Thursday, April 30, 2009

Check out my Appearance on the “Mind your BIZness” Radio Show

An interview I recently did for “Mind your BIZness” radio with host Danielle Hampson is being rebroadcast. Check out either Mind Your or WNB Radio Network to stream the repeat of my interview.

CA Homebuilder Lobby Wants To Extend Tax Credit


The California association that lobbies for homebuilders is pushing for more money to extend funding for a home-buyer tax credit.

In February, the state designated $100 million for the original $10,000 tax credit, which applied to newly constructed, previously unoccupied homes. The money became available on March 1 and is already almost half gone, said Tim Coyle, the California Building Industry Association's vice-president for governmental affairs.

Coyle would not disclose the size of the tax credit the association is seeking, but said that information would be available by next Thursday. By then, the association and its supporters in the state's Assembly and Senate aim to have introduced a bill.

While the association would support a broader credit than the original, this one would also likely apply to new construction because that would net California money, generating more in state revenue than it would distribute in the form of the tax credit, Coyle added.

Tax Official Predicts More Protests Of Home Values

A Colorado tax administrator is predicting that more tax protests will take place in the coming months due to real estate values. You can find a snippet of the Associated Press story below, or read the full story at

Colorado's property tax administrator expects to see more people challenging how much their homes are worth this year, as home prices tumble around the country.

By May 1, property taxpayers will have received notices of the assessed values of their homes as of June 30, 2008. They have until June 1 to protest the value to county assessors. Properties are reappraised every two years.

When the economy was stronger, Colorado housing values generally didn't soar as high as in coastal areas, so they had less room to fall, said JoAnn Groff, property tax administrator for Colorado. Yet some homeowners may question why their values didn't fall more.

"We suspect there will be more protests this year because of national news about declining value. If people don't see a decline, they're going to wonder why," Groff said.

Some homeowners might protest their assessments in a bid to lower tax bills, said Todd Davidson of, which analyzes property values.

In 2007, county assessors received 129,234 protests of different kinds of properties including homes, according to state figures.

Values can vary widely by region and neighborhood.

Oakland Council Backs a Tax on Marijuana

From the Wall Street

Leaders of this economically hard-hit city are proposing to tax medical marijuana as a way to help close a record budget shortfall.

Oakland's City Council last week approved a 1.8% tax on medicinal marijuana sold in the city. If voters pass the proposal in a July election, Oakland would become the nation's first city to directly tax the drug, medical-marijuana advocates say.

Such an outcome would further legitimize medical marijuana in California and represent the latest victory for advocates. Prospects for such a tax were made brighter in February, when U.S. Attorney General Eric Holder announced that the federal government would no longer raid state-approved dispensaries.

Backers of the Oakland tax on dispensaries said they hope to encourage other cities to follow suit. The tax would prove "that government-regulated dispensaries are good neighbors," said James Anthony, a lawyer who represents the Harborside Health Center, one of Oakland's medical-marijuana dispensaries.

California is one of 13 states that have legalized medical marijuana, allowing it to be sold to people with a doctor's recommendation. It is relatively easy for anyone over 18 years old to obtain such a doctor's note. Advocates estimate there are 200,000 or more approved medical-marijuana users in California. Users already pay a sales tax on the drug.

A city tax on medical marijuana could generate at least $400,000 and perhaps more than $1 million annually, said Rebecca Kaplan, the Oakland City Council member who pushed the proposal. The city of 400,000 residents is facing an $83 million shortfall in a $455 million budget.

The owners and managers of Oakland's four medical-marijuana dispensaries said they approached the city with the idea. "We wanted to further legitimize the medical-marijuana paradigm to show that we are truly willing to assist [Oakland], and to show other cities that there are social benefits to this," said Keith Stephenson, executive director of Purple Heart Patient Center.

No formal opposition has formed against the proposal, and Ms. Kaplan and medical-marijuana advocates said they are confident voters will approve it.

But Paul Chabot, a Southern California resident who recently founded the Coalition for a Drug Free California, is opposed to the idea because he thinks the "quasi-legalization" of marijuana would add more of the drug into the black market. "It's a front; it also sends the wrong message to children," he said. "What are you doing to do next, allow prostitution and tax that? Allow methamphetamine to be sold and tax that?"

Wednesday, April 29, 2009

Top Lawmaker Wants Mileage-Based Tax On Vehicles

From the Associated Press:

A House committee chairman said Tuesday that he wants Congress to enact a mileage-based tax on cars and trucks to pay for highway programs now rather than wait years to test the idea.

Rep. James Oberstar, D-Minn., said he believes the technology exists to implement a mileage tax. He said he sees no point in waiting years for the results of pilot programs since such a tax system is inevitable as federal gasoline tax revenues decline.

"Why do we need a pilot program? Why don't we just phase it in?" said Oberstar, the House Transportation and Infrastructure Committee chairman. Oberstar is drafting a six-year transportation bill to fund highway and transit programs that is expected to total around a half trillion dollars.

A congressionally mandated commission on transportation financing alternatives recommended switching to a vehicle-miles traveled tax, but estimated it would take a decade to put a national system in place.

"I think it can be done in far less than that, maybe two years," Oberstar said at a House hearing. He was responding to testimony by Rep. Earl Blumenauer, D-Ore., who recommended that the transportation bill include pilot programs in every state to test the viability of a mileage-based tax.

Blumenauer said public acceptance, not technology, is the main obstacle to a mileage-based tax.

Pilot programs "would be able to increase public awareness and comfort and it would hasten the day we could make the transition," Blumenauer said.

Oberstar shrugged off that concern.

"I'm at a point of impatience with more studies," Oberstar said. He suggested that Rep. Peter DeFazio, D-Ore., chairman of the highways and transit subcommittee, set up a meeting of transportation experts and members of Congress to figure out how it could be done.

The tax would entail equipping vehicles with GPS technology to determine how many miles a car has been driven and whether on interstate highways or secondary roads. The devices would also calculate the amount of tax owed.

"At this point there are a lot of things that are under consideration and there is also a strong need to find revenue," Oberstar spokesman Jim Berard said. "A vehicle miles-traveled tax is a logical complement, and perhaps a future replacement, for fuel taxes."

Gas tax revenues — the primary source of federal funding for highway programs — have dropped dramatically in the last two years, first because gas prices were high and later because of the economic downturn. They are forecast to continue going down as drivers switch to fuel-efficient and alternative fuel vehicles.

Transportation Secretary Ray LaHood has ruled out raising gas taxes to make up for the funding shortfall, and the White House has rejected a mileage-based tax. They have not offered an alternative.

Bankruptcy for Chrysler Likely Averted as Banks Cave on Debt

It seems Chrysler may be able to avoid filing bankruptcy as was suspected earlier in the week, according to You can find a snippet of their post below, but the full story can be found here.

Chrysler LLC and the U.S. Treasury Dept. have reached an agreement with banks and private equity firms holding $6.9 billion of the automaker’s debt. Those firms have agreed to take $2 billion and a small equity stake in the company, paving the way, it seems, for Chrysler to avoid bankruptcy and with Italian automaker Fiat.

The deal, first reported by, was confirmed by a Treasury official who said: “The agreement from Chrysler’s principal banks is an exceptional accomplishment in line with the President’s firm commitment that all stakeholders sacrifice to make this deal succeed.”

Details of the deal may come officially from Chrysler or Treasury officials later today.

Banks, including J.P Morgan, Citi, Morgan Stanley and Goldman Sachs, had been holding up the deal for weeks, insisting on more cash and equity. But a deal struck with the United Auto Workers Sunday night, said one executive familiar with the negotiations, put additional pressure on the debt holders to strike a deal.

Those banks are holding secured debt. And one of the issues confronting them is that Chrysler’s assets—Jeep, minivans, factories, Dodge Ram pickup and real estate—all have limited value in the recession, and few potential buyers [see Chrysler’s Looming Tag Sale].

The possibility of a Chapter 11 filing is not completely off the table for Chrysler. But it is far less likely.

Chrysler was to have filed a new restructuring plan to the White House auto industry task force by April 30, so that the Obama Administration could determine if Chrysler has restructured its business extensively enough to merit an additional $6 billion in loans on top of $4.5 billion it has already received.

A deal with Fiat is now expected to go forward, with the Italian automaker owning 35% of Chrysler, while the United Auto Workers will own up to 55%, and the Federal government up to 10%.

The Obama Administration has already said that Chrysler’s only viable future was one involving a merger with a stronger company. Its commitment to the further loans has been contingent on the Fiat deal. And the Fiat deal was contingent on big concessions from the union and bondholders.

Bankruptcy Bill Watered Down, Still Fiercely Opposed By Banks

From Huffington

After weeks of negotiations between Senate Democrats and major players in the financial industry, a compromise bankruptcy reform deal has been reached, Majority Whip Dick Durbin (D-Ill.) said on the Senate floor Monday night. Whether it will pull 60 votes, the number needed to overcome a GOP filibuster, is a question that will be answered later this week when the Senate takes up Durbin's amendment to the House-passed bankruptcy bill.

In order to garner the support of conservative Democrats and a few Republicans, the proposal has been watered down. The bankruptcy legislation will still allow homeowners to renegotiate mortgages in bankruptcy - the so-called cram down provision - but only under strict conditions. The banking industry has lobbied fiercely against cram down, but Durbin said on the Senate floor Monday night that the compromise was supported by Citigroup, which has been at the negotiating table.

"In the past, some of my colleagues understood the need for action but have been uncomfortable with the original language. Let me be clear: this amendment is different," said Durbin. "The amendment I'm going to offer will make a modest change in the bankruptcy code with a lot of conditions. It won't apply across the board. This amendment limits assistance in bankruptcy to situations where lenders are so intransigent that they are unwilling to cooperate with the foreclosure prevention efforts already underway - Obama's homeowner assistance and stability plan and the Congressionally-created HOPE For Homeowners, which this bill will greatly improve."

If banks refuse to take part in either of those programs, which allow homeowners to renegotiate mortgages under certain conditions, then a bankruptcy judge would be able to reduce a homeowner's monthly payment.

Durbin didn't release any further details. The compromise, which he said is also supported by the Center for Responsible Lending, AARP and the Leadership Council on Civil Rights, is being shared with wavering members and staff leading up to the vote.

Meanwhile, the banking lobbyists are furiously lobbying against it and Durbin acknowledges it will be difficult to "muster the votes, although I know it will be hard."

It is "hard to imagine that today the mortgage bankers would have clout in this chamber but they do," said Durbin. "They have a lot of friends still here. They're still big players on the American political scene and they have said to their friends, stay away from this legislation."

While Citigroup, Bank of America, Wells Fargo and other major banks were negotiating with Durbin and his allies, the major bank lobbies were whipping up opposition to it.

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Feds Come After Redding Couple for Alleged Tax Scam


A Redding couple faces felony charges for running a tax-return scheme and claiming more than $159,000 in false refunds.

A federal criminal complaint accuses Shannon Elaine Ford, 32, and Michael Joseph Ford, 31, of operating a tax return preparation business and recruiting taxpayers, promising them large returns, a news release from acting U.S. Attorney Lawrence G. Brown's office states.

The couple allegedly filed more than 34 tax returns using false tax forms relating to income from nonexistent small businesses. The couple also misdirected federal and state tax return checks to their own bank and credit union accounts, the complaint alleges.

The fraudulent tax returns claimed more than $159,000 in false refunds.

The Fords allegedly ran the scam, which involved more than 20 victims, from March 2004 to March 2007.

Shannon Ford is charged with conspiracy, 34 counts of filing false tax returns, 17 counts of bank fraud and aggravated identity theft. Michael Ford is charged with conspiracy, five counts of filing false tax returns and seven counts of bank fraud, the release states.

The couple was scheduled to appear Tuesday before U.S. Magistrate Judge Dale A. Drozd.

Tuesday, April 28, 2009

Bank Of America May Need More Money

Just days after I posted an entry on the 10 biggest recipients of Federal bailout money, Bank of America announced they may need more help from the government, according to the Associated Press. You can find a snippet of their story below, but the full article can be found here.

Bank of America Corp. (BAC) (BAC) and Citigroup Inc. (C) (C), which have each received $45 billion in government bailout funds, have been told by regulators that "stress test" results show they may need to raise additional capital, The Wall Street Journal said Tuesday.

Charlotte, N.C.-based Bank of America is looking at a shortfall in the billions of dollars, the paper said, citing people familiar with the situation. Both banks plan to rebut the preliminary findings, according to the paper, with Bank of America expected to respond Tuesday ahead of its shareholder meeting Wednesday.

Citigroup declined to comment; Bank of America officials weren't immediately available to comment.

As executives of the nation's largest banks review their stress-test results, even the top performers are lobbying regulators to raise their scores before the numbers are finalized Friday.

Fed officials told reporters Friday that all 19 banks that took its "stress tests" will be required to keep an extra buffer of capital reserves beyond what is required now in case losses continue to mount. That would mean some banks will likely have to raise additional cash. But the Fed stressed in a statement that a bank's need for more capital reserves to meet the requirements should not be considered a measure of the "current solvency or viability of the firm."

Federal Reserve officials held top-secret meetings with bank executives last week to give them preliminary findings of how each bank would fare if the recession got much worse. The government plans to announce the results of the tests May 4, and banks will have the opportunity to appeal the findings.

By law, the banks cannot publicize the results without the government's permission.

Executives sifted through the test results over the weekend, devising arguments they hope will persuade regulators to boost their scores, according to two industry officials who requested anonymity because regulators have barred them from discussing the process.

Banks have until Tuesday to make their cases. They will receive the final test results Friday, and the information will be released next week.

The results will determine the fates of the companies, which together hold one-half of the U.S. banking system's loans. Banks found to need more capital face several possibilities: The government could convert its stake in them to common shares, force them to raise money from investors or eventually release more funds from the Treasury Department's $700 billion financial bailout.

For Treasury, the easiest way to bolster bank balance sheets is to convert the government's existing stake from preferred shares - a form of debt - into common shares that carry voting rights. This would help Treasury avoid returning to Congress for more bailout money - a request lawmakers are likely to rebuff.

The banks' options are designed to ensure banks have enough cash to withstand the mounting loan losses they would absorb in a bleaker economy.

If the test showed a bank would need more money to endure a much worse recession, regulators will force it to meet higher standards for capital reserves, to offset possible future losses.

NYC Personal Income Tax Revenues Plunge In April


New York City's net personal income tax revenues plunged 51 percent in the first 24 days of April, compared with the same period a year ago, the city comptroller's office said on Monday.

New York City's economy has been hurt by the devastation of Wall Street, its largest hometown industry, following the collapse last September of Lehman Brothers Holdings and a series of bank mergers amid the credit crisis. In the month of March alone, for instance, Wall Street shed 3,100 employees, according to the state's Department of Labor.

U.S. states and cities, just like the federal government, usually see tax revenues surge in April because the month includes the April 15th annual tax deadline.

New York City often pays out more in refunds than it collects in taxes during April.

But "through April 24, payments were running 33.5 percent below those of April 2008, and refunds paid out were running 21.8 percent below those of April 2008," said a spokesman for Democratic City Comptroller William Thompson.

The state's economy rests on the city's shoulders because the city's financial sector pays about 20 percent of the state taxes. New York City is equally dependent on the financial sector, with economists saying that each high-paying Wall Street job creates service-sector employment ranging from one to three workers in a broad range of businesses from law firms to clothing stores and little gift shops.

Though the city's real estate market fended off much of the pain seen around the nation until late last year, the depth of its current fall was underscored by the state's mass transit agency.

"We're seeing it declining even faster and deeper than in the post-1987 deflating of the real estate bubble," said Gary Dellaverson, chief financial officer for the Metropolitan Transportation Authority, at a finance committee meeting.

On Oct. 19, 1987, the Dow Jones industrial average .DJI lost 22.6 percent in the largest one-day percentage decline in stock market history. Afterwards, thousands of Wall Street jobs were lost and some never returned.

Democratic Governor David Paterson, speaking to reporters, estimated the state's deficit next year at $2.7 billion.

The state will update its financial plan later this week, he said. New York City also should issue new estimates soon.

While there was a "significant" drop in state corporate tax revenues in March, followed by a decline in personal income tax collections in April, Paterson added that there were signs the economy might stabilize sooner than anticipated.

"However, there seems to be a projection later in the year that things may not be as bad as we first thought that they would be."

The state's current budget cut the three-year deficit to about $11 billion from $16 billion, Paterson added.

Tax Breaks Available for Taxpayers Who Purchase Qualified Plug-In Electric Vehicles

The IRS recently published a new press release discussing tax breaks available for qualified plug-in electric vehicles. Check out the text of the release below.

Plug-in electric vehicles using certain types of batteries may qualify for a new tax credit if purchased this year, the Internal Revenue Service said today.

The Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA) created two new tax credits for various types of electric vehicles, which may include what are commonly referred to as neighborhood electric vehicles.

ARRA creates a tax credit for low-speed or two- or three-wheel electric vehicles, such as motor scooters, purchased after Feb. 17, 2009, and before Jan. 1, 2012. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500. To qualify, a vehicle must be either a low-speed vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 4 kilowatt hours or be a two- or three-wheeled vehicle that is propelled to a significant extent by a rechargeable battery with a capacity of at least 2.5 kilowatt hours.

EESA created a tax credit for vehicles that have at least four wheels and draw propulsion using a rechargeable traction battery with at least four kilowatt hours of capacity. For 2009, the minimum credit is $2,500 and the credit tops out at $7,500 to $15,000, depending on the weight of the vehicle and the capacity of the battery.

During 2009, low-speed, four-wheeled vehicles manufactured primarily for use on public streets, roads and highways (neighborhood electric vehicles) may qualify both for the EESA credit and, if purchased after February 17, 2009, for the ARRA credit for low-speed electric vehicles. A taxpayer may not claim both credits for the same vehicle. Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for either credit.

The Internal Revenue Service is working on guidance regarding certification procedures for both of these credits.

JPMorgan Chase Gets Ohio Tax Break To Create 1,000 Jobs


JPMorgan Chase & Co. was awarded incentives by the Ohio Tax Credit Authority to help the bank create 1,000 jobs in Columbus.

JPMorgan Chase (NYSE: JPM) will save about $14 million during 15 years under the terms of a state incentive approved Monday. The financial services company also is set to gain $8.3 million in tax credits and cash from the city of Columbus.

The company received the 15-year, 75 percent tax credit against its state tax obligation in exchange for its pledge to create 1,000 jobs in Columbus and 150 jobs in Westerville during the next five years. About 900 of those jobs would be created during the next three years.

The state tax deal requires the company to keep the jobs in the region for 30 years.

Columbus has offered JPMorgan Chase two incentives that would bring in an additional $4.5 million in the city’s coffers over eight years, according to the city.

A proposed eight-year, 35 percent Job Growth Incentive from the city would return an estimated $2.5 million of individual payroll taxes withheld to the company over the term of the incentive. The city also has offered a 10-year, 65 percent Job Creation Tax Credit worth $5.8 million over the term. That credit would be applied against the company’s corporate income tax obligation to the city.

City Council will consider the incentive package in May.

Nearly 11,000 of the current 14,000 JPMorgan Chase jobs in the region are in Columbus and nearly 3,000 jobs in Westerville, according to bank spokesman Jeff Lyttle.

About 8,000 jobs are at the company’s operations center at Polaris Centers of Commerce and about 3,000 are at Easton, he said.

The distribution of the jobs at office buildings in Columbus and Westerville remains unclear.

“There’s still some moving parts to settle,” Lyttle said.

JPMorgan Chase also is considering sites in New York, Michigan, Louisiana and Texas.

Monday, April 27, 2009

Snoop Dogg's Tax Debts Unveiled

Famed rapper Snoop Dogg is the most recent celebrity to have his name added to California’s delinquent taxpayers list. Check out the following article on the new development from

Rap superstar Snoop Dogg has been named and shamed as the latest celebrity indebted to the state of California - he's failed to pay more than $284,000 in back taxes.

The Drop It Like It's Hot hitmaker, real name Calvin Broadus, had a tax lien filed against him last month, which accused the rapper of owing $284,053.59, reports

He's not the only musician not up to date with his taxes.

Soul star Dionne Warwick was recently listed in California's top 10 worst offenders, while rappers Xzibit, Method Man and Lil' Kim have also run into trouble with the Internal Revenue Service (IRS).

GOP Stripped Flu Pandemic Preparedness From Stimulus

From The

When House Appropriations Committee chairman David Obey, the Wisconsin Democrat who has long championed investment in pandemic preparation, included roughly $900 million for that purpose in this year's emergency stimulus bill, he was ridiculed by conservative operatives and congressional Republicans.

Obey and other advocates for the spending argued, correctly, that a pandemic hitting in the midst of an economic downturn could turn a recession into something far worse -- with workers ordered to remain in their homes, workplaces shuttered to avoid the spread of disease, transportation systems grinding to a halt and demand for emergency services and public health interventions skyrocketing. Indeed, they suggested, pandemic preparation was essential to any responsible plan for renewing the U.S. economy.

But former White House political czar Karl Rove and key congressional Republicans -- led by Maine Senator Susan Collins -- aggressively attacked the notion that there was a connection between pandemic preparation and economic recovery.

Now, as the World Health Organization says a deadly swine flu outbreak that apparently began in Mexico but has spread to the United States has the potential to develop into a pandemic, Obey's attempt to secure the money seems eerily prescient.

And partisan attacks on his efforts seem not just creepy, but dangerous.

The current swine flu outbreak is not a pandemic, and there is reason to hope that it can be contained.

But it has already believed to have killed more than 100 people in a neighboring country and sickened dozens of Americans -- causing the closing of schools and other public facilities in U.S. cities.

IRS Says Set To Pursue "Other Banks" On Tax Evasion


The U.S. Internal Revenue Service (IRS) is poised to pursue "other offshore banks" for allegedly facilitating tax evasion by wealthy Americans following its high-profile case against Switzerland's UBS AG (UBSN.VX) (UBS.N), an IRS official said on Monday.

"We have identified other offshore banks that are engaged in similar activities," David Reeves, an agent with the IRS' Offshore Compliance division, told a conference in Miami on offshore finance centers.

Small Businesses Brace For Tax Battle

Business owners are bracing for a change in next years tax returns due to President Obama’s aggressive tax reforms. While many of the tax hikes are meant to hit bigger business, some smaller businesses fear they may get hit as well. Check out the following article from discussing the concerns of small business owners.

Gail Johnson doesn't think of herself as wealthy. The former pediatric nurse has spent 20 years building a chain of preschools and after-school programs that accommodate sick children so working parents can keep their jobs.

But, like most small-business owners, Johnson reports her profit on her personal tax return. In a typical year, she and her husband make more than $500,000, according to her accountant, a figure that throws them squarely into the ranks of the richest Americans -- and makes them a prime target for the Obama administration's tax policy.

Since last year's campaign, President Obama has vowed repeatedly not to increase taxes for families making less than $250,000 a year. That pledge, while politically popular, has left him with just two primary sources of funding for his ambitious social agenda: about 3 million high-earning families and the nation's businesses.

Johnson, with her company, falls into both categories. If Obama's tax plans are enacted, her accountant estimates that her federal tax bill -- typically, around $120,000 a year -- would rise by at least $23,000, a 19 percent increase.

"You hear 'tax the rich,' and you think, 'I don't make that much money,' " said Johnson, whose Rainbow Station programs are headquartered near Richmond. "But then you realize: 'Oh, if I put my business income with my wages, then, suddenly, I'm there.' "

Across the nation, many business owners are watching anxiously as the president undertakes expensive initiatives to overhaul health care and expand educational opportunities, while also reining in runaway budget deficits. Already, Obama has proposed an extra $1.3 trillion in taxes for business and high earners over the next decade. They include new limits on the ability of corporations to automatically defer U.S. taxes on income earned overseas, repeal of a form of inventory accounting that tends to reduce business taxes, and a mandate that investment partnerships pay the regular income tax rate instead of the lower capital gains rate.

"They're desperate for revenue. And therein lies the concern of the broader business community," said R. Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce.

"We're going to be a permanent target, and we understand that," added Catherine Schultz, vice president for tax policy at the National Foreign Trade Council. "The way they see it, corporations don't vote."

Obama has proposed some business tax breaks, but those proposals have been dwarfed by the tax increases under consideration, particularly his plan to let tax cuts enacted by former president George W. Bush expire for high earners.

Administration officials say they would simply restore rates in effect during the Clinton administration for every dollar of income over $250,000 ($200,000 for individuals). The plan is intended to counter years of rising inequality in which wealth has been concentrated at the top of the income scale.

From 1979 to 2006, after-tax incomes rose by $863,000 -- more than 250 percent -- for the top 1 percent of households, compared with $9,200 -- or 21 percent -- for middle-income households, according to a recent analysis of IRS data by the nonpartisan Congressional Budget Office. By allowing the Bush tax cuts to expire next year for upper-income taxpayers -- but keeping the cuts that benefit middle-income families -- Obama has said he hopes to "restore some balance to the tax code."

Switzerland Asks US To Drop Tax Case Against UBS

From the Wall Street

Switzerland asked the U.S. government to drop a legal case involving UBS AG (UBS) in return for passing a new tax accord between the two countries, a Swiss official said Sunday.

Swiss President Hans-Rudolf Merz said in Washington over the weekend that U.S. Treasury Secretary Timothy Geithner seemed "understanding of the Swiss position" and that he promised to "look into it," but didn't give a definitive answer, said the Swiss official, who declined to be named.

A U.S. Treasury official said Sunday that during the meeting with Merz on Saturday, Geithner "listened to the Swiss concerns regarding the UBS case and indicated that he understood the importance of appropriately resolving the matter."

UBS, Switzerland's largest bank, recently reached a settlement with U.S. authorities in which it agreed to pay $780 million in penalties and restitution to avoid criminal prosecution in connection with helping wealthy Americans hide accounts and evade taxes. Nevertheless, the U.S. continues to pursue data on more than 50,000 U.S.-based clients of UBS through civil means.

The U.S. Tuesday will start talks with Switzerland, famous for strict bank secrecy, on a bilateral tax treaty. The tax treaty negotiations will be conducted by the Treasury Department, with input from the Justice Department and the Internal Revenue Service, the Treasury official said.

The decision on how to take the case forward would be made by the Department of Justice and the IRS, which is part of the Treasury, the official said. It was not one in which Geithner would intervene.

"It would be very difficult to bring the accord to Parliament for approval with the case still pending," the Swiss official said, reporting what Merz, who's also the Confederation's finance minister, said Saturday after the International Monetary Fund spring meeting in Washington.

Switzerland is in the process of renegotiating dual tax agreements as part of concessions it made on banking secrecy, including agreeing to standards set out by the Organization for Economic Cooperation and Development on transparency and information exchange.

UBS no longer offers offshore banking in the U.S., or financial services out of Switzerland for wealthy Americans.

U.S. prosecutors recently obtained their first guilty plea from a U.S. client of the Swiss bank, as Floridian Robert Moran pleaded guilty in federal court to filing a false tax return and admitting to concealing more than $3 million in a secret UBS account.

The 10 Biggest Recipients of Federal Bailout Money

Over the past year, the federal government has given out a lot of money to both struggling financial companies and American automobile makers. With huge executive bonuses in the news and more money being given out to huge corporations, the American taxpayers are beginning to become more skeptical of federal bailouts. To help the readers of my blog gain a better understanding of these “bailouts” I have put together the following list of the top 10 biggest recipients of federal bailout money.

#1 AIG

$170 to $240 billion

The American International Group (AIG) makes the top of my list because the insurance giant has received numerous bailouts, which many experts claim totals over $170,000,000,000. In addition, it is predicted that AIG could need as much as $75 billion more in federal funds over the next few years. This could put their total at upwards of a quarter of a billion dollars.

AIG got into trouble when their credit ratings were downgraded and the company ran out of liquid assets. The federal government first gave AIG a credit of $85 billion in exchange for a nearly 80% stake in the company. The company later received another bailout from the government, which sparked public outrage after it was learned that AIG had given out massive bonuses to a group of high paid executives. Many Americans felt that taxpayer money should not be going to companies rewarding executives

In spite of all the negative publicity, the government and President Barack Obama have stood behind AIG. They argue that the insurance giant is so deeply intertwined with the financial system that its failure could ruin the country’s already shaken economy. According to reports, AIG provides insurance to more than 30 million policyholders and 100,000 different entitles, including small businesses, government entities, pension funds, and multi national corporations.

#2 Citigroup

$55 to $351 billion

Citigroup is an American financial services company based out of New York. They are estimated to have the world's largest financial services network with over 12,000 offices across the globe. As of this date, they have received two TARP payments from the federal government totaling $50 billion. In addition, the government has also assured up to $301 billion of the company’s assets. Meaning the company could end up receiving over $300 billion dollars of taxpayer money.

So far, the government has had to issue one $5 billion payment to Citigroup because of the asset guarantee. When Citigroup reported huge losses earlier in the year they had to absorb losses totaling $29 billion, but received $5 billion from the Treasury and another $10 billion from the FDIC.

So far, Citigroup has avoided making headlines for executive bonuses. The company claims they are using their funding to expand the flow of credit in the economic crisis and to get loans out to eager borrowers. They even formed a committee to oversee the way their TARP money is being spent.

#3 Bank of America

$45 to $163 billion

According to the Charlotte Business Journal Bank of America Corporation is the world’s largest financial services company in the world. However, along with most of the country’s financial institutions they needed support from the federal government. They were given two payments for stock ($25,000 on October 28, 2008 and $20,000 in January 2009), and received a federal asset guarantee of up to $118 billion. However, it is also important to note that they were paid an estimated $6 billion by AIG during the financial crisis (AIG reportedly used TARP money to make this payment).

Bank of America did receive some lash-back for their decision to acquire Merrill Lynch with out citing their lack of immediate proper funding. However, the federal government had little choice but to offer Bank of America more assistance, as thousands of businesses and taxpayers depend on the bank.

#4 JPMorgan Chase

$25 billion

JPMorgan Chase & Co. is considered one of the oldest financial services firms in the world, but began having asset problems along with all the other banks in the country. On October 28, 2008 they were given $25 billion as part of the government’s initial TARP payments. The company has stayed relatively off the radar since receiving the funds, except for when it was learned that they had made tentative plans to purchase new corporate jets after receiving bail out money. However, they quickly put out a statement announcing that all of their federal debts would be repaid before any jets were purchased.

#5 Wells Fargo

$25 billion

Wells Fargo & Co. is widely considered the “The World's Safest US Bank” after they became the only US bank to be rated AAA by the S&P. Not surprisingly, the bank has had what many are calling one of the most successful bailout stories of the top 10. After receiving federal aid, Wells Fargo made a recent announce to its investors to expect a profit of $3 billion for the quarter. While at face value this seems like a great victory for the banks and economy, some skeptics point out they may not be out of danger. Wells Fargo bought out Wachovia, inheriting some mortgage loans and a lot of government regulation, not to mention missing information and unclear capital numbers. Only time will tell if the acquisition will hurt or help the giant financial institution.

#6 General Motors

$13.4 to $18.4 billion

General Motors Corporation (GM) and Ford have both been in the news about the money they received from the government. However, GM is the only of the automakers to make our top 10 list. So far, they have received an estimated $13.4 billion in bailout funds, and have already requested more help. It’s also important to note that the $13.4 billion does not include an estimated $5 billion that the federal government announced they would be GM and Ford for “for payments to suppliers from participating auto companies,” under a new Auto Supplier Support Program.

As I mentioned before, GM had requested additional funds from the government but President Obama’s administration rejected their proposal. They did agree to provide GM with working capital for the next 60 days, but said that during that time they would “be working closely with GM to produce a better business plan.”

#7 The Goldman Sachs Group, Inc.

$10 billion

The Goldman Sachs Group had managed to avoid controversy, until they recently began selling their stocks to help repay the $10 billion they received from the TARP program. While most onlookers would consider this a good thing, many financial experts are afraid this early repayment will overpressure other banks to repay their debt prematurely. The main concern is that if too many banks follow suit, it could “harm the recovery effort”. Of course, Goldman Sachs benefits from this early repayment by freeing themselves of government restrictions, including spending and bonus caps.

#8 Morgan Stanley

$10 billion

Morgan Stanley is a New York based financial services provider, and unlike many other TARP recipients, they have been very open about when and how their TARP money is being used. They claim to have used some of the money towards their capital account, while additional funds were lent to Verizon Wireless.

Another smart move by Morgan Stanley is their upfront admittance that their debt will not be paid back any time soon. CEO John Mack publicly stated that, “as much as we’d like to give the money back and just focus on not having government involvement, being totally a public entity, we think and I think that it’s the wrong time to do it now... The reason that money was put in the hands of these banks is to help get us through this very difficult time in financial markets and a very difficult time in the economy.”

#9 Merrill Lynch & Co.

$10 billion

Merrill Lynch was amongst the banks hit hardest by the market crash last year. The company received a TARP from the federal government in the amount of $10 billion before Bank of American bought them out at the end of 2008. The company was also received an estimated $6 billion from AIG, who claims to have used TARP money to make the payment.

In addition to the controversy around their Bank of America buy out, Merrill Lynch has also made headlines for huge bonuses paid to executives. Unlike AIG however, Merrill Lynch has not made the list of bonus recipients public, so the American taxpayers really have no idea of knowing if TARP money was used for the bonuses or not.

#10 PNC Financial Services Group

$7.5 billion

PNC is the country’s 5th largest bank, and they first made a big splash one the bailout scheme when they acquired the Cleveland bank National City (NCC) in October of 2008. PNC used some of the money given to them through the TARP program to make the acquisition, and many called this transaction the first real “test” of TARP funds since no one was quite sure how the deal would work out. As of January of 2009, PNC claims that they did see losses immediately after their purchase, but did not think they would need any more TARP money to pull through the recession.

Wednesday, April 22, 2009

Happy Earth Day!

Happy Earth Day everyone! In honor of the day, I decided to “recycle” an older blog entry that I originally posted a few months ago. If you are looking for ways to reduce your carbon footprint while saving money then be sure to check out 10 “Green” Ways to Use your Tax Refund.


NY Tax Worker Accused Of Stealing Ids, $200K

A former NY tax worker has been accused of stealing identities, and making $200,000 in fraudulent charges, reports via The Associated Press. You can find a segment of the story below, but the full text can be found here.

A former New York state tax department worker is accused of stealing the identities of taxpayers and running up more than $200,000 in fraudulent charges on their accounts.

Prosecutors say the confidential information gathered by Walter Healey included credit card and Social Security numbers. The illicit charges are dated between 2006 and 2008.

Healey faces four counts of identity theft, as well as unlawful possession of personal identification, tampering with public records and misconduct charges.

The 63-year-old Troy resident, who says he's retired and last worked in October, pleaded not guilty Wednesday. He and his lawyer, George LaMarche (La-marsh), declined further comment. A judge set bail at $5,000.

Tax Haven Questions Could Trip Up Panama Trade Pact

From the Wall Street Journal:

Questions about Panama's status as a tax haven have raised a new hurdle for U.S. approval of a free trade deal between the U.S. and the Central American nation.

The U.S.-Panama trade pact was signed in June 2007, but the deal has been stalled along with separate bilateral trade pacts with Colombia and South Korea.

The latter two trade deals are ensnared in controversial human rights and market access disputes. But the White House said earlier this year in a "trade policy agenda" document that it hoped to send the Panama deal to Congress for consideration "relatively quickly."

Democratic lawmakers and Obama administration officials now say Panama must take steps to increase transparency and information exchange with U.S. authorities on tax issues, before the free trade agreement can advance.

"I would say with respect to Panama that there are also some important issues that need to be worked through having to do with cooperation in resisting tax evasion," White House National Economic Council Director Larry Summers said at an April 18 press conference at the Summit of the Americas.

The Treasury Dept. launched talks with Panama towards a tax information exchange agreement in 2002, but the talks have made little progress.

U.S. business lobbyists who back the U.S.-Panama trade deal have been pushing for a vote prior to Congress' August recess. But the demands from the Obama administration on tax transparency seem to make that timetable unlikely.

Panama holds presidential and parliamentary elections May 3, and it is doubtful whether the Treasury Dept. would be able to conclude a tax information exchange agreement with the lame-duck administration of outgoing President Martin Torrijos.

The Organization for Economic Cooperation and Development on April 2 listed Panama as one of 30 tax haven jurisdictions that have committed to international standards on bank secrecy, but have "not yet substantially implemented" those standards. Panama is also mentioned in legislation introduced by Sen. Carl Levin, D-Mich., with sanctions for tax haven jurisdictions.

Panamanian officials did not immediately respond to inquiries for this article. In a March letter to the OECD, Panama said that while it is not a tax haven, it is taking steps to strengthen its "legal and regulatory framework, thus helping our international financial center to not by unduly utilized by citizens of other States to evade or defraud their respective tax authorities."

Treasury Weighs New Mortgage Subsidies: Sources

The U.S. Treasury Department may be about to give banks and investors millions of dollars in new incentives to modify mortgages. Check out the following article on the topic thanks to

The Treasury Department is considering giving banks and investors billions of dollars in fresh incentives to modify troubled mortgages and save homeowners from foreclosure, sources familiar with official deliberations said.

Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment, the sources said.

During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien and many of those loans are now failing as the economy and housing market struggle.

Some on Wall Street will likely be angry if Washington doles out money to investors who hold the high-risk end of a home loan.

"Second-lien holders should get zero," said Bill Frey, president of Greenwich Financial Services in Greenwich, Connecticut. "Why should a second lien holder get anything if the first lien holder takes a loss? That's not the way the contracts work, that's not the way privatization works, that's not the way America works."

Officials also envision giving fresh subsidies to encourage 'short sales' in which the lender accepts a payment that does not cover the entire loan amount, according to the sources, who requested anonymity because they are not authorized to disclose details.

Fannie Mae and Freddie Mac, the mortgage finance companies, would administer the new program to resolve problems with second-liens under one plan being considered, they said.

A senior administration official declined to comment on Tuesday, but said the Treasury expected to unveil further details of its homeowner-aid program "soon."

The official said the Treasury Department is also considering ways it could resolve problems in the mortgage insurance industry battered by mounting foreclosure losses.

"We are aware of the difficulties in the industry and we are analyzing different options to deal with" those difficulties, the official said.

In February, President Barack Obama outlined a housing rescue plan that he said could move as many as 9 million homeowners into more-affordable loans by both refinancing and modifying their current mortgage.

Homeowners normally must settle all of a home's debts when they refinance a mortgage but a modified loan may hold the second lien in place.

A bulk of the Obama housing rescue plan involves modifying loans but officials have decided that they will try to ease those second lien payments in order to ease the costs of homeownership, the official said.

"Their debt overhang will be brought down," the official said. "We will have that program shortly."

Michigan May Owe GM $116M In Tax Refunds

From the Associated Press:

General Motors Corp. may get tax refunds totaling $116 million after a judge ruled for the automaker in its dispute with the state.

Ingham County Circuit Judge Rosemarie Aquilina on Friday declared unconstitutional a 2007 Michigan law that retroactively made GM pay use taxes on vehicles driven by employees for testing and marketing.

The automaker claimed it unnecessarily paid taxes on demonstration vehicles for more than a decade.

The Department of Treasury denied GM's request for refunds, pointing to the 2007 law.

The judge ruled GM is exempt from paying use taxes on vehicles used for demonstration purposes. She next will determine what GM is owed.

Aquilina faulted lawmakers for passing the bill without committee hearings to avoid public scrutiny.

Pay Rule Led Chrysler to Spurn Loan, Agency Says

According to a Federal watchdog agency, Chrysler supposedly turned down government loans in order to avoid executive pay restrictions that would have been enforced by the government. Check out the following article on the topic courtesy of the Washington Post.

Top officials at Chrysler Financial turned away a government loan because executives didn't want to abide by new federal limits on pay, according to new findings by a federal watchdog agency.

The government had offered a $750 million loan earlier this month as part of its efforts to prop up the ailing auto industry, including Chrysler, which is racing to avoid bankruptcy. Chrysler Financial is a major lender to Chrysler dealerships and customers.

In forgoing the loan, Chrysler Financial opted to use more expensive financing from private banks, adding to the burden on the already fragile automaker and its financing company.

Chrysler Financial officials denied in a statement that the company's executives had refused to accept new limits on their pay, adding that the firm turned down the loan because it no longer needed it. But their account conflicts with a report set to be released today by the Treasury's special inspector general for the federal bailout, saying the executives' refusal led Treasury to withdraw the loan offer.

"It was certainly a deal-breaker from Treasury's perspective," said Neil M. Barofsky, the special inspector general, who spoke to the bailout program's chief compliance officer about the situation last week.

The incident is the latest controversy to illustrate the hazards confronting the Obama administration as it sets out to assist private firms.

The uproar over the federal financial rescue, much of it focused on executive pay at bailed-out firms, has made companies skittish about taking government aid. Several big banks, such as J.P. Morgan Chase and Goldman Sachs, have said the bailout money now carries a stigma and have taken steps to pay it back. A program to aid small-business lenders has been stymied by the firms' reluctance to accept pay limits and other requirements of bailout loans.

Government officials have said that unless financial firms have enough resources to lend liberally to consumers, the economy cannot be revived.

The Treasury Department previously lent Chrysler Financial $1.5 billion, when less stringent requirements on executive compensation were in place for recipients of federal bailout money. But since that first loan was announced on Jan. 16, the Obama administration and Congress have toughened the rules.

During March, when it seemed that the first loan would run out, the Obama administration began working on a deal to lend the company an additional $750 million.

It did not take long for most of the agreement to fall in place. But on April 7, the Treasury asked Chrysler Financial to have its top 25 executives sign waivers regarding their compensation, according to the special inspector general's report.

Those waivers would have barred the executives from suing the Treasury or Chrysler Financial over new pay restrictions. As part of the economic stimulus package, Congress approved compensation limits, and the Treasury is working on clarifying what the firms must do to comply with the rules.

Tax Move Saves Family $1.5 Million

From the Wall Street

The elderly couple weren't even Eileen O'Connor's clients, but she knew they needed assistance.

The husband, a longtime executive at a technology firm near Washington, D.C., had accumulated $6 million in company stock through his retirement plan and an employee stock purchase plan. He was in his mid-eighties and ready to retire. The problem: If he rolled the funds into an IRA, he would be required to take large distributions and pay the subsequent income tax on those withdrawals - which the couple actually didn't need in the first place.

O'Connor, a certified financial planner and vice president at McLean Asset Management Corp., heard about the situation from the couple's adult daughter, who was a client. O'Connor saw an opportunity to take advantage of tax benefits related to closely held stock in a retirement account. Certain employees who own such stock can gain tax benefits by rolling the shares into a taxable account instead of an IRA: The rollover earns a step-up in basis, the taxable account doesn't require minimum withdrawals, and any withdrawals are taxable at the capital-gains rate instead of the significantly higher ordinary-income rate.

To take advantage of those provisions, Internal Revenue Service rules require the employee elect this option before he or she retires. So timing was of the essence for this family - as was compliance with the complex set of IRS requirements related to such transactions.

There was another big issue as well: "Her father was used to managing everything himself, so he started making some of the arrangements on his own," says O'Connor. "Then he dropped dead in the middle of the whole thing."

That's when O'Connor stepped in. Last September, two months after the man's death, she investigated whether the transaction was still possible. Satisfied that it was, she began working nearly full-time on the project, which had to be completed by year end, in partnership with a CPA firm.

Ultimately, O'Connor's solution was to establish two trusts for the family. The first held assets for the wife, who is in her mid-eighties and in poor health. The second was funded with the rolled-over company stock in order to exclude it from the wife's taxable estate and to achieve the step-up in basis. Once the rollover was complete, O'Connor sold all the shares and distributed the proceeds to individual accounts for each of the couple's three adult children.

"It was a tremendous amount of work," O'Connor says." And it made me realize that there's a real opportunity in helping people who have complex estates to settle. There are new assets to be managed, and new planning issues for the beneficiary."

O'Connor's help certainly paid off: By taking advantage of the relatively obscure provisions in IRS code, she helped the family save $1.5 million.

Today, her firm manages assets for each member of the family. "It was a very stressful time for them. They were going through their own adjustments, and then there were all these details to deal with," she says. "It felt really good at the end to have taken care of that for them, and they recognized the value, too. I think they'll be clients for a long time because of it."

Stimulus Benefits Could End Up Costing Retirees At Tax Time

Sandra Block of wrote an interesting article on how stimulus benefits could complicate the taxes of retirees. You can find a snippet of her post below, but the full text can be found here.

When lawmakers enacted the economic stimulus package this year, they included benefits for seniors. Smart move: Many retirees also have been hit hard by the economic downturn, and they vote in large numbers. Unfortunately, some of the tax headaches we discussed in an earlier column could also affect retirees.

Some examples of potential problems:

Taxpayers who receive a pension and have taxes withheld from their payments could end up owing money to the IRS next year.

In March, the IRS adjusted withholding tables to reflect the Making Work Pay credit, which is worth up to $400 for single workers, and up to $800 for married taxpayers who file jointly. The adjustments will apply to wages, but they'll also affect the amount withheld from pension payments. And that's a problem, because pension payments are ineligible for the credit, says Mark Luscombe, federal tax analyst for tax publisher CCH.

This won't be an issue for retirees who pay taxes on their pension payments each quarter instead of having their taxes withheld, Luscombe says. Likewise, individuals who receive a pension but also have a job may still qualify for the credit because they have earned income, he says. But retirees who have taxes withheld from their pensions and don't have any earned income may need to adjust their withholding to avoid owing money next year.

For information on how to avoid unpleasant surprises at tax time, go to and search for Publication 919, "How Do I Adjust My Tax Withholding." The section titled "Retirees Returning to the Workforce" includes information for pensioners, and is relevant even if you're not going back to work.

Social Security beneficiaries who have earned income could end up receiving a larger credit than they're entitled to.

Next month, the Social Security Administration will deliver a one-time payment of $250 to more than 55 million Americans who receive Social Security benefits or Supplemental Social Security Income. For most beneficiaries, this won't create any problems. But seniors who receive Social Security benefits and also have a job could also end up owing the IRS money next year.

Here's why: If you're employed and have taxes withheld from your paycheck, you'll also receive the Making Work Pay tax credit. But the maximum amount you can receive from both programs is $400, says Michael O'Toole, director of publications and government relations for the American Payroll Association.

"If a single person is getting $400 in reduced withholding from a job, and getting the $250 economic recovery payment because they're collecting Social Security, they're going to be underwithheld by $250," he says.

As a result, Social Security beneficiaries who have jobs may also need to adjust their withholding.

Lawmakers Debate Tax on Health Benefits

From the Wall Street

As lawmakers wrestle with how to pay for a proposed health-care system overhaul, an emerging flashpoint of debate is whether higher-income employees should face steeper taxes on health benefits than those with more-modest income.

Senate Finance Committee staff this month began talks in earnest aimed at reaching bipartisan agreement on a broad health-care rewrite. The greatest chance for bipartisan accord, for now, is in the hands of two Senate players -- Finance Chairman Max Baucus (D-Mont.) and his Republican counterpart, Sen. Charles Grassley of Iowa.

Sen. Baucus favors taxing some employer-provided health benefits. In an informal "white paper" released earlier this year, Sen. Baucus said this could be done without disrupting the employer-based health-benefits system, where nearly three-fifths of Americans get health insurance.

But congressional Democrats and Republicans may have difficulty finding common ground on how to limit the tax benefits that currently favor employer-based health plans. One way to do that is to impose a dollar cap on the cost of health benefits that may be excluded from taxable income.

An alternative, suggested by Sen. Baucus, is to deny the exclusion to individuals above a certain income threshold. Republicans are resisting that approach, according to aides with knowledge of staff discussions.

A third possibility would be to combine the two approaches, by allowing tax-free health benefits to the lowest earners but taxing health benefits above a certain income threshold on a sliding scale that increases as income rises.

For instance, single workers with income under $62,500 could have all their employer-based health benefits excluded from income tax, while benefits eligible for exclusion could be capped for those with income between $62,500 and $125,000. Above $125,000 all benefits may be taxed.

Also under consideration is a plan that would allow for adjustments in the tax treatment of benefits depending on where the employee lived. There is significant variation in health-care costs among states.

Labor unions are warning lawmakers against capping the exclusion for lower- and middle-income workers. They argue that to do so would single out workers at firms with large numbers of older workers and retirees, and small firms that may pay more for health-care because they have less ability to spread risk.

"If you had to choose, an income threshold would be better," said JoAnn Volk, a health-care lobbyist at the AFL-CIO. "But anything that might undermine the place where most workers get coverage is a concern."

Monday, April 20, 2009

PRO and CON: Should I Buy a House in 2009?

The real estate industry in this country is in shambles. It has created a great opportunity for any one that can afford to purchase a home. Not only have prices plummeted over the past five years, but both Federal and State agencies are also providing incentives to help taxpayers make the big leap. Although there are plenty of good reasons to buy now, getting into a mortgage during a nation-wide recession might not be in the best interest of every single American. To help those of you trying to decide if you should buy a home this year, I have put together the following list of reasons TO and NOT TO buy a house in 2009.

PRO: Tax Credits

To encourage home buying, the Federal government is offering all taxpayers a one-time tax credit for first-time buyers who purchase a home before the end of 2009. The credit is for $8,000 (or 10% of the sale price), and—unlike last year’s incentive—it is a direct credit and does NOT need to be repaid.

In addition to the Federal tax credit, numerous state and local government agencies are also offering incentives. For example, here in California there is a $10,000 credit for the purchase of a new construction home. The specific rules and amounts will vary by your location, so be sure to ask your agent and/or lender for more information on the incentives you might qualify for.

CON: Prices still dropping

Although some experts predict the economy will begin rebounding at the end of 2009, many are saying that the real estate market will not follow as quickly. Real estate prices are actually still dropping. Financial analysts insist they may continue to drop for another year, which could lower the value of any home you might buy. However, if you are looking to buy a house in the near future, then make sure you do not wait too long. Also, remember that can take months to complete the purchase of a home.

PRO: Population Demographics

Some economists are looking past the economy towards population demographics to predict the housing market. Many believe the "Baby Boomer" generation’s children are beginning to become of-age to purchase homes, which could contribute to the increased activity in real estate industry. Called "Generation Y," they are typically between the ages of 20 and 30, with well paying jobs in the technology field. As the real estate industry begins to bottom out, experts are predicting that Generation Y will begin purchasing homes at a rapid rate.

CON: You may get stuck

If you are the type of person who only wants to occupy their home for a few years or do not like to feel tied down, then now may not be the best time to invest in a new home. The value of any home purchase in the immediate future is likely to depreciate over the next year. Then add in closing costs and agent fees, and you might be stuck unable to sell your home. Remember, that purchasing a house is a big investment, and you may have to hold onto it for five years or so to turn a profit.

PRO: Recession’s End

As I mentioned before, many analysts are predicting that the economy will begin to rebound at the end of this year. Although the real estate market is not expected to bounce back quite as fast, this does mean your chances of getting a loan may increase. When the economy begins to improve more and more banks will feel more comfortable lending, and home loans will become more accessible to Americans again.

CON: Loan Qualification

Getting a loan for a new home is not as easy as it used to be. Banks are lending more than they were six months ago, but they now include harsher credit checks, more paperwork, and un-estimated deadlines. Paired up with ever-dropping prices, this can be a huge incentive to wait another year or so, when loan qualification is supposed to become somewhat easier.

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