Thursday, January 28, 2010
In a slim vote of 60-40, the Senate approved legislation allowing the government to increase its debt by $1.9 trillion. The fate of the bill might have been different if newly elected Scott Brown (R) had taken his seat in the Senate. However, for now the Democrats still have a supermajority and were able to get the legislation passed.
The measure would put the government on track for a national debt of $14.3 trillion - about $45,000 for every American - and it served as a vivid reminder of the United States' dire fiscal straits.
The massive increase in the debt limit would allow majority Democrats to avoid another vote until after the midterm elections this fall. New estimates released by the Congressional Budget Office on Tuesday show that the U.S. this year could run a deficit matching last year's record $1.4 trillion shortfall.
To win the votes of moderate Democrats, President Barack Obama promised to appoint a special task force to come up with a plan for dealing with the spiraling debt.
From the Wall Street Journal:
The Obama administration is finalizing plans to create a new government program to lend $30 billion to community banks that would include incentives to boost small-business lending, people familiar with the matter said, a move White House officials hope will help jump-start the economy.
Details are still being finalized and changes could be made, the people familiar with the plan said.
Under one leading version, the government would allow banks with less than $1 billion in assets to borrow an amount equal to 5% of their assets from the government. These banks would have to pay the government a 5% dividend on the loan, but that dividend would be reduced to as little as 1% if the banks substantially increased their lending to businesses.
Banks with between $1 billion and $10 billion in assets would be able to borrow up to 3% of their assets from the new program.
The plan would essentially use leftover money from the Troubled Asset Relief Program to allow banks to tap the government funds with fewer strings attached than the initial program created in 2008. Banks that already have TARP funds would be able to essentially refinance into the new program.
Antrel Rolle of the Arizona Cardinals is in hot water with the IRS, after he was recently hit with a $2.2 million tax bill for not reporting income during his first two years in pro-football. Although Rolle cites he has filed a lawsuit with the IRS claiming they violated his rights, he does not out rightly deny all of the claims they have made against him.
According to Forbes.com, the claims are contained in a previously unreported lawsuit Rolle filed in U.S. Tax Court against the agency. His petition asserts the IRS violated the Taxpayer Bill of Rights, denied him due process and failed to treat him in a "fair, professional and courteous manner." He complains the agency refused to transfer his tax audit from Sacramento to Los Angeles where his advisors and records were located and would not accept proffered documentation.
However, Rolle does not specifically dispute the IRS audit findings, which he attached to his pleading. The IRS findings state that it was discrepancies and inconsistencies in Rolle's own filings that accounted for most of the bill. Cited points included nonexistent or unlikely addresses, huge deductions claimed by Rolle for a personally run executive business and hard-to-locate churches listed as recipients of big cash gifts, with the amounts and descriptions of these donations changing.
Hiram M. Martin, the lawyer for Rolle in the tax case, declined comment Tuesday on specifics. Calling the matter "confidential," he said it was "totally inappropriate" for Forbes to have obtained his pleading. "I am outraged," he said. By law, Tax Court lawsuits are public record at the clerk's office in Washington, D.C.
If you are like the majority of Americans, you are probably going to seek the help of a tax professional to prepare and file your income tax return. A few decades ago, most taxpayers filed their own returns. However, the tax code gets more and more complicated each year and as a result millions of taxpayers turn to a tax professional. However, before you leave your house for your tax preparation appointment you will want to bring the following ten items with you:
First and foremost, bring your social security card and a valid drivers license or government issued identification. If you are married then both you and your spouse will need these documents. Finally, if you have children you will also want to have their social security cards on hand.
2. Last Years Tax Return
It is always a good idea to bring your tax return from last year with you. If you are visiting a new tax preparer, they will be able to collect a lot of the information they need about you from the old return. They also might be able to review the old return for errors. If you had your return prepared by someone else you should also look for your receipt. As I will explain this further in number 8.
3. Documentation from ALL Sources of Income
You will need to have documentation of all sources of income from the past year. Wage earning employees will need to bring W-2s from all sources of employment. If you received unemployment compensation then you will need to bring the 1099-G form, which you will get in the mail. Depending on your own financial situation, you might also need to bring documentation of the following sources of income: pension and annuities, alimony received, jury duty pay, gambling winnings, etc.
4. Self Employment Documents
If you are a self-employed individual or sole proprietor you will need to bring 1099 forms from all sources of income. It is also a good idea to put together a profit and loss statement before your appointment so your preparer does not have to add up all your expenses during the appointment. You will also need to bring vouchers for any estimated payments made and copies of health insurance bills.
5. Financial Gains or Losses
Bring along forms and documentation related to all of your financial gains or losses over the past year. This includes interest income statements (1099-INT), proceeds from broker transactions (1099-B), retirement plan distributions (1099-R), etc.
6. Mortgage and Real Estate Taxes
If you own your house, you need to bring a few different documents to ensure you take advantage of all credits and deductions available to homeowners. If you bought a new house in 2009, you need to bring your closing documents. In addition to the first-time homebuyer’s credit, if you are eligible, you will also be able to deduct property taxes and mortgage interest paid. You should receive IRS Form 1098 from your mortgage company, that will give you a total of all interest paid during the year.
7. Automobile and DMV Documents
If you bought a new car in 2009, you might qualify for the vehicle sales tax deduction. If so, bring documentation of the taxes you paid when you purchased the vehicle. Additionally, you should bring proof of any DMV or registration fees you paid for your vehicle.
8. Deductible Expenses Receipts
If you are not going to claim the standard deduction, you will want to bring proof of any deductions of which you think you might qualify. This includes, but is not limited to: charitable contribution receipts, any non-reimbursed expenses incurred while working or volunteering, job hunting expenses, alimony payments, etc. Tax preparation is deductible, so if you had your tax return professional prepared last year bring that receipt as well.
9. Additional Deduction Documentation
In addition to receipts for the expenses listed in number 8, there are a few other deductions that you might qualify for. First of all, you should bring documentation of any state and local income taxes paid. You should also bring records of any IRA or retirement account contributions. Also, if your medical expenses totaled more than 7.5% of your adjusted gross income then you will want to bring documentation of the medical costs.
10. Anything Else your Tax Professional WantsA few days before your tax appointment it is probably a good idea to call ahead and ask your tax preparer what documents you should bring. If you do all these things, you’ll be 100% ready when your appointment rolls around.
Wednesday, January 27, 2010
Treasury Secretary Timothy Geithner spent several hours being questioned this morning, on the government’s actions during and after the bail out of American International Group (AIG). Geithner said that the decision prevented another great depression and – despite what it looked like – was made to protect the American people.
According to a New York Times story, the committee did not seem impressed with his answers and spent a decent amount of time questioning the Treasury Secretary. You can read a segment of the piece below.
Mr. Geithner said he was not involved in the decision to withhold information about deals that sent billions of taxpayer dollars from the bailout of A.I.G., the insurance giant, to big banks.
“I withdrew from monetary policy decisions,” Mr. Geithner said, “and day-to-day management of the New York Fed.”
The committee called Mr. Geithner, former Treasury Secretary Henry M. Paulson Jr. and other officials to explain, once again, the confounding results of an $85 billion rescue loan made to A.I.G. in September 2008. The loan sheltered big banks from any losses, but saddled A.I.G. with a debt so crushing that the Treasury soon had to step in and provide even more rescue money. Mr. Geithner was the president of the Federal Reserve Bank of New York in September 2008, when the first rescue loan to A.I.G. was extended.
The blog titled, Don’t Mess with Taxes, did a great job of compiling some of BankRate.com’s annual tax guide, which is updated every weekday. Some of the tips are very useful, so I wanted to share them all with my readers. You can find a segment of the Don’t Mess with Taxes blog below, or read the Bank Rate guide here.
Then check out these Daily Tax Tips, courtesy of Bankrate's annual tax guide. A new one will be added each weekday (because like the IRS we take weekends and federal holidays off) wrapping up on the April 15 filing deadline day.
You can find the day's featured tip in the upper right corner of the ol' blog during tax-filing season. Or you can check out our running list below, also updated daily.
1. 8 tax-filing moves to make now -- Procrastinate on your taxes and you could pay the price. Here's how to get a head start. (1/5/2010)
2. Who has to file taxes? -- Believe it or not, some people make it through tax-filing season without any hassle. Are you one of them? (1/6/2010)
3. Picking the appropriate Form 1040 -- Yes, there are three versions and the one you file could make a big difference to your tax bill. (1/7/2010)
4. Standard or itemized deductions? -- Either option will help you reduce your amount of taxable income. Find out how to determine which works best for your filing situation.(1/8/2010)
5. What's your filing status? -- It may sound like a simple question, but the correct answer could make a difference in your tax bill. (1/11/2010)
6. Defining your dependents -- For most parents, children are automatic dependents for tax-filing purposes. But check out the rules just to make sure. (1/12/2010)
The State of Oregon approved a $727 million tax increase on businesses and high-earners this week, hoping to bridge some of the gap in the States budget. Well known for being a State with out a sales tax, it is not uncommon for Oregonians to approve taxes increases elsewhere. Checkout the following article on the development courtesy of Bloomberg.com.
Oregonians voted to keep taxes enacted by Democratic Governor Ted Kulongoski in July, according to a count of ballots cast by more than half of the state’s registered voters. Measure 66, which raises taxes on households earning $250,000 or more, passed by 54 percent. Measure 67, which increases corporate levies, garnered favor of 53 percent.
Legislators enacted the tax boost last year to help close a $4 billion hole that the U.S. recession opened in the state’s budget. The levies spurred a challenge from foes who gathered enough signatures to force the referendum. By targeting businesses and the wealthy, proponents parried resistance from voters who twice defeated tax increases in the wake of the 2001 recession.
“It’s a go-after-the-rich strategy,” said John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California in Los Angeles. “It shows that some voters have switched their minds and they’re more likely to go after the rich.”
The results are from an unofficial count of 1.12 million ballots released by the Secretary of State’s office by 11:15 p.m. local time yesterday. That accounts for 55 percent of the state’s registered voters, who cast ballots in a mail-in election that concluded yesterday.
Tuesday, January 26, 2010
Tomorrow night President Obama will deliver his State of the Union speech, and tidbits of its contents have been leaking to the media. The President will no doubt spend much of his address before Congress to discuss the national deficit and job creation. CNNMoney.com posted this useful article on topics the President is likely to touch on; you can find a snippet of their article below or head on over to CNNMoney.com for the full story.
President Obama's State of the Union address will raise the curtain on how he plans to tackle the unsustainable growth in U.S. and our debt over the next decade.
At the same time, he'll be engaged in a tough balancing act: Laying out how he'll close the gap while making proposals to boost hiring and help the middle class.
Obama is set, for instance, to offer a number of sweeteners such as nearly doubling the child care tax credit.
How can he square the circle?
For one thing, the expectation is that most deficit-related measures he proposes wouldn't be implemented before the economy regains a stronger footing.
"Economically, to pull greatly back at a time of enormous economic uncertainty and recession ... could possibly have a very negative impact on the continuing recovery," White House spokesman Robert Gibbs said Monday.
Well known for being the richest man in the world, Microsoft’s Bill Gates spoke with ABC News yesterday to talk about the economy. He also proposed raising taxes a solution to help bridge the budget gap. Although his opinions are different from President Obama’s, Gates is convinced his solution is in the best interest of the country.
According to LuckyRoom, Gates has also come out against excessive state intervention, while U.S. president Barack Obama stressed that focus should be put upon longer term policy issues, such as education, to remove the effects of the worst recession experienced by the U.S. since the late the 1930s. “When you face a financial crisis like this, it will take years to disappear completely.
The budget currently shows a large deficit, and although the economy seems to be recovering, barring any changes in tax policy and the tax enforcement mechanism will not return the budget to a balanced position, said president Obama. It is worth mentioning that Gates speech takes place just two days before the annual speech by Obama in Congress, which is expected to focus extensively on economic issues, including the need to create new jobs.
The statements made by Gates that the U.S. economy will take years to recover reflect on the sales figures of old homes in the U.S. which showed a greater decline after three consecutive increases in by big tax reduction. Sales of old homes fell 16.7% in December, while analysts were expecting a fall below 11.6%.
Admit it: You've already broken your New Year's resolutions. A half-eaten chocolate truffle cake sits in your fridge, your new running shoes are still in the box, and you haven't saved a dime.
No question, resolutions are hard to keep. But if you're serious about saving money, consider starting with your tax refund. This year, you'll have a new option that could eliminate the temptation to spend your refund check. When you file your 2009 tax return, you can arrange to use all or a portion of your refund to buy inflation-adjusted Savings Bonds, or I Bonds.
You don't need to set up an account at Treasury. You don't even need a bank account. All you have to do is fill out Form 8888 and tell the IRS how much of your refund you want to invest in I Bonds. You can have the rest deposited in a bank account, an individual retirement account or a combination.
The IRS has permitted taxpayers to split their refunds in up to three different accounts, including an IRA, since 2007. Adding a Savings Bond to the mix could appeal to savers who are looking to put aside some money but don't want to lock it up until they retire.
And right now, an I Bond provides a significantly higher return than other low-risk investments, says Daniel Pederson, author of Savings Bonds: When to Hold, When to Fold and Everything In-Between. I Bonds purchased between November 2009 and April 2010 pay an annualized earnings rate of 3.36%, vs. an average rate of 0.77% for a one-year certificate of deposit and 0.03% for the average money market fund.
With new restrictions and customers with tighter budgets, many banks are finding it hard to pull in new customers. In an attempt to bring in new business, several banks are offering deals where you can get free cash (often ranging between $50 and $200) to new customers. However, as this article from MSNMoney.com warns, many of those banks offset the free cash by introducing new fees, minimum balance rules, direct deposit requirements, etc.
For decades, banks have been trying to get consumers to open checking accounts with freebies like toasters, George Foreman grills and even iPods and Home Depot gift cards.
Now, they're upping the ante with offers of $100, $150 or more in cold, hard cash. This month, Capital One launched a promotion offering a $200 bonus to customers who open a Rewards Checking account through Feb. 28. Bank of America offers $100 to anyone who opens a checking account through Feb. 28.
While cash incentives aren't new -- Chase has been offering cash bonuses for four or five years, according to spokesman Tom Kelly -- at a time when consumers are starting to receive their holiday shopping bills and are mindful of their budgets, such promotions may seem particularly attractive. And thanks to new credit card legislation coming into effect next month and new regulations limiting banks' ability to charge overdraft fees, banks are likely to make such offers even sweeter.
"Banks are wondering how they'll recoup some of their lost revenue, so they're focusing on generating revenue through checking accounts and debit card activity," says Ron Shevlin, a senior analyst with market research firm Aite Group. (See "Credit card rates, fees soar as new law looms.")
Yet consumers shouldn't jump at such offers without reading the fine print. "These deals sound very attractive, but they come with behavioral restrictions and requirements," says Shevlin. "It's great that you'll get $200 upfront, but will you pay $200 in ATM and safety-deposit fees?" Many banks require consumers to set up direct deposit, maintain a minimum account balance or make a certain number of debit-card purchases each month.
Monday, January 25, 2010
Question #1: Roni, does your law firm offer tax preparation services?
No, Roni Deutch, A Professional Tax Corporation does not offer tax preparation services. However, there are dozens of Roni Deutch Tax Center locations across the country offering tax preparation, in addition to a handful of other financial services. To find the Roni Deutch Tax Center location nearest you, click here or call 1-800-230-1083.
Question #2: What are the income limits for the 2010 home buyer’s credit?
From the Huffington Post:
One year in, President Barack Obama faces a perilous economic choice. He can't pull back the stimulus too quickly, despite the public's concerns about rising deficits, because that could kill a fragile recovery. If he steps too hard on the accelerator to create more jobs, responding to another voter imperative, he risks feeding inflation and restarting the dangerous cycle.
The GOP Senate upset in Massachusetts shows the political risks of any bold move are enormous.
Either way, the road ahead probably means painfully slow job creation accompanied by more government debt and higher taxes.
"Without significant changes to tax and government spending policies, the budget outlook will deteriorate rapidly even after the costs associated with the financial crisis abate," said Mark Zandi of Moody's Economy.com, a former adviser to Republican Sen. John McCain who now counsels congressional Democrats.
When Obama took office in January 2009, financial markets were teetering, jobs were evaporating and global economic activity was tanking faster than in the 1930s. A depression seemed imminent.
Now the economy is back from the brink, thanks largely to the most aggressive global government intervention in history.
In a new business story on NYTimes.com author Randall Stross wonders why in the digital age, taxpayers are still being forced to take the task of preparing a tax return from scratch. Stross argues that since government computers already have important data from employers and financial institutions, the IRS should help taxpayers with their returns.
Requiring taxpayers to file returns without being told what the government already knows makes as much sense “as if Visa sent customers a blank piece of paper, requiring that they assemble their receipts, list their purchases — and pay a fine if they forget one,” said Joseph Bankman, a professor at the Stanford Law School.
Many developed countries now offer taxpayers a return containing all information collected by the taxing authority — to “get the ball rolling by telling you what it knows,” Mr. Bankman says.
It is a stunningly reasonable idea. When you prepare your return, why can’t you first download whatever data the Internal Revenue Service has received about you and, if your return is simple, learn what the I.R.S.’s calculation of your taxes would be? You’d have the chance to check whether the information was accurate, correct it as needed and add any pertinent details — that you’re newly married, for example, or have a new child — before sending it. Far better to discover problems early with the I.R.S., whose say matters more than third-party software’s best guess.
The I.R.S., however, isn’t rushing to offer returns that are already filled in. In the 2009 report to Congress of its Taxpayer Advocate Service, it noted that during the 2008 presidential campaign, Barack Obama proposed giving taxpayers “the option of pre-filled tax forms to verify, sign and return.” The report said “it is not feasible at this time” because the agency receives W-2 data from the Social Security Administration and 1099 data from financial institutions too late in the filing season, “much later than most eligible taxpayers would be willing to wait.”
Last week a Roni Deutch Tax Center franchisee was featured in a NorthJersey.com news story because of their fundraising effort for their local fire department. I am proud to see the charitable nature of this storeowner, and the enthusiasm their office has for their local community. Checkout the following article from NorthJersey.com.
The Roni Deutch Tax Center located at 24-11 Fair Lawn Ave. in Fair Lawn, will be conducting a fundraiser for the Fair Lawn Fire Department and First Aid Squad. This tax season, from now until April 15, the Tax Center will donate $20 to the fire department and first aid squad for every tax return completed.
"We appreciate everything we can get and it's very nice of them to do something to support our efforts," said Jay Bender, a 39-year fire department volunteer of Company 4.
"The community should be aware and support our fire department and first aid squad," said Roni Deutch Tax Center Manager Lisa Hartensveld.
Last year, the tax center partnered with the first aid squad and raised just over $200. This will be Roni Deutch's second tax season in Fair Lawn, and the company hopes to raise even more money this year.
"The money does add up very fast and this is our way of giving back to the community" said Harensveld.
Every customer who wishes to participate in the fundraiser must mention the fire department or rescue squad when they come in to have their taxes completed. The customer will not be charged the $20 for the donation; it will be donated by the tax center.
For more on the fundraiser, call the Roni Deutch Tax Center at 201-663-9055.
Thursday, January 21, 2010
Yesterday, the U.S. House of Representatives voted unanimously to approve a bill allowing taxpayers to write-off donations made to Haitian relief efforts on their 2009 tax returns. According to this article from the Washington Post, the Senate is expected to act quickly on the popular legislation.
Under current law, donors would have to wait until they file their 2010 returns next year to take the deductions. But the newly advanced bill would allow donations made by the end of February to be deducted from 2009 returns.
The bill passed on a voice vote with no opposition. Quick Senate action is expected. A similar law was enacted in 2005 for donations to victims of the Indian Ocean Tsunami in December 2004.
"It's a simple gesture but it will encourage giving in this challenging economy," said Rep. Earl Blumenauer, D-Ore.
In a new press release from the White House the Obama administration has directed the Office of Management and Budget, as well as the Treasury Department and other federal agencies, to take steps to block contractors who are delinquent on their taxes from receiving new government contracts.
He will also direct the IRS to conduct a review of the overall accuracy of companies’ claims about tax delinquency to be sure that when a company says it is paying taxes, it is telling the truth. The President will be joined today by Vice President Biden, Senator Claire McCaskill, Congressman Ed Towns, Congressman Brad Ellsworth, IRS Commissioner Douglas Shulman, and Chief Performance Officer of the United States Jeffrey Zients.
In addition, the President is calling on Congress to give the government the tools necessary to ensure that the public’s tax dollars are not used to boost the profits of companies who refuse to pay their taxes.
From Yahoo Finance:
A surprising jump in first-time claims for unemployment benefits is a painful reminder that jobs remain scarce six months into the economic recovery.
The increase deflated hopes among some analysts that the economy would produce a net gain in jobs in January.
The Labor Department said Thursday that initial claims for unemployment insurance rose last week by 36,000 to a seasonally adjusted 482,000. Wall Street economists expected a small drop, according to Thomson Reuters.
The four-week average, which smoothes fluctuations, rose for the first time since August, to 448,250.
A Labor Department analyst said that much of the increase last week was due to administrative backlogs leftover from the winter holidays in the state agencies that process the claims.
Yesterday, Haiti was sadly struck by another earthquake. As we have all heard in the news, the island was devastated by a series of massive earthquakes on January 12th. The disaster left thousands of Haitians injured or dead, and the relief efforts have encountered all types of problems. There are dozens of organizations working to provide assistance to the people of Haiti, and to help encourage all my readers to make a donation I have put together the following list of ways to contribute as well as a brief explanation of how you can deduct the contributions from your taxable income next year.
Donations are Tax Deductible
With tax season beginning, finances are probably on everyone’s mind. Keep in mind that all charitable contributions are tax deductible. Reach into your pockets a little deeper to donate as much as you can to the relief efforts. Just make sure that you keep records of your donations for next tax season.
Top 10 Ways to Make a Donation
1. Cell Phone Donations
If you cannot afford to make a sizeable donation to the relief efforts then you can make a small and easy donation from your cell phone. You can text HAITI to 90999 to donate $10 to the American Red Cross, or text HAITI to 25383 for a $5 donation to the International Rescue Committee. You will see the charge on your next phone bill, so be sure to keep it stored with your other tax documents.
2. Larger Donations to the Red Cross
If you want to donate more then $10 to the Red Cross, and do not have time to send a dozen text messages, then you can use a credit card to donate either over the phone (1-800-REDCROSS) or by visiting their website. If you would like to mail a check then you can send it to the American Red Cross, P.O. Box 37243, Washington, D.C. 20013.
3. Clinton Bush Haiti Fund
In a sign of bipartisan support for Haiti, former presidents Bill Clinton and George W. Bush setup the nonprofit Clinton Bush Haiti Fund. As of today, the fund claims to have received over 126,000 contributions. You can donate through their website, or text QUAKE to 20222 to make a $10 donation through your phone. You could also mail donations to The Clinton Bush Haiti Fund, c/o William J. Clinton Foundation, Donations Department, 610 President Clinton Avenue, Little Rock, AR 72201.
4. Music for Relief
To encourage younger generations to donate, popular music artists including Linkin Park, Dave Matthews Band, Alanis Morissette, the All-American Rejects, Enrique Iglesias and other teamed up with Music For Relief. Their site offers a free music download, but prompts users to make a donation after downloading.
UNICEF works in over 150 countries to provide children with nutrition, education, and emergency relief. To encourage taxpayers to donate the U.S. Fund for UNICEF is “absorbing all associated administrative costs so that 100% of every dollar you give to the U.S. Fund for UNICEF will support UNICEF's relief efforts for children in Haiti.” To donate check out this link on their website, or call 1-800-4UNICEF.
6. National Nurses United
Over 10,000 nurses have reportedly already volunteered to go to Haiti to work with relief organizations. However, National Nurses United still needs more funding to send them to Haiti. You can make a donation through their website, with all proceeds going directly to the fund to send nurses to Haiti.
AmeriCares is a nonprofit organization that provides disaster relief by supplying medicine and medical supplies to victims. They have already sent over $6 million worth of supplies to Haiti, and are actively seeking more donations. You can make a contribution by dialing 1-800-486-HELP or visiting AmeriCares.org.
8. Doctors Without Borders
Another nonprofit group that has been active in Haiti is Doctors Without Boarders. They are using funds to repair hospitals and send doctors to create temporary emergency centers to treat victims in Haiti. Go to Donate.DoctorsWithoutBorders.
9. World Water Relief
Sadly, clear water is scarce in Haiti and the people need clean water not only for drinking, but also for sanitation and medical treatment. World Water Relief has already sent a team with 18 self-sustaining portable water flirtation units to Haiti, and they are already planning their next effort. 100% of donations go to the cost of sending water systems to Haiti, and you can help by making a donation through their website.
10. Hope for Haiti Telethon
Tomorrow (Friday, January 22) actor George Clooney is hosting the Hope for Haiti Emergency Fundraising Telethon from 8 to 10 pm. Guests will include Mary J Blige, Robert Pattinson, Justin Timberlake, Christina Aguilera, Zac Effron, and many others. The telecast will air on ABC, CBS, NBC, FOX, CNN, BET, The CW, HBO, MTV, VH1 and CMT, without commercial interruption. You can tune in, and make a donation over the phone using your credit card.
The number of new building permit requests unexpectedly jumped in the U.S. this past December. The U.S. Commerce Department made the announcement yesterday in Washington, signaling a good sign for the economy and job market alike. For more information, check out the following story from BusinessWeek.com.
Applications rose 11 percent to a 653,000 annual rate last month, the most since October 2008, the Commerce Department said today in Washington. Work began on houses at a 557,000 pace, down 4 percent from November.
Builders are probably anticipating sales will increase after the government extended a tax credit for first-time buyers through June and expanded it to include some current owners. Record foreclosures and unemployment near a 26-year high represent hurdles that may prevent the industry from strengthening much further.
“After a disappointing December, homebuilding may pick up in the current quarter,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Housing has formidable headwinds to overcome, led by foreclosures and double-digit unemployment.”
A report from the Labor Department showed wholesale prices increased 0.2 percent after jumping 1.8 percent the prior month, indicating the economy is recovering without the immediate threat of inflation. Excluding food and fuel, so-called core prices were unchanged.
Although most people believe the stereotype that women shop more than men, Bundle.com used a new research tool and discovered that single men outspend single women in almost every category. Although men statistically make about 25% more then women in this country, according to the Institute for Women's Policy Research, this article from MSN Money.com asserts that even among similar income levels, men still outspend women.
Men spent about 19% more than women on food and 16% more on travel. Their insurance bills were higher, they paid more for school-related expenses, even their phones cost exceed that of women. Hey, I guess you've got to keep the bromance alive.
Look closer, and some of the trends suggest real differences in the ways single men and single women live their lives. They spent almost exactly the same amount of money on groceries, but men spent 45% more on eating out than women. Perhaps men are still picking up the check, or maybe women are more likely to cook.
The big banks are considering challenging President Obama's proposed tax on very large banks and financial institutions in court as unconstitutional. Let's see if I have this right. The Federal Reserve deciding unilaterally, without public debate, to assume hundreds of billions of dollars of financial companies' liabilities, spent hundreds of billions to buy mortgage-backed securities and potentially expose taxpayers to massive losses: That's totally constitutional. Congress passing a law suggesting that a small portion of the bailed-out financial industry, which is still benefitting from massive government subsidies, pay a fee for running huge balance sheets: That's unconstitutional.
The industry has argued that the Obama bank tax would hurt the recovering economy because banks would pass on higher costs to customers and borrowers rather than eat them. Higher taxes mean less money available for lending. In theory, that may be true. But when you consider the size of the banks, the size of the tax, and the vast sums of money they squander each quarter because of poor lending decisions—the proposed banking tax is a drop in the bucket.
Earlier today a coworker sent me this link to an article on CNN Money, that offers a unique perspective of small business lending in the U.S. CNN worked with the small business association to identify the first SBA loan that was awarded this year. The loan went to the owner of Lawlor’s, a sportswear store in Omaha, and you can read about this interesting story below.
To kick off the new year, we asked the Small Business Administration to find us the first business to receive funding this year through an SBA loan. The agency came back with Lawlor's Custom Sportswear in Omaha, which had its loan application approved Jan. 7 and received a $100,000 check from its bank, Security National Bank of Omaha, on Jan. 19.
When an opportunity arose in November to rent prime real estate in a popular area shopping mall, Pat Lawlor knew it wasn't exactly the best time to expand his modest chain of sports apparel retail stores.
Revenues for Lawlor's Custom Sportswear, which has 28 employees in four locations in and around Omaha, were on track to be down 10% for the year. Plus, the company was already trying to pay off substantial debt.
"I'd be lying if I said that it wasn't a bad year," Lawlor said.
Wednesday, January 20, 2010
As we wait for Congress to decide the fate of health care reform, I think it is important to remember that the House of Representatives and U.S. Senate each passed different bills addressing the issue. Therefore, when debating health care reform, it is important to understand the similarities and differences between each bill.
Affordable Health Care for America Act
Back in November, the House of Representatives passed the Affordable Health Care for America Act of 2009. As I explained in this blog entry, the legislation included a public option that would take affect in 2013. If passed it would extend coverage to 96 percent of legal residents under the age of 65. In order to pay for the legislation, the House included a slew of tax increases including a 2.5% penalty tax for Americans who did not have establish health care coverage, an 8% penalty on businesses that do not provide their employees coverage, and a 5.4% surtax on couples making over a million dollars per year.
Patient Protection and Affordable Care Act
The Senate’s health care legislation (the Patient Protection and Affordable Care Act) has been making headlines more recently as it was voted on just a few weeks ago. It aims to extend coverage to 94% of legal residents, but does so without a public option. The legislation is expected to cost over $870 billion over the next ten years, but would actually reduce the federal deficit because of the tax increases it includes.
The Senate’s bill also includes a penalty for not buying into a qualifying insurance plan, but it would begin as only a 0.5% tax in 2014. It would gradually increase until reaching 2% in 2016. There would also be a mandate on employers, as well as a 40% tax on “Cadillac” health care plans, and a 10% tax on tanning services.
When looking at the tax implications of each bill, it is easy to see their similarities. Both include taxes on employers who do not provide health care coverage, as well as penalties on taxpayers who do not purchase a qualifying plan. They also both include new taxes on medical device manufacturers. Additionally, both health care reform bills ensure that anyone living in the country illegally would be barred from receiving government subsidies.
Although they have a few similar tax implications, the two bills are significantly different. The House of Representative’s bill would cost nearly $1.2 trillion, and includes more aggressive tax increases to pay for the expensive legislation. The penalty on taxpayers without coverage is higher than the Senate’s and would take effect a full year earlier. The House’s bill also includes the massive 5.4% surtax on the wealthiest Americans, which is absent from the Senate’s legislation.
The bill passed by the Senate would only cost $871 billion over 10 years, which is significantly less than the House’s. Although their bill also includes penalties on taxpayers without insurance, it would only start at 1% in 2014, and then gradually increase to 2% in 2016. Even once the penalty reaches its full amount, it will still be less than the House’s penalty. Additionally, the Senate’s bill calls for a non-deductible fee of $750, per employee, for employers that do not offer coverage; this is higher than the 8% tax proposed the House’s bill. Finally, the Senate’s bill also creates two new taxes that were not even considered by the House, including a tax on “Cadillac” health plans, and a tanning tax that has actually gained support by the medical community.
Future of Health Care Reform
Tuesday, January 19, 2010
Yesterday my law firm posted a blog entry (the RoniDeutch.com Tax Relief Blog) describing a handful of tactics used by dishonest tax debt resolution companies. Over the past 19 years, my team and I have heard hundreds, if not thousands, of horror stories about these unethical companies and their practices.
1. Cold Calling Solicitation
Because of high sales demands, some tax debt resolution companies have turned to cold calling in order to solicit new clients. This is alarming because unpaid taxes are not something most people want to freely disclose. Having a stranger leave you an unwelcome message regarding your tax debts can be intrusive and discomforting. These companies may also use half-truths to try and scare you into believing that immediate action is required by you to resolve your tax debt.
Some tax debt resolution companies represent that they can obtain a settlement offer with the IRS for significantly less than what a taxpayer may owe to try and convince taxpayers to retain their services. However, don’t be fooled. No one can guarantee that the IRS will accept your settlement offer. Whether the IRS will accept a settlement offer, otherwise known as an Offer in Compromise, or another tax debt resolution depends on each taxpayer’s unique financial situation, tax liability, and tax filing compliance. The IRS has strict guidelines for some types of tax debt resolutions and the IRS will not accept a particular tax debt resolution if a taxpayer’s financial situation does not meet the established guidelines.
3. No Pre-Analysis, No Attorney Review
Many tax debt resolution companies will sign up new clients without knowing anything about their financial situation. My law firm will not agree to sign up anyone without first performing a free and confidential tax analysis. In order to perform the tax analysis, our law firm asks a series of questions to obtain an understanding of a taxpayer’s unique financial situation. The tax analysis is performed by a tax attorney. After reviewing a taxpayer’s financial information, a tax attorney will recommend which particular tax debt resolution would be the most appropriate for the taxpayer. Unfortunately, performing a tax analysis for a taxpayer and providing the taxpayer with tax resolution options prior to enrolling the taxpayer does not appear to be a common practice with many of the tax debt resolution companies.
Citigroup Inc. posted a $7.6 billion quarterly loss on costs related to repayment of U.S. bailout funds and still-high loan losses, but the bank's shares edged higher as some investors saw glimmers of hope. In a sign of stabilization, losses on consumer and corporate loans fell compared with the third quarter.
"They've crept out of the abyss like everyone else," said Henry Asher, president at Northstar Group, whose clients own Citi shares.
"They have a long way to go before they start reporting significant profits," Asher added.
The government still has a bigger stake in Citigroup than in any other major U.S. bank, reflecting the swamp of toxic assets that threatened Citi's survival. Chief Executive Vikram Pandit told investors that U.S. consumer credit remained an issue for the bank, although he said some credit fundamentals appeared to be stabilizing, especially internationally.
The third-largest U.S. bank said its quarterly loss amounted to 33 cents a share, compared with a loss of $17.3 billion, or $3.40 a share, a year earlier. The loss matched analysts' average estimate, according to Thomson Reuters I/B/E/S. Citigroup shares rose 7 cents, or 2 percent, to $3.49 in midday trading.
According to Bloomberg.com, the Obama administration is considering how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.
The U.S. Treasury and Labor Departments will ask for public comment by next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
Yesterday’s Tax Deduction of the Week blog (Roni Deutch Tax Help Blog) explained the home office deduction. Over the past few weeks, topics have included alimony payment deductions, traditional IRA contributions, and the 2009 vehicle sales tax deduction. I have included a snippet of the home office deduction entry below, but you can find the full text – as well as dozens of informative articles – at the Roni Deutch Tax Help Blog.
Designated Room or Space
In order to qualify as a home office – in the eyes of the IRS – you need to have a separate room or designated space that is used exclusively for business purposes. If it is not a room, the space needs to be separated by a room divider of some sort. Additionally, the IRS is very strict about the exclusive use rule, so if your children play in the office or your spouse uses the room as a home gym then it will not qualify.
Principal Place of Business
According to the IRS, your office must either be the principal location of that business, or a space where you meet with clients regularly. If you work exclusively from home then you can easily prove that the office is your principal place of business. However, if you have an office away from home, you will need to show that you regularly meet with clients from your home office.
Calculating the Deduction
In calculating your home office deduction you need to know both the total square footage of both your home and your designated home office. This is because your home office deduction will be based off of the percentage of your house used for business. For example, if your home is 1500 square feet and your office is 150 square feet then your deduction would be calculated using 10%. Meaning, you can deduct 10% of your rent and indirect expenses.
Monday, January 18, 2010
Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply. I will do my best to get an answer for you!
Question #1: Roni, I donated to the Red Cross through my cell phone to support their Haiti relief operations. Can I deduct this donation on my tax return next year?
Yes. All contributions to qualified charities are fully deductible. Just keep a copy of your next cell phone bill as proof of the donation.
For those of you who have not already, text “HAITI” to 90999 to make a $10 donation to the Red Cross.
Question #2: What is the head of household filing status?
In addition to filing as single taxpayer you can also file your tax return as “head of household.” Typically, if you qualify then your tax rate will be lower and you will be able to receive a higher standard deduction. However, in order to qualify you must meet the following IRS requirements, for more information check out IRS Publication 501.
1. You are unmarried or “considered unmarried” on the last day of the year.
2. You paid more than half the cost of keeping up a home for the year.3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying Person.
Last week the RDTC Tax Help Blog posted this entry with advice for professional musicians. You can find a section of the entry below, but be sure to checkout the full text at Harmonic Tax Advice for Musicians.
You need to decide exactly what type of musician you are before you can even begin thinking about taxes. What course is your career taking? Are you in a band? Are you interested in being a music teacher? Or, do you offer lessons from your home or at a nearby music shop. Once you have classified yourself, if will be easier to keep track of your finances and tax liability.
No matter what type of musician you are, if you make more than $600 in a year doing something then you will need to report your income to the IRS. Whether you make that much in tips from performing at clubs, or from teaching the piano to a family friend, it will need to be reported to the IRS.
If you are a music teacher at a school, you may be able to take advantage of several tax deductions available to teachers. One of the most useful tax advantages for teachers is the educator expense deduction that allows qualifying teachers to deduct $250 worth of out of pocket expenses for classroom supplies. For more information on tax tips for teachers, including the educator expense deduction check out this article on CEO Roni Deutch’s personal blog.
The Business of Music
If you teach music classes from home or a business, you may be able to classify yourself as a small business owner. Speaking of teaching from home, if you have a separate room used to run this business then that room may qualify for a home office deduction. If you have not already, you may need to get a small business license from your city or country, and if the business expands you may even need to get a federal ID.
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