Senate Combines Jobless Benefits, Homebuyer Credit

While still recovering from a failed attempt to extend unemployment benefits last week, Senate Democrats are working on a new bill that would combine the unemployment benefit extension with an extension of the homebuyer’s credit.

Sponsors of the legislation have said it aims to create more jobs and support the struggling real estate market. As this article from the Associated Press claims, Democrats are going to need to get a handful of Republicans on board if they want the bill to pass the Senate.

Under current law, homebuyers who signed purchase agreements by April 30 must close on their new homes by Wednesday to qualify for credits of up to $8,000. The bill would give those buyers until Sept. 30 to complete the purchases and qualify for the credit.

Democrats hope to pick up Republican support for the bill by combining the two provisions. They have been trying for weeks to pass an extension of unemployment benefits as part of a larger tax and spending package, but the larger bill died in the Senate last week.

Without an extension, unemployment payments would continue to be phased out for more than 200,000 people a week.

Many Democrats see the benefits as insurance against the economy sliding back into recession. Many Republicans, however, worry that adding nearly $34 billion to the budget deficit will only contribute to the nation's economic problems.

Continue reading at Google.com…

Get Tan Today: 10% Tax On Its Way

Getting a bronze glow for the summer -- at least artificially -- is about to get a little more expensive. If you were planning on hitting up the tanning salon in the near future, then you should try to get to the salon before the end of the day. The tanning tax is going to take effect tomorrow, meaning the price you pay for your tan will increase by 10%. For more information on you can check out my blog entry explaining the tanning tax, or read more about this new tax from the article below courtesy of CNN Money.

A 10% tax will be tacked on to indoor tanning bills starting Thursday, as part of the health-care reform President Obama signed into law in March.

According to guidelines from the IRS, the tax will apply to electronic products designed for tanning that use one or more ultraviolet lamps with wavelengths between 200 and 400 nanometers. Other sunless tanning options, such as spray tans, are not subject to the tariff.

The tax is expected to generate $2.7 billion by 2019, according to the Congressional Joint Committee on Taxation.

Tanning salons are charged with collecting the levy and reporting it to the government each quarter. That money will help fund the health-reform package, which carries a price-tag of $940 billion.

7 States that Still Owe their Citizens Refunds

Last week the Roni Deutch Tax Center – Tax Help Blog posted a great new article on the seven states that still owe their citizens refunds. The list includes Hawaii, New York, and North Carolina, among others. You can find a snippet of the article below, or read the full story here.

1. Iowa

Like many local governments, the state of Iowa has had their fair share of financial problems due to the recession. Fortunately, the largely agricultural state has managed to bounce back rather quickly compared to other struggling states. In order to get their budget in check, Iowa has used a number of tactics to cope with their financial problems, including a slight delay in the payment of tax refunds. The state’s revenue department is now assuring taxpayers that they have begun processing returns and will mail out refunds as soon as possible. If you are an Iowan taxpayer still awaiting the arrival of your tax refund, click here to check its status.

2. Rhode Island

Thousands of taxpayers in Rhode Island have been patiently waiting for their tax refund. When the residents were told their tax refund might not arrive until the end of the fiscal year, so many taxpayers became upset and the state legislators have introduced a bill that would move up the late-interest fee date—the taxpayers will now get compensated for the inconvenience.

3. Hawaii

Hawaii's economy was hit hard in the recession. The state’s unemployment rates are at the highest levels in over 30 years and personal bankruptcy rates have soared. Hawaii has long been considered one of the best vacation spots in the country, but tourism has slowed down since the recession began and the state government was forced to delay payment of state tax refunds due to a lack of revenue. Fortunately, the local economy is improving and the state government began sending out refunds at the end of May. Residents of Hawaii can visit this site to see the status of their refund.

Bank Tax Tossed from Financial Reg Reform

From Forbes.com:

Sen. Scott Brown, R-Mass., threatened to vote against financial regulatory reform if it included what he called a "$19 billion bank tax." That tax is now off the table, but what's in its place may not be much better for banks.

The conference committee that drafted the final version of the overhaul bill—the committee thought it had finished its work last week--reconvened Tuesday evening to find other ways to pay for the legislation. However, the group of lawmakers from the House of Representatives and Senate ended up scrapping the bank tax. Instead, the bill would prematurely end the Troubled Asset Relief Program (the $700 billion bailout program from 2008), using some TARP money to help pay for the financial regulatory overhaul. In addition, the reform bill will raise the premium that banks pay to the FDIC's Deposit Insurance Fund. Financial firms with less than $10 billion in assets wouldn't be subject to the increase.

Is this a better deal? Depends on how you look at it. Bank tax or no bank tax, banks will still end up paying. In a statement Tuesday evening, Edward Yingling, President and Chief Executive Officer of the American Bankers Association, described the premium increase as "yet another regulatory cost imposed on the many traditional banks that had nothing to do with causing the financial crisis." He says he's concerned about using FDIC premiums as a means to generate revenue for the federal government, particularly without any debate. He says the new proposal is still "a tax on bank capital."

The "bank tax" would have imposed fees--no more than $19 billion by 2015--on large financial institutions and hedge funds to help pay for Wall Street reform. The Congressional Budget Office estimated that while the fees would have amounted to about $18 billion, the measure actually would have brought in about $13.5 billion in revenue because banks would absorb some of the costs as business expenses.

Dad Won't Pay For College, So Daughter Sues

When you read a headline saying a daughter is suing their parent for not paying their tuition, your first instinct is probably to laugh out loud. However, one Connecticut woman not only sued her Father for not paying her college tuition for her senior year, she also won! Read all the details in the NPR.org story below.

A woman in Connecticut sued her father for failing to pay her tuition for her senior year of college. She won.

Her dad had to pay $47,000, according to the Connecticut Law Tribune.

In a 2004 divorce, the father agreed to pay for the education of his three children. The daughter persuaded to him to sign a contract agreeing to pay for tuition as well as expenses such as books and car insurance.

The father paid for the first few years of the daughter's education at Southern Connecticut State University. But he refused to pay for her senior year, according to the article.

So the daughter took out a loan for $20,000 to pay for school, and sued her father for breach of contract.

The case went to trial. The father argued that the daughter failed to attend classes full time and didn't give him receipts for tuition other expenses. And, he argued, she dropped classes and kept the refunds for herself.

The judge didn't buy it. He ruled that the daughter "performed all of her obligations as set forth" in the contract, and that the father failed to prove his arguments.

The $47,000 payment includes the loan, interest, attorney fees and missed car insurance payments, the daughter's attorney told the Law Tribune.

Stupid things people do in the hope of saving money

In this economy, everyone is looking for ways to save money. Unfortunately, some ways to save are not always the wisest. WalletPop.com’s Sarah Gilbert shares 9 not-so-smart things people do trying to save a buck. Here are a few of my favorites:

Membership – paying a fee for the privilege of saving money rarely works in your favor. More often than not, we end up spending more “to get our money’s worth” when all we are doing is buying unnecessary things.

Free Shipping – When you shop online, many retailers give you free shipping if you spend more than $50. So, what do we do? We find something we want to buy, and then go looking for MORE things to buy just to avoid shipping costs. Wouldn’t it make sense to just buy the product at your local store the next time you’re out and avoid the shipping altogether?

Buy One Get One Free – Oh, we do love to get something for free. But this is the oldest retail trick in the book. You take an item that isn’t selling – even in quantities of one – and make it a Buy One Get One Free deal. So, instead of having one item you probably would never buy, you have two of them.

I know we’ve all been guilty of these missteps, but let this article remind you that the real way to save money is simply to stop spending it.
Find more financial missteps here.

U.S. Lawmakers Reach Accord on New Finance Rules

The Wall Street Journal reports that the financial reform bill may finally have enough support for a vote. The vote in each house is tentatively planned for next week. Journalist Damian Paletta reports that all Republicans in both the House and Senate are likely to oppose the reform.

So, what new limits does the banking industry have to look forward to?

• A provision that would prohibit banks for making risky bets with their own funds
• A limit on the ability of federally insured banks to trade derivatives
• New rules for how capital flows through our economy, from loans to more complex banking products
• New consumer-protection regulators within the Federal Reserve, with the power to break up failing companies and assign regulators to monitor financial risks.

Many lawmakers are disappointed that Government-controlled Fannie Mae and Freddie Mac remain a multibillion dollar drain on the Treasury and are left almost entirely out of this reform
According to the article, Democrats are counting on tougher regulations to keep our financial system stable, and prevent another economic meltdown.

Of course, this is all speculation until the votes next week. Read the entire article here.

Use your vacation to do something good -- and get a tax write-off

The tragic Gulf oil spill is inspiring people to use their vacation time for good. I applaud these incredibly dedicated people who take the time off work, often traveling long distances, to help those who are in need. Even better, WalletPop.com has an article reminding us that these charitable individuals may be eligible for a tax deduction.

Of course, time volunteered is never deductible, travel and out-of-pocket expenses are. According to the article, to qualify for the deduction, your expenses must be:

1. not otherwise reimbursed;
2. directly connected with the services you're performing;
3. expenses you had only because of the services you performed; and
4. not personal, living, or family expenses.

If your summer vacation finds you helping to clean up wildlife in the Gulf, keep track of your travel expenses, this includes gas and maintenance of your vehicle, any parking fees or tolls you pay if you are within driving distance. You are allowed to claim reasonable travel expenses including air or bus fare, reasonable hotel and meal expenses, and taxi rides for getting to and from the volunteering site.

Remember, you’ll have to itemize your deductions to claim these valuable tax breaks, so make sure you understand your own tax situation to make sure you’ll be eligible.

Of course the main reason to get involved in the cleanup is to help others. But that doesn’t mean you can’t enjoy the tax breaks your generosity gives you.

Read the entire article here.

Robert C. Byrd, a Pillar of the Senate, Dies at 92

Right on the heels of Martin Ginsburg, we were saddened to hear of the passing of Senator Robert Byrd. Senator Byrd served 51 years in the US Senate, longer than anyone else in history. The New York Times ran his obituary yesterday.

His West Virginia constituents loved him for his constant battling to provide his impoverished state with much needed federal funds. When hearing of the Senator’s passing, President Obama said, “America has lost a voice of principle and reason.”

He was born into the poverty that is so common in his home state, but through incredible efforts he educated himself until he could afford a top notch education. And for that he deserves our utmost respect.

Byrd’s history is not without controversy, his troubled history with civil rights legislation is well documented, but he was a dedicated Senator who struggled with the beliefs and mores of his generation. He backed civil rights legislation consistently only after becoming a party leader in the Senate.

Read his full obituary here.

The Tanning Tax Explained

When President Obama signed the health care reform bill, it signaled the beginning of dozens of tax law changes. Some gradual tax increases are scheduled over the next few years, while others took affect immediately. Later this week, on July 1, the tanning tax will begin and like any new tax law it can be difficult for consumers and business owners to understand how the tax will be levied. To help those looking for more information on the topic, I have put together the following explanation of the tax and the accompanying IRS regulations.

Purpose of the Tax

Starting July 1, 2010 a 10% tax will be levied on indoor tanning salon services. Similarly to sales taxes, the tax will be collected by the business and forwarded to the federal government. The purpose of the tax is to raise money to fund health care reform; the tanning tax replaced a cosmetic surgery tax that was unwelcome by the American public.

A Sin Tax?

The American Academy of Dermatology Association (AADA) actually pitched the idea to Senate members as a way to discourage indoor tanning among the public. As such, many experts refer to the tanning tax as a sin tax, which is a type of tax that discourages certain behaviors among taxpayers. Taxes on cigarettes and alcohol are both common examples of sin taxes. Because of the heighten risk of getting skin cancer, Congress was quick to approve the tanning tax.

Health Concerns

Study after study has reaffirmed the connection between frequent sun exposure and tanning with an increased risk of skin cancer. In addition to being a source of revenue, the government is hoping this will lead to fewer cases of melanoma, which is the most deadly of skin cancers. In fact, other states and local government agencies are also implementing restrictions on tanning for the same reason. New York is even considering an age limit on tanning salons that would require visitors to be at least 18 years old.

Consumer Expense

Many Americans consider a trip to the tanning salon a part of their regular routine, similarly to getting acrylic nails filled or a hair trim. A 10% price increase might not seem like that big of a deal to most Americans, but for consumers who visit the salon on a weekly basis, the tax will result in them paying a significant amount of money to the government.

Popular reality television show star Snooki spoke out against the new tax in the "Jersey Shore" preview, where she announced that she would no longer go tanning due to the tax. She even added, "McCain would never put a 10% tax on tanning.” However, critics were quick to point out that the tax had not yet been implemented when filming took pace. However, Senator John McCain did reply to Snooki by posting a message on his Twitter profile saying "u r right, I would never tax your tanning bed! Pres Obama's tax/spend policy is quite The Situation. but I do rec wearing sunscreen!"

Cost to Some Small Businesses

Since a majority of the nation’s tanning salons are individually owned and operated, many owners are calling the tax an attack on small businesses. They have even warned that the additional tax will lead to a direct loss of revenue and job losses. With all the attention the tanning tax has received in the media, salon owners are already running discounts and promotions to entice customers. In addition to getting customers in the door, these salons are also worried about following the complicated new tax guidelines.

7 Basic Rules

To read all of the tax implications of the tanning tax you can check out this IRS register page. However, I have gone through the legalese and identified seven basic rules you should know.

1. The tax is to be paid by the paying customer, not necessarily the person receiving a tan, at the time of purchase.
2. If the customer purchases goods other than a tan, such as a lotion or bathing suit, the tax only applies to the price of a tanning service, not to the entire tab.
3. If a tanning business owner offers bundle packages that include a tanning service, they are responsible for calculating the estimated price of a tan in the package to properly tax it.
4. Payments made for tanning services on a gift card or certificates are still liable for the tanning tax.
5. The taxes collected from customers by business owners must be recorded, and reported to the IRS in their quarterly tax payments.
6. If the business owner or employee of the tanning establishment fails to collect the tax from a customer, the provider is then liable for the tax.
7. Providers who own more than one tanning business must file a separate IRS Form 720, Federal Quarterly Tax Return for each establishment.

Exceptions

When the IRS published the official regulations on the tanning tax, they also took time to discuss exceptions to these new rules. According to the IRS, "indoor tanning service, as defined in section 5000B(b), does not include any phototherapy service provided by a licensed medical professional. The regulations define phototherapy service and clarify that such service must be performed by, and on the premises of, a licensed medical professional." Additionally, membership fees paid to a qualified physical fitness facility as defined by IRS regulations that offer tanning services; do not need to impose a tax.

Five Rules For Inherited IRAs

Setting up an IRA for yourself can be confusing. However things can get even more complicated when you inherit an IRA. However, as this article from Forbes.com explains, with the right knowledge a family can stretch out the tax breaks of an IRA for decades. They even outline five basic rules for heirs who have inherited an IRA. I have included a few of the rules below, but if you anticipate inheriting a retirement account then I highly recommend going over the full list at Forbes.com.

1. First, do no harm.

If you inherit a retirement account, don't do anything until you know exactly what rules apply. With your own IRA you can take the money out and redeposit it in another IRA within 60 days without penalty. Not so an inherited IRA. All movement of money must be from one IRA custodian to another--be sure to specify a "trustee-to-trustee" transfer. Moreover, unless you've inherited from a spouse, you must retitle the IRA, including the original owner's name and indicating it is inherited, e.g., "Daddy Warbucks, deceased, inherited IRA for the benefit of Little Orphan Annie, beneficiary."

If two or more people are named as beneficiaries, ask the custodian to split it into separate inherited IRAs. That avoids investment squabbles and allows a longer stretch-out for the younger heirs.

2. Beneficiary forms rule.

The beneficiary form on file with the custodian of an IRA controls both whoever inherits the IRA and its ability to be stretched out. If someone other than a spouse is named as heir, they must begin taking distributions from the account by Dec. 31 of the year after inheriting, but they can draw these out over their own expected life spans, enjoying decades of income-tax-deferred growth in a traditional IRA or tax-free growth in a Roth IRA. To give your heirs maximum flexibility, name both primary and alternate individual beneficiaries--say, your spouse as primary and kids as alternates or your kids as primary and grandkids as alternates. Your primary beneficiary then has the option of "disclaiming" or turning down the account, enabling it to pass to the younger alternate.

Continue reading at Forbes.com…

Lowering Your Tax Liability

Last week, my YouTube team shot another great tax tips video. The video was uploaded to my YouTube channel yesterday. In this episode, James explains six ways to lower your tax liability in under ten minutes. I have embedded the video below, but be sure to check out my YouTube channel and subscribe to my future videos.

The 10 Missteps of Financial Reform

From MarketWatch.com:

In hopes to create a new and safer game, Washington has shuffled the deck with which Wall Street plays, but anyone who's gone back to the table after a big loss knows the score.

Same cards, same risks, and the house always wins.

There are a lot of good intentions built into the Dodd-Frank bill. Lawmakers have tried to create standards for mortgage underwriting, preserve and strengthen bank capital and move risky derivative exposure off the balance sheet and into the open.

The banks with the most to lose include Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. Goldman Sachs Group Inc. and Morgan Stanley.

If you had to boil down the complex bill's main flaw it's that it puts too much emphasis on regulators who have failed in their charged tasks. The Securities and Exchange Commission and Federal Reserve -- at least based on their track record -- are short on the kind of man and brain power required to successfully oversee Wall Street risks.

Without trained and well-paid regulators and without closing the revolving door, it's hard to feel hopeful about financial reform, as well-intentioned as it may be. And even with the best intentions, the bill leaves plenty of loopholes to exploit. Here is 1 obvious one:

1. The Volcker Rule. Intended to reduce bank risk, the rule curtails bank participation in proprietary trading, private equity and hedge fund investments -- businesses that arguably were tangential to the financial crisis. Don't believe it? Name one depository institution that teetered due to investments in these businesses.

Rapper Method Man Pleads Guilty to Tax Evasion

Celebrity and rap star Method Man plead guilty in a New York court yesterday, for failing to pay State income taxes for years 2004 – 2007. After paying the State $106,000 in restitution and penalties, he will not have to go to jail. Read more on the story from E! Online below:

As part of a deal with prosecutors, the 39-year-old hip-hopster, real name Clifford Smith, was sentenced to a conditional discharge, which means he'll avoid jail time after paying approximately $106,000 in restitution, penalties and interest he owed to New York State. The arrest will also be expunged from his record if he stays out of trouble.

Method Man was busted Oct. 5, 2009 for failing to file returns and pay state income tax from 2004 to 2007.

"Failure to pay your taxes is not a victimless crime," said Richmond County District Attorney Daniel Donovan, Jr. "In these days of massive budget shortfalls and service cuts, tax evasion is a crime against all New Yorkers. Whether you are a celebrity or an 'Average Joe,' you will be investigated, arrested and prosecuted."

Judge Alan J. Meyer approved the plea arrangement on Monday. A rep for the How High rapper was unavailable for comment.

5 Tips on Obtaining Insurance for your Franchise Business

Earlier in the week, FranchiseBusinessReview.com posted another guest blog from the Roni Deutch Tax Center. This month’s guest blog explains five tips on finding the best insurance policy for a franchised business. You can check out a few of the tips below, or read the full article at FranchiseBusinessReview.com.

Compare Quotes

Never sign up for the first insurance quote you get. Most franchisors will recommend an insurance agent to use, but you should still seek out at least two or three additional quotes before making a final decision. Also, be sure to compare more than just the fees. You should decide on an insurer based on the quality of their coverage, not who has the lowest monthly fee.

Look For Package Deals

Most insurers have bundle packages that give you a discount for having them handle all of your insurance needs. If you already have insurance for your car or home, you should try calling your insurance company to see if they offer a discount for adding business insurance to your package.

Be 100% Honest

Never provide false or misleading information to an insurance agent with the hope of lowering your premiums. You could end up with the wrong type of insurance which could cost you thousands in the long run.

Lookout For Overlaps

Avoid duplicate or overlaps in your insurance policy. You want to make sure you are only paying for what you need, and not paying for coverage you already have.

Could We Be Entering a Third Depression?

At the recent G20 Summit meeting in Toronto, governments pledged to halve their deficits by 2013. According to the Huffington Post, Nobel Prize winning economist Paul Krugman believes this move will plunge us into a “third depression.” Krugman states:

“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost -- to the world economy and, above all, to the millions of lives blighted by the absence of jobs -- will nonetheless be immense.”

Krugman believes that our skyrocketing number of long-term unemployed workers combined with government budget slashing will lead us into a long-term depression that may not be as severe as the Great Depression, could last years. And Krugman isn’t alone. The Wall Street Journal has reported that the Federal Reserve members are preparing for a potential “double-dip” recession in the US, as is Market Watch’s in-house economist.

What do you think? Are we on the verge of recovery, or on the verge of a long-term depression? Tell me your impressions via Facebook or @ronideutch/Twitter.

Read the Full article here.

Death of "Marty" Ginsburg

The Tax Professor Blog author Paul Caron reports that renowned tax attorney and tax professor, Martin D Ginsburg died yesterday. Some may know Ginsburg as one of the authors of the semi-annually updated tax treatise Mergers, Acquisitions, and Buyouts; others know him best as husband to Supreme Court Justice Ruth Bader Ginsburg.

During his life “Marty” held a number of prestigious positions in the tax world: chair of the Committee on Simplification of the American Bar Associations Tax Section, chair of the New York State Bar Association’s Tax Section, consultant to the American Law Institute’s Federal Income Tax Project, member of advisory groups to the Commissioner of the Internal Revenue, the Treasury Department, and the Tax Division of the Department of Justice. Mr. Ginsburg was awarded the American Bar Association Tax Section’s Distinguished Service Award in 2006.

Mr. and Justice Ginsburg celebrated their 56th wedding anniversary last week. He was a brilliant tax mind and will be missed in the tax world and beyond.

Read more about the inimitable Martin Ginsburg here.

Job Blues for Gray-Haired Workers

Lower unemployment numbers are great news for everyone, except older workers, says CNNMoney.com. According to the most recent statistics from the Labor Department, while jobless claims are falling overall, the number of unemployed workers over 55 years old is holding steady.

What does that mean? Companies are hiring all right, but only younger workers. "All the gains we've seen from the peak last fall to now, they've gone to people less than 55 years old," said Heidi Shierholz, a labor economist for the Economic Policy Institute. Furthermore, some experts also believe that the unemployment rate for older workers is artificially low, as they tend to become more discouraged and stop looking for work. And unemployment only counts people who are actively seeking employment.

Overlooking older workers is bad news for employers too. According to Tim Driver, CEO of RetirementJobs.com, older workers bring incredible experience and a lifetime of skills to their jobs that younger workers just can’t duplicate. In addition, older workers tend to keep stay in jobs longer, reducing turnover costs for employers.

Read the entire article here.

A Responsible Estate Tax

In the face of record-breaking deficits, lawmakers are looking for ways to increase tax collections. And the estate tax is ripe for changes. Since January 1, 2010 the United States has been estate tax free, which means our government has already missed out on some big dollars when Texas billionaire Dan L. Duncan passed away this March. Not anxious to miss out on more money, Don’t Mess with Taxes writer, Kay Bell reports that two new estate tax bills are in play.

One bill, written by five senators, proposes a progressive estate tax structure. According to Senator Bernie Sanders, the bill’s sponsor, “99.7% of Americans would not pay any estate tax whatsoever.” The bill states:

• The first $3.5 million ($7 million for married couples) of an estate is exempt from federal taxation.
• Estates valued over $3.5 million and under $10 million would be taxed at 45%
• Estates valued over $10 million, but under $50 million would be taxed at 50%
• Estates valued over $50 million would be taxed at 55%
• Estates valued over $1 billion would have an additional 10% surtax

A popular argument holds that family farms are hurt by estate taxes, so this bill allows farmers to lower the value of their farmland by up to $3 million for estate tax purposes.

The second bill being discussed is a bi-partisan effort from two members of the Senate Finance Committee. While the bill has not been proposed yet, it reportedly includes a 35% top rate, and excludes any estate under $5 million ($10 million for couples). The bill may also include an incentivized pre-payment concept, wherein a person could pay a lower estate tax if they pay up before they pass on.

Read the full article here:

Questions for the Tax Lady: June 28th, 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, and I will do my best to get an answer for you!

Question #1: I am getting married this week, do I need to notify the IRS?

Congratulations on your upcoming wedding! If you are planning to change your last name, you will have to do so at your local Social Security Administration office. Once your name has been legally changed you should inform your employer and local Post Office—once all this is said and done, you will notify the IRS of your marriage and name change the next time you file a tax return by indicating that you are either filing “married filing separately” or “married filing jointly”.

Be sure to change your withholdings to reflect the change in your life circumstances.

Question #2: I want to make a donation to the oil spill cleanup efforts, but I am not sure what organizations are taking donations. Are there any of those easy text to donate numbers setup?

Yes. listed below are instructions for two organizations that are assisting with the clean up efforts. You can also make a donation online at NWF.org.

• Text GULFAID 10 to 27138 to donate $10 to Gulf Aid. Note you can replace the ‘10′ with any dollar amount you’d like to donate. Just be careful not to add an extra zero by accident.
• Text WILDLIFE to 20222 to donate $10 to help protect the wildlife in proximity to the oil spill. Donations go to the National Wildlife Foundation.

IRS Provides Tax Help, Guidance to Gulf Oil Spill Victims

Over the weekend, the IRS published a new press release with guidance for individuals and businesses affected by the oil spill in the Gulf of Mexico and announced a number of new efforts to help affected taxpayers, including a special Gulf Coast Assistance Day on July 17.

“This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico. As residents of the region cope with the evolving situation, I want to assure them that the IRS will be doing everything it can to provide tax help to those who need it,” IRS Commissioner Doug Shulman said. “We encourage anyone who has an issue with the IRS to contact us and explain their hardship, and we will work with them to find a solution. We’ll do everything we can under current law to help taxpayers.”

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.

Every person can have unique financial circumstances, so the IRS encourages taxpayers to review their tax situation or talk with their tax preparers about the implications of payments or compensation from the oil spill.

The new information is available in a question-and-answer format on a special section of the IRS website, IRS.gov. The IRS is closely monitoring the situation in the Gulf, and additional information will be added to IRS.gov as it becomes available.

Wesley Snipes' Lawyers want to Adjust Appeal Request After Adviser's Arrest

From SF Gate.com:

Wesley Snipes' attorneys are requesting that judicial officials in Georgia dismiss their petition appealing the actor's tax evasion conviction following the arrest of his former financial adviser.

The "Blade" star was convicted of three misdemeanor counts of willful failure to file his income tax return in 2008. He is currently free pending an appeal to reduce a three-year prison sentence on U.S. federal tax charges.

Meanwhile, Snipes' one-time accountant, celebrity investor Kenneth Starr, was busted in May and accused of embezzling a massive $30 million from stars including the action star, Uma Thurman and Martin Scorsese.

Starr has been charged with wire fraud, investment adviser fraud and money laundering amid claims he used the stolen cash to buy a luxurious Manhattan apartment.

Snipes' lawyers are hoping Starr's arrest will help the actor's own case, and they filed papers in the 11th Circuit Court of Appeals in Atlanta on Wednesday, asking for judges to ignore their petition for an appeal.

Instead, Snipes' attorneys want to lodge a new petition asking to have the star's conviction dismissed, or set up a new trial on the grounds that the actor was the victim of a "miscarriage of justice."

Unemployment Benefits Extension Nixed for Nearly 1 Million

According to CNN Money, over a million Americans have lost their unemployment benefits as Senators failed to pass an extension last Thursday. There were 57 votes for the legislation, but it was not enough to overcome the GOP filibuster of the bill.

Hoping to overcome deficit concerns, the Senate trimmed down the bill yet again on Wednesday night so that it would only increase the deficit by $33.3 billion over 10 years, instead of $55.1 billion. The main changes were to scale back additional Medicaid funding for the states and to reallocate some stimulus and Defense Department spending.

The bill will now be pulled, according to two Democratic leadership aides. This leaves many groups in flux, including the jobless who have lost their safety net, companies who are waiting to learn what tax breaks are extended, and governors who were counting on the additional funds to balance their budgets.

The grab-bag legislation pushes back the deadline to file for federal unemployment benefits until the end of November, renews expired tax provisions, lengthens a small business lending program and adds to infrastructure investments.

Continue reading at CNN.com…

Anti-Tax Initiative Qualifies on California Ballot

California taxpayers will be voting on a new anti-tax initiative in November that would make it illegal for lawmakers to approve taxes disguised as fees without a proper vote. According to Mercury News, both the California Taxpayers Association and the California Chamber of Commerce are supporting the initiative.

California's secretary of state certified the initiative Thursday, the ninth to go before voters in November.

The proposition would stop state lawmakers from approving taxes disguised as fees without the constitutionally required two-thirds vote for a tax increase. Passing a fee right now only requires a majority vote of the Legislature.

Supporters say lawmakers try to skirt the high vote threshold required to approve taxes by labeling charges as fees on everyday items such as food and fuel.

The initiative also would require local officials to bring similar fee increases to voters.

Government Revises GDP Estimate Down to 2.7% For 1Q

The Government lowered their original first quarter estimates regarding the Gross Domestic Product, due to a an underestimate of consumer spending. Even though the estimate is lower, it does mark the third consecutive quarter of growth. Check out the following story about the adjustment courtesy of USA Today:

Gross domestic product rose at a 2.7% annual rate in the January-to-March period, the Commerce Department said Friday. That was less than the 3% estimate for the quarter that the government released last month. It was also much slower than the 5.6% pace in the previous quarter.

GDP measures the value of all goods and services produced in the United States and is considered the best measure of the country's economic health.

The economy has now grown for three consecutive quarters after shrinking for four straight during the recession — the longest contraction since World War II.

In normal times, 2.7% growth would be considered healthy. But it's relatively weak for a recovery after a steep recession. After the last sharp downturn in the early 1980s, GDP grew at annual rates of 7% to 9% for five straight quarters.

Continue reading at USA Today.com…

Why Are Weddings So Expensive? Historians Find the Answer

From WalletPop.com:

The modern American couple starts life with a heavy financial burden: In a big city like Chicago, the average wedding costs between $22,500 and $37,500. Yet in the 1930s, it was cheap, costing around $400. There's no question that wedding prices are out of control. What went wrong?

I went to the Chicago History Museum, where historians have figured out how it happened.

Timothy Long is the costume curator of the museum, which (surprisingly) is thought to have the second-largest fashion collection in the world. Decades of wealth have found a repository in the museum's stacks, including the paperwork from the legendary Marshall Field's department store, which dates to the mid-19th century and was the king of the world's department stores for generations.

While poring through the museum's holdings, Long realized something important about the modern wedding: It became a massive, ostentatious production around the time the retail pioneers at Marshall Field's decided to turn the ceremony into a consumer event for Chicago's high society.

If you want to blame someone for how much weddings cost in our society, the paperwork points to Marshall Field & Company. For example, it was the first store to implement a gift registry for brides, which encouraged friends and family to make expensive public purchases on the couple's behalf. It created low-cost knockoffs of high-fashion garments so women of every income could imitate the rich. Also, in the name of luxury and convenience, it also designed a system that took couples under its wing to sell them a range of other expensive accouterments that proved their place in society, including flatware, linens, and catering.

Lawmakers Seal Deal On Historic Wall St Reform

Lawmakers delivered a win for the Obama administration when the reached an agreement on the historic Wall Street reform bill after a 21 hour-long session debate. The bill is meant to institute tighter restrictions, more oversight, and hedge profits of the financial industry.

As this article from Reuters.com explains, the legislation represents the most sweeping financial rules revamp since the 1930s. The bill is expected to get final congressional approval next week although the new rules will not be implanted for months.

The legislation would set up a new financial consumer watchdog, create a protocol for dismantling troubled financial firms and mandate higher bank capital standards, all in an effort to avoid a repeat of the 2007-2009 credit crisis that hammered the economy and triggered taxpayer bailouts of floundering firms.

To secure agreement, lawmakers reached deals in the final hours on the most controversial sections, which restrict derivatives dealing by banks and curb their proprietary trading to shield taxpayer-backed deposits from more risky activities.

Banks will be allowed to keep most swaps dealing activity in-house, although the riskiest trading would be pushed out into an affiliate. They will also be permitted small investments in hedge funds and private equity funds.

The concessions could lessen the impact on bank profits.

The KBW bank stock index, which registered its worst performance since October last month, was 1.6 percent higher in late-morning trade, with both Goldman Sachs Group Inc and Morgan Stanley, two of the banks that will be most affected, showing gains.

Bonds: Avoid the next great bubble

“Fueled by a combination of fear and greed. ” That is how CNNMoney.com describes the bond market bubble. According to CNNMoney.com:

A projected $380 billion will pour into bond funds this year, more than went into domestic stock funds in the past decade. That's on top of a record $376 billion last year. All this money flowing in has made bonds very expensive.

It's true that bonds are less volatile than stocks. But in fact they lose money just as often as equities do. "I don't think the public understands they can lose money in bond funds," says James Swanson, chief investment strategist at MFS, an asset-management firm in Boston.

So that's the fear part. The greed part comes from an entirely different group of people: safety-loving folks who normally park their money in cash, such as bank savings accounts, CDs, or money-market funds. Fed up with the meager interest rates those accounts are paying these days -- the average taxable money-market fund yields 0.03% -- they're venturing into short-term bond funds to eke out a bit more yield.

Why the bubble could burst

One part of the bubble is already leaking air: long-term government bond funds. Because they invest in super-safe U.S. Treasuries and other forms of government-backed debt, they were a popular place to hide during the mortgage meltdown.

But when the economy began improving and rates on 10-year Treasuries began rising (from about 2% at the end of 2008 to as high as 4% in April before slipping to 3.3% today), these funds started suffering. In fact, the Vanguard long-term Treasury bond fund fell 12% in 2009 and, despite the recent run up in Treasury securities, is still down 5% since the end of 2008.

Experts say that's just the beginning. Read about the major factors that could harm bonds further here.

200,000 could lose out on homebuyer tax credit

Many homebuyers, as many as 200,000 buyers according to CNN Money.com, could lose out on the $8,000 homebuyer tax credit. This is because many people are trying to purchase short sales, buying homes from sellers who owe more on their mortgage than the home is worth. Despite the name “short sale,” these deals often take a long time for the lender to approve. It could be anywhere from two to six months. This lag time could mean that buyers will lose out on the tax credit because their pending deals won’t be finalized by the June 30th deadline. Taking even more time are the home inspections. The average foreclosed home comes with many problems to repair, and fixing the issues takes time, slowing the process even further.

Richard Smith, CEO of Realogy, the parent company of several franchise real estate brokers started warning buyers back in January that short sales may not close in time to take the credit.

Read the full article here.

Are BP payments taxable income?

Many people on the Gulf Coast affected by the oil spill are filing claims through the BP oil company and they want to know, “Will the BP payments be taxable income?” This great question came up on the Don’tMessWithTaxes blog, and the answer to the question is: Yes, the payments will probably be taxable, but you never know, maybe not. Basically, the BP payments are considered payments made to individuals in the form of compensation for lost wages that would have otherwise been taxable income. Therefore, taxable. But sometimes people will get special tax treatment if they’ve been affected by disasters. Remember my blog about tax relief to flood victims?

Kenneth Feinberg, head of the Independent Claims Facility, said last week that it hasn't been determined if the payouts will be considered taxable income. Remember, this isn’t a gift from BP, it’s been given to cover money lost for jobs that couldn’t be done. The Treasury would lose a lot of revenue from these checks.

The recommendation is always set aside money for the IRS until you are certain it will not be taxable, just to be safe.

Mortgage rates hit new low

Wow, CNNMoney.com is reporting that 30-year fixed mortgage rates have dropped to an amazing 4.69%. Freddie Mac is saying it is the lowest level since they started tracking it 38 years ago. This means, yes, it is cheaper to buy a house. Unfortunately it is doubtful there will be a spike in home sales with unemployment so high, wages stagnant and tax incentives expiring.

With low home sales, home prices will continue to fall. Economists on CNNMoney.com predict by the end of next year, home prices will be at least 5% lower. However, lower home prices are bittersweet news. It’s great news for buyers, but bad news for all of those in or near foreclosure.

Read the full article here.

New York May Tax Clothing Sales to Narrow Budget Gap

Only a few days after New York raised the state tax rates on cigarettes, Governor David Paterson is now considering a 4% sales tax on clothing purchases under $110. The tax was put into place for 3 years once, but was repealed in 2006. Officials say the tax could raise $660 million annually.

“Taxes on clothes have been brought back to us” by legislators, Paterson said in an interview on New York City radio station WOR today. “It’s in the discussion phase.”

Lawmakers face a June 28 deadline set by Paterson for agreement on a budget covering the year that began April 1. If no agreement is in place by then, Paterson has said he will submit his own budget plan in an emergency spending bill, which lawmakers would have to approve, or shut down government.

Paterson’s $135.2 billion budget proposed earlier this year includes cuts in aid to school districts and a tax on sweetened beverages that lawmakers oppose. Additional taxes should close 10 percent to 13 percent of the deficit, or $920 million to $1.2 billion, Paterson said in an interview on radio station WGY in Albany.

Taxing clothing sales or finding revenue by other means is needed because lawmakers are balking at Paterson’s proposals to raise $710 million by allowing wine sales in grocery stores and imposing a new levy equaling 1 cent per ounce on sweetened beverages, the governor said.

Continue reading at Business Week.com…

The Dumbest Financial Laws Of All Time

As we all know, lawmakers do not always get it right when they draft and support new financial laws. However, as this Forbes.com article shows, some times the bills they pass are so ridiculous that it is surprising they ever become law. In a new “Gallery of Pain,” Forbes.com has collected a slideshow of the dumbest financial laws of all time. You can find the text regarding some of the laws included in their list below, but be sure to view the slideshow at Forbes.com.

How worried should the world be about the new regulatory reform bill wending its way through the U.S. Congress? Given the country's track record on looking after the financial services industry, the answer is: plenty worried.

Even the staunchest believers in free enterprise would agree that a modicum of regulation is necessary for a functioning economy. The new bill, which Congress aims to get on President Obama's desk before the July recess, looks to be chock full of ways to ward off yet another financial crisis. These include: audits of the Federal Reserve; the dismantling of lucrative banking divisions devoted to crafting and trading complex securities called derivatives; an agency that would take quick control of troubled financial institutions; and the so-called Volcker rule, after former Federal Reserve chairman Paul Volcker, that would prohibit banks from making speculative trades with depositors' money.

Whatever ideas end up on the books, three things are certain.

First, regulation--no matter how well intended--comes with a whole heap of unintended consequences. Some laws have invited, or at least exacerbated, full-blown financial crises. (For a round-up of the most ill-fated legislation, see our slide show.) "Regulations are fixed in time and can't adapt," says David Weiman, a professor of economics history at Barnard College.

The second certainty: No matter what the rules are, the financial industry will figure out how to innovate around them. "New regulations often let people find ways within the letter of the law to do whatever they wanted to do in the first place," says Edward Kane, a professor of finance at Boston College.

Ex-Detroit Mayor Indicted on Fraud, Tax Charges

From the Associated Press:

A prominent Detroit pastor says the indictment of former Mayor Kwame Kilpatrick is another chapter in a "sad saga" that has gone on too long.

Kilpatrick was charged Wednesday with fraud and tax crimes. Federal prosecutors accuse him of enriching himself and others by milking $640,000 from a tax-exempt charity that he created as a way to enhance Detroit and improve the city's image.

The indictment says Kilpatrick used the funds to pay for yoga, golf, camp for his kids, travel, a video about his family, cars, political polling and much more. Defense lawyer James Thomas says he'll fight the charges.

The Rev. Horace Sheffield says the Kilpatrick "story needs to end." The former mayor is in state prison in an unrelated criminal case.

Banks: We're Hiring So We Can Make More Home Loans

Even though home sales are down, a handful of financial institutions are getting ready to hire more loan originators, so that they can increase lending. This should come as good news to the thousands of Americans finding it difficult to get a home loan. You can check out a segment of the story below, or read the full post at CNNMoney.com.

Several banks are gearing up to do a whole lot more mortgage lending in the future.

Even though new homes sales were at a historical low in May and the housing market in general is in the doldrums, these banks are hiring hundreds of loan originators, getting ready for what they believe will be a significant pick-up in lending.

JPMorgan Chase (JPM, Fortune 500), one of the nation's largest lenders, is in the midst of hiring 1,200 mortgage officers. "We may not be inundated with applications tomorrow, but we are confident the the need will be there," said Christine Holevas, a spokeswoman for JPMorgan Chase.

Housing experts, however, warn that overall mortgage lending is expected to remain flat, largely due to a decline in refinancing.

Loans for home purchases should steadily increase over the next two years to $916 billion, up from an expected $725 billion this year, according to forecasts by the Mortgage Bankers Association. But refinancings should plummet to $474 billion in 2012, down from $717 billion this year.

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New Drill Ban as Oil Still Spews

BP is facing a slew of lawsuits and a criminal investigation as oil still gushes from their ruptured well in the Gulf of Mexico. Top Obama administration officials are also telling lawmakers in Washington that initial findings are showing definite “reckless conduct” leading up to the initial April 20th explosion.

Reuters.com reports the latest lawsuit will most likely be by investors, specifically the New York State pension fund—these investors are angry about the drop of the BP stock price. All the while, scientists estimate the oil leak is spewing up to 60,000 barrels a day!

According to reuters.com, Interior Secretary Ken Salazar said he would soon issue a new ban on deepwater drilling off the U.S. coast that would be more flexible than the suspension overturned a day earlier by a federal judge. He would like the new ban to include: when the ban would end and that it might allow oil companies to drill in certain low-risk areas. However there was no word on when Salazar would reissue this ban.

Let me know your thoughts. Follow me on Twitter @ronideutch or find me on Facebook.

New Credit Card Rules Effective August 22. What you need to know

Credit card companies have done their fair share of making sure they make money at your expense. Before now, they had really come up with their own set of rules. Well, there are new consumer credit card protection rules that are set to begin August 22, 2010.

This set of rules is the latest in a series of regulations that implement the Credit Card Accountability, Responsibility, and Disclosure Act (the Credit Card Act). For other credit card rules that already went into effect February 22, although you can go the the website here. You can see some of the provision below. Here’s what you can expect from these new protections:

Reasonable penalty fees

• Today: Your late payment fee may be as high as $39, and you likely pay the same fee whether you are late with a $20 minimum payment or a $100 minimum payment.
• Under the new rules: Your credit card company cannot charge you a fee of more than $25 unless:

1. One of your last six payments was late, in which case your fee may be up to $35; or
2. Your credit card company can show that the costs it incurs as a result of late payments justify a higher fee.

What’s even better, your credit card company cannot charge a late payment fee that is greater than your minimum payment. So, if your minimum payment is $20, your late payment fee can't be more than $20. Similarly, if you exceed your credit limit by $5, you can't be charged an over-the-limit fee of more than $5.

Additional fee protections

• No inactivity fees. Your credit card company can't charge you inactivity fees, such as fees for not using your card.
• One-fee limit. Your credit card company can't charge you more than one fee for a single event or transaction that violates your cardholder agreement. For example, you cannot be charged more than one fee for a single late payment.

Explanation of rate increase

• If your credit card company increases your card's Annual Percentage Rate (APR), it must tell you why.

Plus a Re-evaluation of recent rate increases

• Today: Your credit card company can increase your card's APR with no obligation to re-evaluate your rate increase.
• Under the new rules: If your credit card company increases your APR, it must re-evaluate that rate increase every six months. If appropriate, it must reduce your rate within 45 days after completing the evaluation.

Fed To Keep Rates Low To Support Weak Recovery

The federal reserved resumed a two-day meeting today to discuss their optimism in the counties economic recovery, as well as fears for a possible relapse. According to Forbes.com, experts are expecting that interest rates will remain low to support the struggling economy.

The Fed resumed its two-day meeting Wednesday with policymakers having cause for optimism as well as caution. The economy has been growing again for nearly a year. Manufacturing activity is picking up. Businesses are spending more. And Fed Chairman Ben Bernanke has expressed confidence that the nation won't fall back into a "double dip" recession.

At the same time, the recovery remains vulnerable to threats: Europe's debt crisis, an edgy Wall Street, cautious consumers, a fragile housing market and high unemployment.

"The effect of European developments on the U.S. economy is likely to be modest, so we expect the tone will be cautious but certainly not dire," said Michael Feroli, economist at JPMorgan Chase (JPM - news - people ) Bank.

The Fed is certain to leave its key bank lending rate at between zero and 0.25 percent. An afternoon announcement is expected. The rate has remained at that level since December 2008.

One More Worry for Banks: Wal-Mart

From CNNMoney.com:

America's biggest banks are in retreat, tightening lending, increasing fees, and closing branches. But one company still wants to become your neighborhood bank: Wal-Mart.

While the banking sector has been in turmoil, Wal-Mart has aggressively courted customers' pocketbooks, partnering with financial services companies to offer money transfers, check cashing and bill payments, and putting virtual checking accounts -- refillable pre-paid debit cards -- in the hands of more than two million customers.

The company downplays its desire to garner a banking license, but recent changes in the banking and regulatory landscape has only increased the eventual likelihood of a Wal-Mart Bank. The latest evidence that Wal-Mart plans to continue its push into financial services was the news last week that it had taken an equity stake in Green Dot, which manages the retailer's prepaid debit cards and is currently seeking regulatory approval to acquire a small Utah-based bank for $15.7 million.

Wal-Mart has attempted to acquire its own banking license several times since 1999. In 2007 it dropped plans to acquire an industrial-bank charter in Utah after heavy lobbying by the banking industry. Banks argued that Wal-Mart might steer lending toward favorable suppliers and away from competitors. Had Wal-Mart succeeded, its Utah "industrial loan corporation" could have handled all of its card processing and allowed the retail giant to take deposits and make loans.

While it must now partner with companies like Green Dot and SunTrust (STI, Fortune 500) to provide such services in the United States, this shaving of the profit margin hasn't slowed Wal-Mart (WMT, Fortune 500) down. Last week, Wal-Mart opened its 1,000th "Money Center" and announced that it planned to expand to 500 more stores. It also trumpeted the launching of a Wal-Mart credit card in Canada, where it received a banking license just last month. In Mexico, where it has operated a bank since 2007, Wal-Mart has plans to open up to 150 new branches and take deposits in the checkout line. Back in the U.S., through a partnership with SunTrust, Wal-Mart has nearly doubled the number of bank branches in its stores over the last five years to a total of 83.

Consumers Say: "In tweets we trust"

According to the second annual Digital Influence Index study, 75% of U.S. consumers are more likely to trust companies that microblog on popular sites like Twitter.com. The study also noted that 90% of consumers use the Internet to either buy, or compare prices on items.

Some 75 percent of people surveyed said they view companies that microblog -- sending short, frequent messages on sites like Twitter or status updates on social networks like Facebook -- as more deserving of their trust than those that do not, according to a survey by Fleishman-Hillard, conducted with market research firm Harris Interactive.

The second annual Digital Influence Index study, released at the Reuters Consumer and Retail Summit in New York, researches the extent to which the Internet affects consumer behavior.

The findings on Twitter are particularly notable in a year where many leading corporations found themselves in crisis mode, from BP's role in the Gulf oil disaster to recalls from Toyota Motor Corp and Johnson & Johnson and a viral campaign against new diapers from Procter & Gamble on Facebook.

"What really matters here I think is that the rules of crisis engagement that we've known for years and years still apply, but they still apply in a much more accelerated way," Dave Senay, Chief Executive of Fleishman-Hillard, told Reuters in a telephone interview.

Continue reading at Reuters.com…

Half of all loan modifications delinquent again within year

From CNNMoney.com:

It’s looking like homeowners who received loan modifications last year are already falling behind according to a federal report released Wednesday. I think this is an absolute tragedy—this economy continues to wreak havoc on the lives of many! Here’s what the article had to say:

Modifications made under President Obama's foreclosure prevention program, known as HAMP, had lower re-default rates than non-government modifications. Some 7.7% of HAMP modifications were delinquent after three months, compared with 11.3% of all modifications.

Is this an all-across-the-board problem or were there some loan modifications that fared better? HAMP had lower default rates than other non-government modifications. Under the HAMP program borrows receive incentives for making timely mortgage payments and they have their monthly payments reduced to no more than 31% of their pre-tax income.

Many experts say that servicers must do more principal reduction if they want to halt the foreclosure tidal wave. Homeowners are more likely to walk away if they owe much more than the home is worth, a situation about 1 in 4 borrowers find themselves in.

What are your thoughts on loan modifications or government programs like HAMP? Do you agree with borrowers getting incentives for paying their mortgages on time?

5 Tips for Protecting Your Home from Foreclosure

Many U.S. homeowners are in foreclosure or desperately trying to prevent their home from being foreclosed upon. Maybe they have missed a couple of mortgage payments and they just aren’t sure what to do next. www.federalreserve.gov has posted five 5 tips to protect your home:

1. Don’t ignore your mortgage problem. If you are unable to pay--or haven’t paid--your mortgage, contact your lender or the company that collects your mortgage payment as soon as possible. Mortgage lenders want to work with you to resolve the problem, and you may have more options if you contact them early. Call the phone number on your monthly mortgage statement or payment coupon book. Explain your financial situation and offer to work with your lender to find the right payment solution for you. If your lender won’t talk with you, contact a housing counseling agency. You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development's (HUD) website or by calling (800) 569-4287.

2. Do your homework before you talk to your lender or housing counselor. Find your original mortgage loan documents and review them. Review your income and budget. Gather information on your expenses, including food, utilities, car payment, insurance, cable, phone, and other bills. If you don’t feel comfortable talking to your lender, contact a housing or credit counseling agency. Counselors can help you examine your budget and determine the options available to you. They may also advise you about ways to work with your lender or offer to negotiate with your lender on your behalf.

3. Know your options. Some options provide short-term solutions/help, while others provide long-term or permanent solutions. You may be able to work out a temporary plan for making up missed payments, or you may be able to modify the loan terms. Sometimes, the best option may be to sell the house. For information on different options, visit HUD’s website or Foreclosure Resources for Consumers for links to local resources.

4. Stick to your plan. Protect your credit score by making timely payments. Prioritize bills and pay those that are most necessary, such as your new mortgage payment. Consider cutting optional expenses such as eating out and premium cable TV services. If your situation changes and you can no longer meet your new payment schedule, call your lender or housing counselor immediately.

5. Beware of foreclosure rescue scams. Con artists take advantage of people who have fallen behind on their mortgage payments and who face foreclosure. These con artists may even call themselves “counselors.” Your mortgage lender or a legitimate housing counselor can best help you decide which option is best for you. For tips on spotting scam artists, visit the Federal Trade Commission's website, Foreclosure Rescue Scams. Report suspicious schemes to your state and local consumer protection agencies, which you can find on the Consumer Action Website.

Please see my blog entry and video on the same topic, Other Options than Foreclosure here.

Prisoners cashed in on homebuyer tax credit

During many of my tax season interviews, I warned taxpayers claiming the first-time homebuyer credit to beware of IRS audits—even back then it was common knowledge that the IRS would be paying extra close attention to every tax return claiming the first-time home buyer credit. Of the fraudulent tax credit request found by the IRS were made by state and federal prisoners—and the numbers are astounding!

According to a Treasury Department report released Wednesday reported by CNNMoney.com, the inmates defrauded the government of $9.1 million in tax credits reserved for first-time homebuyers.

4,608 state and federal inmates tried to file for the first-time home buyer tax credit. 1,295 of them actually received the fraudulent refunds. 241 of those inmates were serving life sentences!
The Treasury’s inspector general also found that thousands of people filed multiple claims or made claims outside the allotted time period. In all, more than $28 million was given out improperly.

The problem was particularly bad in Florida: 61% of the “lifers” who received credits were incarcerated in the Sunshine State.

"It is possible for an inmate to buy a house while in prison," said Jo Ellyn Rackleff, spokeswoman for the Florida Department of Corrections. "…Many of the inmates have families with children who live outside." She said that one of the reasons why Florida inmates feature prominently in the Treasury report is because the Florida prison system is transparent in providing inmate information to the IRS.

However, it wasn’t just prisoners filing faulty homebuyer credit claims, the report found that the IRS awarded $17.6 million to 2,555 filers who had bought their homes before the credit program kicked in. The inspector general also identified 206 filers who claimed the credit for multiple addresses; these fraudulent filers were awarded a total of $1.4 million.

The report also found that improper filers included 34 employees of the IRS! This is in addition to 53 IRS employees that the inspector general identified last year as improper filers.
More according to CNNMoney: the report included a response from the IRS, which highlighted the huge scope of the program, with $12.6 billion in claims awarded to 1.8 million participants. The IRS said it had ramped up efforts to crack down on criminal activity and would continue to review claims and "recapture" pay-outs determined to be fraudulent.

The IRS claims to be working on finding the identities of the agency employees who are at fault for questionable or fraudulent claims.

Read the full article here: