Compliance December 2, 2008

IRS Reminds Workers about Retirement Saver's Credit

December 2, 2008 (PLANSPONSOR.com) - The latest bulletin from the Internal Revenue Service, IR-2008-134, reminds low- and moderate-income workers they still have time to take steps to get the full benefit of the saver's credit.
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Also known as the retirement savings contributions credit, the saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans, and similar retirement programs. Eligible workers have until April 15, 2009, to set up a new IRA or add money to an existing IRA and still get credit for 2008, the IRS said.

According to the bulletin, elective deferrals to a 401(k), a 403(b) plan, a 457 plan, and the Thrift Savings Plan for federal employees must be made by the end of the year.

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The saver’s credit can be claimed by:

  • Married couples filing jointly with incomes up to $53,000 in 2008 or $55,500 in 2009;
  • Heads of Household with incomes up to $39,750 in 2008 or $41,625 in 2009; and
  • Married individuals filing separately and singles with incomes up to $26,500 in 2008 or $27,750 in 2009.

Other rules that apply to the saver’s credit include:

  • Eligible taxpayers must be at least 18 years of age.
  • Anyone claimed as a dependent on someone else’s return cannot take the credit.
  • A student cannot take the credit. A person enrolled as a full-time student during any part of five calendar months during the year is considered a student.
  • Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2008, this rule applies to distributions received after 2005 and before the due date (including extensions) of the 2008 return. Form 8880 and its instructions have details on making this computation.

In tax-year 2006, the most recent year for which complete figures are available, saver’s credits totaling almost $900 million were claimed on nearly 5.2 million individual income tax returns, according to the bulletin. Saver’s credits claimed on these returns averaged $213 for joint filers, $149 for heads of household, and $128 for single filers.

The bulletin can be found on the IRS’ Web site at www.irs.gov .

Investing December 1, 2008

No Deflation in Cost of True Love

December 1, 2008 (PLANSPONSOR.com) - Recession or not, true love will cost you dearly this year.
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More accurately, the cost of the items given by “my true love” in the song, ‘The Twelve Days of Christmas’, has gone up 8.1% over the past year to $21,080 (see  True Love Costs More in 2007 ), at least according to the PNC Christmas Price Index.  

That’s the second biggest “leap” in the 24-year history of the whimsical economic analysis by PNC Wealth Management (the largest jump was 16.0% in 2003). This year, commodities prices, concerns about increased energy and shipping costs and jobs were major factors in the cost, according to PNC.  

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Swan “Song”

Nearly all of the increase was due to the Seven Swans-a-Swimming, which cost 33.3% more than a year ago.   Indeed, “True Loves” will spend $5,600 this year for Swans compared with $4,200 in 2007, $1,400 of the $1,573 increase.   In fact, if you exclude the costs of swans, the so-called “core” CPI increased just 1.1%.

Nor were the swans the only item to have a “fowl” impact on the pricing.   The Two Turtle Doves were up 37.5% (to $56 from $40), and that Partridge in the Pear Tree was a third higher ($199.99 versus $149.99 a year ago).   On the other hand, the Three French Hens and Six Geese-a-

Laying both dropped in price.   This year the hens cost $30.00 (a drop of 33.3%), and the geese cost $240.00, also falling one-third. The Four Calling Birds remained steady, but, at $599.96, were pricey nonetheless.  

On the other hand, True Loves will pay less for the Five Gold Rings this year, with prices dropping by 11.4%, according to PNC.  

(1) Editor’s Note   If you’re wondering where one finds the price of some of this stuff, PNC says that the National Aviary inprovided the cost of some of the birds in the song, including the partridge, the French hens, geese and swans. The Cincinnati Zoo provided the cost of turtle-doves, while national pet chain PetCo provides the price of the calling birds, or canaries.

The pear tree price came from, anursery. Gordon’s Jewelers provided the cost of five 14-carat gold rings, and Philadanco, a modern dance company in, offered the price of ladies dancing. The Pennsylvania Ballet offered the price of the lords a-leaping. Prices for the musicians in the song—the drummers and pipers—were provided by amusicians union.

Higher labor costs squeezed the price of the eight Maids-a-Milking, who received a raise for the second straight year, due to another increase in the federal minimum wage (to $6.55 per hour).   In the last two years, the Maids-a-Milking have seen their wages rise by $1.40 per hour, an increase of 27%.   Still, the maids will cost the True Love $52.40 this year, only $5.60 more than a year ago, a relative bargain in the PNC CPI.   The cost of most performers in the index — the Drummers Drumming, Pipers Piping and Lords-a-Leaping — jumped a more modest 3%, essentially a cost-of-living increase.   Only the price for the Ladies Dancing was unchanged this year.

For those True Loves who prefer the convenience of shopping online, PNC Wealth Management also calculates the cost of "The Twelve Days of Christmas" gifts purchased on the Web.   This year, the trends identified in the traditional index are repeated in the Internet version, but with an overall price growth of just 2.8%, significantly less than the traditional PNC CPI increase of 8.1%.  

On the other hand, True Loves will pay a grand total of $31,957 to buy the items online, almost $11,000 more than in the traditional index.   PNC notes that the Internet price of Swans-a-Swimming was unchanged this year, but that they still cost significantly more to buy online at $7,035.   In general, Internet prices are higher than their non-Internet counterparts because of shipping costs for birds and the convenience factor of shopping online, according to PNC.

As part of its annual tradition, PNC Wealth Management also tabulates the 'True Cost of Christmas,' which is the total cost of items gifted by a True Love who repeats all of the song's verses. This holiday season, very generous True Loves will pay more than ever before; $86,609 for all 364 items, up from $78,100 in 2007, a 10.9% increase.

By the way - not that one should be stingy when it comes to True Love - but the cheapest cost of Christmas in dollars occurred in 1995, when the true cost of Christmas was only $51,000.

More information is online at http://www.pncchristmaspriceindex.com/CPI/index.html

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