Author: lpaulriddle

Tax planning 101…

lpaulriddle

OK, so our 2007 taxes are done. Up till now, taxes were always something I did after the end of the tax year. At that point, all the forms are available from the relevant taxing authorities; tax software is available; I know exactly how much we made, how much we paid in taxes; etc. So with all the ducks in a row, I would typically knock off a given year’s taxes by the end of January of the following year. Now, I’ve decided to take this a step further, and turn taxes into a kind of ongoing thing that I work on over the course of the tax year. Being the obsessive financial control freak I am, this is always something I have wanted to do, but it’s always seemed prohibitive. Estimating the current year’s income is not a big deal and can be done with varying degrees of accuracy, depending on how much time you want to spend. But what about tax forms, software, etc.? These are typically not available until late in the tax year. So how do we do this? Enter the spreadsheet.

I’ve always used tax software to prepare our taxes. Tax software is great for what it does: it streamlines the tax preparation process, generates IRS-friendly hardcopy, and facilitates e-filing. Where it falls short, IMO, is in its ability to play out “what-if” type scenarios. What happens if I use FIFO vs. average cost in computing a capital gain? What would happen if I take the standard deduction vs. itemizing? How close am I to getting tripped by the AMT? etc. I want to be able to tweak certain numbers on my forms, and instantly see the end result in taxes owed, refund, etc. With tax software, I have always found it cumbersome to go through, tweak things like this, and see the results. This is the kind of thing a spreadsheet excels at (no pun intended). So, for 2007, I took the plunge and wrote up a spreadsheet to do my initial tax calculations, falling back on the tax software to verify that my numbers are correct. It wasn’t too hard, and I really like the instant gratification I get from changing one number and immediately seeing the result. I also realized something else, after using software exclusively for so many years: doing the spreadsheet really gave me a better feel for how the tax code works, and why certain things are the way they are. Software, by its design, insulates the user from a lot of what is happening behind the scenes. This is good in some ways but bad in others.

After the initial spreadsheet exercise, I realized that the spreadsheets would also be useful for tax planning during the current year. The key to this is keeping up with changes to the tax laws since the previous year, and adjusting the spreadsheet to accommodate them. Most years, there aren’t many changes. The IRS re-indexes the tax brackets every year for inflation, which changes the tax tables as well as employer withholding tables. Using this data, one can compute paycheck withholding and come up with a pretty clear picture of salary income for the coming year. Projecting the other stuff (investment income, etc) involves a bit of hand-waving, adjusting various things to account for inflation, etc. The important thing to keep in mind is that most peoples’ tax situation does not change much from year to year. As the year progresses, I’ll just keep updating the spreadsheet to replace projected numbers with real numbers.

Doing this opens up a lot of planning possibilities. I now have a much clearer picture of how many withholding exemptions to claim on my W-4, and as the numbers become more accurate over the course of the year, I’ll be able to do more accurate year-end planning too. And, my taxes will be more-or-less finished at the end of the year.

This exercise has already helped me out this year. It alerted me that I’m losing a capital-loss write-off that I’ve been able to claim for the last few years (since selling off some of my wife’s really bad mutual funds :-)). Well, after several years of carryover, I’ve finally churned through the loss, and will flip back into the black in 2008, losing the write-off and creating an extra several hundred dollars in tax liability. So, time to bump down the withholding exemptions and tighten the belt a bit. Better to know that now, then get surprised with a huge tax bill (complete with penalties etc) next year.

Server shuffle again

lpaulriddle

My server shuffling is finished, and went off (almost) without a hitch. Slight hiccup installing my new Zonet USB 2.0 PCI card. When I first popped it in, it worked fine. But for some reason, after I finished all the hardware shuffling and booted back up, the Linux kernel no longer recognized the USB 2.0 EHCI host controller on the card.  I ran ‘lspci’ and the card was there, but it showed only the UHCI (USB 1.1) controller.  And of course, I had just cut the UPC off the box and mailed in the rebate submission, thus rendering the card un-returnable.  Funny how those things work.

Anyhow, before I tried anything drastic, I upgraded my Linux kernel from 2.6.20.1 to 2.6.23.14 (the latest revision as of this writing), and damned if that didn’t fix it. Not sure if this was a one-time glitch, or if the newer kernel actually fixed something related to this. But in any case, I’ll keep an eye on it. I can’t complain too much.. the thing only set me back 8 bucks.

Weekend update

lpaulriddle

Kind of a lazy weekend so far. It’s too cold to really want to go out and do anything, so everyone is just puttering around the house. Yesterday I drained the pool water back down below the tile line. First time doing that so far this winter. Since closing, the water had crept back up several inches. Before that, we hit Macaroni Grill for an early lunch to celebrate my b-day, and I picked up some telecom equipment at Home Depot so I can work on rewiring the phone jack in the master bedroom. I have never wired a 66 punchdown block before, so this is going to be a learning experience. I think I am going to use the 66 block to replace the existing screw-terminal phone junction in the boiler room, which is a bit of a bird’s nest. It’s going to take a little planning. I will probably end up taking a day off work to do it, on a day when I can have the house to myself.

Today I have mainly been working on spackling and sanding the trim in the master bedroom, in preparation for painting. Most of the prep work has been concentrated on the trim. Years ago, someone decided to mount a phone jack near the entrance to the bathroom, so they tapped into an existing jack behind the bed and ran phone wire along the trim to the new jack. The wire was meticulously tacked along the baseboard, up one door opening, over three doors, back down, across more baseboard, up and over the bathroom door, and finally back down to the jack. It was really quite impressive, especially considering they could have run it through the basement, which would have taken about half the time, used about half the wire, and resulted in a nice, concealed wiring job instead of a massive eyesore. But, I digress. Anyhow, I pulled out all the wire, which was (of course) covered with several layers of paint, leaving me with a big patch and spackle job. But it’s almost done now, and soon we’ll be painting. Can’t wait.

The server shuffle

lpaulriddle

I’ve decided to do a bit of server shuffling this weekend. I’m basically going to do a case/motherboard swap of concerto, my 700mhz server at the office, with my 450mhz server at home. That will give me a little bit more CPU at home to run stuff like GnuCash and OpenOffice inside my VNC desktop. The motherboards in the two boxes are very similar, so this should be a really easy swap… no new kernels needed, etc. Ironically, this will put concerto back on the original hardware that ran it, which should more than suffice for what it runs now, namely Apache, MySQL and Samba. One difference between the two motherboards is that [I believe] the 700mhz board does not have an ISA slot. That means I won’t be able to use my really-old ISA 56K modem card at home any more. I don’t think I’ll miss it, though, and if I do, PCI modem cards are cheap.

Yesterday I ordered a Western Digital “My Book” 750G external USB hard drive from newegg.com. I need something portable to use for backups of important documents, digital photos, videos, music, etc. The sale price was $175, including free shipping. That works out to just over 23 cents per gigabyte… amazing. And a few years from now, that’s probably going to seem expensive.

Of course, to get any kind of transfer speed out of a USB hard drive, USB 2.0 is a necessity. My old machines only support USB 1.1 on-board, so I also needed to buy a USB 2.0 PCI card. These are amazingly cheap now too. Grand total of $9.99 – $7.00 mail-in rebate, or $2.99. Technology is a funny thing. Compared to 10 years ago, the price of milk and gas seems sky-high nowadays.  But that same 10 years ago, I paid $3000+ for a 300mhz Pentium-II with an 8 gig hard drive, which seemed unthinkably cutting-edge at the time.  Computers (and electronics for that matter) are cheap, cheap, cheap now by comparison.

Taxes, painting and stuff

lpaulriddle

It’s been a while since I wrote anything here, mainly because I have been swamped at work, getting ready for a presentation next week at Educause, my first foray into public speaking since, oh, 1995 or so. That was back in the days of transparencies, so it’s been a while. And I do have to say, there are much better tools around for preparing slides nowadays. But anyhow, it’s been pretty all-consuming writing up this presentation, and by the time I get home I haven’t been much in the mood to write anything else.

Interesting tax-related development here in the People’s Republic of Maryland. It seems that the legislature has raised the personal exemption amount for 2008 a whopping 33%, from $2400 to $3200. This is the first time Maryland’s personal exemption amount has changed since 2002, when it rose from $2100 to $2400. Apparently this is the legislature’s way of providing relief to the “working families” they are always harping about. This is in contrast to the governor’s original plan that would have widened the lower-income tax brackets, and being a flat tax advocate, I think it’s a better idea, although it benefits fewer people. For a typical family of four (like us.. imagine that) this results in $3200 less taxable income in 2008 than in 2007. Maryland has also completely overhauled how they figure payroll withholding. For me, that resulted in about $27 less state tax being withheld from my paycheck. This seems like a lot. According to my handy spreadsheet, an exemption amount of $3200 would have resulted in $254 less in taxes owed in 2007. Extrapolating the $27 withholding difference out to 26 paychecks results in $702 less tax withheld in 2008, leaving me $448 in the hole. There must be something I’m missing here, or I’m going to have to tweak my withholding exemptions again.

In other, less exciting news, we are finally getting ready to paint the master bedroom, several years after buying the paint. In preparation, I’m putting in a new phone jack. The original jack was one of those “woodwork warts” that was surface-mounted to the trim. I hate these, so I’m getting rid of them as we paint the rooms, in favor of flush-mounted wall jacks. This will be the first phone jack I’ve rewired, so I’m going to do it right and use twisted-pair cable with a Leviton “QuickPort” punch-down type jack. In the basement, I’ll install either a patch panel or a 66-type punch-down block (haven’t decided which yet) and splice it into the old quad-conductor cable that makes up the rest of the house’s phone wiring. Then as I replace jacks down the road, I’ll replace the quad with Cat-5. Doing this might improve our DSL speeds, too.

Back to the grind

lpaulriddle

The holidaze are now in the rear-view mirror, I’m back at work, the kids are back in school, and we’re back to our normal, boring day-in day-out routine.  For me, unlike the previous two years, the break didn’t feel too long.  That may have been because it was only two weeks as opposed to 16-18 days in past years.  Or, it may be because this year’s break was punctuated by a nice, whole-house case of the stomach bug.  Mmm, fun…  pass the Immodium, please.

Measured against past holiday breaks, this one was fairly productive, which I know is not saying much.  Got the tractor more-or-less winterized, the leaves more-or-less cleared, the house more-or-less grounded, and the master bathroom sink drain more-or-less fixed, and started prepping the master bedroom for painting.  All in all, not too bad.

I cracked a bottle of homebrew on Christmas Eve, 8 days after bottling, and it was pretty good, although still in need of a bit more conditioning/carbonating.  It compared favorably to the 2007 Anchor “Special” Holiday Ale I drank around the same time.  I imagine by now it’ll be fully carbonated and really good.  Will probably try another bottle this weekend at some point.  Need to get my taste for beer back first 🙂
Painting the master bedroom is the next big project on the docket.  There’s a bit more prep work to do (sanding, spackling, relocating a phone jack) but all in all, it’s about ready to paint.  Just need to come up with a good day to do it, and put it on the calendar.  Once that’s done there’s the laundry station.  These two should take us up to late winter or early spring, at which point we need to do something about the basement walk-out steps.

All of which brings us to…  this weekend’s to-do list.  This weekend is kinda booked up, so this is an accordingly brief list:

  • Install new fill valve in toilet in kids’ bathroom (never got around to this over the break)
  • Sanding and other prep work in master bedroom
  • Retirement portfolio rebalancing & 2008 tax planning

Today in review

lpaulriddle

Today marked the start of the 2-week Christmas break. I actually managed to get a few things done. First off, I came up with a temporary fix for the house’s grounding system, which faithful readers may recall was interrupted when we had our copper water main replaced with plastic. I realized that we had a copper line running underground from the well room to the old abandoned hand pump by the garage, so I bonded it to the copper water pipe just downstream of the pressure reducing valve. Not sure how good of a ground it is, but it’s definitely better than it was, and it buys me a little time to plan how to do it right.

Next up was the master bathroom sink, which had been out of commission for a couple months. My original attempt at snaking the drain was a rush job and did not work out too well. This time I took my time and pulled out a big plug of hair. Then I put the drain back together and poured several big buckets of hot water down to try to clean things out a bit. Not sure why this drain in particular has so much clogging trouble. I think for starters, I’ll get a strainer for it to keep hair out of it. Then I may see about rerouting the A/C condensate drain, which currently runs into the drain via the attic vent.

Also managed to bag up some leaves for yard waste pickup today. Leaf removal is running behind schedule due to inclement weather. At the rate I’m going, I may be putting leaves out all the way up to January 21, when the pickups end for the winter.

To do for the rest of the week: finish winterizing the tractor, clean the humidifier, caulk the sill plate in the back part of the basement, replace the toilet fill valve in the kids’ bathroom, and work on getting the master bedroom ready for painting.

Beer bottled

lpaulriddle

I managed to sneak a couple hours this afternoon and bottle the beer, in the hopes that it’ll be carbonated and ready to drink by Christmas Eve. That completes the batch, for better or for worse. Final gravity was around 1.020, so with an initial gravity of 1.070, that translates to about 7.5% alcohol by volume. Should be just the thing to prepare for the Church pageant. 🙂 Total bottle tally was: 21 × 22-ounce bottles and 12 × 12-ounce bottles, plus about 8 extra ounces which I dutifully consumed. It was quite good. Not sure what it is, but the beer always tastes better out of the bottle than out of the hydrometer flask.

Lesson learned for today: I forgot that it’s harder to siphon out of a carboy than a plastic bucket. You can’t reach into the carboy and control the depth of the hose. I lost my suction a couple times because of the hose’s tendency to coil up, and my inability to hold it where I needed it. Next time I will use a racking cane, which should make it a lot easier.

Tax Time Again

lpaulriddle

You know you’re a financial geek when you’re working on taxes a full 4 months before they’re due, and before the tax year in question has even ended. The People’s Republic of Maryland hasn’t even released its 2007 tax forms yet, so for now, I’m working on fed.

This year, for the first time, I’m taking the true hard-core accounting geek route of using a spreadsheet to do our taxes. It really hasn’t been that hard, and it allows me to play out some “what-if” scenarios that would be hard to do with canned tax software. When it comes time to file, I’ll use TaxACT for federal and Maryland’s iFile for state, both of which are free. When all is said and done, I’ll have a set of spreadsheets I can use every year with only (hopefully) small modifications. The spreadsheets will also help me do more accurate tax planning throughout the year.

Last year’s tax planning appears to have had the desired effect: It looks like we are going to owe money rather than getting a refund. I’ve set aside money to cover the taxes owed, and it’s been spending the year earning interest for us rather than Uncle Sam. We are actually going to owe a little bit more than what I had planned, because of Cathy’s extra income from child care. I think we’re still below the penalty threshold, but for 2008 I may want to increase my withholding just a tad.

Last week, H&R Block sent me a TaxCut 2007 CD in the mail. They want $40 for the “premium” product that includes state, but no free e-file. Unfortunately, TaxCut is not nearly the deal it was up till a couple years ago, when I last used it. Back in the day, it cost $20-$25 and included free federal e-file. When the price jumped last year, I switched to TaxACT and was pretty happy with it. I did notice that Block is now giving away their DeductionPro software, so I grabbed a copy to help tally up all of our non-cash donations.  The software still works OK, but the UI is not as nice as it was in past years (in particular, I couldn’t find a feature to search for an item).  I guess you get what you pay for.  In any case, I do applaud them for making this available for free, as it does save me some work.

Fast Fermentation

lpaulriddle

I racked the beer into my glass carboy this morning. Specific gravity was an amazingly low 1.025 (give or take a few thousandths), indicating that the beer is already almost finished fermenting. That was really fast, and it also may account for the lack of activity I noted in my post a couple days ago. However, I’m still not convinced that my bucket lid is airtight. I’m much more confident in the carboy, and the carboy is occasionally bubbling, but there’s definitely not much activity. At any rate, it looks like the beer will be ready to bottle before too long. My first good bottling opportunity is coming up in two weeks, on the weekend of the 22nd-23rd, when (by some miracle) we don’t seem to have anything else going on. Barring that, we’ll try to get it done the week after Christmas. With any luck, it’ll be carbonated and ready to drink around my birthday.

Taste-wise.. the sample was nice and smooth with the spices (orange, cloves and cinnamon) dominating the flavor. Strong but not overpowering alcohol taste, with just enough hop flavor to balance things out. Definitely tastes like it’s almost done.

Really happy with these results so far. I’m sure the starter culture contributed to the fast fermentation, so I’m going to try to do one for all of our future batches.