Archive for February, 2010
Seven Facts to Help You Understand the Alternative Minimum Tax
Tax Time-2010
The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax.
Here are seven facts the Internal Revenue Service wants you to know about the AMT and changes to this special tax for 2009.
1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting taxpayers who could claim so many deductions they owed little or no income tax.
2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
4. The AMT exemption amounts are set by law for each filing status.
5. For tax year 2009, Congress raised the AMT exemption amounts to the following levels:
$70,950 for a married couple filing a joint return and qualifying widows and widowers;
$46,700 for singles and heads of household;
$35,475 for a married person filing separately.
6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2009.
7. If you claim a regular tax deduction on your 2009 tax return for any state or local sales or excise tax on the purchase of a new motor vehicle, that tax is also allowed as a deduction for the AMT.
Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Source: IRS
It’s a new day for credit cards
By JENNIFER WATERS
For the first time in three years, credit-card issuers are ramping up their mailbox solicitations. But don’t expect to see your father’s credit-card appeals. Variable interest rates, higher annual fees and a host of new charges will be hidden in the fine print of these offers.
With new consumer protections in the Credit Card Act (officially called the Credit Card Responsibility and Disclosure Act) set to take effect Monday, the nation’s largest credit-card issuers upped their direct-mail solicitations to consumers by more than 45% in the fourth quarter from the prior quarter, according to two leading market-research firms.
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Tom BloomBut a new credit card these days will cost you. The average annual percentage rates, which climbed steadily most of last year, are now at the highest level in five years. Some 35% of cards now have annual fees and a number are raising or imposing new charges for balance transfers and inactive accounts.
“Issuers are looking for ways to recoup potential lost revenues from the new regulations,” says Andrew Davidson, senior vice president at Mintel Comperemedia.
In the fourth quarter, the average annual percentage rate stood at 13.5%, well above the year-ago rate of 11.8%, according to Synovate Mail Monitor. Last week’s average APR, according to CreditCards.com, was about 14.2%, up from 12.1% just six months ago. Interest rates for subprime borrowers were significantly steeper at 24.9%, compared with 14.3% six months ago.
It’s also worth looking at the spread between the prime rate, currently at 3.25%, and the variable interest rate the issuer applies to the credit card, says Anuj Shahani, director of competitive tracking for Synovate’s financial-services group.
The prime rate is three percentage points above the Federal Reserve’s target rate for fed funds, which now is 0% to 0.25%. Variable rates are tied to the prime rate, meaning that as rates change, the APR on a variable-rate card changes, too.
The gap between the prime rate and the average APR of 13.51% is 10.26 percentage points, the widest variance in 10 years. In 2007, the spread was less than half that, at 4.8 percentage points.
As the economy recovers, the Fed will eventually raise interest rates, which will then raise the variable rate on those types of credit cards, no matter what your credit history is. For example, if the Fed raises interest rates by a quarter of a percentage point, that average APR from CreditCards.com’s 14.1% rate would rise to 14.4%.
“We’re expecting APRs to average in the high teens by 2010 and expecting them to touch 20% and higher by 2011,” says Mr. Shahani, who is assuming the Fed will raise rates this year. There are others, however, who believe the Fed won’t do so till 2011.
If Mr. Shahani is right, people who now have variable rates at 29.9% — and many do — will be looking at rates that top 30% when the prime rises. “It does sound crazy and shocking, but if you think of it, some of those subprime folks can be looking at 35% or more this year,” he says.
Meanwhile, many customers will see the return of annual fees. In the fourth quarter, 35% of cards charged an annual fee, the highest level in the past decade, according to Synovate, which expects more issuers to tack on annual fees in the coming months. That could come back to haunt some card issuers. A recent Synovate study found that three out of every four credit-card holders will either cancel or consolidate cards that carry an annual fee.
Here are the things you need to watch out for should you be tempted by any of the credit-card offers you receive:
Average annual interest rates: They will be higher than you’re used to and could get higher yet. Most, if not all, credit cards will offer an attractive introductory rate for 12 months before it shoots up to something not so pretty. Make sure you know what you’re getting into.
Rate increases: The new law prohibits card issuers from escalating rates during the first year. Rates cannot increase without a 45-day notice — and the opportunity for you to opt out and cancel the card. But it you’re more than 60 days late on payments, all bets are off.
Annual fees: Yes, they’re back, but not on every card. If you’re the type who pays off credit cards every month, then consider this the credit-card issuers’ payback for not contributing to top-line sales. Of course, you can choose another card or consolidate on another household charge account.
Application fees: These are new to most people. It’s a charge for the opportunity to apply for a card, whether you get the card or not. Annual and application fees cannot exceed 25% of your credit limit. But don’t get fooled by them. They can represent another form of interest on your account.
Hybrid cards: Synovate’s Mr. Shahani expects to see innovation take over the card space as issuers look for new ways to raise money. Watch out for low-fee cards that could have other high-interest charges or fees.
Late fees: They haven’t gone anywhere and could now come in different packages. Many issuers are looking at tiered payments such as $29 for balances below $500 and $35 for those above $500.
Over-limit fees: You have to let the card issuers know you’re willing to pay a fee should you go over your limit. If you don’t, you’ll be turned down at the cash register. Some issuers such as American Express and Discover have done away with over-limit fees.
Write to Jennifer Waters at jennifer.waters@dowjones.com
Simple Steps You Can Take Now to Prevent Identity Theft
Identity Theft
by Stan Stahl
Many people think that as long as their computer is in their possession, no one can access the information on it. But identity thieves have many clever ways to get information from your computer. Did you know they can remotely install rogue programs that take over your computer or they can park near your home and intercept your wireless network signals?
Here are some basic ways to protect your computer from cybercriminals:
- Set Microsoft Windows and Office to automatically update security patches and service packs.
- Install a reputable host intrusion prevention system, such as Blink. Basic antivirus/antispyware software is not adequate protection against today’s threats. (One year of Blink blink is free for personal use.)
- Don’t run peer-to-peer file-sharing programs, such as Kazaa, Limewire or BitTorrent.
- If you have a wireless network, encrypt it with WAP2 encryption.
- Don’t click on website ads offering to scan your computer for free. Instead of scanning your computer, many of these offers actually infect it.
- Never open unusual or unexpected email attachments, not even from people you know. Your friend’s computer may have been taken over by a virus or worm and instructed to send the malicious code to everyone in their address book.
- Never follow links in emails that request your user names, passwords or financial information. A reputable bank or credit union will never email you asking for such information.
Guard your online financial information
- Never send your Social Security number, bank account numbers or credit card numbers in unencrypted email.
- Only buy online from merchants whose URL begins with https://. You can also look for the small lock symbol at the top of your browser window. HTTPS provides encrypted transmission between the user’s computer and the merchant. While it provides protection from your transaction being intercepted by criminals, it does not provide any assurance that information stored on the merchant’s server will be protected.
Monitor your credit
- Subscribe to a basic credit monitoring service (AAA offers a free basic one for members).
- Review your bank and credit card accounts each month for fraudulent activity.
Protect your information away from home
- Keep your laptop with you at all times. Never leave it in your car.
- Keep Wi-Fi and Bluetooth turned off except when you are using them.
- Consider encrypting the hard drive of your laptop. If you lose the laptop, the information is still safe. (You can get free encryption software at http://www.truecrypt.org/.)
- Don’t use public computers or public Wi-Fi for online banking or shopping. You don’t know how secure they are.
As a general rule, don’t give your information to anyone online, except when establishing accounts with reputable businesses. Once the account is established, never log on from an email link, a public computer or public Wi-Fi.
3 Reasons Why Email Still Matters to Your Business
Your Email
by Paul Diamond
Email has long been considered the dinosaur of the digital marketing world. Our inbox is overflowing to the point where it is unmanageable and we certainly don’t need more of it, right? However, there are plenty of reasons why email marketing will remain the workhorse of any digital marketing strategy, and in particular, any successful social media strategy. Here are the top 3 reasons why email and social media belong together.
#1 – Not all customers are social media users.
Yes, it’s true. Some customers aren’t on Twitter and don’t know what RSS stands for. And even though social media participation is on the rise (only about 20% of U.S. Internet users don’t engage with social media, according to a report by Forrester Research), it would be a mistake to ignore those who aren’t yet comfortable with social media. You can still stay in touch with these people by email, and use it to alert them when you have a new blog post up.
#2 – Some of your customers are HUGE social media users.
On the flip side, some of your customers are engaged in a number of social networks, and will find that email is truly the only way to keep up with what’s going on in each of them. For instance, I don’t check Facebook or LinkedIn every day, but I have set up email notifications for when something of interest happens on one of those networks. And although I have an RSS Reader set up with literally hundreds of feeds from various blogs, I set my favorite blogs to send me updates by email. It’s simply easier for me that way. I guarantee you that you’ll have some customers and prospects in the same situation.
#3 – Email itself is becoming more social.
Google announced Google Buzz, a new feature within Gmail to make the service more “social.” Facebook also has plans to add an email client to its service.
Eventually we will converge on a platform that will look like a combination of what we now know as “email” and “social media.” Until then, make sure you keep email as part of your digital marketing strategy. Your social media neophytes and veterans alike will thank you.
How Pay-By-Cell Will Transform Your Business
My i Phone
by Paul Diamond
Cell phones are becoming not only virtual credit cards, but also mobile credit card processing terminals. In Japan and Sweden consumers have long been using cell phones to make purchases. The United States has been slow to adopt the technology, but currently has four forms of mobile phone transactions in use, and these may become widely adopted soon. The four models for cell-phone transactions are:
- Swipe your phone: Customers can securely swipe their cell phone and use it just like a credit card, making for a quicker transaction. One provider, BlingNation, is spreading this technology via community banks, which provide local merchants with a phone-swipe terminal and checking-account customers with a small adhesive tag that sticks to the back of their phone. Swipe the tag over the terminal to make a purchase. The transactions are processed directly by a local bank which results in lower fees than merchants normally pay for credit card transactions.
- Accept payments with your phone: You can now buy a small card reader made by SqaureUp that hooks to your iPhone, Android or Blackberry. When a customer wants to buy something from you, they simply swipe their credit card through this gadget connected to your phone, then they sign their name on your phone, and the transaction is complete. It’s a good solution for retail businesses that want to sell items off-location and for consultants, one-person businesses, or artisans that want to accept payment by credit card but either couldn’t get a merchant account or didn’t want one because of the fees. With this service you don’t need a merchant account and there are no contracts or monthly fees. The cost per transaction hasn’t been disclosed yet. This service, which aims to be available in Q2 2010, is brought to you by the people who invented Twitter–expect it to be highly disruptive to traditional merchant accounts.
- Enter your phone number online: Customers shopping online can enter their cell phone number—then reply to a text message—the check out and pay. The customer then pays the charge on their monthly cell phone bill. Using a cell phone number is a lot quicker and easier than entering credit card and address info online, and it appeals to younger people and those who may not have a credit card. What the rub? The transaction fee is painful—as a merchant you must give 35-50 percent of the sale price to the mobile carrier that processes the transaction. These fees may drop in time.
- Transfer money via cell phone: Transferring cash via text messages is simple when both the sender and recipient register for a free account with a provider such as Obopay.com. Sending money only costs 25 to 50 cents per transaction, and the money can go directly from and to bank accounts. For small business owners it’s an easy, inexpensive way to send or collect payment overseas. Wave goodbye to the fees, long forms and bank visits associated with wiring money.
These nascent mobile commerce platforms will likely battle it out in VHS-vs-Betamax style, while most of us will be on the sidelines with a wait-and-see attitude. Forward-thinking companies should dive in now, even if they risk adopting a platform that goes the way of Betamax.
5 Ways to Offer Outstanding Customer Service
Customer Service
by Paul Diamond
Good customer service brings customers back and gets them talking and spreading the word about your business. There’s always a cost associated with retaining customers and with attracting new ones. Here are five tips to help you offer excellent service and lower the above mentioned costs:
- Answer your phone or email: People want prompt service, and they want it on their terms, whether that’s by phone or email. If someone is not available to answer the phone or respond immediately to email, then try to respond within an hour of the contact. See phone answering tips to win business for more advice.
- Address customer concerns immediately. Customers will buy again if their complaint is resolved, according to Kyle LaMalfa, a customer loyalty consultant with Allegiance. And if the customer feels the complaint is resolved quickly, 95 percent are likely to remain a client. When customer’s get a happy resolution to their complaints, they tell, on average, five people about their positive experience.
- Ask your customer for feedback. The best time to ask your customer a question is during the time of service or transaction. Jay Forte, a Bizmore blogger and employee performance expert, recommends this question, “If we could improve just one thing, what would be the most meaningful thing for you?” If your service is conducted over the phone or online, says Forte, then present the question with a thank-you email. Present the responses you get at a recurring team meeting; it builds the customer perspective into your organization’s culture. Lastly, remember to communicate to your customers when you make changes based on customer feedback. LaMalfa recommends that you communicate this personally to the customer(s) who complained or recommended the change, as for the public companies can use their newsletter, website, or social media to get the word out.
- Extend yourself to find a solution to the customer (even when there is no profit in it for you). No matter what problem a customer or even a prospective customer presents you with, go out of your way to find a solution for them. When a customer is made to feel important, says business advisor Morris Segal, and their needs are satisfied, they’ll talk positively about you and refer people to you.
- Only make promises that you can deliver on: When offering solutions to customers’ problems, never make a promise that you can’t fulfill. Customers feel a new level of betrayal when this happens.
One final bonus tip:
Keep a record of customer requests. Have your sales and customer service team keep a list of all the requests your customers volunteer, specifically those for products or services that you currently don’t provide. Barry Schimel, author of 100 Ways to Profit in a Volatile Economy says you can discover what you aren’t selling with this list which he calls a “lost sales report.”
Five Important Facts About Your Unemployment Benefits
TAX SAVING
Taxpayers who received unemployment benefits in 2009 are entitled to a special tax break when they file their 2009 federal tax returns. This tax break is part of the American Recovery and Reinvestment Act of 2009.
Here are five important facts the Internal Revenue Service wants you to know about your unemployment benefits.
- Unemployment compensation generally includes any amounts received under the unemployment compensation laws of the United States or of a specific state. It includes state unemployment insurance benefits, railroad unemployment compensation benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It does not include worker’s compensation.
- Normally, unemployment benefits are taxable; however, under the Recovery Act, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their federal tax return.
- For a married couple, if each spouse received unemployment compensation then each is eligible to exclude the first $2,400 of benefits.
- You should receive a Form 1099-G, Certain Government Payments, which shows the total unemployment compensation paid to you in 2009 in box 1.
- You must subtract $2,400 from the amount in box 1 of Form 1099-G to figure how much of your unemployment compensation is taxable and must be reported on your federal tax return. Do not enter less than zero.
For more information, visit IRS.gov/recovery.
Five Ways to Offset Education Costs
College can be very expensive. To help students and their parents, the IRS offers the following five ways to offset education costs.
- The American Opportunity Credit This credit can help parents and students pay part of the cost of the first four years of college. The American Recovery and Reinvestment Act modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
- The Hope Credit The credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009.
- The Lifetime Learning Credit This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program. Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return.
- Enhanced benefits for 529 college savings plans Certain computer technology purchases are now added to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.
- Tuition and fees deduction Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or lifetime learning credits.
You cannot claim the American Opportunity and the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim any of the credits if you claim a tuition and fees deduction for the same student in the same year. To qualify for an education credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.
For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).
Start obesity prevention in the cradle, US study urges
WASHINGTON — A team of US doctors has urged that obesity screening start in the cradle after a study they conducted showed that half of US children with weight problems became overweight before age two.
The “critical period for preventing childhood obesity” in the children observed in the study would have been in “the first two years of life and for many by three months of age,” said the study, published in Clinical Pediatrics.
“Unfortunately, the chubby healthy baby myth is alive and well despite the high prevalence of childhood obesity, with only 20 percent to 50 percent of overweight children being diagnosed and even fewer receiving documented or effective treatments,” the authors of the study said.
For the study, which was conducted to try to pinpoint the “tipping point” for when a child first became overweight, researchers looked at 480 medical records for patients between the ages of two and 20 at a private medical practice and a teaching hospital, both in Virginia.
Of those patients, 184 were included in the study because they met the age criteria, their weight and height had been recorded during five visits to the medical practice, and they were overweight during one of the visits.
The researchers found that the median age for when the children became overweight was 22 months. They also found that a quarter of the children reached their overweight “tipping point” at or before five months of age.
When the children who were overweight on their first visit to the practices were taken into account, the median tipping point age dropped to 15 months and a quarter of the subjects had a weight problem at or before three months of age.
The study recommends that health care providers begin screening for excessive weight gain “as early as possible” in order to prevent childhood obesity, rather than trying to reverse it once a weight problem as “spiralled out of control.”
According to the National Health and Nutrition Examination Survey of 2007, nearly half of US children are either overweight or obese, said the study, which was published two days after First Lady Michelle Obama launched a nationwide campaign to push back childhood obesity.
Source: AFP
‘Cash for Appliances’ program
Cash for Appliance
A government program that gives consumers rebates on purchases of energy-efficient household appliances is ramping up in states across the country.
The $300 million ‘Cash for Appliances’ program, first announced last year, is funded by the government’s American Recovery and Reinvestment Act and is similar to other federal programs like Cash for Caulkers and Cash for Clunkers.
Under the program, consumers are eligible to receive rebates on new, energy-efficient appliances such as refrigerators or washing machines. The rebates vary by state, type of appliance, and level of efficiency.
Rebates are only available on appliances with the Energy Star logo, which meet the energy efficiency guidelines set by the Environmental Protection Agency and Department of Energy.
The goal of Cash for Appliances is to help American’s conserve energy, while also boosting retail sales and ultimately helping spur the economic recovery.
In New York, where the program went into effect Friday, rebates range from $75 to $105 on refrigerators, freezers and clothes washers. The rebates can be as high as $555 for bundled purchases of all three appliances.
“This program will provide a tremendous incentive for consumers all across New York to reduce their energy consumption while providing an important stimulus to our economy,” New York Gov. David Paterson said in a statement.
0:00 /3:48Preparing for ‘Cash for Caulkers’
Georgia, which also launched its program Friday, is offering consumers rebates of up to $199 on items such as air-source heat pumps, solar-powered water heaters and gas boilers.
California received the most funding, with $35.3 million. The state already has incentives in place of energy-efficient appliances, but will begin offering additional rebates under the federal program in April.
West Virginia received the second largest amount
Source: CNN Money.
