Monday, April 11, 2011

Questions for the Tax Lady: April 11th, 2011

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, is there any way to get an extension of time to file my state return? I live in California.

Answer: Oh, are you ever in luck! The California Franchise Tax Board, who is in charge of state income tax filing, automatically grants you an extension until October 17, 2011. No forms to fill out, nothing to mail in.

That said, if you owe more state income taxes than you paid, you still have to pay that by April 18th. You can pay by online
here, and you can pay by credit card, but additional fees will apply. Not sure if you owe? Check out this site to get a tax estimate. Remember, this is only for California income taxes.

Check with your own state’s taxing authority to find out whether you can get an extension of filing time as well.

Question: Is it better to use my refund to pay off credit card debt or save it for retirement?

Answer: Well, that all depends upon your financial situation. If your debt issues are causing problems, but your retirement savings are doing well, by all means, pay down debt (remember, highest interest rate debt first). On the other hand, if your debts are minimal and of the “responsible debt” variety (like student loans, or your mortgage) but your retirement savings are laughable, go ahead and use your tax refund to start investing in your future.

If you are like many people and your situation falls between these two extremes, I recommend using the rule of thirds: devote 1/3 of your refund to paying off debt, another 1/3 to saving for your future, and 1/3 to buy something you need now.

At the end of the day, there are no hard and fast rules for how you use your tax refund. It all depends upon your personal financial situation.

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