Thoughts on tax preparation
Did you know that in Norway, the government does your taxes for you? Each year they send you your filled out tax return, in case you have any corrections to make, but other than that, it's all taken care of. Of course, in order to calculate this, they have access to all of your financial records, bank account activity, etc.
As a side note, they still have lots of accountants. That comment is directed at people who say that accountants who think that Fair Tax won't work are only concerned about losing their jobs since there won't be tax work for us anymore. Apparently, not the case.
Another trade-off to living in Norway, and one that is overwhelming in its implications: they publish a list of everyone's taxable income, assets, and total tax for the year.
You can check this out at skattelister.no, but I'll warn you that it's all in Norwegian. It's also more interesting if you know some Norwegians that you can look up. Here's an example where I searched for Norway's prime minister, Jens Stoltenberg.
Some people among the personal finance bloggers share their monthly income, or their net worth. Others are not so comfortable with the idea of announcing to the world how much money they make. One of my favorite articles that touches on this is Babci's Rules of Personal Finance, from First Gen American. It's right there, rule #9 - "Never tell anyone how much money you have." Babci's possible outcomes from this: people will resent you, people will think that they're better than you, or people will try to take it from you.
I suppose the topic of whether a government should be able to decide to release this information is sort of a moot point, since Norway is the type of government where, yes, government gets to make those decisions. But who is the wiser in this case - Babci or Norway?
Hopefully Norway will conduct some sort of study on how this affects their populace. (Because there's nothing Norway loves more than a good study documenting Norwegians.) How does it affect communities when people can look up their neighbor or co-worker's salary with a few quick clicks on the internet? Working at a place where people have been fired in the past for discussing their salaries with co-workers, it's so strange to see the completely opposing mindset in Norway.
Taxes and other unexpected bills
I've written before about how every month there seems to be another "unexpected bill." Some large amount that's not budgeted for, but it seems to pop up every month.
In January, that was our gas bill - over $800! Luckily split between three people that was only $200-something.
This month it was taxes. This weekend I had some free time, so I decided to sit down and file my taxes so I could get my refund check quicker. I was a little apprehensive since I worked as a "contractor" this summer, which means that nothing was withheld, plus it is subject to self-employment tax. I was hoping that my withholding from the other jobs I held throughout the year would be enough to keep me safe from payments.
Not the case. Before my self-employed income of $6500, I was getting a refund of $1,500. After I entered my self employed income, I owed $500 to the federal government and $300 to the state.
I just had to console myself with the fact that at least I didn't give the government an interest free loan all year, right? Plus I got full use of what is probably the highest student loan interest deduction I'll have for awhile, thanks to my parents paying off $10,000 towards my undergrad loan this summer, which included a big chunk of interest.
Has anyone else filed their taxes yet?
Investment Income and Taxes
Disclaimer: I am not a certified financial planner, nor do I claim to be an expert regarding taxes. I am simply an individual sharing my philosophy on investing. Basically - I am not responsible for any decisions you make with your money!
Passive income is money that you earn while you're sleeping.
You write a book, it takes you a year, but you earn royalties every time it's sold without having to do additional work. Royalties are a form of passive income.
You buy a house and rent it out to some tenants. Rental income is another form of passive income.
Of course, both of these endeavors take more effort than the term "passive income" implies. As a landlord, you have to deal with collecting from late tenants, or fixing plumbing disasters. As an author these days, you need to travel the country on an exhausting schedule of readings and book signings to ramp up the publicity for your latest novel.
One of the most truly passive forms of income is earning dividends by investing in stocks. I have read several blog posts recently about investing in high-dividend-yield stocks in order to generate a steady stream of passive income.
Investing in dividend-yielding stocks is a great way to build passive income because it is easy, with no hassle. You also can only lose as much money as you put into it - with something like renting out a house, you open yourself up to liability issues, or having to fork out additional cash to fix any problems with the property.
Also, qualified dividends and long term capital gains currently are taxed at lower rates than ordinary income. Any passive income you earn through royalties, or even ad revenue from your blog, is taxed at your regular (higher) tax rate. Additionally, sometime like ad revenue from your blog would be subject to additional taxes from having to pay both halves of employment tax.
Essentially, the government wants us to buy stocks, because investing is good for the economy. Also, a lot of rich people own stocks. This means that the government wants to reward you with lower taxes for putting your money into this type of investment.
Do you have an investing strategy? Should I be buying high dividend yield stocks instead of high growth? (Maybe when I have a bigger chunk of change to invest into stocks directly!)
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