Given the new passport rules, I thought it might be helpful to give some helpful instructions on how one goes about applying for and getting a United States Passport.

What You’ll Need

• Passport application form. If it’s your first time (or first time in a long time), you’ll likely need the DS-11; if it’s a renewal, you’ll likely need DS-82. Both have online versions you can fill out online and print out (DS-11 Online, DS-82 Online). DO NOT SIGN those documents, you must sign them in person!
• Two photographs of yourself. The photos must be 2″ x 2″, identical, taken within the last six months, full color, frontal with a white or off-white background, and some other specifications. Basically, you need to have them done at a place that does Passport photos.
• Proof of U.S. Citizenship. This is most easily achieved by an expired Passport or a certified Birth Certificate (one with a raised or embossed seal); but you can also use a Consular Report of Birth Abroad or Certification of Birth, Naturalization Certificate, or a Certificate of Citizenship. A military ID is not sufficient. If you don’t have any of those, there is a full list of acceptable options here.
• Valid form of photo identification. Again, if you have an expired Passport then that’s your best bet but if not, you can try a Naturalization Certificate or a current and valid Driver’s license, government ID (city, state or federal), or a military ID. If none of those work, there are a few more options here.
• Your social security number - Not sure why this is necessary but if you don’t, apparently the IRS can impose a $500 penalty. The State Department doesn’t specify if you need your social security card but I’d bring it if you have it handy.

Where To Go
Your best bet is to go to a post office but there are a whole bunch of official places you can go to including courthouses, some libraries and a few county and municipal offices. There are also regional passport agencies and 1 Gateway City Agency, which can do a rush job if you need it for travel in two weeks - those require appointments. If you’re renewing, you can just mail it in, new applicants will have to appear in person.

How Much Will It Cost?
$97 if you’re over 16, $82 if you’re younger, only $67 if it’s a renewal - you can pay with credit, debit, check, etc. If you want it expedited, it’s an additional $60.

How Long Will It Take?
6 weeks normally but 2 weeks if you get it expedited (at a cost of $60). Some have stated that applying during a slow period (September or December) may get you your passport faster than six weeks - your mileage may vary.

Expiration Dates…
If you are 15 or under, the passport will be good for five years. if you are 16 or older, the passport will be good for ten years. Lastly, while this isn’t part of the process but worth mentioning - some countries require that your passport’s expiration date be at least 3 to 6 months past the date of entry or exit. If your trip puts you within that six month expiration window, call up the embassy/consulate of the nation you’re visiting and see what their special expiration rules are.

Good luck and remember to send me a postcard!

Source: State Department

On Tuesday, during the President’s State of the Union address, President Bush is going to be discussing, among other things, three items that relate to some of the issues often discussed on personal finance blogs. Just wanted to give a heads up in case you were planning on watching the State of the Union and wanted a score card.

Health insurance deduction

In an attempt to help more Americans obtain health insurance, the President will propose a plan in which each citizen will be able to deduct $7,500 ($15,000 for families) from their taxes and employer paid medical insurance will become taxable. What this means is that everyone who doesn’t get insurance help from their employer will get that help from the government and everyone who does will now pay taxes (if their benefit exceeds the deduction) on what is now a tax-free benefit. Personally, while I may find myself owing a little more in taxes, I think it’s better for the country as a whole to have more individuals covered by medical insurance.

Making tax breaks permanent

President Bush would like to make permanent those tax breaks currently set to expire in 2010 such as the lower rates on income tax, capital gains, and dividends. I think that some of those breaks unnecessarily benefit the wealthy (not many low income earners find themselves investing in stocks, they’re investing more in groceries).

Social security shortfall… your poor ugly stepsister/brother

While there were no hints as to what they were going to do, apparently the President will ask Congress to work with him to try to solve the shortfall issue - though Democrats have called his individual accounts plan a “non-starter.”

Source: CNN Money

If you’ve been reading for a little while, you’ve probably heard me mention the Energy Tax Credit when talking about all the windows and sliding doors I had replaced in our home a few months ago so I’m just going to give you a little linkfest capturing all that useful knowledge (The third article is by far the most actionable of the three):

• Tax Credit for Energy Saving Home Improvements - My first look at the Energy Policy Act of 2005 and how I would be able to use it for replacing my windows.
• Energy Policy Act of 2005 Saves Me $500 - A second briefer look at the Act.
• Claiming the Energy Savings Tax Credit - After getting the windows replaced, I researched what would be involved in claiming the credit and what “proof” I would need in the event of an audit.

I recently pulled my credit report from TransUnion and discovered that there was some erroneous information negatively impacting my report. It turns out that I was 90-days late on a utilities payment to UGI, a utility company I have never even heard of. Digging a little deeper into my report, I saw that they had an alternate social security number that one digit off and an address in Pennsylvania that I had never even heard of… let alone once lived at. A quick phone call to TransUnion (and the two other bureaus) led to an investigation and a quick resolution in my favor.

One thing I was surprised to see was that they listed “alternate social security numbers,” one of which was wrong, and when I asked the CSR about why they even accept a report with an erroneous SSN, she explained that they will accept it if it has no negative impact because sometimes they get typos. This is clearly a loophole or error that should be investigated… if someone doesn’t even have the right social in their report to the bureau then the bureau should reject it and request that the originator fix it! In my particular case, they accepted the wrong social and pegged a utility bill to my name.

Hopefully this wasn’t a case of identity theft and I’ll definitely have to keep an eye out for this but it illustrates how important it is to keep on top of your credit history. The only major effect it had, which I didn’t know at the time, was that it made it a little harder to get that 0% financing deal for the windows I purchased from Castle; I wish I had checked a month ago to find out why it was “harder” but depending on when UGI reported (some credit card companies don’t report until it’s 60 days late) the late payment, I may have completely missed it.

If you haven’t checked your report this year, you have absolutely no excuse not to go to the government’s annual credit report website and request at least one report (I like to stagger them out so I can get it three times a year) right this very second. You should never have to pay for you credit report and going through the government’s website is the best way to ensure you get your free copy.

For anyone who runs their own business and has hired an accountant (or anyone who has gone to an H&R Block, based on what I’ve heard), you’ll run into someone who will aggressively pursue deductions even if you’ll feel a little uneasy about taking them. Now, it’s hard to figure out whether or not the deduction is legitimate for your situation and each one of us has a different level of tolerance for aggressive deduction taking but Jeanne Fleming and Leonard Schwartz recommend that you simply ask the accountant to explain the reasoning behind the deduction.

I agree with their argument that you shouldn’t accept any of these explanations:

• The likelihood of an audit is low.
• Everyone else is doing it. (Seems very grade school-ish of an answer doesn’t it?)
• The penalties are low if you’re caught.

With the wealth of information on the internet, you can simply shelve the deduction for now and do a little research on it. While nothing online, short of the IRS website, can be a definitive answer, many sites can easily tell you if you should be wary of taking a deduction. You can always email me and I can give you my unfounded opinion or, if you’d like, I can post the question on this site and hopefully someone will be able to steer you in the right direction.

Remember, in the end it’s your neck on the line with your tax return, no matter who actually fills it out, so if you wouldn’t feel comfortable taking a deduction after doing your research, don’t take it.

Source: CNN Money

Nickel and I were talking about the social security and he told me that you only have to pay on your first $94,200 of income, which was something we both knew already. For your typical employee, this calculation is very simple and done by your employer, you pay 6.2% of your salary up to $94,200 towards social security. Every dollar you earn after that will not be subjected to social security.

Now, all the literature on the social security website gives you a scenario where the $94,200 is entirely employee income, in which case the answers are cut and try: pay up to $5,840.40, after that you’re home free with respect to social security. They also give you the scenario where the $94,200 is entirely self-employment income, in which case you’re on the hook for both sides (employee and employer) to the tine of 12.4% or $11,680.80.

Now, what happens when you have a mixture of both? If I made $50,000 from my job and $50,000 from self-employment, is social security taken out from the job income and then the double-hit social security taken from the self-employment? Or you do you take the double-hit first from your self-employment? I can’t seem to find any literature on it so if anyone knows and can point me to something “official” I would truly appreciate it!

On October 20th, the Internal Revenue Service announced that the 2005 Ford Escape Hybrids were added to the list of vehicles eligible for the hybrid tax credit specified in the Energy Policy Act of 2005. The two vehicles added were the 2005 model year versions of the Ford Escape, previously only the 2006 model years were eligible. The two cars are:

• Ford Escape 2 WD Hybrid (2005) - $2,600
• Ford Escape 4 WD Hybrid (2005) - $1,950

For more information on how the tax break works, I wrote about the 2006 Hybrid Tax Break rules back on April 27th.

Here is the full list of eligible vehicles and their tax credit amounts after the jump.

2007

• Chevrolet Silverado 2WD Hybrid Pickup Truck - $250
• Chevrolet Silverado 4WD Hybrid Pickup Truck - $650
• Ford Escape Hybrid 2WD - $2,600
• Ford Escape Hybrid 4WD - $1,950
• GMC Sierra 2WD Hybrid Pickup Truck - $250
• GMC Sierra 4WD Hybrid Pickup Truck - $650
• Lexus GS 450h - $775 (decreased because of quantity limits)
• Lexus RX 400h 2WD and 4WD - $1,100 (decreased because of quantity limits)
• Mercury Mariner 4WD Hybrid - $1,950
• Saturn Vue Green Line - $650
• Toyota Camry Hybrid - $1,300 (decreased because of quantity limits)
• Toyota Prius - $1,575 (decreased because of quantity limits)
• Toyota Highlander Hybrid 2WD and 4WD - $1,300 (decreased because of quantity limits)

2006

• Chevrolet Silverado 2WD Hybrid Pickup Truck - $250
• Chevrolet Silverado 4WD Hybrid Pickup Truck - $650
• Ford Escape Hybrid (Front) 2WD - $2,600
• Ford Escape Hybrid 4WD - $1,950
• GMC Sierra 2WD Hybrid Pickup Truck - $250
• GMC Sierra 4WD Hybrid Pickup Truck - $650
• Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration - $1,300 ($640 with update)
• Honda Civic Hybrid CVT - $2,100
• Honda Insight CVT - $1,450
• Lexus RX400h 2WD - $1,100 (decreased because of quantity limits)
• Lexus RX400h 4WD — $1,100 (decreased because of quantity limits)
• Mercury Mariner Hybrid 4WD - $1,950
• Toyota Highlander 2WD Hybrid - $1,300 (decreased because of quantity limits)
• Toyota Highlander 4WD Hybrid - $1,300 (decreased because of quantity limits)
• Toyota Prius - $1,575 (decreased because of quantity limits)

2005

• Ford Escape 2 WD Hybrid - $2,600
• Ford Escape 4 WD Hybrid - $1,950
• Honda Accord Hybrid AT and Navi AT - $65li>
• Honda Civic Hybrid MT and CVT - $1,700
• Honda Insight CVT - $1,450
• Toyota Prius - $1,575 (decreased because of quantity limits)

Source: IRS: Hybrid Car and Alternative Motor Vehicles