Bailout Loss Estimated at $29 Billion

In a new report released yesterday, the Treasury Department announced that they expected to lose around $29 billion from the financial crisis bailouts. More than half of the loss is a result of the bailout of the auto industry, with a considerable amount of funds also going to the departments housing finance program. Check out the following story about the announcement courtesy of NYTimes.com.

The Treasury Department expects to lose $29 billion on the federal bailouts stemming from the financial crisis, with most of the losses in its housing finance program and the auto rescue.

In a report released on Tuesday, the administration said it expected a $17 billion loss from its investments in General Motors, Chrysler and the auto finance companies, as well as a $46 billion loss from housing programs like the mortgage modification program known as the Home Affordable Modification Program.

The new figures, which include profits that offset some of the losses, come just as the Obama administration tries to wind down the bailout program known as the Troubled Asset Relief Program, or TARP. Last week, the government announced a plan to exit its investment in the insurer the American International Group.

Treasury officials have declared the bailout a success, emphasizing that much of the program’s money has been returned and that losses are now likely to be less than once expected. The cost, the report says, is far below the $350 billion the Congressional Budget Office once estimated.

“Because of the success of the program, TARP will likely cost a fraction of this amount,” the report said.

Continue reading at NYTimes.com…

20% of Americans Hit by Major Economic Loss

A new Economic Security Index study found that economic losses were at a 25-year low for Americans last year, with about 20% of the population facing major losses. The study – which has been tracking economic data sine 1985 – used a wide variety of information to achieve accurate results.

According to CNN Money, the index was constructed by Yale political scientist Jacob Hacker, and the project was funded by the Rockefeller Foundation.

The ESI defines people as economically insecure when their situation meets two criteria. First, within a year's time they have lost 25% or more of their available gross income. Available gross income is the money they have left over after paying for medical costs and debt. Second, they don't have enough in an emergency fund or other liquid reserves to make up the difference.

Hacker noted that it can typically take between six to eight years to restore one's available income to its previous level. Meanwhile, a survey cited by Hacker found that 48% of Americans said last year they only had enough resources to carry them for two months before experiencing any economic hardship.

According to the index, which is based primarily on Census Bureau data, 12.2% of Americans were economically insecure in 1985. By 2009, Hacker and his team estimate that 20.4% of Americans could be classified that way. The actual number of people affected increased by more than half, from 28 million in 1985 to roughly 46 million by 2007, the last year for which hard numbers were available.

Continue reading at CNN.com…

4th Quarter's Fast Economic Pace Likely to Wane

According to the Associated Press, the economy expanded at a rate of 5.7% during the fourth quarter of 2009. This was the second consecutive quarter of growth, but economists warn that this rate of growth will not likely continue.

Consumer spending, chilled by double-digit unemployment and scant wage gains, remains weak. And the benefits of government aid and higher company output to feed stockpiles will dwindle.

Many analysts predict gross domestic product will expand at a rate closer to 2.5 to 3 percent in the current quarter and 2.5 percent or less for the year.

That won't be enough to significantly reduce the unemployment rate, now 10 percent. In fact, most analysts expect the rate to keep rising for months and to remain close to 10 percent through year's end.

To drive down the jobless rate by just 1 percentage point this year, the economy would have to grow by 5 percent for the whole year. No one thinks that will happen. Until companies step up hiring and raise pay, consumers will feel squeezed. For all of last year, workers' compensation rose by the smallest amount on records going back more than a quarter-century.

"Consumers are walking, not running," said Ken Mayland, president of ClearView Economics.

Continued at Yahoo Finance…

Geithner: 'The Credit Crunch is Not Over'

At a small business finance forum in Washington, Timothy Geithner reminded small businesses that the credit crunch is not over yet and warned listeners not to get too far ahead of themselves. He went on to explain that while many big businesses are already seeing profits, small business owners still have more recovering to do. Checkout the following CNNMoney.com article on the event below.

One day after Goldman Sachs' CEO apologized for his bank's role in the financial meltdown, Treasury Secretary Geithner called on the nation's financiers to step up and do more to fix the damage they helped cause.

"This credit crunch is not over," Geithner at a small business financing forum in Washington hosted by the Treasury. "It may feel dramatically better for large companies, but it is not over for small businesses across the country."

The nation's banking system was stabilized with taxpayer dollars, and Geithner said he holds the biggest banks accountable for passing the torch from Wall Street to Main Street.

"Banks bear some responsibility for the extent of the damage caused by the crisis," he said. "And they carry a substantial obligation to help our communities get back on their feet."

Geithner and an assortment of top Washington officials, including Small Business Administrator Karen Mills, met Wednesday with a gathering of bankers and small business owners to address the credit crunch that has plagued small business owners for more than a year. Frozen out by banks unwilling to make risky lending bets on startups and small companies, the nation's 6 million small employers are struggling.

Continue reading at CNN Money.com…

Questions for the Tax Lady: November 16th, 2009

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: Are Veterans exempt from paying property taxes?

Answer: It depends. There are a handful of different property tax exemptions available to Veterans – including the Veterans' Real Property Tax Exemption, the Cold War Veterans Exemption, and Alternative Veterans Exemption – which can exempt a Veteran from paying property taxes. However, some cities and county government agencies have opted out of the programs. To find out if you, or a Veteran you know, qualify for a property exemption then you should check with your local tax department. For more information on the topic, checkout this blog entry on the Tax Help Blog: Top 10 Tax Tips for Veterans.

Question #2: If I lose money on the sale of my property can I deduct it amount on my tax return?

No, losses from the sale of a personal residence cannot be used to reduce your taxable income. However, if the property was an investment and you did not live in it, then you may be able to claim a capital loss. Be sure to speak with a qualified tax professional before taking a capital loss deduction.

Obama Calls for $250 Payments to Seniors

President Barack Obama is asking congress to pass a new plan to give senior citizens $250 payments next year to compensate for not receiving any increase in their social security payments. For the first time since 1975, there will be no increase to the amount recipients of social security checks receive since it is pegged to the inflation rate, which was negative this year.

"Even as we seek to bring about recovery, we must act on behalf of those hardest hit by this recession," Obama said in a statement. "This additional assistance will be especially important in the coming months, as countless seniors and others have seen their retirement accounts and home values decline as a result of this economic crisis."

Obama's proposal is similar to several bills in Congress. The $250 payments would also go to those receiving veterans benefits, disability benefits, railroad retirees and retired public employees who don't receive Social Security. Recipients would be limited to one payment, even if they qualified for more.

The White House put the cost at $13 billion. Obama said he would not allow the payments to come out of the Social Security trust funds, further eroding the finances of the retirement program. Social Security already is projected to pay out more in benefits than it collects in taxes in each of the next two years.

Continue reading at APnew.MyWay.com…

FHA Shortfall Seen at $54 Billion May Lead to Bailout

The Federal Housing Administration may be asking taxpayers for a bailout within the next year, claims former Fannie Mae executive Edward Pinto. He asserts that the program will incur over $54 billion in unexpected losses in the next twelve months. For those of you who may not be familiar, the Federal Housing Administration helps finance mortgages with low down payments, but had been struggling to keep up with risky loans in an unstable housing market. Check out the following story about the announcement courtesy of Bloomberg.com.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.

The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The jump has left the agency backing risky loans and exposed to fraud in a “market where prices have yet to stabilize,” he said.

Representative Scott Garrett, a New Jersey Republican, introduced legislation this month to boost the FHA’s minimum down payment to 5 percent from 3.5 percent to help shore up the agency’s insurance fund, a move that could add to the housing market’s burdens as it struggles to recover.

Questions for the Tax Lady: September 21st, 2009

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: If I sell my house at a loss, can I deduct that amount on my income tax return?

No, you cannot deduct the loss of funds from the sale of a personal residence. However, if the home was an investment property, and not your principal place of residence, then you may be able to deduct a capital loss. However, I recommend you have a tax professional review your finances before taking such a deduction.

Question #2: I ran out of time to trade in my car before the Cash for Clunkers program expired. Do you know it will ever come back?

Although many people have praised the Cash for Clunkers program, it does not look like it will get another extension. The program was successful in increasing auto sales, and provided a decent economic boost, but there has been no serious mention of bringing it back. However, there are other similar programs such as “dollars-for-dishwashers,” that are likely to begin in the next few weeks.

Taxpayers Face Heavy Losses on Auto Bailout

A new report coming from a congressional oversight panel suggests that a majority of the $81 billion given in the auto bailouts last year may never get paid back. This means that U.S. taxpayers will have taken a decent loss in order to keep the American auto industry from collapsing.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

"I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."

The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.

For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.

Continued at APNews.MyWay.com…

College Saving: How To Avoid Losses, Save On Taxes

It is back to school time for kids and college students alike. As such dozens of news outlets are running stories on saving for college. Yesterday, I came across this interesting article from Philly.com explaining how to save for college while avoiding losses. Check out the text of their article below, or for more information your can read this article on the RDTC Tax Help Blog titled Top 10 Tax Planning Tips for Families with Children.

As parents of young children see teenagers head off to college for the fall semester, they may be fretting about how they'll be able to meet the rising cost of tuition when their time comes.

That includes looking at 529 plans that offer special tax benefits on college savings and are named after the Internal Revenue Service code that regulates them. Accounts can be set up through a state agency or pre-paid university and college programs.

Let's look at the tax advantages, the home-state factor and the best way to protect the account from market losses.

Q: What are the tax advantages of a 529 plan?

A: Earnings in 529 plans are not subject to federal tax, and in most cases you do not pay state taxes as long as you use the money for eligible college expenses. That typically means tuition, room and board, and mandatory fees. Books and computers also qualify when they are required.

Money taken out of the account for reasons other than college expenses will be subject to income tax and a 10 percent federal tax penalty.

The Securities and Exchange Commission offers an introduction to 529 plans with some basic information on taxes and other issues on its Web site at: http://www.sec.gov/investor/pubs/intro529.htm.

Continue reading at Philly.com…

College Saving: How To Avoid Losses, Save On Taxes

It is back to school time for kids and college students alike. As such dozens of news outlets are running stories on saving for college. Yesterday, I came across this interesting article from Philly.com explaining how to save for college while avoiding losses. Check out the text of their article below, or for more information your can read this article on the RDTC Tax Help Blog titled Top 10 Tax Planning Tips for Families with Children.

As parents of young children see teenagers head off to college for the fall semester, they may be fretting about how they'll be able to meet the rising cost of tuition when their time comes.

That includes looking at 529 plans that offer special tax benefits on college savings and are named after the Internal Revenue Service code that regulates them. Accounts can be set up through a state agency or pre-paid university and college programs.

Let's look at the tax advantages, the home-state factor and the best way to protect the account from market losses.

Q: What are the tax advantages of a 529 plan?

A: Earnings in 529 plans are not subject to federal tax, and in most cases you do not pay state taxes as long as you use the money for eligible college expenses. That typically means tuition, room and board, and mandatory fees. Books and computers also qualify when they are required.

Money taken out of the account for reasons other than college expenses will be subject to income tax and a 10 percent federal tax penalty.

The Securities and Exchange Commission offers an introduction to 529 plans with some basic information on taxes and other issues on its Web site at: http://www.sec.gov/investor/pubs/intro529.htm.

Continue reading at Philly.com…