The bank tax as it is being called will be levied only on the largest financial corporations, defined as those with combined assets across all their controlling interests that amount to more than $50 billion. When this is taken into consideration, the statistics reveal that the majority of the tax revenue (about 60%) will come from the top 10 largest firms.

The Opposition to the Tax.

Of course a tax of this nature is bound to draw severe criticism from those likely to be affected by it. The banks argue that they have in fact already repaid the sums borrowed under the TARP (Troubled Asset Relief Program) and point the finger at the car industry which continues to struggle to keep its business intact.

In fact there seemed to be a mad rush to repay those TARP funds that the financial industry so desperately needed only a short time ago. The major players J.P. Morgan Chase, Wells Fargo, Citigroup, Morgan Stanley and Bank of America were all trying to rush each other to the head of the line in December 2009 to repay the money owed and all this a whopping two years ahead of the deadline.

The logical question to ask is “why was the TARP money repaid early?” The only answer that makes sense seems to be because it would look bad if banking executives continued to be paid millions in bonuses while the debt was outstanding.

What Does This Mean for Consumers?

The American consumer must take those facts into consideration and try to make sense of them. The banks are angry about the Financial Responsibility Fee that came as a result of their bonus payments and they warn that the tax can be passed on to consumers in the form of lower interest on deposits, higher interest on loans and higher or additional fees. The government counters this argument by highlighting that that tax will only be levied on the largest of the banks so taking this route would only make them less competitive.

The affected banks are in talks to pursue legal action against the tax and simply will not take it lying down.

In the meantime the consumer should be on the lookout for sneaky increases and cut backs on services that were once free. Shopping around for the best rate and price will continue to be the best way to save money in the future.

Who Will Pay President Obama’s Bank Tax? was created by and is property of American Consumer News.

Actually, you may not have to pay afterall. As a taxpayer, you need to be aware of what deductions you can legally claim in order to lower your taxable income and increase your odds of getting back a tax refund. If you want to receive thousands of dollars from the government instead of paying, you want to try and qualify for something called the Earned Income Credit or EIC (also called the Earned Income Tax Credit or EITC). There are many tax write-offs that people can take (whether you are a business owner or not) that will qualify you for this credit, and you should take advantage of them. They are set up for the express purpose of helping any taxpayer with a pulse…and a social security number. Below is a list of my ten favorite. Although this is not a complete list, these ones are the easiest for anyone to gather and qualify for.

WHAT IS EARNED INCOME CREDIT (EIC)?

Here’s how taxes work (plain and simple). You make money and you pay tax on that money. The more money you earn, the more tax you pay. (Duh, right?) What you may not be aware of is that if you fall within the low-income tax bracket, you could be due a cash credit towards your taxes equaling as much as $4,710. It’s called the Earned Income Credit and offers low-income workers the opportunity to pay their taxes with the government’s money. And guess what…if you have a larger credit then what you owe, the government will send you that money as a refund.

Here’s How You Qualify:

• If you have more than one qualifying child, and you earned less than $37,783 ($39,783 if married filing jointly), you can qualify for as much as $4,710 of EIC.
• If you have one qualifying child, and you earned less than $33,241 ($35,241 if married filing jointly), you can qualify for as much as $2,850 of EIC.
• You do NOT have a qualifying child, and you earned less than $12,590 ($14,590 if married filing jointly), you can qualify for as much as $420 of EIC.

If you would like to know exactly how you rate, go to this link at the IRS’s website and play with the numbers until you have an idea of how much you might be able to qualify for: http://apps.irs.gov/app/eitc2007/ShowCalcTips.do

TAX DEDUCTIONS

Now that you have an idea, here are legal tax deductions that will get anybody a better refund.

1. Standard Mileage: This is my favorite of all the tax deductions. It is a valid expense that totals up the miles you drive in relation to business, medical, moving or charitable events, and reduces your income accordingly. Even better, most mortgage companies do not consider it a valid expense when calculating your income for a home loan, thus qualifying you for a larger mortgage. For 2007, the rate is calculated as follows:
   1. $0.505 per mile driven in relation to a business event that you were not reimbursed for. This reduces your income $505 for every 1,000 miles you drive.
   2. $0.19 per mile driven in relation to medical and moving expenses (or $190 for every 1,000 miles).
   3. $0.14 per mile driven in relation to charitable events ($140/1,000 miles).

1. IRA Deduction: Until April 15^th of any given year, you can deposit up to a pre-specified amount into an IRA and reduce your income for the previous year. By doing so, you not only keep money that you might otherwise be paying to the government in taxes, but you are securing your future. (To see all of the limits for an IRA deposit, click here: http://www.irs.gov/formspubs/article/0,,id=117542,00.html).

1. Health Savings Account (HSA): If you qualify, you can open an HSA. An HSA is a tax-deductible and tax-exempt savings account that can be used for any kind of medical expenses without federal tax liability. To see if you qualify, click the following link: http://www.irs.gov/publications/p969/ar02.html#d0e159

1. Qualified Tuition Program (a.k.a. Plan 529 or Coverdell ESA): There are several college savings accounts that offer tax deductions, including a 529 Plan or a Coverdell ESA. These accounts can be setup before April 15^th and allow you a tax deduction. Just check with your local banker or financial planner to set one up and take advantage of the tax deduction. Click here for more information: http://www.irs.gov/pub/irs-pdf/p970.pdf.

1. Alimony Paid: You can deduct alimony or separate maintenance payments made under a court order.

1. One Half of Self-Employment Tax: If you have paid self-employment tax (social security tax and/or Medicare tax), you can deduct the amount of your taxes.

1. Self-Employed Health Insurance Deduction: If you are self-employed, you can deduct the cost of health insurance for yourself, your spouse, and your dependents.

1. Moving Expenses: If you moved more then 50 miles for a job or business, you can deduct the costs for moving your possessions, travel and lodging for you and your family.

1. Student Loan Interest Deduction: You can deduct a maximum of $2,500 of interest on a qualified student loan per return.

1. Qualified Higher-Education Expenses: If you attended a qualified higher-educational institution (including graduate school), you can deduct attendance costs. These costs include tuition, fees, room and board, and an allowance for other necessary expenses, as determined by the eligible educational institution.

As I stated before, there are many other deductions as well, such as your mortgage interest. Check to see if your state offers a Renters Credit.  California is offering a $60 credit.  If you are a home owner, check with your county’s local assessor’s office to get your homeowner’s property tax exemption credit.

Get a Big Fat Tax Refund was created by and is property of American Consumer News.

New Tax Brackets, Higher Standard Deductions & Higher Personal Exemptions – Tax Brackets and the standard tax deduction increase every year by the rate of inflation. You’ll also be able to deduct more for each of your dependent family members as the amount of money you can deduct for a personal exemption has increased as well. This mean that you’ll end a smaller amount of taxes if you made the same amount of money as you did last year. You can view information about this year’s tax brackets here.

Increased Business Mileage Rates – You’ll be able to deduct more of depreciation if you own a vehicle and use it for business purposes. In 2007 you could deduct 48.5 cents per mile, and in 2008 you’ll be able to deduct up to 50.5 cents per mile.

New Rules for Charitable Giving – The IRS is attempting to clamp down on fraudulent charitable giving this year by making it so that you cannot deduct a cash donation unless you can provide a record of the contribution. These records include a notice from the charity, a cancelled check, or a bank statement.

Limits on Itemized Deductions for the Wealthy - If you and your spouse make more than $159,950 or if you are single and make more than $79,975 this year, you may lose a portion of your itemized deductions.

Increased Roth IRA Contribution Limits – In 2007 you could deposit up to $4,000 into a Roth IRA and have the investment be completely tax free. In 2008, you will be able to deposit up to $5,000 and have all of the earnings on that money be tax free. Those over 50 can deposit up to $6,000 this year as their catch-up contribution.

Better Tax Breaks for College Students – The amount of money that your family can make and still be qualified for the Hope & Lifetime Learning credit increases to a sliding scale between $47,000 and $57,000 in 2007 and between $48,000 and $58,000 in 2008.

Improved Adoption Credits – Taxpayers can now deduct a maximum credit of $11,390 when they adopt a child. You must make less than $210,000 to qualify for any or all of this credit.

PMI is now deductible – If you had to purchase private mortgage insurance as part of your mortgage, you will now be able to deduct the amount you pay.

Increases in Alternative Minimum Tax Limits – The alternative minimum tax limits were raised for the taxes filed on 2007 income by a bill in congress late last year. This number will drop down significantly next year unless congress reforms the legislations

New Tax Law Changes for Your 2008 Federal Income Taxes was created by and is property of American Consumer News.