Benefit tests 'not money driven'

8 June 2011 Last updated at 11:03 The assessments have been criticised by some charities A system of assessments to encourage more people on benefits back into work is "not a financially-based exercise", a minister has said.

Work and Pensions minister Chris Grayling said that work capability assessments were all about identifying people with the potential to work.

The government is seeking to reassess all 2.6 million people on incapacity benefit - and its successor, employment and support allowance (ESA) - by 2014.

Some charities criticised the move.

'Life-changing experience'

The assessments determine whether applicants are entitled to the highest rate of ESA - for those deemed unable to work at all due to sickness or disability - or are considered "fit for work", in which case they are put on jobseeker's allowance instead.

The test, first introduced by the last Labour government and being rolled out by the coalition, can also place applicants into a "work-related activity group", where they will be expected to take steps to prepare themselves for work in the medium to long term.

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[It is] a once in a lifetime opportunity to transform people's lives for the better”

End Quote Chris Grayling Work and Pensions minister Speaking to the Commons Work and Pensions Committee, Mr Grayling said the assessments were potentially "quite difficult" and a "life-changing experience" for some people on benefits.

However, he said it was the correct thing to do in the long term.

"[It is] a once in a lifetime opportunity to transform people's lives for the better," he said.

Earlier this year, six charities - including the MS Society and Parkinson's UK - said the assessments were declaring sick people fit for work, and called for changes to the system.

Earlier in June, campaigners - including charity Mind - strongly criticised the assessments, saying the changes were causing "huge" distress and had resulted in suicides.

Some changes have been made to make the assessments "fairer", following an independent review by Prof Malcolm Harrington.

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Rental costs 'will keep rising'

9 June 2011 Last updated at 11:34 Some potential first-time buyers have continued to rent because of mortgage rationing Rents are continuing to rise for tenants and more increases are expected in the coming months, a survey has suggested.

About 42% more surveyors reported a rise in rents than those who saw a fall during the three months to the end of April, the Royal Institution of Chartered Surveyors (Rics) survey said.

Tenants' rising costs are most marked in London and south-east England.

Some 33% more surveyors expect rents to go up than those predicting a fall.

"Although we are beginning to see more mortgages aimed at first-time buyers, many potential homeowners are still restricted from getting a foot on the property ladder, leading to increased demand in an already oversubscribed rental market," said Rics spokesman James Scott-Lee.

"There has been a small uplift in supply, but the imbalance between demand and availability can only mean rents will continue to rise."

First-time buyers

A separate survey, published last month, said that rental costs in England and Wales had reached a record high in April.

LSL Property Services, which owns a lettings agents network including chains such as Your Move and Reeds Rains, said the average rent stood at £692 a month.

However, there have been some signals that lenders are looking more favourably towards people looking to get on the property ladder.

There are now 183 mortgage products on the market aimed at first-time buyers, compared with 62 products two years ago, according to financial information service Moneyfacts.

There are also 31 different loans available for people offering a 5% deposit, although this was far lower than the 1,079 available at the height of the property boom in July 2007.

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Tax Prep Calls for Careful Steps

The time is coming faster than you think. Yes, it's tax crunch time.

I know I'm breathing a little better. For the first time in years, my husband and I aren't going to be up all night April 14 trying to gather our tax records. But if you're still not there yet, here are some last-minute tips, plus mistakes to avoid, courtesy of the Internal Revenue Service:

Got a Personal Finance Question? • Transcript: Personal finance columnist Michelle Singletary was online to talk about last-minute tax filing tips, getting your finances organized and any other personal finance topic on your mind.
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Memorable Changes
Many of this year's changes involve minor adjustments. But for taxpayers affected, they can be well worth knowing about.

Numbers Crunch
It's clear that taxpayers who don't use professionals to prepare their returns need to have up-to-date guides and/or software.
_____  Featured Columnists _____ A Big Refund Isn't Great
Michelle Singletary writes that come tax time, it's better not to receive a refund. Transcript: Michelle Singletary and Jim Dupree of the IRS Special Report:
Our coverage includes quick links to advice, federal and state tax forms, a guide to tax law changes that could affect your return this year, and information on getting help.

• Choose the correct filing status. Many people who are single, recently separated or divorced often make a mistake by either not claiming "head of household" when they can or claiming it when they don't meet the requirements for that status. For example, one of the requirements is that during the tax year you paid more than 50 percent of the costs of keeping up a home for yourself and qualified dependent(s), which by the way could be your child, a grandchild or parent.

For more information on your filing status, check out IRS Tax Topic 353 at www.irs.gov. Also, don't assume that if you're married it's financially advantageous to choose "married filing separately." Doing so could make you ineligible for some tax breaks. If you're married and you're not sure which filing status to use, compute your taxes separately and jointly and see which method results in a smaller tax liability.

• If you know you can't file in time, request an extension. You can get an extension to file by Aug. 15 by filling out IRS Form 4868, "Application for Automatic Extension of Time to File." Just keep in mind that you still have to pay any taxes you owe by April 15. I know that last piece of advice sounds nonsensical. If you have to pay your taxes, doesn't that mean you have to do some work to figure out how much you owe? Yup. But nonetheless pay up or risk a penalty.

• If you realize you have a huge tax bill this year, don't panic. You can apply for an IRS installment agreement. To request an installment agreement, submit Form 9465, "Installment Agreement Request," and send it with your return. You can also send a written request. Just attach it to the front of your return. In your letter you'll need to specify the amount you can pay and the day you wish to make your payment each month. The IRS says it usually responds to such requests within 30 days. You'll be told whether your request is approved or denied and whether additional information is needed.

If you can't pay, contact the IRS at 800-829-1040. There are other options. For example, if you're experiencing some unusual economic hardship you may qualify for an "Offer in Compromise." Under such an offer the IRS may accept less than what you owe (under certain circumstances). Whatever your situation -- you need more time to pay or you don't have the money at all -- it is better to initiate the call than to have the IRS chase you down.

• Did you write off all the points paid as a result of a refinance last year? If you did, you may have made a common tax mistake. Generally, points paid for an original home mortgage can be fully deducted in the year the points were paid. But points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

However (isn't there always a however when it comes to the tax code?), if you used money from your refinancing to make home improvements (and if you meet certain other requirements), you may be able to deduct more points. For more information on deductions related to refinancing, see IRS Tax Topic 504 or Publication 936, "Home Mortgage Interest Deduction."

And how do you figure out how much in points to deduct? Here's an example from the IRS: Let's say you paid $2,000 in points and your loan calls for 360 payments on a 30-year mortgage. You could deduct $5.56 per monthly payment, or a total of $66.72, if you make 12 payments in one year. In other words, if you have a 30-year mortgage, you don't divide what you paid by 30 but by the number of payments you have to make over the life of the loan.

• Many people incorrectly believe that you can't deduct the interest on a home-equity loan or line of credit unless the money was used for home improvements. The fact is you can deduct all of the interest on a home-equity loan of up to $100,000 ($50,000 or less if married filing separately).

• Finally, when you do file your return, there are several ways to check on its status. You can go to www.irs.gov and click on the link for "Where's My Refund?"

Don't have a computer? No problem. If it has been at least four weeks since you filed your return, you can call the IRS at 800-829-4477 to check on your refund. Before making the call, be sure to have the first Social Security number shown on your return, your filing status and the amount of your refund. The telephone refund system is updated each weekend, so if you can't get information about your refund you may need to wait another week.

Now, go and do your taxes.

Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online at www.npr.org. Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or send e-mail to singletarym@washpost.com. Comments and questions are welcome, but because of the volume of mail, personal responses may not be possible. Please also note that comments or questions may be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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You Can't Save 'Too Much' For Retirement

When I solicit comments or questions, I don't want you all to think they go into the abyss, never to be read. I do read your questions and comments and, while I can't respond to all, here are answers to some:

Q I make $50,000 a year. When I include my company's contribution to my 401(k), I'm saving around $525 a month for retirement. I'm getting a new apartment this month, on my own so I can finally be rid of roommates. But I find it's difficult to afford my own place. Am I saving "too much"? Is it possible to decrease the amount I'm saving for retirement in order to have more money to live on each month?

Got a Personal Finance Question? • Transcript: Personal finance columnist Michelle Singletary was online to talk about last-minute tax filing tips, getting your finances organized and any other personal finance topic on your mind.
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AHave you been reading all the controversy about Social Security? Since no one can say what will happen to Social Security benefits, I say you can't save too much for your retirement. Let's put that $525 in perspective. That's $6,300 a year, which is more than a lot of people are putting away. But will that be enough? You won't know without doing some calculations and making some assumptions (How long until you want to retire? What other retirement income will you have?). I suggest you use a few retirement calculators to help determine whether you are saving too much or not enough. But don't get scared off by the results. They are just estimates. You may need more or less depending on a lot of factors (your savings, if your job offers a pension, whether you plan on working in retirement, etc.). So here are a few calculators you might try:

• The Ballpark Estimate Retirement Planning Worksheet at www.choosetosave.org.

• Retirement calculators at www.bankrate.com/brm/calculators/retirement.asp.

• T. Rowe Price's at www3.troweprice.com/ric/RIC.

• Vanguard's at flagship3.vanguard.com/VGApp/hnw/RetirementSavings.

Finally, if your retirement saving is crimping your lifestyle (as in you're tired of eating canned soup), perhaps you weren't ready to get rid of your roommates. However, if you still want to live on your own, then you have just two other options: cut your expenses or make more money.

Here's the scenario: A parent has just sold a house (for under $50,000) and wishes to divide the proceeds equally among three grown children. Are there any tax considerations the parent (or the children) should keep in mind?

This is a situation where a gift tax might come into play. A gift tax is a tax on the transfer of property (or money) by one individual to another while receiving nothing, or less than full value, in return. The part that people often get wrong is who pays the tax. It is the donor (in this case the parent) who is generally responsible for paying any gift tax. The people who receive the gifts (the children) will not have to pay any federal gift or estate tax. Also, they don't have to pay income tax on the money.

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Investor Beware: The Con Is On

It's the season to scam.

I think I've used the phrase "low-life bum" more than I care to as I've read story after story this past year of investors being ripped off in new and old scams.

Most recently, the Securities and Exchange Commission filed civil charges against two Maryland businessmen, accusing them of bilking investors of $8.2 million with promises of risk-free returns of between 1 and 5 percent per month.

Got a Personal Finance Question? • Transcript: Personal finance columnist Michelle Singletary was online to talk about last-minute tax filing tips, getting your finances organized and any other personal finance topic on your mind.
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In its complaint, the SEC said people were told their money would be pooled with other investors' in $1 million lots to buy "debt obligations of the top 50 banks in the world." Investors were promised their money would be safe and secure.

But the SEC thinks this was a classic "prime bank" scheme. It alleges that the money collected from investors was in fact used to engage in highly speculative and expensive trading in the precious metals markets.

The SEC says that, in similar cases, investors are told their funds will be used to buy and trade "prime bank" financial instruments and are led to believe the investment, while low risk, will net high returns. But no such prime bank instruments exist.

With the ups and downs of the stock market (mostly down these days), investors, especially retirees, are becoming more vulnerable to fraud or, at the very least, open to putting their hard-earned money in inappropriate investments.

Con artists are diligent in gaining the trust of unsuspecting investors, in some cases even getting on their knees and praying with their victims to win them over.

In February, a federal jury convicted a Georgia man -- a preacher, no less -- of stealing nearly $9 million from 1,600 small, black churches and other nonprofit organizations by promising them big returns on small investments.

Prosecutors in the case said the minister told the faithful (who then told their friends and relatives) that he was developing Christian resorts around the country and that for a fee of a few thousand dollars, their churches could be "members" of his company. In return, he promised that in time, the churches would get a grant or a forgivable loan of up to $500,000.

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Youth Is Fleeting, But Debt Isn't

I had no idea I would touch off such a storm when I wrote that college students, who are racking up student loan debt that could take them two or three decades to pay off, can't afford to take spring break vacations.

Reader responses fell into two camps. In the far more financially responsible and conservative camp were those who agreed that being young isn't an excuse to spend unwisely.

Got a Personal Finance Question? • Transcript: Personal finance columnist Michelle Singletary was online to talk about last-minute tax filing tips, getting your finances organized and any other personal finance topic on your mind.
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Then there was the camp that argued college students should throw financial caution to the wind because they're only young once.

Here's a sampling of what folks in the "don't spend what you don't have" corner had to say (some writers asked that I not use their names):

• "Far too many people feel like they 'need' to indulge themselves," wrote a Scotch Plains, N.J., mother of two college students who have not taken spring break vacations. "I guess it helps that I never went on lavish vacations myself. My children knew I was saving for more important things -- like their educations."

• Karla Weigold of Minneapolis said: " 'I want what I want when I want it' is the perfect phrase and description for too many spending habits these days."

• "While in college I went on spring break once or twice, and of course I couldn't afford it," wrote a captain in the Marine Corps. "I was one of those who piled on the credit card debt and student loans while holding down two jobs. And I paid for all the 'fun' I had over the next five years as my wife and I struggled to pay off our credit cards."

Now here's a sample of the comments from the "you're only young once" crowd:

• From a college student who has amassed "a reasonable amount of debt" from trips: "My parents are always behind me in my decisions to go abroad. This includes for leisure [and] academic purposes. They never had the opportunity to venture off to these locations, and they see it as an advantage for me to have the privilege of expanding my horizon."

• David W. Pearlman, a certified financial planner from Lauderhill, Fla., wrote: "I would ordinarily agree with paying off debt before going on vacation, but in this instance, I must take exception to your article. The four years after a young person graduates high school and is in college are a very special time. While nobody should spend money frivolously, when will [college students] have this type of fun again?"

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