Color of Money Live

Mar 10, 2011

It's that time of year again: Your federal and state taxes are due in just over a month. The Post's personal finance columnist Michelle Singletary will be joined by Jim Dupree of the IRS to answer your questions about tax forms, filings, and refunds on Thurs., March 10 at 12:00p.m. ET.

Just finished my video chat. Hope you view it later. Got lots of questions so let's get started.

I printed out the payoff for my husband's car today and am mailing in the final payment. We've paid off my car and all of our credit cards in the past year. We still have my student loans and a mortgage, but we are definitely moving in the right direction. It feels soooooooo good. Thank you for your wonderful advice. It has been incredibly helpful. :)

I'm starting graduate school in the fall and need to borrow a chunk of money. I've done all of the FAFSA stuff and am waiting for a reply. I'm starting to get a little worried and wonder if I should contact a private lender now. (I paid out-of-pocket for undergrad so I don't know how this stuff works.) I've got 6 months until I start school and wonder how long I should wait for a reply before I take my own action. What say you? Thanks!

Would you kill me if I said you need to wait?

You paid cash for undergraduate, why not continue that trend and stay out of debt?


Good Afternoon! I have already received my tax refund (Federal and D.C.) and used it to pay off my student loans. They were basically 0% interest but I paid them off in 8 years instead of 10. I'm so excited! I'm taking a combination of tips I've read in this chat and set up automatic transfers into various accounts (new car, savings and Roth IRA) that total the amount of what my student loan payment was each month. I even set it up for the same day, so that I will not go a month without seeing a withdrawal on that date. I'm saving for a new car (one of the accounts) and hope to not finance more than $10K (assuming the current car allows that....) of the purchase price. I'm almost 32, SINK and feel like this will be my best financial year! Thanks for all the great tips you provide!

Oh my, I'm so very proud of you. Say, you deserve one of my debt defeater tee-shirts. They are free, well free if you send me your story to

I just highlighted a debt defeater in my live video chat. So come one one of my club members.

Again, congrats. I know it feels great to get that student loan monkey off your back. And your savings strategy is right on the money!

Don't worry, Jim is here. Just having some computer problems. I'll start posting his answers to your questions in just a bit. I think it's the rain!

Michelle, I've been reading your columns and chats for years, and I agreed with so much of your advice that I followed most of it. Now I'm 37 with no debt, a paid-off house, a maxed-out 401(k) every year, and enough savings to live on for several years if I needed to. My husband and I are not having kids, so the only things we're really saving for are elder care for my parents and our own retirements. I am having a terrible time figuring out what to do next, and I don't remember ever seeing you cover the next steps. Do you have any columns that cover what happens once you're financially secure and just accumulating savings? Are there any books you can recommend? Safe things like CDs have a godawful rate of return, the stock market is frighteningly volatile, and real estate investments don't seem much more secure. Any advice you can give would be appreciated. (Text chat only please, if you respond. I don't know if you pull from the text chat for your video.)

What's next?

Rejoice. Running in the streets.

Seriously, you are in a position few people are. So what's next is really what else you want to do with your money -- more charitable giving, helping other family members (any niece or nephews piling on college debt). Once you decide what you want to do with the money, the you decide where to invest it or whether to invest any more money.



After filing my 2010 taxes last month and receiving a refund, I realized I'd forgotten something...extra income, which means I need to pay the IRS. How much time do I have to do an amended return? Does that need to be done by April 18 because I now owe money?

You are correct. Filing an Amended return on IRS Form 1040X will prevent late filing penalties and interest if filed before April 18.

This isn't a tax question, but I hope that you answer it. I used my income tax refund to pay off my credit cards, and I now want to refinance my student loans, which are at 8 and 10 percent. How long after the credit card payments will my credit score be adjusted, such that I can reap the benefits on the refinancing?

The answer to that question is a mystery. The credit scoring companies won't really say. But you should see a jump in your credit score within the next several months. The card companies report to bureaus regularly so once the card company systems update for your payments that will be sent to the bureaus.

However, I'm not sure a higher score will result in your being able to get a loan to pay off those student loans. You would have to get a personal loan and if you owe a boat load of money that will be difficult in this credit market where companies are very reluctant to make such loans.

We put in a new efficient water heater and washer and dryer and new electrical panel in our second home last year? Can we apply that to the energy tax credits?

Here's what the IRS says about this credit:


Nonbusiness energy property credit. This credit, which expired after 2007, has been reinstated. You may be able to claim a nonbusiness energy property credit of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2010. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel.

 Limitation. The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.

You can find a nice list of qualifying home improvement equipment from the EnergyStar web site. Before you take the credit be sure you qualify.


I received a large settlement for physical injuries from a traffic accident in 2010. Should I put down the settlement figure as income on my income tax form?


From James Dupree:

Physical injuries or physical sickness settlements are generally non-taxable. If you receive a settlement for physical injuries or physical sickness and did not take an

itemized deduction for medical expenses related to this injury in prior years, the full amount is non-taxable and generally does not need to be reported on your income tax return. If you receive a settlement for physical injuries or physical sickness and did deduct medical expenses related to the injury, the tax benefit amount is taxable.


Is there an income limation for the CCTC? Can parents with joint custody get credit for their respective payments even during the years when the child is not claimed as a dependant?

Yes there is. You must reduce you child tax credit if your modified adjusted gross income is about $110,000 for taxpayers filing Married filing jointly - $75,000 for Single, head of household or qualifying wiodow(er) or $55,000 for taxpayer filing married filing separately. 

 The child must be claimed as a dependent on your return and lived with you for more than half of 2010.

I'm freaking out! I need to save a large amount of money in a small amount of time ($2000/6 weeks). My salary is not huge. I have a student loan and hardly ever use my credit card. Any mantras to help get through? Thanks sooo much.

I'm not sure I have a good mantra other than to say cut everything you possibly can, perhaps look at getting a part-time short for the short term (maybe working nights stocking shelves, etc.). 

But I know freaking out won't help the situation.

Michelle... I recently changed my W-4 withholding number from 2 to 4... From my understanding, will this number increase the amount of money I bring home during the year and decrease my annual tax refund? Although I do like to receive the refund, I am more interested now in bringing home more money during the year versus getting a big refund...

To really tell what the change will do, you should get help from a tax professional or walk thu your tax return with the higher withholdings. Don't just guess.

The amount of money withheld from your paycheck is determined by the number of allowances you claim on your W-4. The W-4 has a worksheet to help you figure out how many personal allowances to take, based on what tax deductions or credits you expect to claim on your return. You can also use the IRS online withholding calculator at In the search box, type "withholding calculator." You will need your most recent pay stub and a copy of last year's tax return. 

In Wednesday's column, you briefly said that using a debit card is not the same as cash. Can you elaborate? Any links/resources would be great too. Thanks!

Well you can search the archive of my columns because I've addressed this before. This question I assume stems from my column today: In the battle over swipe fees, consumers will lose

So here is the deal. Using your debit is not the same as cash because you can spend more than you have in your bank account thanks to overdraft protection. And even if you opt out of overdraft, several studies have shown when you use plastic -- credit or debit -- you tend to spend more than if you use cash. 

I am curious - every year we file our taxes (we have 3 minor children), are homeowners (mortgage holders), both work full-time, use the Flexible Spending Accounts, one of our children is in Pre-K, about to start Kindergarten. We know people who pull in $10,000 tax refunds. We are not those people. We have tweaked our W-4 each year and it never comes out "a wash" - we owe nothing, we get no refund. Are we calculating incorrectly? Or is this just something we have to learn to live with? I would love to neither owe or gain at tax time. Just file and be done with it. If we get a large refund, I think "we left $ with the gov't all year". If we owe, that just hurts. NOTE: The last few years, hubby has gotten laid off and collected Unemployment - requested no taxes be taken out - so we have to pay them at tax filing time. If he had the taxes taken out, it would eat into an already smaller paycheck. Then, he is called back to work and we go on through the year. THANK YOU!!!!

Check out the IRS online Withholding Calculator at IRS.Gov.... It can help you determine whether you need to give your employer a new  Form W-4, Employee's Withholding Allowance Certificate to avoid having too much or too little Federal income tax withheld from your pay. You can use your results from the calculator to help fill out the form.

Is it worth it to amend three years of prior filings if it nets us about $800 per year but my spouse (gay couple filing single with federal) will not only have to pay back $4000 in refunds per year, but also owe the government about $2000 per year in taxes? We had two houses for the past 3 years and each of us claimed one house in our taxes. However, I make more money than my spouse and just learned this tax year when we sold one house that we would have received $800 more per year in refunds if I had claimed everything. Is there a way we can figure out if it's worth it to amend? For instance, what, if any, interest my spouse would have to pay on (1) the $4k he received each year in tax refunds; and (2) the$2k he would owe each year? Can we do this without raising audit suspicions? I'm thinking it's not worth it - live and learn - but the frugal side of me wants to do the calculations. Do you think it's worth it?

I think -- know I know -- you should talk to a tax professional. Your question is a bit complicated but it says if you refile your return you get money. If your partner he will owe but it sounds like he didn't do his return correctly anyway. There's a chance the IRS won't catch this but if they do, the penalties for any underpayment for your partner could really add up. 

Hello Michelle! I have to disagree with the idea that *I* am addicted to my debit card - I use it just as I use cash, except that I don't have to carry as much cash in my wallet or deal with personal checks. For me, it makes my life so much easier. And I have yet to bounce any transaction! On another note, I followed your advise 3 years ago and had my credit card debt negotiated with MMI. I'm still on the program and was able to pay one of my credit cards off today! Several more steps left to go, but I am closer to being debt free today than I was 3 years ago. Thanks!

Perhaps addicted was too strong a word but the fact that people can't imagine operating without it suggest a strong attachment to this form of payment. I have counseled a lot of people who think they are doing just fine using debit and not cash. But they are also overspending because they don't see all the cash going out of their account. There is something about having to hand over cash that gives your brain a signal that money is being spent. That is my point.

And good for you for taking care of that credit card debt.

You'll never be able to get your withholding to exactly match what you owe. You can minimize the difference, so maybe you get a $53 state refund and owe the Feds $102 (or vice versa), but it will never come out even. There are too many variations throughout the year--your mortgate interest deduction goes down slightly every year as you pay off your mortgage, your property tax rate changes, your charitable contributions vary, etc.

Thanks. I think this will help folks understand.

I'm embarrassed to ask my local IRS person this...I'm on a payment plan for my taxes. Has anyone ever requested to have their wages garnished? I take extra out of my paycheck every month to pay the next year's taxes anyway...seems like I could do the same for taxes that I currently owe.

No need to feel embarrassed! <smile> An installment agreement allows you to make a series of monthly payments over time and the IRS offers various options for making monthly payments, such as: 


Direct Debit from your bank account 

Payroll Deduction from your employer 

Payment via check or money order 

Payment by Electronic Federal Tax Payment System (EFTPS) 

Payment by credit card via phone or Internet, or

Payment by Online Payment Agreement (OPA) 


To initiate a payroll deduction installment agreement, submit IRS Form 2159, Payroll Deduction Agreement. Form 2159 must be completed by your employer. The IRS will set up a regular installment agreement for you and convert it to a payroll deduction agreement upon receipt of the completed form from your employer. 


Here's a link to the form:

My daughter graduated from college in 2010. She is now getting the bills for student loans, but is applying for Grad school. I told her I would pay the undergraduate loans while in Grad school. Since I am a co-signer on the loans, would I be able to claim the interest on my taxes or can only she claim this? Thanks.

If your modified adjusted gross income (MAGI) is less than $75,000 ($150,000 if filing a joint return) there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. 


Check out IRS Publication 970 (2010), "Tax Benefits for Education," for additional info:


Hi Michelle, love you and your chats. My husband and I are in our early 30s, with secure and stable careers. We both have 401(k)s that are worth less than 100k right now and a life insurance/investment program that will pay dividends when we turn 55. We used to have a Roth IRA accts, but have less than 10k in there because we no longer qualify with our incomes. At this point, I feel like we're not doing enough for our retirement. Should we open a regular IRA? Contribute more to our 401k instead of just matching? What should we do more to ensure a better retirement fund? Thank you.

Go to There is a ballpark retirement calculator that will help you figure out if you are saving enough for retirement.

Saving money is a slow race, not a fast one. Is the 2k a want or a need? It is something that you can put off a couple of months? Do you already have a budget in place?

Good questions for the person trying to save. I figured it was necessary otherwise why the rush.

I know what I want to do with the money - use it to try and retire earlier, and be as comfortable as possible during retirement. (We already donate to charities every year and help out our families.) So now how do we figure out where and how to invest? Is it just time to move beyond the limits of your advice and find a financial planner?

Probably. The important thing is to figure out how much income you want in retirement and then figure out if you have that already and if not where can you/should you invest it to meet your goal. That, I'm afraid, is not something I can do for you.

Michelle -- We just paid off $15,000 in credit card debt over the past two years (hooray!!). Nice feeling to have that behind us. Now -- what do we tackle next? Between my spouse and me, we have $~75,000 in student loans with interest rates between 1.85% and 2.25% and we have ~$51,000 in a second mortgage with an interest rate of 9.25% (I know, I know ... big mistake ... no need to get into that. What's done is done). We can't refinance the second mortgage as the house is underwater. Many thanks.

In this case your lowest debt is also the debt with the highest interest rate so I would aggressively go after paying off the second mortgage. And I agree, what is done is done. I don't typically lecture folks when they've made a mistake UNLESS they are in denial. No need to kick a debtor when he or she is already down (smile).

You are a clarion call for consumers to pay attention to those transaction fees, debit card debits, service charges, bag taxes and the creeping cost, often cent-by-cent, of living. I used to shrug off the complicated Pepco bill, Comcast charge and the more than occasional "I don't what that $3 is for but it's not worth fighting about" fee from some company and just write my check or click pay. No more. I'm being taken; and if I don't stand my ground, no one else will. I'm looking at my bills. I'm looking at how and when I pay them. I'm looking at what is necessary or luxury. (E.g., ATM fees? No, thank you.) Appreciate your column. Keep up good work. And in what ways do you think most households miss ways to save money?

I hear you my friend. Good for you. I too, try to pay attention to the small things. I once held up a line in the grocery story because the cheese I was buying was labeled on the shelf as being on sale but the sale at ended. Not my problem. I picked it up because it was supposed to be on sale. And that's the store policy. If they mislabel an item, you get the sale price. Think the savings was about $1.50 but it was worth it. 

And really it's food that bust many people's budget. They don't pay attention to the extra they spend in the grocery store and eating out. Second is transportation. Second biggest item in people's budget because we can't hold unto our cars. Got to upgrade all the time.

Hi, this question is for Jim. I am the personal rep for my father's estate, and the IRS is auditing the 706, which is not unexpected. We really cannot afford the attorney who prepared the return for help with the audit, as he would charge $14,000 for the initial response to the auditor's request for information. Am I crazy to think I can handle this on my own? I already have all the information compiled, but is the IRS auditor out to try to find more tax come hell or high water? Or does the auditor really simply want to make sure we're paying the correct amount of tax? We took a discount on the property where my father lived because he was murdered there (per the advice of the attorney). So my fear is that the auditor will not allow this, even though we have multiple offers on the property which were withdrawn specifically because the buyers learned of what happened there (and we have that reason in writing from buyers). Thanks!

I can assure you, the IRS Auditor's job is to make sure you are paying the correct amount of taxes due, if you have to pay.

I have a full-time job and also do some freelance work. One of my clients still hasn't gotten me my 1099. Claims to have mailed it two weeks ago. They finally sent a pdf so I can finish my taxes. But this has happened before with them. Client is actually fine, it's the accountant who has worked for them for years who is remiss. And has been so in the past (missed W4s, 1099s, late payroll). Is there an IRS deadline by which I should have received the form from the client and if so and accountant missed it, can I report him to the IRS? Thanks.

Here's a good article on this on since I don't have a lot of time. There is a deadline, Jan. 31 I believe.

If a company does not furnish employees with correct W-2 forms by the deadline, does not receive an extension and cannot show good cause for the delay, it may be penalized by the IRS. But just so you know, it's possible the company will be penalized not the bad accountant.


What forms do I use if my spouse died in April of 2010? I always use 1040a and we always filed jointly.

I'm sorry to hear of your loss.As the surviving spouse, you are considered married for the whole year for filing status purposes. If you did not remarry in 2010 you can continue to use the 1040a form.   After that, if you do not remarry, you must file as a qualifying widow(er) with dependent child, head of household, or single. 


For more information about each of these filing statuses, see IRS Publication 501:

Hey, I know we didn't get to as many tax questions as I had hoped. Computer issues. But I'll get Jim to answer some leftover questions and either print them in my Post column or in my eletter. So if you don't subscribe to the eletter please do.

Thanks for joining me today.

In This Chat
Michelle Singletary
Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Thursday and Sunday. Her award-winning column is also carried in more than 120 newspapers. In her spare time, Singletary is the director of a ministry she founded at her church, in which women and men volunteer to mentor others who are having financial challenges.

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James Dupree
James Dupree is a media relations specialist for the IRS.
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