Tax Changes for 2010

The American people have been promised "change" - and whether we like it or not, taxpayers need to take note of the significant changes in the tax rules for 2010. All of the following revisions could very well affect you:

DEDUCTIONS - For 2010, every taxpayer is entitled to the entire $3,650 for personal exemptions & itemized deductions. In the past, higher-income taxpayers were restricted to an income-based reducion. Take advantage of this on your 2010 tax return because after December 31, 2010 itemized deductions and personal exemptions will again be limited for high-incomers.

RMDs- RMDs (Required Minimum Distributions) are amounts of money that a retirement plan owner must withdraw annually once they reach 70 1/2. In 2009 these distributions were suspended, however they now (in 2010) must be taken by December 31, 2010. (Taxpayers who turn 70 1/2 in 2010 can choose to delay their first distribution until April 1, 2011.)

ROTH CONVERSIONS - We spoke in detail about the new Roth conversion rules in our blog. In brief, as of January 1, 2010 anyone can convert a traditional IRA to a Roth IRA regardless of income. Please remember that the conversion is taxable. Talk to your banker about electing to report half of the income on your 2011 tax return and the other half on your 2012 tax return.

Changes to Protect Credit Card Holders

The Credit Card Accountability, Responsibility, and Disclose Act of 2009 (CARD) was written into effect by President Obama in order to protect Americans from unfair credit practices (i.e. hidden fees & rate hiking). Nearly 80 percent of Americans have credit cards and 44 percent of them carry an outstanding balance on them. Credit card companies have been taking advantage of this and were earning an estimated $15 billion every year from consumer fees. The following provisions were taken by Congress in order to address this problem:

Introductory rates must remain in effect for at least one year (six months for promotional offers). If a rate is to be raised, the credit card company must give the card holder at least 45 days' notice.
Credit card statements must now be mailed seven days earlier than before (21 days before the due date).
Interest rates on an existing balance can not be raised unless payment is late by 60 days or more.
Opposed to how payments were previously applied, now companies are required to apply payments to the debt with the highest interest first.
Double-billing cycles, the practice of basing finance charges on both the current & previous balance, are banned.
Cardholders must now give permission to process transactions above their personal limit (this reduce "over-the-limit" fees).
Consumers must be notified how long it will take, & how much if will cost, to eliminate debt through minimum monthly payments.
Applicants under 21 years of age won't qualify for a credit card without proving ability to pay or without a co-signer.
Statements must notably display fees paid to-date as well as explanations for those fees.

If a credit card company fails to abide by the new regulations they will face penalties. The new CARD law will give consumers, you, the strong protections deserved.

FUTA Surtax is Extended

The federal unemployment surtax was scheduled to end after 2009. The surtax has, however, been extended to through June 2011 in order to help offset the cost of extending unemployment insurance benefits for the unemployed.

As always, if you have any questions or concerns regarding this month's Wally's World, please do not hesitate to contact us. 704-341-9611 or online.