2006 Federal and State Tax Filing

Last week I managed to complete the filing of our 2006 Federal and State Tax return. I have an educational background and professional certification in finance and as such, I have been preparing our family's tax return by myself with the help of TurboTax software. This year, we are expecting a federal tax refund of $4,163.00 and a state tax refund of $1,555.00 -- A total of $5,718.00. Our joint 2006 adjusted federal gross income is $147,856 with taxable income of $95,697, which puts us to the 25% marginal tax rate bracket (for Married Filing Jointly Status). The actual tax liability is $16,649.00 and our effective tax rate is 11.26%. Since we are e-filing with refund being requested through direct deposit to one of our Checking accounts, I'm expecting to receive the federal refund by April 20, 2007 and the state refund between April 22-28, 2007. Let's see whether refund timeframe (as estimated by TurboTax and IRS) turns out to be true.

4/19/2007 UPDATE: The State Tax Refund Payment Arrived today
The state tax refund of $1,555.00 has been posted to the checking account today, so it took only about a week and it certainly beats the expected timeframe.

4/20/2007 UPDATE: The Federal Tax Refund Payment Arrived today
Uncle Sam keeps his promise: The federal tax refund of $4,163.00 has been posted to the checking account today. We are pleased by in the influx of the cash flow and I will immediately transfer the total refunds to the Savings account.

This year may be the last year where we could contribute to both my Roth IRA and my spouse's Roth IRA. We have been able to allocate $4,000 to each of our Roth IRAs and $2,000 to each of our children's Coverdell (Educational) accounts.

We will need to adjust our tax withholding with our employers and set up a direct deposit so we are not lending Uncle Sam tax too much free money. I have heard that tax withholding formula is complicated, but also heard that TurboTax will be able to help me. I will get on to this task shortly.