MONEY payments

The U.S. Treasury Is Now Accepting PayPal

150219_EM_TreasuryPayPal
John Greim—LightRocket via Getty Images

But you can't use it to pay your taxes just yet.

What do eBay, Walmart, and the U.S. Treasury Department have in common? They all accept PayPal.

That’s the word from the Treasury Department, which announced on Wednesday that its Bureau of the Fiscal Service would begin accepting payments to federal agencies through both PayPal and Dwolla, an electronic payment network that lets users transfer money cheaply.

For now, the move exclusively affects Pay.gov, a website where citizens can pay things like court fees and Veterans Affairs health care co-payments, or donate to the National Endowment for the Arts. In other words, you can’t PayPal Uncle Sam your taxes just yet.

The new changes also appear to be limited in scope. In our own quick scan of Pay.gov, not every payment type listed PayPal and Dwolla as an option.

That said, the changes will still make a difference to a large number of Americans who were previously limited to debit and credit card payments. The Fiscal Service Bureau collected $3.73 trillion in fiscal year 2014 and processed 400 million transactions through multiple programs including Pay.gov. Adding more modern payment options should make government bills a little less painful for the site’s many users.

Beyond the immediate benefits, the news also shows the Treasury is slowly but surely entering the 21st century when it comes to moving money. Some of the fastest growing startups are centered on making transferring cash easier and more user friendly, and it’s nice to see the federal government isn’t totally oblivious to which way the wind is blowing.

“Digital wallets provide convenience, simplicity, and a trusted customer experience, while achieving cost effectiveness for the Federal Government,” said Corvelli McDaniel, assistant commissioner for revenue collections management for Fiscal Service, in a statement. “We are committed to operational excellence and continually improving our business processes; digital wallets help us achieve that goal.”

Today PayPal, tomorrow… Apple Pay?

MONEY Taxes

Don’t Make These 8 Classic Tax-Filing Fails

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Zachary Zavislak

These common mistakes can keep you from getting the refund you're owed.

Slipping up on your taxes can exact a high price. Some of the most frequently made blunders—silly things like entering the wrong Social Security number, spelling your name incorrectly, or putting in the wrong account numbers for direct deposit—hold up processing your return and any refund you might be due. That’s bad enough.

Other common mistakes cost you more than time. They cost you real money. Just by overlooking deductions, taxpayers give up an average of about $600 at tax time, according to research by Youssef Benzarti, an economics Ph.D. candidate at the University of California at Berkeley. He found that many people don’t itemize when they should—therefore passing over breaks such as the write-off for investment-related expenses. “Or,” says Benzarti, “they take only the easy deductions like mortgage interest and state taxes” and not harder-to-prove ones, such as charitable donations and use of a home office.

With April 15 fast approaching, MONEY consulted with a slew of tax pros to find out what other savings taxpayers like you typically miss. Review your return to make sure you don’t commit any of these costly errors.

1. Taking the wrong tax write-off for college

There are two mutually exclusive breaks you can use to ease the pain of paying for higher ed. People sometimes automatically take the $4,000 tuition and fees deduction because it sounds like the most money. But the $2,500 American Opportunity Tax Credit is typically a better deal,
says Melissa Labant, director of tax advocacy for the American Institute of CPAs. Here’s why: The tuition and fees deduction lowers the portion of your income subject to tax. “But a tax credit yields a dollar-for-dollar reduction in the taxes you owe,” says Labant.

You’re eligible for the full AOTC if you spend $4,000 on tuition and fees, as you can slash your taxes by 100% of the first $2,000 and 25% of the next $2,000. Also, your adjusted gross income must be $80,000 or less if single, $160,000 or less if married and filing jointly. (Partial credit is available for incomes up to $90,000 for singles and $180,000 for couples filing jointly.)

One caveat: You can’t take the AOTC for more than four years for any one dependent. So if your kid takes longer to graduate, you’ll be glad to have the tuition and fees deduction for year five.

2. Paying too much tax on investments you sold

At its simplest, your cost basis for figuring out the tax liability on an investment you’ve sold is the original price you paid for that investment. It’s subtracted from the price at which you sell in order to calculate capital gains or losses. Where it gets thorny is when you have to adjust your shares for such things as stock splits, reinvested dividends, capital gains distributions, and sales commissions.

Brokerages and mutual fund companies have been required to track cost basis for their customers since 2011 and 2012, respectively. But you have to calculate cost basis yourself on shares bought before those dates. Unfortunately, many investors forget to do that and end up paying more capital gains than they owe when they sell, says Kris Gretzschel, CPA and manager of the tax and financial planning team for Wells Fargo Advisors.

Say you purchased 100 shares of a stock for $100 per share and paid a $20 commission; your original cost basis is $10,020. Let’s assume you then received a $3-per-share dividend each year for five years that you automatically reinvested. Your new cost basis is $10,020 plus $1,500
($300 times five years) for the dividend, or $11,520. Now say you sell the stock for $18,000. Using the original cost basis instead of the adjusted one, you’d be paying taxes on $7,980 in gains vs. $6,480.

Online calculators like the one at CalcXML.com can help you tally up your cost basis. Or you can use a service like Netbasis.com, which charges $25 per transaction.

3. Leaving money on the table when changing jobs

High earners who had more than one employer during the year, this one’s for you. In 2014 each employer had to withhold 6.2% in Social Security taxes on the first $117,000 in income (the limit is $118,500 in 2015). “But that could lead the employers to withhold more taxes than you’re required to pay,” says Suzanne Shier, chief wealth planning and tax strategist for Northern Trust in Chicago.

Let’s say you worked for Company A for half the year and earned $62,000, then moved to Company B and earned $70,000. Each company would withhold taxes on your total earnings, but you should have paid taxes on only $117,000, not $132,000, and you would have overpaid by $930.

Tax prep software should catch this one, but paper filers may get snagged. Luckily, it’s an easy fix: “You can claim the money as a credit on line 71 of your 1040,” says Shier.

4. Blanking on what you saved

It’s not uncommon to forget money socked away in an IRA the previous year, especially since your broker doesn’t send you paperwork confirming contributions (IRS Form 5498) until after you file your taxes.

But if you forget to report a contribution to a traditional IRA and you qualify for a deduction—see IRS Publication 590-A—you will miss a break on your current taxes. If the contribution is nondeductible, you still need to file Form 8606 so that you don’t pay income taxes on a portion
of your withdrawals during retirement, notes Gretzschel. So call your brokerage to refresh your memory about 2014 contributions.

5. Missing out on money back for your home office

Moonlighters often opt to forgo the home-office deduction, both because it’s a hassle to keep track of the paperwork and because they’re worried about putting up red flags to IRS auditors.

As of last year, however, an alternative, simplified version of the write-off allows you to deduct $5 per square foot of office space up to $1,500 with no documentation whatsoever. Unlike the old method of calculation, no depreciation is taken on your home, which means the break will not affect capital gains when you sell, says Eric Bell, a CPA with Jones & Roth in Eugene, Ore.

6. Overpaying taxes on retirement distributions

People 70 or older and retired are required to withdraw certain amounts of money from 401(k)s and IRAs each year. When you begin receiving distributions, you have the option to have income taxes withheld. Call it a senior moment, but retirees sometimes forget that they chose to have taxes taken out, says Gretzschel.

They don’t look closely enough at the 1099-R forms and therefore don’t input the taxes paid into their 1040. As a result, they could end up paying the taxes twice—and the IRS may or may not catch the mistake, Gretzschel says.

7. Overlooking online largess

There’s been a big increase in online charitable giving, but many people forget to save emailed receipts as they do ones that come in the mail. “If you don’t have an organized electronic life, it’s hard to get receipts together,” says Shier.

She recommends searching your email in-box for “gift” and “donation.” If you are in the 28% bracket and discover $250 more in donations to report, you’ll reap $70 in tax savings.

8. Ignoring the write-off that is right in your hands

Those who itemize can write off certain investing and tax expenses—including tax-prep software, financial adviser fees, and rent on a safe-deposit box where you store securities—that exceed 2% of your adjusted gross income.

Bell says that those most likely to overcome the 2% hurdle on these “miscellaneous expenses” have modest income but a fairly large taxable portfolio that they pay an adviser to manage; many retirees who super-saved fit that bill. If you have an AGI of $100,000 and you have
$5,000 in investment-adviser fees (equating to 1% on a $500,000 portfolio), you’ll have to exclude the first $2,000, but can deduct the remaining $3,000.

While calculating your costs, don’t forget that you can add subscriptions to professional publications, business magazines, and investing magazines—including the one you’re reading now.

More from the 2015 Tax Guide:
The IRS Could Audit You For Doing This
7 Ways to Keep Your Tax Refund Safe From Thieves
Where to Get Free Tax-Prep Help

 

MONEY IRAs

The Retirement Investing Mistake You Don’t Know You’re Making

The investor rush to beat the April 15 deadline for IRA contributions often leads to bad decisions. Here's how to keep your investments growing.

It happens every year around this time: the rush by investors to make 11th-hour contributions to their IRAs before the April 15 tax deadline.

If you’ve recently managed to send in your contribution, congrats. But next time around, plan ahead—turns out, this beat-the-clock strategy comes at a cost, or a “procrastination penalty,” according to Vanguard.

Over 30 years, a last-minute IRA investor will wind up with $15,500 less than someone who invests at the start of the tax year, assuming identical contributions and returns, Vanguard calculations show. The reason for the procrastinator’s shortfall, of course, is the lost compounding of that money, which has less time to grow.

Granted, missing out on $15,500 over 30 years may not sound like an enormous penalty, though anyone who wants to send me a check for this amount is more than welcome to do so. But lost earnings aren’t the only cost of the IRA rush—last-minute contributions also lead to poor investment decisions, which may further erode your portfolio.

Many hurried IRA investors simply stash their new contributions in money-market funds—a move Vanguard calls a “parking lot” strategy. Unfortunately, nearly two-thirds of such contributions are still stashed in money funds a full 120 days later, where they have been earning zero returns. So what seems like a reasonable short-term decision often ends up being a bad long-term choice, says Vanguard retirement expert Maria Bruno.

Why are so many people fumbling their IRA strategy? All too often, investors focus mainly on their 401(k) plan, while IRAs are an after-thought. But fact is, most of your money will likely end up in an IRA, when you roll out of your 401(k). Overall, IRAs collectively hold some $7.3 trillion, the Investment Company Institute (ICI) found, fueled by 401(k) rollovers—that’s more than the money held in 401(k)s ($4.5 trillion) and other defined-contribution accounts ($2.2 trillion) combined.

Clearly, having a smart IRA plan can go a long way toward improving your retirement security. To get the most out of your IRA—and avoid mistakes—Bruno lays out five guidelines for investors:

  • Set up your contribution schedule. If you can’t stash away a large amount at the start of the year, establish a dollar-cost averaging program at your brokerage. That way, your money flows into your IRA throughout the year.
  • Invest the max. You can save as much as $5,500 in an IRA account in 2015. But for those 50 and older, you can make an additional tax-deferred “catch up” contribution of $1,000. A survey of IRA account holders by the ICI found that just 14% of investors take advantage of this savings opportunity. (You can find details on IRS contribution limits here.)
  • Select a go-to fund. Skip the money fund, and choose a target-date retirement fund or a balanced fund as the default choice for your IRA contributions. You can always change your investment choice later, but meantime you will get the benefits—and the potential growth—of a diversified portfolio.
  • Invest in a Roth IRA. Unlike traditional IRAs, which hold pre-tax dollars, Roths are designed to hold after tax money, but their investment gains and later payouts escape federal income taxes. With Roths, you also avoid RMDs (required minimum distributions) when you turn 70 ½, which gives you more flexibility. Vanguard says nine out of every 10 dollars contributed to IRAs by its younger customers under age 30 are flowing into Roths. Here are the IRS rules for 2015 Roth contributions.
  • Consider a Roth conversion. High-income earners who do not qualify for tax-deferred Roth contributions can still make post-tax contributions to an IRA and then convert this account to a Roth. The Obama Administration’s proposed 2016 federal budget would end these so-called backdoor Roth conversions, which have become very popular. Of course, it’s far from clear if that proposal will be enacted.

Once you have your IRA set up, resist tapping it until retirement. The longer you can let that money ride, the more growth you’re likely to get. Raiding your IRA for anything less than real emergency would be the worst mistake of all.

Philip Moeller is an expert on retirement, aging, and health. His latest book is “Get What’s Yours: The Secrets to Maxing Out Your Social Security.” Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: 25 Ways to Get Smarter About Money Right Now

MONEY Ask the Expert

How to Turn Your Tax Loss Into a Gain

Investing illustration
Robert A. Di Ieso, Jr.

Q: I have a substantial amount of tax-loss carry forwards, but all of my net worth is now in tax-deferred accounts, such as my 401(k). I am 68 years old and don’t expect any large capital gains to offset these losses. Is there any way to recover these losses before I die?

A: The silver lining of investment losses is that you can use them to offset future capital gains—and you can carry them forward indefinitely. In other words, if you lose $10,000 on a stock in a taxable account, you can sell other stocks at a $10,000 gain and not owe taxes, even if those gains come years down the road. (Remember that to claim any loss you need to have actually sold the dud investment, and of course you’ll need to fill out the proper IRS paperwork to get that loss on record.)

Unfortunately, as you noted, these losses aren’t as useful if most of your savings is in tax-sheltered retirement vehicles, which aren’t subject to capital gains taxes. “Anything you take out of a 401(k) or other tax-deferred vehicle is taxed as ordinary income,” says Barbara Steinmetz, a certified financial planner and enrolled agent in San Mateo, Calif.

Uncle Sam does offer some consolation. Each year, you can use up to $3,000 of your losses to offset your ordinary income, says Steinmetz. But you need to first use your losses against any capital gains that year.

Moreover, upon death, your spouse effectively inherits those losses. A spouse can then use those losses to offset capital gains or, if there are no gains or excess losses, up to $3,000 a year against ordinary income. Once your spouse passes away, however, those losses are gone.

If you sell your home and make more than $250,000 on the sale ($500,000 if you’re married) you can apply your carry-forward losses toward any gains above those exclusion limits, says Steinmetz.

Likewise, you could open a taxable brokerage account knowing that you’ve banked some losses toward future appreciation and harvest your winners from there. But whatever you do, don’t let the proverbial tax tail wag the dog. Better to forgo the write off than make bad investment choices.

MONEY Taxes

Some Need to Take a Quiz to Get Their Tax Refund

Pop Quiz! written on black chalkboard
Isaac Koval—Getty Images

In Ohio, state officials are trying to stop tax identity theft by requiring some taxpayers to fill out an online quiz before accepting their returns.

State governments around the country are struggling with tax return identity theft, a problem so rampant that even TurboTax had to temporarily suspend electronic state filing. In Ohio, where 58,000 fraudulent tax returns have been intercepted this tax season, state officials have taken the drastic step of requiring some taxpayers to fill out an online quiz before accepting their returns.

“The Ohio Department of Taxation has intercepted more than $250 million of fraudulent refund claims this year,” the agency said on its website. That’s a huge increase from 10,000 fraudulent returns seeking $8 million last year, according to the Dayton Daily News.

Once a computer determines that something is suspicious about the return, taxpayers are directed toward the “quiz,” which will look a lot like the out-of-wallet challenge questions posed by AnnualCreditReport.com and other sites seeking to authenticate consumers. According to taxpayers who say they’ve been challenged, the questions ask users to confirm streets they’ve lived on, cars they’ve owned, and so on.

“This is changing daily, but as we are still relatively early in the filing season, the Ohio Department of Taxation is opting to be more stringent with the screening of returns,” said Gary Gudmundson, the agency’s communications director. “Of the 1.2 million returns requesting a refund, 49% of those filers/taxpayers … have been directed to take the Identity Confirmation Quiz.”

Users directed to the quiz can expect delays in receiving their tax refunds; how long is unclear. Those who cannot correctly answer the questions can expect additional delays. They will be directed to telephone operators for additional verification.

“Of those who’ve taken the quiz, 95% passed. Those who don’t are asked to submit documentation (copy of driver’s license, birth certificate, utility bills, previous year(s) tax returns, etc.) to prove they are who they say they are,” said Gudmundson.

One user who said she failed to answer correctly wasn’t immediately booted from the system.

“Did it and apparently answered one wrong but they give you another chance,” she wrote on Facebook.

Given the heightened concern about identity theft and tax returns, some residents are worried the challenge questions are part of a scam. Ohio tax officials are telling taxpayers via regular mail that they must complete the quiz.

“If you get a letter, yes it is from the state, not a con,” wrote one Ohio resident on her Facebook page.

For an identity thief to steal your tax return, they need a lot of personal information, including your Social Security number, which can be used to perpetrate all sorts of fraud, even opening new accounts in your name and wrecking your credit in the process. You can spot identity theft quickly by regularly monitoring your credit. You can get your credit reports for free once a year at AnnualCreditReport.com and you can get your credit scores for free every month on Credit.com.

More on Income Tax:

TIME citizenship

More Americans Than Ever Are Giving Up Citizenship

It may be because of a new tax law

A record number of Americans gave up their citizenship or long-term residency in 2014, according to the Treasury Department.

According to a quarterly list released by the Treasury on Tuesday, the number reached 3,415, up from 2,999 in 2013, which was also a record.

Many speculate that taxes are a primary motivation in the decision. “Many Americans abroad are finding that retaining their ties is not worth the cost and hassle of complying with the U.S. tax laws,” Andrew Mitchel, a lawyer in Centerbrook, Conn. who tallies the lists of names released quarterly by the Treasury Department, told the Wall Street Journal.

The surge in Americans giving up their citizenship comes just months after the Foreign Account Tax Compliance Act took effect, in July. The law requires foreign financial institutions to report the incomes of their U.S. customers to the Internal Revenue Service. The U.S. is unique in that it forces its citizens living abroad to pay domestic income taxes, no matter where they reside.

For some Americans living abroad, it appears that the hassle of filing tax returns and paying taxes on overseas income may outweigh the benefit of legally being an American citizen.

 

MONEY Taxes

The IRS Could Audit You for Doing This

Here are some things Uncle Sam might consider red flags.

Fewer than 1% of U.S. taxpayers are audited by the IRS each year. However, some things can dramatically increase your chances of being audited. Here are three things our experts say can make your tax return catch the IRS’ attention.

1) Claiming unusual deductions.

You generally needn’t worry about an IRS tax audit unless you’re trying to pull a fast one on Uncle Sam. That said, a return that is unusual in any way could draw attention from the agency. The IRS processes so many tax returns that it knows what to expect from all kinds of people and situations. It knows, for example, the typical range of charitable contributions for people at every income level. If your reported generosity in a given year is far above the norm, that can be a red flag that prompts the IRS to take a closer look. If you’re being honest on your return and you really did donate what you said, then an audit will be a simple matter of your providing records and the IRS’ closing the case.

Other unusual deductions can also raise eyebrows, such as mortgage interest deductions that seem too large. Another example: If you’re self-employed and claim outsized deductions for business meals and entertainment, the IRS might want to see your receipts.

Even having a high income can trigger an audit. The IRS audits those earning more than $200,000 per year more than three times as often as those earning less than $200,000. It also knows what people in various occupations tend to earn, so if your income as a high school teacher or nurse is much higher than the norm, the IRS might want a closer look.

You might not be able to avoid being audited one day, but you can make the process easier by keeping good records of your inflows and outflows, as well as any financial events that appear on your return in some way. — Selena Maranjian

2) Contradicting your ex-spouse.

One area where the IRS has ramped up enforcement activity involves alimony payments between divorced spouses. Under current law, alimony payments are deductible by the person making the payment, while the other person must declare that money received as taxable income. Yet because there are no specific 1099 reporting requirements, the only information the IRS has to go on is the two regular tax forms from the divorced spouses. If they’re inconsistent, then the IRS has grounds for an audit.

It’s important for divorced spouses to realize that not all payments they make or receive are alimony. Money for child support, property settlements, and voluntary payments between former spouses don’t qualify as alimony, so they’re not deductible by the payer or included in the income of the person who receives them. In general, if nothing says a payment isn’t alimony, then it will be treated as such, and the deduction and income rules will apply. Ideally, your divorce decree will include a breakdown of any payments between spouses and whether they’re considered alimony, but it’s still a confusing area that can draw IRS scrutiny if you don’t stick to the rules. — Dan Caplinger

3) Abusing business deductions.

One big red flag is reporting excessive business deductions or reporting an operating loss for a business, which leads to no income tax liability. These claims can indeed be legitimate — after all, many businesses lose money — but they dramatically increase the risk of an audit.

One particular deduction that’s abused by self-employed individuals (and therefore catches the attention of the IRS) is the home-office deduction. In order to claim this, a portion of your house must be used exclusively for the purpose of conducting your business. A computer workstation in the corner of your family room doesn’t count, so don’t even try it.

Many other business deductions are also abused frequently. For example, some people try to deduct family vacations as “business travel,” business clothing as “uniforms,” or their personal vehicle as a company car. Before you get creative with your business deductions, consider that the odds that your return will be audited triple if you submit a “Schedule C” to claim business income and expenses, and they increase almost tenfold if your business income is over $100,000.

By all means, claim every single legitimate tax deduction and credit to which you are entitled. Then you should have nothing to worry about, even if you are audited. Just make sure you can back up everything you claim. — Matt Frankel

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

MONEY Ask the Expert

How To Tame The Unexpected Costs of Medicare

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I got my annual notice from Social Security this week for 2015 and was surprised to find out that the Medicare premiums for me and my wife were going up for this year because of the amount of money I made in 2013. I did not know Medicare premiums were adjusted based on income. I am 71. Is there anything I can do? – Norman Medlen

A: You won’t be able to change your premiums for this year, but there are moves that can help lower your future costs.

First, though, realize that your confusion is understandable. Many people don’t know that Medicare premiums are calculated based on income, says Nicole Duritz, vice president of Health and Family Education and Outreach for AARP. Some people even believe that Medicare, which most Americans are eligible to receive when they turn 65, is completely free. It’s true that most people don’t pay for Medicare Part A, which covers hospitalization, but that’s because they have contributed to Medicare throughout their careers through payroll taxes.

But your income determines how much you pay for Medicare Part B, which covers routine medical care, including doctor visits and outpatient services, such as physical therapy and X-rays. Under the rules, your income can include a salary from working, as well as proceeds from the sale of a house or withdrawals from a portfolio.

Granted, the income thresholds are relatively high. If an individual earns $85,000 or less, or a married couple earns $170,000 or less, the premium is $104.90 a month. People earning more than $85,000, or a couple earning more than $170,000, will pay $146.90 to $335.70 a month depending on their income. Only an estimated 5% of Medicare recipients pay more than the basic $104.90 level. The premiums are deducted from your Social Security check.

Premiums for Medicare Part D, which is for prescription drug coverage, are also income-based, which add anywhere from $12.30 to $70.80 a month to the premiums charged by the plan you select.

Still, there’s good news: your premiums are re-evaluated each year based on your most recent tax return. So if the money you received was a one-time windfall, your premiums will drop back down the following year.

To make sure your premiums stay affordable, do some advance planning, says Rich Paul, president of investment advisory firm Richard W. Paul and Associates. That’s especially true if you think you may have more windfalls ahead. “It’s not just your Medicare premiums that will go up—the additional income may bump you into a higher tax bracket and your income taxes will go up too,” says Paul.

For example, if you are converting a traditional IRA to a Roth, consider spreading the amounts over several years. That way, you won’t have a large one-time jump in your income. Or make a large charitable contribution at the same time as you convert, since the deduction will offset some of your tax bill.

In addition to the premiums, the size of Medicare’s out-of-pocket costs surprises many people, says Duritz. Medicare Part B covers roughly about 80% of your medical bills, but you have to pay the other 20%, including deductibles, co-insurance and co-pays. And unlike many employer plans, Medicare doesn’t cover some major medical expenses, including glasses and dental work.

To cover those gaps, many people opt for a Medicare supplemental plan or Medicare Advantage. How much you pay depends on where you live and the status of your health, in addition to your income. “If you’re healthy, you won’t incur the same costs as someone with a chronic condition because you don’t need as much care or medication,” says Duritz.

Fortunately, there are a number of ways you can lower costs. She suggests getting regular health screenings to catch any problems early, exercising and maintaining healthy weight. If you are on medications, talk to your doctor about lower-cost options. “It doesn’t have to be a generic—it could just be an older brand name,” says Duritz. “We have had people cut their prescription drug costs by $1,000 or more using alternative medications.”

It’s also important to reevaluate your Medicare plans during annual open enrollment, which runs from October 15th to December 7th. Plans and costs change every year—and your medical needs may change too.

For help finding the best options, try AARP’s “doughnut hole” calculator—named for the gap in prescription drug coverage under Medicare Part D—to find suggested drug alternatives to discuss with your doctor. AARP’s Medicare Health Care Cost calculator will estimate your overall Medicare costs and suggest ways to minimize your spending. And AARP’s Question and Answer tool walks you through all the costs of Medicare and how it works. With this information, you’ll have a better idea of the costs to expect from Medicare.

More on Medicare from Money’s Ultimate Retirement Guide:

What is Medicare?

What is Medigap insurance?

How do I select a Medigap policy?

Read next: So You’re Retired! Now What?

Listen to the most important stories of the day.

MONEY Taxes

You Just Got a Break If You Messed Up Your Obamacare Tax Credit

The IRS will give you more time to pay back any excess premium subsidies when you file your taxes.

Consumers who received too much in federal tax credits when buying insurance on the health law’s marketplaces last year got a reprieve of sorts from the Internal Revenue Service this week. Although they still have to repay some or all of the excess subsidies, the IRS won’t ding them with a late payment penalty if they don’t repay it by the April 15 tax deadline.

“They’re trying to make this work,” says Timothy Jost, a law professor at Washington and Lee University who’s an expert on the health law.

Under the law, people with incomes between 100% and 400% of the federal poverty level ($11,670 to $46,680 for an individual in 2014) who did not have insurance through their job could qualify for tax credits to make premiums more affordable. They could elect to have these subsidies paid in advance directly to the insurance company, and many did. A typical tax credit was about $3,000 annually.

The amount people received was based on an estimate of their 2014 income. At tax time, that amount has to be reconciled against consumers’ actual income on IRS Form 8962. If consumers or the marketplace underestimated their 2014 income, they may have received too much in tax credits and have to pay back some or all of it.

How much people have to repay is based on their income and is capped at $2,500. People with incomes over 400 percent of the poverty line have to repay the entire amount, however.

This penalty reprieve only applies to the 2014 tax year. The IRS will allow people to repay what they owe on an installment basis. But be forewarned: Interest will continue to accrue until the balance is paid off.

MONEY Taxes

What Obama’s Tax Plan Would Mean for Your Wallet

150129_FF_TaxPlanWallet
Peter Dazeley—Getty Images

The president's State of the Union proposals probably won't go anywhere. But if they did, the true "middle class" would barely notice a change, a new study concludes.

In his 2015 State of the Union address, President Obama said his tax reform plan would lower taxes for middle-class families. According to a new analysis from the Tax Policy Center, that’s not quite the case. According to the TPC’s calculation, Obama’s tax proposals would hike taxes on top earners, offer tax relief to low-income Americans—and change little for everyone in the middle.

Though there’s a next-to-zero chance that Congress will pass Obama’s plan as is, here’s what it would look like, in dollars, if it were implemented. The Tax Policy Center found that the lowest 20% of earners—households making less than $25,260 a year—would save an average of $174 in 2016. The top 20% of earners would pay an average of $1,818 more.

The richest of the rich would take the biggest hit. Households in the top 1%—those earning more than $663,130 a year—would pay an extra $28,983 in taxes on average. And the top 0.01% would owe another $168,006. That sounds like a lot, but the top 0.01% of households earn more than $3.4 million a year. Under Obama’s tax plan, their after-tax income would shrink by 2.6%.

So with the ultra-rich paying much higher taxes, the upper-middle class would still make out okay. Households at the lower end of the top 20%, in the $141,662 to $200,181 range, would actually keep another $116 on average.

And “middle”-middle class? They would pay just as much as they pay right now. Households earning between $49,086 and $84,055, the middle quintile of earners, would see almost zero change in their after-tax income. They would pay $7 more, on average.

In fact, households in the middle 60%—if you earn between $25,260 and $141,662, this includes you—would see a 0% to 0.1% increase in their after-tax income, on average.

Obama’s plan has two main components. First, roll back tax laws that primarily benefit higher-income Americans. Second, create, expand, and consolidate tax credits that primarily benefit Americans with lower incomes.

For starters, Obama wants to increase the capital gains tax rate from 25% to 28% for taxpayers earning more than $500,000. That’s the tax on your profits from the sale of assets such as stocks, bonds, mutual funds, or real estate. Unsurprisingly, the Tax Policy Center reports that high-income Americans report the most capital gains.

The president also wants to close what he calls the “trust fund loophole.” Today, when you inherit an asset and later sell it, you owe taxes only on the gains you’ve earned since getting your inheritance (what’s called a stepped-up basis). Obama is proposing taxing all gains based on the original value of the asset.

Those increased tax revenues would fund a new tax credit for two-earner families, expand the earned income tax credit for low-income taxpayers, and consolidate several education tax credits into a more generous American Opportunity Tax Credit for college students.

However, don’t get too attached to your new tax return—Republicans have called the whole tax plan a “non-starter.”

In fact, Obama has already had to abandon one of his ideas in the face of bi-partisan opposition. His plan initially included a new tax on 529 college savings accounts—your 529 investments would still have grown tax-free, but you would have paid taxes on your earnings when you withdrew the money, even if it was to pay for college. (The Tax Policy Center did not take the 529 proposal into account in its analysis.)

White House spokesman Eric Schultz said the administration dropped the idea because “it was a distraction.”

And it goes to show how hard it is to change any aspect of the tax code.

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