Give Me A (Tax) Break Part 3

Well, well, well.  It seems that Obama did a back room deal to try and get the tax cuts extended.  And while there are democrats that are upset over this deal, it appears that they have the votes to get it passed.  Now, I could do this blog about the politics behind getting this deal passed but to be honest, nobody really cares about all that.  All people want to know is “What’s gonna happen to my check?”  Well, I’ll tell you as best I can.

Before I begin, I want to make it known that there is no way to fully explain what’s going to happen until this plan gets signed into law.  With legislation comes revisions and who know what the House and the Senate are going to do to Obama’s plan before it gets signed into law.  So as with the last blog, this is just speculation based on what is being said now.  With that, let’s begin.

If the plan that Obama talked about on Monday gets passed, you will keep the Bush tax cuts that are currently in your check right now so that aspect of your money won’t change.  I told you in my last blog that you also got a “making work pay” tax cut as well.  To refresh your memory:

“With this cut, a single employed person received a tax break of $400 yearly and a married couple received a tax break of $800.  This tax cut is different in that with the Bush tax cuts everyone received a tax break whereas with this one, it only applied to people making up to $95,000 individually and up to $195,000 married.  AGIs (adjusted gross income) were $75k and $150k respectively.”

You will lose this tax cut so say goodbye to that.

To offset losing that tax break, Obama wants to lower payroll tax by cutting the amount of money that you pay into social security and medicare for one year.  Basically 6.2% of your salary up to $106k is deducted for social security.  He will lower that to 4.2% which means a person making 60k a year will bring home an extra $1200 a year.  I was skeptical at first about this but then figured I might as well spend my social security money now since I won’t be able to when I am old enough to retire.

Unemployment benefits will also be extended for the next 13 months so that Congress can figure out a way to increase jobs which I really hope that they figure out because if I hear one more politician tell me that “The American people are suffering”, I’m going to scream.

I never discussed these tax credits but there was an earned income tax credit and also a child tax credit that was enacted in 2009 that will also be retained as well.  (PSA: THIS IS NOT AN EXCUSE TO HAVE MORE KIDS.  YOU WON’T GET A TAX BREAK THAT WAY SO TAKE YOUR PILL)

Now the purpose of all of these tax cuts and extensions are to increase jobs and grow the economy.  Do I think it will work? No.  Am I going to take the money? Yep.  I, however, plan on taking my tax break to use not to grow the economy, but to grow my net wealth by paying down debt and increasing my saving and while I should be fiscally responsible and tell you the best thing to do to help the economy overall is to spend the excess, I can’t in all good faith advise that when the future is still a little shaky.  If you want to buy something, start with stocks and mutual funds!

Give Me A (tax) Break! Part 2

Ok, we talked about the bush tax cuts in the first part.  In this part, we are going to talk about Obama’s tax cut and ways to keep more of your money next year if these tax cuts don’t get passed. 

President Obama signed a “Making Work Pay” tax cut.  Basically, this tax cut was a part of the American Recovery and Reinvestment Act of 2009.  With this cut, a single employed person received a tax break of $400 yearly and a married couple received a tax break of $800.  This tax cut is different in that with the Bush tax cuts everyone received a tax break whereas with this one, it only applied to people making up to $95,000 individually and up to $195,000 married.  AGIs (adjusted gross income) were $75k and $150k respectively.  This tax break is also set to expire at the end of this year and while you won’t lose a lot of money (estimated to be about $9 a week individual and $18 a week married), that plus the bush tax cuts will significantly reduce your salary come January 1^st.   

I have given you all the bad news so is there anything you can do to prevent losing more of your money?  The answer I have is “maybe”.  I know it doesn’t sound promising but here are a few ideas I have seen that have been suggested that I will rank as “practical” and “extreme” based on degree of difficulty and your mindset about money.

PRACTICAL- If you have not maxed out your retirement contribution, now maybe the time to consider increasing it as they are pretax dollars which lowers the amount that you will be taxed next year.  I mean let’s face it, YOU ARE GOING TO LOSE THE MONEY!  Do you want to lose it to Uncle Sam or to your 401k?

EXTREME- If you are getting a refund from the IRS every year, you are not maximizing your withholdings.  Let me break it down this way.  A tax refund is basically money you should have gotten during the year but you let the federal government hold it for you until the end of the year.  If you talk to a tax professional, they can figure out how much you are to withhold during the year so the IRS doesn’t get an interest free loan from you to pay back the following year.  Downside to this is you won’t get a refund.  Upside is you only give the IRS what they deserve.

PRACTICAL- Don’t let your uncle do your taxes this year.  Just because he has the new version of turbotax does not mean he is familiar with all of the changes to tax law.  In some cases, I actually advise against you filing your own taxes as well.  If you don’t know all of the changes in the law this year and are just depending on whatever updated software you buy to know what you need to do, I advise against it during these times.  Not saying that the software is bad, but I can’t tell you how many times I have heard people say that they lost money filing their own taxes and didn’t know it.  You need a professional who will know which forms to file to maximize your return and most accountants are not as expensive as you think.  Some places will file a 1040 for less than $100 (which is about how much you are paying to file it electronically anyway).  I know the family is going to be mad because Joe been doing the family taxes since you was a baby but this is your money, nothing wrong with verifying if he is doing it the right way.

I realize that some of you are still uneasy about using a tax professional so let me propose something to you.  Look at your 2009 tax return and see how much money it cost to do the taxes and how much you got back for a refund.  Use a tax professional this year and see if you made or loss money.  If you lose money, I’ll admit it was a bad idea (cuz I ain’t giving you no money), but if you get a bigger refund, let me know I was right.  I would be happy to post both successes and failures.

Give me a (tax) break!

There have been a lot of talks about Bush tax cuts recently.  Now I must admit that before I really started following politics, I thought that Bush only helped out the wealthy.  And the reason why I thought that way wasn’t based on my own research, but basically on what other people said.  Everyone around me called Bush an idiot that didn’t like black people, so I called Bush an idiot that didn’t like black people.  When I started doing my own research in 2007, I found that Bush did help out working class families as well as the wealthy.  Now this isn’t a political blog to discuss the purpose of the tax breaks and whether or not they worked.  This is just to let you know what will happen next year if these cuts aren’t extended.

Brief History: In 2001, Bush signed The Jobs and Growth Tax Relief Reconciliation Act.  Basically this act was suppose to take 9 years to take full effect which offered tax breaks to everyone to some degree.  Your degree of tax break depended on your income along with other variables.  To explain tax brackets would take too long so let’s just crunch the numbers.  For individual income taxes:

• a new 10% bracket was created for single filers with taxable income up to $6,000, joint filers up to $12,000, and heads of households up to $10,000.
• the 15% bracket's lower threshold was indexed to the new 10% bracket
• the 28% bracket would be lowered to 25% by 2006.
• the 31% bracket would be lowered to 28% by 2006
• the 36% bracket would be lowered to 33% by 2006
• the 39.7% bracket would be lowered to 35% by 2006

In 2003, a second act was passed basically expediting those tax cuts so everyone got their tax breaks in 2003 instead of 2006.  So what does all that mean in dollars?  Well according to the Wall Street Journal, these are estimates if the tax cuts are not extended:

• A household making $40,000 would see its paychecks shrink by $95 a month if it had no children, $135 if it had one child and $165 if it had two children.
• A household making $80,000 would see its monthly paychecks shrink by $145 with no kids, $150 with one and $180 with two.
• A household making $100,000 would clear $270 less per month with no kids, $300 less with one and $335 less with two.

Now these cuts are set to expire by January 2011.  Benefit to that is that they estimate 700 billion dollars will be added to help the national debt.  The bad news is that you will be paying those 700 billion dollars to the debt.

During a recession, everyone tightens the way they spend money, including the government.  Now from a political aspect, it makes sense to extend the tax cuts and not further hurt the working class.  From a financially responsible standpoint, it makes sense to save as much money as they can.  Will they extend them?  It will depend on how much it is covered publically.  If the media doesn’t promote it and if we don’t question it as voters, they will just let this pass.  So, if you want to help the debt, don’t bring up the tax cuts.  If you want your money, make a big stink about it everywhere you go.  I know I am.  Keep people talking about it and Congress will be forced to act!

So, let’s say they don’t extend the tax cuts (which I have a bet going saying they won’t), what can you do to combat this?  I will be posting a blog soon to discuss ways in which you can combat the added cost if the tax cuts aren’t extended.

HEALTHCARE REFORM PART 3

Part 2 was just too long so I had to split it up but I am jumping right into it:

I am sure a lot of you have heard about the “fat tax” back in 2008 that Alabama wanted to place on their state employees.  Basically if you are overweight, you have to pay more for insurance.  A lot of people were very upset about this but there is something that some insurance companies are doing based on smoking.  Basically, if you smoke, you have to join a smoking cessation program or pay more for insurance.  Now, they make it sound like they care for your health but the reality is it costs A LOT of money to take care of a patient with lung cancer or COPD.  Now what’s funny is that legally you can’t say that smoking causes cancer.  There is a correlation between the two but you can’t say smoking is the cause of COPD and cancer.  But an insurance company can charge you more for the correlation between the two.  That’s a double standard to me.  You tell me that I can’t say smoking causes COPD or cancer, but you can charge me more money to insure me if I smoke because of the possible costs?  There is something not quite right with that.

And it’s not just smoking and obesity.  I know firsthand that some employers and insurance companies are charging more money if you don’t get your wellness exam.  So, basically Obama makes physicals free so companies say “OK, since it’s free, you have to get it done or we will charge you more money”.  Now, as a provider, I believe that all people should get physicals, but there is part of me that still thinks it should be a choice.  I know it is still “implied” as a choice because you can always choose to say no but is it really a choice.  That’s like my mother giving me the option as a child to clean up my room or get my @** whooped.  I mean, it’s a choice but it’s not a good one.  Of course I will clean up my room because you crazy enough to beat me. (and yes, I called my mother crazy and if you meet her, she will seem like the nicest, sweetest woman you ever met but aren’t most crazy people like that?)

Here is the one that did it for me:  My insurance company will charge me more money if I put my wife on my insurance plan and she is employed!  Basically either she gets insurance through her job or I pay an “employed spouse tax” on my insurance.  Now, is it a choice? Yes.  Is it a fair one? No.  My wife has never come to me and asked to be put on my insurance and in the past, she could.  She can’t any more.  I mean, she can ask but if she waiting to be put on my insurance, she better not get hurt next year because she is going to have some issues. I’m just saying…………

What’s my bottom line?  The bill will help and hurt a lot of people.  The question is will it help more people than it hurts?  That still remains to be seen but I do know one group that will not be hurt and that is the insurance companies.  They have been making money and getting bonuses for years and reform will not change that.  They are just finding new ways for the consumer to pay for it so it depends on which side you are on as to whether or not this is good for you.  Overall, I only go to my physician once a year so the only thing this bill is doing is increasing my rates BUT I also have more patients coming in now because they have insurance so for me, it’s both.  What is it for you?

HEALTHCARE REFORM PART 2

As we continue this discussion on healthcare reform, I will admit that this blog will probably develop more questions than answers but we will see.

On part 1, I informed you of all the changes that are taking place January 2011 with health insurance.  Now it is time for me to tell you what insurance companies are doing to offset this cost.  If you think they are just going to count it as a loss, you got another thing coming.  I have to make two points before I begin:

1) There are thousands of different insurance plans out there and I cannot know how each and every plan will make changes but I can safely assume that since I and my wife’s have changed, others will as well.  For this blog, I will be discussing the changes in me and my wife’s insurance plans.

2) Don’t look at this blog as a “See, this is why I hate insurance companies because all they think about is themselves”.  You have to understand that you can’t get mad at people trying to make money.  That’s what businesses do and I’m sorry but how many people can honestly say that if they owned a company and the federal government was making decisions as to how you spend your company’s money, you wouldn’t be upset or try to find ways to cut costs.  I think the majority of us would.  Now let’s begin:

First, last year my co pay (the amount of money you pay up front to be seen by a medical professional) for office visits was $20.  That has since been increased to $30.  It seems stupid, however, that the name of the plan is called the “choice 20 plan”.  It ain’t 20 bucks no more.  Ten dollars may not seem like much but if you factor in the thousands of people employed here, that will make a significant boost in revenue.  The co pay to see a specialist has also gone up from $40 to $45.  They might as well change the name from the “choice 20 plan” to the “Choice to give me more money plan”.  I told you, they aren’t eating the costs…………..    

Another important fact that insurance companies have figured out is that a lot of people in America do not have primary care physicians.  Most people go to the Emergency Room for primary care.  This is the reason why ER co pays are so high.  Mine used to be $150 already and next year they are increasing it to $200.  So, now if I am really sick, I have to pay $200 and sit in the ER for hours behind a kid with a cold, a man with arthritis, and a lady waiting for a pregnancy test.  I know women who will sit in the ER for 4-5 hours just to get a pregnancy test.  Really?  You don’t have a dollar to buy one yourself?  What’s interesting is that all three of those problems can just as easily be treated at a doctor’s office for a lot less money.  To be honest, the EPT over the counter is probably better than what we use in my office anyway but y’all want confirmation and we want the $25 we can bill for the test so it’s a win-win I guess (yes, a urine pregnancy test in a doctor’s office will be on average $25.  Just pee on a stick at your house, call your future baby daddy and tell him you keeping it.  It saves money).  Emergency Room visits cost both the employee and the employer/insurance company a lot of money.  The only difference is that the insurance company/employer can raise their rates, deductibles (amount of money you have to pay before the insurance starts covering the bill), and co pays to cover their costs.  So guess who gets stuck?  The employee.  The best way to combat this is to have more people get established with primary care physicians that way if an “emergency” happens between 8-5, they can be seen by someone who is familiar with them and can provide the best care for them.

I’m just getting started, wait until I give you part 3, It’s mind boggling………………….

Healthcare reform Part 1

Healthcare reform has been a hot topic recently.  Since the bill has passed, America has called it everything from “vital” to “socialism”.  Whatever you want to call it, it’s here.   But before you go to the doctor and ask for free healthcare because “Obama said so”, let us take a better look at some of the ins and outs of the healthcare bill.

Before we begin, I have to let you know that the entire healthcare bill is not in effect as of yet.  It will take years to get the entire bill effective but a few parts of the bill will be implemented in January 2011.  This part of the bill will affect MOST, but not ALL plans.  You have to check with your insurance to find out if it will affect you.  With that said, let us begin:

First,   Kids can be covered under their parents insurance until the age of 26.  What they didn’t tell you that it doesn’t matter if your child is married, single, living with you, living on his own, dependent, or not.  If you gave birth to that ungrateful runt, you can keep him/her on your insurance.  But don’t tell them unless you like them.  If they are annoying and aren’t worth the extra money, let them fend for themselves.

In the past, insurance companies had something called a “lifetime maximum”.  This is the maximum amount of money that an insurance company would spend on someone.  After you reach that maximum, you could be dropped from the insurance.  The lifetime maximum has been removed from plans so there is no longer a maximum amount of money insurance companies can spend for your services.  Same rules apply about only insuring the people you like.

Also, preventative screenings will be covered by insurance companies at 100%.  You don’t even have to pay a co pay. Keep in mind that most screenings are only covered once a year (physicals, mammograms, pap smears).  Don’t go to the doctor’s office 3-4 times a year asking for a “physical” just to come in and be seen for something else.  They will not pay for it.  And for that matter, just tell us what you want when you call.  If you think you got an STD, just tell the receptionist "I think I have an STD".  Trust me, they don’t care.  It makes no sense for me to come into the room thinking you just got a headache and you really just been nasty.  STOP BEING NASTY!!!!! Now I got to step out of the room and tell the nurse to prep you for STD swabs when all of that could have been handled before you got there.  (That had nothing to do with healthcare reform, I was just venting so when you call for your appointment, just say what you want)

Lastly, you can no longer buy Over-The-Counter (OTC) medications with your Flexible Spending Account (FSA). This will piss off quite a few pharmacist and providers because you will now need a prescription in order to get OTC meds.  This means more prescriptions for us to write and more prescriptions for pharmacist to fill.  Imagine going to the doctor to get a prescription for Nyquil.  You may have to because most doctors will offset this new headache by making patients come in to be seen in order to get the prescription.  So, is it really cheaper to pay a co pay or a bill just to use your FSA on OTC meds?  If anything, it would be better to not add money to your FSA for OTC medications.  I think maybe that is what the government wants.  The more money you don’t add to your FSA, the more money the government can tax.  Makes sense to me.

So, we know what the new bill will provide for us.  In Part 2, I will explain how some insurance companies are trying to offset the new costs.  Here is a hint, They aren’t eating it…………They’re passing it.