Finalizing our youngest daughter's adoption on her fifth birthday.

Note: This is my family’s tax story, not to be confused with actual tax advice from a qualified professional.

I’ve mentioned before that we’re an adoptive family. We welcomed our “bundles of joy” to the family in 2005 (daughter age 7 from the USA, now 12.5) and in 2008 (daughter age 3 from Ethiopia, now 5.5).

There’s a cool little feature in the tax code that gives you a credit to help offset your adoption expenses.  When we adopted our first daughter, the credit amount was about $10,000 and with our second daughter, I think it was up to $12,000.  It doesn’t fully cover the cost of adoption, but offset 1/3-1/2 of costs in each case,and really made the process much easier–especially since we’d used a lot of debt to make these adoptions happen.

The problem is that if you don’t pay that much in taxes, you spread your tax credit over several years—each year, getting back everything you paid in, until such time that that you’ve run out of credit to take.

Except for this year. This year, the tax credit became refundable. This means that you can get back more than you paid in, or even go back, and amend prior year’s tax returns in order to take more of the standard deductions and roll more tax credit forward to this year.

Before the flame wars begin, let me be clear: I don’t agree with this particular bit of tax code. I think it must have been an accidental omission of language when this year’s tax code was written. The idea of giving families back more than they paid in, is outrageous and borderline on irresponsible federal spending.  This was an unexpected change in the tax rules, and we were not seeking handouts when we started this process.

With all of that said, I’m still filing to take advantage of it.

We re-filed four years worth of amended returns, each working out to be 136 pages long with full documentation –every receipt and statement and bill accounted for to justify our spending to go back and take standard deductions and roll forward more adoption tax credit.

The punchline:

The refund will be sufficient to pay off our last remaining debt (an adoption loan) and start our emergency fund, putting us 2-3 months ahead of our planned debt-free date.

Even though the check isn’t here yet, I feel 100 pounds lighter.

My thoughts feel clearer.

I feel free.  Like really, truly free.

The takeaway lessons to you are these:

1. Keep everything you ever use to  file your tax returns. One day the tax codes might change, and you’ll find yourself neck-deep in four-year-old receipts just wishing that you still had that medical bill or mileage record.

2. You too can stalk the IRS and see the status of your refund at Where’s My Refund? You’ll need to know the exact amount of your anticipated refund, your filing status and your social security number (for joint filers, use the social security number of the person whose name appears first on the return).

Lets talk interest rate!

Chase has my interest rate set unreasonably high at the moment, some where in the neighborhood of 23%. I am told this is due to my payment in February not being for the full amount of the minimum due, which I corrected myself before talking with customer care when I saw the error.  [My payment was $9 short of the minimum amount of $209 after they raised the minimum.  Yes, my own fault]

Right now I have a credit line with Chase but will not use it for anything with the interest rate at 23%. That means that Chase is making no money off of my account from interest, and should the rate stay at that level I will close my account in the near future. Considering my history of both carrying debt and also paying it consistently, this would be a loss of potential revenue for Chase.

So, how can we keep me happy with Chase and start me using my line of credit with chase again? Simple, lower my standing interest rate and open up my balance transfer options. I have a balance on my Bank of America credit card that is $10,090.47. It is steadily being paid down as my credit history will show. While it is being paid down, Bank of America is earning money, Chase is not earning anything. That balance can be yours, and the wonderful interest payments that make Chase profitable. All you need to do is set the ongoing interest rate below what BoA has for me, which is 13%, and a nice promotional balance transfer option will grease the wheels, after all, I have to see some financial benefit in transferring my balance to Chase.

Lets make this a win win business relationship. The other option is for me to open a credit card with some one else who will give me a nice interest rate and then I still win, and Chase is still left out in the cold. I have a history with Chase, and have no need for more credit, but if you are not going to play ball I will go to some one who will.

Thanks,

RD

What the heck, I have nothing to lose right?

We got the final answer from Chase concerning my request that they set my interest rate at something more reasonable.

A paraphrasing of the multiple emails exchanged:

RD: My interest rate is way too high.  I have $0 balance on this card, the interest rate is set to double that of my other credit card, I refuse to use the card at this high of an interest rate, you are making no money, and I have no incentive to keep this account open.  Lower the interest rate and give me a good balance transfer option and you will start making money again.

Customer Care: Hello Ryan, [cut and paste terms of credit card interest rate here].  Since we value your time [cut and paste advertisement for automatic payments here]

RD: Thank you for the swift response.  I can see that you are doing your job and are giving me the answer you are supposed to based on your procedures.  Can you please forward my inquery on to some one who is able to qualitatively examine my request?

Customer Care 2: Hello Ryan, [cut and paste "we don't have to do anything for you" language here].  However, we value your business so we are going to lower your interest rate by 2% out of the goodness of our hearts.  Now please go away and don’t ask for anything else from us.

RD: Thank you very much for your gesture of good will.  Going from 24.24% to 22.24% is a step in the right direction.  However, that still does not provide any incentive for me to use my Chase card or to even keep the account open.  Can you forward my request on to some one with the authority to actually read my first email and judge the merit of my request?  Thank you

Customer Care 3: Hello Ryan, [cut and past "we wont do anything else for you" language here].  We value you as a customer and look forward to helping you in the future.

RD: …

Started with $75,000 in debt

I guess I’d better start by coming clean about where I’m at on my debt journey. In the past three years my husband and I have been bailing out from under about $75,000 in debt, not counting our mortgage. Two cars, and some adoption loans (we’ve adopted our two beautiful daughters), college loans, etc. The college loans and adoption loans and car loans are paid off now and all that is remaining is some adoption travel on a credit card (one month in Ethiopia) and some medical bills (all current).

Progress on paying these off was slowed when I was laid off from my regular job in December and decided to pursue writing full time (a dream I thought would have to wait for retirement), but we’re getting back on track now and we feel like we’re in the “home-stretch.”

Current Debt

Here’s where we’re at:

• Mortgage remaining $163,000 (just refinanced into a fifteen year loan)
• Credit card 1 $13,700
• Credit card 2 $591
• Medical debts $987

Total non-mortgage debt: $15,278

Total debt with mortgage: $178,278

How we’re taming this dragon is by living on a serious budget. (I’ll post about the budget later), and following the Dave Ramsey “debt snowball” program. As adoptive parents, we’ve had the benefit of claiming the adoption tax credit, (usually over two years) and applying that towards our remaining adoption debt each time. It doesn’t quite offset the entire cost, but has gotten us pretty close. Ultimately the $15,000 doesn’t seem so scary since we’ll get back between $7-10k in February.

Our goal is to be out of non-mortgage debt before the end of this year so we can start funding college savings for our oldest daughter. Realistically, it looks like it will take us until about April to be out of debt, as we have some additional medical expenses coming up.

I’ll post more soon, and look forward to getting to know you all. If you’d like to know more about my story in the meantime, you can visit my “Laid off and loving it” story at www.pennywisefamily.blogspot.com. If you’d like to know more about our adoption journeys, those are also online at www.jessc098.blogspot.com. We have a daughter from the USA and one from Ethiopia.

Ciao for now,

Jessica

Burn it.

No, not the loan statement…..the car.

I read an interesting piece in the wall street journal today about the rise of Insurance Fraud as more and more police are finding burned or abandoned cars in Las Vegas.

Wow.

This is bad. Very bad. If you can’t afford your car anymore…you don’t deserve the car. Work out a payment plan with car maker…most companies really, really, don’t want to repossess your car. It’s costly for them, sometimes a legal liability, and they don’t want your car. So, get on the phone and work something out.

Don’t go all felon and start burning stuff up. That really can’t be good on mother nature either.

Look, your credit score is important. But it’s not worth committing a crime to keep intact. If you lose the car and it gets repossessed your credit is going to take a hit.

Big deal, you should probably be paying cash for stuff anyway.