Your Card Has Been Declined, Just as You Wanted

If you are one of those people who just cannot seem to stay within your monthly budget, you might want to look into the new personal finance tools Citigroup plans to begin offering customers. They intend to offer a feature that will allow customers to set budgets for themselves, and have their card decline purchases that would put them over budget.

The service, called inControl and already in use by some Barclaycard holders in Britain, is a sort of financial chastity belt that offers the potential to prevent a variety of budget sins and other money traps.

Worried about your restaurant habit? If your bank adopts MasterCard’s service, you could tell it to have your debit or credit card reject any restaurant purchase above whatever monthly cap you set.

Sick of your credit card number falling into the hands of thieves? Tell your card issuer to never allow charges originating from the fraud-prone countries that end in “stan” or “ia.” (Don’t worry: You can instruct your bank to make an exception for Australia during the few weeks that you’ll be honeymooning in Sydney.)

Continue reading at NY Times.com…

State Taxes Across U.S. Take Second Consecutive Record Plunge

From the Rockinst.org:

For the second quarter in a row, tax revenues collected by states across the U.S. plummeted sharply in April-June 2009, according to the latest quarterly report on state revenue collections issued today by the Rockefeller Institute of Government.

When compared to the same period one year earlier, second-quarter 2009 tax revenues in the 50 states dropped a record 16.6 percent — the second consecutive quarter in which revenues fell more sharply than during any previous time on record. Forty-nine states saw total tax revenue fall during the quarter, with 36 states reporting double-digit declines.

Tax collections for two major sources of revenue — sales taxes and personal income taxes — declined for the third consecutive quarter. Income tax was down by 27.5 percent, while sales tax was down by 9.5 percent.

Consumer Confidence in the US Drops in June

Surprising new reports have emerged reporting that consumer confidence has dropped drastically in June of this year, adding more tension to an already shaky economic situation. For those of you not familiar with the term, check out the following definition from Wikipedia.

“Consumer confidence is the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. How confident people feel about stability of their incomes determines their spending activity and therefore serves as one of the key indicators for the overall shape of the economy. In essence, if consumer confidence is higher, consumers are making more purchases, boosting the economic expansion. On the other hand, if confidence is lower, consumers tend to save more than they spend, prompting the contraction of the economy."

According to a Yahoo Finance article, “the consumer confidence index fell to 49.3 in June from 54.8 in May,” while economist had predicted “healthier reading of 55.0 for the month.” Not surprisingly, the announcement has had a pretty decent impact on the U.S. stock market. Check out the following article explaining the affect on stocks courtesy of Reuters.

U.S. consumer confidence took an unexpectedly steep slide in June, figures released on Tuesday showed, suggesting the 18-month-long recession had yet to loosen its grip on the economy.

A separate report on April house prices in major cities offered some encouraging signs that the worst of the housing slump may be over, but that was not enough to lift investors' spirits. Another crop of economic data showed business activity in New York City and the Midwest remained weak, while retail chains slogged through a rough June.

Billionaire investor George Soros added to the cautionary tone, saying that rising borrowing costs posed a threat to any eventual economic recovery.

"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said at a breakfast hosted by the Wall Street Journal.

Major stock market indexes fell after the Conference Board's consumer confidence index showed households felt gloomier about their current situation and less optimistic about what the coming months might bring.

Kevin Kruszenski, head of listed trading at Keybanc Capital Markets in Cleveland, said the confidence data "kind of took the wind out of things a little bit."

U.S. Corporate Tax Audits Down 9 Percent

From Reuters.com:

The percentage of corporate tax returns audited by U.S. collectors fell about 9 percent in 2008 and was down nearly 20 percent from about a decade earlier, an inspector general report released on Monday said.

About 15.3 percent of returns filed by corporations with $10 million or more in assets were examined by the Internal Revenue Service last fiscal year, down from about 16.8 percent in 2007, the Inspector General for Tax Administration for the U.S. Treasury Department said in its annual report.

In 1999, about 19 percent of tax returns for the group were examined by tax collectors. The rate of examination ranged between 15 and 19 percent in the intervening years, with the exception of a 20 percent rate in 2005.

The IRS's enforcement staff has been whittled down in recent years, a response to fervent complaints by some U.S. lawmakers critical of what was characterized as aggressive tax collection.

"After several years of improved results, many collection function activities and results declined during FY 2008," the report said.

The enforcement staff shrank 20 percent to 14,900 at the end of 2008, down from 18,700 in 1999, the report said.

President Barack Obama has proposed doubling the agency's enforcement budget for 2010, including hiring about 800 new staffers just to enforce international tax law. That is part of a wider effort by the administration to crack down on what it calls the abusive use of tax loopholes and outright tax evasion.

Enforcement revenue fell in 2008, though that interrupted a steady rise in the past decade or so, the report said.

The IRS collected $2.75 trillion in fiscal year 2008, a record.

The report did not make any specific recommendations, but noted the enforcement of tax laws is among the key "high-risk" areas consistently cited by the Government Accountability Office.

The tax gap -- the difference between what is owed and what is collected -- was about $345 billion in 2001, the last year it was examined, according to the government.

Americans' Net Worth Shrinks $1.33 Trillion In 1Q

From BreitBart.com:

American households lost $1.33 trillion of their wealth in the first three months of the year as the recession took a bite out of stock portfolios and dragged down home prices.

The Federal Reserve reported Thursday that household net worth fell to $50.38 trillion in the January-March quarter, the lowest level since the third quarter of 2004. The first-quarter figure marked a decline of 2.6 percent, or $1.33 trillion, from the final quarter of 2008.

Net worth represents total assets such as homes and checking accounts, minus liabilities like mortgages and credit card debt.

The damage to wealth in the first quarter came from the sinking stock market. The value of Americans' stock holdings dropped 5.8 percent from the final quarter of last year.

Another hit came from falling house prices. The value of household real-estate holdings fell 2.4 percent. Collectively, homeowners had 41.4 percent equity in their homes in the first quarter. That was down from 42.9 percent in the fourth quarter.

The latest snapshot of Americans' balance sheets was contained in the Fed's quarterly report called the flow of funds.

Despite the drop, the speed at which net worth shrunk slowed to start the year. During the recession's deepest point in the October-December period, Americans' net worth fell 8.6 percent, according to revised figures.

With wealth declining and unemployment rising, there are questions about how consumers—the lifeblood of the economy—will behave in the coming months.

If they continue to spend, even at a subdued pace, the recession likely will end this year as predicted by Fed Chairman Ben Bernanke and other economists. However, if consumers hunker down and cut spending again, that could delay any recovery. In the final quarter of last year, Americans slashed spending at an annualized rate of 4.3 percent, the most in 28 years.

Still, there was some encouraging news on consumer spending Thursday.

Retail sales rose 0.5 percent in May, following two straight monthly declines, the Commerce Department reported. Meanwhile, the number of newly laid-off workers filing for unemployment benefits fell last week by 24,000 to 601,000, the lowest level since late January.

IRS Audits of Large Companies Decline for 3rd Year in Row

From the Wall Street Journal.com:

Internal Revenue Service audits of large corporations fell for the third straight year, as the tax agency focused scarce resources on the growing area of partnership returns and the very largest corporations.

According to 2008 IRS enforcement data released Monday, the IRS audited 15.3% of returns of corporations with assets of $10 million or more. That is the lowest audit coverage level since 2003 and down from a 20% coverage rate in 2005.

Audits of corporations with assets of $50 million and higher increased, however. The IRS also continued to direct examination resources towards partnerships, auditing about 1,000 more partnership returns than it did in 2007, an 8% increase. The number of partnerships filing returns has grown by about two-thirds over the last 10 years.

IRS Deputy Commissioner Linda Stiff said 2008 was "a very challenging year," where the agency saw a decline in enforcement staffing levels of about 2%.

In addition, some enforcement staff were re-directed to help field calls from taxpayers related to tax rebates that Congress ordered as part of economic stimulus legislation.

The "IRS is very proud of what we were able to accomplish. It's been a solid year in the enforcement arena, and we continued to build on the success of earlier years," Ms. Stiff said in an interview.

Overall, the IRS collected $56.4 billion from enforcement efforts in 2008, which would be a record but for 2007's high-water mark $59.2 billion in collections.

Dean Zerbe, national managing director of the alliantgroup LP, said the decline in overall large corporation audit coverage is disturbing given what he says is a shift in IRS resources towards more of a focus on small and medium-sized firms.

Audits of small and mid-sized firms don't produce as much tax revenue, and about one-third of the time produce no change in taxes assessed, according to Mr. Zerbe. "They spend a lot of time doing root canals on people who are basically compliant," he said.

Alliantgroup represents small and mid-sized firms in disputes with the IRS.

Individual audits remained about the same as in 2007, with about 1.4 million returns audited, or about 1% of total individual returns.

Taxpayers with income of $200,000 or above had about a 3% chance of being audited. Those with income of $1 million and above stood a 5.6% chance of being audited, down from 6.8% coverage in 2007.

Ms. Stiff said the IRS will continue in 2009 the same level of focus on individuals with incomes above $200,000. With respect to business returns, the agency will continue to give more scrutiny to the largest corporations, and will intensify examinations with respect to employment taxes, she said.

Report: Tax Collections Down In Nearly Every State

From BusinessWeek.com:

Tax collections continued to drop in almost every state during the first quarter of 2009, off an average 13 percent from a year earlier as the recession and wary consumers cut into income and sales tax revenue.

The Rockefeller Institute of Government's latest report shows a nearly 16 percent average decline in personal income taxes. That's the steepest drop since 2002.

An institute analyst says tax revenue is expected to decline further in the quarter ending in June, which will include April income tax returns hit hard by financial market declines in 2008.

The report released Wednesday says corporate income taxes fell 16 percent and sales taxes were off almost 8 percent. It was the second quarter in a row with income, sales and corporate tax collections all dropping.