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As we reach the end of the year, it is time for that lovely American tradition: tax season.  Starting January 1st, keep your eyes on the mailbox (and e-mail box nowadays) for tax forms from employers, banks, investment companies, and other income sources.

To get ready, I always make a full list of what I expect to get and check things off as I go along.  Here is a re-visit of a post from last year about preparing for tax time.

Only three months to tax day. It is probably time to start getting ready. Here are my two cents on early tax preparations. The first steps involve making lists and gathering documents needed for tax preparation.

1. Make a list of all of your bank accounts (even ones that you do not use). As your forms start to come in the mail (or are available online), check them off of the list. Most bank tax forms start to come around the end of January. These come in the form of IRS tax form 1099.

2. Make a list of all investment accounts. Like banks, you will get forms starting at the end of January. Unlike banks, most investments do not require that you pay taxes until the investment is sold. Your investment firm will take care of tracking that for you and send you the detail.  These come in different versions of the 1099 and several other forms.

3. Make a list of jobs or income sources that will report income to the IRS. I had two jobs this year, but expect three W-2 forms from an extra income source.

4. If you have a mortgage, add that to the list. Form 1098 shows interest paid for a mortgage, which is tax deductible.

5. Collect any other deduction forms. These can relate to education (direct school expenses and student loan interest) or donations. I keep my school book receipts and get a tax form from my school for tuition. I also make donations (not too big, as I am paying for school) to 501c3 charities that allow for a tax deduction.

This is not an exhaustive list, as everyone has unique circumstances. I fill out a form for my accountant listing everything above and give him the big stack of tax forms. I found that a professional preparer is worth the cost in my case because my combination of income, expenses, scholarships, and deductions fall under so many different tax laws that only a professional could ensure I get every deduction and credit that I deserve.

Did I miss any tax forms that you need? Let me know in the comments.

Check it out here: Might Bargain Hunter

As we near the end of 2009, it seemed only appropriate to jump on the bandwagon and look back at the most popular posts of the year.  Proof that SEO is king, the top two articles discuss reviews of Mint.com and Thrive.  Take a few minutes to look back at the most popular pages this year:

1. A Review of Thrive vs. Mint.com

2. A Mint Alternative: Thrive

3. Underpants Gnome Capitalism

4. How Margin Trading Works

5. How To Pull Your Credit Score for Free

6. How Banks Make Money and How You Can Make Money Like A Bank

7. Stock Splits Explained

8. Investment Options: Stocks, Bonds, and Funds. Oh my!

9. What Does a Share of Stock Represent?

10. Mint.com to Be Purchased by Quicken Owner Intuit

Which were your favorite Narrow Bridge posts from 2009?

For Chanukah, I asked for and received a Roku.  Roku is like a cable box for the internet.  My box brings in unlimited Netflix streaming videos (20,000 available) and music from Pandora.  It can be setup to do much more.

I decided, upon getting the gift, to cut my Netflix subscription from 2 DVDs at a time for $13.99 per month to 1 DVD at a time for $8.99 per month.  Sure it is only $5 per month, but that is $60 per year.  I can do a lot with $60.  The cheapest Roku costs $80, so this is a 16 month break even point for what I look at as an entertainment investment.

For now, I am sticking with cable as well, but it definitely makes me think.  If I could Hulu through the box as well, and have a digital antenna, it would make me think a lot harder.

So far, I have not used the box a lot but I like it.  It works just like a cable box.  It was easy to setup and has its own remote.  I started watching season one of Dexter on my Roku.  It is just like watching it on TV, but I can pause and leave and come back.  I guess it is like a cable box and DVR in one.

“]If you live in the UK, your paper checkbook is going to die a slow and lonely death.  The check clearing system, similar to the Federal Reserve Clearing House in the United States, is going be phased out over the next decade and will close for business in October, 2018.

Ultimately, this seems like a good step for the international banking system. There is no use to waste the time and cost for companies and banks to process paper checks. The recent laws in the United States that require digital check images be treated as a paper check was the first step here, in my humble opinion.

I work in the payment processing side of a very large company, and it would save us a lot of money, which could mean lower rates for our customers, if we only had to deal with .03 ACH transactions or cheaper EDI (electronic data interchange) rather than the much more expensive paper checks.

I am check free (no relation to the payment processor) for everything except my rent, and I am switching that over to bill pay this month. I will not have to write a paper check on a regular basis ever again.

So, would the United States follow suit in the near future?  I am not sure if we can expect a ten year turn around period, but I bet we go paperless in the next twenty.  It could save lots of trees and lots of hassle.

What do you think?  Are paper checks as dead as Vanilla Ice’s career, or will they stage a comeback?  Please give your thoughts and opinions in the comments.

Hat tip to the Mint.com blog for this topic.

While credit reports are only built on your responsible use of credit, the companies that issue you the cards look a little deeper into your spending habits to build a bigger risk profile for you.

What does that mean to you?  If you are an avid Internet porn fan or a weekly boozer, you should pay in cash or check, not with a credit card.  The companies, notably Amex, look at your specific transactions to find patterns that lead to bad debt write offs.

According to Realm of Prosperity (hat tip to Wise Bread), these items should be paid in cash:

So, while you are doing your last minute shopping, take cash to Fascinations and the liquor store.  Read the rest at How To Hide Naughty Credit Card Purchases care of Real of Prosperity.

[SPONSORED POST]

According to recent data from the Federal Deposit Insurance Corp., millions of Americans today do not have a bank account, and they like it that way. In fact, they choose to do business with other types of financial institutions, such as check cashing stores, to meet their banking needs. While the FDIC would like to encourage the general public to utilize traditional banking services, many feel that doing so is not in their best interest.

Ginger R., a mother of two and hard-working American citizen, conducts all of her banking business at an area check cashing store. Driving a recent model Toyota Camry, which contains numerous children’s items, she uses non-traditional banking services for many reasons.

“I don’t like the banks,” she said. “They kept charging me fees on top of fees. If my account was just one penny overdrawn, they would charge me thirty dollars. They were rude when I asked questions.”

Ginger also mentioned that, due to the current economy, she has been unable to pay a few of her bills, who had attempted to automatically remove payments from her previous checking account. “I can’t risk that. I need to know that I have money. I closed my account after that.”

Other consumers choose to thumb their noses at the banking system for other reasons. Worry about the removal of unauthorized funds is at the top of the list, followed by identity theft, unexpected fees, funds availability policies, and overdraft charges. Overdraft protection, which is often offered for a fee through the banks, is not necessary through check cashing stores.

While some banks are beginning to offer banking incentives, such as free checks, free ATM transactions, and online bill pay, check cashing stores ultimately remain in the lead. Customers know that worries such as fees, terms, conditions, or changes in policy never occur. They can come to the location, cash their checks, and receive cash.

An increase in check store patronage can be attributed to the recent rise in unemployment, as numerous unemployed individuals choose to cash their checks at places other than their banks. “They would take it all from me anyway,” says George L., a long-time former employee of a local company. “I have bills outstanding with automatic withdrawal. This way, I pay the bills when I can, not when they want me to.”

Unless the banks are willing to change their policies, it can be expected that consumers will continue to utilize alternative financial institutions.

[Disclosure: This post was provided and sponsored by ACE Cash Express]

If you are a fan of peer to peer lending, you might be interested in microfinance.  Microfinance is a type of lending designed to help people in poor communities around the world start a small scale business that can completely change their standard of living.

Muhammad Yunus, a banker from Bangladesh, is often credited with bringing microfinance to the mainstream.  His principle is that people in poor communities might only need a small loan to start a profitable business model.  Remember that currencies, exchange rates, and standards of living are completely different in rural Africa and Southeast Asia.  There, $25 or $100 might be all that is needed to change the outlook for an entire family.

Microfinance lenders are small banks accessible by people living in rural areas.  The banks will generally lend money to a community of people, rather than an individual.  Experience has shown that communities are generally very honest when working together, and default rates are much lower.  Remember, rural Africans do not have bank accounts or credit scores, and their economies are generally sustenance based.

Microfinance banks, for the most part, take out large loans from major commercial banks.  While on a trip to New York over the summer, I met the microfinance team for Deutsche Bank.  These lenders do due diligence on the lenders around the world, and give them large sums to lend out in the form of microloans.

While this growing system, which has proven both challenging, risky, and profitable, is able to reach people all over the world, there are still financing shortages.  That is where you can come in.

One major project, called Kiva, is a peer to peer lending facilitator for microloans.  Kiva describes itself as a service that helps you lend to low income entrepreneurs.  You can learn more at about it at Kiva.org.

I like several things about microloans through Kiva.  First off, it is like a charity, though it is not a donation.  When you loan money to someone, you can plan to get that money back with interest.  In $25 increments, you can change the lives of family or village somewhere in a developing part of the world.

Lending through Kiva is not risk free.  There is a good chance that these people, living with no financial infrastructure, will not pay the loan back.  However, most do.  The people receiving microloans are generally honest people with a sense of responsibility to pay the loan back.  Kiva facilitates the payment through one of a number of microlenders, and those lenders are responsible for collecting the loan payments and ensuring the transaction is equitable for all parties.

Kiva also allows you to give gifts to friend through loans.  You can give a friend a gift at Kiva that they choose how to distribute.  The goal is, in a few years, that they get the gift money back with interest.  It is not too late for a Chanukah or Christmas gift through Kiva.

The site has been endorsed by political leaders and business people around the world, though it has been criticized for its high loan rates.  Kiva argues that those rates are high because it is important for the banks to offset the high default rate for these types of loans.  Kiva takes funds through a no fee PayPal transaction.

What do you think of Kiva?  Have you tried it?  Have you heard about it?  Please share in the comments.

If you have ever been stuck with a fee at an ATM or while using a debit card for a lack of funds, but would not have made the charge had you realized there was not enough cash in the bank, today is a good news day for you.  The Fed has made a rule that banks have to require customers to choose to participate in NSF programs, rather than just be included automatically.

From the Fed website:

Release Date: November 12, 2009

For immediate release

The Federal Reserve Board on Thursday announced final rules that prohibit financial institutions from charging consumers fees for paying overdrafts on automated teller machine (ATM) and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions.

Before opting in, the consumer must be provided a notice that explains the financial institution’s overdraft services, including the fees associated with the service, and the consumer’s choices. The final rules, along with a model opt-in notice, are issued under Regulation E, which implements the Electronic Fund Transfer Act.

“The final overdraft rules represent an important step forward in consumer protection,” said Federal Reserve Chairman Ben S. Bernanke. “Both new and existing account holders will be able to make informed decisions about whether to sign up for an overdraft service.”

The Board’s consumer testing shows that most consumers prefer not to be enrolled in overdraft services for ATM and one-time debit card transactions unless they affirmatively consent, or opt in. At the same time, testing shows that most consumers want overdraft services to cover important bills, such as checks they use to pay rent, utilities, and telephone bills.

To ensure that consumers have a meaningful choice, the final rules prohibit financial institutions from discriminating against consumers who do not opt in. The final rules require institutions to provide consumers who do not opt in with the same account terms, conditions, and features (including pricing) that they provide to consumers who do opt in. For consumers who do not opt in, the institution would be prohibited from charging overdraft fees for any overdrafts it pays on ATM and one-time debit card transactions.

“Overdraft fees can be costly,” said Governor Elizabeth A. Duke, the chair of the Board’s Committee on Consumer and Community Affairs. “Our rule will help consumers better understand the terms and conditions of overdraft services and will give them an opportunity to avoid fees when these services do not meet their needs.”

The Federal Register notice is attached. The final rules are effective July 1, 2010.
 

I don’t recall ever going over my stock portfolio in detail.  I thought you all might be interested in what stocks I own and why I own them.

My Company Stock – $2,600 market value.  Paid $1,980.

• I purchase my company stock for a 15% discount.  That is an amazing hedge and it has turned out to be a solid investment over the last two years.

Walmart (WMT) – $223 market value.  Paid $202.

• This was one of my first investments, hence the low value in the portfolio.  Walmart is the largest retailer in the world and has performed solidly over the last several decades.  The company continues to expand internationally and works to cut costs and increase sales volume.

General Electric Company (GE) – $198 market value.  Paid $197.

• This stock has been a relatively weak performer for me, but I did buy it right before a major drop.  It has come back into the green for me, so I can’t complain.  I believe the core businesses of GE are powerful and will continue to grow in the future.  Now that the capital markets are opening back up, GE Capital will begin to perform better as well, leading the whole company to growth in the long run.

Home Depot (HD) – $569 market value.  Paid $541.

• Home Depot is another strong retailer.  When the economy is down, HD will do well because so many people will try do it yourself projects to save money.  When the economy is up, it is a top destination for repair workers.  Only one major direct competitor remains (Lowe’s) and the company has growth potential around the world.

Berkshire Hathaway (BRK.B) – $3,275 market value.  $3,404 paid.

• Aside from being run by the “Oracle of Omaha”, Berkshire Hathaway is one of the most admired companies among investors.  Warren Buffet has led this company to amazing achievements and continues to lead the markets through his value investments.  BRK.B is planned to split 50:1 in January, bringing the stock price down to around $60-$70 per share.  I believe that the stock will rise dramatically when it becomes affordable to the average investor, not just people willing to pay well over $3,000 per share.  While this is not a value investment thesis, I am confident that it is a good bet.

My Watch List: WWE, MO

These investments are all in my portfolio and all opinions here are my own.  If you decide to buy these or any other stocks, you risk losing financial value.  Only invest what you can afford to lose.  I am not responsible for your investment losses (though I would love credit if you do well).