How To Save $1,000 On Your Taxes By Investing In Your Future

According to a survey conducted by Transamerica Center for Retirement Studies, less than 12% of Americans are aware of what is called The Savers Credit — a way to save up to $1,000 on their income tax. Yes, believe it or not, the government will credit low- and moderate-income taxpayers who save for their retirement. So if you currently do not have a retirement savings plan in place, this information might encourage you to do so. This is how it works in California.

Qualifying Accounts
To qualify for the Savers Credit, you must make regular contributions to an employer sponsored 401k, 403(b), 457 plan, a Simple IRA, a SEP IRA, a traditional IRA, or a Roth IRA. Keep in mind that while you can claim your contributions to these accounts, you may not claim any contributions made by your employer.

How to Be Eligible

Eligibility for the Savers Credit requires the following three things:

In 2012, the maximum adjusted gross income to qualify for the Savers Credit is $57,500 for a married couple filing jointly, $32,125 for a head of household, and $28,750 for others. The maximum credit you can claim diminishes as your income increases.
The filer must be 18 years of age or older by the end of the filing year, not a full-time student during the year taking the credit, and not claimed as a dependent on another person’s return.
The contributions made to your retirement account must have been made during the tax year for which you are filing.
How Much You Can Save
Of course, before you put the ball in motion, you will want to know how much you can actually save by claiming the Savers Credit. Depending on your income and filing status, you can claim the credit for 50, 20, or 10 percent of the first $2,000 you contribute to a retirement account in that tax year. That makes the maximum credit amounts $1,000, $400, or $200.

A married couple, filing jointly, can claim $2,000. However, if you took a taxable distribution from your account any time during the two years prior to filing your return, that distribution reduces the credit you can claim. Also, the Savers Credit is a credit, not a refund. Claiming it can reduce the tax you owe to zero, but you will not get a refund from it.

How to Claim the Credit
To claim the Savers Credit, you must file a form 1040A, 1040 or 1040NR. You cannot take this claim if you file a 1040EZ. You must also attach Form 8880, “Credit for Qualified Retirement Savings Contributions.”

If you use an online tax preparer like TurboTax (find out how to file your state income tax for free), and you answer all the applicable questions, they automatically apply any credits for which you qualify. However, if you do your own taxes, or pay a human tax preparer, you may want to ask about the credit. Remember, if you are not currently enrolled in a retirement savings plan through your employer then you will want to enroll now to be able to claim the credit for 2013.

Also, according to the IRS website, “many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.” But don’t let that stop you from checking into it. Any amount of a tax credit is better than no credit at all.…

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TIPS FOR COLLEGE STUDENTS: HOSPITALITY JOBS CAN PAY WELL

The holidays are nearly over and a new year is approaching. Whether you are resolving to earn and save more money, trying to cover some of the holiday debt you incurred or simply trying to get a job, there are a few part time options out there that are particularly well-suited to a college schedule and pay a decent hourly rate, to boot.

Waiting Tables

Table service in a restaurant can pay amazingly well. You’ll typically earn a base hourly rate — in many states, it is mandated by law and often the equivalent to minimum wage — and the rest is all about the tips. Tips, of course, are dependent upon a number of factors including your charm and ability to hustle quickly from table table. On the other hand, some factors that affect tips are out of your control. The number of servers on staff during a shift, the number of customers that come in at the time you work on the days you work, and the overall popularity of the restaurant. You will often have to work your way into better shifts, but the better-paying times (evenings and weekends, typically) have the added benefit of not interfering with a standard full time class schedule.

It’s important to do a little research before you apply for and accept a serving job. Make sure that the restaurant has a decent amount of business. If not, there are much more rewarding things that you can do for minimum wage (or less!). Ask what shifts the place is hiring for. You’d hate to end up in a position where your making excuses to your new boss or a professor for absences due to work/school conflicts. Obviously, this is true for any job you apply for, but restaurant jobs, in particular, tend to have schedules that move around a bit. A server at a popular restaurant can easily expect to earn $15-$20 per hour, including tips, during a shift. Moreover, for those who are people persons, the work is actually pretty fun and the shifts tend to fly by pretty quickly.

As an adjunct to waiting tables, older students (those over 21 — and psychology majors, perhaps) may find bartending to be both fun and lucrative. A popular bartender in a busy bar can make enough money to wonder why he’s attending college in the first place. That is, of course, until he takes a look at his cranky 60-year old co-worker who’s lived his whole adult life behind a bar wearing gin-soaked sleeves. It’s a good way to pay for some college expenses and have a little extra left over, though.

Delivery Driver

For students who have cars, this is a great way to make an hourly wage, possibly earn tips — and get your gas paid for. Most places that hire delivery drivers reimburse mileage at a federally mandated rate. At the 2020 rate of more than 50 cents per mile, the amount you are reimbursed will pay for a gallon of gas every six or seven miles you drive. If you keep your car in good shape and you segregate your fuel reimbursement from your earnings (which you should do for tax purposes, anyway), you will find that most of your routine car-related expenses, including gas, can be covered out of your mileage reimbursement.

As a delivery driver for a courier company, which take packages from business to business, you can easily earn an hourly rate of more than $10 plus a mileage reimbursement. Food delivery drivers can expect to make a base hourly rate near minimum wage, the mileage reimbursement and, in most cases, tips, which can raise your hourly gross by several dollars if you work for a busy or popular restaurant.

As you can tell with the direction I took with in post, I am a firm believer in tip-based jobs. The reason for that is they offer one way (especially in a college town) to break away from the pack income-wise and actually make some real money. In areas where hospitality jobs are among the most numerous and easiest to get, the glut of cheap labor represented by the student population tends to keep wages relatively low. With tip-based jobs, you have more control over how much you earn based on your personality and willingness to hustle. The one other benefit of a job in which you earn tips is that you will typically walk away with some cash in your pocket at the end of a shift. It may not always be much, but there is a certain amount of well being that comes with the sense of being able to pay for a cup of coffee when you want it or not having to worry about putting some gas in your car.…

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