Stimulus Straight Talk

This month Kim focuses on the economic stimulus package, refinance deals and banks.

By Kimberly Lankford, Contributing Editor

From Kiplinger's Personal Finance magazine, June 2009

Can you tell me when the stimulus checks for 2009 will be mailed out? I've heard that this money has to be paid back when I file my tax return next year. Is that true? -- K.C., Albuquerque

A lot of people share those -- and other -- misconceptions about the stimulus law. For example, instead of getting the extra money in a check from the U.S. Treasury, you'll see an adjustment to tax withholding in your paycheck, worth about $45 extra per month for the rest of this year ($65 for married workers). If you're self-employed, you can adjust your quarterly tax payments to benefit from the tax credit. Recipients of Social Security, Railroad Retirement and Veterans Administration benefits will receive a one-time payment of $250, either electronically or by check, depending on how they receive those benefits.

And most people won't have to pay back the money next year. The stimulus rebate is actually a tax credit of 6.2% of taxable wages in 2009 and 2010, to a maximum each year of $400 for single taxpayers and $800 for married couples filing jointly. The credit is refundable, which means that you can still receive the full credit even if it is worth more than your total tax liability. But not everyone qualifies for the credit. It begins to phase out for single filers who have modified adjusted gross income of $75,000 and disappears entirely at $95,000 (for married couples filing jointly, it begins to phase out at $150,000 and disappears at $190,000).

People are also confused about whether the first-time home-buyer credit needs to be repaid. If you bought a first home between April 9 and December 31, 2008, you are eligible for a tax credit of 10% of the home's purchase price, up to $7,500. That credit must be repaid over 15 years, starting two years after you claim the credit. But the stimulus included a better deal for people who buy their first home (and go to settlement) between January 1 and November 30, 2009. They can receive a credit for 10% of the home's purchase price, up to $8,000, and that credit does not have to be repaid as long as they own the home for at least three years.

You can claim the credit for the 2009 home purchase on your 2008 taxes. If you've already filed your return, you can use Form 1040X to amend it. Be sure to submit the revised Form 5405 to claim the credit.

Bank investing checkup. I own shares of several major banks. Even though they've rebounded a bit lately, the stock prices have taken quite a beating over the past year or so. How can I tell whether these banks are in trouble with regulators? -- N.W., via e-mail

Banking regulation is handled by a patchwork of agencies. That can make tracking down particulars on a given institution cumbersome. For any of the banks you've invested in, first figure out what type of bank it is and which federal agency regulates it. The Office of the Comptroller of the Currency (OCC) charters and regulates national banks, which may include the word "National" or the initials "N.A." in their name. The Office of Thrift Supervision charters and regulates thrifts, which may include the word "savings" or the initials "F.S.B." in their name. Banks organized under state laws are chartered by their state's bank commissioner but are regulated at the federal level by either the Federal Reserve or the Federal Deposit Insurance Corp. (FDIC).

The Office of Thrift Supervision's enforcement page links to the sister pages of the other regulators' sites, where you can search for enforcement actions taken against a specific institution. The FDIC maintains a watch list of troubled institutions, which was 252 long at the end of 2008, but it doesn't release the names of institutions on the list. (The Obama administration says it plans to disclose details about the financial health of the 19 largest U.S. banks.) You can find an unofficial approximation of the list at the blog Bankimplode.com.

Help for refinancers. I'd like to refinance my mortgage, but I don't have 20% equity in my home. Can I benefit from the Obama administration's refinancing plan? -- D.L., via e-mail

There's a good chance you could. This special program can help you refinance into a cheaper loan, even if you owe a little more on your mortgage than your home is worth. To qualify, your loan must be owned or guaranteed by Fannie Mae or Freddie Mac, and you must not have missed any loan payments for the past 12 months. The deadline for refinancing under this program is June 2010.

It isn't always obvious whether Fannie or Freddie owns your mortgage because you may send your monthly payments to a mortgage serv-icer. Ask the servicer if Fannie or Freddie owns your loan, or you can look up your loan in the Freddie and Fannie databases.

The Web site also has a great tool for determining whether you qualify for either the refinancing program or the administration's loan-modification program.

My thanks to elizabeth ody for her help this month.

Got a question? Ask Kim. Kimberly Lankford is the author of Ask Kim for Money Smart Solutions (Kaplan, $18.95).

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