Middle Class Tax Relief and Job Creation Act of 2012

The payroll tax holiday
gets an extension

In late February, Washington passed another Tax Relief and Job Creation bill that extends the 2% payroll tax break for all employees through 2012. This means W-2 employees will pay 4.2% versus the normal 6.2% and self-employed will pay 10.4% versus 12.4% for the balance of the year. Medicare payments remain unchanged.

Background

In late 2011, Congress extended the lower Social Security tax (OASDI portion of FICA) through February, 2012. The short two-month extension was all Congress could agree to because of disagreement on how to pay for the tax cut. When Congress came back from their holiday break, bills were introduced to extend this tax break through 2012. Also included in the bill were unemployment benefit payment extensions.

What does it mean?
	Review your paystubs once again. Some companies were able to make the change, some were not. Simply make sure the FICA portion you pay equals 4.2% of the first $110,100 of your wages in 2012.
	What does it cost? The cost of this portion of the bill is estimated to be $93.2 billion over 11 years. The tax-cut is being funded by transferring money from the "general fund". Basically one part of the government loaning money to another part of the government.
	More money to pay back. While some of the cost of the additional tax breaks and increased benefits are being paid for by selling our airwaves to private companies, the majority is being added to the debt.
	I thought that Social Security was going broke? So why are they doing this now? Good question, and a highly debated topic. That's one to ask your representative.
	How much do I benefit? The Whitehouse/Congress assumes the average family will receive approximately $1,000 in additional take home pay.
	What about my January/February Wages? Those who received more than the maximum allowed benefit for the reduced tax in January and February will not have to repay the excess benefit. Instead, wage withholding adjustments will need to be made over the balance of 2012.

Teaching Your Children to Save

Six simple ideas

Teaching our children sound financial principles such as how to save and invest wisely will serve your children for the rest of their lives. Unfortunately, this topic is rarely covered in school and with the desire for instant gratification imbedded into our culture it is a wonder anyone saves money. Here are a few ideas to consider to help your children become smart savers.

	Start as early as possible. Encourage your child to develop good savings habits at an early age. Create your own “interest payment opportunities” by adding to their savings periodically for every dollar in their piggy bank.
	Set goals. Help your child save for something meaningful to them. Embracing the concept of saving for the future versus giving into the need to buy it now can save your child from a lifetime of financial hardships.
	Save a consistent amount. Consider giving your child an allowance. As part of this process talk about dividing the allowance into saving, spending, and charitable giving buckets. By putting a set amount into each bucket the “habit” of savings can be established.
	Show your bills. When paying bills consider showing your children how much things cost. While you do not want your child to worry about money, you also want them to know that heat and electricity cost money. This can lead to a discussion about how you save enough money to pay for daily and monthly bills.
	Have them pay for things. When you purchase a small item at the store, have your child pay for it. The act of giving money and receiving change not only builds practical math skills, it also helps them visualize the need to have money to buy the things you need.
	Consider a bank account. Your child’s initial bank is probably in the form of a classic piggy bank. At some point have them go with you to a bank and open an account. Since savings rates are so low, an idea could be to augment the child’s saving deposit with "family interest". For example, for every dollar your child deposits in a savings account, you could deposit ten cents in "family interest".

The concepts of interest, savings accounts, stocks, bonds, and other means of growing your wealth were foreign to all of us at one time. By making this a normal part of discussion in your home, your children can start to see the benefits of savings and will hopefully find the world of finance and financial instruments less intimidating as they get older.

 New Consumer Agency Wants Your Ideas

As part of the Wall Street Reform Act in 2010, a new federal agency was created to protect and improve consumers' rights on financial matters. The new agency, Consumer Financial Protection Bureau (CFPB) is now up and running. To see the scope of their work to date and explore their activities you can log on to their website at: www.consumerfinance.gov

What is now news is the request in mid-February by the CFPB for the public to provide them with suggested changes to the regulations they oversee. Want to provide your feedback and input, but aren't sure what regulations there are? Here is a list. The most common are highlighted in bold:

	Equal Credit Opportunity Act
	Home Mortgage Disclosure
	Alternative Mortgage Transaction Parity
	Electronic Fund Transfers
	Fair Debt Collection Practices Act
	S.A.F.E. Mortgage licensing Acts
	Disclosure Requirements for Depository Institutions lacking Federal Deposit Insurance
	Land Registration
	Purchasers Revocation Rights, Sales Practice and Standards
	Special Rules of Practice
	Consumer Leasing
	Mortgage Acts and Practices Advertising
	Mortgage Assistance Relief Services
	Privacy of Consumer Financial Information
	Fair Credit Reporting
	Real Estate Settlement Procedures Act
	Truth in Lending
	Truth in Savings

What this means to you

Are your eyes starting to glaze over? With all the regulations, it seems only experts can keep track of all these details. However, if you've had a bad experience, this might just be an opportunity to have your voice heard. Copies of the regulations can also be found on provided links. While most of the feedback will be from experts in the field, everyone has an opportunity to provide suggestions. If you wish to remain anonymous you may enter your suggestion without providing your contact information.

The input form can be found online at: http://www.consumerfinance.gov/regcomments/comment/

So if you've had a bad credit experience and you think the companies involved are hiding behind the "regulations" now is your chance to provide your suggested changes to make things better.