Is there a fee inside that “free” checking?

I just received a blog post from ING Direct and it was so good, I thought I should share it with you. http://wethesavers.ingdirect.com/

Once upon a time, way back in 2009, it was easy for big banks to make big money off of their checking account Customers—in the form of overdraft fees and other so-called “service charges.” For many of the nation’s biggest banks, these service charges accounted for anywhere from 11 percent to 28 percent of overall core revenue, according to the Wall Street Journal. But last year the Federal Deposit Insurance Corporation began flagging some of the industry’s more abusive practices, such as the huge overdraft penalties—as much as $35 a pop—that banks charged customers who dipped into debt for incidental purchases as minute as a cup of coffee.

That means banks are scrambling for new sources of revenue.

Tag, free checking: You’re it.

Before, because of the money they made on overdraft fees and other charges, banks were able to offer the basic service of a checking account for free. Now, many are sticking a price tag on that basic service.

However, consider this: According to a recent study, more than half of checking account customers are highly likely to switch banks if their institution begins charging fees for what were previously free services for their checking accounts. What does that signal? Any bank with a brain in its branch is going to offer a workaround, a way to keep the basic service “free”—in exchange for certain behavioral requirements.

Thus, “free” checking becomes an if/then scenario.

If you keep a minimum balance of $2,000…then we won’t charge you for your checking account.

-and/or-

If you have a monthly direct deposit of $500…then we won’t charge you for your checking account.

-and/or-

If you agree to never step foot in our branch or demand anything of our customer service… then we won’t charge you for your checking account.

The array of choices and combinations by which one can be assured of “free” checking is dizzying and potentially misleading. After all, maintaining a daily balance of $2,000 in a checking account means you’re forgoing interest you’d earn in a high-yield savings account—at current rates, that annual opportunity cost is roughly equivalent to a $20 fee.

The New York Times recently published an enlightening piece titled “As Banks Raise Fees, You Have Options.” Indeed, you do have options—and some are far better than others. So if your bank is cramping the “free” in your free checking, we’ll offer you a free piece of advice: Do your homework.

Go to http://wethesavers.ingdirect.com/road-to-saving/is-there-a-fee-inside-that-free-checking/. This is a great blog to follow.

Medical & Dental Expenses

After spending the weekend playing in the dirt at Quartsite Arizona, along with thousands of other motorhomers, I am back at my desk today, and loe and behold a tax tip from the IRS just came to my computer.  I always wonder if the IRS highlights certain areas that they know they will be looking at closely on these tax tips or ????  Anyway I thought I would list their six points aboue medical and dental and you can make up your own mind.
1. In 2010 you can only deduct the amount by which your total medical expenses for the year exceed 7.5% of your adjusted gross income.  This calculation is on Schedule A of Form 1040.
2. The medical expenses you can include are the qualified medical expenses you pay for yourself, your spouse and your dependents.  If you share custody of a child you can deduct only the amount that you pay out of pocket for the childs medical expenses.
3. To deduct a medical expense for the tax year 2010, it needed to be paid in that year.  If you have an expense and are reimbursed for some of it you cannot include the reimbursed part of the expense.
4. Medical expenses include payments for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. If you have prescription drugs the cost of them can be deducted, plus any insulin paid for which does not require a prescription.
5. You can deduct mileage or other transportation costs which are primarily for and essential to medical care that qualify as medical expenses The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car you can deduct the actual out of pocket expense or you can deduct the standard medical rate for medical expenses.
6. Distributions from Health Savings Accounts, and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.

If you want more information on deductible medical expenses please visit the IRS website at www.irs.gov and look for publications 502 and 969.

Tax Tips for Self-employed Individuals

If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.
Here are six things the IRS wants you to know about self-employment:

1.     Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2.     If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income. However, if your business is trading and you qualify for
Traders Status you do not have to pay any Self-employment tax.

3.     If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.

4.     You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

5.     To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

6.     For more information see IRS Publication 334, Tax Guide for Small Business, IRS Publication 535, Business Expenses and Publication 505, Tax Withholding and Estimated Tax, available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Who do you trust?, or can you trust anyone anymore?

I know that those of you who follow my blogs and attend my webinars hear me state that I follow the SEC litigation website.  Here is one that I thought some of you might be interested in.  I am truly amazed in the number of scams that I see the SEC going after.  Tons and Tons of money that has been invested by trusting people.  I guess the name of this blog sez it all.

Litigation Release No. 21817 / January 14, 2011
SEC v. Christopher Wheeler, et al., Civil Action No. 11-CV-0289 (GBD) (S.D.N.Y. January 14, 2011)

On January 14, 2011, The Securities and Exchange Commission charged an upstate New York-based penny stock promoter and his affiliated website with fraud for failing to disclose that he was paid by certain issuers to promote their stock while simultaneously liquidating millions of his own shares for profits of at least $2.95 million.

The SEC alleges that Christopher Wheeler of Victor, N.Y., received compensation at various times in 2007 and 2008 to promote several thinly-traded penny stocks on his website, OTCStockExchange.com.  Wheeler’s website claimed to “have compiled a long list of successful stock picks” and to afford investors the opportunity to “make a fortune.”

The SEC alleges that after receiving millions of shares in undisclosed compensation from the issuers, Wheeler featured the issuers’ stock on OTCStockExchange.com, recommended that investors purchase the securities, and posted lofty price predictions for the stock without any reasonable basis for those projections.  Wheeler’s and OTCStockExchange.com’s promotional efforts often resulted in dramatic, but temporary, increases in the volume of shares traded and the price of the issuers’ securities.  Once the prices were pumped in this manner, Wheeler simultaneously dumped shares from his personal brokerage account onto the market.

What Price Doth Tax Compliance Cost US, or would a flat tax be a better way?

IRS ALARM - The National Taxpayer Advocate at the IRS has issued her annual report to Congress, saying that "The most serious problem facing taxpayers - and the IRS - is the complexity of the Internal Revenue Code."  More information is available from Forbes.com, but get this..."The total cost of compliance in 2008 was $163 billion, or more than 11% of total income tax collections."  That's crazy!  

Another day in paradise

Sitting here on my patio today, temperature suppose to get up to 72 degrees, after the cold snap we have experienced for the past 10 days this is heaven. 

We left off yesterday talking about the new tax changes for tax year 2011, so lets continue. 

Electronic Funds Transfer Rules

As of the first of this year all employers must use EFT to make all federal tax deposits.  This will include employment tax, excise tax and your corporate income tax.  This is screwing over the banks where you used to have to make a manual deposit, and then the bank got the float on your money until the IRS took the money from the bank.  I know we all feel sorry about the banks loosing this perk, especially after earnings reports today.

Mileage Rates Are Up

The mileage allowance for owned or leased autos is up one penny to 51cents per mile.  If you are using your personal car for medical care, the rate is 19 cents per mile.  Remember though that you must have proper documentation in case you are audited.  The IRS can accuse you of fraud if you do not have this documentation.  It is not hard to keep a log, but you have to learn apply.  There is a set of 8 CD's and a big workbook, called Tax Secrets for Business Professionals, that shows you how to maintain a proper log.  if you would like to know more about this neat set call Raven Johnson at 800.938.9513 and she can tell you all about it.

Basis Overstatement can Trigger 6-year Limitation Period

Ok so we save the biggest one for last!  The IRS has indicated that an understated amount of gross income reported on a return which results from an overstatement of unrecoverable cost or other basis is an omission of gross income which triggers a 6-year period for the IRS to assess tax, rather than the more normal 3-year period.  This limitation period applies when you omit an amount from your gross income that is greater than 25% of the amount you have entered in your return.

Extended Due Date for Your Return This Year

Because of the Emancipation Day Holiday in the District of Columbia, the due date for Form 1040 is April 18th instead of April 15th for all taxpayers.

Have a great weekend, we'll talk next week.

2011 Tax Changes

Well it seems that we might know of all of the tax changes that will affect you for 2010 & 2011 now so let's start discussing them.  It will probably take a couple of days so that you are not bored out of your gourd, but here goes.

Final Regulations on Stock Reporting Rules

The good old IRS has issued the final regulations explaining the reporting requirements that will be put into effect for most securities you acquire after 2010, for mutual funds ar for a drip plan.  Brokers will have to report to the IRS your adjusted basis in the security and if it has been sold whether the gain is long-term or short-term capital gain.  For those of you who are wondering what the difference is it is ST Capital Gain if you hold a position for less than 365 days before selling it, and long term if you hold it for more than 365 days.  As you can see this is going to tighten up the IRS position on whether you are properly reporting your gains/losses and also will probably work into a look at wash sales.

More Guidance on the Small Business Health Care Credit:

Now if you are trading as a business this could have a large impact on you.  For tax years beginning after Dec. 31st 3009, an eligible small employer (ESE) can claim a tax credit for non-elective contributions to purchase health insurance for its employees. An ESE is an employer with no more than 25 full time employees employed during the tax year and where the employees have wages that average under $50K per year.  The full credit is available to you if you have 10 or fewer FTEs with an average wage of less than $25K.

These two will directly affect you if you are an active trader, especially if you have taken my advise to trade as a business.  Hope all is well...regards Jim