By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 4/11/2006 2:35:31 PM ET 2006-04-11T18:35:31

We are less than a week away from the deadline to file taxes which no doubt will have millions of procrastinating Americans scrambling. Even if you aren't one of the last-minute filers, tax time can be stressful because of all the questions related to giving your scratch to Uncle Sam. Take Vicky in Ohio, for example, who wants to know if the government can double dip into her funds.

Why can the government double-tax my income? The IRS says I have to report my 2004 tax refund on my 2005 federal return. How can they be permitted to re-tax this money?
-- Vicky D., Cincinnati, Ohio

I’m going to assume you’re talking about your state income tax refund. A refund from the IRS is not considered income and is not taxed; however, your state income tax refund is another matter. Let’s assume you overpaid your taxes to Ohio on your 2004 return and got your refund in 2005. You probably deducted the full amount of those state taxes on your 2004 federal tax return. But because you got that refund, you actually overstated your state income tax deduction on your federal return. The result: you paid less federal tax last year than you actually owed.

The state will report the amount of your refund to the IRS and they will expect you to treat it as taxable income on your next return. In the Form 1040 Instructions, use the worksheet on page 24 to determine the taxable portion of your refund.

“The reality is you didn’t pay enough taxes the first year because your deductions were too high. This is just restoring an overstated deduction,” says Britt Smith, President of Smith & Just Certified Public Accountants in Seattle.

This situation only comes up for people who itemize on their federal return. If you take the standard deduction and don’t claim your state taxes as a specific deduction, the money refunded to you is not considered income and there are no tax consequences.

Why are we paying more for diesel than gasoline?
-- Jerry W. Elko, Nev.

There are so many factors impacting the price of petroleum products that it is impossible to point a finger at any one. And everyone you ask has a different answer: the volatile global oil market, increased world demand for diesel or greedy oil companies.

Dave Fogerty, a spokesperson with the Western States Petroleum Association, says diesel “is subject to many of the same market conditions as gasoline.” Demand for diesel in the U.S. is growing 4 percent a year and the increase is more dramatic in Europe, where diesel will grow to about 40 percent of the market in the next few years, according to Fogerty.

And Europe’s rising demand for diesel will drive up prices in the U.S.. “Refined products are now a worldwide commodity, and refiners can get a lot more for their diesel over there,” says Angela Veitch at the Energy Information Administration.

Consumer advocate Tyson Slocum has another explanation for the higher prices. “The oil companies are charging more because they can,” he says. “It’s legal for them to get away with it.” Slocum, director of the energy program at Public Citizen, blames big mergers for reducing competition. According to Slocum, the ten largest oil companies controlled 55 percent of the market in 1999, now they control more than 83 percent. “When you reduce competition, you have less ability for the free market to set a fair price,” he argues.

According to the AAA Daily Fuel Gauge Report on April 10, the average price for diesel nationwide was about 5 cents a gallon more than regular gasoline. The difference in price has closed significantly in recent weeks as gasoline prices have skyrocketed. Just a month ago, the spread was almost 30 cents. In your home state, Nevada, diesel averaged 15 cents a gallon higher than gasoline on April 10. Be thankful you’re not driving in Utah according to the latest AAA data, diesel costs about 41 cents a gallon more than gasoline!

Diesel prices could get another boost because of a change in the way it is refined. Starting this fall, new clean air rules will require diesel to have much lower sulfur levels. The new ultra-low sulfur diesel will be more costly to produce and those costs will likely be passed to consumers.

On a brighter note, a diesel engine is more fuel efficient than a gasoline engine. According to the auto experts at Edmunds.com, the engine can be 20 to 40 percent more efficient, giving you a little more bang for your buck.

I have a loan that is due on the 15th of each month. If my payment is not received by the 30th a penalty is imposed, so I figure there’s this 15-day grace period. If I pay this bill on the 20th can they report me to the credit bureau as being late?
-- MJS (city withheld)

Let me start by stating the obvious: the due date is the due date. But chances are you won’t have a problem.

Gerri Detweiler, author of "The Ultimate Credit Handbook", says most lenders won’t report you until you are 30 days late. “There’s no guarantee, of course, but that’s the usual rule of thumb,” she says.

I contacted two of the big three credit reporting agencies, Experian and TransUnion, and they confirm that’s the way it normally works -- a delinquent payment isn’t noted in a credit file until it is 30 days or longer past due.

Still, it would make sense to check with your lender to find out exactly what the policy is for reporting late payments.

Are there any limitations on the early withdrawal penalty a bank can charge you for closing a Certificate of Deposit before the maturity date?
--
Bill, Silver Spring, Md.

The Federal Reserve Board’s Regulation D covers early withdrawals and it does not limit the penalty. So if you cash out early, a bank can ding you for as much as it wants.

Regulation D says a bank must charge a penalty “of at least seven days simple interest” if you withdraw money from a CD (or other time deposit) within the first six days after the deposit. Since the bank can charge you more, it’s important to ask the financial institution about its penalty structure.

Greg McBride, Senior Financial Analyst at BankRate.com, points out that many banks vary the penalty based on the maturity of the CD. The penalty is typically 3-months interest for a CD of 1-year or less. The penalty is usually higher for 2-year, 3-year or 5-year CDs. “In that case, you are easily looking at a 9-month, maybe a year, interest penalty,” McBride says.

There is a reason why financial institutions want to discourage you from making an early withdrawal. They’re paying you an interest rate on that CD that is higher than what you’d get on a liquid account -- such as a money market or savings account –- because you are making a commitment to leave your money there for a specified amount of time. “If the investor breaks that commitment and withdraws the money prior to maturity,” McBride says, “that complicates things for the bank, and they’ll slap you with a penalty.”

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