ask them how to best take advantage of this area. Finally, if you do land a new job, don’t forget that you can also deduct moving expenses:

To qualify for the moving expense deduction, you must satisfy two tests. Under the first test, the “distance test”, your new workplace must be at least 50 miles farther from your old home than your old job location was from your old home. If you had no previous workplace, your new job location must be at least 50 miles from your old home.

Save More vs. Earn More: A Dollar Saved Is Two Dollars Earned

Earn more. Save more. Those are the two ways to get out of debt and build wealth. I’m a big proponent of doing both, but for many people it may be easier to cut back on some luxuries rather than land a higher-paying job, start a side business, or become an investing wizard. It’s also more effective due to marginal tax rates. Let’s say you are single resident of California and your (taxable) gross income is $50,000 a year.

If you were to go out and earn another dollar as an employee, here’s how that additional $1 would get broken down:


You’d only keep 58 cents. On top of that, a lot of extra or freelance work is done as an independent contractor. That means you’re self-employed and get the happy task of paying another 7.65% of payroll taxes (the employer share), which brings your total tax hit to 49.6%! So in order to keep $1 in your pocket, you’d have to get someone to pay you $1.99. In that case, your choice becomes:


This relationship helps me visualize the power of spending less. Now when you save $1, you can feel good knowing that you’d have to have earned $2 of income to equal that. But on the flip side, when I get a check from a side project for $500, I know I’ll only keep $250 of it. 🙁

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TurboTax 2011 Review: My Experience and Comparison With TaxACT

I just finished filing my federal and state income tax returns (again) using TurboTax Deluxe Online edition. This is the 2nd part of my series comparing the three major tax preparation websites: TurboTax, TaxACT.

You can see my TaxACT 2011 review here.

Tax Situation
Again, here’s a quick summary of our personal tax situation.

  • Married filing jointly, subject to state income tax
  • Both with W-2 income, as well as self-employed income (Schedule C).
  • Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
  • Contribute to retirement accounts (401ks and IRAs).
  • Capital gains and losses from brokerage accounts (Schedule D).
  • Itemized deductions (Schedule A), including mortgage interest and charitable giving.

Retail Price
Although their website shows a “retail” price of $49.95 for TurboTax Deluxe, anyone who visits the site will at most pay $29.95 for Federal including e-File. TurboTax State is $36.95 including e-file. If you are a Vanguard Flagship Services or Asset Management Services client, you get a TurboTax Online Federal Deluxe + State + efile for free. All other clients get discount of about 25% off; you must log in to get your discount. There is also a free edition available if you have a very simple tax return – no itemized deductions, investment income, but remember that State is $27.95 extra in that case.

TurboTax Premier offers “additional guidance” for investment income from stocks and bonds and also rental income. However, I had the usual stock and bond sales and was able to complete my return without upgrading to Premier. I did not feel I needed any extra guidance, but if you do it will run an extra $20 for a total of $49.95. Finally, TurboTax Home & Business ($74.95) offers “additional guidance” for self-employment income including dealing with business expenses. However, if all you have is a couple of 1099-MISCs to report as I did, you can get by with Deluxe.

User Review

With all these tax sites you can start your return for free, and only pay when you file. Since I had already input all my tax data into, I simply opened that up in a web browser tab side-by-side and start filing things out. The Q&A interview questions are in roughly the same order, but there are enough differences to make you jump around a bit.

Import from TaxACT & H&R Block at Home
Last year, I used TurboTax for my tax return. Thus, this time around TurboTax had all my old tax info pulled up immediately. Filing status, dependents, address, DOB, SSN, etc. They also had all my old W-2 and 1099 providers to reduce my data entry needs a little bit more. For example, all my Employer Tax IDs and addresses were pre-filled. This did feel rather convenient, and it helped make sure I didn’t forget any 1099s from old bank accounts.

However, as a result I was never asked if I wanted to import a previous year’s return from another provider like TaxACT or H&R Block. Perhaps someone can shed some light on this in the comments?

W-2 and 1099 Direct Import from Providers
One of the strengths of TurboTax is that you can directly import your W-2 and 1099 information from a number of partner providers. However, the W-2 part didn’t really impress me. Our W-2s came from Ceridian and we had to enter some sort of username and password which I’ve never set up before. It was faster to just type in the 10 numbers and get on with it.

1099s were a different story, at least for me. I was able to provide my Vanguard username and password and have my 1099-INT, 1099-DIV, and 1099-B data imported in seconds. Other partners that I was able to use included Betterment, Chase Bank, Capital One 360 (Sharebuilder), and Pentagon Federal Credit Union. USAA, TD Ameritrade, E-Trade, and Wells Fargo were also available. For those with a lot of transactions, this is a great time-saver.

In addition, after comparing with my TaxACT data, I found that I had made a data entry error of $300 with one wrong digit when manually entering all those capital gains and losses from stock sales. The TurboTax import would have help me avoided that mistake, which I don’t think I would have caught otherwise.

Finally, a cool feature is that if all your accounts are linked to the aggregation site, you can simply log into your Mint account and have all your available forms imported with one login (Intuit owns both TurboTax and Mint).

The Small Stuff
This time around, I did notice that TurboTax has something called “Flags” that are the same as Bookmarks with TaxACT that allow you to mark confusing questions to come back to. The icon is small and there is no text, so I probably would have missed it again if I wasn’t looking for it. A minor positive I noticed is that TurboTax automatically enters commas when you reach thousands (ie. 3,459 instead of 3459). It helps with data entry, as I have already shown that I am error-prone!

A minor negative is that TurboTax had many more server delays where the page would not load or would be blank and I had to refresh the page. I did not have any such problems with TaxACT, which I was using simultaneously on the same internet connection and computer.

Foreign Tax Credit
After everything was entered, there was a difference of less than $50 in my total calculated refund between TurboTax and TaxACT. After some research, I found that it was due to my treatment of my foreign taxes paid as a deduction vs. credit. TaxACT appeared to be more aggressive and just allowed me to take it as a credit, while TurboTax seemed to require more information and otherwise steered me towards taking it as a deduction. This was partially my own fault, but the two questionnaires definitely had a different approach. In the end, I got everything to match up between them. (Take the credit if you can.)

Upselling and Price Tricks?
There are some upsell attempts during the tax return to upgrade to Premier or Home & Business, however it was only a couple times and didn’t feel overly pushy. At the end, the price total was as expected with no bogus charges. There was a final pitch for a product call Audit Defense for $39.95, which provides you “professional representation in the event of an audit” and covers both federal and state returns. As before, I am not convinced of the quality of such representation.

Turbotax showed why it remains the best-known and popular tax software. That is, it covers all of the tax aspects about as equally as well as the others, perhaps with a bit more thoroughness (anality?). However, where it separates itself is the importing of data from financial institutions. It is indeed more expensive – for most people TurboTax will cost $30+ more than TaxACT but if it saves you both time and effort in data entry (and potentially prevents errors), then I can definitely see how people would be willing to pay a premium.

There is also the familiarity factor. I definitely kept feeling the benefit of using it last year and again this year. It compared all my 2010 and 2011 numbers side-by-side, which was nice for us financial geeks. It also remembered little things like my old IRA basis, so I wouldn’t have to look it up again. On the other hand, if my return was simple and would not benefit much from automatic importing, I would probably rather stick with TaxACT.

LendingClub 1099 Forms and Tax Reporting Questions

If you’re a newer investor in Lending Club P2P notes, you may be wondering how to handle your investments at tax time. Will I get a 1099? Even if you do get a 1099, it might not cover all your loans. Unfortunately, the documentation provided by LC is often inadequate on its own. Here is what their website says you will receive in terms of tax documents;
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TaxACT 2011 Review: My User Experience With Screenshots

According to my tax software poll, it appears that the vast majority of readers are using one of the “big 3” tax filing software: TurboTax, H&R Block At Home, or TaxACT. This matches industry-wide estimates; Did you know that H&R Block tried to buy TaxAct last year but was blocked by the Justice Department as it would hurt competition and basically create a duopoly?

Here is my hopefully-useful review of, the first part of a series to try out each of these three products to do my real-life taxes and then compare each of them.

Tax Situation
Here’s a quick summary of our personal tax situation, which I think should cover the most common features of tax software. We don’t have any rental income, however.

  • Married filing jointly, subject to state income tax
  • Both with W-2 income, as well as self-employed income (Schedule C).
  • Interest income and dividend income from bank accounts, stocks, and bonds (Schedule B).
  • Contribute to retirement accounts (401ks and IRAs).
  • Capital gains and losses from brokerage accounts (Schedule D).
  • Itemized deductions (Schedule A), including mortgage interest and charitable giving.

Retail Price
Of the Big 3, TaxACT regularly has the lowest retail price. I will be using the online version of TaxACT, of which there are two editions:

  • Federal Free Edition (Basic): Free for Federal return + efile, $14.95 for State return + efile
  • Deluxe: $9.95 for Federal return + efile, $8.00 for State return + efile

Both versions include all Schedules and all e-fileable IRS Forms. Reasons for upgrading to Deluxe (basically an extra $3 for Fed + State) are the ability to import information from your 2010 TaxACT return, import info electronically from Gainskeeper, help with valuing donation items, as well as free phone support. If you are not subject to state income tax, then you can indeed use TaxACT completely free including efile regardless of income level or complexity of return. Nice! There is also a desktop version available on CD and via download for Windows only.

User Review

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Payroll Tax Cut Extended For 2012: Increase 401k Contributions?

Congress has just passed a bill which the President has promised to sign that includes an extension of the 2% payroll tax cut for the rest of 2012. Specifically, the employee portion of the Social Security tax is reduced to 4.2% in 2012 instead of the standard 6.2%. The employer portion remains unchanged at 6.2%. The Medicare tax remains unchanged at 1.45% each for employers and employees. This tax cut has already been in effect since the beginning of 2011 and was scheduled to end at the end of February 2012 before this most recent extension.

For example, someone earning $50,000 annually will see increased take-home pay of $1,000 spread out evenly over a year of paychecks. The limits on wages subject to Social Security tax is $110,100 for 2012, so the maximum savings per person is $2,202. You can verify this tax cut for yourself by checking your most recent paycheck stub. Divide the Social Security tax line by your Gross Pay line. It should be either equal or less than 0.042, or 4.2%. (It might be less than 4.2% due to items that are exempt from SS tax like flexible spending account contributions.)

Spend it, or save it?

The idea behind this tax break is to provide a small, steady increase in income that you’ll hopefully spend quickly and thus stimulate the economy. Even though $1,000 sounds like a lot, when it comes to you as $40 every bi-weekly paycheck, you tend not to notice it. Surveys confirm that the majority of people don’t even know this tax cut exists after enjoying the benefits for a year.

However, if you’re happy with how you’ve already stimulated the economy and would like to put something away to invest and spend later, this might be a good time to increase your savings rate instead. Remember that your savings rate is the most important factor in whether you’ll be able to retire early (or perhaps ever).

Since this tax break comes automatically every paycheck, it makes sense to “pay yourself first” by putting it aside immediately via automatic savings. Instead of mindlessly spending like they want you to, mindlessly save it instead. 😉 If you have a 401(k) or similar employer-sponsored retirement plan, why not increase your contribution rate by 2%, and see if you notice it for the rest of the year? Of course, if you have high-interest debt and some extra willpower, perhaps you should put it aside each paycheck and pay that off instead. You can also use direct deposit or automatic transfers to send money over every paycheck to an online savings account.

Sources: Philadelphia Inquirer, Associated Press

Non-Deductible IRA Contribution & Roth IRA Conversion Rules

Mrs. MMB and I both contributed $5,000 each to a non-deductible Traditional IRA again for the 2012 tax year this week, with the intention of converting it into a Roth IRA in the future. Are you eligible to do this as well? Of course, we had to wade through a ton of IRS fine print to try and achieve a bit of tax savings.

First, can we just contribute directly to a Roth IRA? Per this IRS flowchart, because we are married filing jointly and will most likely have a modified adjusted gross income (MAGI) over $183,000, we are unable to contribute to a Roth IRA. How many people know what their MAGI is? It’s not impossible to figure out, but if I was closer I’d rather wait and have TurboTax figure it out for me when I filed my 2012 taxes.

Can I contribute to a Traditional IRA, even if I have a work retirement plan? Yes, it doesn’t matter if you have a 401k or 403b or whatever. The question is whether it is tax-deductible. Remember, when money is withdrawn from a Traditional IRA, it is taxed again at ordinary income rates.

Well, is the contribution tax-deductible? From this other IRS flowchart, because we are married filing jointly, covered by a retirement plan at work, and have an MAGI of over $112,000 or more, I see out that our contribution is not tax-deductible. Finally, you should remember to note the non-deductible (post-tax) contributions on IRS Form 8606 at tax time.

Can I convert my non-deductible IRA to a Roth IRA? In 2010, the previous $100,000 income limit for Roth IRA conversions was removed. It was initially thought to be a temporary thing, but it has not been addressed since. There is some speculation that the government is quietly (and happily) collecting taxes right now on all the rollover money, as opposed to later. Thus for 2012, there is again no income limit on the conversion from a Traditional IRA to Roth IRA. Even so, there are still some catches if you have both deductible and non-deductible (pre-tax vs. post-tax) IRA balances available to be converted. We have already converted all our pre-tax IRAs a while back, so it will be a simple “same trustee transfer” at Vanguard for us.

Okay, so we successfully navigated all these IRS rules and legally minimized our tax liability. But how many people won’t? Even for tax benefits for low to moderate-income earners like the Earned Income Tax Credit, the Government Accountability Office (GAO) found that between 15% and 25% of households who are entitled to the EITC do not claim their credit, or between 3.5 million and 7 million households. I mean, just look at how long the Wiki page that supposedly summarizes the credit is. It shouldn’t be this complicated.

What Cities Are People Moving To For Financial Reasons?

This post has been revised with new info and added to my Expense Reduction Guide: Housing.

Although it takes considerable effort, nearly 40 million Americans move every year. Now, the reasons for all these moves are not all financial, but you can improve your financial situation drastically by moving. You might increase your income, decrease your housing costs, or decrease your tax bill.

Where are people moving to? This Forbes article analyzed address data from IRS tax filings, and found that a trend that households are moving to warmer climates with lower taxes and property values. The majority of the top ten counties are in Texas and Florida, where there is no state income tax.

After accounting for property taxes, Shrum’s analysis shows that Texas has the fourth-lowest personal tax burden in the country, and Florida has the eighth lowest.

They also compiled an interactive map which shows relative inflows and outflows for each county. (Previous year’s version here). It’s pretty fun to click around to where you live, and where you might consider moving to.

Below is the map for Travis County, TX, where Austin is the major population center. A blue line between two counties mean that more people migrated to Austin than left, and a red line means that more people left Austin for that county than came in.

Where are people leaving? Places with high tax rates.

Shrum also points to eight states that have targeted wealthy households with extra-high tax brackets: California, New Jersey, New York, Maryland, Hawaii, Oregon, Connecticut and Wisconsin. Six of the top 10 counties the rich are fleeing are located in those states.

Personal case study. My sister used to live in San Francisco, California. She recently moved to Austin, Texas where her income increased and her housing costs decreased at the same time. Texas has no state income tax but relatively high property taxes. But since she rents in both places, the lack of state income tax becomes yet another boost to her bottom line. I should note that we both lived there for a while as children, so there is some familiarity, but she left in elementary school. From the looks of it, she wasn’t alone!