Wednesday, September 23, 2009

I Fought the Tax Man & Won

Back in July I received a letter in the mail that nobody likes to receive...An audit letter from the IRS. They had looked at our 2007 tax return and found some differences than what was reported to them, so they asked us to clarify them. Here is the details:

1. There was a large amount on a 1099-C from forgiven debt that they did not see within the income portions of 1040.

2. There was $1 of interest received on a bank account that we had not received a statement on. The $1 of interest did not affect our amount of tax owed.

Because we were insolvent at the time, we had filled out the proper form electronically to inform the IRS that the forgiven debt should not be considered as income due to our insolvent situation. It appears though that the information did not transmit to them properly. What we did to fix the problem was we provided a copy of the form that was submitted electronically, provided a net worth statement based upon the date the amount was forgiven, a letter explaining the situation, and a form they included with the audit letter filled out. We were able to provide the net worth statement due to my thorough tracking through

A couple weeks after we had mailed in the information we received a letter informing us they had received our information and were reviewing it. Last week in the mail a letter stated that they had reviewed the information and that they corrected their information and we owed nothing. We're saving that letter with our 2007 taxes as a precaution. In addition, our 2009 taxes will be mailed in on paper so that we can make sure the information is transmitted correctly to them for the forgiven debt.

Sunday, September 13, 2009

Why File for Bankruptcy?

I spoke to my father just a few minutes ago and he has been toying for years to file for bankruptcy. His credit was trashed back in 2002 when my step-mom passed away and he hasn't had credit cards since at least 2005. He is going out of the country for 6 months this winter and was considering filing for bankruptcy next summer. The question I asked him is "Why File for Bankruptcy?"

Personally, I seek to pay off all my creditors, but for him he does not want to. He also does not plan to buy a house in the coming years, he is on social security disability payments and does not own anything of value. He also does not have any retirement money put aside. Due to his health, all he wants to do is rent a place to live, have a basic car to drive places, and spend time with friends and family.

His concerns was that people were telling him that they can potentially pull money out of his bank account or take his social security benefits. I let him know at least in Illinois that they are not able to do so since he does not receive wages and all of his income is from social security. At the end of the call, he agreed with me and is considering not filing.

How many others out there in the foreclosure fiasco will be like my dad in 5 years and realize that all they really want out of life is a place to lay their head, a car to take them places, the ability to spend time with friends/family, and a tv to entertain themselves when no one is around?

Friday, September 11, 2009

Why Am I Focused on My Finances?

Yesterday was a rough day at work, I got reminded about how I really can't take much of a vacation due to no one else there to take up my slack and I had a disagreement with a co-worker over e-mail that my boss ended up being on my side (I was focused on our lack of customer service for a client, my co-worker was upset I spoke up on his project). It got so bad that I called my wife in the afternoon saying "I'm about ready to just leave this place!"

She as the sensible woman she is calmly reminded me of why I am there and the reason we've been working on our finances the past couple of years. She said "This job is a means to end right now so that in the future we can reach our goals." and then reminded me of some of them. I have probably listed them in past posts, but here they are:

Retire at 42: I don't want my kids to grow up with the concept that Dad goes to work for 12 hours a day, comes home, eats dinner, then goes to bed. There are things beyond work that I want to do with my wife and kids that "retirement" will make happen. My definition of "retirement" is more along the lines of financial independence, where I will probably still be involved in money-making projects, but it won't be me worrying if we'll have enough for the next month or even next year.

Trip Around the World: Once my kids are high-school age, I want to take them on a trip around the world with my wife. We would spend at least a year visiting a variety of locations, both the standard touristy locals and the places in the world with need. I believe this will help them understand different cultures better and give them an appreciation for everything they have. I also pray that they may come to Christ during that trip if they have not done so yet.

Missions Work: I want to be able to take 3 months and go help with Habitat for Humanity, building homes for those in need. I have a heart for meeting the basic needs of others (food, shelter, water) that is hard to listen to when my own family has troubles with those basic needs. I want to build water pumps where people are walking miles right now to get fresh water. I know I can currently send small amounts of money to organizations involved in such programs, but I want to be the hands and feet of God and involved in the work myself.

Create Companies to Create Jobs: We officially started this process on my birthday this week, incorporating our urban farm business. We will be hiring at least 1 person next year with the possibility of 2 or some temp labor. My feeling on unemployment is that people have forgotten that jobs are created, not found on a "hunt". For example, instead of complaining about not having a job, one can look at their skill set and say "How can I use these to create a business that meets people's needs or wants?". One person sees a 1/2 acre back yard as something they have to spend money to upkeep in mowing and watering, while I see a gold mine just waiting to be utilized to grow local vegetables.

What would be on your list of reasons why you are focused on your finances?