2008 Tax Time: Amending my 2007 return with Form 1040X

Posted the other day about the Saver’s Credit which caused me to do a quick return review. Turns out I didn’t report my Roth IRA contributions on Form 8880 on last year’s return. My 457 contributions were on there, but they were below the $2,000 limit so I didn’t get the full credit. I can get an additional $90 back if I amended my 2007 return and included those Roth contributions.

My returns have been fairly simple since I started working and have never had to amend a return. The process is fairly simple once you understand the forms involved. The 1040X is used to explain the differences between your original return and your amended numbers. Since the increased credit only changed a few lines it was easy enough to fill out by hand. I filled out an updated 1040 and 8880 with the correct numbers and double checked everything. Just need to send it in and I should have my $90 in a month or so.

Amending a return isn’t a horrible experience, but it is a little time consuming. It took me almost 3 hours to figure everything out and get the forms reprinted. I almost didn’t bother with the amended return thinking it wouldn’t be worth the effort. If the difference was lower then I might not of, but $90 isn’t an insignificant amount of money. For 2008 I’ll be a little more careful and double check the actual forms before e-filing to avoid amending another return. TurboTax does a pretty darn good job of filling all the forms out, but I know my tax situation best and what strategies to use.

My comment on a post about checkbook balancing

I left this comment on the Your Money Relationship site in response to this post and the Mrs. A comments, Do You Still Balance Your Checkbook? I Sure Don’t

I’m one of the “young’uns” Mrs. A is referring to. I was balancing my checkbook right out of high school while I was working part-time during college, but I eventually stopped because it served no purpose for me. During college I was writing a few more checks, but now I only write 1 or 2 a month. 80% of my transactions go on credit (payed off every month and I never ever use debit) and the rest are electronic bank transfers. Those transactions get pumped into Yodlee Moneycenter and are categorized so I can see how I’m doing against my budget throughout the month and track spending with almost zero effort on my end.

So I could theoretically balance my checkbook and write every single electronic transfer down, but why? I’m already reviewing every single transaction the day after it posts to my checking account. Do I need to look at my monthly statement just to say “Yup I spent all that money.”?

Like Adam I don’t even look at my monthly statements, I just have to check in at Yodlee Moneycenter every couple days and see what’s posted to my accounts.

I don’t run my finances like a business because I don’t need to account for my expenses. How much did I spend on groceries last month? Was I under budget? Great, that’s all I need to know.

Does anyone still write everything down and balance their checkbook? I can’t imagine doing that with the number of electronic transactions I’ve got going.

Tax Time 2008: Retirement Savings Contributions Credit and IRAs

Now that we’re in 2009, it’s not a bad idea to start thinking about 2008 taxes. I don’t expect anything to be drastically different this year, but there are a few things I’m going to be looking at this year.

Credit for Qualified Retirement Savings Contributions
Form 8880 – TurboTax filled this in for me last year and I didn’t even know about it until I read more about it this year. In 2008, if you are filing jointly and have an Adjusted Gross Income (AGI) of less than $53,000 then you can receive a tax credit on a portion of your contributions to an IRA or retirement plan. Last year we were low enough to get the 10% credit on up to $2,000 of our contributions. Lower incomes receive a higher percentage back. Remember, tax credits > deductions.

Doesn’t sound like a big deal, but it’s actually a pretty good deal for those with lower incomes since the credit is a straight up reduction of your total tax bill. If you contribute to a Traditional IRA, you get the deduction there that brings your AGI down and then on top of that you get anywhere from $200-$1,000 back. The income limit for the 50% credit is low ($16k single, $32k joint), but if your income is in that range then you’d definetely want to contribute $2,000 to a Traditional IRA before April 15, the deadline for making 2008 IRA contributions. If you were in that situation you’d be able to put $2,000 away for retirement, reduce your AGI by $2,000 and get $1,000 slashed off your tax bill. I could see people in that situation paying $0 in Federal taxes when combined with other deductions and credits.

IRA Rollovers
I never rolled my SIMPLE IRA (money market funds) from my old job over to Vanguard and now would be a great time to do it considering equity prices are down. If I rollover into a Roth IRA then I pay taxes on the whole thing. I’ll only do that if we’re over the $53,000 limit for the Savings Credit and I can’t get my AGI under that with contributions to Sarah’s Traditional IRA. If I roll into my Roth I’ll eat the taxes this year and then roll Sarah’s into a Roth next year and be done with Traditional IRA’s for the foreseable future.

Traditional IRA deduction limits
And the reason I’m moving away from Traditional IRAs is the fact that we’ll eventually both be participating in employer sponsored retirement plans. If we are both active in an employer plan, then the Traditional IRA deduction starts to phase out at a modified AGI of $83,000. Once that phase out hits it makes sense to put money into a Roth IRA because of tax advantages and the fact that non-deductible contributions in a Traditional IRA really complicates things. Remember, Roth IRA contributions > Non-deductible Traditional IRA contributions.

So that’s just some of the stuff I’m going to be dealing with this year. I’ve still got a lot to learn, but it is nice to finally learn the ropes and be more aware throughout the year of things that affect our taxes. This year I’m getting the wife involved and she will be sitting down in front of TurboTax and filling out our return with my help. What do you think, should I add tax geek to my list of geekdoms?


Washington Mutual’s fall was quick and painful. The bank’s stock was down like 95% with a market cap of $2 billion and a couple hundred billion in outstanding loans so there’s no surprise they failed. What does surprise me is how quick they went down. I opened a checking account at BofA last week just in case so I’ll have to decide what to do with that. I was getting 4% in my savings account with WaMu, so if JPMorgan nerfs that rate I’ll jump ship. Too bad I didn’t know about BofA’s referral program before opening my account, could have gotten me and the Blarg $25 each. If anyone wants to move from WaMu to BofA let me know and I’ll send you a referral.