Refund Anticipation Loan Alternatives

A few weeks ago I posted a blog entry regarding the IRS’s announcement that they would suspend the availability of the debt indicator next tax season. This indicator was used to identify whether an individual taxpayer would need to have a portion of their refund withheld because of unpaid taxes or other debts, such as unpaid child support or delinquent federally funded student loans.

However, the indicator also enabled tax companies to issue refund anticipation loans (RALs). These refund advances have come under fire over the past few years, because of excessive fees, and some unethical tax preparation offices that target low income taxpayers. Without the debt indicator, tax preparers will not be able to offer RALs.

Since RALs will no longer be available to taxpayers I decided to put together the following list of alternatives. By planning ahead you can prevent yourself from getting into a situation next April where you need extra money in a rush.

File Early

You can file your tax return as soon as tax season begins mid January. If you need your refunds quickly, then you should try to file as early as possible – while making sure you have all the proper documentation. As you get closer to the deadline IRS offices become swamped and it will take longer for them to process your return, and issue a refund. If you need your return quickly, then you should file as early as possible.

E-File your Return

Stop wasting time with paper returns, if you do not already e-file your tax return, then I highly recommend doing so this upcoming tax season. You will get your refund almost as fast as you would with a RAL, but without paying a penny in interest. According to the IRS, paper filers can expect to wait eight to ten weeks for a refund. E-filers, on the other hand, will receive their refunds in only a couple of weeks. Additionally, the likelihood of an error is significantly reduced when you e-file.

Direct Deposit

It is also a good idea to have your refund deposited directly into your bank account. Even if you do not e-file your return, you should still consider opting for direct deposit. When the IRS issues a check, it can take weeks to reach your mailbox. However, when you have the refund direct deposited it will show up in your bank account in as few as ten days.

Visit a Free Tax Preparation Office

If you are worried you might not be able to pay to have your tax return prepared without a RAL, you should consider visiting one of the IRS’s free tax return preparation sites offered by the Volunteer Income Tax Assistance Program (VITA) and the Tax Counseling for the Elderly (TCE) Program. In order to be eligible for the free service, you will need to meet certain income requirements. For more information visit this page on IRS.gov.

Payday Loans

Just in case you do find yourself in a situation where you have no other option, you can always consider a payday advance loan. In order to qualify for an advance you will usually only need a steady job, and proof of income. However, you should always use extreme caution with payday loans, as they are notorious for very high fees and interest rates.

White House Pushes to Extend College Tuition Credit

The popular American Opportunity Tax Credit helped an estimated 12 million college students pay for their education. The popular credit is set to expire at the end of the year, however the President has suggested extending the credit to continue helping students who cannot afford to pay for college.

CNN Money.com reports:

The American Opportunity Tax Credit helped soften the blow of college tuition for more than 12 million students last year, but it's due to expire at the end of this year unless President Obama gets his way.

To remind Congress of the importance of extending the credit, top government advisers spoke to reporters Wednesday about why they believe the break is worth keeping around.

"[Obama] believes that it is important for this to be extended and for families to have the certainty and confidence that this [credit] will be there when they are making the choices about sending their children to college," said Gene Sperling, Counselor to the Treasury Secretary.

The tax break, introduced under the government's 2009 Recovery Act and applicable to 2009 or 2010 college tuition, expands the existing Hope Credit to include more lower- and higher-income Americans.

Unlike the Hope Credit, the AOTC is also partially refundable and covers more of the expenses associated with sending a child to college, like textbooks and computers. It is available for the first four years of post-secondary education, up from two years under the Hope Credit.

Read more here

IRS Releases Draft W-2 Form for 2011; Announces Relief for Employers

According to a new press release, the IRS posted a draft Form W-2 for 2011, to help employers and employees confused about looming changes related to health care reform. Employers use the form to report wages and employee tax withholding.

The IRS also announced that it will defer the new requirement for employers to report the cost of coverage under an employer-sponsored group health plan, making that reporting by employers optional in 2011.

The draft Form W-2 includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. The Treasury Department and the IRS have determined that this relief is necessary to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with the new reporting requirement. The IRS will be publishing guidance on the new requirement later this year.

Although reporting the cost of coverage will be optional with respect to 2011, the IRS continues to stress that the amounts reportable are not taxable. Included in the Affordable Care Act passed by Congress in March, the new reporting requirement is intended to be informational only, and to provide employees with greater transparency into overall health care costs.

As Miners Soar, Dollar Slides

From Forbes.com:

As trapped Chilean miners were rising one by one to safety in a dramatic rescue attempt on Wednesday, shares of large mining companies were also on the ascent in London. But while people around the world marvelled at the celebrations that greeted the miners in South America, investors in Europe picked up the likes of Xstrata and Fresnillo for the more sobering reasons of strong production figures, higher commodity prices and (indirectly) actions by the U.S. Federal Reserve.

The Mexican miner Fresnillo was up by 3.2% or 40 pence to £12.81 in early afternoon trading after it reported a record output of silver and gold in the third quarter and said it was on track to meet its production targets.

Xstrata gained 3.9% to trade at £12.93 while Anglo American 3.6% to £28.35. Xstrata said it planned to restart its Falcondo ferro-nickel facility in the Dominican Republic, and was targeting 50% of capacity by March 2011.

Gold futures were higher, with spot gold trading hands at $1,358 per troy ounce, up $7.80 from its close on Tuesday in New York, amid rising expectations that the Federal Reserve would restart its quantitative easing program to boost the American economy.

The dollar fell against the euro, with the European single currency buying $1.396, up from $1.393 late Tuesday in New York. The dollar has weakened in response to expectations of a bigger Fed balance sheet, which has in turn made commodities like gold and oil more attractive.

U.S. States, Cities Seek Voter Approval for $17 Billion of Debt

States and municipalities across the country are asking voters to approve $16.8 billion in bonds this upcoming election on November 2nd. According to Business Week.com, this represents the lowest amount during a congressional year general election since 1996. Check out a snippet of their story below.

U.S. states and municipalities from Maryland to Alaska will ask voters to approve $16.8 billion in bonds Nov. 2, the lowest general-election amount in a congressional year since 1996, Ipreo Holdings LLC data show.

Lawmakers in Alaska seek to issue $997 million of bonds, the most of any ballot question this year, to fund mortgages for veterans, while voters in Washington state will consider $505 million for energy projects at schools, according to New York- based Ipreo, a market-research company. Issuers asked for authority to borrow almost $67 billion in the general election two years ago and $79 billion in 2006, the largest amounts since 1946, according to data compiled by Thomson Reuters.

In 1996, voters considered $16.6 billion in bonding authorizations, Thomson Reuters data show. General-election ballots typically contain more debt in even years, when congressional elections are held, than in odd-numbered ones. In 2009, governments sought approval for $9.8 billion.

“The public is getting nervous about all the debt being accumulated in this country,” said John Matsusaka, president of the Initiative & Referendum Institute at the University of Southern California in Los Angeles. “The appetite has been diminished.”

The $67 billion sought two years ago was driven by California, which isn’t putting any statewide bond questions before voters on Nov. 2.

Continue reading at Business Week.com…

Procrastination Doesn’t Pay

As the October 15th, final filing deadline looms, people are scrambling to file their tax returns. Luckily, with e-filing options, we can wrap it up at 11:59 pm on October 15 and still file on time, right? Oh, the perils of procrastination.

We all know the risks of waiting until the last minute – anything could go wrong and you have no time to fix it. What if your computer dies? Or your internet goes out? Or you just can’t find that one last receipt? Remember in 2007 when tax-preparation software form Intuit, TurboTax and a few others all malfunctioned? A million things could derail the tax filing train. And just to mix things up a little this year, the IRS is having technical problems of their own.

As Kay Bell of Don’t Mess With Taxes reports, the IRS shut down e-filing system for a few days to run some standard tests. Only, when they tried to start it up again, they couldn’t get the system back up and running. The IRS says this shouldn’t cause a problem as their older backup system should just pick up the slack. But, are you willing to risk late-filing penalties?

Perhaps this can be a little object lesson in proper planning so you’re not rushing to file?
Good luck to all those taxpayers who filed for extensions, let’s hope the IRS fixes this problem and you file with no trouble at all.

(hat tip: Don’t Mess With Taxes)

How Much of My Savings Should Go to Annuities?

Prioritizing your income and deciding how much should go where can be difficult, especially in today’s economy. One of the toughest decisions many Americans face is how much of your savings or 401(k) should go towards annuities. CNN Money.com recently published an article on this topic, in response to a question from an Ohio taxpayer. You can find a section of their answer below, or check out the full text at CNN Money.com.

Question: What portion of my 401(k) and savings should I move to annuities? -- Jack S., Alliance, Ohio.

Answer: That depends. Many annuities have such onerous fees and other drawbacks that you're better off avoiding them altogether.

There's one type, though, that I've long believed can play a useful role in some retirement portfolios. I'm talking about immediate income annuities, where you turn over a lump sum to an insurance company and in return receive guaranteed monthly checks for life, regardless of how the economy and markets fare.

But while most people should at least consider devoting some money to such an annuity at retirement, don't assume that buying one is the best move for you.

For one thing, retirees automatically qualify for an immediate annuity of sorts -- Social Security, which provides guaranteed, inflation-adjusted lifetime payments. If you'll be collecting a pension on top of that, you may very well have the assured income you'll need to cover enough of your expected outlays in retirement without an annuity.

What's more, if you have large balances in your 401(k)s and other retirement accounts, you might be able to draw enough from them with little risk of outliving your assets.

Continue reading at CNN Money.com…

How to Claim a Charitable Contribution Deduction

Last week my team put together another great tax tip video. In this new episode our hosts, Edward and James, sat down to discuss the charitable contribution deduction. You can watch the embedded video below or visit my YouTube channel for more great tax videos.

Savings Experiment: Carpooling

From WalletPop.com:

Everyone knows that carpooling can save energy and it diminishes traffic. When many people use only one vehicle to get to the same place, fewer resources are used up. But does the money it saves passengers really make much of a difference to your pocketbook?

According to the AAA, the average American one-way commute to work is 16 miles, so most of us travel an average of 32 miles a day just to get to and from our jobs. Using the commute computer at RideFinders.com, a ride-sharing portal, we found a savings of more than 50% for people in car pools.

Assuming a vehicle costs 59¢ a mile to operate five days a week (a typical figure under stop-and-go conditions over 15,000 miles a year), we can do a little math and find that when split equally among all members of the car pool, the per-person price for fuel, car maintenance, paring and tolls plunges by half or more compared to solo commuting.

That car will cost about $4,680 a year to get to and from work. Start splitting that among passengers, and the per-person cost plummets. For two people, the per-passenger savings is $2,340 per year. Split between three people, the per-person savings is $3,120 per year; instead of shouldering the whole $4,680 cost, each person in a three-person pool pays only $1,560.

Carpoolers also can become productive during a significant portion of their day. Instead of manning the steering wheel every day, the passengers in a car pool can spend their time doing more productive things, such as reading the news, writing, catching up on books, texting family -- for a 45-minute commute, that's like getting another hour and a half of your life back when you're not driving.

What Happens When Cities Go Broke?

In a new article on Forbes.com, author Jonas Elmerraji examines the possibility of a city or municipalities filing for bankruptcy. It may seem strange, but just two years ago Vallejo, CA filed for bankruptcy. With the economy stalling, we may just see more cities looking toward bankruptcy to restructure debts and obtain more attractive financing.

Forbes.com reports:

In today's shaky economic environment, bankruptcy has become a dreaded--yet not all that uncommon--phenomenon. But what happens when it's not a person or company going broke, but an entire city? With added emphasis on government finances in 2010, it's a question that more and more citizens are beginning to ask themselves.

Municipal and state bonds are investments that touch a huge percentage of the investing public. And as we're seeing right now in Europe, there's no limit to the size to which government budget problems can grow.

Here's a look at what it means for a city--or a county or state--to go bankrupt, including the fallout for its citizens and stakeholders.

New Kid on the Block

Bankrupt cities are a relatively new phenomenon. Until the 1930s, it was legally impossible for U.S. cities to declare bankruptcy due to the absence of any municipal bankruptcy legislation. That changed in 1934 when the Bankruptcy Act was modified to include municipalities, a change made in response to the growing number of insolvent towns in the U.S. during the Great Depression.

After a number of evolutions and changes, the rule emerged as today's Chapter 9 of the U.S. Bankruptcy Code. Chapter 9 bankruptcies are available exclusively to municipalities. But there are some significant differences between a city's Chapter 9 bankruptcy and the much more common personal and business bankruptcies that take place on a daily basis.

Chapter 9 bankruptcies aren't designed to extinguish excessive debts. Instead, their purpose is to aid in reorganization by allowing a city to break untenable contracts and obtain more attractive financing. That's a good thing for a city's bond holders, who would typically see their assets at risk in a corporate bankruptcy.

Read more here

FDIC May Seek More Than $1 Billion From Failed-Bank Executives

The Federal Deposit Insurance Corp. is going after over 50 failed bank officers and directors, to collect losses caused by the financial crisis. The agency is hoping to recoup more than $1 billion from credit crisis losses.

Bloomberg.com reports:

The lawsuits were authorized during closed sessions of the FDIC board and haven’t been made public. The agency, which has shuttered 294 lenders since the start of 2008, has held off court action while conducting settlement talks with executives whose actions may have led to bank collapses, Richard Osterman, the FDIC’s acting general counsel, said in an interview.

“We’re ready to go,” Osterman said. “We could walk into court tomorrow and file the lawsuits.”

The FDIC, which reviews losses for every bank failure, has brought only one case against officers or directors tied to recent collapses -- a suit filed in July seeking $300 million in damages from four executives of IndyMac Bancorp Inc.

When a bank fails, the agency’s investigators take about 18 months to complete their autopsies, meaning most of the probes stemming from the financial crisis are ongoing, Osterman said.

Continue reading here…

Bank Of America Halts All Foreclosure Sales

From CNNMoney.com...

Bank of America is halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process, the company announced Friday.

The announcement came a week after the nation's largest bank said it was freezing home foreclosures in 23 states where foreclosures must be approved by the courts. Friday's announcement by Bank of America extends a review of foreclosure documents to all states, regardless of the required legal processes.

"Our ongoing assessment shows the basis for our past foreclosure decisions is accurate," said Bank of America (BAC, Fortune 500) spokesman Dan Frahm in an e-mailed statement. "We continue to serve the interests of our customers, investors and communities."

The announcement came two days after JPMorgan Chase (JPM, Fortune 500) said it will also halt foreclosures for about 56,000 homeowners after learning that its employees may have approved foreclosures without personally reviewing loan files.

JP Morgan Chase had no comment on Friday's announcement by Bank of America.

Five myths about TARP, according to Treasury Secretary Tim Geithner

The Troubled Asset Relief Program officially ended last week, and many Americans are wondering about how the money was spent. To clear up misunderstandings surrounding the program, Treasury Secretary has personally penned an article for the Washington Post on 5 common myths about TARP. You can find a segment of Geithner’s article below.

Born at the peak of the financial crisis in 2008, the Troubled Asset Relief Program expired last week, ending what was perhaps the most maligned yet most effective government program in recent memory. Despite new evidence about the low ultimate cost and positive impact of the TARP, there is still a chasm between the perceptions of the program and its overwhelmingly favorable effect on the U.S. economy.

The TARP was doomed to be unpopular from inception, because Americans were rightfully angry that the same firms that helped create the economic crisis got taxpayer support to keep their doors open. But the program was essential to averting a second Great Depression, stabilizing a collapsing financial system, protecting the savings of Americans and restoring the flow of credit that is the oxygen of the economy. And it helped achieve all that at a lower cost than anyone expected.

As we put the TARP to rest, let's also put to rest some of the myths about the TARP.

The TARP cost taxpayers hundreds of billions of dollars.

1. The true cost of the financial crisis will always be measured by the devastating losses of jobs, homes, businesses, retirement savings and fiscal revenues. But the cost of the TARP, which succeeded in reducing the overall economic damage, will be considerably lower than once feared. In fact, the direct budget cost of the program and our full investment in the insurer AIG is likely to come in well under $50 billion -- $300 billion less than estimated by the Congressional Budget Office last year. And taxpayers are likely to receive an impressive return (totaling tens of billions) on the investments made under the TARP outside the housing market.

Continue reading at Washington Post.com…

California Senate Approves a Budget Plan

100 days after the constitutional deadline to pass a budget, the California Senate finally came to an agreement and sent a budget to Governor Arnold Schwarzenegger. According to News10.com, the vote came after a long night of floor votes and party caucuses. However, not everyone is happy about the new changes and spending cuts it includes.

"This budget has too much spending, which could make next year's deficit even worse. I'm voting no, "said Sen. Jeff Denham, (R) Merced.

Democrats say the spending plan is fair.

The state Assembly passed the main bill Thursday afternoon in a legislative package aimed at ending California's record budget impasse and closing a $19 billion deficit. Trailer bill list

Lawmakers voted 54-1 Thursday in favor of the measure, SB970, getting just enough support in the 80-member house to reach the required two-thirds vote threshold.

The budget package contains no new taxes or fees, and just 40 percent of the gaping deficit would be closed by additional spending cuts. The rest would be addressed through rosy revenue assumptions and creative accounting.

Questions for the Tax Lady: October 11th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply. I will do my best to get an answer for you!

Question #1: Is it better, tax-wise, for married couples to divorce and cohabit, or is this an urban legend?

Answer: Ah, the marriage penalty, this myth continues to circulate even though it’s largely untrue. Years ago, if both spouses worked, it may have been more beneficial to be divorced and filing taxes separately.

However, years of tax adjustments have removed the marriage penalty from all but the most unique tax circumstances. By and large, the tax code allows married couples equal benefits to single people. For example, the standard deduction for filing single is $5,700. For a married couple filing jointly, the standard deduction is $11,400. Exactly double the amount for single.

Don’t go rushing to a divorce lawyer to save money on your taxes. If you really feel like filing jointly is costing you more money, talk to a tax professional and see if you would do any better by filing separately.

Question #2: I filed an automatic six month extension last April, but have not finished preparing my return yet. Is it possible to request another extension?

Answer: Unfortunately for you, the six-month extension is the end of the line, tax-wise. (Unless of course you are living out of the country). October 15 is the very last deadline before the IRS will start slapping you with failure to file penalties. If you are struggling with preparing your tax return, you may want to enlist the aid of a qualified tax professional.

My recommendation would be to do whatever it takes to get that return mailed or electronically submitted by midnight, October 15. Then immediately start getting ready for the next filing season so you can avoid this problem next year.

No Cost-Of-Living Raise This Year For Seniors

Although the Social Security Administration has informed Congress that they will not make an official announcement about cost of living increases until later this week, experts are widely expecting the agency not to recommend any adjustment to benefits. The administration has to wait until after October 15th to make a final decision so they can review the September Consumer Price Index (CPI).

According to Huffington Post.com, the CPI would have to show a remarkable uptick in price to effect the SSA's decision not to provide the annual cost of living adjustment (COLA) which, by statute, is based on the rate of inflation.

If there is no measurable increase in the cost of living, then there is no adjustment, a rationale that unsurprisingly placates roughly zero beneficiaries.

Social Security recipients eagerly anticipate the annual increase. Touching a senior's COLA is a political third rail. Florida GOP challenger Dan Webster found that out the hard way when he suggested the federal government "take back some of the COLAs for the entitlement programs." Under withering fire from the elderly, he quickly backed off the suggestion, saying that he meant his comments to apply to federal workers -- who, of course, are not paid by "entitlement programs."

The backtracking largely got him out of the jam, but Democrats will be in their own fix when the announcement is made public. The COLA announcement will come as little surprise, since inflation has remained relatively low all year as a result of Federal Reserve efforts.

Republicans Accuse Dems of Using IRS Audits to Bully Conservative Groups

From TheBlaze.com:

Congressional Republicans are accusing Democrats and administration officials of leaking privileged IRS information and using invasive audits to bully conservative groups, the New York Times says, and they are not happy about it.

The first charge by Republicans Senators centers around a senior Obama administration official who may have improperly accessed the tax records of Koch Industries, an oil company whose owners are major conservative donors, while the second charge lambastes Senator Max Baucus (D-MT) for scoping the funding activities of historically conservative tax-exempt groups.

According to the Times, the Treasury Department has opened up an investigation regarding allegations by Sen. Chuck Grassley (R-IA)* and six other Republican senators who claim a senior administration official disclosed confidential taxpayer information regarding Koch Industries — whose owners are major conservative donors — during a conference call with journalists.

During that call, the official pointed to Koch Industries as an example of “multibillion-dollar businesses that are structured as partnerships in ways that allow them to avoid paying sizable corporate taxes.”

Important Tax Deadline Approaching

The deadline for taxpayers who filed a request for an automatic extension is only a few days away (October 15th), and if you have not yet net filed your return then you should do so as soon as possible. However, Friday is also a deadline for thousands of nonprofit organizations at risk of losing their tax-exempt status.

SV Herald.com:

“The Oct. 15 deadline is particularly important this year because it’s the last chance for many small charities to comply with the law under the one-time relief program the IRS announced in July,” said IRS commissioner Doug Shulman. “And as always, it’s an important deadline for taxpayers who took an extension to file their returns.”

Don’t miss your 1040 deadline

The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers can wait until after Oct. 15 to file, including those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.

The IRS encourages taxpayers to e-file. E-file with direct deposit results in a faster refund than by using a paper return. Electronic returns also have fewer errors than paper returns. Oct. 15 is the last day to take advantage of e-file and the Free File program.

Read more here

What Banks Say About The Economy

Although the economy continues to struggle, and unemployment numbers continue to increase, financial institutions are showing profits. This suggests the worst of the credit crisis is over, as many banks are charging less to cover bad loan losses. Read more from CNNMoney.com.

As the economy goes, so goes the financial sector, which explains why bank shares have taken a hit ever since fears of another slowdown emerged. But you can't just look at stock prices. You have to weigh the performance of the underlying businesses. When you do, you may be in for a bit of a surprise.

With unemployment about as high as it's been in 30 years and the nastiest real estate bust in almost a century still playing out, you'd think that big banks would be having a rough time making money, right?

Actually, they're pretty much printing profits. The big four -- Wells Fargo, Bank of America, Citi-group, and J.P. Morgan Chase -- collectively earned almost $14 billion in the second quarter.

The good news: Fewer deadbeat borrowers

This is a reflection that banks are having to charge off less to cover bad loans, which suggests the worst of the credit mess is really behind us. Wells recently trimmed its loan-loss reserves by $500 million, which went straight to its bottom line. Over the next few years, it could release as much as $11 billion more.

Another plus for banks: Funding costs are incredibly low right now. While you may be frustrated with the paltry interest rates you're getting on your CDs, these low rates are manna from heaven for banks.

Continue reading at CNN.com…

Late Back-To-School Shopping Lifts Retail Sales

During times of economic struggle it is not uncommon for new consumer trends to surface, the latest of which is late bargain shopping. Retailers saw stronger-than-expected sales in September as shopping held out for back-to-school clearance bargains. This is a trend that many expect to be repeated during the holiday season.

Reuters.com reports:

Department stores and luxury chains also posted forecast-beating results, helping push retail shares higher.

But retail experts warned that shoppers are still cautious as they draw up budgets for the holiday season, as unemployment remains high. That means they are likely to hold out for discounts again even if overall spending rises from 2009.

"It was a late back-to-school season that started slowly while shoppers waited for discounts," said David Bassuk, managing director at AlixPartners' global retail practice. "And it looks like they'll do the same for the holidays."

U.S. same-store sales rose 2.8 percent, according to Thomson Reuters data which tracks 28 top chains, beating analysts' estimates for a 2.1 percent increase. It was the 13th straight month of sales gains.

Read more here

Baseball's Best Playoff Players For The Buck

From Forbes.com:

High-performing bargain players like Joey Votto and Johnny Gomes are the reason the Reds are in the postseason.

A winning baseball roster isn't put together by money alone. Cash helps, but for most ball clubs, it's limited. And that requires a front office that's savvy enough to find bargains.

This year's eight-team playoff field includes payrolls from all over the spectrum: High (Yankees, Phillies), middle-high (Giants, Twins), middle-low (Braves, Reds, Rays) and low (Rangers). All but the Yankees and Phillies have one common ingredient: at least one player on our list of top performers for the buck among this year's playoff participants.

The most cost-efficient player in the postseason, Reds' first baseman Joey Votto, is a strong favorite for the National League Most Valuable Player Award after hitting .324 with 113 RBI, while leading the league in on-base percentage and slugging percentage. Votto's 2010 salary: $525,000.

To rate players' contributions on the field, we used a method popularized by Baseball Prospectus, Value Over Replacement Player (VORP), which calculates how many net runs a player is responsible for producing for his team relative to a hypothetical "replacement" player assumed to perform at an average rate for minimal cost. We then factored in salary to determine players' performance per dollar. Votto's VORP score of 78.2 was fourth-highest in the majors in 2010, and easily the best on a per-cost basis among postseason players.

Obama Seeks To Partner Businesses, 2-Year Colleges

In a new attempt to improve job growth in the country, President Obama is looking to partner companies and labor unions with two-year colleges. The proposal comes after Congress scaled back the President’s attempt to pump billions of dollars into community colleges.

According to USA Today, Obama is also asking public-private partnerships and philanthropies to help the schools produce a well-educated workforce.

On Monday, he announced an initiative through which companies, labor unions and two-year colleges in 50 states would collaborate to improve job training and workforce development.

Today, he is scheduled to address business leaders, educators, and others at a White House summit aimed at better aligning learning with workforce goals.

"We want to make it easier to join students looking for jobs with businesses looking to hire," Obama said Monday at the start of a meeting with his economic recovery advisory board. "We want to put community colleges and employers together to create programs that match curricula in the classroom with the needs of the boardroom."

Continue reading at USA Today.com…

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Temp Hiring Is Back. Is a Jobs Recovery Next?

Temporary job hiring is on the rise, which has some assuming that job recovery is on the way. However, data is showing that the unemployment problem is not likely to improve anytime soon.

CNNMoney.com reports:

Jobs in the temporary services industry are up 22.1% year-over-year, according to the Labor Department. But the overall job market expanded only 0.2% during the same period. And the outlook is still pretty grim.

"By this stage, we would have expected to see businesses add on larger numbers of permanent workers," said Richard Wahlquist, president and CEO of the American Staffing Association.

The problem is that businesses are still too scared to hire. Mixed economic data, sweeping new financial and health care reforms and uncertainty about the expiring Bush tax cuts, have all left employers feeling jittery about their future business prospects, Wahlquist said.

Read more here

Black Friday 2010: Buy American

As our economy continues to struggle, many Americans are looking for ways to help. According to WalletPop.com, one of the best ways consumers can help with economic recovery is to ensure items you buy are made in the country. Especially as we get closer to the Black Friday holiday, where many taxpayers do most of their holiday shopping. Check out the following article from WalletPop.com.

It's the rare story about retailing that doesn't garner reader comments about where the products are made. It's also the rare retailer that makes the effort to stock only American made goods. Deborah Leydig is one of those retailers. Her Barrington, Ill. business stocks exclusively products made in this country, something that has become increasingly difficult to do.

"Deborah Leydig is in search of a can opener manufactured in the U.S.," opens a story in the Chicago Tribune. "The artist-turned-merchant had been stocking the iconic Swing-A-Way can opener, but had to stop this year when production moved overseas."

For decades, American companies have been outsourcing labor and relying on foreign production to stabilize businesses at home. Over time, it incurs cost to the environment, negatively affects our employment rates, and discredits our claims of sustainability. In a utilitarian sense, trade and commerce with other economies are of course necessary, but, is it healthy for us to rely on foreign systems? Especially when we are so proud of being self-reliant.

Leydig is just one example of a well-intentioned business owner trying to save jobs in the U.S., and she is not alone. Conscious consumerism is on the rise. Americans are buying environment-friendly goods, fair-trade products, and locally grown or made food at increasing rates.

Continue reading at WalletPop.com…

IMF Revises U.S. Growth Down, Jobs Picture Bleak

From Reuters.com:

U.S. economic growth will be much weaker this year and in 2011 than previously thought and that dims hopes for bringing down a very high unemployment rate anytime soon, the International Monetary Fund said on Wednesday.

In a sober assessment of the U.S. outlook, the IMF pulled down its estimate for 2010 growth to 2.6 percent from the 3.3 percent it published in July and said gross domestic product or GDP will expand 2.3 percent in 2011 instead of 2.9 percent.

"The most likely prospect for the U.S. economy is for a continued but slow recovery, with growth far weaker than in previous recoveries, considering the depth of the recession," the IMF said in its World Economic Outlook published ahead of weekend semi-annual meetings of it and the World Bank.

The IMF said the main reason the U.S. recovery is so weak is that consumer spending is sluggish and suggests it is little wonder that is the case. Falling home prices have reduced household wealth, 9.6 percent of the workforce is unemployed, banks won't lend and people are scared into saving.

It says the gap between actual and potential economic output will be a lingering drag on the pace of recovery.

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…

AT&T to Pay $300 Million to IRS

AT&T Inc. has agreed to pay the Internal Revenue Service a huge settlement related to deductions from 2008 and 2009. The two parties reached the settlement earlier this week, according to a regulatory filing with the Securities and Exchange Commission.

The Dallas Business Journal reports:

AT&T will pay the IRS $300 million during the fourth quarter of 2010. This payment settles a dispute over certain disallowed deductions taken in 2008 and 2009 related to a restructuring of the company’s wireless operations.

Dallas-based AT&T (NYSE: T) is a communications holding company. AT&T has wireline and wireless operations in San Antonio.

Campaign Watchdogs Accuse Top Conservative Group of Violating Tax Laws

From WashingtonPost.com:

Two campaign-finance watchdogs asked the Internal Revenue Service on Tuesday to investigate Crossroads GPS, the big-spending conservative group supported by Republican guru Karl Rove, for allegedly violating U.S. tax laws limiting the political activities of nonprofit groups.

In a complaint filed with the IRS, Democracy 21 and the Campaign Legal Center say the group - an arm of the American Crossroads political committee - is using its nonprofit status to shield the identities of its wealthy donors.

The complaint says "the group was organized to participate and intervene in the 2010 congressional races while providing donors to the organization with a safe haven for hiding their role."

Jonathan Collegio, spokesman for American Crossroads and Crossroads GPS, said the GPS group "carefully follows all laws" governing nonprofit organizations.

"This is a baseless complaint, filed by a partisan group that files baseless complaints for its living," Collegio said.

IRS Answered Only 8.8% of 352,758 Telephone Calls From Deaf Taxpayers

According to a new report from the Treasury Inspector General for Tax Administration, the IRS exceeded toll-free telephone assistance goals, but provided the lowest level of service to deaf taxpayers since 2003. I have included a section of the report below (Toll-Free Telephone Access Exceeded Expectations, but Access for Hearing- and Speech-Impaired Taxpayers Could Be Improved), courtesy of the TaxProf Blog.

During the 2010 Filing Season, the IRS exceeded its key toll-free telephone assistance performance measurement goals. However, hearing- and speech-impaired callers that used the IRS Text Tele-typewriter/Telecommunications Device for the Deaf (TTY/TDD) telephone line experienced a low Level of Service and had difficulty reaching an IRS assistor...

The Level of Service for the TTY/TDD toll-free telephone line for the 2010 Filing Season was 8.8%, the lowest Level of Service since the 2003 Filing Season when it was 6.2%. The TTY/TDD product line Level of Service has consistently provided the lowest Level of Service among all of the Customer Account Services Enterprise product lines.

Questions for the Tax Lady: October 4th, 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: Roni, I have a small business with about a dozen employees. If I throw a Halloween party can I deduct the expenses of the necessary supplies? Like decorations and food?

Absolutely. Your employees work hard for you, and I believe that rewarding them with a holiday -- any holiday -- party goes a long way in keeping employees feeling appreciated and happy. According to the IRS, the costs of holiday parties for your employees are 100% deductible. This includes food, decorations, entertainment and more. Just make sure to keep the expenses reasonable for the size of your staff. If you only employ 5 people, a $10,000 deduction for holiday parties will likely raise eyebrows at the IRS.

Question: What is the standard mileage rate for this year? Has it changed from 2009?

The IRS mileage standards decreased this year, since gas prices have fallen. The various mileage rates for 2010 are shown below:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

These rates apply for cars, vans, pickups or even panel trucks.

Labels Matter to the IRS

Last week, I drafted a new article for WomenEntrepreneur.com on how to decide whether you should label your new employee as an independent contractor or a standard wage earning employee. You can find a snippet of the article below, or visit WomenEntrepreneur.com for the full text.

When business owners start looking into hiring employees, many are overwhelmed at how expensive it can be. Of course, you must pay this person a decent wage, but there are even more expensive costs: taxes.

And there are a lot of them to think about: unemployment taxes, payroll taxes (7.65 percent of the employee's total salary) and other taxes.

Some business owners try to sidestep these tax issues by hiring workers as "independent contractors." Sounds like a good idea, right? Independent contractors do the work but save you the hassle of payroll taxes, tax withholding and unemployment taxes. Hold on! Before you jump aboard the independent contractor bandwagon, you need to understand that the IRS has a say in the matter.

The IRS has very strict rules for determining who is an independent contractor and who is an employee. How you classify your workers revolves around three basic characteristics:

Behavioral control: Do you as the business owner have the right to determine how the work is done via training or instructions, for example?

Financial control: Do you as the business owner have the right to determine or control the financial or business aspects of the work?

Type of relationship: Do you or your workers perceive an employer-employee relationship?

Ex-Football Player Jailed for Punching His Accountant

From WebCPA.com:

Florida Circuit Court Judge John Brown sentenced the 57-year-old former NFL player to 11 months and 29 days in jail on Monday and ordered him to attend anger management classes, according to the Northwest Florida Daily News.

Bruner was found guilty of felony battery in August, but was acquitted of retaliating against a witness. His accountant, Wayne Montgomery, accused him of striking him several times during a meeting at Bruner’s home in July of last year. Bruner was upset that Montgomery hadn’t been able to do more to help him get a larger refund from the IRS, and he accused Montgomery of working for the accounting firm Carr, Riggs and Ingram, which Bruner had sued. Bruner is the former owner of an amusement attraction called Big Kahuna’s water park.

Montgomery testified that Bruner first waved a fake gun and yelled at another man who was present at the meeting. After the other man walked out of the room, Bruner took out his aggressions on his CPA, punching him in the eye, pushing him face down onto a recliner, and then punching him repeatedly in the head, neck and back.

Montgomery said that Bruner later called him in January at 4:38 in the morning and threatened him, “Battery, battery, battery. You just think battery. That was not battery. You ain’t seen battery. Next whipping I’m giving you real battery. I’m going to destroy you and your property in Alabama and Tennessee.”

The 3 Main Types of IRS Audits

Although the IRS performs over a million audits per year, not every one results in an in person review. In fact, the most popular type of audit is done by mail. The Roni Deutch Tax Center - Tax Help Blog posted a new entry explaining the 3 main types of audits. Check out a section of the article below, or click here for the full text.

Letter Audit

The letter audit is by far the most common type of IRS audit. Typically, letter audits are a simple request for more information, or a list of possible math errors. Some times the audit is just to inform you of a correction that has been made to your return, which can result in either a tax bill, or a larger refund. The IRS may ask you to supply them with a few documents or receipts, and you will be required to respond.

The IRS may take a while to process your response, and it could take weeks or even months before you hear back regarding the audit. With a letter audit you are not required to meet face to face with any IRS representatives. All correspondences can be completed through the mail.

Office Review

The second, and more intimidating type of IRS audit is the office review. You will be asked to meet with an IRS auditor at a place in close proximity to your home address. The representative will work with you to schedule a review at a time that is convenient for you, and you can feel free to ask to reschedule any appointment that might not fit into your schedule.

A Tax Cut Both Parties Should Love -- But Don't

Tax cuts and rebate checks to stimulate the economy have been discussed frequently in the media. However, some economists are now suggesting that a payroll tax holiday would be more effective. Even the nonpartisan Congressional Budget Office agrees that a payroll tax holiday would be more likely to increase consumer spending.

CNNMoney.com reports

The payroll tax is the amount paid by both employers and employees to fund Social Security. Each pay 6.2% of a worker's salary, up to the first $106,800 of income.

Because of that limit, the tax is one of the most regressive in place today, hitting the working poor and middle class much harder than the wealthy.

The nonpartisan Congressional Budget Office estimated earlier this year that eliminating payroll taxes was roughly two to four times more effective in spurring economic activity than a reduction in income taxes, the policy option that's getting most of the attention in Congress.

"This is a better tax cut than a general income tax cut," said Roberton Williams, senior fellow with the Tax Policy Center. He said getting more money to workers who earn less increases the chance that it will be spent rather than saved, a concept popular among Democrats.

Read more here

Taxpayers Face Oct. 15 Deadlines: Due Dates for Extension Filers, Non-Profits Approach

In their newest press release, the IRS reminded taxpayers of the upcoming October 15^th deadline for extension filers and non-profits. Taxpayers and non-profits that filed for an extension will have until then to file their late return.

“The Oct. 15 deadline is particularly important this year because it’s the last chance for many small charities to comply with the law under the one-time relief program the IRS announced in July,” said IRS Commissioner Doug Shulman. “And as always, it’s an important deadline for taxpayers who took an extension to file their returns.”

Don’t Miss Your 1040 Deadline

The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers can wait until after Oct. 15 to file, including those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.

The IRS encourages taxpayers to e-file. E-file with direct deposit results in a faster refund than by using a paper return. Electronic returns also have fewer errors than paper returns. Oct. 15 is the last day to take advantage of e-file and the Free File program.

Continue reading at IRS.gov…

Goodbye To TARP, But Good Riddance?

From Forbes.com:

The Troubled Asset Relief Program expires Sunday, meaning the Treasury Secretary can commit no more funds from the bailout legislation Congress passed two years ago.

Since then, the TARP, which gives the Secretary enormous power to spend up to $700 billion in basically any manner he pleases in order to buttress the economy, has been reviled as the mother of all bailouts. Among other things, it has been used to assist banks and insurers, bail out General Motors and Chrysler, and solve America’s foreclosure problem. It kicked off the anti-government spending movement, which has culminated in the success of many Tea Party candidates this year.

To be sure, TARP has had its faults, including a lack of transparency, failure to fix the housing market and mission creep. (It was supposed to be used to relieve banks of toxic assets, remember?) Read any of watchdog Neil Barofsky’s quarterly reports to Congress for an accounting of them.

But was TARP such a bad idea? Increasingly, it’s looking like the answer is “no.” The Treasury Department now estimates that losses to the economy from the TARP will be $50 billion at worst. By any measure, that’s a lot of money, but it’s not anywhere close to the $700 billion that TARP opponents have argued that taxpayers are responsible for. In fact, not even $400 billion in TARP money has been spent. From The New York Times Friday:

Whatever the final losses from housing, auto companies, A.I.G. or smaller banks, those will be offset by taxpayers’ profits from the big banks that have been the focus of their ire since 2008.

They have repaid their loans and Treasury has collected about $25 billion more from dividends and proceeds from the sale of warrants held as collateral, officials say. Many smaller banks hold on to their loans, however, reflecting their weakness and the desire of some others to keep the money given its advantageous terms. Scores are behind on dividend payments to the Treasury.

8 College Fees You Didn't Plan For

There is no doubt that college has its expenses, but beyond tuition and supplies, there are dozens of other hidden costs you should plan to incur. SmartMoney.com put together a great list of 8 college fees you probably aren’t planning on. You can find a few of their tips below, or check out the full list here.

Freshman orientation: $100

Orientation isn’t usually optional, but neither is it free. For opening dorms early, guest speakers or, yes, even orientation parties, some schools charge $100 per student – or more. Iowa State University charges $190. Boston University charges $215 per student; if parents and siblings attend, they're charged $100 and $50 each, respectively.

Study abroad enrollment: $800

Aside from regular tuition and the costs associated with living abroad, some schools tack on a “maintenance fee” for study abroad. Purdue University, for example, charges a fee of up to $853.35 per semester if a student goes abroad through a program that isn’t run by Purdue. A spokeswoman for the university says the fee covers maintaining relationships with the host university, including the cost for Purdue officials to travel to the school abroad to check on the program.

Technology: $130 to $445

The days of free computer labs are over. Nowadays students are often charged about $200 per year to cover maintenance, ink and paper, says a spokesman for the U.S. Student Association, a network of college student governments. And more tech-oriented students pay more. At Iowa State, most students pay $115 per semester, but majors in fields like engineering and computer science pay $223.

Student activities: $270

The extracurricular activities on campus look free, in that students don’t have to pay to attend them. Instead, there’s a student union fee tacked on to tuition bills to help pay for the student newspapers and activities like dances. At the Massachusetts Institute of Technology and the University of Maryland, it’s $272 for the year. At California State University, Fresno, it’s up to $109 per semester to pay for the recreation center, plus a $34.50 student body fee for support of on-campus student organizations.

Sports: $200 to $1,000

Big-time jocks get college scholarships. Amateurs and enthusiasts have to pay to play. At Ohio State, students in intramural sports will pay up to $125 per team per quarter. These sports aren’t supported by university athletic departments, so they turn to students for funding, says Rod Bugarin, a former financial aid officer at Brown and Columbia universities. And even if your child isn’t the athletic type, you may still have to pay $1,000 or more to support a school’s athletic program – especially if it’s in the National Collegiate Athletic Association’s top division, says a USSA spokesman.

Tax Hikes to Expect in 2011

As we wait for Congress to take up a handful of tax and financial issues, taxpayers across the country are wondering what tax laws will change in 2011. A handful of tax cuts and incentives are scheduled to expire at the end of the year, and unless Congress takes action Americans are going to pay more taxes in 2011. These hikes are going to affect more than just taxpayers making over $200,000 per year. There are dozens of tax changes on the horizon that could hit families of all kinds of different income levels. To help readers of my blog prepare for the potential changes, I have put together the following list of tax hikes to expect in the coming year.

Income Tax Rates

Depending on what action Congress takes on the Bush tax cuts, income tax rates could increase significantly in 2011. President Obama has urged congress to only allow the cuts to expire for taxpayers making over $200,000. However, Congress must decide the fate of these tax rates and unless they pass legislation in the next few months, tax rates will increase for all taxpayers. For more information on the impact of the Bush tax cuts check out this blog entry I posted a few weeks ago.

Estate Tax

As many of you already know, the estate tax expired at the end of last year and was not extended. Therefore taxpayers who inherited a sizeable amount of money this year did not have to pay the standard estate tax. Next year the tax is scheduled to be reinstated at a higher rate (55%). It will also target taxpayers receiving smaller estates. Additionally, if Congress does take up the issue they might instate a retroactive tax that could affect Americans who thought they were able to avoid the estate tax.

Dividends

Qualified dividends are currently taxed at 15% because of the Bush tax cuts. However, if the cuts are allowed to expire, that rate will increase to nearly 40% for some taxpayers. This could represent a significant increase to taxpayers who rely on income from dividends.

Capital Gains

Another area the Bush tax cuts would impact is the capital gains rates. Depending on how Congress acts, the rates could rise to 20% in 2011. The increase is likely to only hit high-income taxpayers, and if you are worried about the hike then you might want to consider selling off some of your gains in 2010. However, you should always speak with a financial advisor to determine the most advantageous strategy.

Sin Taxes

Lots of taxpayers have seen drastic increases on cigarette taxes over the past year as local government agencies seek sources of additional revenue. However, these are not the only sin taxes that have increased. As part of the health care reform bill an indoor tanning tax was instituted, and going in to 2011 you can expect to see many more sin tax increases, especially at state and local levels.

Marriage Penalty

Married taxpayers should be concerned about another looming tax hike in 2011. Unless Congress addresses the issue, the "marriage penalty" will return next year, which has significant implications on couples that have significantly different income levels. Luckily, some of these taxpayers might be able to avoid the penalty by filing separately.

Deduction Caps

Although not a direct tax hike, the new deduction caps looming in 2011 will force many high-income taxpayers to pay more to Uncle Sam. President Obama has expressed interest in limiting the value of deductions at 28%, but has faced significant opposition. Many charitable groups have spoken out against this tax change, with fear that it will result in fewer donations from Americans.

Business Taxes

Small and large businesses should also expect tax increases in the next year. There are going to be higher SECA taxes for owners of S firms and partnerships, restrictions on worker classifications, and an elimination of the deduction for domestic production.

Audits

The last thing that any taxpayer wants to hear is that the likelihood of an IRS audit will increase in the next year. However, the White House has been pushing the IRS to crackdown on both small businesses and individuals. Earlier in the year Treasury Secretary Timothy F. Geithner even asked Congress for additional funds to support the increased collection efforts.