1) When you do a good deed, get a receipt in case Heaven is like the IRS.
2) Doing your own income tax return is a lot like a do-it-yourself mugging.
3) A political promise today means another tax tomorrow.
3) Q: Ever wonder why the IRS calls it Form 1040?
A: Because for every $50 that you earn, you get $10 and they get $40.
4) Income tax forms should be printed on Kleenex because so many of us have to pay through the nose.
5) Isn't it appropriate that the month when the taxes are due begins with April Fool's Day and ends with cries of "May Day!"?
6) Why does a slight tax increase cost you two hundred dollars and a substantial tax cut save you thirty cents?
7) America is the land of opportunity. Everyone can become a taxpayer.
8) The latest income-tax form has been greatly simplified. It consists of only three parts:
1. How much did you make last year?
2. How much do you have left?
3. Send amount listed in part 2.
9) Q: What do accountants suffer from that ordinary people don't?
A: Depreciation.
10) Whomever said that truth never hurts never had to fill out a Form 1040.
11) Drive carefully.
Uncle Sam needs every taxpayer he can get.
12) Q: Why is a tax loophole like a good parking spot?
A: As soon as you see one, it's gone.
Interesting Facts And Confusing Thoughts About The American Poor
Just came across some interesting numbers on American poverty, through this report: “Understanding Poverty in America“. In the write-up below, I am presenting some interesting highlights from the 2004 report (which is based on the Census data from 2002).
To better appreciate the facts, it is important to view them in light of the poverty thresholds (income levels below which a person or a family is considered “poor”) for 2002. Towards that, here are some of the 2002 poverty thresholds from Census.gov.
Now, let’s move on to the "typical" characteristics of these poor people, as mentioned in the report [by the way, always keep in mind that “typical” does not mean “all” - it is just a statistical average, and there are always some data that do not fit in this average].
The following are facts about persons defined as “poor” by the Census Bureau, taken from various government reports:
The report later concludes:
These facts bring up some food for thought. Here is what I have been thinking:
To better appreciate the facts, it is important to view them in light of the poverty thresholds (income levels below which a person or a family is considered “poor”) for 2002. Towards that, here are some of the 2002 poverty thresholds from Census.gov.
- Single person: $9,183
- Two person household: $11,756
- Three person household: $14,348
- Four person household: $18,392
Now, let’s move on to the "typical" characteristics of these poor people, as mentioned in the report [by the way, always keep in mind that “typical” does not mean “all” - it is just a statistical average, and there are always some data that do not fit in this average].
The following are facts about persons defined as “poor” by the Census Bureau, taken from various government reports:
- Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
- Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.
- Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
- The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
- Nearly three-quarters of poor households own a car; 30 percent own two or more cars.
- Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
- Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
- Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.
- When asked, some 89 percent of poor households reported they had “enough food to eat” during the entire year, although not always the kinds of food they would prefer. Around 9 percent stated they “sometimes” did not have enough to eat because of a lack of money to buy food.
- Some 70 percent of poor households report that during the course of the past year they were able to meet “all essential expenses,” including mortgage, rent, utility bills, and important medical care.
The report later concludes:
- The typical American defined as “poor” by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry and he had sufficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians.
These facts bring up some food for thought. Here is what I have been thinking:
- Can people really be defined as “poor” based on the income criteria? In the same breath, if income is not a good criteria for defining the “poor” - then it cannot be a good criteria for defining the “rich”.
- If you look at all the things that a “typical” poor person is enjoying - and then look at the poverty threshold (income level) - it seems to me that poor people might be doing things frugally. Of course this doesn’t say whether they are more (or less) frugal than rich people.
- It can also be construed that poor people are being too consumerist and in fact, are "poor" in the first place because they try to buy too much on too little income. However, “too little” is a very relative term - and it doesn’t make sense to put any dollar amount income levels here.
- Is a person, who is $2,000,000 in net debt, but living in a mansion and earning $100,000 a year, richer or poorer than someone who has a positive net worth but is making ends meet with great difficulties (barely able to provide food, education, shelter, etc) ?
- So who exactly classifies as poor? a person facing financial hardships? but hey, that can happen to people with high income and bad spending habits.
©thetaoofmakingmoney.com
Building Your Profitable Tax Lien Portfolio
Your first step to building a profitable tax lien or tax deed portfolio was deciding why you want to invest. This will determine how you are going to invest. Will you invest through a self-directed IRA or with after tax funds; in your own name or through an entity; in tax liens, tax deeds, or redeemable tax deeds? Once you determine how you are going invest, the next step is to decide where you will invest. What state and county are you going to invest in?
Once your done with steps one and two, the why and the how, it's time to concentrate on the what. The third step to building your profitable tax lien portfolio is finding the tax sale information. You need to find out when and where the tax sale is held and obtain a list of properties that are in the sale. For most areas this step will be easy, you just need to know where to go and who to contact to get this information. Sometimes you will have to pay for it and sometimes you will be able to get it free of charge.
Each state is a little different in regard to how the tax sales are conducted and who is responsible for them. In some states you'll have to contact the county tax collector, in others it could be the county treasurer, or the county sheriff, or there could be a separate county office just for this purpose. I recommend that you first contact the county tax collector, or whoever is responsible for the tax sale and ask for the tax sale information. Ask for a list of tax sale properties. Usually you can get this list for free and sometimes it may eve be available online.
All tax sale lists are not created equal. Some lists will have all the information that you need to do your due diligence (the next step in the process of building your profitable tax lien portfolio) and some will only list the tax number, block and lot, owner of record, and amount due for each property in the sale. The physical address of the property may not be included. If that is the case, you have two choices, you can buy a detailed tax sale list that includes all of the information that you need, or you can look the information up yourself, which can be a very tedious process.
Very large detailed tax sale lists can be quite expensive, even a few hundred dollars, so if there are a lot of properties in the tax sale you would be better off to limit the amount of properties that you are interested in and look up the information that you need yourself. You can limit yourself to a particular area, or to only certain types of properties to make the next step in the process a little easier. If the list is not that large and costly, you may want to buy the tax sale list from a tax sale list provider. It will save you lots of time in doing your due diligence.
Once your done with steps one and two, the why and the how, it's time to concentrate on the what. The third step to building your profitable tax lien portfolio is finding the tax sale information. You need to find out when and where the tax sale is held and obtain a list of properties that are in the sale. For most areas this step will be easy, you just need to know where to go and who to contact to get this information. Sometimes you will have to pay for it and sometimes you will be able to get it free of charge.
Each state is a little different in regard to how the tax sales are conducted and who is responsible for them. In some states you'll have to contact the county tax collector, in others it could be the county treasurer, or the county sheriff, or there could be a separate county office just for this purpose. I recommend that you first contact the county tax collector, or whoever is responsible for the tax sale and ask for the tax sale information. Ask for a list of tax sale properties. Usually you can get this list for free and sometimes it may eve be available online.
All tax sale lists are not created equal. Some lists will have all the information that you need to do your due diligence (the next step in the process of building your profitable tax lien portfolio) and some will only list the tax number, block and lot, owner of record, and amount due for each property in the sale. The physical address of the property may not be included. If that is the case, you have two choices, you can buy a detailed tax sale list that includes all of the information that you need, or you can look the information up yourself, which can be a very tedious process.
Very large detailed tax sale lists can be quite expensive, even a few hundred dollars, so if there are a lot of properties in the tax sale you would be better off to limit the amount of properties that you are interested in and look up the information that you need yourself. You can limit yourself to a particular area, or to only certain types of properties to make the next step in the process a little easier. If the list is not that large and costly, you may want to buy the tax sale list from a tax sale list provider. It will save you lots of time in doing your due diligence.
Author Info:
This is the fourth article in a series of eight about the seven steps that you need to follow in order to build a profitable portfolio of tax lien certificates or tax deeds. If you missed the previous articles in this series you can read them at http://www.taxlienconsulting.blogspot.com . To find out more about investing in tax lien certificates or tax deeds, you can register for free telesmeniars at http://www.taxlienlady.com/teleseminar.htm
This is the fourth article in a series of eight about the seven steps that you need to follow in order to build a profitable portfolio of tax lien certificates or tax deeds. If you missed the previous articles in this series you can read them at http://www.taxlienconsulting.blogspot.com . To find out more about investing in tax lien certificates or tax deeds, you can register for free telesmeniars at http://www.taxlienlady.com/teleseminar.htm
Income - Tax Planning Tip For 2007
The beginning of a new year is a time for contemplation, reflection and doing a little planning. As 2007 quickly approaches, you need to give some thought to your tax planning for the year.
Income - Tax Planning Tip for 2007
If you complain because you feel you are paying far too much in taxes, you may be right. So, is the government giving you the once over when it asks for that check in April? Well, it is probably is. On the other hand, there is a person you know much better who is often also to blame. Who? YOU!
The key to minimizing your taxes is to take the time to do tax planning. This planning should be done in January for the upcoming year. “Tax planning” is not sitting down with your accountant on April 14th and trying to reduce your tax bill. If you act proactively, and ahead of time, you can do a lot to keep your money out of Uncle Sam’s hands.
As we enter 2007, you should begin to contemplate your tax planning for the year. At this point, I would typically go into a long spiel about maximizing deductions, retirement accounts and so on. While you should still do all of these things, the 2007 tax year is shaping up to be something a bit different. Why? Politics, my friend.
As you well know, the recent elections resulted in a major political change in Washington. Out went the Republican majority and in came the Democrat majority. In both houses! Regardless of your politics and whether you think this is a good or bad thing, the tax change winds are beginning to blow in the wind.
If you have been watching the fiscal figures for the federal government, you know our national debt has been expanding at an alarming rate. While there are a variety of reasons for this, the combination of tax cuts and an expensive war are certain two of the primary ones. Now that President Bush does not have a friendly Congress and is a lame duck, you should expect an effort to address the red ink. Since no exit from Iraq seems to be on the horizon, it is reasonably to suspect we will see taxes raised. This probably will not happen until later in the year or 2008, but you should be planning for it now.
When putting together you tax plan for 2007, you need to consider how you can best take advantage of the current low income tax rates. Assume you have some source of revenues or assets that trigger income tax payments when you receive the money or sell them. If any of these are going to occur in 2008 or beyond, you might consider trying to move them forward into 2007. By doing so, you can take advantage of the current rates instead of getting caught with your pants down when rates go up.
Income - Tax Planning Tip for 2007
If you complain because you feel you are paying far too much in taxes, you may be right. So, is the government giving you the once over when it asks for that check in April? Well, it is probably is. On the other hand, there is a person you know much better who is often also to blame. Who? YOU!
The key to minimizing your taxes is to take the time to do tax planning. This planning should be done in January for the upcoming year. “Tax planning” is not sitting down with your accountant on April 14th and trying to reduce your tax bill. If you act proactively, and ahead of time, you can do a lot to keep your money out of Uncle Sam’s hands.
As we enter 2007, you should begin to contemplate your tax planning for the year. At this point, I would typically go into a long spiel about maximizing deductions, retirement accounts and so on. While you should still do all of these things, the 2007 tax year is shaping up to be something a bit different. Why? Politics, my friend.
As you well know, the recent elections resulted in a major political change in Washington. Out went the Republican majority and in came the Democrat majority. In both houses! Regardless of your politics and whether you think this is a good or bad thing, the tax change winds are beginning to blow in the wind.
If you have been watching the fiscal figures for the federal government, you know our national debt has been expanding at an alarming rate. While there are a variety of reasons for this, the combination of tax cuts and an expensive war are certain two of the primary ones. Now that President Bush does not have a friendly Congress and is a lame duck, you should expect an effort to address the red ink. Since no exit from Iraq seems to be on the horizon, it is reasonably to suspect we will see taxes raised. This probably will not happen until later in the year or 2008, but you should be planning for it now.
When putting together you tax plan for 2007, you need to consider how you can best take advantage of the current low income tax rates. Assume you have some source of revenues or assets that trigger income tax payments when you receive the money or sell them. If any of these are going to occur in 2008 or beyond, you might consider trying to move them forward into 2007. By doing so, you can take advantage of the current rates instead of getting caught with your pants down when rates go up.
By: Richard A. ChapoRichard A. Chapo is with
BusinessTaxRecovery.com - providing information on tax debt relief.
BusinessTaxRecovery.com - providing information on tax debt relief.
Tax Return Online Is There For Proper Guidance
Taxes are something that has to be filed within the time period allotted, so that unnecessary problems and tax raids can be avoided. In fact, nobody wants to entangle themselves in raid problems and ruin their business. Tax return is one of those issues that require complete concentration in the matter of tallying of the financial documents. As far as the financial documents are concerned, there are a lot many to be tallied. Profit and loss account, trial balance, financial statements, balance sheet, daily bills receivables and payables and a lot many things form a part of financial documents. In order to simplify the process of filing tax return, online services have been started. Tax return online has helped the tax filers to a large extent.
Tax season is the time, when all the accounting firms witness heavy load of work. Every certified public accountant is seen busy in paper work because every other small element needs to be checked before one gets to know the tax amount to be paid. With tax return online, things have come a bit under control. Now, you don’t have to run to your accountant every time for asking queries and seeking his or her guidance in this regard. Tax return online will enable you to contact a certified public accountant through internet and send them the details. Before giving your case to any accountant, you should make sure that the accountant is certified through American Institute of Certified Public Accountant. After all, you are going to handle your tax return filing case and accountant has to be properly qualified for that.
There are numerous accounting firms that have their websites, on which you can find the option of tax return online. In doing so, you will be able to save a lot of money along with the valuable time. Filing tax is really a hard nut to crack and if you are able to get the services of tax return online, then you surely are the lucky chap. Almost every tax return online firm provides the facility of calculating the exact amount of the tax that has to be filed. After all, you have the right to know the amount that you are paying and details regarding this too. This service has been preferred by every tax payer, especially at the time of heavy tax paying season.
What will happen if you are not able to get the services of qualified and certified public accountant at the time when essentiality arises? It is the tax return online service that comes to the rescue. Almost all the tax return online firms provide their services at a reasonable rate. And this saves you extra dollars that would have gone wasted in giving to the in-house staff. Calculating tax amount and filing them at income tax office is a tiring legal process. So, it is always better for you to opt for the services of certified public accountants.
Since the idea of tax return online has come up, every other business individual is speaking in its favor. Who wants to waste extra time that could be utilized for doing other tasks? Everyone’s time is precious and it is valued like money, so there is no point in wasting time and money in roaming around in search of certified public accountant. If you are not able to find a CPA near your place, then internet is there to solve your problem. All you can do is look out for the CPA that is near your place. But be sure that you must not get swayed by what is written on those sites. You get to meet them personally and see to it that they are bale to handle your case or not.
Tax season is the time, when all the accounting firms witness heavy load of work. Every certified public accountant is seen busy in paper work because every other small element needs to be checked before one gets to know the tax amount to be paid. With tax return online, things have come a bit under control. Now, you don’t have to run to your accountant every time for asking queries and seeking his or her guidance in this regard. Tax return online will enable you to contact a certified public accountant through internet and send them the details. Before giving your case to any accountant, you should make sure that the accountant is certified through American Institute of Certified Public Accountant. After all, you are going to handle your tax return filing case and accountant has to be properly qualified for that.
There are numerous accounting firms that have their websites, on which you can find the option of tax return online. In doing so, you will be able to save a lot of money along with the valuable time. Filing tax is really a hard nut to crack and if you are able to get the services of tax return online, then you surely are the lucky chap. Almost every tax return online firm provides the facility of calculating the exact amount of the tax that has to be filed. After all, you have the right to know the amount that you are paying and details regarding this too. This service has been preferred by every tax payer, especially at the time of heavy tax paying season.
What will happen if you are not able to get the services of qualified and certified public accountant at the time when essentiality arises? It is the tax return online service that comes to the rescue. Almost all the tax return online firms provide their services at a reasonable rate. And this saves you extra dollars that would have gone wasted in giving to the in-house staff. Calculating tax amount and filing them at income tax office is a tiring legal process. So, it is always better for you to opt for the services of certified public accountants.
Since the idea of tax return online has come up, every other business individual is speaking in its favor. Who wants to waste extra time that could be utilized for doing other tasks? Everyone’s time is precious and it is valued like money, so there is no point in wasting time and money in roaming around in search of certified public accountant. If you are not able to find a CPA near your place, then internet is there to solve your problem. All you can do is look out for the CPA that is near your place. But be sure that you must not get swayed by what is written on those sites. You get to meet them personally and see to it that they are bale to handle your case or not.
By: Michelle Barkley
Michelle Barkley is a CPA working for Ifrworld.She specializes in Bookkeeping outsourcing,
Accounting outsourcing and Tax Return Online.To know more about
Tax Return Online and to use the services visit ifrworld.com
Michelle Barkley is a CPA working for Ifrworld.She specializes in Bookkeeping outsourcing,
Accounting outsourcing and Tax Return Online.To know more about
Tax Return Online and to use the services visit ifrworld.com
The power of lower taxes
For his final curtain call as Chancellor, Gordon Brown delivered a truly big Budget. He broke with his own recent past by sharply cutting the headline tax rates for individuals and businesses and taking the first steps towards simplifying an over-complex taxation system.
It is a tribute to Brown's mastery of the Treasury that in his tenth year in office he is still capable of taking far-reaching decisions on the way the nation's finances are managed. This is made easier by the fact that Britain is enjoying a golden period of economic expansion stretching back over the ten years of the Chancellor's stewardship. It means that Brown will leave the Treasury on a high note.
His last Budget also represents a sharp change of direction. Since Brown decided to lavish a fortune on the NHS eight years ago, the Budgets have all been about expanding the public sector, which has grown at a phenomenal rate of 5% a year after inflation.
But the glory days of big spending are now over. The extra NHS spending that Brown referred to in his Budget speech yesterday has already been announced. The stark reality is that under the new public spending settlement, which will be unveiled in the Autumn, average real growth in public spending will be just 2% - which will mean that in some cases there will have to be actual cuts.
Some departments are taking genuine cuts. Only education is singled out for extra spending and it will be receiving an increase of just 2.5% above inflation. Brown's successor at the Treasury is likely to continue to wield the axe, rather than dishing out the largesse. By all accounts Brown and his colleagues have actually been listening to the criticism of his economic management by the Organisation for Economic Co-operation and Development, the International Monetary Fund and others. The Chancellor has decided to draw in the claws of the state and focus instead on restoring Britain's global competitiveness. The cut in the headline rate of corporation tax to 28% will mean it is substantially below the 34% rate in France and 38% in Germany.
It is a radical change directly aimed at keeping Britain an attractive place to locate for the new light-footed businesses which will dominate the 21st Century including financial services, pharmaceuticals and the creative industries.
The Budget pays for this tax reduction by removing allowances which largely benefit older industries - such as the energy utilities (many of them foreign owned) - which have been able to claim allowances on old plant dating back to the Second World War.
By lowering the main corporation tax and removing out-dated allowances, he has made a key move towards simplification of the system - and stolen one of the key reforms proposed by the Tory tax commission. Simpler taxation is also at the heart of the personal tax changes. By cutting 2p from the basic rate of income tax and abolishing the 10p band, which was introduced in Brown's 1999 Budget, it means there will now be just two bands: 20% and 40%.
Moreover, for the first time the thresholds for paying income tax and national insurance will be the same - a reform called for by the Institute of Fiscal Studies. We may be a long way from 'flat taxes' (where there is just one rate of tax for both individuals and corporations) in the newly emerging markets of Eastern Europe, nevertheless the system should be easier to understand.
Although some will be worse off, the net impact of the mass of personal tax changes will be that overall the public will be paying £2.5billion less in income taxes. This reduction-will be largely paid for by the extension of green taxes, most notably on gas guzzling cars and a new tax on property companies who leave shops empty on our high streets.
By using tax reductions to drive the economy, rather than public spending, Brown is recognising the importance of the wealth-creating sector of the economy. Something he has been loathe to do in the past when he has relied on public spending to boost output.
In this latest Budget, however, Brown is having to deal with a sharp drop in the tax revenues from the North Sea as production declines and the world oil price falls. He will be borrowing an extra £12bn over the next five years above and beyond what was forecast in December's pre-Budget Report.
But he will continue to abide by his own fiscal rules. The 'golden rule' which requires borrowing only for investment in infrastructure is met and overall debt as a proportion of the total output of the economy remains below 40% at 38.2%.
There will be much quibbling in the City, from the IFS, other think tanks and the Tories about these figures. Brown is accused of using 'off balance sheet' borrowing, through the private finance initiative, and selling public assets to remain on target.
Yet the fact remains that the Chancellor, in his ten years, has changed the nature of the British economic debate. It is no longer about missing the target for the Budget deficit by tens of billions of pounds - as was the case previously - but is focused around rules which are designed to enforce prudence.
It would, of course, be far better had the Chancellor taken the opportunity to trim the public sector much earlier during his reign.
The main concern for the Government now is that the next rise in interest rates will slow growth. Yet the financial markets and business will find it hard to bet against the output projections of a Chancellor whose figures have often proved right. This is especially true now that, in his last weeks in office, he has discovered the awesome power of lower tax rates.
It is a tribute to Brown's mastery of the Treasury that in his tenth year in office he is still capable of taking far-reaching decisions on the way the nation's finances are managed. This is made easier by the fact that Britain is enjoying a golden period of economic expansion stretching back over the ten years of the Chancellor's stewardship. It means that Brown will leave the Treasury on a high note.
His last Budget also represents a sharp change of direction. Since Brown decided to lavish a fortune on the NHS eight years ago, the Budgets have all been about expanding the public sector, which has grown at a phenomenal rate of 5% a year after inflation.
But the glory days of big spending are now over. The extra NHS spending that Brown referred to in his Budget speech yesterday has already been announced. The stark reality is that under the new public spending settlement, which will be unveiled in the Autumn, average real growth in public spending will be just 2% - which will mean that in some cases there will have to be actual cuts.
Some departments are taking genuine cuts. Only education is singled out for extra spending and it will be receiving an increase of just 2.5% above inflation. Brown's successor at the Treasury is likely to continue to wield the axe, rather than dishing out the largesse. By all accounts Brown and his colleagues have actually been listening to the criticism of his economic management by the Organisation for Economic Co-operation and Development, the International Monetary Fund and others. The Chancellor has decided to draw in the claws of the state and focus instead on restoring Britain's global competitiveness. The cut in the headline rate of corporation tax to 28% will mean it is substantially below the 34% rate in France and 38% in Germany.
It is a radical change directly aimed at keeping Britain an attractive place to locate for the new light-footed businesses which will dominate the 21st Century including financial services, pharmaceuticals and the creative industries.
The Budget pays for this tax reduction by removing allowances which largely benefit older industries - such as the energy utilities (many of them foreign owned) - which have been able to claim allowances on old plant dating back to the Second World War.
By lowering the main corporation tax and removing out-dated allowances, he has made a key move towards simplification of the system - and stolen one of the key reforms proposed by the Tory tax commission. Simpler taxation is also at the heart of the personal tax changes. By cutting 2p from the basic rate of income tax and abolishing the 10p band, which was introduced in Brown's 1999 Budget, it means there will now be just two bands: 20% and 40%.
Moreover, for the first time the thresholds for paying income tax and national insurance will be the same - a reform called for by the Institute of Fiscal Studies. We may be a long way from 'flat taxes' (where there is just one rate of tax for both individuals and corporations) in the newly emerging markets of Eastern Europe, nevertheless the system should be easier to understand.
Although some will be worse off, the net impact of the mass of personal tax changes will be that overall the public will be paying £2.5billion less in income taxes. This reduction-will be largely paid for by the extension of green taxes, most notably on gas guzzling cars and a new tax on property companies who leave shops empty on our high streets.
By using tax reductions to drive the economy, rather than public spending, Brown is recognising the importance of the wealth-creating sector of the economy. Something he has been loathe to do in the past when he has relied on public spending to boost output.
In this latest Budget, however, Brown is having to deal with a sharp drop in the tax revenues from the North Sea as production declines and the world oil price falls. He will be borrowing an extra £12bn over the next five years above and beyond what was forecast in December's pre-Budget Report.
But he will continue to abide by his own fiscal rules. The 'golden rule' which requires borrowing only for investment in infrastructure is met and overall debt as a proportion of the total output of the economy remains below 40% at 38.2%.
There will be much quibbling in the City, from the IFS, other think tanks and the Tories about these figures. Brown is accused of using 'off balance sheet' borrowing, through the private finance initiative, and selling public assets to remain on target.
Yet the fact remains that the Chancellor, in his ten years, has changed the nature of the British economic debate. It is no longer about missing the target for the Budget deficit by tens of billions of pounds - as was the case previously - but is focused around rules which are designed to enforce prudence.
It would, of course, be far better had the Chancellor taken the opportunity to trim the public sector much earlier during his reign.
The main concern for the Government now is that the next rise in interest rates will slow growth. Yet the financial markets and business will find it hard to bet against the output projections of a Chancellor whose figures have often proved right. This is especially true now that, in his last weeks in office, he has discovered the awesome power of lower tax rates.
Alex Brummer, Daily Mail
The virtues of a 401(k)
Uncle Sam doesn't offer many gifts. This is one.
If someone offered you free money, would you refuse it? Probably not. But that's just what you're doing if you don't contribute to your 401(k). The more you contribute, the more free money you get. Here's why:
Contributing part of your salary to a 401(k) gives you three compelling benefits:
- You get an immediate tax break, because contributions come out of your paycheck before taxes are withheld.
- The possibility of a matching contribution from your employer - most commonly 50 cents on the dollar for the first 6 percent you save.
- You get tax-deferred growth - meaning you don't pay taxes each year on capital gains, dividends, and other distributions.
The federal limit on annual contributions has been increasing gradually, and is $15,500 in 2007. If you're 50 or older, you may contribute an additional $5,000.
Keep in mind, however, that while federal law sets the guidelines for what's permissible in 401(k) plans, your employer may set tighter restrictions. Plus, it will take time for the administrators of your plan to implement the changes.
What's more, there are other federal non-discrimination tests a 401(k) plan must meet, one of which applies to "highly compensated" employees. So if you make more than $100,000 a year (the limit for 2006 and 2007), you may not be permitted to contribute as high a percentage of your salary as some of your lower paid colleagues.
For all its tax advantages, the 401(k) is not a penalty-free ride. Pull out money from your account before age 59-1/2, and with few exceptions, you'll owe income taxes on the amount withdrawn plus an additional 10 percent penalty.
Also, be aware of your plan's vesting schedule - the time you're required to be at the company before you're allowed to walk away with 100 percent of your employer matches. Of course, any money you contribute to a 401(k) is yours.
from CNN money
401(k)
1. A 401(k) offers three compelling benefits.
A 401(k) represents a way to reduce your taxable income since contributions come out of your pay before taxes are withheld; many plans include a matching contribution from your employer; and the money you save benefits from tax-deferred growth, which lets your money compound more quickly than it would if it were taxed yearly.
2. The federal limit on annual pre-tax 401(k) contributions is on the rise.
In 2007, the maximum contribution rises to $15,500, or $20,500 if you're 50 and older.
3. Matching contributions are "free money."
If you can't afford to max out your 401(k), contribute at least enough to get the matching contribution, a.k.a.. free money. The typical match is 50 cents on the dollar up to 6 percent of your salary.
4. Taking money out of a 401(k) before retirement is expensive.
Loans must be repaid with after-tax money plus interest. And, with few exceptions, if you withdraw money before age 59-1/2 you must pay income taxes plus a 10 percent penalty. What's more, lost time for compounding will substantially shrink your nest egg.
5. When setting up your 401(k) investments, figure out what your mix of stocks and bonds should be.
Two factors influence this decision: your time horizon until retirement and your risk tolerance.
6. You're limited to the investments your employer chooses for your 401(k) plan.
If you don't like many of the selections, keep your choices simple by investing, for example, in a broad-based index fund. Don't boycott the plan altogether. If you do, you lose out on tax-advantaged compounding and a matching contribution.
7. When you change jobs, you'll often have three choices: leave your 401(k) money where it is, roll it into an IRA or another 401(k), or cash out.
If your account balance is less than $5,000, your employer may insist you take it out of the plan, but cashing out is like shooting yourself in the foot financially. Even small amounts can grow large with time and tax-deferred compounding. You'd be better off rolling the money into another retirement account.
8. When you do roll money into an IRA or 401(k), make it a "trustee-to-trustee" transfer.
That is, have the check made out to the custodian of your new account, not you. Otherwise, you risk possible penalties if you fail to execute the rollover properly.
9. IRS rule 72(t) provides one way to take early 401(k) withdrawals without penalty.
You must take a fixed amount of money out for five years or until you reach 59-1/2, whichever is longer. The annual withdrawal amount is based on your life expectancy.
10. Some employers let you leave money in your 401(k) account when you retire.
Find out what rules, if any, the employer imposes on when and how you must start taking distributions. If there are none, you may leave the money untouched until you're 70-1/2. That's the age when Uncle Sam insists all retirees begin withdrawing money from traditional IRAs and 401(k)s.
from CNN money
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