More Strategies on Weathering the Economic Storm

We have seen lots more volatility this week in the stock market. Bad news keeps getting badder, like the loss of over $1 million jobs this year and General Motors burning through billions of dollars worth of cash in the last quarter alone. These are staggering numbers. What do they have to do with you and me? In the short term--everything as we continue to watch our 401ks become 101ks but as long term investors, we can weather the storm. Here are some strategies that you have probably heard before but we all need continued reassurances:

1) Stick to your plan.

• Young people--keep on funding your Roths and make sure you have emergency savings
• Pre-Retirees--keep on saving in to your retirement plans--your dollar cost averaging is a big plus right now
• Retirees--watch your spending --you might have to tighten the belt for a few years

2) Stick to simple investing

• Low cost mutual stock and bond funds
• Don't try to figure out the next hot sector or the sector that you think is poised for significant growth
• And for goodness sake, don't think you know when to get out of the market and when to get back in. Remember that upward surge of 900 points the end of October???

3) Rebalancing

• Rebalancing your portfolio at least annually provides smoother returns and guarantees that you are selling high and buying low
• Harvest those tax losses now--great opportunity to rebalance taxable accounts and capture the losses (can always be carried forward if not used this tax year) and rebalance your portfolio at the same time

4) Turning off the "white noise"

There are some total idiots on the major news channels who just love to spout off and create sensational stories. Boring! Turn them off!

Call or email me anytime with any issues. Have a great weekend.

Misc IRS Adjustments for 2009

IRS has $266 Million in Undeliverable Refunds and Stimulus Payments. The IRS is urging taxpayers to make sure their mailing address is up-to-date. If a taxpayer has moved since he or she last filed a tax return, Form 8822, Address Change Request, should be filed with the IRS. It is critical that taxpayers who are due a stimulus check update their addresses with the IRS before year-end, because by law, economic stimulus payments must be sent out by December 31 this year.

2009 Social Security Cost of Living Adjustments. Beginning January 1, 2009, the maximum earnings subject to social security tax withholding increases to $106,800. The earnings needed for one quarter of coverage is $1,090. The threshold for coverage for domestic employees increases to $1,700.

2009 Inflation Adjustments AnnouncedThe IRS has released Revenue Procedure 2008-66 announcing increases in deductions, exemptions, limitations, and credits for 2009, as well as widened tax brackets. Key changes affecting 2009 returns include the following:

• The value of each personal and dependency exemption increases to $3,650.
• The new standard deduction is $11,400 for married couples filing a joint return, $5,700 for singles and married individuals filing separately, and $8,350 for head of household.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900
• . The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028. The income limit for the credit for joint return filers with two or more children is $43,415.
• The annual gift exclusion rises to $13,000, up from $12,000 in 2008.

Prescription for Today's Economic Uncertainty

Many people are over-indebted, over-fed and living in a fast-depreciating house. Savings rates, although improved, are paltry. It's time to return to the practice of thrift and leave the culture of debt behind. If there is any lesson to be learned from the current economic uncertainty it is that we can no longer rely on gains from our assets to adequately provide for us. We need to focus on what we can control-spending less and saving more. Building a bigger nest egg is our best hope for accumulating enough assets to finance our lifestyles over a 30- to 40-year period. To accomplish this, we must live well below our means and save the difference. Even if you are years away from retirement, start saving now. For every 10 years you delay saving for retirement, you will need to save three times as much each month just to catch up. Put savings at the top of your expense list and pay yourself first. Take full advantage of the match your employer offers in your retirement savings plan. Never leave free money on the table. If you are just a few years away from retirement and determine that you'd rather build a bigger safety net than rely on stock market returns to get you through, think about working longer or working part-time after you've retired from your full-time job. You may even consider a second career. Leaving your nest egg to grow for a longer period may mean you won't have to alter your lifestyle later on. If you are already in retirement and are concerned that your spending level might jeopardize the longevity of your assets, then a retrenchment plan may be in order. Scrutinize your expenses, cut back the "fluff" and find expense-cutting ideas in books and magazine articles. Find ways to have fun with little or no money. Find a cause you have passion for and get involved. It will cost you more time than money. Running retirement projections as often as I do, the variable that seems to threaten the longevity of retirees' assets more than any other is their spending level. What retirees seem to worry most about is outliving their assets. Turn worry into action. Spend less, save more and measure your goals periodically to assess your progress. If you don't manage it, you can't measure it. It's never too late to start. It's only too late if you don't start at all.

Judy's Letter from her heart

Dear Friends,

Today is Saturday and we have a blessed three days of NO stock market as the market is closed on Monday in observance of Columbus Day. I pray that everyone takes a deep breath and just calms down for the next three days. I plan on going for long walks, doing yoga, attending a wedding for the son of some dear friends and going to the Charger game on Sunday. It has been an incredible week—we are truly living in unprecedented times. My mom (who was a young girl during the depression) called yesterday to see how her portfolio is doing. When I gave her the news, she said that she would gladly lose all her money if she could have my Dad back with her. My Dad died three years ago and three months before my late husband, Lee. That really hit home with me. And it kind of put everything in perspective.

I really want to share from my heart with you because you are all dear friends and I so appreciate the fact that you have entrusted me with your financial well being. It is a responsibility that I willingly accept. This week, I have been in agony as I have watched and seen everyone’s hard earned savings lose so much in value. The weight of the responsibility has been crushing. However, I do believe with every fiber of my being that this will pass—it may take a few years—but we will recover and learn from this. While there is no way to determine where the bottom of this market is—the issue is not how far it falls but how high it will bounce thereafter.

There are serious forces at work in the economy that are causing this turmoil and some are temporary and some are permanent: I am quoting from a newsletter that was sent to me by Bill Losey, a CFP. The following 5 paragraphs with the bold headings are written by Bill.

The credit markets have seized up. This is real and it is temporary. Almost all large public and private companies issue commercial paper - short- term debt instruments that mature in less than 270 days to help meet their short-term liabilities. This debt in the past has been very liquid and quite secure. It is what has been owned by most money market funds to help them give savers better returns than they would get from owning Treasuries. Since concern has dramatically increased about corporate balance sheets and their ability to meet even the shortest of obligations, two things have happened. People have fled money market funds, which means that those funds must sell their paper and there is no market for the new paper that is being issued. When you hear about the "need" for a rescue package, this is the main reason why. The Fed and the Treasury are trying to create an avenue of liquidity for these instruments. This part of the plan is what will eventually hit Main Street. The reason that this is temporary is because it is too significant to not be worked out. Everything from hospital payrolls to inventory purchases is dependent upon this mechanism, so it will be fixed.

Wall Street is broken. This is real and it is permanent. Some of the largest investment banks were using a tremendous amount of leverage on exotic instruments that created even more leverage. This industry will continue to change and change dramatically. Access to money will not be as easy, which means profits for these companies will be compromised. Eventually they will come up with new and different ways to make money, but regulation will inevitably make it harder to make as much as they did for contributing as little as they had. This will inevitably change what types of investments will make sense going forward. Less exotic will be back in vogue

Fear and greed own the day. This is real and it is permanent. Every day, stock prices are determined by sellers - who either need to raise money or are convinced their stocks are going down, and buyers - who believe that they are getting bargains on investments that will go up. In periods of turmoil, there are far more sellers than buyers. People get scared that their investments are going to fall forever and sell (often at the worst possible times). When markets are going up, people think that they have all the answers and end up buying at the worst possible times. No one is ever completely rational, but successful investors tend to be less scared and less greedy than unsuccessful ones.

Diversification doesn't work. This is real and it is temporary. When we have a global melt-down, all investments, other than the very safest, fall. This means that asset classes initially fall together. And this is usually the case for around three to six months. After that, the most mispriced asset classes come back more strongly than others. Everything has been a sinking ship this past month.

People are hurting. This is real and it is temporary. Jobs have been lost and more jobs will be lost. People who piled on debt will have tremendous problems working their way out of the hole that they dug for themselves. The stress of seeing investments drop can add to the stress that each of us feel in raising a family, or work, or tending to our aging parents. People are scared right now and are not making rational decisions.

The one universal truth is that nothing lasts forever and things will change. It may take awhile but we will dig ourselves out of this mess. Regardless of whether you are a republican or democrat or which candidate you endorse for president—I do believe that a new administration will bring some much needed leadership and confidence to this country. I really think we will see a more positive spirit in this country after November 5th.

I want to let you know (again) what I think you should be doing right now and what my husband and I are doing:

1. If you are working, keep your jobs. Work harder and smarter than your co-workers. Layoffs could be coming and you want to be the LAST one considered. If you fear a layoff, be proactive and get out there and start looking for a job. Don’t sit around and wait for the axe to fall. High unemployment is inevitable in the next few years due to the domino effect of what is going on.

2. If you are retired and in a position where you are drawing down on your portfolio and not adding to it, then consider part time work in the next few years so that you can slow down the withdrawals.

3. Control your spending. Go through your spending categories and cut out most of the discretionary stuff like eating out, expensive vacations, clothes shopping etc… Now is the time to take that money and stick it into your emergency savings account. This gives you peace of mind and lets you sleep at night.

4. Save, save, save.

5. Do what it takes to keep your good credit history and reputation. Credit will be tight from now on and your credit reputation is of paramount importance. The days of buying houses and cars with mediocre credit are OVER.

6. Turn off the TV and the talking heads and go for a walk or take up a hobby. Do not sit around and listen to this stuff. They all sensationalize it and make it seem worse than ever. Fall is a beautiful time of the year, regardless of where you live, so go out and enjoy it.

7. Be more frugal with Christmas and holiday presents this year. Your family and close friends would love to have the gift of your time and love rather than expensive gifts.

8. Do not make any BIG purchases right now, especially real estate. Always call first and let’s discuss it first.

9. Home equity lines are being frozen, so if you really think that you will need to use in the future, I suggest that you draw on it NOW and put the money into a savings account.

10. And finally, if you really cannot sleep at night and are so distressed by the current situation, then please call me and we will discuss making some changes to your portfolio. I know this is contrary to what I have been preaching for the past two weeks (and I have no intention of selling anything in my portfolio) but physical and mental and emotional health, in my opinion, are more important than the size of your portfolio.

Please let us know how we can help you or discuss any concerns or questions. I am leaving for Nashville on Friday, Oct 17th and returning Tues, October 21st. I am attending the annual Cambridge Financial Advisor conference. Trust me; I need this conference and some R&R! Bill is going with me but Cheryl and Marcie will be here and minding the store. Again, I take my job and your financial well being with the utmost seriousness. It is a sacred trust. Thank you for letting me be your guide during these difficult days.

Warmly,

Judy Stewart, CFP, MBA, E.A.

What Does Warren Buffet think?

Did you see Charlie Rose’s interview with Warren Buffett? On October 1, they met in San Diego for a brief chat about the economy and the financial markets. Earlier that day Buffett had announced that his holding company, Berkshire Hathaway, would invest $3 billion in General Electric. The great investor was realistic about today’s economy – and also optimistic.“It’s like a great athlete that’s had a cardiac arrest.” That’s Buffett’s view of the U.S. economy right now. What led to the heart attack? He puts it as simply as he can: “300 million Americans, their lending institutions, their government, their media, all believed that house prices were going to go up consistently. And that got billed into a $20 trillion residential home market.” Everyone leveraged up, and when “you have a 20% fall in value of a $20 trillion asset, that’s $4 trillion. And when $4 trillion [in] losses lands in the wrong part of this economy, it can gum up the whole place.” Now, with major financial institutions deleveraging, “only one institution in the world that can leverage up in [a] countervailing force to that, and that’s the United States Treasury.”“An economic Pearl Harbor.” Dire words? Well, in Buffett’s view, that was what the last month or so on Wall Street had meant for the country. “In my adult lifetime, I don’t think I’ve ever seen people as fearful economically as they are right now. They are not wrong to be worried.” When something like this hits, he added, “You better spring into action with the best people you have.” He praised the initiative and vision of Treasury Secretary Henry Paulson – and FDIC Chairman Sheila Bair, in his view the unsung hero of the crisis. For the next administration, “it’s more important who the Treasury Secretary is than who the Vice President is.”Will taxpayers get their money back? “I would bet on it.” Buffett feels that the Treasury Department’s plan to purchase hundreds of billions of mortgage-related assets will turn a profit given that they will buy them at market, and also “because the United States government has staying power and it has a low cost of borrowing.” The Bush administration’s plan is, in short, “the kind of stuff I love to do.” He noted that “if I could take 1% of that $700 billion pot and take the gain or loss from it and be their partner, and they would buy the stuff at market, I’d make a lot of money.”“Financial weapons of mass destruction.” Buffett is no fan of derivatives. “They destroyed AIG. They certainly contributed to the destruction of Bear Stearns and Lehman.” He feels that if AIG had resisted the temptation of derivatives, it “would be doing fine today.” He later added that the Federal Reserve structured its $85 billion loan to AIG “very, very well … they have put themselves in a position where they are very likely to get their money back, maybe more … I mean I want to hire the guy that made that deal. He’d fit in well at Berkshire.”The “choice” America is making. In Buffett’s assessment, the U.S. is “to some extent, making a choice between future inflation and getting off the floor. And we’re likely to have more inflation in the future as a consequence of the things we do to fight the present situation.” He cautions that “unemployment’s going to go up under any circumstances.”“You want to be greedy when others are fearful.” Personally, Buffett sees many attractive opportunities right now. Cash reserves are important, “but when people talk about cash being king, it’s not king if it just sits there and never does anything. There are times when cash buys more than other times, and this is one of [them].” In addition, Buffett reminds us of the inverse of his principle: “You want to be fearful when others are greedy. It’s that simple.”“Oh, I think confidence will come back.” When Rose asked him what might “never be the same” about Wall Street or the American economy, Buffett replied optimistically. “We’ve got all the ingredients for a sensational future. It’s just that right now the athlete’s on the floor. But this is a super athlete.”“I don’t want any viewer to [think] a magic wand exists in Congress,” he stated. “So they’re going to see some more bad news. But if we do this, we’re doing the right thing. And if [we do], the system will work over time.”

Is My Money Really Safe?

An article that I highly recommend, "Is My Money Really Safe?," by Joan Goldwasser, Kimerly Lankford, and Pat Esswein. Clients, if you have any questions about this article or anything pertaining to it, please write me an email.

Is My Money Really Safe?

When IndyMac bank failed this summer, the lines of nervous account holders trying to withdraw their money made headlines everywhere. But that was an anomaly.

The Federal Deposit Insurance Corp. has taken over ten other banks this year without incident. If you are worried about the safety of your money -- in banks or brokerages, such as Lehman Brothers, which filed for bankruptcy September 14 -- or money you've paid your mortgage servicer for taxes or insurance, here are answers to your pressing questions.

To finish the article, please follow this link to Kiplinger's.

Legitimate Business or Hobby??

Many people are confused about the rules for having their own business. The IRS is clear that, in order to file as a business venture, it must truly be a business. The following are some guidelines to ehlp you decide.

Is Your Hobby a For-Profit Endeavor?
FS-2008-23

The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby.

Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the "hobby loss rule."

Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.

Is your hobby really an activity engaged in for profit?
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.

The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Do you depend on income from the activity?
• If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
• Have you changed methods of operation to improve profitability?
• Do you have the knowledge needed to carry on the activity as a successful business?
• Have you made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Do you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

What are allowable hobby deductions under IRC 183? If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity. Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:

• Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
• Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
• Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

Who Qualifies for Mortgage Help and How to Get It

"Who Qualifies for Mortgage Help and How to Get It"
By Dave Carpenter, AP Business Writer

Questions and answers about the Hope for Homeowners Act of 2008, passed by Congress last weekend to try to steer as many as 400,000 struggling homeowners away from foreclosure:

Q: What exactly will the legislation do?
A: It will allow those who qualify to cancel their old mortgage loans and replace them with 30-year fixed-rate loans for up to 90 percent of the home's current value. The FHA will insure a total of $300 billion of the loans over a three-year period.
But the decision on whether to write such a loan remains up to banks, which would have to be willing to take a loss on the existing loans in exchange for avoiding an often-costly foreclosure.

Q: Who is eligible?
A: Eligible borrowers must have spent more than 31 percent of their monthly incomes on their mortgages as of March 1, 2008. The troubled loan must have originated no later than Jan. 1, 2008, and be on the borrower's primary residence. And the borrower's income must be verified.

Q: When does the program start?
A: It takes effect Oct. 1 and runs through September 2011, although the FHA isn't likely to have it operating at full capacity until next year.

Q: Since lenders can pick and choose which loans to refinance, how can consumers determine if theirs will be selected?
A: Check with the bank or financial company servicing your mortgage, but it may be weeks before they make decisions concerning the new guidelines and assess individual loans.
Even then, keep expectations limited. "Servicers are going to be reluctant to take the government up on their offer," predicted Mark Zandi, chief economist at Moody's Economy.com. "The earliest they'll start taking them up on it is early next year. And even then it's likely to be modest."

Q: Is there anything a homeowner can do to improve chances of benefiting from the program, such as crunching numbers to make a case for the bank?
A: Not really. The best step is to keep up your payments as best you can.

Q: But doesn't this provide an incentive to NOT pay your mortgage, if you're barely keeping ahead of bills and are underwater on your house, so you can qualify?
A: No. If your situation deteriorates enough, the bank may reject any possible new loan.
"Turning yourself into a financial basket case is not going to work," said Dan Seiver, a finance professor at San Diego State University. "If you turn into a complete deadbeat, the servicer is going to just foreclose and dump it."

Q: So what should I be doing now besides trying to keep up with payments?
A: Talk to a local credit counselor and call the toll-free hot line of the Hope Now alliance — an industry group trying to coordinate a response to the mortgage crisis — at 1-888-995-HOPE. It is available 24 hours a day to provide mortgage counseling in multiple languages. Mary Thomason, director of resource development for The Impact Group of Atlanta, a housing counseling group, also suggests tracking expenses and income closely in order to be able to forecast your cash flow for the next six months and give yourself better control of your finances.

Q: If the banks and lenders refuse to write these loans, then what?
A: Public and political pressure may prompt them to participate. If not, and more people continue to lose their homes, Zandi says the next White House administration subject them to additional regulations or investigations if they remain unwilling to take on the risks.

Q: What happens if I'm able to sell my home after I refinance?
A: If you sell during the next five years, you must agree to share 50 percent of any profits from the resale with the government. What's more, homeowners can only retain equity gains based on a sliding scale. The homeowner would have zero equity from a sale in the first year, with the amount rising 10 percent in each succeeding year and capping at 50 percent from a sale in year five and thereafter. The equity must be repaid because the maximum amount on the new loans will be capped at 90 percent of the current market value, which automatically gives the previously troubled homeowner 10 percent equity in the home.

Q: Where can consumers find more detailed information about the plan?
A: There is a six-page summary of the housing act at
http://banking.senate.gov/public/_files/HousingandEconomicRecoveryActSummary.pdf
and the FHA's Web site at http://www.fha.gov is a place to watch for updated information. The entire 694-page bill is at http://www.house.gov/apps/list/press/financialsvcs_dem/hr3221_bill_text.pdf

Roth IRA Conversions in 2010

Virtually anyone can take advantage of this tax law loophole. 2010 will be an extraordinary year for tax law, a tax year so potentially advantageous that we may never see its like again. One probable 2010 phenomenon: a wave of high-income and high net worth individuals converting traditional IRAs to Roth IRAs. Here’s why 2010 represents a great year to make that move.Income limits: gone. Today, you have to pass an income test before you can convert a traditional IRA to a Roth. If your modified adjusted gross income (MAGI) is more than $100,000, you can’t do it. This limit has long frustrated high-income taxpayers.In 2010, it’s a whole different story – there is NO income test.

Anyone with any MAGI can make the conversion.While you still can’t contribute to a Roth IRA if your 2007 MAGI exceeds $166,000 (joint filers) or $114,000 (most single filers), it is the conversion that is important.Potential advantages: considerable. Many high-salaried people have rolled old 401(k) assets from old jobs into traditional IRAs. In 2010, they can convert them to Roths, which will mean:· Tax-free growth of these assets· Tax-free withdrawals of these assets someday (assuming they are 59½ or older and the Roth IRA is more than 5 years old)· No minimum distribution requirements once you turn 70½· An eventual reduction in their taxable estateTaxes: deferred. Of course, you will pay taxes on a Roth IRA conversion. But if you do this in 2010, you don’t have to pay them right away. Unless you elect otherwise, the taxes on the conversion will be spread out over the 2011 and 2012 tax years. In effect, this gives taxpayers the ability to delay full payment of any tax due until 2013.The non-deductible IRA option. Some high-income earners have opened non-deductible traditional IRAs with the intent of converting them to Roths in 2010.While a traditional IRA has no contribution phase-outs due to income, high-income taxpayers can’t deduct their IRA contributions like the middle class can. For tax year 2007, for example, the deduction phase-outs (this is MAGI) start at $83,000 for joint filers and $52,000 for single filers and heads of households.If you don’t qualify to make a deductible IRA contribution or a Roth contribution, the non-deductible IRA lets you make a permissible “end run” to build some assets that can “go Roth” in the near future.

If the tax law changes taking effect in 2010 stay in place for years to come, you will be able to open a non-deductible IRA annually (as long as you keep earning income) and convert it to a Roth each year.Why would Congress give IRA holders a break like this? The simple answer: quick revenue for the federal government. In 2010, a LOT of cash will be pumped into the Roth IRA program, and that will result in a LOT of taxes as a result of the conversions (a short-term revenue boost).Ready for 2010? Whether you do or don’t convert a traditional IRA into a Roth in 2010, you will want to know about the changes in tax law affecting IRAs and other retirement savings vehicles, and your estate and your investments. Before you make a move with your IRA, talk to a qualified financial advisor or tax professional who understands the coming rules modifications.If you have any questions or if I can help you in any way, please call me at 888-891-9709.

The Right Beneficiary

Who have you chosen to inherit your assets? It may be wise to review your choices. Here’s a simple financial question: who is the beneficiary of your IRA? How about your 401(k), life insurance policy, or annuity? You may be able to answer such a question quickly and easily. Or you may be saying, “You know … I’m not totally sure.” Whatever your answer, it is smart to periodically review your beneficiary designations.Your choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Was it back in the Eighties? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit – perhaps more than a bit?

While your beneficiary choices may seem obvious and rock-solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions. In fact, you might want to review them annually. Here’s why: companies frequently change custodians when it comes to retirement plans and insurance policies. When a new custodian comes on board, a beneficiary designation can get lost in the paper shuffle. (It has happened.) If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning. How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k) or life insurance policy may be your spouse, your child, maybe another loved one or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away. Many people do not realize that beneficiary designations take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she will receive the death benefit when you die, regardless of what your will states. You may have even chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed, and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets?

How your choices affect your estate. Virtually any inheritance carries a tax consequence. (Of course, through careful estate planning, you can try to defer or even eliminate that consequence.) If you are simply naming your spouse as your beneficiary, the tax consequences are less thorny. Assets you inherit from your spouse aren’t subject to estate tax, as long as you are a U.S. citizen. For example, a spouse can roll assets inherited from a 401(k) plan into an IRA without incurring taxes on the wealth transfer.

When the beneficiary isn’t your spouse, things get a little more complicated … for your estate, and for your beneficiary’s estate. If you name, for example, your son or your sister as the beneficiary of your retirement plan assets, the amount of those assets will be included in the value of your taxable estate. (This might mean a higher estate tax bill for your heirs.) And the problem will persist: when your non-spouse beneficiary inherits those retirement plan assets, those assets become part of his or her taxable estate, and his or her heirs might face higher estate taxes. Your non-spouse heir might also have to take required income distributions from that retirement plan someday, and pay the required taxes on that income. As a result of the Pension Protection Act, surviving spouses from same-sex couples may be allowed by employers to convert inherited retirement plan assets into inherited, traditional or Roth IRAs, avoiding taxes until those assets are withdrawn. This requires a direct transfer, not a rollover distribution. Before the end of 2008, Congress may vote to make this option mandatory.If you designate a charity or other 501(c)(3) non-profit organization as a beneficiary, the assets involved can pass to the charity without being taxed, and your estate can qualify for a charitable deduction.

Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. If you have any questions about your situation, please give me a call at 888-891-9709 or drop me an email at judy@stewart-financial.com

TD Ameritrade Update

Important Information Regarding TD AMERITRADE's Financial Strength and Stability

We recognize that the current economic environment continues to be a source of concern for you and your clients. Many of you have questions about recent events, along with concerns about ongoing market volatility and what it means for both your investments and your clients'.
If you'd like to gain a better understanding of TD AMERITRADE's financial strength and stability in light of the industry-wide issues of subprime market risk and liquidity, please read below.

Does TD AMERITRADE have liquidity issues?

TD AMERITRADE's capital structure and liquidity are strong and stable. TD AMERITRADE has no exposure to the U.S. housing market and the associated complex financial structures that are at the root of the current liquidity crisis. The collateral backing our liquidity is in cash or U.S. securities, which are available and marked-to-market daily, and not housing-related securities.
The credit and liquidity issues currently impacting other firms have not impacted our liquidity structure, which we monitor daily.

In addition TD AMERITRADE does not take proprietary risk on its balance sheet. Our clear, transparent business model and commitment to conservative fiscal management have helped us avoid the recent troubles other firms have experienced from investment risks.

Does the recent buy out of Bear Stearns by JP Morgan affect TD AMERITRADE?

It does not affect the firm financially or otherwise. Our capital structure and liquidity are strong and stable.

Does TD AMERITRADE invest in or have exposure to risks in the subprime market?

TD AMERITRADE does not own securities in the subprime and Structured Investment Vehicles (SIV) markets.

In addition, we keep our own assets separated from our clients' assets. This means your investments and those of your clients with TD AMERITRADE are not exposed to any hypothetical risks associated with our firm's investments.

Please note, however, that every investment has risk and TD AMERITRADE can't offer an opinion as to whether the investments made in self-directed accounts are exposed to additional risk as a result of the current market climate.

Are the money market funds available through TD AMERITRADE safe?
If the available cash in your TD AMERITRADE account or your clients' accounts is invested into money market funds, the money is invested in either the TD Asset Management USA funds or The Reserve funds.

Both of these investment companies have provided statements regarding their respective funds' exposure to the subprime market, SIVs and asset-backed conduits that focus on the subprime asset class.

Please see the statement from TD Asset Management USA and/or see the statement from The Reserve.

If available cash in a TD AMERITRADE account is invested in a Money Market Deposit Account (MMDA) when it isn't currently invested in securities, that money is held at TD Bank USA and is FDIC insured. In addition, please note that TD Bank USA does not invest in the subprime and SIV markets.

Before investing in any mutual fund, be sure to carefully consider the security's investment objectives, risks, charges, and expenses. For a prospectus containing this and other important information, contact the investment company or TD AMERITRADE. Please read the prospectus carefully before investing.An investment in a money market fund is not insured by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

What protection does TD AMERITRADE provide to client accounts?
TD AMERITRADE is a member of the Securities Investor Protection Corporation. SIPC protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). An explanatory brochure is available on request, or at www.sipc.org. The SIPC phone number is (202) 371-8300.

In addition, TD AMERITRADE carries "excess SIPC" insurance through London insurers. Customers are protected up to an additional $149.5 million per customer (including $900,000 in cash) up to an aggregate of $250 million.

Using Your Brain

Dispelling the Myth about Your Brain and Recall

The brain is an organ and, as such, it requires oxygen and exercise. Feed your mind, and you'll feel emotionally and physically invigorated. It's critical to focus on keeping your brain in shape.
By consistently engaging in the right activities, you can increase your memory, improve your problem-solving skills and even boost your creativity. Here are some fun ways to keep your mind active:

Grab a cue and play pool. Rack 'em up, grab a cue and contemplate on your strategy. Billiard players must focus on the immediate, blocking out distractions as they plan their next moves. Strategic planning increases mental clarity. Concentrating on the immediate helps keep your mind sharp. Additionally, this game of angles demands that players think in terms of physics, something most of us rarely do in our everyday lives.

Calm down with yoga.You might be surprised at how demanding yoga can be. Beyond the physical demands that give your entire body a workout, yoga has great calming and relaxation qualities. Yoga forces you to focus on controlling all your muscles and your breathing. Let your worries slide away and give your mind a rest from stress.

Play golf in the fresh air. Escape to the links and spend a few hours in the fresh air counting birdies, bogeys and mulligans. Golf is a social sport and a great way to network and loosen up at the same time. Golfers get mental stimulation using their decision-making skills as they plan stroke strategies. As the sport involves the control of repetitive movements, it instills mind-body discipline.

Lace up your running shoes. Lace up your jogging shoes and get moving. Even if you never plan to run a marathon, it will get both your body and mind in shape. Running will boost the levels of oxygen in your brain and flowing through your body. In turn, your body will release more endorphins, which will make you feel energized while producing a sense of pleasure and well-being.

Challenge a friend to a game.Challenge a friend to a game of chess at lunch. Invite colleagues over for an evening of cards. Besides the social aspects, such activities will keep your mind active. You'll use your memory and expand your powers of recall. You'll also test your mathematical skills and logic.

Subscribe to a daily online newsletter. Whether it's a "word of the day," "quote of the day" or "this day in history" newsletter, receiving new information each day will add data to the HD (hard drive) in your head. The mental stimulation will increase your comprehension skills.
Pick up a book.Choose from classic literature, science fiction or self-improvement books and give your brain a boost. Pick up a novel before your next business flight or vacation. On top of the cerebral benefits, the escapism that comes from reading can be refreshing. Reading helps you exercise your cognitive skills and increase your vocabulary.

Take a course.Learn something new. Sign up for a cooking class, register for karate training or enroll in a wine-tasting seminar. You'll be challenging yourself to assimilate new concepts, information and ideas, and you'll hone your retention skills through memorization.

Learn a new language.Attend classes, listen to tapes or date someone with whom you can converse in another language. Instead of watching the same TV programs you always do, take in a foreign-language movie with subtitles. Learning a new tongue keeps your brain flexible and your mind sharp, helping to reduce the slowing of the thought processes that comes with age.

Grab the controller.Believe it or not, playing certain video games really can be good for your health. The operative word here, however, is "certain": choose games that involve strategy or problem solving. Problem-solving and role-playing games will help you practice strategic planning. You'll also improve your hand-eye coordination.

Rent a classic movie.Rent Shakespearean adaptations or other language-heavy period movies and treat them as an exercise; watch them with a dictionary and thesaurus in hand and make a point of understanding all the dialogue, even if it means pausing the movie periodically. Some options include Macbeth, Othello and Hamlet.

Learn to play an instrument.Pull out your old guitar, sign up for piano lessons, or rent a trumpet or a clarinet. Trying to understand how music is made will stimulate your creativity. Reading music provides mental stimulation. Playing an instrument requires powers of recall as well as concentration to maintain tune and tempo.

Build a model.Remember how excited you were as a kid making model airplanes and ships? Re-create that by building a miniature model. Following written instructions sharpens your powers of concentration.

Do a crossword. Stick the newspaper crossword puzzle in your purse or briefcase and work on it while you're waiting for an appointment or a meeting to begin. You'll improve your cognitive skills and creative thinking, as well as your word power and vocabulary.

Engage in a debate.A lively discussion can be invigorating. As long as you avoid letting it digress into an altercation, you can have a lot of fun debating the pros and cons of an issue with a friend or colleague. You'll practice your quick-thinking skills, logic and creativity.

Use your cognitive skills, test your powers of recall, improve your memory and challenge yourself to be more creative in your thinking. You'll reap great brain-boosting benefits by keeping your mind active.

Rebate Checks

This article was written by Tedd Oyler, a Cambridge Finacial Planner in Michigan. He is a respected colleague of mine.


ECONOMIC STIMULUS
(A SKEPTIC’S VIEW)

OK, I see that I am going to receive a check from the government – maybe in May, maybe not – that is labeled a “tax rebate”. And I also see that I am expected to spend this money along with all of the rest of you in order to help the economy avert the recession that is predicted by so many of the experts.

Have I stated the undisputed facts correctly? I am not suggesting that it is factual that we are headed for a recession – just that the experts say we are.

If we can agree on the facts, then I’d like to delve into the facts behind the facts together.

If we are in a recession – or about to be in one – why? I sure do not know much about macroeconomics, but my layman’s understanding of the recent economic chatter tells me that we may have overspent ourselves into this purported recession. This was apparently accomplished because lenders made mortgage and credit card money available to us in gargantuan proportions, such that many of now owe much more than we can reasonably pay back.

A significant portion of this easy credit fueled a run-up of real estate prices (not “values” – there’s a difference between value and price) beyond levels that the market could truly support. Many of the mortgages were at 100% of the then-appraised “value”, meaning that any slippage in the market would render the mortgage upside down. The out-of-whack loan-to-value ratios, coupled with all the adjustable-rate loans and the ensuing entirely predictable increases in interest rates, have successfully created a thriving market in foreclosed properties.

In other words, over-lending and over-borrowing – in other words “over spending” – have us on the doorstep of the next recession. It is my understanding that economies go through recessions from time to time, so there is really nothing all that unusual about the predictions. What might be unusual here is the response of the geniuses we’ve elected to serve us.

This “stimulus” is really a return to us of tax money we’ve already paid in – which is actually an advance payment to us of a tax credit that will be available to us on our 2008 tax returns (to be filed a year from now), except that the President and Congress, in their profound responsiveness to economic theory, are also rebating tax dollars to folks who have not paid any in recently. I just shake my head – the Feds are in a pretty serious deficit-spending footing, so they give us back money that they will pay for by giving us a tax credit NEXT year. Meanwhile, all of this is financed by borrowing (T-Bills, savings bonds, etc) against future tax collections.

In other words, the Federal Government is borrowing from next year’s tax collection to pay us a few bucks this year, so that we’ll spend it to avoid predicted but not certain cyclical economic trending. And it is being done so as to incur interest costs of that borrowing well intro the future. Patriotism now means spend even if you don’t have it.

In still OTHER words, the President and Congress are modeling the very behavior that got us into this predicament.

Like I said, I just shake my head.

So, as a skeptic, I encourage you to stop the madness. I encourage you to not fall into the spending trap. When you get your little check this spring or summer, use it more wisely than the bankers who made bad loans and the debtors who borrowed too much and the Feds who are but pandering to your lower nature.

Here are some suggestions:
· If you have any credit card debt, pay your rebate towards that
· If you have no consumer debt, then pay the rebate towards home equity debt (not mortgage debt)
· If you have no consumer or home equity debt, then sock the rebate into a Roth IRA

If you find yourself drawn to spending the rebate on a new toy, then you are allowing yourself to be sucked into the spendthrift mindset that got us here. Just say “no”.

Scary News Stories

HOW MUCH SHOULD I CARE ABOUT ECONOMIC NEWS?

I admit it - I pay some attention to how the American economy is doing. And I even sometimes find myself experiencing emotional reactions to the news from time to time. What normal person wouldn’t? Heck, every news program and every talk show and every newspaper and newsmagazine start every edition with the most recent nerve-wracking dire economic news or prediction, don’t they?

Sub-prime mortgages – recession – Enron – Social Security funding deficit – makes you really want to turn on the radio, doesn’t it? And, despite your jangled nerves, you do in fact turn it on and you listen to the next bad thing being reported to you. And then you wonder what you should do in your own life to protect yourself against the next or most recent bad thing.

It is maybe impossible NOT to wonder. After all, you are charged with providing for your family or for retirement or for your employees. Yes, I wonder, too. When I am thinking through my emotions, which isn’t really thinking at all, I make immediate plans to get out of the stock market – or maybe I think that the market has nosedove as far as it is likely to and so I should jump more boisterously INTO the market. Neither of these reactions makes senses when one places them in proper perspective, nor do any other fear-based, knee-jerk responses.

Political fearmongers and talking heads benefit from our scaredy-cat reactions, since they are selling irrationality and WE are their market. Sellers of fear-based financial products (such as annuities and weird life insurance policies and beat-the experts investment schemes) profit handsomely from our lack of understanding of long-term economic reality.

When I find myself succumbing to the fears, I must resist. I hope you can, too.

There is a vast difference between what we really need and what the fear peddlers are telling us we need. They want us to worry about things we cannot control, things like what the greedy bankers are doing and what the Iranians are doing. I suggest that these things matter to you and me only on an infinitesimal level. Unless you plan to become a political candidate or a lobbyist, the only thing you can do about most of the macro “problems” that constitute the bulk of our spoon-fed economic “news” is become a more informed, less fearful voter and even then you are not influencing events a whole helluva lot.

Much more importantly, in our day-to-day lives, we are better off if we accept the news as (perhaps) factually true but not very important, and certainly not very important in out personal lives. When I am operating on all cylinders, I hear the latest stimulus package pabulum, for instance, and see it for what it is, which is that the political process is more interested in looking good than in doing good.

Then I work my way back to what it means to have financial peace of mind in my own life. Financial peace of mind is not made possible – or even likely – by the actions or behaviors of those external to me, by exogenous factors. My financial peace of mind is pretty much entirely up to me. This is either the bad news or the good news, depending on your mindset. If you like to blame others for your failures, then this is very bad news indeed.

What exactly can we control in our financial lives in order to assure, as much as possible, peace of mind? These possibilities boil down to how much we make, how much we save and how much we pay in taxes.

Income (from all sources) – we have more control over this that we usually think. Many of us want to blame the boss, but I do not want to hear it. If the job is bad, we can choose to go somewhere else. If the pay is bad, then we MUST. We can work better, or harder, or smarter or elsewhere – see, we have control.
Savings – whether in retirement plans or for emergencies, we have utter control over how much we save. If income is flat, we can still save more by lowering expenses or by becoming a wiser consumer. The more we save, the less we have to worry about.
Taxes – one of the quickest ways to generate savings is by lowering taxes. Income taxes are lowered by working at it, not by complaining about them. There are plenty of ways to increase savings AND lower taxes at the very same time.

If you’re not taking advantage of the opportunities you have readily available to you, then you are achieving financial discomfort rather than peace of mind, and the economic news will depress you. Remember, that we can create our own financial comfort and peace of mind.

The Rebate Checks are Coming!

February 14, 2008
President Signs Stimulus Package

On February 13, President Bush signed the long awaited stimulus package designed to put money into the pockets of many American taxpayers. Along with the rebate checks, the bill contains some business incentives.

The IRS has indicated that they will begin mailing the rebate checks in late spring and continue through the summer. The rebates are based on the information reported on the taxpayer’s 2007 return. If a return is not filed, the taxpayer will not receive a check even if they may otherwise qualify. Many of the taxpayers who fall into this category are not required to file because of low income. If a return is filed for these taxpayers, the IRS will send them a rebate check provided their qualified income is at least $3,000.

Recipients of Social Security, Railroad Retirement, and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X to ensure they receive their rebate.

For taxpayers who elect direct deposit for their 2007 income tax refund, their rebate check will also be deposited directly into that same bank account.

Most taxpayers will receive two notices from the IRS. The first general notice from the IRS will explain the stimulus payment program. The second notice will confirm the recipients’ eligibility, the payment amount, and the approximate timetable for the payment. Taxpayers will need to save this notice to assist them when they prepare their 2008 tax return next year.

Credit Scores and Why They are Important

Your 5-minute guide to credit scoresA better score means a better deal from landlords, lenders, insurers and other creditors. Use these dozen-plus tips to boost yours. By MSN Money staff Your credit score is likely the most important three-digit number in your life. Your score affects how much you pay for credit, and it can affect other bills you pay, where you live and where you work. Banks and credit card companies review your score when deciding whether to extend you credit and how much interest to charge. (See "What bad credit really costs you.")

A high score can lead to lower car- and home-insurance premiums, a deposit waiver from utility companies and a better service package from the cell-phone company. (See "5 people who check your credit.") Many landlords check credit scores before allowing you to sign a lease. (See "Credit checks: A civil rights issue?") Many employers -- 35% in 2003 -- are doing credit checks on prospective employees, particularly those who would deal with money. Employers need your written permission to make the check and must give you a chance to respond.

With so much at stake, it's wise to find out where you stand and take steps to raise your score if it's below 700, particularly before you apply for a mortgage or other loan. Above 760 and you're in the upper echelon. A score below 620 tells people you're not a good risk and destines you for credit denial or subprime interest rates.

What is a credit score? The three major credit-reporting agencies -- Equifax, Experian and TransUnion -- use software developed by Fair Isaac Corp. to rate your risk for assuming debt based on your credit history. The result is commonly known as a FICO score. The score is based on five factors, including payment history, the amounts you owe and the types of credit you've obtained. Personal information like income, occupation, age and marital status are not considered. The FICO score can range from 300 to 850, although very few reach that pinnacle. Each credit bureau may assign you a different score, based on the information it receives from creditors. You generally have to pay to get your credit score. You are legally entitled to one free credit report each year from each of the three credit reporting agencies. (See "How to get a free credit report.")

To watch for errors and identity theft, stagger your requests and get a report from a different bureau every four months. Go to AnnualCreditreport.com to order a free report. Make sure you access the right Web site. Impostor Web sites abound.

Want to improve your score and keep it high? Think of credit as a privilege to be used sparingly. Don't apply for lots of credit cards. A credit inquiry can deduct five points from your credit score. However, multiple checks made when you're shopping for a mortgage will count as only one. Asking for your personal report won't hurt your score. Neither will requests made by credit card companies that offer preapproved cards, or requests by prospective employers. Avoid applying for credit cards from companies that don't set a spending limit or won't report your limit to the credit bureaus. Don't cancel multiple credit cards. That can suddenly lower your available credit and can hurt your credit score. Keep old accounts open to ensure a long credit history. Limit the percentage of available credit you use to no more than 30%, even if you pay off your balance each month. Your credit report will show the amount you owed, even if you subsequently paid in full, and excessive spending will ding your score. If you don't have a credit history, start one by obtaining a secured credit card and managing it responsibly.

It pays to pay on time The No. 1 way to raise your credit score? Pay all of your obligations on time. Your payment history constitutes 35% of your credit score. That includes library fines and parking tickets. Municipalities are more aggressive about turning over delinquent accounts to collection agencies, which will drag down your score. One late payment reported to a credit bureau can drop your score by 100 points, particularly if you had a high score. Late payments can remain on your credit report for seven years. Bankruptcies appear for 10 years. Consulting a credit counseling service to manage excessive debt will not damage your credit score.

If you find an error in your credit report, ask the creditor to correct it, then notify the credit bureau by sending a certified letter and copies of documents that support your claim. If the error isn't fixed, the bureau must identify the person who investigated your claim, and you can request a second report. If the error is corrected, the bureau must send you a copy of your new report and, at your request, a copy to everyone who obtained your credit report within the previous six months. If it's not corrected, you can include a statement in your credit report. Faced with a faulty credit report when you're about to obtain a mortgage? Mortgage companies can engage a rapid rescoring service to correct errors within days. Paying a service to monitor your credit is not worth the fee, unless you've been the victim of identity theft and have reason to believe you're still at risk.

The Mortgage Forgiveness Debt Relief Act of 2007

President Bush, on December 20, 2007, in signing The Mortgage Forgiveness Debt Relief Act of 2007, stated:

"The bill I sign today will help this effort by ensuring that refinancing a mortgage does not result in a higher tax bill. Under current law, if the value of your house declines and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as money that can be taxed. And of course, this makes a difficult situation even worse. When you're worried about making your payments, higher taxes are the last thing you need to worry about. So this bill will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. And it's a really good piece of legislation. The provision will increase the incentive for borrowers and lenders to work together to refinance loans — and it will allow American families to secure lower mortgage payments without facing higher taxes."

Quite simply, the way the new law functions is by amending Code Section 108. A little background: Code Section 61 indicates that gross income includes all income from whatever source derived. Code Section 108 addresses income from discharge of indebtedness. This amount is taxable unless it results from a title 11 case, insolvency, or is qualified farm indebtedness. The new addition to non-taxable cancellation of indebtedness (COD) reads as follows: the indebtedness discharged is qualified principal residence indebtedness which is discharged before January 1, 2010. That's it, in a nutshell.

The basis of the principal residence is reduced by the amount excluded. Qualified principal residence indebtedness means acquisition indebtedness (under IRC 163(h)(3)(B), but substitutes $2,000,000 for the $1,000,000 cap under acquisition debt). The effective date of the act is for discharges of indebtedness on or after January 1, 2007.

The IRS website has a web section on foreclosures. If you go to www.irs.gov, and type in foreclosure in the search box, you will find the following:

Special Web Section Unveiled for Homeowners Who Lose Homes; Foreclosure Tax Relief Available to Many
IR-2007-159, Sept. 17, 2007
WASHINGTON — The Internal Revenue Service unveiled a special new section today on IRS.gov for people who have lost their homes due to foreclosure. The IRS also reassured homeowners that, although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax bite for financially strapped borrowers who lose their homes.

Other changes: The Mortgage Insurance Premiums that can be deducted as interest has been extended for 2008 through 2010.

Sale of residence has been modified for sales or exchanges after December 31, 2007. In the case of a sale or exchange or property by an unmarried individual whose spouse is deceased on the date of such sale, the $500,000 exclusion applies if such sale occurs not later than 2 years after the date of death of such spouse and the regular requirements for the special rules for joint returns under IRC 121 apply.

Penalties: Here is the bad news. The failure to file partnership penalties increase from $50 per partner per month, for a maximum of 5 months, up to $85 per partner, per month, for a maximum of 12 months. In other words, the penalty goes from a maximum of $250 per partner to a maximum of $1020! This is effective December 20, 2007.

For S corporations, the penalty is also the $85 per month, maximum of 12 months, with an effective date of returns required to be filed after December 20, 2007.

There are also changes made that result in an exclusion from income for benefits provided to volunteer EMS and firefighters, modification of the prohibition against full-time students from qualifying for low-income housing credit, and changes to modify tests to qualify as cooperative housing corporation.