The highly anticipated legislation that will extend unemployment insurance benefits, prevent doctors from absorbing cuts in Medicare payments and provide money to struggling state governments passed a significant hurdle in the Senate on Tuesday. It gained momentum after 60 new tax breaks for individuals and businesses were added to the bill.

The unemployment insurance alone — to provide weekly unemployment checks averaging above $300 to people whose core 26-week benefit package has run out — will cost $66 billion through December. In some states people are eligible to receive benefits for up to 99 weeks.

The bill demonstrates the difficulty Democrats face as they focus on jobs. It doesn't include new ideas for boosting jobs, but instead reprises elements of last year's $862 billion economic stimulus bill, which is earning mixed reviews from voters. Simply extending those provisions has produced a far more expensive measure than a separate so-called jobs bill that Democrats hope to soon send to President Barack Obama. That measure would boost highway spending and give tax breaks to companies that hire the unemployed and could clear the Senate for Obama's desk this week.

At a gross cost of about $148 billion, Tuesday's measure illustrates the extraordinary cost of the unemployment safety net as the economy inches out of the recession. Democrats say the unemployment benefits inject demand into the economy and say renewing the tax cuts helps preserve existing jobs.

The measure closes $29 billion of tax loopholes to help defray its cost, including one enjoyed by paper companies that get a credit from burning "black liquor," a pulp-making byproduct, as if it were an alternative fuel.

From CBSNews.com:

Jeremy Bray received an e-mail message this morning with an unwelcome surprise: Amazon.com told him it had canceled its affiliate program, which provides small payments for referring customers, for everyone in the state of Colorado.

The reason? A state law, which Democratic Gov. Bill Ritter signed last week, slaps onerous new restrictions on large out-of-state sellers like Amazon, which said it has no choice but to end its marketing program in response.

Bray, a blogger who has lived in Pueblo, Colo., for more than 20 years, told CNET on Monday that he's now trying to "bring as much attention to the issue as possible in hopes of getting Colorado to repeal" the new law.

Colorado is not alone. Fifteen other states have considered or are considering enacting laws targeting Amazon and other e-commerce companies that typically do not charge sales tax for shipments sent outside their home state, according to a report released Monday. Four states including Colorado have already enacted them.

It should come as no surprise that the number of millionaires in the country decreased in 2008 due to the market meltdown, and poor economy. However, I was surprised when I read that the number of millionaires actually increased by around 16% in 2009, according to this article on CNN Money. As it explains, the number of households in the U.S. worth $1 million or more grew to 7.8 million in 2009.

The firm's report, "Affluent Market Insights 2010," also found that the number of ultra high-net-worth households, worth $5 million or more jumped 17% to 980,000 in 2009.

"This is largely attributed to the stock market rebound, since other assets including real estate and private businesses have not rebounded as dramatically," said George H. Walper, Jr., president of Spectrem Group.

The report comes one year to the day after the Dow and the S&P 500 closed at 12 year lows in the thick of the financial crisis.

Question #1: Can I still make donations to Haiti that can be counted on my 2009 tax return?

Unfortunately, no. The deadline to make deductions that can be counted on your 2009 tax return was February 28^th. However, if you have any extra money then you should still consider making a donation; you can claim the deduction on your 2010 return. To learn how you can make a contribution checkout this article on the top 10 options for donating to the Haitian relief efforts.

Question #2: If my husband and I start a new business can we classify it as a sole proprietorship or do we need to form a partnership?

You and your husband can classify the business as a sole proprietorship as long as you meet the following IRS conditions:

1. The only partners in the partnership are a husband and wife

2. They file a joint tax return

3. The husband and wife must materially participate in the trade or business.

4. Both spouses must elect qualified joint venture status on Form 1040 by dividing the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture and each spouse filing a separate Schedule C, C-EZ, or F accordingly, and, if required, a separate Schedule SE to pay self-employment tax.

According to the Congressional Budget Office, Obama’s proposed budget would add over $9.7 trillion to the national debt over the next ten yeas. They made the announcement on Friday, and claim that the President’s tax cuts for the middle class are the main reason for the shortfall.

The 10-year outlook released by the nonpartisan Congressional Budget Office is somewhat gloomier than White House projections, which found that Obama's budget request would produce deficits that would add about $8.5 trillion to the national debt by 2020.

The CBO and the White House are in relative agreement about the short-term budget picture, with both predicting a deficit of about $1.5 trillion this year -- a post-World War II record at 10.3 percent of the overall economy -- and $1.3 trillion in 2011. But the CBO is considerably less optimistic about future years, predicting that deficits would never fall below 4 percent of the economy under Obama's policies and would begin to grow rapidly after 2015.

Deficits of that magnitude would force the Treasury to continue borrowing at prodigious rates, sending the national debt soaring to 90 percent of the economy by 2020, the CBO said. Interest payments on the debt would also skyrocket by $800 billion over the same period.

As this article on USA Today.com explains, Federal employees earn higher wages than comparable workers in the private sector in more than eight out of 10 occupations. I have included a section of their article below, but you can checkout the full text – including a comparison chart – at USA Today.com.

Accountants, nurses, chemists, surveyors, cooks, clerks and janitors are among the wide range of jobs that get paid more on average in the federal government than in the private sector.

Overall, federal workers earned an average salary of $67,691 in 2008 for occupations that exist both in government and the private sector, according to Bureau of Labor Statistics data. The average pay for the same mix of jobs in the private sector was $60,046 in 2008, the most recent data available.

These salary figures do not include the value of health, pension and other benefits, which averaged $40,785 per federal employee in 2008 vs. $9,882 per private worker, according to the Bureau of Economic Analysis.

From the Tax Professor Blog:

President Obama proposes to fund his health care bill in part by limiting the tax rate at which itemized deductions reduce tax liability to 28%:

The Administration proposes to limit the tax rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting only single taxpayers with income over $200,000 and married taxpayers filing a joint return with income over $250,000 (at 2009 levels). The proposed limitation would be effective for taxable years beginning after December 31, 2010.

I was recently quoted in a personal finance article in The Faster Times on how to “tackle your tax bill.” It explains every step you need to take to get your return filed, with strategic tax advice. You can check out an excerpt from their post below:

" 'Tis the season for all things taxes. You suspect you might have to pony up to Uncle Sam. Sorry about that. But the good news is: you still might be able to lessen the blow.

Be strategic

In light of the struggling economy, some families are choosing to live in multi-generational households. If you are supporting one of the ever emerging multi-generational households, you may be eligible to claim tax exemptions for the additional household members.

Exemptions reduce your taxable income, explains Roni Deutch, author of The Tax Lady’s guide To Beating the IRS.

Run the numbers

As part of last year’s stimulus package, many American’s received extra money in their paychecks. But approximately 15 million taxpayers will have to repay $250-$400 of the tax credit they received. To avoid getting a nasty surprise when you file, use the IRS Schedule M to determine whether or not you may have to repay Uncle Sam.

“Although this credit is meant for good, it may cause some harm to unsuspecting taxpayers because the credit was applied automatically to all tax withholdings whether the taxpayer qualified for it or not,” says Deutch. After you determine whether you have to pay this credit back for tax year 2009, you should get a head start and check your current withholdings because this credit extends to tax year 2010, she adds."

Charles Rangel – chairman of the tax-writing House Ways and Means Committee – stepped down yesterday after eight months of ongoing investigations. While numerous other House of Representative members had urged his resignation due to ethics complaints, ironically including unpaid taxes, while others feel his resignation came at the wrong time.

There are dozens of items on the tax agenda, and many economists are worried that Rangel’s replacement (Sander Levin) may not be familiar with them. Earlier today, the Associated Press put together the following list of unfinished tax business that Rangel is leaving behind for Levin to handle:

• The top two marginal tax rates would increase, with the top rate going from 35 percent to 39.6 percent. The increase would affect individuals making more than $171,850 and couples making more than $209,250. President Barack Obama has asked Congress to limit the tax increases to individuals making more than $200,000 and couples with incomes more than $250,000.

• Tax rates also rise for just about every other income level. The lowest tax rate would rise from 10 percent to 15 percent. This year that 10 percent rate applies to taxable income under $8,375 for individuals and under $16,750 for couples.

• The child tax credit would be reduced from $1,000 to $500.

• The top tax rate of 15 percent on dividends would expire, leaving dividends to be taxed as regular income, with a top rate of 39.6 percent.

• The top capital gains tax rate of 15 percent would increase to 20 percent.

• The federal inheritance tax, which has been gradually phased out over the past several years, will return with a 55 percent tax on estates above $1 million.

From the WallStreetJournal.com:

Two Democratic senators were pushing for a vote Thursday on a measure that would levy a one-time tax on bonuses paid to executives at firms that received significant infusions of taxpayer cash during the economic crisis.

If Sens. Barbara Boxer (D., Calif.) and Jim Webb (D., Va.) are successful, it would bring the contentious issue of executive compensation back to the fore.

"It's a one-time amendment based on a unique situation in this country when the American taxpayers had to bail out our major companies in order to stabilize our economy," Mr. Webb said on the floor of the Senate Thursday.

The tax would be a one-off 50% levy on bonuses above $400,000 paid to executives at institutions that received $5 billion or more of taxpayer support.

It would apply to 11 institutions, all financial firms except for car maker General Motors Co., which has one of the largest outstanding debts to the Treasury. Housing guarantee agencies Fannie Mae and Freddie Mac would also be hit by the measure.

We have all heard about how healthcare reform legislation will affect patients, but few have spoken on the affect changes to the industry will have on doctors and nurses. CNN Money.com posted an interesting article examining how the proposed cut of Medicare payments will reduce the income of many doctors in this country. For those of which who are still paying off student loans, these reductions could lower their income to levels comparable of a minimum wage job.

When you think of low-paying jobs, doctor doesn't usually come to mind.

But with a 21% cut in Medicare payments slated to take effect later this month, physicians who say they are making an “OK” living may be reduced to income levels that no longer make their profession viable. That's especially true for those still paying medical school costs and other training.

"The cuts will hit me," said Dr. William Schreiber, a primary care physician based in North Syracuse, N.Y.

Schreiber sees 120 patients a week. About 30% of them are enrolled directly in Medicare, while another 65% have private insurance plans that peg their payments on Medicare's rates. Only 5% pay without the help of an insurance plan.

As a result, Schreiber expects the cuts to take away $3 out of every $5 he currently earns. And, as a primary care physician, he already wasn't earning anything near the salary of a specialist.

Life without tax increases

Bad States for amateur gamblers

Taxpayers have $1.3 billion in unclaimed refunds

Musical chairs at Ways & Means

Top 6 mindless money wasters

I put a lot of effort into writing about the financial consequences of unpaid tax debts on my blog. However, the stress of an IRS audit or the back tax collection process can lead to very serious health problems as well. To help the readers of my blog avoid a serious medical issue, I have put together the following list of common health effects of IRS collections. By staying aware of potential problems, you can establish a routine to properly manage your stress.

Chronic Stress

Dealing with the IRS can be stressful for any American. However, when the stress becomes chronic it can lead to a whole other set of medical issues. Chronic stress is the human body’s response to large amounts of stress for prolonged periods of time. If untreated, chronic stress can seriously inhibit both your mental and physical health in a variety of ways including headaches, insomnia, anxiety, mood swings, depression, hypertension, hemorrhoids, and even varicose veins. In more serious cases chronic stress can develop into panic attacks, and eventually a panic disorder. All of these symptoms are difficult to live with, and impossible to ignore. If you are experiencing any signs of chronic stress, then I highly recommend seeking the opinion of a medical professional.

Eating Problems

As a response to insomnia, depression, or stress it is very common to unknowingly alter your eating habits. Disorders related to eating can develop quickly, and be hard to recognize. If you find yourself not following your usual eating habits because of stress, then you should try planning balanced meals a day ahead of time. That way you can stick to your plan, and ensure you are receiving proper nutrition. Additionally, having an eating plan can make it difficult to skip meals, or resort to only eating unhealthy fast food. If you continue to struggle with your eating habits then you might want to seek support from friends and family, or even a trained therapist.

Depression

Severe stress and mild to severe depression often go hand-in-hand when dealing with life changes and prolonged problems, such as IRS collections. Depression comes in many degrees of severity, but recognizing that you have a problem with depression is not always easy. Everyone feels depressed at times, but if your depression continues to last, and you become so unhappy that it is difficult to get out of bed then you may have a more serious disorder. Try spending more time with close friends and family, especially on your most stressful days. If this does not help then you may want to visit a doctor or psychiatrist to see if your depression is a problem that needs medical treatment.

Dental Health

Constantly worrying about a tax problem can also lead to dental issues, if you are not properly managing your stress. Studies show that individuals facing large amounts of severe stress for an extended period of time have higher chances of developing tooth or gum disease. It is also common for people to begin grinding their teeth while under stress, which can also lead to dental problems. Therefore, it is important to remember your dental health – and not neglect your teeth – while going through a stressful time in your life.

PTSD

Once the IRS collection process is over and the weight is lifted from your shoulders, you should still monitor your health and mental well being for an extended period of time. Post-traumatic stress disorder can happen to anyone – and in varying degrees – that have dealt with such a stressful situation that their body could not handle it at the time. Common symptoms of PTSD are flashbacks, lucid nightmares, sleeplessness, anxiety, and emotional numbness. If you experience any of these symptoms make an appointment with your doctor as soon as possible.

Other Serious Risks

The list goes on and on when it comes to the health effects of an unhealthy state of mind. In addition to the problems listed above, other serious risks include ulcers, obsessive-compulsive disorder, severe anxiety, hyperthyroidism, hair loss, heart disease, and even cancer.

Prevention

Most Americans know about the tax benefits of having children, but you might be surprised to learn that there are actually decent tax incentives to adopt children. The RDTC Tax Help Blog posted a blog entry last week explaining the tax laws surrounding adoption. You can find a segment of the article below or find the full text at the RDTC Tax Help Blog.

The Basics

There are two main tax incentives for families that adopt, an exclusion and a credit. Taxpayers can take advantage of the credit and exclusion for the expenses of adopting an eligible child. Meaning, you may be able to exclude up to $12,170 (or whatever the limit is for the tax year) from your income, and claim a credit for the same amount. However, you cannot claim both the credit and exclusion for the same expenses.

Credit Amounts

The value of the credit for the past few years is listed below. It is important to note that the credit was expanded in 2001 as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, which is due to expire at the end of 2010. Unless Congress extends the package the value of the credit will be reduced by at least 50%.

2011: $6,000 or less

2010: $12,170

2009: $12,150

2008: $11,650

2007: $11,390

2006: $10,960

Income Phase Outs

As with most federal tax credits and deductions, the value of the adoption credit phases out when your income reaches a certain level. The phase out ranges are listed below for the past few tax years. The IRS also provides a worksheet for figuring out your credit value in the Instructions for Form 8839.

2010: $182,520 - $222,520

2009: $182,180 - $222,180

2008: $174,730 - $214,730

2007: $170,820 - $210,820

From Bloomberg.com:

Service industries in the U.S. accelerated in February more than anticipated, indicating the economic expansion may soon create jobs following the worst employment slump in the post-World War II era.

The Institute for Supply Management’s index of non- manufacturing businesses, which covers almost 90 percent of the economy, increased to 53 from 50.5 in January. Last month’s reading was the highest since October 2007 and exceeded all estimates of 73 economists surveyed by Bloomberg News.

The factory rebound that helped the economy emerge from the recession is starting to filter to other industries, giving a boost to companies such as Macy’s Inc. Stocks climbed as another report showed job losses cooled in February and pointed to gains in employment as soon as this month.

“We’re starting to see a broadening of the economic recovery,” said Richard DeKaser, chief economist at Woodley Park Research in Washington, whose forecast of 52.9 was the highest in the Bloomberg survey. The data “are encouraging, to say the least.”

The Standard & Poor’s 500 Index rose 0.4 percent to 1,123.14 at 12:13 p.m. in New York. The 10-year Treasury note fell, pushing the yield up to 3.64 percent from 3.61 percent late yesterday.

Earlier this week the National Retail Federation (NRF) revealed that the number of Americans likely to pay off a debt with their tax refunds this year has gone down by about 4%. In 2009 it was estimated that 48% of Americans would use their tax refunds to pay off debts, but this year the number has dropped to only 44%. As this Biz Journal article explains, the main reason for the drop is that fewer US taxpayers are expecting to receive a refund this year.

According to those polled, fewer taxpayers are expecting a refund – 65.5 percent this year, compared to 68.4 percent last year.

“A little bit of ‘free money’ will go a long way for Americans this year,” said Tracy Mullin, president and CEO of the NRF. “Retailers planning special promotions over the next few months may find that shoppers are a bit more receptive to opening up their wallets than they have been for the past year.”

NRF said only 12.5 percent of those polled plan to treat themselves or their families with a major purchase with the refund, which is up from 11 percent last year. More than 40 percent plan to save it, nearly 29 percent will put it toward everyday expenses and 10 percent will use it for vacation.

Online filing is becoming more popular across the country, with more than 54 percent planning to file via Internet, compared to more than 50 in 2007.

Less than a month after Roni Deutch Tax Center partnered with the Sacramento Kings for the “Kings Tax Night,” the Roni Deutch Tax Center has also partnered with the NJ Nets to offer a similar promotion to residents of New York and New Jersey. This Friday representatives from local Roni Deutch Tax Centers will be available to answer questions, and all fans who attend the game will receive a coupon that they can redeem at a Roni Deutch Tax Center to get their state income tax done free.

According to NYTimes.com, “the Nets will not be paying their fans’ tax bills, and a similar coupon can be downloaded from Roni Deutch’s Web site. Deutch charges $29 to prepare a state income tax return and $185 for a federal return.” Roni Deutch had no trouble linking her fortunes to the worst team in the N.B.A.; in fact, she said she relished the chance.

Businesses large and small have been struggling through the recession, and the U.S. Postal Service is also feeling the strain of the poor economy. The government agency recently admitted to a $3.8 billion loss last year, and in an attempt to keep their doors open, the post office is hoping to put an end to Saturday mail deliveries.

As this article on CNN explains, the USPS posted a $3.8 billion loss in its 2009 fiscal year, the latest in a multiyear string of whopping losses. Mail volume was down 12.7% for the year, a trend the agency expects to continue over the next decade as more consumers opt for online bill payments and message delivery.

The Post Office was $10 billion in debt as of Sept. 30 -- not far off from its $15 billion debt limit, which the agency expects to hit in its 2011 fiscal year.

The challenges hurting USPS's bottom line are reflective of a "macro change in society," Postmaster General Jack Potter said at a press conference Monday previewing the proposed changes. "All posts around the world are challenged, just as we are, by the diversion of hard copy to electronic medium."

From BusinessWeek.com:

More than $1 trillion of high-yield debt will come due between now and 2015—a big potential weight on the U.S. economic recovery

Whatever the economic indicator—from manufacturing reports to home sales to consumer spending—the message is clear: The U.S. recovery is under way. It will likely be a tepid comeback, but it will still fit economists' definition of a recovery. While most post-World War II recessions have been followed by strong recoveries, economists and business leaders all caution that this time it will be different.

The Great Recession had many causes. Clearly the bursting of the bubble in asset values, particularly U.S. residential real estate, was the main cause of the subprime mortgage crisis and the resultant bust. Those asset valuations did not shoot higher on their own; they were sustained by ever-increasing debt levels that primed the pump and inflated the bubble.

While asset values can evaporate in an instant, the indebtedness assumed to acquire the asset does not. Significant debt can take years and even decades to eradicate. Unless, of course, the debtor goes bankrupt. While filing for Chapter 11 may appear to be a quick solution, it is by no means an easy one. Few debtors are willing to write off their equity unless there is no other alternative.

It is no secret that millions of Americans go with out health insurance because of high cost, and with the ongoing unemployment problems many families simple cannot afford coverage. Fortunately, MSN Money.com put together this helpful article with tips on how to find affordable health care. You can find a few of their tips below, but be sure to check out the full article at MSN Money.com.

If you're uninsured and seeking stopgap medical care before you find coverage again, you can triage your way to better health by understanding the trade-offs of several care options, experts say. A retail clinic, urgent care facility or community health center may be a suitable fit, depending on the severity of your medical need and your personal preferences.

A broad spectrum of care is available, from the limited offerings of a retail clinic to the high-end capacity of an emergency department, said Ateev Mehrotra, a policy analyst at Rand and a professor at the University of Pittsburgh School of Medicine.

"They're all places you don't need an appointment, there's open extended hours, and they're there to treat people who can't get in to see their regular provider," Mehrotra said.

If you have a regular doctor you'd like to keep seeing but fear you can't pay full price because of lost coverage, give the doctor a chance to work out a charity care arrangement, payment plan or possible treatment changes to lower costs, said Dr. Lori Heim, the president of the American Academy of Family Physicians, who practices in Laurinburg, N.C.

Most doctors will try to work with patients to ensure their continuity of care, she said. "Physicians also value that personal relationship that develops."

Question #1: If my college student wants to claim himself as a dependent when he files his return can I still claim his as a dependent on my return?

No. If you want to claim your son as a dependent and take an exemption for him on your return then he cannot claim a personal exemption for himself on his IRS tax return. Instead, he will need to check the box on his return indicating that someone else claimed him as a dependent.

Question #2: What should I do if I realize I made a mistake on my tax return that I have already e-filed?

Tax Audit Defense is one of those insurance products that you think you can do without, but when you get one of those large envelopes with the return address of the Internal Revenue Service you wish a thousand wishes that you had Tax Audit Defense. There are very few pieces of mail that you receive that makes your stomach flutter than getting anything from the IRS let alone an audit notice. If you have Tax Audit Defense Insurance and you get an audit notice, just fax or mail it to your insurer and they take care of the rest. You will not have to even correspond with the IRS. They do it all.

There are other advantages to having Tax Audit Defense insurance than just having protection in the event of an audit. First of all there is a tax hotline, where a number of tax professionals are standing by Monday through Friday every week of the year to answer any tax question that you have. You can ask as many questions as you like and call as many times as you like. The second major service of Tax Audit Defense is they will review your tax return for accuracy to make sure you are taking advantage of all the deductions available to you. They will also review your tax return to identify any audit triggers. They will not only review your most recent return, but they will review any return that you prepared in the last 3 years. Another advantage of Audit Insurance is a Quarterly Tax Bulletin. This quarterly publication provides you with current information on any IRS legislation that could impact your tax status. It helps you learn more about how to minimize your tax liability while enhancing your financial well being. It also offers helpful tips on avoiding tax audit pitfalls and lets you know what is happening within the IRS on an ongoing basis.

Tax Audit Defense Insurance is definitely a pay me now or pay me later proposition. Since it involves one of those things that make your stomach flutter and prevents you from sleeping nights, I think it is better to pay now. Believe me you will be glad you did.

Tax Audit Defense

Tax Audit Defense

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