Geico Mastercard Adds $48 Annual Fee

First, they reduce credit lines, now THIS!

Effective December 2009, card holders will be charged $4.00 per month for the priviledge of holding one of these cards.

Seems to me this is a sure fire way to thin out the herd of remaining card holders!

Credit Cards and Bank Tellers

My last post talked about how Geico decreased my credit line. An article appears today in USA Today entitled "Credit slashed for responsible borrowers"!

From a bankers perspective, I understand entirely why this 'slashing' is required. Accounts issued to those that don't use them, or to those who avoid fees and other charges are simply unprofitable. It just doesn't make any sense to maintain accounts that effectively cost the business money.

From a consumers perspective, I feel quite defensive about this. First, it can and will impact credit scores (see my last post where I write about this). Second, I feel as though something of mine has been taken away from me un-rightfully, regardless of what the fine print might say.

Seems to me that the banking systems needs to find other ways to support their overhead. Perhaps they may consider reducing their overhead! Executive payroll, even in your small community banks and credit unions might surprise you!

Instead of looking for additional income from creditors, why not fee other transactions? Just for example...

Payroll expenses could be reduced by training customers to use automated systems for routine transactions rather than seeing a live person (teller). How? For every teller window transaction that could have been conducted at an ATM or online, a fee would be imposed that is not imposed had the automated system been used. One would pay extra to talk with a teller. Why? Because tellers cost more! Eventually, people would come to use the less expensive technology, thereby reducing the bank or credit unions reliance on human resources, ultimately reducing overhead expenses.

Would this work? Sure, it already does. When was the last time you talked with a teller when you stopped into ING Direct?

Geico Platinum Mastercard Reduces Credit Lines

I've recently joined the group of folks who have had their credit negatively impacted by a credit card company that indiscriminately reduces credit lines. Geico Platinum Mastercard notified me that they were reducing my credit card line of credit significantly, down to the balance that I had carried on the account. How can this effect ones credit negatively?

A large part of ones credit score is determined by the amount of credit available. Earlier this month, I had a $10,000 limit on this card. If I carried a $1,000 balance, then I had 90% of my credit line available. When the credit limit is reduced, in this case to $1000, the available credit is now $0, making it appear as though I've 'maxed out' my credit line.

When the credit bureaus receive my balance information showing that I now have a $1000 balance on a $1000 credit line, my credit score will be recalculated and will likely drop significantly, for no fault of my own.

How can the credit card companies do this? I have made all of my payments on time, never late, never missed. Managed my account with stellar diligence. Still, I run the risk, again by no fault of my own, that my credit score will suffer. If my score drops, I run the risk of paying higher interest rates for future credit needs. You would think that there would be a law against this!

Read you account agreements carefully. There is almost always a clause that gives the card company the right to reduce or cancel the credit line at their discretion, regardless of your payment history.

What's the solution? I called Geico Platimum Mastercard and asked that they reconsider. They acknowledged that I had always paid my account better than agreed, but that there wasn't anything that they could (or would) do. Because it was a corporate business decision, they could not increase the line so that I would have only 50% utilization, nor would they reduce the APR on the account. My options were very limited.

I could; (1) decide not to pay them, or (2) pay off the balance in full. Fortunately, I was in the financial position that I could chose option 2. In addition, I will be looking for a new insurance company to handle my motor vehicle insurance needs. Note: I did not close the account because I want to keep my available credit lines open in order to preserve my credit rating.

Have you had this happen to you? What did you do?

Taxes

Spent the better part the day yesterday in front of the computer looking for ways to reduce our tax obligation this year. Need I say that this year we're paying in? This is the first time in a long time, so I guess I can't complain too much.

In 2008, we had a job change. This 'life change' job change is part of the reason for the change in tax status; but its not the only reason.

Last year, we changed our W4's so that our employers were deducting the proper amounts from our paycheck. We stopped making loans to the federal government. Before we made this change, we were having too much taken from our pay, of which we'd receive back each year as a refund for overpayment.

Now, instead of waiting a year to have access to this money, we receive it weekly. I must admit however, it sure would be nice right about now to get a check!

2009 Tax Changes

Source: IRS.gov

2009 Tax Changes for Individuals

Child-Related Tax Changes
Information on adoption benefits, child and dependent care credit, child's investment income, and additional child tax credit.

Credit for Prior Year Minimum Tax
There are several changes to the credit for prior year minimum tax.

Earned Income Credit
The earned income credit amounts have increased for 2008.

Education-Related Tax Changes
Information on education savings bond exclusion, hope and lifetime learning credits, tuition and fees deduction, and student loan interest deduction.

Exclusion of Income for Volunteer Firefighters and Emergency Medical Responders
For tax years beginning after 2007 and before 2011, gross income ...

Health/Medical-Related Tax Changes
Information on Archer Medical Savings Accounts (MSAs), Health Savings Accounts(HSAs), and long-term care premiums.

Home/Residence-Related Tax Changes
Information on mortgage insurance premiums, residential energy credits, and sale of main home by employees of intelligence communities.

Increase in Limit on Long-Term Care and Accelerated Death Benefits Exclusion
New limits on exclusion payments made under a long-term care insurance contract.

Itemized Deductions
The itemized deduction phaseout income limits have increased for 2008.

Maximum Tax Rate on Qualified Dividends and Net Capital Gain Reduced
There are changes to the maximum tax rate on qualified dividends and net capital gain.

Penalty for Failure to File Income Tax Return Increased
The failure to file penalty has increased.

Personal Exemptions
The deduction amount and phaseout income levels have increased for 2008. Also, the definition of qualifying relative is clarified.

Recovery Rebate Credit
See if you are eligible for the recovery rebate credit.

Social Security and Medicare Taxes
The maximum amount of wages subject to the social security tax and Medicare tax has increased for 2008.

Standard Mileage Rate
The standard mileage rate for business use of your vehicle, medical and move- related use and charitable use has increased for 2008.

Wage Threshold for Household Employees
The social security and Medicare wage threshold for household employees is...

2009 Anticipated Refund Dates

To find out when you can expect your 2009 IRS Tax Refund, click here!

No Tax Break for Car Loan Interest

As you might be aware, one of the provisions set forth in the proposed stimulus package was a tax break for interest paid on car loans. Sen. Barbara Mikulski (D-Md.) who sponsored the bill, confirmed today Congress has scaled back the bill and interest paid on car loans is not included in the package.

The final stimulus bill agreed upon by the House and the Senate provides tax relief for sales and excise tax.

Automotive News sources said the trim in the tax break for new-vehicle purchases reduced its cost from about $11 billion to about $2 billion. Negotiators wanted to limit the cost of the stimulus bill to ease the concerns of the lawmakers who were concerned with excessive spending.

Sale of Experian based FICO scores discontinued on myFICO.com

Want to know what Experian is reporting about your credit history? It's going to be a little more difficult now!

Experian has announced that this action is specific to their consumer business unit, and will not impact their relationship with lenders.

Fair Isaac has received notification from Experian of its decision to terminate the agreement which allows the distribution of Experian-based FICO® scores and reports from www.myFICO.com.

While it is our desire to continue informing consumers of FICO® scores from all three credit bureaus, FICO® scores from Experian will no longer be available to consumers. FICO® scores from Equifax and TransUnion continue to be available.

There are three myFICO® products which will be impacted by this change:

* FICO® Credit Complete: No longer available after February 13th, 2009.

* FICO® Standard: The single Experian FICO® score and report will no longer be available after February 13th, 2009. You will still be able to obtain FICO® scores and reports from Equifax and TransUnion.

* Suze Orman's FICO® Kit: The single Experian FICO® score and report will no longer be available after February 13th, 2009. You will still be able to obtain FICO® scores and reports from Equifax and TransUnion.

It is important to understand that the majority of lenders will continue to use FICO® scores based on Experian data to make creditworthiness decisions, but those FICO® scores based on Experian data will not be available via www.myFICO.com, nor any other public venue.

We sincerely regret any inconvenience this causes to our loyal customer base. For the affected services, we will provide a smooth and thoughtful transition. Please know we are committed to giving clear and continued communications on this issue.

For more details on this change, especially if you currently own any of the three products mentioned above, we have provided a thorough FAQ, which is found on the FICO® Forums page.

Here is a link to the FAQ

Car Loan Interest Tax Credit

Senate Approves Mikulski's Auto Amendment
WASHINGTON, D.C. – U.S. Senator Barbara A. Mikulski’s (D-Md.) amendment to the American Recovery and Reinvestment Act to save American jobs and help American consumers by giving tax relief to new car buyers was approved by the Senate today.

“Today the Senate voted ‘yes’ to getting our economy rolling again,” Senator Mikulski said. “President Obama said the goal for the economic recovery program is to create jobs and save jobs. That’s exactly what my amendment does. It’s targeted at saving American jobs and helping families buy the cars they need to get to work and take their kids to school. Our economy is teetering, and Congress must take swift action to save jobs and lend a helping hand to struggling families. That’s what we did here today.”

Senator Mikulski’s amendment, the Auto Assistance Ownership Amendment, makes interest payments on car loans and state sales or excise car tax-deductible for new cars purchased between November 12, 2008 and December 31, 2009, which, in turn, will help more Americans afford cars during these tough economic times and spur investment in America’s ailing automobile industry. For more information about Senator Mikulski’s amendment, go to: http://mikulski.senate.gov/_pdfs/Press/autoownershiptaxamendment.pdf

The American automobile industry is currently one of the biggest drivers of the U.S. economy. One out of every 10 jobs in America is auto-related. A collapse of a major U.S. automaker, such as GM, Ford or Chrysler, would further erode the American economy, given the huge network of suppliers, dealers, and other businesses and communities that would be affected. Already this year the U.S. auto industry has shed 110,000 jobs. In Maryland, approximately 500 jobs have been lost this year due to the closing of automobile dealerships.

Co-sponsors of the amendment include: Senator Sam Brownback (R-Kan.), Senator Debbie Stabenow (D-Mich.), Senator Kay Bailey Hutchison (R- TX.), Senator Jim Webb (D-Va.), Senator Sherrod Brown (D-Ohio), Senator Robert F. Bennett (R-Utah) and Senator Evan Bayh (D-Ind.).

The next step in the legislative process for the Mikulski Amendment is Senate approval of the American Recovery and Reinvestment Act. The bill then goes to conference, where differences in the House and Senate versions will be resolved before the legislation is sent to President Obama for his signature.

Senator Mikulski’s remarks, as prepared for delivery on the Senate floor, follow:

“Mr. President, our economy is in shambles. Our unemployment rate is at a 16-year high. More Americans are out of work today than at any other point in the last 25 years, and we lost more jobs in 2008 than in any year since 1945. People are losing their jobs, their life savings, and their homes.

“There is much work to do and no time to waste. We’ve already done a bailout. We’ve helped the sharks and we’ve helped the whales. Now it’s time to help the minnows.

“I have a proposal that will help. I am offering an amendment, co-sponsored by Senator Brownback, to save the American automobile industry, to help consumers to get our economy back on track, and to help state governments get more revenue. “It’s simple, it’s straightforward, it’s bipartisan. It’s also timely, targeted and temporary. And it saves jobs. Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big 3 auto makers, they can’t survive if consumers don’t start buying cars. That’s where my amendment helps. “I want to stimulate demand in the automobile industry so that people go to showrooms and buy cars. Why is this a good idea? If you buy a car, someone’s got to make them, someone’s got to sell them, someone has to service them and someone has to provide administrative services. So this amendment is good for the manufacturers, the dealers, the suppliers and the consumers. “My amendment is simple. If you buy a new passenger car, minivan, or light truck by December 31st of 2009, you will get a tax deduction for your sales or excise tax and the interest on your loan. A family would save about $1,500 on a $25,000 car, not counting the additional incentives from dealers.

“My amendment is not about bailouts. It’s about jobs, jobs, jobs. Six million jobs are at stake in the American car industry. One out of 10 jobs in America relates to the auto industry. Right now the facts are gloomy. If we lose the Big 3, then 3 million jobs are at risk. The only way to save the Big 3 is to get people into showrooms, but 1,000 dealerships could close this year. That’s 53,000 jobs that could be lost just at the dealerships. I believe we can help by getting the consumer into the showroom. They will know that the government is on their side and helping them with one of the biggest purchases they will make during this tough time.

“My amendment also helps state governments. States rely on tax revenue from new car sales. In my home state and many other states the sales tax is around 6 percent, so on a $25,000 car the state gets $1,500 in revenue. New car sales are down millions per year from their averages. This means states are losing billions when they already are struggling. My amendment will help because as people buy new cars states’ tax revenues will increase.

“This amendment is a big deal to families because a car is the second biggest purchase most families make. My amendment is targeted. Families with an income of more than $250,000 a year are ineligible. Cars costing more than $49,500 also are ineligible. This amendment also helps the environment because it gets more people into new cars and new cars are cleaner and more fuel efficient than old cars.

“There are 20,000 new car dealerships nationwide. They employ a million people. In my own home state, there are around 300 dealerships. Most people don’t realize that dealers employ an average of 53 people in sales, mechanics, and administrative positions. I visited car dealerships in Maryland and heard from these employees.

“I’ve talked to people like the mechanic who works for a Chevy dealer in Bethesda. He’s worked there for 23 years. He said to me, ‘Senator Barb, all my life I’ve loved to work on cars. I just love it. I love to fix them, I love to repair them. If they’re new, I want to make sure they’re fit for duty. I’ve earned a good living. I’ve been happy and I think I’ve helped make a lot of other people happy. But the only way I can stay happy is if I continue to work. I’ve got a mortgage. I’ve got two kids in college. Maybe they’re going to go into engineering, I don’t know, but if we don’t get more people into this dealership, my job could be gone.’

“And I talked to the dealer. The dealer’s name is Sam. The first thing you note about him is that he wears the little rotary pin because he’s the guy that not only provides jobs in the community, he is also part of the Chamber of Commerce and part of the United Way.

“We are talking about people who are part of the fabric of our society. We are not talking about an abstraction and we’re not talking about a single zip code, like Wall Street. We are talking about the automobile industry, which is in every state and every community.

“Maybe you know somebody who works for a hedge fund. I don’t. But I do know the people who work for the automobile industry, like the receptionist who went to work at a dealership 43 years ago right out of high school. And she said, ‘Senator Barb, women couldn’t sell cars in those days, but I’ve been here in and out of this same dealership for 43 years. I’ve raised my kids and earned a good living doing the back office work and I want to keep on doing it. I’m not ready for Social Security and for God’s sake don’t put the money in Wall Street.’

“Well, I say let’s put money where it matters — where it creates jobs. That’s why we need this amendment — for creating jobs, for consumers, and for the auto industry that is such a driver of our country’s economy — so we can get America rolling again.”

2008 Tax Law Changes Highlights

This information is from www.IRS.gov

Highlights of 2008 Tax Law Changes: Tax Breaks Renewed, Recovery Rebate Credit, Homeowner Relief


FS-2009-1, January 2009

AMT exemptions rise; several expiring deductions and credits get a new lease on life; a new standard property tax deduction and a special first-time homebuyer credit are available to some homeowners; and retirement savings incentives expand. These are among the changes taxpayers will find when they fill out their 2008 tax returns. More information about these and other changes, summarized below, can be found on IRS.gov and in various IRS documents, including the Instructions for Form 1040.

Economic Stimulus Payments Tax Free

Economic stimulus payments are not taxable, and they are not reported on 2008 tax returns. However, the stimulus payment does affect whether a taxpayer can claim the Recovery Rebate Credit and how much credit he or she can get. The credit is figured like last year's economic stimulus payment except that the amounts are based on tax year 2008 instead of 2007. A taxpayer may qualify for the Recovery Rebate Credit if, for example, she did not get an economic-stimulus payment or had a child in 2008. See Fact Sheet 2009-3 for details. In most cases, the IRS can figure the credit. The instructions for Forms 1040, 1040A and 1040EZ have more information.

AMT Exemption Increased for One Year

For tax-year 2008, Congress raised the alternative minimum tax exemption to the following levels:

*
$69,950 for a married couple filing a joint return and qualifying widows and widowers, up from $66,250 in 2007
*
$34,975 for a married person filing separately, up from $33,125 and
*
$46,200 for singles and heads of household, up from $44,350

Under current law, these exemption amounts will drop to $45,000, $22,500 and $33,750, respectively, in 2009. Form 6251 and the AMT Calculator provide more information.

Expiring Tax Breaks Renewed

Several popular tax breaks that expired at the end of 2007 were renewed for tax-years 2008 and 2009. As a result, eligible taxpayers can claim:

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The deduction for state and local sales taxes on Form 1040 Schedule A , Line 5
*
The educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
*
The tuition and fees deduction on Form 8917 and
*
The District of Columbia first-time homebuyer credit on Form 8859

In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify. Use Form 5695 to claim the credit.

The non-business energy property credit for insulation, exterior windows, exterior doors, furnaces, water heaters and other energy-saving improvements to a main home is not available in 2008 but will return in 2009.

Standard Deduction Increased for Most Taxpayers

Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions. The basic standard deduction is:

*
$10,900 for married couples filing a joint return and qualifying widows and widowers, a $200 increase over 2007
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$5,450 for singles and married individuals filing separate returns, up $100 and
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$8,000 for heads of household, up $150

Higher amounts apply to blind people and senior citizens. The standard deduction is often reduced for a taxpayer who qualifies as someone else’s dependent.

New this year, taxpayers can claim an additional standard deduction, based on the state or local real-estate taxes paid in 2008. Taxes paid on foreign or business property do not count. The maximum deduction is $500, or $1,000 for joint filers.

Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster. A worksheet is available in the instructions for Forms 1040 and 1040A.

First-Time Homebuyer Credit

Those who bought a main home recently or are considering buying one may qualify for the first-time homebuyer credit. Normally, a taxpayer qualifies if she didn’t own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only –– on homes bought from April 9, 2008, to June 30, 2009. It can be claimed on new Form 5405 and is repaid each year as an additional tax. Income limits and other special rules apply.

Tax Relief for Midwest Disaster Areas

Special tax relief related to severe storms, tornadoes or flooding, occurring after May 19, 2008, and before Aug. 1, 2008, is available to individuals in portions of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin that were affected by these disasters. Tax benefits include:

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Liberalized rules for certain personal casualty losses and charitable contributions
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An additional exemption amount for persons who provided housing for someone displaced by these disasters
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The option to use 2007 earned income to figure a 2008 earned income tax credit (EITC) and additional child tax credit
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An increased charitable standard mileage rate for use of personal vehicle for volunteer work related to these disasters
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Special rules for withdrawals and loans from IRAs and other qualified retirement plans

Details on these and other relief provisions are in Publication 4492-B .

Contribution Limits Rise for IRAs and Other Retirement Plans

This filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $53,000 and $63,000, compared to $52,000 and $62,000 last year.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $85,000 to $105,000, up from $83,000 to $103,000 last year.

Where an IRA contributor who is not covered by a workplace retirement plan is married to someone who is covered, the deduction is phased out if the couple’s income is between $159,000 and $169,000, up from $156,000 and $166,000 in 2007.

The phase-out range remains $0 to $10,000 for a married individual filing a separate return who is covered by a retirement plan at work.

The worksheet in the instructions for Form 1040 Line 32 or Form 1040A Line 17 can help a taxpayer figure the IRA deduction.

For 2008, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b) and most 457 plans remains unchanged at $15,500. This limit rises to $16,500 in 2009. The catch-up contribution limit for those aged 50 to 70-½ remains at $5,000 in 2008 but rises to $5,500 in 2009.

The AGI phase-out range for taxpayers who contribute to a Roth IRA is $159,000 to $169,000 for joint filers and qualifying widows and widowers, compared to $156,000 to $166,000 in 2007. For singles and heads of household, the comparable phase-out range is $101,000 to $116,000, compared to $99,000 to $114,000 in 2007.

Standard Mileage Rates Adjusted for 2008

The standard mileage rate for business use of a car, van, pick-up or panel truck is 50.5 cents per mile from Jan. 1, 2008, to June 30, 2008, up 2 cents from 2007. The rate is 58.5 cents for each mile driven during the rest of 2008.

From Jan. 1, 2008, to June 30, 2008, the standard mileage rate for the cost of operating a vehicle for medical reasons or as part of a deductible move is 19 cents per mile, down a penny from 2007. The rate is 27 cents from July 1 to Dec. 31.

The standard mileage rate for using a car to provide services to charitable organizations is set by law and remains at 14 cents a mile. As noted earlier, special rates apply to the Midwest disaster area.

Exemptions Rise

The value of each personal and dependency exemption is $3,500, up $100 from 2007. Most taxpayers can take personal exemptions for themselves and an additional exemption for each eligible dependent. An individual who qualifies as someone else’s dependent cannot claim a personal exemption, and though personal and dependency exemptions are phased out for higher-income taxpayers, the phase-out rate is slower than in past years.

This is one of more than three dozen individual and business tax provisions that are adjusted each year to keep pace with inflation. A complete rundown of these changes can be found in 2008 Inflation Adjustments Widen Tax Brackets, Change Tax Benefits.

Earned Income Tax Credit Rises

The maximum earned income tax credit (EITC) is:

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$4,824 for people with two or more qualifying children, up from $4,716 in 2007
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$2,917 for those with one child, up from $2,853 last year and
*
$438 for people with no children, up from $428 in 2007.

Available to low and moderate income workers and working families, the EITC helps taxpayers whose incomes are below certain income thresholds, which in 2008 rise to:

*
$41,646 for those with two or more children
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$36,995 for people with one child and
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$15,880 for those with no children

One in six taxpayers claim the EITC, which, unlike most tax breaks, is refundable, meaning that individuals can get it even if they owe no tax and even if no tax is withheld from their paychecks.

Taxes Lowered for Many Investors

The five-percent tax rate on qualified dividends and net capital gains is reduced to zero. In general, this reduction applies to investors whose taxable income is below:

*
$65,100, if married filing jointly or qualifying widow or widower
*
$32,550, if single or married filing separately or
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$43,650, if head of household.

Note that taxable income is normally less than total income. The worksheet for Form 1040 Line 44, Form 1040A Line x or Schedule D and its instructions provide details.

Kiddie Tax Revised

The tax on a child's investment income applies if the child has investment income greater than $1,800 and is:

*
Under 18 old
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18 years of age and had earned income that was equal to or less than half of his or her total support in 2008 or
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Over 18 and under 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.

Previously, the tax only applied to children under age 18. Form 8615 is used to figure this tax.

Self-Employment Tax Changes

For those who receive Social Security Retirement or disability benefits, any Conservation Reserve Program (CRP) payments are now exempt from the 15.3-percent social security self-employment tax. Schedule SE and its instructions and Publication 225, Farmer’s Tax Guide, have the details.

More farmers and self-employed people this year can choose the optional methods for figuring and paying the self-employment tax. These optional methods allow those with net losses or small amounts of business income a way to obtain up to four credits of Social Security coverage. The income thresholds for both the farm optional method and the nonfarm optional method are increased for 2008 and indexed for inflation in future years. Choosing an optional method may increase a taxpayer’s self-employment tax but it may also qualify him for the earned income tax credit, additional child tax credit, child and dependent care credit or self-employed health insurance deduction. Schedule SE and its instructions have details.