THE NEW TAX CODE AND YOU! GET READY FOR STICKER SHOCK!

Posted by admin on August 19, 2010

Normally this post is about jobs and this one is too whether the title indicates it or not. This is about the changes in the 2011 TAX CODE and it will affect you whether you believe it or not. I did make these facts up but have documented my sources. It’s lengthy but please I beg you read it all the way through, then copy and paste it and send it to everyone you know. If you host a blog PLEASE COPY AND PASTE IT. The elections are in November and if we don’t get this repealed we will all be in trouble.  – Dewey Kearney webmaster

In  just six months, on January 1, 2011, the largest tax  hikes in the history of America will take  effect.

They  will hit families and small businesses in three  great waves.

On January  1, 2011, here’s what happens… (read it to the end,  so you see all three waves)…

First  Wave:

 
Expiration  of 2001 and 2003 Tax Relief

In  2001 and 2003, the GOP Congress enacted several tax  cuts for investors,  small business owners, and  families.

These  will all expire on January 1,  2011.

Personal  income tax rates will rise.

The  top income  tax rate will rise from 35 to 39.6 percent (this is  also the rate at  which two-thirds of small business profits are  taxed).

The lowest  rate will rise from 10 to 15 percent.

All  the rates in between  will also rise.

Itemized  deductions and personal exemptions will  again phase out, which has the same mathematical  effect as higher marginal  tax rates.

The  full list of marginal rate hikes is  below:

• The  10% bracket rises to an expanded 15%
• The  25% bracket rises to 28%
• The  28% bracket rises to 31%
• The  33% bracket rises to 36%
• The  35% bracket rises to 39.6%

Higher  taxes on marriage and family.

 
The “marriage  penalty” (narrower tax brackets for  married couples)  will return from the first dollar of income.

The  child tax credit  will be cut in half from $1000 to $500 per child.

The standard  deduction will no longer be doubled for married  couples relative to  the single level.

The  dependent care and adoption tax  credits will  be cut.

The  return of the Death Tax.

Think this doesn’t affect you? Guess again!

This  year  only,  there is no death tax.  (It’s a  quirk!)  For  those dying on or after January 1,  2011, there is a 55 percent top death tax rate on  estates over $1 million.  A person leaving  behind two homes, a business,  a  retirement account,  could easily pass along a death tax bill to their loved ones.

Think of the farmers who don’t  make much money, but their land, which they  purchased years ago with after-tax dollars, is now  worth a lot of money.  Their children will have  to sell the farm, which may be their livelihood,  just to pay the estate tax if they don’t have the  cash sitting around to pay the tax.

Think  about your own family’s assets.  Maybe your  family owns real estate, or a business that doesn’t make much money, but the building and equipment are  worth $1 million.  Upon their death, you can  inherit the $1 million business tax free, but if  they own a home, stock, cash worth $500K on top of  the $1 million business, then you will owe the government $275,000 cash!  That’s 55% of the  value of the assets over $1 million!  Do you  have that kind of cash sitting around waiting to pay  the estate tax?

Higher  tax rates on savers and  investors.

The  capital gains tax will rise from 15 percent this  year to 20 percent in 2011.

The  dividends tax will rise from 15 percent this year to  39.6 percent  in 2011.

These  rates will rise another 3.8 percent in  2013.

Second  Wave:

Obamacare

There  are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January  1, 2011.  They include:

The  ”Medicine Cabinet Tax”

Thanks  to Obamacare, Americans will no longer be able to  use health savings  account (HSA), flexible spending account (FSA), or  health reimbursement  (HRA) pre-tax dollars to purchase  non-prescription, over-the-counter  medicines (except insulin).

The  ”Special Needs Kids Tax”

This  provision of Obamacare imposes a cap on flexible  spending accounts (FSAs) of  $2500 (Currently, there is no federal government  limit). There is  one group of FSA owners for whom this new cap will  be particularly cruel  and onerous: parents of special needs children.

There are thousands  of families with special needs children in the  United States, and  many of them use FSAs to pay for special needs  education.

Tuition  rates at one leading school that teaches special  needs children in  Washington , D.C. ( National Child Research Center )  can easily exceed $14,000 per  year.

Under  tax rules, FSA dollars can not be used to pay for  this type of special needs  education.

The  HSA (Health Savings Account) Withdrawal Tax  Hike.

This  provision of Obamacare increases the additional tax  on non-medical early withdrawals from  an HSA from 10 to 20 percent, disadvantaging them  relative to IRAs and  other tax-advantaged accounts, which remain at 10  percent.

Third  Wave:

The  Alternative Minimum Tax  (AMT)  and Employer Tax Hikes

When  Americans prepare to file their tax returns in  January of 2011, they’ll  be in for a nasty surprise-the AMT won’t  be held  harmless, and many tax relief provisions will have  expired.

The  major items include:

The  AMT will ensnare over 28 million families, up from 4  million last year.

According  to the left-leaning Tax Policy Center, Congress’  failure to index the AMT will lead  to an  explosion of AMT taxpaying families-rising from 4  million last year  to 28.5 million.  These families will have to  calculate their tax  burdens twice, and pay taxes at the higher level.   The AMT was created  in 1969 to ensnare a handful of  taxpayers.

Small  business expensing will be slashed and 50% expensing  will disappear.

Small  businesses can normally expense (rather than  slowly-deduct, or “depreciate”)  equipment purchases up to $250,000.

This will  be cut all the way down to $25,000.  Larger  businesses can  currently expense  half of their purchases of equipment.

In January of 2011, all  of it will have to be  ”depreciated.”

Taxes  will be raised on all types of  businesses.

There  are literally scores of tax hikes on business that  will take place.   The biggest is the loss of the “research  and experimentation  tax credit,” but there are  many, many others. Combining high marginal tax rates  with the  loss of this tax relief will cost  jobs.

Tax  Benefits for Education and Teaching  Reduced.

The  deduction for tuition and fees will not be  available.

Tax credits for  education will be limited.

Teachers  will no longer be able to deduct  classroom expenses.

Coverdell Education  Savings Accounts will  be cut.

Employer-provided educational  assistance is curtailed.

The student loan interest deduction  will be disallowed for  hundreds of thousands of  families.

Charitable  Contributions from IRAs no longer  allowed.

Under  current law, a retired person with an IRA can  contribute up to $100,000  per year directly to a charity from their IRA.

This contribution  also counts toward an annual “required  minimum distribution.”   This ability will no longer be  there.

To read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1

And worse  yet?

Now,  your insurance  will be INCOME on your W2′s!

One  of the surprises we’ll  find come next year, is what follows – - a  little “surprise”  that 99% of us had no idea was included in  the “new  and improved” healthcare legislation . . .  the dupes,  er, dopes, who backed this administration will  be astonished!

Starting  in 2011, (next year folks), your W-2 tax form sent  by your  employer will be increased to show the value of  whatever health  insurance you are given by the company. It does  not matter  if that’s a private concern or governmental body  of some  sort.

If you’re retired?  So  what… your gross will  go up by the amount of insurance you  get.

You  will be required to pay taxes on a large sum of  money that you have  never seen.  Take your tax form you just  finished and  see what $15,000 or $20,000 additional gross does to  your tax  debt.  That’s what you’ll pay next year.

For many,  it also puts you into a new higher bracket so it’s  even worse.

This  is how the government is going to buy insurance for  the15% that don’t have  insurance and it’s only part of the tax  increases.

Not  believing this???  Here is a research of  the summaries…..

On  page 25 of 29: TITLE IX REVENUE PROVISIONS-  SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec.  9001,
as modified by sec. 10901) Sec.9002   ”requires employers to  include in the W-2 form of each employee the  aggregate cost of applicable  employer sponsored group health coverage that  is excludable  from the employees gross  income.”

-  Joan  Pryde is the senior tax editor for the Kiplinger  letters.
-  Go  to Kiplingers and read about 13 tax changes  that could  affect you.  Number 3 is what is  above.

More Americans’ credit scores sink to new lows

Posted by admin on August 11, 2010

By EILEEN AJ CONNELLY

The Associated Press
Monday, July 12, 2010; 11:08 AM

NEW YORK — The credit scores of millions more Americans are sinking to new lows.

Figures provided by FICO Inc. show that 25.5 percent of consumers – nearly 43.4 million people – now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.

“I don’t get paid for loan applications, I get paid for closings,” said Ritch Workman, a Melbourne, Fla., mortgage broker. “I have plenty of business, but I’m struggling to stay open.”

FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.

More are likely to join their ranks. It can take several months before payment missteps actually drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual’s score. Once the damage is done, it could be years before this group can restore their scores, even if they had strong credit histories in the past.

On the positive side, the number of consumers who have a top score of 800 or above has increased in recent years. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is notably above the historical average of 13 percent, though down from 18.7 percent in April 2008 before the market meltdown.

There’s also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data shows that this group comprised 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.

This group is significant because it may feel the effects of lenders’ tighter credit standards the most, said FICO’s Jennings. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with mid-range scores that had been eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans.

Workman has seen this firsthand.

A customer with a score of 679 recently walked away from buying a house because he could not get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been a half-percent lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.

“There was nothing derogatory on his credit report,” Workman said of the customer. He had, however, recently gotten an auto loan, which likely lowered his score.

Studies have shown FICO scores are generally reliable predictions of consumer payment behavior, but Workman’s experience points to one drawback of credit scoring: the automated underwriting programs lenders use can’t always differentiate between two people with the same score. Another consumer might have a 679 score because of several late payments, which could indicate he or she is a bigger repayment risk. But a computer program that depends just on score won’t consider those details.

On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same impact on a borrower’s FICO score.

In the past too much credit was handed out based on scores alone, without considering how much debt consumers could pay back, said Edmund Tribue, a senior vice president in the credit risk practice at MasterCard Advisors. Now the ability to repay the debt is a critical part of the lending decision.

Workman still thinks credit scores alone play too big a role. “The pendulum has swung too far,” he said. “We absolutely swung way too far in the liberal lending, but did we have to swing so far back the other way?”

Webmasters Note: If you need credit help we offer solutions from Bankruptcy help, credit cards, bad credit Auto Loans (approximately 85% approval) and more including Legal Credit Repair attorneys and our 1-800BadCredit website has more.

Credit Counseling – My Personal Experience

Posted by admin on May 9, 2010

By Leslie Kearney

10+ years ago credit counseling was something I had never heard of. Not that they didn’t exist, it’s just that until you need something you tend to not go looking for it.

I had been out of steady work for 6 months and temping for low pay, barely keeping my head above water. Needless to say credit card bills were not as important as rent and electricity and I fell behind and that’s when the interest rates began going up, and up, and up . . . well, you get the picture!

After finally landing a full time job I knew I needed to start getting my finances in order so I started researching.

Credit counselors are typically non-profit companies. They are direct liaisons between you and the credit card company. All those calls you get about your late payments become a thing of the past when a they step in!

The credit counseling agency contacted all my credit card companies and negotiated a set interest rate (way below where it was). Then they faxed me the pre-filled-in forms and all I had to do was sign!

So, now instead of making 6 payments I made one each month to the counseling agency. For a $25 a month fee (way less than the cumulated interest I was saving!) I sent them my money and they distributed it electronically to each and every credit card company.

In 3 years my credit cards were completely paid off and I was debt free. My credit score went up significantly and on my next new car purchase I was able to get 0% interest!

Signing up with a credit counseling agency was the smartest thing I ever did. I was drowning each month, unable to make the minimums. Late fees were racking up and no matter how much I paid them the balance always seemed to go higher instead of lower! Working with them took the stress off me and allowed me to budget in the payment each month.

If you are considering using a credit counselor and you have more than $5,000 to $10,000 in credit card debt, you won’t regret it. It never hurts to do your research and talk to one. In a few years you can either still be struggling to make the minimums or debt free. It’s your choice!