The Internal Revenue Service is too busy trying to punish taxpayers instead of helping them navigate the complex tax system, according to a government official who watches out for taxpayers.
The report to Congress by Taxpayer Advocate Nina Olson said that taxpayers looking for help from the IRS only get through on the phone 70% of the time, and have to wait 11 minutes for a response when they actually do get through.
"The IRS is failing to address the needs of taxpayers who are experiencing economic difficulties and has not revised collection policies that harm taxpayers, thereby undermining its goal of increasing voluntary compliance," Olson wrote.
Olson said the IRS has ramped up spending on "hard core" enforcement and handing out levies in recent years, while spending has declined on the type of services that help Americans understand how to pay their taxes. She said that seems misguided, because in many cases the IRS is punishing Americans who had a good tax history before falling into hard times because of the recession.
She said the real problem with compliance is the difficulty in negotiating an increasingly complex tax system. This is because payments from new programs — including the stimulus, Making Work Pay, First-Time Homebuyer Credit and hybrid car credit — have put added pressure on the IRS by creating a backlog of additional work cash advance loan no fax.
"Many of these provisions have created taxpayer confusion, generated considerable telephone and correspondence volumes, … caused IRS processing delays and programming problems, produced several refund fraud schemes and resulted in several spikes in the Taxpayer Advocate Service’s caseload," wrote Olson.
She said the 70% response rate to taxpayer calls was actually an improvement, up from 53% in the prior year. That compared to an 87% response rate to calls five years ago.
The advocate acknowledged that the job of the IRS has gotten more difficult in recent years, causing the under-funded agency to strain under the added responsibilities of administering new services. She suggested that the IRS develop a strategic plan acknowledging its "dual role as part tax collector and part benefits administrator" in its effort to seek more funding.
IRS officials were not immediately available for comment.
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Kentucky’s seasonally adjusted preliminary unemployment rate rose to 10.6 percent in April, up from 10.4 percent in April 2009 but down from a revised 10.7 percent in March 2010, according to figures released Thursday by the Kentucky Office of Employment and Training.
The U.S. seasonally adjusted unemployment rate rose to 9.9 percent in April, up from 8.9 percent a year earlier and 9.7 percent in March 2009, according to the U.S. Bureau of Labor Statistics.
Seven of Kentucky’s 11 major nonfarm job sectors reported year-over-year employment increases, and four reported decreases.
Kentucky gained a net 7,500 jobs, bringing the state’s nonfarm employment to a seasonally adjusted total of 1,769,500. It marked the second consecutive month of net job growth in the state, according to the OET.
April job gains were experienced in the following sectors: manufacturing; government; construction; trade, transportation and utilities; educational and health services; professional and business services; and “other” services sector (repair and maintenance, personal and laundry services, religious organizations, and civic and professional organizations).
Declines were experienced in mining and logging, information, leisure and hospitality, and financial-activities sector.
As with fast payday loans, this recently used to be the case, but competitive lenders and higher demand has taken this loan type to mainstay levels.
Dividend investors are enjoying fatter payouts again, to the tune of $10 billion per year.
The reason? More than one-quarter of companies in the Standard & Poor’s 500 have increased their quarterly payouts over the past 5½ months, with just two cutting dividends.
But President Barack Obama and Congress are almost certain to approve higher taxes on dividend income.
In fact, investors in the top tax bracket could see dividend taxes more than double next year to 39.6 percent, up from the current 15 percent. For most taxpayers, a more likely scenario is a rate of around 25 percent, rather than 15 percent.
Whatever increase Washington settles on, it will change the math for dividend-paying stocks and mutual funds with a strong dividend tilt in their portfolios. They’re big draws for retirees and others who prefer a steady income stream, not just potential paper gains from appreciating stock prices.
Still, market pros say the recent surge in companies reversing dividend cuts appears to have staying power. Here are five things to know about dividend investing:
1. It can only get better, and it is: When stocks tanked in late 2008, companies that had reliably raised quarterly dividends year after year suddenly cut them, opting to hold on to extra cash to ride out the recession. It was a matter of survival for many, especially bailed-out banks that had been among the most dependable dividend payers.
This year’s turnaround has been sharp, particularly last month. The list of 25 companies announcing increases in April included IBM, Exxon Mobil, Procter & Gamble and Johnson & Johnson.
2. Watch the taxman: Expect a quick end to the historically light tax bill dividend investors have faced in recent years. Taxpayers in all but the lowest two brackets currently pay 15 percent on dividend income.
Obama proposed an increase to 20 percent. But a proposal that cleared the Senate Budget Committee last month would go further, with steeper increases for those in the middle tax brackets, and a 39.6 percent rate for those in the top rung. The House is expected to begin debate this month.
The outcome: A $1 dividend paid this December would leave an investor with 85 cents after taxes. But in January, when the new rates would take effect, it could be closer to 70 cents or 60 cents, depending on your income.
3. Expect bank dividends to come back — if you’re patient. Financial stocks like Bank of America and Citigroup have historically been among the most reliable dividend payers, but that changed in 2008. The market meltdown hit bank stocks especially hard, and they cut dividends deeper than those in other sectors.
Many financial companies are still restricted from paying dividends as a condition of government bailouts. But even those no longer facing restrictions are cautious. They’re uncertain how tougher financial regulations will crimp business.
4. Dividends could be safe harbors if the market drops again. Dividend-paying companies typically have more cash on hand and steadier income than growth-oriented companies that instead plow profits back into their operations.
5. Dividends are solid long-term. Even after 2009, dividend stocks still have a good long-term record. S&P 500 stock prices ended up the last decade slightly below where they started, after the dot-com bubble burst early on, and the more recent subprime mortgage mess sent stocks tumbling. S&P stocks lost an average 2.7 percent per year over the decade, while dividends returned nearly 1.8 percent.
General Motors has made a final payment of $5.8 billion to the U.S. and Canadian governments, paying off the last of its $6.7 billion in loans, the company said Wednesday.
"I am very pleased to announce that, as of today, General Motors has repaid, in full and with interest, the loans made last July by the U.S. Treasury and Export Development Canada," said GM chief executive Ed Whitacre, speaking at a plant in Fairfax, Kan., where GM builds Chevrolet Malibu and Buick LaCrosse sedans.
Whitacre also announced that GM would make two big investments for production of the next-generation Malibu: $136 million in the Fairfax facility, which will become the primary production point for the car, and $121 million in its Detroit-Hamtramck plant, which will provide additional production at times of peak demand.
GM has already begun manufacturing the Chevrolet Volt electric car in Hamtramck, where it also makes the Buick Lucerne and Cadillac DTS large cars.
On Tuesday night, the automaker wired $4.7 billion to the U.S. Treasury Department and $1.1 billion to Canada.
"GM’s ability to pay back our loans ahead of schedule is a sign that our plan is working," Whitacre said.
But the loan money is only a fraction of the financial support that the federal government gave to GM over the past 12 months to stop it from going out of business.
Overall, GM received $50 billion in federal help. In return, the government got $2 billion in preferred stock and 61% of the company’s privately held common shares.
Taxpayers could recoup money from a possible sale of GM stock to the public in the future.
A White House report issued shortly after GM’s announcement was upbeat on the progress that both General Motors and Chrysler have made since coming out of bankruptcy but noted that the government would likely not make a profit on the funds it had invested.
"Overall, the investments made by the prior and current administration in GM, Chrysler, and GMAC will likely result in some loss, but the U.S. Treasury anticipates it to be much lower than forecast last year," the report said.
Mark Reuss, president of GM’s North American operations, said in an interview with CNNMoney.com that he was "positive" that GM’s stock would ultimately be profitable for taxpayers.
To protect Wisconsin’s lakes, streams and rivers from phosphorus runoff beginning April 1, Wisconsin residents can no longer apply turf fertilizer that contains phosphorus to their lawns, except in limited instances, under a new law that affects retailers as well.
The restriction, according to a press release from the Wisconsin Department of Agriculture, Trade and Consumer Protection, also applies to professional lawn and landscape businesses, golf courses and municipalities.
“The new law makes it illegal for Wisconsin retailers to display turf fertilizer that is labeled as containing phosphorus or available phosphate,” said Charlene Khazae, the Department’s fertilizer program manager. Retailers can post a sign that indicates fertilizer with phosphorus is available upon request.
Fertilizer products carry three numbers that indicate the amount of nitrogen, phosphorous and potash in the product, commonly referred to as N-P-K no fax cash advance. The middle number, which represents the amount of phosphorus ‘P,’ should be zero.
Fertilizer that contains phosphorus can still be used in agricultural production, pastures and home gardens.
Similar restrictions already exist in places such as Dane County, some counties in Michigan and Florida and in the state of Minnesota.
Additional restrictions for all types of turf fertilizer, no matter if it contains phosphorus or not, include: no application of fertilizer can be made to frozen ground or surfaces like driveways or sidewalks
For more information about the turf fertilizer law, visit www.datcp.state.wi.us and search ‘turf fertilizer.’
WASHINGTON–The U.S. economy grew at a 2.2 per cent pace in the third quarter as the recovery got off to a weaker start than previously thought. But all signs suggest the economy will end the year on a stronger footing.
The commerce department’s new reading on gross domestic product for the July-to-September quarter was slower than the 2.8 per cent growth rate estimated a month ago. Economists had predicted this figure would remain the same in the final estimate of the quarter’s GDP – the value of all goods and services produced in the United States.
The main factors behind the downgrade were that consumers didn’t spend as much, commercial construction was weaker, business investment in equipment and software was softer and companies cut back more on their stockpiles of goods.
Even so, the economy managed to return to growth during the quarter, after a record four straight quarters of decline. That signalled that the deepest and longest recession since the 1930s had ended and the economy had entered a new fragile phase of recovery.
Despite the lower GDP reading, many analysts still think the economy is on track for a better finish in the current quarter.
Tuesday’s report showed consumer spending grew at a 2.8 per cent pace, slightly weaker than the 2.9 per cent rate previously estimated and one of the factors behind the lower overall reading.
Retail sales, though, showed momentum in October and November. That raised hopes that holiday sales would fare better than last year’s season, the worst in nearly four decades.
The economy is probably growing at nearly 4 per cent in the October-to-December quarter, analysts say. A few peg it closer to 5 per cent. If they’re right, that would mark the strongest showing since 5.4 per cent growth in the first quarter of 2006 – well before the recession began. The government will release its first estimate of fourth-quarter economic activity on Jan. 29.
Jamie Naessens thought so. She used her credit card to get a free sample of a tooth whitener advertised as cheaper than visiting a dentist.
"A friend of mine on Facebook posted about a product she was happy with that she got for free," she says. "Her account was hacked, but I didn’t know until later."
She went to the website, www.premiumwhitepro.com, and agreed to pay $1.95 (U.S.) to cover shipping costs. But a confirmation email showed $11.90 charged to her credit card.
"We charge an extra $9.50 for international orders," she was told after calling the Colorado-based company for a live chat on the night she did the transaction.
Only when she asked to cancel did she find out that accepting the trial order could have trapped her in a monthly shipping program.
"If you don’t cancel, you will be billed $87.62 for the product and you’ll then become a PremiumWhite Celebrity Member," the website says.
Naessens cancelled the trial order, but the company insisted the $11.90 shipping charge was non-refundable. Luckily, she had a screen shot of her live chat and sent it to her credit card issuer, President’s Choice Financial.
She also cancelled her credit card and asked for a new one to be issued with a new number.
Erin Gray, a President’s Choice spokeswoman, said customers have to take precautions against online scams.
"Ms. Naessens was reimbursed for the charge she incurred from the company," Gray said. "By taking the extra step of closing her card and opening a new one, she should avoid further charges related to the online offer.
"Should the company proceed with charging the card again, we will certainly work with Ms. Naessens to find a resolution (including adjusting the charge)."
Complaints about recurring charges by merchants often have the same result No teletrack payday loans. Customers have to call their credit card issuer every month and file a dispute.
This happens despite guarantees by Visa and MasterCard against unauthorized purchases made in a store, over the phone or online.
Naessens feels a little foolish, but a lot wiser, about how credit card companies operate.
"I have always considered myself a fairly smart consumer. However, I’ve been humbled recently.
"I feel that credit card issuers are not committed to changing the system to protect consumers.
"It is true that the issuer has promised to work with me in the future. However, that is not the same as making a promise to reverse any future charges, even though I did everything I could possibly do, given the situation.
"The very fact that suspect merchants can resubmit the charges is unacceptable — and once again, the consumer is victimized."
Naessens had one more surprise. She joined a security group at Facebook to share her experience.
But she couldn’t comment online without verifying her Facebook account. This meant having to provide her cellphone number, so she could be sent a text message with a security code.
"I’d already compromised my credit card number. I wasn’t going to do that with my cellphone number," she says.
Internet user beware. A free sample is a common come-on for monthly shipments of vitamins or cosmetics. And if you complain, the company will say you agreed to the terms and conditions before placing your order.
Next week, we’ll wrap up this Sunday series on fraud before tackling something new in the new year.
eroseman@thestar.ca
Federal Reserve Chairman Ben S. Bernanke said removing the central bank from bank supervision and tampering with its political independence would “seriously impair” economic stability in the U.S.
“A number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions,” the Fed Chairman said in a commentary released yesterday on the Web site of the Washington Post. The measures “would seriously impair the prospects for economic and financial stability in the U.S..”
Bernanke has presided over the most expansive use of Fed powers since the Great Depression. While the 55-year-old Fed chairman has said he averted a financial meltdown, lawmakers have voiced concern about taxpayer-sponsored bailouts and proposed the most sweeping dismantlement of Fed authority since the creation of the institution in 1913.
Bernanke’s commentary is his first comprehensive answer to proposals in the House and Senate that would limit the Fed’s supervisory powers and exert more political oversight in the setting of interest rates. The issues are likely to be discussed when he faces the Senate Banking Committee on Dec. 3 for a hearing on his nomination to a second term as chairman.
“Congress has a lot of public support for an attack on the Fed,” Allan Meltzer, a Fed historian and professor at Carnegie Mellon University in Pittsburgh, said in an interview Nov. 23. “They bailed out everybody in sight.”
Lax Supervision
Senate Banking Committee Christopher Dodd, a Democrat from Connecticut, has criticized the central bank for lax supervision and introduced legislation this month that would strip bank oversight from the Fed and create a single bank regulator. Dodd would also limit the central bank’s ability to loan to individual companies.
“There is a strong case for a continued role for the Federal Reserve in bank supervision,” Bernanke said. “Because of our role in making monetary policy, the Fed brings unparalleled economic and financial expertise to its oversight of banks.”
The Fed chairman pointed to capital adequacy tests the Fed performed in May which helped restore confidence in the banking system. The Standard and Poor’s 500 Financials Index has increased 34 percent since May 1, outperforming the S&P 500 by about 10 percentage points.
Dodd and Representative Barney Frank, chairman of the House Financial Services Committee, want to take away the Fed’s rule- writing power on consumer financial products and give it to a new Consumer Financial Protection Agency.
‘Excessive Risk-taking’
“The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis,” Bernanke said. The Fed has reviewed its performance and “moved aggressively to fix the problems,” he added.
As the subprime mortgage crisis began to trigger losses in bank portfolios, Bernanke used emergency authority last year to purchase securities from Bear Stearns Cos. and facilitate its merger with JPMorgan Chase & Co.
The Fed chairman said that the government’s actions, while in some instances “distasteful and unfair,” were necessary to prevent “a global economic catastrophe that could have rivaled the Great Depression in length and severity.”
Bernanke pushed the Fed’s backstop lending beyond banks, setting up programs to support the commercial paper and asset- backed securities markets easy payday loan. The Fed Board approved the bank holding company applications of Goldman Sachs Group Inc. and Morgan Stanley, giving them access to the Fed’s loan window.
Propped Up Markets
The former Princeton University economist and Great Depression scholar has more than doubled the Fed’s assets to $2.21 trillion and become the lender of last resort to government bond dealers, banks, Wall Street firms and U.S. corporations. The central bank has also propped up markets for mortgage-backed and asset-backed securities that support credit to consumers, small businesses and commercial real estate.
A financial regulatory reform bill proposed by Frank, a Democrat from Massachusetts, would limit Fed emergency lending to broadly available credit programs.
The Frank bill preserves the Obama administration’s proposal to make the Fed the lead regulator of risk across the financial system.
The central bank’s independence is also under fire from both chambers of Congress. Frank’s committee advanced a proposal this month to remove a three-decade ban on congressional audits of Fed interest-rate decisions. The proposal was offered by Representative Ron Paul, a Republican from Texas, and based on a bill with more than 300 co-sponsors.
Less Independent
Bernanke said studies show that central banks independent of political influence tend to keep inflation and interest rates lower than their less independent counterparts.
“The general repeal of that exemption would serve only to increase the perceived influence of Congress on monetary policy decisions, which would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation,” Bernanke said.
Under the proposal by Dodd, commercial banks would lose their power to appoint directors of the 12 regional Fed banks. Instead, directors would be chosen by the Fed’s Senate-confirmed governors, and each board chairman would be appointed by the president of the United States and subject to Senate approval.
The proposal would increase political oversight of the Fed bank presidents, who are among the most vocal proponents on the Federal Open Market Committee for keeping inflation low.
‘Financial Stability’
“Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation,” Bernanke said.
Policy makers cut the benchmark lending rate to a range of zero to 0.25 percent almost a year ago and this month reiterated a pledge to keep the policy rate low for “an extended period.”
While the economy expanded at a 2.8 percent annual pace in the third quarter, unemployment jumped to 10.2 percent in October. The Fed’s challenge is to support growth without unleashing expectations of higher inflation prompted by aggressive monetary stimulus.
“The ultimate goal of all our efforts is to restore and sustain economic prosperity,” Bernanke said. “Our ability to take such actions without engendering sharp increases in inflation depends heavily on our credibility and independence from short-term political pressures.”
Amelia A.J. Bond is opening a St. Louis office for George K. Baum & Co., a Kansas City-based public finance firm.
Bond worked as managing director and head of public finance for Wachovia Securities for two years after its merger with A.G. Edwards in 2007. Before the merger, she served for seven years as senior vice president and director of public finance for A.G. Edwards.
While leading the A.G. Edwards public finance department from 2001 to 2007, Bond supervised the doubling of annual revenue for the department.
From 2003 to 2006, Bond served on the Municipal Securities Rulemaking Board, the regulator for U.S. municipal bonds, and she was elected by fellow board members to serve as its chairman during the 2005-2006 fiscal year. She is only the second woman to have held that position in the organization’s 30-year history.
Central banks will be net buyers of gold this year as they diversify away from the U.S. dollar, global commodities investment fund BlackRock said on Monday in comments that helped drive bullion to fresh record highs.
BlackRock is one of the world’s largest fund managers, boasting a total $1.4 trillion under management across all asset classes. It is manager and adviser to the U.S. Federal Reserve and its views can influence the direction of global markets.
Evy Hambro, who runs two of the world’s largest commodities funds, BlackRock World Mining Fund and Gold & General Fund, gave an upbeat outlook for gold during a media briefing in Australia.
His forecast for net central-bank purchases of gold this year would, if met, mark the first year in two decades when the world’s central banks bought more gold than they sold. They have been net sellers of gold each year since 1988.
“The most recent break-out in the gold price in U.S. dollars has caused most gold prices to start trending higher at the same time,” Hambro said, adding that investors were now looking for gold to rise in other commodities as well as U.S. dollars.
“When you start to see the price rising in a range of different currencies, it is a clear sign of a very strong market to come,” he added.
Spot gold stood at $1,123.70 as of 0216 GMT after touching $1,126.30 per ounce, a record, compared with the notional New York close of $1,118.50, helped higher by Hambro’s bullish outlook, according to financial broking group IG Markets.
The previous record was $1,122.85 marked on November 12.
Bullion was also gaining on renewed appeal as a hedge against the U.S. dollar’s weakness and inflation risks.
In other currencies, gold has not reached new highs since early 2009. In Australian and Canadian dollars and the South African rand, it peaked in February.
But Hambro said investors were now “looking for price rises across all currencies” as central banks build up their gold holdings and global supplies tapered off.
“Gold’s role is gathering a lot more attention in terms of risk diversification,” he said.
Hambro also said that the high level of gold production in China, which has replaced South Africa as the world’s biggest producer, was not sustainable, pressuring world supply.
China’s gold production rose 13.49 percent in the first half of 2009 from a year earlier to 146.505 metric tons, according to the Ministry of Industry and Information Technology.
Hambro also said U.S. demand for commodities was starting to show signs of recovery. This, along with stronger Asian demand, set the stage for a prolonged bull market, he added.
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