TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

Rep. McHugh (R-NY) introduced the Worker Savings Account Act of 2008 on August 1, 2008. H.R. 6799 would create Unemployment Savings Accounts. These accounts would be treated like IRAs for tax purposes. Workers could contribute to these accounts to protect them during periods of unemployment other than following termination for gross misconduct. Note if passed: This legislation would not lessen the requirement for employers to pay state or federal unemployment taxes, and would not reduce an individual’s unemployment benefits. Employees would be limited to annual contributions of $5,000 (indexed to inflation) and employers could provide matching contributions up to the full amount of the employee’s contribution. The employe could rollover WSA funds into an IRA or 401(k) plan. This Bill was referred to the House Committee on Ways and Means. Because this is an election year, the Bill will most likely die in the Ways and Means Committee.

Nearly 1 million individuals and businesses filed bankruptcy in the 12 months ended June 30, according to U.S. Court data released August 27, 2008. There were 967,831 bankruptcy cases filed since July 1, 2007, up 28.9 percent from the prior 12 months, when cases totaled 751,056. Non-business filings made up 96.5 percent of those cases, but on the business side a total of 33,822 cases were filed in the 12-month period, including 23,372 under Chapter 7.

The Case-Shiller Home Price Index came out today, and it showed that home prices fell 15.4% in the second quarter nationwide, and this just puts more pressure on anyone falling behind in mortgage payments. A homeowner that has a loan worth more than their mortgage often finds it easier to just walk away from a home rather than sell it, so until we can see some price stabilization, the glut of homes on the market is likely to grow. Keep in mind that a lot of the adjustable loans are still set to adjust, so again, the pressure on prices will likely continue. Note: Commercial Building prices seem much steadier. The problem I observe is not the Sales price being too low, but the Listing price of many properties being above market value.

Due to rising gas prices, the IRS announced the mileage rate will increase by eight cents to 58.5 cents a mile for all business miles driven from July 1 through Dec. 31, 2008. The new rate for computing deductible medical or moving expenses will also increase by eight cents to 27 cents a mile. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. Full Article .

Manufacturing and Construction down! The Institute for Supply Management's manufacturing index for May showed its fourth straight monthly decline,. The Commerce Department reported construction spending dipped in April, for the sixth time in seven months, due to a drop in home building.

IRS Drops Interest Rates The Internal Revenue Service announced June 2, 2008 that interest rates for the calendar quarter beginning July 1, 2008, will drop by one percentage point. The new rates will be: five (5) percent for overpayments [four (4) percent in the case of a corporation]; five (5) percent for underpayments ; seven (7) percent for large corporate underpayments ; and two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.

Remember all the experts reminding us the aggregate housing market had never declined since the Great Depression? That myth was shattered by today’s Case-Shiller 20-City Index showed a huge 14.4% decline in the March 2008 compared with March, 2007 prices. This is average of the 20 cities. Las Vegas was down nearly 26%. This was the biggest decline in the index has seen since it was started in 1988. Other areas not in the index, such as shore and vacation properties show an even bigger decline.