Financial Headline News for Friday 1/27

1) Phil's Financial Tip of the Day:
Now that tax time is coming-Check this out!

The $8,000 Tax Mistake-From Dave Ramsey.com

Lori Thompson thought she was doing the right thing when she went to a so-called pro to file her 2009 income taxes. Early on, however, she had a bad feeling that turned out to be right on target.

"I had just purchased my first home," Lori said. "When tax season came around, I knew I could no longer use the (1040)EZ form." She chose an agent who billed himself as an expert with 25 years of experience, specializing in first-time homeowner taxes—just what she was looking for. But as the agent began sorting through Lori's records, she had one of those unexplainable "bad feelings."

"I was told I could eliminate any worries if I purchased their IRS guaranteed protection package," Lori said. Many tax prep companies offer protection packages like the one Lori was offered. They guarantee the customer that the company will correct any mistakes an agent may make in calculating or filing the customer's income taxes. Since Lori was already feeling uneasy, she bought the extra protection, but the bad feeling wouldn't go away.

 

I Owe How Much?

When the process was complete, Lori's agent told her she owed $8,000 in taxes, plus nearly $300 for the tax preparation itself! "I was stunned and panicked at the same time," Lori said. "I asked, 'How can this be? If I just bought a house, shouldn't that make a difference? Don't I get the first-time homebuyer's credit?'"

But the agent told her she'd received all the deductions she was eligible for and asked if she was prepared to pay the entire amount. "At this point, I was being rushed along because the next client had already been waiting 20 minutes," she said.

As Lori became more anxious, the agent suggested she get a loan or ask family or friends to help her pay the bill. She paid the fee for the service, gave the agent permission to file her return electronically, and left to find a way to come up with the $8,000.

 

A Second Opinion Is A Good Thing

That evening, a friend suggested Lori get a second opinion and put her in touch with Evelyn Saunders, a CPA and one of Dave's Endorsed Local Providers (ELP) in the California area. Lori met with Evelyn the next day and got some great news. She did not owe $8,000—she was actually due a refund!

"She found that the other preparer at the chain tax prep service made numerous mistakes not only in how my return was calculated, but also in the lack of deductions I was eligible for, such as the first-time homebuyer credit I mentioned several times," Lori said.

Lori also simply felt better about the service she received from Evelyn. "I feel more secure because I believe she is truly working to do the best job possible for me, instead of feeling like I'm just the next person in line," Lori explained. "I can ask questions, and she will actually take the time to answer or explain without making me feel like I'm encroaching on the next person's time slot."

 

Tax Chain's Broken Promises

Using the documents Evelyn provided, Lori returned to the original agent to file an amended return.

The agent corrected the mistakes, but the company refused to refund her preparation fees or the cost of the guaranteed protection package.

Lori eventually chalked up the experience as an expensive lesson learned, and she now recommends avoiding big chain tax prep companies altogether. "Doing someone's taxes is a very personal thing and should be personalized," she said. "It cannot and should not be packaged in a one-size-fits-all format these large companies tend to use."

 

Find Your Tax Professional

Dave has a tax ELP in your area who will give you the same personalized, one-on-one service Lori received. Contact your ELP today!

 

Reclaim Your Cash Now!

Millions of people who take the standard deduction or don't use a true tax pro overpay the IRS. Are you one of them? Find out more.


2) In the Markets today:
Blue-chip stocks finished in the red, pushing the Dow to its first losing week this year, after a reading on domestic economic growth fell short of expectations.


Stocks end mixed after fourth-quarter GDP report-From USA Today


US stocks ended the day mostly lower Friday after the government reported the economy grew at a slower pace than economists had expected in the fourth quarter.

The Dow Jones industrial average fell 74 points, or 0.6 percent, to close at 12,660.46 The broader Standard & Poor's 500 index fell 2 points to end the day at 1,316.33. The Nasdaq composite index edged up 11 points to close at 2,816.55.

A slump in the Dow pushed the index down for the week, the first time that has happened in 2012. The index had risen three weeks in a row and is up 4% so far this year.

Nearly two stocks fell for every one that rose on the New York Stock Exchange. Volume was light at 3.9 billion shares.

The Commerce Department said the U.S. economy grew at a modest 2.8% in the final three months of last year. Economists had expected 3% growth.

While that is the fastest quarterly growth in 2011, full-year growth adjusted for inflation's impact was 1.7% compared to 3% in 2011. A recovery in the U.S. is vital for global growth at a time when Europe is facing another recession.

Among stocks making big moves, Chevron (CVX) ended the day down 2.5% after falling more 3%, the most of the 30 stocks in the Dow average, because the energy giant's fourth-quarter revenue and earnings per share came in well below what analysts were expecting. Oil and natural gas production declined in the quarter.

Ford Motor (F) fell 4.2% after reporting disappointing fourth-quarter earnings due to weak sales in Europe. The company said results were also hurt by trouble at parts suppliers in Thailand due to flooding there.

Starbucks (SBUX) fell 1% after reporting late Thursday that full-year results were likely to come in below expectations. Procter & Gamble (PG), which makes Tide, Crest and other consumer products, fell about 0.75% after cutting its earnings outlook.

European markets were muted after the latest economic data from Spain, which already has the highest unemployment rate among the 17 nations that use the euro. Spain has more than 5 million people without jobs, and its National Statistics Institute said the jobless rate shot up from 21.5% to 22.8% in the fourth quarter.

Britain's FTSE 100 slipped 1% to 5,736.13 while Germany's DAX dropped 0.4% to 6,516.90 and France's CAC-40 lost 1.1% to 3,324.88. The euro was up 0.2% at $1.31137.

High unemployment and budget cuts across the eurozone are forecast to weigh on even traditionally stronger economies like Germany.

Attention was also focused on the resumption of talks to reach a deal on how Greece can avoid a catastrophic default on its debt. Greece and its bailout rescuers — other countries that use the euro and the International Monetary Fund— are asking private creditors to swap their Greek bonds for new ones with a lower value and interest rate.

The two sides have so far disagreed over what interest rate the new bonds should take. Some negotiators have said they hope to have a deal this weekend, in time for a European leaders' meeting on Monday.

While investors appear to expect a deal at some point — the euro was up and eurozone borrowing rates were down, suggesting a steady increase in confidence — some were still focusing on the fact that the crisis is far from over.

Portugal's markets have worsened in recent days on fears that its austerity efforts will not be enough to achieve its deficit-reduction targets and that it may end up like Greece, needing a second bailout effort and possibly a debt writedown.

Getting economies like Portugal to grow is fast becoming a priority and is expected to be one of the main topics of discussion at the European leaders' summit in Brussels on Monday.

Earlier in the day, Asian markets showed little momentum ahead of the weekend.

Japan's Nikkei 225 index fell 0.1% to close at 8,841.22 while South Korea's Kospi rose 0.3% to 1,957.18. Hong Kong's Hang Seng rose 0.3% to 20,501.67 and Australia's S&P/ASX 200 gained 0.4% to 4,288.40.

Japanese exporters continued to be hit by a strong yen, which reduces the value of profits from exports. The dollar fell to 76.95 yen from 77.49 yen.

Nintendo, the Japanese gaming giant behind the Super Mario and Pokemon games, plummeted 4.1%, a day after it lowered its annual earnings forecast to a 65 billion yen ($844 million) loss. The company blamed the strong yen for much of the loss.

Japanese electronics company NEC plummeted 7.1% after announcing Thursday that it was slashing 10,000 jobs worldwide and would slide into the red for the full year.

Benchmark oil for March delivery was up 39 cents at $100.09 per barrel in
electronic trading on the NY Mercantile Exchange.

The contract rose 30 cents to finish at $99.70 per barrel on the Nymex on Thursday.

3) Top financial story of the day:
That's the final, pathetic growth number for 2011.

2011 GDP: 1.7%-From The Business Insider

From the just-released GDP report:

Real GDP increased 1.7 percent in 2011 (that is, from the 2010 annual level to the 2011 annual level), compared with an increase of 3.0 percent in 2010.

The increase in real GDP in 2011 primarily reflected positive contributions from personal consumption expenditures (PCE), exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending, private inventory investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

Not exactly a barnburner.

4) Quote of the Day from Dave Ramsey.com:
There is no real excellence in all this world which can be separated from right living. — David Starr Jordan