What I’ve Been Up To

This Week in Your Wallet: January 31, 2012

Filing your taxes can be a complicated process — after all, there have been nearly 15,000 changes to the tax code since 1986.  That’s why many of us put it off. But when you do decide to sit down and do the deed, you want to be sure not to miss out on important deductions that are rightfully yours.  You also don’t want to flag an audit.  Last week, I went on the Today show to talk about some do’s and don’ts of tax season. Here are some of the most important points:

• DO file for any charitable contributions you’ve made. Make sure you have records and receipts for even the smallest of donations. Those cans of soup you leave with your church every week do add up.
• DON’T let these charitable contributions look out of whack with with you earn. Any inconsistencies in your filing will create a red flag for the IRS.
• DO file for job hunting costs if it amounts to two percent or more of your gross income. This might sound like a lot, but if you’ve been out of work for awhile and have spent significant amounts of money looking for a new job, this could help you out a bit.
• DON’T get tricked by the home office deduction. Yes, you can apply for this, but the rules around it are strict: it has to have a space that you use exclusively for business  and it has to be your principle office.
• DO get help. When you use a pencil and paper and try to do all of this on your own, you miss out on all these deductions. Using a program like Turbo Tax can save you time, money and, most importantly, aggravation.

For more details on tax season do’s and don’ts, you can read a column I wrote here. And, for those of you who filed early, this USA Today story has an update on when you can expect to receive your return. (Spoiler alert: It might take a week longer than you were planning.)

And now, here are the other headlines for the week:

War of the plastics, round two

According to an article from LowCards.com, there is another looming battle over credit card swipe fees (last year’s, you’ll recall, was about debit card swipe fees).  This is one that could impact the consumer in a bad way. Here’s what’s going on: There is an antitrust suit between five million retailers and Visa, MasterCard and 13 large banks, including Citi, Bank of America, Chase, and more. Retailers are saying that banks and the payment systems have unfairly worked together to increase the fees retailers pay on credit card transactions. This antitrust suit could lower these fees by as much as 75 percent. This would be great for retailers, but not so good for banks — and by extension, not so good for you. Because if retailers get their way, banks will likely try to compensate for the lost income by decreasing rewards programs, increasing convenience fees and increasing interest rates.

Nothing definitive has happened yet, but stay tuned here for updates. I’ll certainly be watching this situation with interest. In the meantime, you can read the full LowCards article here.

Size really does matter

Bill size, that is.

You’ve heard me say this before, but a new study from the Journal of Consumer Research further confirms that people are less likely to spend money if they’re carrying larger bills. The study builds on 2009 research that found that people were more likely to spend four quarters than a $1 bill, and more likely to spend five $1 bills than a $5 bill.  Mentally, larger bills seem like more money, so we’re reluctant to break them, especially on insignificant purchases.  Smaller bills are quickly eaten up, as we mentally classify them as petty cash.  The takeaway:  If you’re looking to save cash, carry Benjamins instead of Lincolns.

As for other sizes that matter, check out this Today clip if you haven’t seen it yet.  (It’s funny!)

Of mice and insurance

Finally, I want to take a quick minute to thank everyone who sent in their answers to last week’s trivia question! The correct responses were: “To a Mouse,” a poem by Robert Burns (written in 1785, it goes, “The best laid schemes of mice and men/ Go often askew…”) and of course, “Of Mice and Men,” the novel by John Steinbeck and whose title was inspired by Burns’ poem. Winners should have received a notification yesterday, but if you weren’t a winner, don’t fret — I’ll continue to do giveaways every once in awhile.

And for one last matter of housekeeping: As I’m sure you know by now, I have a new show coming out! We’re working on an episode about insurance, and we’re looking for viewer and reader questions. So if you’ve got insurance questions — about car insurance, life insurance, home insurance — I’ve got answers! Send them to jean@jeanchatzky.com and I’ll answer them on the show. Feel free to send your non-insurance questions through, too. The show is about how to manage your money and prepare for retirement, so any and all questions are welcome!

Have a great week!

Jean