Economy Archives - Page 3 of 5

Stricter Auto Lending Standards Means Deals For Some, Not For Others

In 2008, when the government announced plans to bail out the auto industry, many Americans were surprised to learn that the industry has reached such a low point. At the time the big American auto companies were all ailing from economic woes, and faced all out bankruptcy. The reasons? Non-unionized competition from overseas, huge pension costs, and the inability to fund jobs and benefits. Thanks in no small part to the economic stimulus, the American automotive industry has come back from the grave, streamlined their business, and cut excess costs. They're now coming back with what will hopefully be stronger strategic plans.

Good Time To Buy A Car?

Now that the big 3 manufacturers are slowly coming back, many are encouraging Americans to buy back into the auto industry by buying new car. MSN reports that if you have a relatively good credit history, then you can probably receive a pretty low rate on a car loan.

Folks with untarnished credit will find good rates, eager lenders and some amazing deals as increasingly desperate car manufacturers try to revive sagging sales.

With many lenders eager to work with consumers and a car industry highly motivated to keep sales alive for American-made products, you can get some great savings towards the purchase of a new car.

On the other hand, people with low credit scores are having a hard time getting the same kinds of deals as those with stellar credit histories. While these customers can still receives loans to buys cars, the rates are much higher, which puts the customer at risks for not being able to make the monthly payments.

Folks with troubled credit will find higher rates, increased scrutiny and warier lenders, but they won't face anything like the trouble they'd experience if they were shopping for a mortgage.

Lending standards from the automakers have been made much stricter since the crash as they now know the inherent risks in lending to those with big credit risks, and they didn't want auto lending to become the next sub-prime lending crisis, as it did in housing.

Finding A Better Deal On Your Loan And Insurance

In order to stave off this concern lenders are currently more likely to work with consumers who have a positive burrowing history. If you’re concerned about your loan application, check your credit score and consider talking to a lender about finding a better rate, and options for cash rebates or savings. Also consider finding a loan through a credit union or other bank before going to the dealership, and ask the dealership to beat the best rate that you find.

Control the things that you can, like improving your credit history. Pay off all installment loans on time, dispute incorrect statements on your credit, ask companies to remove things from your credit file, and pay off debts that you may have.

When it comes time to actually purchase your car, also make sure to get and research free insurance quotes online to get the best deal on insurance as well. Don't forget to look up ways to get a reduction in your insurance rate, like multi-car discounts, and companies that give discounts for good drivers.

Conclusion

While the automotive industry is back on it's legs, things aren't completely back to where they were before. Lending standards are now stricter, and if you've got a dent in your credit, you may not find it as easy as before to find a deal. The key is to do what you can to improve your credit, shop around for the best deals on cars and insurance, and in the end you'll find what you're looking for.

Have you found recently that buying a car was a bit tougher? Tell us about it.

Tax Filing Deadline Extended To April 18th For Filing 2010 Taxes In 2011

By Mr. Money 3 Comments

Earlier this week we wrote about how because Congress took so long to act on the tax bill in December (the act was passed on December 17th), the IRS had to push back the filing start date for those that itemize. There would be a tax filing delay well into the month of February for all of us itemizers out there because the IRS needs more time to update their systems. Of course all the companies who help us to file our taxes like TurboTax will be updated long before the government is, and you can start your return there at any time. But of course that's no big suprise- that private business moves at a faster pace than government.

Tax Filing Deadline Extended

This week the IRS announced that there would be a tax filing deadline extension for everyone – and that the deadline would be pushed back from April 15th as it normally is, to April 18th.

The Internal Revenue Service today opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns. The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

So the reason for the deadline extension isn't because of the delays in people being able to file, or because of the impact of the new tax bill, it's because there's a government holiday observed on that day – meaning it has to be pushed back. Ah, to be a government worker and get all those extra days off!

Tax Filing Delay – Who Must Wait To File?

As mentioned in the first paragraph above, there is going to be a delay in the start to tax filing season as well. As many as 50 million taxpayers itemize on their taxes, and would be affected by the delay. Of those 50 million usually only around 9 million usually file in January or February and would be affected by the delay.

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.

Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

So basically the start to filing season is delayed so that the IRS can implement the extensions of several tax cuts, tax credits and other things that were to be expiring, and that have now been renewed.

Do What I Plan On Doing – File Your Taxes Now With TurboTax

While the government is still updating all of their software, many or most of the tax filing software are already up to date for the new tax law. While you won’t be able to file and get a refund until the IRS starts actually accepting returns, you can file your return with companies like TurboTax (who will allow you to file your return starting January 6th), and then just let them file the return for you when the government is ready to accept it.

don’t wait to start your return. TurboTax products are already up-to-date with all the latest forms and schedules. You can prepare your return with TurboTax and electronically file it beginning on Jan. 6.

TurboTax will securely hold your return until the IRS begins accepting returns impacted by the processing delays. TurboTax will send you an email confirmation that your return has been e-filed and accepted by the IRS.

TurboTax is the tax software I used last year to file my taxes, after having used several others in past years, including a good one from TaxSlayer.com. While TaxSlayer and other packages aren't bad, I found the TurboTax interface to be much easier to use, and less complicated to complete. I double checked my return with TaxSlayer and CompleteTax last year, and both of them gave me about the same number for my amount due as TurboTax. So based on TurboTax's better interface, I would recommend it first.

Check out all of your filing options at the TurboTax site!

Do you usually not file your taxes til the last minute? Will this extension be just what you needed in order to file on time? Are you expecting to be delayed in filing your taxes because you itemize? Tell us in the comments!

2011 Payroll Tax Holiday Will Mean A Cut Of 2% In Social Security And Medicare Payroll Taxes

By Mr. Money 14 Comments

This past week the Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The tax package was designed to extend the Bush era tax rates for another 2 years, in addition to extending unemployment benefits, lowering the estate tax and other smaller measures. This means that the 2011 federal income tax brackets will remain essentially unchanged.

A few new tax measures were created in addition to extending the current rates, however. Among them was the 2011 payroll tax holiday.

2011 Payroll Tax Holiday

One measure that President Obama wanted to pass as a replacement to the expiring Making Work Pay tax credit that was enacted in 2009 is the new 1 year 2011 payroll tax holiday. The payroll tax, or FICA portion of your paycheck tax withholding – which funds Social Security and Medicare, will be cut by 2% for 2011. The withholding rates for your Social Security taxes will go from 6.2% to 4.2% for the 2011 tax year. The other 1.45% of your FICA taxes go to Medicare funding, and will remain unchanged.

What does that mean for the average taxpayer? Around a $1000 tax savings. Since the Social Security tax is capped at $106,800, the maximum savings that could be seen by a higher income individual is around $2136. This as opposed to a $400 credit for singles and $800 credit for families under the “Making Work Pay” tax credit.

When Will I See The Extra 2% In My Paycheck?

Typically the payroll tax is taken care of by your employer or the company that processes your payroll. You as the employee shouldn't need to take any action – like filling out a W4 withholding form.

New withholding tables have been released by the IRS now, so most employers will begin updating their own tables soon. Since the legislation was passed so late in the year, employers will have until 1/31/2011 to put in place the new payroll tax rate of 4.2%, and make any adjustments or corrections by 3/31/2011. So you should starting seeing it shortly after the new year. If you haven't seen the changes in your paycheck byFebruary, you may want to ask your HR department when the change will be happening.

What are your thoughts on the new payroll tax holiday? Are you glad they enacted something to take the place of the “Making Work Pay” tax credit? What are your thoughts?

2011 Marginal Tax Rates: Will We Keep The Same Rates, Or Will Taxes Go Up?

By Mr. Money 1 Comment

The last few months we've had quite a bit of uncertainty when it comes to what will happen to our 2011 marginal tax rates. The Congress and President Obama have gone back and forth trying to work out a deal on extending the current tax rates. First there was no consensus on whether they would extend them for all taxpayers, or only some. Republicans wanted them extended for everyone, while the Democrats wanted them extended for everyone except high income individuals.

After the election at the beginning of November, however, President Obama took on a decidedly different tone when it came to the tax rate extensions. His party had lost power in the House, and he was now more open to a compromise to get something done. He doesn't want to risk having the rates go up on the middle class and poor, and admits that raising the rates while our economy is down like it is – wouldn't be the course he'd want to take.

Package To Extend Marginal Tax Rates For 2 Years

A couple of weeks ago President Obama met with Republicans and hammered out a tax cut package that would extend the current tax rates for another 2 years. Also included in the package would be a social security tax holiday, in addition to an extension for 13 more months of unemployment benefits for the long term unemployed – which lapsed last month. Details of what is included in the package:

Extend Bush tax cuts for everyone, for 2 years.
Reduce Social Security tax levied on a worker’s wages from 6.2% to 4.2% for one year.
Reinstatement of the estate tax at 35%
Extension of jobless benefits for long term unemployed for another 13 months.
Extend current tax rates on capital gains and dividends for two years, including for higher earners.
Extend business tax breaks, including credit for spending on research

Where Is The Tax Cut Package Now?

As of this week the tax cut package is still working it's way through Congress. Yesterday the Senate passed the package overwhelmingly, and it now moves on to the House.

The Senate approved a controversial $858 billion tax cut package Wednesday, overwhelmingly voting to extend the Bush-era tax reductions despite a series of objections from both the left and the right.

The measure passed 81-19 to advance to the House of Representatives, which will take it up on Thursday, according to Majority Leader Steny Hoyer, D-Maryland.

The package includes a two-year extension of the Bush-era tax cuts set to expire December 31. It also would extend unemployment benefits for 13 months, cut the payroll tax by 2 percentage points for a year, restore the estate tax at a lower level and continue a series of other tax breaks.

So one of the key hurdles, passage in the Senate, has now been cleared.The problem? In the House some of the Democrats have threatened to change certain provisions of the bill that they don't like, which could derail the compromise.

A number of House Democrats, including Speaker Nancy Pelosi, D-California, want to change the estate tax to levels previously approved in a separate House bill that would exempt inheritances up to $3.5 million and tax amounts above that at a 45% rate. Pelosi said Wednesday the change would bring in an additional $25 billion instead of providing tax protection to only 6,600 more families through the lower rate and higher exemption in the negotiated tax deal.

Some moderate Democrats have called for the House to pass the bill unchanged. So now we'll have to wait and see if the measure will be changed, and if so, what that means for hopes of it passing.

The House Rules Committee decided Wednesday night to allow a vote on changing the estate tax provision to the levels in the previously passed House bill. If approved, the changed bill would then go back to the Senate. If rejected, the House would then hold a separate vote on the Senate version, with approval sending the bill to Obama.

Republicans involved in the negotiations with the White House on the package have warned that any changes by the House could derail the entire proposal, causing tax rates to increase in 2011.

So now we wait and see what happens with the bill – if the House votes to change the estate tax provision, and if so, if the Senate will allow the changes. Some have said that such a change could derail the deal, and could mean that marginal tax rates go up on January 1st. We shall see!

UPDATE: Sounds like the House passed the bill now as well, 277-148. Both parties contributed almost an equal amount of votes to get it to pass – 139 Dems, 138 Republicans. All that remains now is for the president to sign the extension.

What do you think will happen? Will the compromise package be passed, or will changes be made to the package that sends it back to the Senate. Tell us what you think in the comments!

One Casualty Of The Recession: Charities

By Contributor 3 Comments

Tim Chen is founder and CEO of NerdWallet.com, a website that helps consumers to compare low apr credit card offers. Tim also educates consumers about credit cards and personal finance at the Christian Science Monitor, Forbes Moneybuilder Blog, and the Huffington Post.

At the same time that Americans remain as generous as they can be, public charities and private foundations continue to take a beating from the economy's slide as donations continue their downward spiral.

Non-profit research firm GuideStar reported donations are way down as charitable organizations have been hit hard by the weak economy. The study revealed about 40 percent have seen declines in contributions in the first five months of 2010 at the same time that a majority, 63 percent, saw an increase in demand for their services. According to the study, “even organizations that have stopped the bleeding are concerned.”

Everybody Is Giving Less

More than 60 percent of participants who reported decreased contributions attributed the drop to a decline in both the number of individual donors and the size of their donations, both functions of the downturn.

GuideStar pointed out that the pain was pretty well spread among different types of organizations, although those involved in mental health and crisis intervention were more likely to report a decline in contributions (51 percent).

In addition to the number and size of individual donations, other issues responsible for decreased contributions included smaller corporate gifts; smaller private foundation grants; and discontinued private grants and government grants. As a result, 17 percent of the charities said they had to cut services while 11 percent were forced to lay off employees.

Other Estimates Corroborate The Dropoff

Meanwhile in its annual report, the Giving USA Foundation stated donations fell 3.6 percent in 2009, the largest drop in 26 years. Individual giving dropped by 0.4 percent while grants from foundations were down almost 9 percent. Americans gave $303 billion to various religious, health, cultural and environmental causes in 2009. And according to the Association of Fundraising Professionals 2009 State of Fundraising Survey, nearly half of charities in the United States raised less money in 2009 than in 2008.

What's more, researchers at Boston College's Center on Wealth and Philanthropy, which estimates how the most recent changes in financial resources affect the aggregate level of household giving, estimates US household giving for calendar year 2009 totaled between $216-$218 billion dollars, representing a decline of between 4.8 percent and 5.7 percent from the 2008 total of $229 billion.

Preliminary projections for 2010 are all over the place, as the researcher predicts that total household charitable giving could return to the pre-recession (2007) level of approximately $234 billion in the best case scenario, or on the low end, decline an additional 3.9 percent to a total of $212 billion by the end of 2010. Still the researchers pointed out the 2010 estimates would be lower if unemployment remains high throughout 2010 and higher if the recovery is stronger than expected.

A Final Warning To Fundraisers

If you’re going to be doing any fundraising in the downturn, you’re going to have to be smart about it. Peppering potential donors with constant reminders turns out to not be the best approach. When individuals were asked about why they stopped giving, the No. 1 response was being petitioned for money too frequently by a particular charity, and solicited an inappropriate amount. It makes sense when you think about it – what do you do with all of those “0% APR balance transfer” offers you get in your mail every day? That’s what I thought.

President Obama And GOP Reach Deal On Extending Bush Tax Cuts. Will Congressional Democrats Go Along?

By Mr. Money 3 Comments

We've been talking for months now about whether or not Congress and President Obama would be renewing the Bush tax cuts of 2001 and 2003. We've looked at what the 2011 tax rates would be if they weren't extended, and talked about what some of the problems of not extending the Bush tax cuts would be. In the end I wasn't sure that the Democrats and Republicans could find enough common ground on the issue to actually come up with a compromise solution. But last night President Obama and Congressional Republicans agreed in principle to a deal to extend the Bush tax cuts for all taxpayers, including high income earners. Not all Democrats are happy about the deal, so it still remains to be seen what they will do. Here is Obama announcing the deal.

In exchange for allowing an extension of the tax cuts, President Obama was able to get some concessions which are detailed below.

Deal On Extending The Bush Tax Cuts

Last night President Obama announced the deal (see the video to the right), and what it would entail.

President Barack Obama reached agreement Monday with Republican leaders in Congress on a broad tax package that would extend the Bush-era income tax cuts for two years, reduce worker payroll taxes for one year and give more favorable treatment to business investments.

Other elements of the deal include a temporary reinstatement of the estate tax at 35%—the level favored by most Republican lawmakers—as well as an extension of jobless benefits for the long-term unemployed.

“We have arrived at a framework for a bipartisan agreement,” Mr. Obama said on Monday night, capping weeks of negotiations with leaders in Congress.

The outcome of the negotiations is vital, because the current tax levels signed into law by President George W. Bush expire on Dec. 31. Unless Congress acts, tax rates on virtually all Americans who pay income taxes will rise on Jan. 1. That could affect economic growth and even holiday sales.

What Is In The Deal?

To recap, the following were agreed to by President Obama and Congressional Republicans. (No Democrat nod to this plan as of yet).

Extend Bush tax cuts for everyone, for 2 years.
Reduce Social Security tax levied on a worker's wages from 6.2% to 4.2% for one year.
Reinstatement of the estate tax at 35%
Extension of jobless benefits for another 13 months, beyond current 99 weeks.
Extend current tax rates on capital gains and dividends for two years, including for higher earners.
Extend a raft of business tax breaks, including credit for spending on research

Democrats Not On Board… Yet

So far the plan has been panned by Congressional Democrats and the liberal base, and Obama has admitted that there is a tough road to get this deal passed.

In reaching the deal, whose details still need to be worked out, Mr. Obama brushed past the demands of many in his own party to curb tax cuts for the wealthy. Some liberal lawmakers and activists were left seething, particularly over last-minute concessions to Republicans on the estate tax. Democratic leaders didn't agree to the deal during meetings on Monday with Mr. Obama and Vice President Joe Biden, according to a House aide.

“I can tell you with certainty that legislative blackmail of this kind by the Republicans will be vehemently opposed by many, if not most, Democrats,” said Rep. John Conyers (D., Mich.).

In the Senate, Tom Harkin (D., Iowa) called it “an understatement” to say he was disappointed.

So at this point liberal lawmakers and activists are “left seething” at the deal, and convincing them that his is a good idea isn't going to be easy. Obama may need to rely on Republicans to help get this passed.

White House officials will now try to persuade Democrats to back the agreement, but anger on the left suggests that Mr. Obama might need to rely heavily on Republican support to move legislation through Congress.

Republican leaders spoke highly of the agreement. In a statement, House Republican Whip Eric Cantor said, “No one gets everything they want in a deal, but our top priority is to restore certainty to the private sector so that businesses small and large can start hiring again.”

Senate Republican Leader Mitch McConnell also praised the deal and asked that Democrats in Congress now “show the same openness to preventing tax hikes the administration has already shown.”

The Republicans admit that they didn't want to extend unemployment insurance past the current 99 weeks or reinstate the estate tax, but that the political reality was that they would need to in order to come to a compromise.

If Tax Cuts Are Passed, Will It Lead To Growth And More Stability?

Many congressional leaders have stated that in order to get the economy moving again we need to pass something in order to restore a bit of stability for business. They need to know what's going to be happening next year so that they can adjust payroll, plan expenditures and move forward in their planning for 2011. Hopefully if this can get passed it will be a spark that we need to give business a boost.

What do you think about the deal that President Obama announced last night. Do you think it's a good thing, and will congressional Democrats get on board? Tell us your thoughts in the comments.

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