Making Work Pay Credit

The good, the bad, the ugly

In early 2009 the American Recovery and Reinvestment Act introduced a $400 ($800 joint) Making Work Pay Credit for 2009 and 2010. The credit is 6.2% of your earned income up to the maximum credit amount. The credit phases out for those with income from $75,000 - $95,000 for single taxpayers and from $150,000 - $190,000 for joint filers. 2009 is almost over...is this found money for you at tax time?

The Good. If you have a number of part time jobs or jobs that do not withhold income taxes you could receive the full benefit of the credit at the time you file your taxes.

The Bad. If you go out and spend this "savings" you may be in for a surprise at tax time. This is because the payroll withholding tables were adjusted to account for your credit. If the withholding tables were correct, your take home pay was slightly higher throughout the year. Thus no increased tax refund OR reduction in taxes would occur during the filing season.

The Ugly. Your tax bill may actually be higher! If your household income is beyond the phase-outs for the credit you might have to pay more when you file your tax return. Why? Because the withholding tables assume you would get the credit even though you didn't qualify. This causes "under withholding" on your paycheck throughout the year and this shortfall has to be made up when filing your taxes.

1. You may have to file a tax return to receive the full benefit of the credit. So if you are not normally required to file a tax return, you may wish to do so to take advantage of the credit.


2. If you received $250 during the year as a Recovery Act retiree payment, your Making Work Pay Credit will be reduced by this amount.


3. You may wish to review your withholdings and submit a new W-4 to your employer to correctly adjust for the credit in 2010.

Holiday Budgeting

Tips to Keep You and Your Pocketbook Happy This Holiday Season

The holiday season can be stressful and expensive! The average American family spends anywhere from $750-$1,200 just on gifts. If you're not careful, holiday spending can create a financial burden that lasts well into the New Year.

Consider these tips to help you make the most of your holiday budget:

• Make a Budget: set a realistic amount of how much you wish to spend this holiday season. Include food, gifts, transportation, and clothing costs.


• Shop With a List: make a list of gift recipients and include how much you want to spend on each person. Come up with gift ideas before you go shopping and then try to stick to your list.


• Pay With Cash: don't spend money you don't have. Shop with cash and leave the credit cards at home. If you must shop with a credit card, use a low-interest card and use it judiciously.


• Comparison Shop: before you go shopping, check catalogs and the internet to compare prices on gifts you plan to buy.


• Consider Alternative Gifts: gifts don't have to be expensive to be meaningful. Consider making meals or baked goods for family and friends, spending time with a friend doing an activity you both enjoy, or volunteering your time to baby-sit or dog-sit.

Homebuyer Credit Extended

Credit now applies to first-time and existing homebuyers

The Homebuyer's Credit has been extended until April 30, 2010. The credit amount remains unchanged at 10% of the home's purchase price (up to $8,000 for joint tax filers) for first-time homebuyers. In addition, the income limits have increased to $125,000 for single (up from $75,000) and $225,000 for married couples (up from $125,000). The credit phases out for incomes above these levels.

In addition the program is now expanded beyond "first-time" homebuyers to include a credit for homebuyers who have lived in their current residence for at least five of the last eight years. The amount for this group is a maximum credit of $6,500. The same income limits apply.

Become a Better Charitable Giver

Simple moves to make your giving go farther

These days, we all want our money to go further and charitable donations are no exception.

Yet sometimes, even well-intentioned gifts may end up going to a poorly run charity or the charity does not receive the full benefit of your
gift.

Here are some tips to ensure that your donation has the biggest impact:

Research the Charity: make sure the charity you donate to is a good steward of your resources. Websites like www.charitynavigator.org track the
financial health and effectiveness of charities. Effective charities spend 75% or more of their resources on their services and 25% or less on
fundraising and administrative costs.

Be Proactive: identify the causes that are most important to you and your family and then target those organizations - it's easy to give haphazardly to whomever asks you for money.

Do Not Give Over the Phone: charitable telemarketing campaigns generally use for-profit fundraisers who take a percent of your gift. This means the charity often receives substantially less of your donation if you give over the phone. If you truly support the organization, hang-up, and contact the charity directly to make a donation.

Focus Your Support: focus on one or two charities that you are passionate about. Repeat donations from reliable donors save charities money because they don't have to go looking for more donors and are not wasting money trying to woo uncommitted or one-time donors.

Share Your Intentions: whether your donation is a one-time gift or part of a long-term commitment, tell the charity so that they do not continue to spend money on seeking more donations from you.