The announcement by the Obama administration that they were launching a Task Force on Middle Class Working Families has created a huge surge in the number of people asking themselves how middle class is defined.  The goals of the task force, cited on their A Strong Middle Class website are as follows:

• Expanding education and lifelong training opportunities
• Improving work and family balance
• Restoring labor standards, including workplace safety
• Helping to protect middle-class and working-family incomes
• Protecting retirement security

While these goals sound great, middle class isn’t defined anywhere on the site.  That really shouldn’t come as a big surprise because “middle class” is a social term with ambiguous meaning.  In their thorough discussion of the topic, Wikipedia defines the American Middle Class as

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There are all sorts of tips and strategies out there for owing less in taxes, from legitimate (i.e. IRS approved) deductions to more questionable techniques.  As a corollary to owing less in taxes comes the more practical technique of paying less in taxes.  This information is particularly useful for anyone who regularly receives a huge refund each year.

If a big fat refund check sounds like a good thing, remember that the government isn’t giving you free money, they are simply returning the money you paid them in excess of what you owed.   To prevent that from happening again, turn to Form W4, which you file with your employer.  Your W4 tells your employer how to determine the amount of taxes to withhold from each paycheck.

The first item on your W4 is whether you are single or married.  Those sound fairly simple, but a third option, Married, but Withhold at the Higher Single Rate could be throwing your withholding off.  This option is for married people who want to have taxes withheld as if they were single, which is at a higher rate.  You might choose to do this if you normally owe a lot of taxes at the end of the year, but if you are married and getting a large refund, then the Married box is probably the better choice.

Next up comes

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USPS May Need to Cut Delivery To 5 Days/Week

According to the Associated Press, U.S. Postmaster General John E. Potter testified before Congress that massive deficits may force the USPS to cut delivery by 1 day each week.  Current law requires mail delivery six days a week.  It was interesting to note that the proposed day to cut was not Saturday, but rather Tuesday, which is the lightest mail day by volume.

As more people use alternative forms of correspondence, revenue goes down and the United States Postal Service’s ability to cover their relatively fixed operating cost is diminished.  The economic downturn isn’t helping either.  One side effect of a slowing economy is a reduction in advertising.  Since 52% of the USPS’s mail volume is comprised of junk mail, it should come as no surprise that a reduction in direct marketing mail would hit the USPS hard.

In a few realms, the USPS has its hands tied.  Many of its costs, such as its retiree health and benefit programs, can’t be reduced all that much.   Income from postage declines as volume is reduced and there are very restrictive limits on postage rate increases.  The number of delivery days is one variable that could reduce some costs, though that too would require a law change.  The relevance of the USPS may have declined since its heyday, but some form of inexpensive, reliable, and daily delivery service is clearly vital to the success of the economy.

Below are the US 2008 federal tax rates for informational purposes.  To compute your actual income tax, follow the 2008 instructions that accompany Form 1040.

Here are the 2008 IRS tax rates:

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Another Crack at the Original Economic Stimulus Checks

In discussing the current stimulus package making its way through the government, The Digerati Life questioned why stimulus checks weren’t expected to be part of this plan as they were during the last stimulus bill.  The answer given, that the previous stimulus checks were ineffective at stimulating the American economy, was certainly disconcerting.  Even so, the discussion did remind me to tell all of you about a tax law that could allow many people to get another crack at the original stimulus.

Eligibility for those checks was based on your 2007 tax return when they were issued, but the law actually sets eligibility based on either your 2007 or 2008 tax return.  Obviously no one knew what their 2008 return would be back when the checks were issued, but now that 2009 is here, our 2008 returns will soon be known.  This information could be key to anyone who either didn’t qualify for a stimulus check or only received a partial payment.  Here’s my original information on economic stimulus phase-out amounts and eligibility requirements.

With the current economic downturn, many people have lost their jobs or otherwise seen their income reduced in 2008.  If your stimulus check was non-existent or less than the maximum, you might be eligible for the Recovery Rebate Credit on your 2008 return.  Families with children born in 2008 may also be eligible, since they’ll have another dependent on their 2008 return (worth $300 as part of the stimulus program) that was not included on their 2007 return.  Families who adopted in 2008 are in the same situation.  Tax credits are much more valuable that tax deductions since every dollar of credit means an extra dollar in your return check whereas only a portion of each deducted dollar makes its way back to you.

So if your 2008 income was less than in 2007, you had a child in 2008, or other event that significantly affects your tax situation be sure to ask your tax preparer about the Recovery Rebate Credit or keep a close eye out for that section within your tax return software.  Any additional credit due will be added to your tax return rather than come in the form of a separate stimulus check, but the form of payment is much less important then the fact that you get everything that you are due.

Just a reminder to everyone who pays estimated taxes: the final payment for 2008 must be postmarked by Thursday, January 15th.  You can skip this payment if your 2008 tax return is filed by February 2, 2009, and you pay the entire balance due with your return.  For more information on estimated taxes, see 2008 IRS Estimated Taxes: Why, When, and How to Pay.