/PRNewswire/ -- Late Friday afternoon, Congress enacted the most sweeping change in the estate tax law in 29 years. The new law contains some good news for the very wealthy, but it also makes most estate plans obsolete. Everyone who has a living trust (family trust) should update it promptly.
Tax lawyer and estate planning expert Robert F. Klueger notes that, "At a minimum, the new law requires every married couple who wrote an estate planning trust to have that trust reviewed, and perhaps modified. If not, many people will learn that their trust doesn't reduce their taxes but can indeed increase their tax liability."
Klueger & Stein, LLP has prepared a short video featuring Robert F. Klueger that reviews the changes to the estate tax law and how it impacts existing estate plans, with suggestions as to how these plans can be modified. The video can be viewed free of charge at http://www.maximumassetprotection.com or http://www.lataxlawyers.com.
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Monday, December 20, 2010
New Tax Laws Preempt Existing Trusts Tax
Friday, December 17, 2010
Fed Proposed Debit Interchange Fee Cap Rule Could Have Unintended Consequences for Government Benefit Cards, Flexible Spending Accounts and Reloadable Prepaid Cards
/PRNewswire/ -- The Network Branded Prepaid Card Association (NBPCA) is concerned that the interchange fee structure and network routing terms announced by the Federal Reserve in its proposed rulemaking will inevitably increase costs to consumers and issuers. Operational flaws, such as requiring prepaid gift cards and flexible spending account cards to include PIN-based debit, not only serve no purpose but also create inefficiencies, increase risk of fraud and unnecessarily raise costs.
Of particular concern to the prepaid card industry is the proposed rules do not clarify how the critical exemptions for government benefit cards and reloadable prepaid cards would be implemented by the card networks under the proposed interchange fee cap rule, as mandated by the Dodd-Frank Wall Street Reform Act. This fact was noted during yesterday's meeting, when a Federal Reserve official acknowledged the proposed rule permits but does not require card networks to allow a higher interchange fee for government benefit cards, reloadable cards not marketed as gift, or cards issued by banks with less than $10 billion in revenue. The official added if it becomes problematic for the card networks to implement the exemptions, then the lower interchange rate would apply.
"At a time of historic economic hardship, millions of Americans rely upon government benefit cards and reloadable prepaid cards as a secure, convenient, non-stigmatizing payment tool to make everyday purchases," said Kirsten Trusko, NBPCA President and Executive Director.
"NBPCA looks forward to submitting comments to the Federal Reserve and hopes it will clarify how exemptions will be handled in its final rule. Failure to do so could reduce the availability of prepaid cards, resulting in a catastrophic impact on consumers and governments," added Trusko
Financial institutions offer government benefit cards to states at little to no cost because they receive revenue primarily from the debit interchange. Nearly every state in the nation (47 states) either uses prepaid cards or is in the process of setting up programs to administer a variety of benefits, such as unemployment and Temporary Assistance to Needy Families (TANF) to millions of needy Americans.
The US Treasury dispenses Social Security benefits through its Direct Express government benefit card. Not only do states save money from check related costs, which is critical at a time when states are experiencing huge budget deficits, but consumers benefit from receiving their funds more efficiently and quickly through this electronic payment tool. Without the exemption from the lower debit interchange fee, it is likely banks will be forced to reduce or eliminate the availability of government benefit cards to nearly every state in the nation.
Millions of unbanked and underbanked individuals also rely upon prepaid cards to participate in our card based economy. It is quite probable if these cards aren't exempted from the interchange fee cap, prepaid card users will be subject to merchant minimums for credit cards because clerks could confuse the cards with credit cards and deny prepaid cardholders from making basic purchases like milk and eggs.
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Wednesday, December 15, 2010
Study: Recession Will Cost Baby Boomers Up To $40,000 in Social Security Benefits
/PRNewswire/ -- Baby Boomers will see greatly reduced Social Security benefits over the course of their retirements due to an unprecedented combination of low wage growth and no annual cost-of-living adjustments (COLA), according to a new study by The Senior Citizens League. And those who first become eligible for Social Security in 2011 will receive lower benefits than retirees born a year earlier.
This is the most comprehensive study ever released to show the recession's impact on Social Security benefits for the first wave of baby boomers.
It found that the combination of rapidly slowing wage growth and no COLA is shrinking the normal increases in initial retirement benefits. An inequity will also be created: people born in 1949 (who turn 62 next year) will receive lower benefits than retirees with similar work histories born just one year earlier. Moreover, the lack of a COLA will reduce lifetime Social Security benefits by as much as $40,000 for many retirees with average earning histories (reductions will be felt regardless of the age at which people begin claiming benefits, and some higher-earning seniors stand to lose even more).
Recent wage and consumer price trends – two of the key factors in determining Social Security benefits – have combined to form a "perfect storm" for the first wave of Baby Boomers. Since the start of the recession, average wage growth has plummeted, and there will be no COLA in 2011 for the second year in a row.
Under normal economic conditions, the initial benefits of each succeeding birth year tend to be slightly higher than the previous birth year as wages rise over time. But average wage growth has been slowing since the 1980s and has dropped markedly since 2008.
Furthermore, low inflation (a situation that government economists expect to continue) led to no COLA in 2010 and 2011. The loss of the compounding effect of a COLA on lifetime benefits is high, and grows the longer a senior spends in retirement. Seniors who turn 62 during the years of no COLA are hit with the full brunt of the compounding loss and stand to lose the most.
Aggravating the situation is the fact that, although general inflation is low, seniors' living costs have increased, especially due to rising Medicare premiums.
Lifetime Social Security Benefits an Average Senior Will Lose Due to No/Low COLAs(1)
Year of Birth | 62-Year-Old Retiree | 66-Year-Old Retiree | |
1946 | -$30,163.60 | -$39,152.50 | |
1947 | -$31,436.10 | -$39,463.20 | |
1948 | -$20,871.00 | -$26,130.60 | |
1949 | -$8,908.90 | -$11,141.30 | |
1950 | -$2,229.20 | -$2,880.90 | |
1951 | -$463.00 | -$648.70 |
(1) Low COLA is defined as less than 2.8 percent, which is the average COLA paid from 1975 through 2009. This chart shows how much low or no COLA will affect benefits over a 20-year (for those retiring at age 66) or 25 year (for those retiring at age 62) retirement.
"Large numbers of seniors will be at risk of outliving their retirement income and being pushed into poverty due to an unprecedented combination of economic factors," said Larry Hyland, chairman of The Senior Citizens League. "The Senior Citizens League is adamantly opposed to deficit reduction proposals that would cut COLAs. Instead, Congress needs to pass an emergency COLA provision or guarantee a minimum average COLA to prevent this disturbing erosion in Social Security benefits."
The Senior Citizens League also recommends that any legislation that changes how Social Security benefits are calculated is devised in a way that is fair to all, to prevent inequities between retirees close in age.
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Monday, December 13, 2010
Consumer Reports Index: Worried Consumers May Make Reluctant Shoppers During Final Weeks of December
/PRNewswire/ -- While retail spending was strong this November, consumers are feeling the pain of a weak employment picture and increased financial troubles. Americans are showing signs of waning confidence, increased stress and reluctance to spend more in December than a year ago, according to the Consumer Reports Index December report.
The Consumer Reports Retail Index showed that the Past 30-Day Retail Index for December, reflective of November activity, was 12.4, up from both the prior month (10.9) and one year ago (11.2). But with just two weeks left to go in the holiday shopping season, the Consumer Reports Index offers some troubling signs for retailers. The Next 30-Day Retail Index for December (reflecting planned December activity) is down slightly (11.8) versus a year ago (12.2). This was led by the soft performance of planned purchasing of personal electronics relative to last year (27.8% versus 32.9%, respectively).
"Despite all the talk and media attention about positive economic growth, consumers are telling us that they are not seeing or, more importantly, not feeling the difference," said Ed Farrell, a director of the Consumer Reports National Research Center. "The consumer may not be confident enough to continue spending through the holiday season. It may require deep discounting from retailers to get consumers back to the store in the final weeks of December."
After five straight months of improvement, the Consumer Reports Trouble Tracker Index points to an increase in consumer financial difficulties (e.g. missed major bills, job loss, loss of health-care coverage) and is up this month to 52.7 from 49.3 the prior month, but well below one year ago (62.0).
The Consumer Reports Employment Index is down in December to 49.2 from 50.3 in November, and is on par with one year ago (48.9), bringing to a halt three months of modest gains. December's Employment Index is indicative of an economy shedding more jobs than it is creating. In the past 30 days, the proportion of Americans that have lost their job has increased to 7.4% from 4.9% a month earlier. Past 30-day job losses are at their highest level since June (8.6%).
The Consumer Reports Index report, available at www.ConsumerReports.org , comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Here are the key findings:
Consumer Reports Sentiment Index : 45.1*
The Consumer Reports Sentiment Index (45.1) has slipped slightly from the prior month (46.6), but is up slightly from one year ago (41.8). Sentiment has doggedly refused to enter positive territory (over 50) since it was first measured by the Consumer Reports Index on October 5, 2008 and stood at 45.3.
* The most optimistic consumers: Age 18-34 – 53.5, (down from 58.4 the prior month) and those with household incomes $100,000 or more – 54.5, even with prior month (55.1).
* The most pessimistic consumers: Households with income less than $50,000 (40.2, down slightly from the prior month at 42.2), and consumers age 65 and older (38.7, little changed from a month earlier at 38.4).
* The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.
Consumer Reports Retail Index : Past 30-Day 12.4, Next 30-Day – 11.8*
* The Past 30-Day Retail Index for December (reflective of November activity) is 12.4, up from the prior month (10.9), as well as a year ago (11.2). December's Next 30-Day Retail Index (planned purchases for December), is at 11.8, up substantially from last month (8.0), but is slightly trailing last year at this time (12.2).
* Looking in detail at the categories comprising the Past 30-Day Retail Index* gains were attributable to an uptick in small appliance sales versus the prior month (21.8% versus 16.7%, respectively); gains in home electronics, up to 15.0% from 11.8% a month earlier; and personal electronics (26.2), up substantially from the prior month (19.6). Versus one year ago, sales in the past 30-days were up for home electronics (15.0%) versus 11.9% last year; and for major appliances (8.1%), up from 6.8% a year ago.
* The gain in the Next 30-Day Retail Index* for December, reflective of December activity, was attributable to an increase in planned purchasing of personal electronics (27.8%), up from 18.2% a month earlier; and a gain in planned purchasing for home electronics (16.5%) versus the prior month (10.0%). Compared to last year, however, planned purchasing of personal electronics was down for this December, 27.8% versus 32.9%, respectively.
* The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30 days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.
Consumer Reports Trouble Tracker Index : 52.7
* Consumers faced more troubles than last month, signaling a halt to five months of improvement. The trouble tracker index increased to 52.7 in December, up from November's 49.3, though the Trouble Tracker Index is much improved from one year ago (62.0).
* Negative developments were led by an increase in consumers that lost their job in the past 30 days to 7.4% from 4.9% in November, and an increase in those that have missed a payment on a major bill (not mortgage) to 9.5% from 8.9% a month earlier.
* A sign of the weak jobs market is the proportion of consumers that have lost or face reduced health-care coverage (9.0%), up slightly from last month (8.7%), but up from a year ago (7.9%).
* On the positive side, there were fewer consumers that could not afford medical bills or medications (13.3%) versus last month (14.5%) and one year ago (15.7%). However, the improvement in the proportion that could not afford medical bills or medication may signal a change in behavior, where consumers are availing themselves of medical services less often.
* Overall, the most prevalent consumer troubles include: the inability to afford medical bills or medications (13.3%) missed payment on a major bill – not a mortgage (9.5%), and lost or reduced health-care coverage (9.0%).
* The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced health-care coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.
Consumer Reports Stress Index : 60.8*
* The level of stress consumers feel they are under is down to 60.8 from 58.5 the prior month, but is below the level from one year ago (63.0).
* The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).
Consumer Reports Employment Index : 49.2*
Regionally, the Northeast is doing slightly better this month, led by declining consumer stress and improved retail activity. The North, Central and South have declined slightly as a result of increased consumer economic difficulties and a decline in Consumer Sentiment.
* The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.
For more information regarding the Consumer Reports Index, visit www.ConsumerReports.org .
The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,263 interviews were completed (1,013 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between December 2 and December 5, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available.
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Tuesday, November 30, 2010
New Research from EBRI: Health Law Cut Some Health Costs in Retirement, But Retirees Will Need Big Savings
/PRNewswire/ -- Even though the new health reform law will reduce some health costs in retirement for many people, retirees will still need a significant amount of savings to cover their out-of-pocket health expenses when they retire, according to a report released today by the nonpartisan Employee Benefit Research Institute (EBRI). Women in particular will need more savings than men because they tend to live longer.
For instance, EBRI finds that men retiring in this year (2010) at age 65 will need anywhere from $65,000–$109,000 in savings to cover health insurance premiums and out-of-pocket expenses in retirement if they want a 50–50 chance of being able to have enough money; to improve the odds to 90 percent, they'll need between $124,000–$211,000.
Women retiring this year at 65 will need even more: between $88,000–$146,000 in savings if they are comfortable with a 50 percent chance of having enough money, and $143,000–$242,000 if they want a 90 per-cent chance.
These estimates are for Medicare beneficiaries age 65 and older: Anyone retiring early, before age 65, would need even more.
The new EBRI analysis details how much savings an individual or couple will need to cover Medicare and out-of-pocket health care expenses in retirement, updating earlier EBRI simulation results from 2008. Some prior estimates have been significantly revised downward as a result of changes to Medicare Part D (prescription drug) cost sharing that will be phased in by 2020 due to the recently enacted health reform law, the Patient Protection and Affordable Care Act of 2010 (PPACA).
However, EBRI finds that retirees will continue to need a substantial amount of savings to cover their health care expenses in retirement, and that uncertainty related to health care use, prescription drug use, and longevity will still play a major role in planning for retiree health care. Results are shown by the desired level of probability (50, 75, and 90 percent) of having enough savings to cover health costs in retirement.
The full report is titled "Funding Savings Needed for Health Expenses for Persons Eligible for Medicare," and is published in the December 2010 EBRI Issue Brief, online at www.ebri.org
"Because employers are continuing to scale back retiree health benefits, and policymakers may soon begin to address Medicare's funding shortfall, more of the financial costs of health care will be shifted to Medicare beneficiaries in the future," said Paul Fronstin, director of EBRI's Health Research and Education Program, and a co-author of the report.
Dallas Salisbury, EBRI CEO and also a co-author of the report, noted that "many workers are generally unprepared for both health care expenses in retirement and retirement expenses. In fact, many individuals will need more money than the amounts cited in this report," since the analysis deliberately does not factor in the savings needed to cover long-term care expenses or the fact that many people retire prior to becoming eligible for Medicare.
EBRI notes that in 2007 (the most recent data available), Medicare covered 64 percent of the cost of health care services for Medicare beneficiaries age 65 and older, while retirees' out-of-pocket spending accounted for 14 percent. Private insurance and various other government programs covered the remaining 12 percent of costs.
Among the key findings of the EBRI analysis:
* Single men: Men retiring at age 65 in 2010 will need anywhere from $65,000 to $109,000 in savings to cover health insurance premiums and out-of-pocket expenses, if they want an average (50–50) chance of being able to have enough money. If they want a 90 percent chance of having enough to cover these expenses, they'll need between $124,000 to $211,000.
* Single women: Women retiring at age 65 in 2010 will need anywhere from $88,000 to $146,000 in savings to cover health insurance premiums and out-of-pocket expenses for a 50 percent chance of having enough money, and $143,000 to $242,000 if they prefer a 90 percent chance.
* The near-elderly: Persons currently at age 55 will need even greater savings when they turn 65 in 2020. The needed savings for men retiring in 2020 range from $111,000 to $354,000, while needed savings for women range from $147,000 to $406,000 (in 2020 dollars), depending on their source of health insurance coverage to supplement Medicare, any employer subsidies, prescription drug use, and their savings goal related to their comfort level with having a 50 percent, 75 percent, or 90 percent chance of having enough savings to cover health insurance premiums and out-of-pocket health care expenses in retirement.
EBRI is a private, nonprofit research institute based in Washington, DC, that focuses on health, savings, retirement, and economic security issues. EBRI does not lobby and does not take policy positions.
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Wednesday, November 17, 2010
Watch Out for Black Friday, Cyber Monday: Having Holiday Shopping Smarts Will Pay Off in Time and Money
/PRNewswire/ -- Are you tired of the holidays yet? It's been a winter wonderland in most stores for weeks and prospective shoppers are being bombarded with special deals and offers earlier and more frequently than in past seasons. Retailers are trying to get more consumers in the stores than last year, so deals aren't just happening on one day.
With the increased competition for still limited dollars, the Illinois CPA Society says being aware of the tactics used to lure shoppers will help you spend your time and money wisely. Use this broader shopping season to your advantage – have a strategy, compare prices and stick to a budget. Here's what you'll need to watch out for:
* Black Friday "Month." No longer is there one day designated for kicking off the holiday season. Some stores have already started touting "Black Friday" sales; others will be open on Thanksgiving Day to offer Black Thursday night deals. Shopping can be fun and entertaining, but don't take every opportunity to shop and don't make impulse purchases (especially for yourself).
* Return Policies. If you're shopping early, make sure to read the fine print. Many stores have strict new return policies, especially during the holiday season. If a store won't allow anything to be returned after 30 days, you may want to hold off on purchasing until closer to the date you plan to give it to the recipient. Get gift receipts and keep in mind personal information may be requested on returns. Stores are being more restrictive on return policies and keeping close tabs on return records to prevent fraud.
* Store Credit Cards. If you already have a card from your favorite retailer, see if there are special discounts on Black Friday and the surrounding days. If you're making a large purchase, it may be worth it to open a card for the day, get the discount and immediately pay off the balance. Think twice about opening any new accounts if you can't pay off the balance; they often come with steep interest rates and your holiday savings will be eaten away in finance charges.
* Rebates. Essentially, rebates are big coupons. Spend the money now, but get it back later. The key is to be diligent about sending them in. Make sure you have receipts and any other proofs of purchase needed to process the rebate. Keep copies of these items since rebate submissions can be lost. Note the date you mail the rebate and read the fine print, especially about the dates for submitting the rebate and the time frame you have to purchase the rebate item. Although you're not necessarily saving money immediately upon purchase, think of a rebate as a gift to yourself come January – when the credit card bill is actually due.
* Cyber Monday/Online Shopping. Retailers are making greater use of email, mobile phone apps and texts. They want shopping to be as easy and convenient as possible so you spend as much as possible. Don't get carried away and think before you click. Use those special offers you get through email alerts, but be choosy in giving out contact information so you're not inundated with too many messages. Make sure personal information, like a credit card number, is provided only on secure sites.
* Bank Credit Cards. Choosing your card wisely could net savings and rewards; using too many cards can leave you in deeper credit card debt. See which cards have the best cash back or bonus point offers, which stores and purchases they apply to, and if there are any limits or restrictions.
* Gift Cards. There's good news and bad news with gift cards. Thanks to new government rules, gift cards must remain valid for at least five years from the purchase date. No fees can be charged for cards that haven't been used in the past 12 months. However, cards won't need to show the expiration date and fee policy information until the end of January. You may also be out of luck if the card's lost or stolen; some cards may also still have inactivity fees. And always watch out for the activation fee on some cards – they effectively lessen the total card value.
According to the Illinois CPA Society, the bottom line is making sure you have a game plan. Ask yourself how you're going to pay for all of this and what amount you're budgeting for the holidays. And do you have a list? Sticking to a list will help keep your spending on budget. If you can, try to make all of your purchases using cash or layaway to keep your post-holiday bills low. Be a smart shopper. It's not necessarily a deal just because the store says so, and it's not a deal if you don't need it or it's more than you want to spend.
If you're looking for a little help with your finances, you can find local deals, finance definitions and tips on managing your money on the Society's Twitter consumer resource, @thriftitude.
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Tuesday, November 16, 2010
Georgians' Holiday Spending Plans Reflect Current Consumer Mindset
/PRNewswire/ -- While not pulling back to Scrooge-ish extremes, Georgia merchants may again face cautious shoppers this holiday season, according to the latest poll from Georgia Credit Union Affiliates (GCUA).
While about half (52.8 percent) of nearly 6,000 credit union members surveyed statewide said they plan to spend about the same as last year, 44.3 percent indicated that they plan to spend less on the holiday season than in 2009. This statistic appears to reflect a continued trend in austerity around gift-giving, given that 51.2 percent of respondents to GCUA's survey in 2009 said they planned to spend less on the holidays than the previous year.
Backing up the latest poll numbers, data from 39 credit unions statewide shows Georgia consumers have a penchant for bolstering their account balances. During the first nine months of 2010, savings deposits grew by 6.3 percent and checking account balances increased by 11.4 percent.
The poll results and credit union data are included in the latest "Paying Attention" report from GCUA, gauging the mindset of Georgia consumers on economic and personal finance. The report also recaps quarterly lending and saving statistics from credit unions statewide.
"Shoppers who already trimmed their spending in 2009 will be frugal again this year," said Mike Mercer, president and CEO of GCUA. "The poll results appear to bear that out, with just 2.9 percent of respondents saying they plan to spend more this holiday season."
Overall, the poll found that:
* 52.8 percent plan to spend about the same this holiday season as last year, while 44.2 percent plan on spending less. Only 2.9 percent plan on spending more this holiday season than last year.
o In 2009, 51.2 percent said they planned to spend less than the previous year while 45.4 percent planned to spend about the same. 3 percent expected to spend more in 2009 compared to the year before.
* Most shoppers still plan to spend modest amounts on gifts. 43.9 percent of respondents are planning to spend between $100 and $500 while 28.7 percent are planning to spend between $500 and $1,000. In a true turn toward austerity, 16.4 percent said they plan to spend less than $100 in total on gifts this year; conversely, 11 percent plan to spend more than $1,000.
o Last year, 47.9 percent said they planned on spending between $100 and $500 in total, 30.8 percent planned on spending between $500 and $1,000 and 11.4 percent said they were going to spend less than $100, and 9.9 percent planned on spending more than $1,000.
* The majority of respondents (77.8 percent) are planning to pay mostly or completely by cash compared to 17.3 percent who plan to pay using a credit card. 4.9 percent plan to use savings from a Christmas club account or other means.
o In 2009, 75.6 percent said they planned on paying all or mostly by cash compared to 11.8 percent who planned on paying all or mostly by credit card. 12.7 percent said they would pay with savings from a Christmas club account or other means.
Credit Union Data Shows Continued Trend Toward Savings
In addition to the consumer poll, GCUA compiled data from 39 credit unions from across the state representing 90 percent of credit union assets and 82 percent of members in Georgia to gauge current lending and savings trends. The data compare year-to-date figures from the first nine months of 2010 to the same period in 2009. Summarized below, the findings indicate a continued trend toward savings among consumers, while figures for lending varied (all rates are annualized):
* Compared to the same period last year, savings deposits grew by 6.3 percent during the first nine months of 2010 and by 7.1 percent over the past year.
* Checking account balances increased by 11.4 percent between January and September and by 16.5 percent over a 12-month period.
* Money market account balances grew by 23.8 percent during the first three quarters of the year and by 35.6 percent over the previous 12 months.
* New vehicle loan balances decreased by 9.7 percent over the past year; however, balances for used car loans increased more than 7.7 percent in the first nine months of 2010, and 10 percent over the past 12 months.
* First mortgage balances increased by 5.8 percent during between January and September and by 12.5 percent over a 12-month period.
* The number of bankruptcy filings among members rose by 13.8 percent over the past 12 months.
"Credit union members represent a good cross section of middle-class Georgians," Mercer said. "Our latest report shows that Georgia consumers seem to be settling into a routine of conscious saving and cautious spending."
More information is available at www.georgiacreditunions.org or on www.facebook.com/creditYOUnion.
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Monday, November 1, 2010
Will Small Business Jobs Act Boost Economic Growth?
The recently enacted Small Business Jobs Act of 2010 fulfills a promise U.S. President Barack Obama made to entrepreneurs soon after his election, pledging to create incentives aimed at encouraging small-business creation and growth.
Many experts agree that the package of finance and tax incentives represents some good news for small businesses struggling to cope with weak economic conditions. Although some faculty at Emory University and its Goizueta Business School and other observers praise the new initiative, others wonder if it will have the necessary impact to help jump-start the economy.
"Until now, large companies have been the biggest beneficiaries of stimulus programs and tax incentives," says Thomas Smith, an assistant professor in the practice of finance at Goizueta. "The accelerated tax write-offs featured in the new act are a good idea, since they’re aimed at incentivizing businesses to make capital purchases that can have a ripple effect throughout the economy."
Among other changes under the Small Business Jobs Act, companies can reduce their taxable income by immediately expensing the costs of certain kinds of newly acquired business assets, instead of depreciating them over their "useful life," a period of years determined by the Internal Revenue Service. Generally, companies like to expense their assets quickly as a way to significantly reduce their tax liability.
The asset write-offs, popularly known as Section 179 after the applicable part of the Internal Revenue Code, were previously limited to $250,000 in a given year. The new act raises the threshold to $500,000 of newly purchased assets per year, subject to certain limitations, during 2010 and 2011.
In another bid to get businesses to spend more, the act extends and revises the so-called bonus depreciation rules, which let taxpayers depreciate 50 percent of the cost of certain assets in the first year they are placed in service.
An earlier set of bonus depreciation rules expired at the end of 2009, but the new act extends it to assets placed in service through the end of 2010, and certain assets may qualify even if they are purchased and put into service through 2011.
Some observers have questioned the timing of the legislation, suggesting that few small business owners will risk making significant capital expenditures during the current downturn. They also complain that the bonus depreciation rules, while welcome, have such a limited timeframe that few businesses will not have enough time to plan and get financing for the capital purchases.
Smith, however, isn’t so sure about that.
"The fact is that machinery and equipment is either wearing out—or, in the case of computers and other technology-based assets—is becoming obsolete," he says. "Businesses that want to stay competitive aren’t likely to hold off on necessary purchases just because the economic recovery isn’t moving as quickly as they hoped. Obama’s responses to the recession may not all be perfect, but he’s moving in the right direction."
If Smith was hedging on his view of the tax incentives, another Obama initiative has his full support.
"I think the tax incentives were a good idea, but the $30 billion that’s being released to banks to stimulate small-business lending is even better," he says. "Many small business owners I’ve spoken with have complained that they’ve wanted to take advantage of expansion and other opportunities, but simply couldn’t get loans to finance their plan."
Besides replacing aging assets, some business want to upgrade to more efficient machinery and equipment that can reduce their operating and other costs, adds Smith.
"It’s difficult to say with certainty exactly what the catalyst to spur business activity will be," Smith observes. "But we’ve got to try bold, new initiatives like these, as well as other strategies, to incentivize businesses to start hiring again. To do nothing would be myopic."
Perhaps, but this economy presents some unique challenges, says T. Clifton Green, an associate finance professor at Goizueta.
"Although the recession is officially over, we seem to be having the jobless recovery that people feared, in that unemployment is still very high," notes Green. "The idea behind the $30 billion government bank-loan program and the tax credit initiative is to get small businesses spending to expand their businesses and hire new people."
But large companies can easily borrow at historically low rates, "and they are not using the money to expand," he adds. "Rather than hiring, they're using new debt to buy back stock or replace old technology that they held off replacing during the recession. The recent behavior of large business suggests the small business act may not have the intended new hiring effect."
Indeed, William J. Carney, a chaired professor of corporate law at Emory, stresses that another administration initiative, healthcare reform, may have already undermined any benefit the Small Business Jobs Act may have provided.
"Congress meant well by pushing businesses to provide healthcare insurance," he says. "But it could be counterproductive to hiring, especially among low-wage employers who don't want to take on "Cadillac" insurance programs for minimum-wage workers. We've already seen pushback from McDonald's Corp. and other big employers that complained and are getting limited waivers."
Yet New York City entrepreneur and Goizueta graduate Brett Klasko believes that more credit access could boost businesses.
"Opening up the lending channels is a good idea," says Klasko, chief executive officer of the marketing firm Phinaz whose subsidiaries, Ticket Boosterand Investors Alley, focus on the sports and financial industries, respectively.
"The additional federal funding could give banks an incentive to lend," he adds.
If the effectiveness of this program and others is in debate, then how—or if—such legislation can stimulate a positive response with voters in the midterm elections is even murkier.
"I don’t know if this program and others will really help the Democrats much in the midterm elections," notes Klasko. "For example, the president has been pushing to let some or all of the Bush-era tax cuts expire, and I don’t think that’s a good idea, since it will end up hurting businesses."
Obama may hope that the administration’s most recent stimulus effort will help Democrats in the November elections, but Goizueta finance professor Tarun Chordia does not believe it will help the economy much.
"The act, like the previous "cash for clunkers" and "homebuyers’ incentive," might just move some activity forward," he says. "It might not really create new activity, and we’ll suffer the aftereffects later on."
In contrast to these "small fixes," there’s a real need to upgrade infrastructure, says Chordia. "We currently have spare capacity in the economy, and it is important that the right projects are funded. There is a large debate in economics between those who feel that government spending on infrastructure projects during downturns can help future GDP growth and those who feel that government spending is generally wasteful. It is probably true that projects funded for political reasons, just before the November elections, are likely to be wasteful.
Chordia believes that big issues like the hangover in the housing market will take at least two or three years to resolve, regardless of what the federal government does.
"This recession is different than past slumps," explains Chordia. "In this one, we’ve seen a broad retreat in asset prices, and it will take time to get supply and demand back into balance. At this point the motivation for the stimulus programs seems to be the November election."
From Knowledge@Emory
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The Return of the Holiday Layaway
/PRNewswire/ --Layaway may sound like an old-school concept, especially in today's "buy now, pay later" society. But the idea of setting aside products to pay for gradually is making a comeback, and is a great alternative to using credit cards this upcoming holiday season.
"The credit card allows shoppers to buy on impulse without the immediate worry of how to pay for their purchases," said Dorothy Guzek , GreenPath Debt Solutions financial counselor. "Unfortunately, when the credit card bill comes due, consumers are left with a surprise balance they can't afford to pay, because they forgot to keep track of each purchase."
Layaway may be the answer for those who can't afford to pay all at once or who simply want to avoid using credit cards this holiday season. An added benefit is that layaway helps keep prying eyes from gifts and presents before the big holiday celebration.
"Our customers are looking for ways to better manage their spending, while still getting the items they need and want," said Salima Yala , Divisional Vice President of Financial Services for Sears Holdings. "Layaway is a financial tool, much like an interest-free payment plan, that allows them to pay over a set period of time."
In addition to traditional in-store layaway, stores like K-Mart and Sears are offering online layaway programs. Online layaway lets you browse and shop for items on the web, pay over time just as you would with traditional layaway, and then pick up the merchandise in-store.
"Layaway provides customers with innovative ways to shop – and with the launch of online layaway, the younger generation of online shoppers are able to manage their budgets, and shopping needs, in a smarter way," said Yala.
GreenPath Debt Solutions offers the following tips for buying on layaway:
1. Get a copy of the store's layaway policies and staple it to your receipt. You may also find layaway policies on the store's website.
2. Make sure you understand the policies such as schedule of payments, late fee policies, refund and exchange policies, markdowns on sale prices and loss or damage of items while in layaway.
3. Be realistic in what you can afford over time and what you put on layaway.
4. Keep clear and accurate records of payments made (staple them to the original receipt and layaway policy statement) in case you have disputes later.
5. When going to the store to make a payment, use the direct in-out method. Walk into the store and directly to the layaway counter to make the payment and then walk back out to your car. Avoid the urge to shop. Preferably, make your layaway payment online and avoid the stores altogether.
6. Don't forget that, until you pay off the items in layaway, the store has your money and merchandise. If the store goes out of business while you're still paying, you could be out both the cash and goods. So only deal with reputable businesses.
Other stores offering layaway this holiday season include Sears, T.J. Maxx, Burlington Coat Factory, Marshalls and Toys R Us, among others. You many find more stores by searching the Internet.
GreenPath's Guzek reminds shoppers, "Regardless of how you decide to shop this holiday season, make a budget in advance, shop from a list, track your expenses and stick with your original plan."
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Thursday, October 21, 2010
In 15 of Last 25 Months, Treasury Needed to Borrow Money to Pay Social Security Benefits
(CNSNews.com) - The U.S. Treasury has needed to borrow money to pay Social Security benefits in 15 out of the last 25 months on record because the Social Security system was in deficit in those months, with the cost of monthly benefit payments exceeding the Social Security tax revenues flowing into the Old Age, Survivors and Disability Insurance trust funds, according to data published by the Social Security Administration.In 15 of Last 25 Months, Treasury Needed to Borrow Money to Pay Social Security Benefits
Tuesday, October 12, 2010
More Pension Shortfalls...
Report warns of coming wave of municipal pension shortfalls
By Michael A. Fletcher Washington Post Staff Writer
Tuesday, October 12, 2010; 12:12 AM
The nation's largest municipal pension plans are carrying a total unfunded liability of $574 billion, which comes on top of as much as $3 trillion in unfunded pension promises made by the states, according to a report released Tuesday.
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/12/AR2010101200044.html?utm_source=Newsletter&utm_medium=Email&utm_campaign=Heritage%2BHotsheet&hpid=moreheadlines
Monday, September 20, 2010
Community & Southern Bank Acquires the Assets and Deposits of Three Georgia Banks from the FDIC
/PRNewswire/ -- Community & Southern Bank has acquired certain assets and deposit accounts and other liabilities of Bank of Ellijay, Ellijay, Georgia, First Commerce Community Bank, Douglasville, Georgia and The Peoples Bank, Winder, Georgia, from the Federal Deposit Insurance Corporation ("FDIC"), as receiver for Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank. Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank were closed by the Georgia Department of Banking and Finance at the close of business on Friday, September 17, 2010, and the FDIC was appointed receiver. Community &Southern Bank will begin operating Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank branch offices as Community & Southern Bank offices immediately.
These are the third, fourth, and fifth acquisitions that Community &Southern has completed. On January 29, 2010, Community & Southern acquired certain assets and deposits of First National Bank of Georgia, Carrollton, Georgia. That acquisition established Community & Southern Bank as one of the market leaders in West Georgia. On March 19, 2010, Community & Southern completed its acquisition of Appalachian Community Bank, Ellijay, Georgia, making Community & Southern the 6th largest Georgia-based bank.
"We're very pleased to announce the acquisition of Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank from the FDIC. The addition of these banks will allow us to serve a wider community throughout Georgia. As we stated previously, our goal is to build a new banking franchise for Georgia, with the strong traditions of service excellence and community support," said Community &Southern Bank's President and Chief Executive Officer, Patrick M. Frawley. "As we integrate these acquisitions, we will first and foremost focus on our customers, our employees, and the communities we serve."
John Spiegel, Chairman of the Board of Directors of Community & Southern Bank and former Chief Financial Officer of SunTrust Bank, added, "The customers of Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank can rest assured knowing that there will be no disruption to the operations and services provided by their bank. Community &Southern Bank looks forward to building upon the traditions and values that are the foundation of our bank. These acquisitions further strengthen our position in our North and West Georgia Regions and establishes us in several new markets in Canton, Winder, and Athens. We welcome all of our new customers into the Community & Southern Bank family as we work to develop the premiere banking franchise across North Georgia."
Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank customers should be aware that their accounts have been automatically converted to Community & Southern Bank accounts. All deposit accounts will continue to be fully insured to the maximum limits allowed by the FDIC. Bank of Ellijay, First Commerce Community Bank, and The Peoples Bank customers should continue to visit existing branches and use their existing checks and ATM/Debit cards to access their funds. All direct deposit and electronic bill pay transactions will continue to be processed normally.
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Friday, September 17, 2010
Taxpayers Will See Relief By Way of Inflation-Adjusted Indexing, But Total Tax Impact Remains Unclear, CCH Says
/PRNewswire/ -- Taxpayers stuck in the current economic downturn will get at least some relief in 2011 thanks to the mandatory upward inflation-adjustments called for under the tax code, according to CCH, which today released estimated income ranges for each 2011 tax bracket. CCH also projects the growing number of other inflation-sensitive tax figures, such as the personal exemption and the standard deduction.
"Indexing for inflation has become an established part of our tax system, and it's likely to be a part of the tax law for the foreseeable future even as Congress debates changes to the tax rates themselves," according to George Jones, JD, CCH Senior Federal Tax Analyst.
Projections this year, however, are clouded by the uncertainty of expiring provisions in the tax code. If Congress allows the tax cuts within Economic Growth and Tax Relief and Reconciliation Act of 2001 (EGTRRA) to expire as called for at the end of 2010, many taxpayers could lose more ground than they will otherwise gain.
When there is inflation, indexing of brackets lowers tax bills by including more of people's incomes in lower brackets - in the existing 15-percent rather than the existing 25-percent bracket, for example. The formula used in indexing showed a relatively small amount of inflation this year, just under 1.5 percent. However, this is far greater in comparison to the 0.18 percent inflation factor used to set 2010 tax amounts. Therefore, while 2010 inflation-adjusted amounts in many cases stayed flat as a result, most 2011 figures will move higher.
For 2011, however, the big question is not whether the brackets will continue to increase because of inflation - they will. Rather, it is what tax rates will be applied against those brackets. The current 10-, 15-, 25-, 33- and 35-percent rates are now scheduled to sunset to the pre-EGTRRA rate structure of 15, 28, 31, 36 and 39.6 percent. In addition, there are two possible alternative scenarios being debated by lawmakers:
-- Extend the current tax bracket structure in its entirety; or
-- As the proposal from President Obama calls for, keep the current rate
structure except revive the 36- and 39.6-percent rates, starting at a
higher income bracket level; he would also amend the standard
deduction so that it does not revive the marriage penalty that had
been in place prior to EGTRRA.
In other words, Jones noted, it gets complicated quickly without knowing yet which approach Congress will take.
"While we were looking at the very real possibility of deflation in the tax adjustment required under the tax code last year, this year we are 'back to normal' in the sense that the expected upward adjustment in tax benefits from 2010-2011 are taking place," said Jones. "The only wildcard remains how Congress will deal with the sunsetting provisions. We may not know that until a possible lame-duck session of Congress this December."
The examples below show the modest tax savings generated by indexing and how they would be reversed if the EGTRRA tax cuts were to expire wholesale:
-- Because of inflation adjustments, a married couple filing jointly with
a total taxable income of $100,000 should pay $112.50 less in income
taxes in 2011 than they will on the same income for 2010 (compared to
only a $12.50 savings between 2009 and 2010). That savings remains
whether the EGTRRA tax cuts are fully extended or President Obama's
proposal is adopted. However, if the rates and marriage penalty relief
sunset entirely, the couple will end up paying $3,143 more in taxes in
2011.
-- A single filer with taxable income of $50,000 should owe $56 less next
year due to the adjustments (again, compared to only a $6.25 savings
between 2009 and 2010). However, once again, even with savings from
the inflation adjustments, a single filer will owe $834 more in 2011
than in 2010 on the same $50,000 amount if complete sunset of the
rates takes place.
-- For taxpayers with more than $379,150 in taxable income in both 2010
and 2011, the maximum savings from indexing the tax brackets for 2011
will be more dramatic. However, so will the additional tax that would
be owed under either a complete sunset of the EGTRRA tax cuts or
adoption of the Obama proposal, which would continue to give
high-income taxpayers the incremental benefit of the 10-percent rate
bracket as well as allow them an expanded 28-percent bracket.
Inflation-generated savings if all rates were extended would amount to
$330 for a single filer with $400,000 taxable income, for example.
However, that same taxpayer would pay an additional $11,394 under a
full sunset of the rates, and $5,080 more under the Obama proposal
above 2010 amounts.
Inflation Adjustments
Since the late 1980s, the U.S. tax code has required that federal income tax brackets be adjusted for inflation annually, and inflation adjustments have been inserted into the Internal Revenue Code in recent years with increasing frequency.
For example, the Code now requires over 50 other inflation-driven computations to determine deduction, exemption and exclusion amounts in addition to the 40 separate computations needed to inflation-adjust the tax bracket tables each year. In fact, the health care reform legislation passed earlier this year adds an even greater number of inflation-adjustments to the tax code, although health-related indexing won't start until 2013.
Most adjustments are based on Consumer Price Index figures for September through August immediately prior to the adjusted year. However, some inflation-adjusted figures are computed earlier and some later. For example, amounts such as the 2011 vehicle depreciation limits won't be available until 2011 (the $3,060 regular first-year amount for 2010 was not released until February 2010), while the standard business mileage rate (that is currently set at 50 cents for 2010) isn't expected to be computed for 2011 and released until December 2010.
CCH's projections for other indexed amounts are based on the relevant inflation data released September 17, 2010, by the U.S. Department of Labor.
The IRS usually releases official numbers by December each year. CCH tax bracket projections are provided for illustrative purposes only, and should not be used for income tax returns or other federal income tax related purposes until confirmed by the IRS later this year.
Some Items Not Indexed
Jones observed that some items in the Code are not indexed for inflation and stay the same, while others rise by dollar amounts already written into the tax law.
"The exemption amounts for the alternative minimum tax are not indexed, which means that each year Congress must either increase the amounts by statute or expose additional households to the AMT," Jones said.
For 2009, Congress set the AMT exemption amounts at $46,700 for single individuals and $70,950 for married couples filing jointly. Congress has relied on one- or two-year AMT patches to account for inflation from the initially set amounts of $33,750 and $45,000, respectively. However, there is no technical requirement under the tax code to increase those amounts for inflation. No amounts have been set yet for 2010, no less for 2011. While they are scheduled to revert to the default amounts of $33,750/$45,000 without action, the Obama administration tax proposals contemplate further increases.
Standard Deduction, Personal Exemption Rise
The standard deduction and personal exemption amounts are also subject to indexing; however, because of "rounding down," some years show no change at all. After very little movement in the 2010 amounts, 2011 will see a jump in all standard deduction levels. However, a wrinkle occurs if the EGTRRA sunset provisions move forward. In which case, the marriage penalty relief that has been built into the standard deduction for married couples filing jointly will be eliminated. Rather than double the standard deduction for unmarried single filers, the 2011 standard deduction for joint filers would drop by $1,750 to $9,650, even taking the past year's inflation into account.
Assuming that Congress will not let any of the standard deduction amounts sunset, however, the standard deduction for single taxpayers, heads of households and marrieds filing separately will all increase by $100 in 2011. The standard deduction for joint filers would rise by $200, to $11,600. Any increase in the standard deduction, of course, can produce lower taxes by decreasing the taxpayer's taxable income.
The additional standard deduction for those age 65 or older or who are blind will rise by $50 to $1,150 in 2011 for married individuals and surviving spouses, and by $50 to $1,450 for single filers. The personal exemption amount also gets bumped up by inflation by $50, to $3,700 in 2011.
Taxpayers have had to lose a good portion of the value of personal exemptions and itemized deductions when their incomes rise above certain levels, which have also been adjusted for inflation. For 2010, these "phaseouts" disappeared from the tax code, but only temporarily if Congress does not act. As part of the EGTRRA sunset, they are scheduled to return in 2011, with a personal exemption phase-out range starting at $254,350 for joint filers and $169,550 for single filers and a phase-out range for itemized deductions starting at $169,550 for all filers except married couples filing separately whose phase-out range for itemized deductions starts at $84,775.
"The removal of limitations on itemized deductions and personal exemptions, rather than indexing of brackets, will provide major tax savings in 2010 for many well-off taxpayers. The return of these limitations in 2011 would pose an equally important change in the reverse direction," Jones observed.
For a complete look at how income ranges for each tax bracket are projected to shift next, see the CCH chart below.
"Kiddie" Deduction, Gift Tax Exemption
In general, inflation adjustments are rounded to the next-lower multiple of $50, so if the adjustment produces an increase of less than $50, no increase is made. The "kiddie" deduction, used on the returns of children claimed as dependents on their parents' returns, increased only five times in the years 2001 through 2010. It last rose for the 2009 tax year. For 2011 the deduction will remain at that $950 level.
The Code only allows the gift tax exemption to rise when the inflation adjustment would produce an increase of $1,000 or more. The last increase occurred in 2009, when it rose to $13,000. It remains there for 2011.
CCH 2011 TAX PROJECTIONS*
Married Filing Jointly (& Surviving Spouse)
Tax
Rate 2011 Taxable Income
Complete Full
Sunset Extension
10% n/a $0-$17,000
15% $0-$57,650 $17,000-$69,000
25% n/a $69,000-139,350
28% $57,650-$139,350 $139,350-$212,300
31% $139,350-$212,300 n/a
33% n/a $212,300-$379,150
35% n/a $379,150+
36% $212,300-$379,150 n/a
39.6% $379,150+ n/a
Tax 2010 Taxable
Rate 2011 Taxable Income Income
Obama
Proposal
10% $0-$17,000 $0-$16,750
15% $0-$69,000 $16,750-$68,000
25% $69,000-$139,350 $68,000-$137,300
28% $139,350-$237,300 $137,300-$209,250
31% n/a n/a
33% n/a $209,250-$373,650
35% n/a $373,650+
36% $237,300-$379,150 n/a
39.6% $379,150+ n/a
Unmarried Individuals (other than surviving spouses and heads of
households)
Tax Rate 2011 Taxable Income
Complete Sunset Full Extension
10% n/a $0-$8,500
15% $0-$34,500 $8,500-$34,500
25% n/a $34,500-$83,600
28% $34,500-$83,600 $83,600-$174,400
31% $83,600-$174,400 n/a
33% n/a $174,400-$379,150
35% n/a $379,150+
36% $174,400-$379,150 n/a
39.6% $379,150+ n/a
2010 Taxable
Tax Rate 2011 Taxable Income Income
Obama Proposal
10% $0-$8,500 $0-$8,375
15% $8,500-$34,500 $8,375-$34,000
25% $34,500-$83,600 $34,000-$82,400
28% $83,600-$195,550 $82,400-$171,850
31% n/a n/a
33% n/a $171,850-$373,650
35% n/a $373,650+
36% $195,550-$379,150 n/a
39.6% $379,150+ n/a
Head of Household
Tax Rate 2011 Taxable Income
Complete Sunset Full Extension
10% n/a $0-$12,150
15% $0-$46,250 $12,150-$46,250
25% n/a $46,250-$119,400
28% $46,250-$119,400 $119,400-$193,350
31% $119,400-$193,350 n/a
33% n/a $193,350-$379,150
35% n/a $379,150+
36% $193,350-$379,150 n/a
39.6% $379,150+ n/a
2010 Taxable
Tax Rate 2011 Taxable Income Income
Obama Proposal
10% $0-$12,150 $0-$11,950
15% $12,150-$46,250 $11,950-$45,550
25% $46,250-$119,400 $45,550-$117,650
28% $119,400-$216,400 $117,650-$190,550
31% n/a n/a
33% n/a $190,550-$373,650
35% n/a $373,650+
36% $216,400-$379,150 n/a
39.6% $379,150+ n/a
Married Individuals Filing Separate Returns
Tax Rate 2011 Taxable Income
Complete Sunset Full Extension
10% n/a $0-$8,500
15% $0-$28,825 $8,500-$34,500
25% n/a $34,500-$69,675
28% $28,825-$69,675 $69,675-$106,150
31% $69,675-$106,150 n/a
33% n/a $106,150-$189,575
35% n/a $189,575+
36% $106,150-$189,575 n/a
39.6% $189,575+ n/a
2010 Taxable
Tax Rate 2011 Taxable Income Income
Obama Proposal
10% $0-$8,500 $0-$8,375
15% $8,500-$34,500 $8,375-$34,000
25% $34,500-$69,675 $34,000-$68,650
28% $69,675-118,650 $68,650-$104,625
31% n/a n/a
33% n/a $104,625-$186,825
35% n/a $186,825+
36% $118,650-$189,575 n/a
39.6% $189,575+ n/a
Standard Deduction Amounts
Filing Status 2011** 2010 Increase
Married Filing
Jointly (&
Surviving
Spouse) $9,650 (with marriage $11,400 (-$1,750)
penalty relief
sunset);
$11,600 (without marriage
penalty relief
sunset) $11,400 $200
Married Filing
Separately $4,825 (with marriage $5,700 (-$875)
penalty relief
sunset)
$5,800 (without marriage
penalty relief
sunset $5,700 $100
Single $5,800 $5,700 $100
Head of
Household $8,500 $8,400 $100
**A marriage penalty exists when the combined tax liability of a
couple filing a joint return is greater than the sum of the tax
liabilities each would have if they were unmarried. If the EGTRRA
sunset takes effect, it will trigger a marriage penalty with the
basic standard deduction for married individuals filing joint
returns dropping considerably.
Standard Deduction for Dependents ("Kiddie" Standard Deduction)
2011 2010 Increase
$950 $950 $0
Income Level at Which 3-Percent Itemized Deduction Limitation Takes
Effect (Adjusted Gross Income)
2011(with
Filing Status sunset) 2010*** 2009
Married Filing
Jointly $169,550 n/a $166,800
(& Surviving
Spouse)
Married Filing
Separately $84,775 n/a $83,400
Single $169,550 n/a $166,800
Head of Household $169,550 n/a $166,800
*** For 2010, these limitations disappeared from the tax code; if the
limitation rules under EGTRRA are allowed to sunset, the above rates
will apply for 2011.
Personal Exemption Amounts
2011 2010 Increase
$3,700 $3,650 $50
Threshold for Personal Exemption Phaseout
2011(with
Filing Status sunset) 2010**** 2009
Married Filing
Jointly $254,350 n/a $250,200
(& Surviving
Spouse)
Married Filing
Separately $127,175 n/a $125,100
Single $169,550 n/a $166,800
Head of
Household $211,950 n/a $208,500
**** For 2010, these "phaseouts" disappeared from the tax code; if
the phaseout rules under EGTRRA are allowed to sunset, the above
phaseout levels will apply for 2011.
Gift Tax Exemption
2011 2010 Increase
$13,000 $13,000 $0
Income Limit for Full Roth IRA Contribution
Filing Status 2011 2010 Increase
Married
Filing
Jointly $169,000 $167,000 $2,000
Single $107,000 $105,000 $2,000
Income Limit for Full Roth IRA Contribution
Filing Status 2011 2010 Increase
Married Filing Jointly $169,000 $167,000 $2,000
Single $107,000 $105,000 $2,000
* These numbers are projected for the 2011 tax year and have not been confirmed by the Internal Revenue Service. CCH, a Wolters Kluwer business (CCHGroup.com) is the leading global provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913.
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Thursday, September 16, 2010
US Department of Labor announces final rule for Unemployment Compensation Program funding goals
/PRNewswire/ -- The U.S. Department of Labor's Employment and Training Administration today announced a final rule regarding the Unemployment Compensation Program. This rule implements federal legislation requiring the department to establish criteria for states to qualify for interest-free federal loans for the payment of unemployment compensation.
"The past few years have really tested the unemployment programs. For that reason, and the future health of unemployment trust funds, it is especially important that states make reasonable efforts to maintain the solvency of their unemployment compensation systems before receiving interest-free federal loans," said Secretary of Labor Hilda L. Solis.
The Social Security Act provides for the federal government to make advances to states that deplete their unemployment trust fund accounts. This arrangement ensures that eligible unemployed workers receive benefits to which they are entitled. These advances are generally interest-bearing; however, states may obtain interest-free advances under certain conditions. Under current law, states owe no interest on amounts they obtain from the federal government during a calendar year if the advances are repaid by Sept. 30 of the same year and no additional advances are made that year.
The purpose of the legislation spurring today's final rule was to encourage states to adequately forward fund their unemployment compensation systems to minimize the need for advances. The final rule conditions a state's receipt of interest-free advances upon the state meeting new funding goals as well as existing requirements.
The rule requires that a state:
1) meet a solvency goal based on a generally accepted measure of trust fund solvency in at least one of the five years preceding the year the advance occurs; and
2) has had no significant tax reductions in the years between the last that the solvency measure was met and the year in which the advance occurs.
Implementation of the final rule will be phased in beginning in 2014 in order to allow states additional time to repay current advances and build sufficient reserves to meet the new requirements for interest-free loans. Full implementation will occur in 2019.
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Wednesday, September 15, 2010
Sandwich Generation Stretched Thin Financially
/PRNewswire/ -- Today, Generation Mortgage Company and Zogby International released alarming new data detailing the financial tribulations of the Sandwich Generation -- a sector largely comprised of Baby Boomers who are caring for their aging parents while supporting their own children. The study found that a majority of the Sandwich Generation give their household's current financial situation a negative rating and are having to make tough financial decisions and cutbacks.
The eye-opening results shed light on many financial hardships facing the Sandwich Generation. With unemployment near 10 percent, it is no surprise that 23 percent of those polled have lost a job recently and an additional 24 percent have taken a cut in pay or benefits. This has resulted in 17 percent failing to make a mortgage or rent payment on time due to insufficient funds.
According to the Generation Mortgage/Zogby International survey, finances have forced the Sandwich Generation to make serious cuts in their spending habits to survive during the recession. Seventy-three percent have decreased spending on entertainment, recreation or eating out. Moreover, 43 percent have decreased overall spending on food or groceries and three out of five of those polled say it is difficult to be a caregiver for their parents and/or in laws while financially supporting their children.
"The Sandwich Generation is probably the most financially vulnerable demographic to result from the recession," said Jeff Lewis, Chairman, Generation Mortgage Company. "They are unemployed or under-employed, financially supporting two generations in their family and are saddled with debt from bills and a mortgage. As this group looks to retire, their financial situation, coupled with the state of the economy, is not leaving them with many options."
The study also uncovered that 78 percent of those polled said they are worried about having enough money to retire comfortably and 23 percent have restructured their retirement plan in the last year due to financial reasons. Even more distressing, 52 percent responded that they plan to work part time during retirement to make ends meet.
"As the Sandwich Generation looks towards retirement," commented Lewis, "they should become educated on their available financial options. One of the financial options that is often overlooked is a reverse mortgage."
Zogby International was commissioned by Generation Mortgage to conduct an online survey of 271 adults who have children and are caregivers of parent(s). The survey was conducted from August 9-11, 2010. A sampling of Zogby International's online panel, which is representative of the adult population of the U.S., was invited to participate. Slight weights were added to region, age, race, gender, and education to more accurately reflect the population. The Margin of Error (MOE) is +/- 6.1 percentage points. Margins of Error are higher in sub-groups. The MOE calculation is for sampling error only.
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Consumers Union Report: Prepaid Cards Come With Long List of Fees and Weak Consumer Protections
/PRNewswire/ -- Prepaid cards continue to grow in popularity, but this new form of plastic payment comes with high fees and weaker protections than those offered by traditional debit or credit cards, according to a new report by Consumers Union, the nonprofit publisher of Consumer Reports.
Prepaid cards are reloadable cards that can be used to make payments similar to debit cards and are becoming the foundation of a second tier banking system used by a growing number of low income consumers.
"Prepaid cards come with a long list of fees that are often hidden deep in the fine print," said Michelle Jun, Staff Attorney for Consumers Union. "Consumers considering prepaid cards should be aware that those fees can add up quickly and that they may be vulnerable to losing their money if their card is lost or stolen."
Prepaid cards are a growing business and usually bear a network logo such as Visa or MasterCard and often have the word "debit" printed prominently on the front of the cards. The Federal Reserve estimated that 312 million transactions were made with prepaid cards in 2006 for a total value of $13.3 billion. These numbers have undoubtedly continued to rise as the prepaid card industry has worked to enroll the millions of unbanked and underbanked consumers.
Consumers Union reviewed the terms and conditions of 19 different prepaid cards and found that consumers face multiple fees and other costly "gotchas":
-- Activation Fees: 12 of the 19 prepaid cards reviewed charged
consumers a fee for activating their cards. These activation fees
ranged from a low of $3 for the Walmart Money card and the nFinanSe
card to a whopping $39.95 for the First Vineyard card.
-- Monthly Fee: 16 of the 19 prepaid cards charged monthly fees ranging
from $2.95 per month for the nFinanSe card to $9.95 per month for the
NetSpend VISA card, Rush card, and AccountNow card. Most prepaid card
issuers will waive the monthly fee if a direct deposit is set up.
Some card issuers will waive the monthly fee if the consumer chooses
the "pay as you go" option. The Green Dot card charges a $5.95
monthly fee unless the consumer maintains a $1,000 balance or has 30
posted transactions.
-- Fees to Get Cash: All 19 prepaid cards reviewed charged fees for
withdrawing cash from ATMs in the U.S. On the low end, consumers
using the nFinanSe card are charged 99 cents per withdrawal.
Consumers using the NetSpend Visa card, AccountNow card, and Bank
Freedom card are charged $2.50 for each withdrawal. In one case (Rush
card), consumers were given two free withdrawals but then charged
$2.50 for each additional withdrawal. Consumers using the Green Dot
card get free withdrawals at in-network ATMs, but are otherwise
charged $2.50 per withdrawal. Fees were even higher for international
withdrawals.
-- Balance Inquiry Fees: 18 of the 19 prepaid cards charged fees for
checking balances at ATMs, ranging from 45 cents to $1. This does not
include any additional fee charged by the ATM owner.
-- Paper Statement Fees: 15 of the 19 prepaid cards charged fees for
providing consumers with a paper statement detailing transactions on
their account. Paper statement fees ranged from $1 to $5.95. All 19
prepaid card issuers provide free access to account statements online.
-- Customer Service: Most pre-paid card issuers provide free customer
service, but consumers using the BuyRight card will be charged $1 to
speak to a customer service representative, while users of the Exact
card will pay $3.95 for doing so. Some prepaid card issuers charge
customer service fees after a limited number of free calls.
-- Fees for Inactivity: 9 of the 19 prepaid cards charged fees when
cards are not used after a certain period of time. These dormancy
fees range from $1.95 per month for the Rush Card (after 90 days of
inactivity) to $9.95 per month for the Exact card.
-- Overdraft Fees: A number of prepaid card issuers claim that they do
not charge fees when users spend more than the available amount on
their cards. However, Consumers Union found that 13 of the 19 cards
it reviewed included overdraft or "shortage" fees. Most of the card
issuers that charge an overdraft fee do not specify the amount of the
fee. Instead, the card agreement indicates that consumers will be
charged "applicable fees" for the shortage.
When prepaid cards are lost or stolen and used by others to make fraudulent transactions, consumers are not protected by the same regulatory and statutory safeguards that enable other debit card users to recover their money. If a consumer contacts a card issuer about a lost or stolen debit card within two business days, the consumer's liability is limited to up to $50 (or up to $500 if the consumer reports the debit card lost or stolen after two business days). By contrast, prepaid cards may only have voluntary protections that could be revised or rescinded at any time for any reason.
Some prepaid cards claim to provide consumers a way to build a credit record or include a credit line feature. However, Consumers Union found that the prepaid card issuers may report "credit building" activity to an alternative, less used credit reporting agency or may report only the payment of the card's high monthly fees. The credit line feature may provide credit which is as expensive as costly overdraft loans and payday loans.
Finally, consumers with traditional bank accounts have peace of mind that their money will not be lost as long as their bank is FDIC insured. But consumers who use prepaid cards have no guarantee that they will be able to recover all their money in the event of a bank failure because the funds may not be insured by the FDIC.
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Tuesday, September 14, 2010
Consumer Reports Index: Economy Continues to Waiver With Worsening Job Outlook
/PRNewswire/ -- Consumer difficulties are declining, but the economy continues to waiver, with a worsening job picture and declining retail activity, according to the Consumer Reports Index for September.
The U.S. job outlook remains bleak, the September results for the Consumer Reports Employment Index marks a two-month decline, down in September to 49.1 from 50.2 in August. The share of Americans claiming to have started a new job in the past 30 days is 5.0%, versus 5.9% in August, and down from July's recent high of 7.8%. Job losses in the past 30 days were up, 6.9%, from August, 5.6%. Results show that younger Americans between the ages of 18-34 years have been hit the hardest by job losses (13.7%).
Americans are continuing to pull their purse strings tight. The Consumer Reports Retail Index for August continues to decline. The Past 30-Day Retail Index for September is at 9.8, down significantly from last month's 11.4. September marks an overall decline from a year ago when the Past 30-Day Retail Index was at 11.0, and is at its lowest level since November 2009 (9.0). September's Next 30-Day Retail Index is at 7.6, down from August (8.1), as well as a year ago (8.8). Per capita spending in the past 30 days is down to $185, from $286 in August.
The economy remains unsteady and Americans are cautious, but the Consumer Reports Trouble Tracker continues to show positive developments. It has declined to 53.7 from 56.6 in August, and has posted three months of declines from its recent high in June (63.5). The Trouble Tracker has improved from this time last year when it was at 68.7, a 15-point drop. Positive developments this month were led by a decline in consumers losing or facing reduced healthcare coverage, to 6.7% from 9.7% in August.
As the Trouble Tracker improves, Americans' outlook has yet to brighten. The Consumer Sentiment Index has gradually slipped over the past two months and is currently at 44.1, continuing a slide from July (45.2). This index has changed little since October 2008 when it stood at 45.3.
"The recovery faces serious challenges and is at risk of stalling," said Ed Farrell, a director of the Consumer Reports National Research Center. "Job creation remains the greatest challenge. The growth in the ranks of the employed remains anemic and will dampen consumer outlook moving forward. Americans have not seen any real improvement in their financial situation since the recession hit and this is reflected in our Sentiment Index, which has been in negative territory for the last two years."
The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Here are the key findings:
Consumer Reports Sentiment Index: 44.1
-- Consumer Reports Sentiment Index has gradually declined from 45.2 in
July to 44.1 in September. The most optimistic consumers are between
the ages of 18-34 (49.9), along with households with an income of
$100,000+ (50.7). The most pessimistic consumers are between the ages
of 35-64 (42.3) or age 65+ (41.1), and households with an income less
than $50,000 (40.4).
The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.
Consumer Reports Trouble Tracker Index: 53.7
-- The Consumer Reports Trouble Tracker Index has shown a decline this
month, pointing to fewer troubles for consumers, dropping to 53.7 in
September from 56.6 in August, and is down substantially from a year
ago (68.7).
-- Positive developments were led by a decline in consumers losing or
facing reduced healthcare coverage, to 6.7% from 9.7% in August; a
drop in the proportion of Americans unable to afford medical bills or
medications (13.6%), down from 15.4% in August, and a slight reduction
in the proportion of Americans that faced negative changes to their
credit cards, down to 7.2% from 8.9% in August.
-- The most common difficulties faced by Americans are:
-- Unable to afford medical bills or medications (13.6%), down from
15.4% in August
-- Missed payment on a major bill - not mortgage (9.3%), down from
10.2% in August
-- Credit card increased rates/fees, reduced credit line (7.2%), down
from 8.9% in August
-- Lower-income households, earning less than $50,000 a year, have been
disproportionately affected. In the past 30 days:
-- 22.4% Have been unable to afford medical bills or medications
-- 16.1% Missed payment on a major bill - not mortgage
The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced healthcare coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.
Consumer Reports Retail Index: Past 30-Day - 9.8, Next 30-Day - 7.6
-- Consumer Reports Past 30-Day Retail Index for September, reflective of
August activity, is at 9.8, down from the prior month (11.4). Per
capita spending for the past 30 days was down significantly for
September, reflecting August activity, to $185, from $286 the prior
month.
-- The proportion of Americans buying across categories in the past 30
days showed the greatest declines in small appliances (16.6%, down
3.7% points), personal electronics (21.4%, down 3.5% points), and
major home electronics (10.7%, down 2% points).
-- Among the non-index categories, past 30 day purchases, reflecting
August activity, were down slightly for new cars (1.7%) versus the
prior month (2.2%), but up for used cars (5.1%) from the prior month
(3.7%). Home purchases were up slightly in September (2.5%) relative
to August (1.6%).
-- Consumer Reports Next 30-Day Retail Index, reflective of planned
purchases for September, is at 7.6, down from the prior month (8.1) as
well as one year ago (8.8).
-- Among the non-index categories, next 30 day planned purchasing points
to new cars declining slightly, 2.5% versus 3.1% the prior month, and
used cars also moving downward to 3.5% from 4.3% for August. Planned
purchasing for homes in the next 30 days, reflecting September
activity, is on par with the prior month (1.5%).
The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30-days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.
Consumer Reports Stress Index: 60.1
-- According to the Consumer Reports Stress Index, the level of stress
consumers feel they are under (60.1) is unchanged from the prior month
(59.4), but down from one year ago (65.4).
The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).
Consumer Reports Employment Index: 49.1
-- The Consumer Reports Employment Index is down in September (49.1) from
50.2 in August, dipping into negative territory.
-- Overall labor force activity has slowed considerably in the past
month, with significantly fewer Americans claiming to have started a
new job in the past 30-days, 5.0% versus 5.9% the prior month.
-- Job losses in the past 30-days (6.9%) were up from the prior period
(5.6%). Job loses have hit younger Americans age 18-34 the hardest
(13.7%).
The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30-days.
For more information regarding the Consumer Reports Index visit www.ConsumerReports.org.
The Consumer Reports Index, conducted by the Consumer Reports National Research Center is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,257 interviews were completed (1,007 telephone & 250 cell phones) among adults aged 18+. Interviewing took place between August 26-August 29, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields, 914.378.2454, cfields@consumer.org.
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