By Bonnie Lee
If you find yourself among the 9% who are unemployed, you probably have more important things on your mind than the tax consequences or tax breaks that may help or hinder your financial welfare. But there are some key things unemployed taxpayers need to know when looking ahead to filing your 2011 tax return next April 15.

Severance packages, accumulated sick leave, vacation and holiday pay are all taxable income. When you are terminated from your job, you may receive this additional pay and be surprised, like a friend of mine recently was, to find that it’s taxable. These amounts will have taxes deducted and will be declared on your W2.

Unemployment benefits are taxable income. I call this the “kick-you-while-you’re-down” legislation. Be ready to pay taxes on your unemployment checks.

You can ask the government to withhold 10% of the payments in order to prepay the resulting tax liability. Simply complete IRS Form W-4V and submit it to your state unemployment department, it will provide form 1099-G by Jan. 31 to show how much you received in benefits. The IRS will be looking for this number on your tax return.

Withdrawals from retirement plans and IRAs are generally taxable, and if you’re under age 59 ½ you may be subject to a 10% early-withdrawal penalty (your state may assess a penalty as well). There are some exceptions to this penalty, check out Publication 575 available at www.irs.gov.

If you roll over your retirement fund or pull money out for 60 days then redeposit the entire amount into a qualified retirement plan, you can escape the penalty.

Loans and gifts from family and friends are not taxable income. Bank loans or credit card cash advances are also not subject to tax. Money received from credit card company insurance carriers to cover your monthly payments while unemployed is not taxable income. Public assistance, welfare and food stamps, are not taxable income either.

Debt forgiveness may be subject to income tax. Because you are unemployed, you may not have the ability to repay existing debt. If a creditor writes off the balance owing or reduces your balance by forgiving some of the debt, you are liable for income taxes on the amounts forgiven. You will receive a Form 1099 by Jan. 31 indicating the amount that is taxable.

However, if you file bankruptcy none of the forgiven debt is taxable income. If you are insolvent, you may escape a tax liability to the extent of insolvency. To determine this, add up the value of all of your assets on the eve of the debt forgiveness. Then add up the value of all of your debt. Subtract the debt from the assets. If the result is a negative number, then you are insolvent to that extent.

For example, your assets total $100,000 and your debt is $120,000 resulting in insolvency of $20,000. The credit card company forgives a balance of $30,000. You would have to pay taxes on $10,000: the difference between your insolvency and the balance owing.

Tax Benefits. You may find additional tax benefits because you are unemployed. First of all, your decrease in income will likely throw you into a lower tax bracket. Because of this, you may enjoy a refund. If your earned income is low enough, you may qualify for the Earned Income Tax Credit (EITC), and the additional Child Tax Credit, which will result in an even bigger refund.

Also, do not forget to track job search expenses as they are deductible. If you go back to school, you may qualify for the American Opportunity Credit or an education deduction for college tuition, books, fees, and computer equipment.

And, if you are lucky enough to snag a new job and the job requires a move, you may be able to deduct moving expenses. Check out IRS Publication 521 to determine if you meet the time and distance requirements and to find out which expenses are deductible.

But don’t get excited thinking you can file your 2011 income tax return before the year is over to enjoy the refund. Not possible. First of all the forms aren’t even out yet, and secondly, the IRS wants you to wait. Who knows? You might land the job of your dreams and be getting another W2 or you may win the lotto.

If you have a tax liability from prior years and are on an installment plan, you will likely be able to put off repayment because you are unemployed. Call the IRS and let them know your situation. They can deem you “uncollectible,” giving you a year to pull it together before they begin collection efforts again. If another year passes and you are still unemployed, it will renew the “uncollectible” status. Penalties and interest will continue to accrue, but you will be relieved of the debt.

By DAVID REILLY

It’s a case of when, not if. At least, that is the market’s thinking on the Federal Reserve again buying more bonds to boost the economy.

But the unanswered question remains: Having failed so far to significantly reduce unemployment through previous extraordinary actions, can or should the Fed continue trying?

Certainly, revised economic projections released by the Fed following its two-day meeting, as well as comments from Chairman Ben Bernanke, seemed to lay the groundwork for further easing. The Fed now expects unemployment to be between 7.8% and 8.2% in 2013, compared with a forecast in June of 7% to 7.5%. It also released 2014 projections, which showed joblessness at 6.8% to 7.7%. Meanwhile, economic growth in 2012 is likely to come in between 2.5% to 2.9%, a far cry from the 3.3% to 3.7% expected in June.

So while inflation looks to be under control, things are “very unsatisfactory in terms of the rate of growth and unemployment,” Mr. Bernanke said. He also said that given that the moribund housing sector is “a big reason the economy is not recovering more quickly,” purchases of mortgage securities are a viable option for the Fed.

This prompted many to ask why the Fed didn’t just pull the trigger now. Indeed, Wednesday’s Fed statement saw one dove, Chicago Fed President Charles Evans, dissent over a lack of such action.

But there were good reasons for the Fed to hold its fire. The economy is growing, albeit not at a rate the Fed would like, and deflation isn’t an imminent risk. As recently as August, the Fed took the unprecedented move of saying it would keep short-term interest rates zero-bound until mid-2013; in September it moved to bring down long-term rates by shifting its holdings of Treasurys to longer-dated securities. So it was time for a pause, to see what impact those unconventional moves have.

The Fed may have also wanted to keep its powder dry as it waits to see how Europe’s sovereign-debt crisis plays out. And as it watches the possibility that deficit battles in the U.S. could lead to spending cuts that act as economic drags.

A bigger reason for hesitancy may be that the Fed is uncertain as to how much extreme monetary policy can directly influence unemployment. True, the Fed’s prior actions appear to have staved off the threat of deflation and helped arrest the collapse of the housing market.

But even as the Fed has expanded its balance sheet to about $2.8 trillion through purchases of mortgage bonds and Treasurys, unemployment has remained stuck above 9%. And while the Fed has helped through its latest actions to bring mortgage rates down to about 4%, this isn’t yet proving a tonic for housing.

So for now, wait-and-see is warranted. Though the Fed’s trigger finger will remain itchy, especially if stock markets again swoon.

‘Atlas Shrugged’ finally comes to the screen, albeit in chunks
A capitalist taken with Ayn Rand’s 1957 novel spends almost 20 years and $20 million of his own money to get the first third of it filmed.

By Rebecca Keegan, Los Angeles Times
April 10, 2011

It has taken businessman John Aglialoro nearly 20 years to realize his ambition of making a movie out of “Atlas Shrugged,” the 1957 novel by Ayn Rand that has sold more than 7 million copies and has as passionate a following among many political conservatives and libertarians as “Twilight” has among teen girls.

But the version of the book coming to theaters Friday is decidedly independent, low-cost and even makeshift. Shot for a modest $10 million by a first-time director with a cast of little-known actors, “Atlas Shrugged: Part I,” the first in an expected trilogy, will play on about 300 screens in 80 markets. It’s being marketed with the help of conservative media and “tea party” organizing groups and put into theaters by a small, Salt Lake City-based booking service.

The fact that one of the 20th century’s most influential books is coming to movie screens in such a fashion is — depending on whom you ask — a reflection of liberal Hollywood’s aversion to Rand’s ideas, a symptom of Aglialoro’s rigid adherence to them, or a testament to the challenges inherent in adapting the complex tome.

Aglialoro ultimately made a movie that hews more to Rand’s ideology than the conventions of cinematic storytelling, at the risk that far fewer people will see it. Taking a page from the independent blockbuster “The Passion of the Christ,” however, he is paying for his own theater bookings and marketing his film to an audience Hollywood often overlooks.

The novel takes place in an unspecified future in which the U.S. is mired in a deep depression. Heroine Dagny Taggart is trying to save her railroad company from collapse amid increasing government control and a mysterious phenomenon causing the nation’s leading industrialists to disappear. “Atlas Shrugged” lays out Rand’s passionate defenses of capitalism and individualism, and has been a source of inspiration to figures as varied as Alan Greenspan and Angelina Jolie.

The 97-minute film is a faithful adaptation of the first third of the book, with some adjustments made for modern audiences: It takes place in the year 2016, when gasoline costs $37.50 a gallon, train travel predominates and clothes, cellphones and offices look pretty much as they do on a “Law & Order” rerun. Dagny, played by Taylor Schilling of the now-canceled television show “Mercy,” is still trying to hold Taggart Transcontinental together. She’s building a train line with a new metal alloy made by the man who is also her love interest, steel magnate Hank Rearden (former “True Blood” werewolf Grant Bowler). Much of the film’s dialogue comes straight from Rand’s often didactic prose and, perhaps as a result of the quick and thrifty adaptation, some dramatic action scenes are left out and key props, like a supposedly groundbreaking motor, look more jury-rigged than cutting-edge.

The graphic sex scenes of the novel are considerably toned down, earning the film a PG-13 rating and making Rand’s story somewhat more palatable to the Christian family audiences who are among those the filmmakers hope to court. “Atlas Shrugged” has long been a sacred text among many conservatives and libertarians, but as an atheist who had an open marriage and wrote unapologetically sexual characters, Rand doesn’t fit neatly into any Christian values-based marketing plan.

In February, the producers began to share the film with people likely to be in accord with the author’s views. They showed footage at the Conservative Political Action Conference in Washington, unveiling a trailer that has since been downloaded more than a million times on YouTube, and screened the final cut for influential conservatives like House Speaker John Boehner (R-Ohio) and commentator Andrew Breitbart. They enlisted Freedomworks, the political organizing group behind many tea party events, to help promote it, and started advertising with posters that said “Who Is John Galt?,” the first line of the book and a meaningful catchphrase for Rand’s acolytes.

Part of the marketing for “Atlas Shrugged: Part I” relies on the movie’s status as a product, as Fox News host Sean Hannity has described it, that “liberal Hollywood doesn’t want you to see.”

The real story of what kept “Atlas” out of movie theaters for so long is a bit more complicated.

During Rand’s lifetime, the author stymied “The Godfather” producer Al Ruddy’s attempts to make a movie of “Atlas Shrugged” by demanding veto power over every frame. Rand, who was also a screenwriter, had adapted her 1947 novel “The Fountainhead” herself for a 1949 movie starring Gary Cooper, and was irked by a single line cut from the final film. A book like “Atlas Shrugged,” at more than 1,000 pages, dense with philosophical ideas and containing a character’s speech that covers 57 pages, would require major changes in its adaptation for screen.

“I said, ‘Look, Ayn, the language of film is different,’” Ruddy recalled. “John Galt says goodbye to America for 60 … pages. In a book it can be charming, but in film you look foolish.”

After the Ruddy deal and another for an NBC miniseries fell apart, Rand worked on her own screenplay for “Atlas Shrugged” right up until her death in 1982. Her fantasy casting for the leads were Farrah Fawcett and Clint Eastwood. “She loved ‘Charlie’s Angels,’” said Anne C. Heller, author of “Ayn Rand and the World She Made.” “They were like Dagny with guns.”

In 1992, the heir to Rand’s estate sold a 15-year option on the book’s rights to Aglialoro for $1 million. “This is the greatest epic that’s never been made into a movie,” said Aglialoro, who is now chief executive of the exercise equipment manufacturer Cybex. “I was like, ‘I don’t need a 15-year lease. This is done in 18 months.’”

The businessman, now 67, had first read “Atlas Shrugged” while working as a stock and bond trader on Wall Street in the early 1970s. “It was a stunning realization,” Aglialoro said. “It gave a political poetry to capitalism — capitalism as the only moral way people should live in this world.” Aglialoro would fashion himself into a kind of Randian hero, owning and operating more than 30 companies and winning a U.S. poker championship.

Over the next 18 years (he bought extensions on his option), Aglialoro developed several ill-fated scripts. One attempt to get the book greenlighted as a miniseries at TNT got caught in post-9/11 concerns about the novel’s apocalyptic setting, according to Ruddy, who worked on it. A feature screenplay, by “Braveheart” writer and “Secretariat” director Randall Wallace, was set up at Lionsgate in 2007 with Angelina Jolie attached to play Dagny. According to a source close to Lionsgate, the project fell apart when Aglialoro’s commitment to the book’s philosophical messages clashed with the studio’s aims to make the story more cinematic. According to Aglialoro, the multiple parties couldn’t agree on a director.

“There are two big factors that I sense have frightened filmmakers about ‘Atlas Shrugged,’” Wallace said. “One is the reverence with which Rand’s followers hold the novel and the other is the sprawling nature of the story. I believed to climb that mountain I’d have to shrug off both those fears.”

Meanwhile, Rand was gaining a new currency with readers. After several years of selling about 75,000 copies a year, sales of “Atlas Shrugged” spiked during the recent recession, reaching 500,000 in 2009, according to the Ayn Rand Institute, a nonprofit think tank in Irvine.

By March of 2010, Aglialoro had three months to get a film into production or the book’s rights would revert to Rand’s estate. “It was my wife who said you better get the hell out there and do it,” he said.

By necessity, the picture came together hastily, with Aglialoro bringing on Harmon Kaslow, a producer of low-budget horror and action films, to produce, and hiring Brian Patrick O’Toole, a writer with some horror credits, to work on the script (in a practice unusual for a producer, Aglialoro also took a screenplay credit on the film). Just 11 days before the start of production, after a six-hour meeting at Shutters on the Beach in Santa Monica, Aglialoro hired his director, Paul Johansson, who is best known for acting on television’s “One Tree Hill.”

Johansson, who had directed some episodes of “One Tree Hill” but never a theatrically released film, earned the job based on his enthusiasm for Rand. “I was really nervous,” he said. “I had no cast. No time to address anything in the script. I woke up in the morning and said, ‘This is going to be the hardest thing I’ll ever do. It could possibly ruin my career. But I have to attempt this.’”

The filmmakers cast the lead role of Dagny just two days before they called “action,” and shot the film over a few weeks in the summer of 2010, mostly in and around L.A. at sites like Union Station and the Biltmore Hotel.

“I just wish we had more time to find the interesting nuances,” Johansson said. “[Aglialoro's idea] of what movie we were making and mine at times were different. Had I been asked to direct a film that was a piece of Republican catechism I would have said no. I’m not in the business of doing political films. I’m in the business of doing good films.”

Aglialoro intends to open “Atlas Shrugged: Part I” on Friday, normally tax day, with the help of Rocky Mountain Pictures, a Utah film booking service that handled the anti-evolution documentary “Expelled” and the animated religious film “The Lion of Judah.”

His unorthodox distribution and marketing plans may actually work, according to one expert.

“There may be some advantages to these folks being outsiders to Hollywood,” said distribution strategist Peter Broderick. “This guy wants to make sure that the message of the movie doesn’t get watered down. He can control the marketing, how much is spent. If you can get enough people out from those core audiences the first weekend, it can build.”

Employing a strategy similar to the one used on the breakout low-budget horror hit “Paranormal Activity,” the producers have asked fans to “Demand Atlas” in their city by filling out a form on the film’s website. So far the most eager city is Atlanta, with more than 3,200 requests.

O’Toole is currently working on scripts for the second movie, and — if the first does as well as its makers expect — production could start by mid-September, Kaslow said.

After years of developing scripts and paying for the production, distribution and marketing of this first film, Aglialoro estimated he will have spent more than $20 million on “Atlas Shrugged” by the time it opens. Ironically, given Rand’s theories of self-interest, what Aglialoro said he really hopes the movie will do is help other people.

“I hope that by seeing the movie people will win their own competitions,” Aglialoro said. “Get the best from within you, and that’s how you’ll make contributions.”

rebecca.keegan@latimes.com

Times staff writer Ben Fritz contributed to this report.

I just got a job. Should I be saving or investing?

By Walter Updegrave, senior editor

(MONEY Magazine) — Where should someone just starting out in his career look to invest for his future? — Douglas S., Jersey Shore, New Jersey

I think it’s great that you want to invest for your future. And I’m certainly happy to get you started the right way on that front.

That’s not to say that investing, and doing it well, isn’t important. It is. You certainly don’t want to fritter away your money in lousy investments.

But when it comes to creating wealth and financial security over 30 or 40 years of your working life, I’d argue that you’re better off first turning your attention to saving as much as you can on a regular basis so that you have money to invest, and nurturing your career so you have more income from which to draw savings.

I know this may sound like heresy, especially coming from a personal finance columnist, but bear with me as I explain.

You don’t say how old you are, but just for purposes of an example, let’s assume that you’re 25, that you earn $40,000 a year and that over the course of your career you’ll average salary increases of 2% a year.

If you save 5% of your salary year in and year out over the next 40 years, you would have just under $527,000 by age 65, assuming a 7% annual return. (For simplicity’s sake, I’m ignoring taxes.)

There are several ways to increase that sum. But for whatever reason, the strategy that seems to pop into most people’s minds first goes something like, “Gee, I’ll end up with a lot more if I just find investments that earn 8% instead of 7%.”

And that’s true. A higher return will lead to more wealth. If you pump up your investment return to 8%, at age 65 you’ll have a portfolio worth roughly $674,000.

Problem is, squeezing an extra percentage point (or more) of gain out of your investment portfolio year in and year is a lot harder than most people think. In fact, I don’t think it’s something a reasonable person should count on.

Sure, it’s possible to bulk up your investment return if you’re starting from a truly subpar portfolio — say, one that consists solely of money-market funds or other very low-risk investments that don’t have much in the way of long-term growth potential.

But once you’ve put together a diversified mix of stocks and bonds that’s appropriate for someone of your age and risk tolerance, your chances of significantly boosting your return fall dramatically.

Essentially, your results are going to be determined pretty much by whatever return the financial markets deliver. Of course, that market return can vary substantially over different periods of time, depending on the level of interest rates and how the stock market fares.

According to Ibbotson, for example, in the 65 overlapping 20-year periods from 1926 to the beginning of 2010, a portfolio of 50% stocks and 50% bonds gained as much as an annualized 14.8% (1979-1998) and as little as 4.6% (1929-1948).

But, whatever the market return is for a particular mix of assets, it’s extremely difficult for you to beat it without taking on extra risk. So the point is that once you have a reasonable portfolio, you have very little control over the returns you’ll earn.

If stocks are generating returns of, say, 6% a year and bonds are returning 3%, it’s not as if you can just ratchet up your returns by picking stocks that will earn 7% and bonds that will earn 4%. If you do that, you’ll have to buy riskier stocks and bonds, which means you may get higher returns, or you might end up with even lower returns or outright losses.

All of which is to say that I think anyone who believes he can substantially increase his wealth over the course of a career by superior stock picking, timing moves in and out of different investment sectors and such is fooling himself. Your real goal as an investor should be to get as much of whatever return the financial markets generate.

So if you can’t rely primarily on investing, how can you create more wealth and financial security over the course of your working years? Well, I’d focus first on saving.

Remember that near $527,000 you would have by saving 5% of salary and earning a 7% annual investment return? Well, if you up your savings rate from 5% to 8%, you’ll end up with just under $843,000 by age 65. And if you can boost the amount you save to 10% of salary, you would have just over $1 million.

But there’s another lever you may also be able to use: your earning power. The more you earn during your working years, the more wealth you can build, assuming you continue to save diligently.

So, for example, if by working hard and deftly managing your career, you’re able to average pay increases of 2.5% a year instead of 2%, by age 65 you would have a bit over $900,000 socked away, assuming an 8% savings rate, and upwards of $1.1 million if you save at a 10% rate.

Admittedly, neither your ability to save nor the amount you earn is completely within your control. But I think most of us have much more influence over how much we save than on the size of returns we earn on our investments.

And while you certainly can’t just choose the salary you want — if that were the case, I’d double mine, pronto — there are steps you can take to increase your chances of boosting your income, such as getting more education or acquiring skills to enhance your career prospects, keeping abreast of the best opportunities available in the job market and establishing a reputation for hard work and productivity so prospective employers will consider you a top candidate for any openings.

But as I noted earlier, investing is also important, so I want to weigh in on that too. But here, I think the key isn’t to try to beat the market or engage in razzle-dazzle investment strategies that putatively lead to outsize returns.

Rather, the single most effective thing you can do is to set an investment strategy that allows you to get the most out of whatever opportunities for gains the economy and financial markets provide, without taking on more risk than you can stomach.

The first step toward doing that is coming up with the right asset allocation, or appropriate blend of stocks and bonds. For a youngster like yourself with many, many years of investing ahead of you, that mix will likely lean very heavily toward stocks, since over long periods of time they tend to provide the highest return.

Next, you want to choose investments with low costs so that you’re getting as much of the market return as possible. The simplest way to do that is to invest in broad index funds or ETFs. For example, if you invest in a total U.S. stock market index fund or ETF, you get the entire U.S. stock market in one fund.

And you can get such an investment at an annual cost of as little as 0.07% of assets, or just $7 for a $10,000 investment. (For more on the benefits of indexing, low costs and keeping it simple when investing, I suggest you read my recent interview of Jack Bogle, the man who popularized index investing.)

You can find all the stock and bond index funds you need to create a simple but effective portfolio on our MONEY 70 list of recommended funds. Finally, once you’ve created an appropriate portfolio and stocked it with low-cost funds, don’t undermine yourself by constantly trading and moving your money around.

Aside from occasionally rebalancing your portfolio, you should pretty much stick with whatever mix of stocks and bonds you’ve decided is right for your situation.

The bottom line, though, is that if you really want to be serious about creating a secure financial future, do all you can to earn to your full potential and regularly put away a substantial portion of your salary. Because if you don’t do that, even the smartest investing moves in the world ultimately won’t be much help. 

WASHINGTON — Businesses stepped up hiring in December, adding a net total of 103,000 jobs during the month and offering a little hope for a sustained improvement in the struggling U.S. jobs market.

The Labor Department said government jobs fell by 10,000 in December, but private employers — the backbone of the economy — boosted hiring, adding 113,000 jobs after a gain of 50,000 jobs in November.

The December job gains were enough to drive down the unemployment rate to 9.4 percent from 9.8 percent the previous month, marking the largest one-month decline in the nation’s unemployment rate since April 1998. December’s jobless rate was the lowest since May 2009.

Another key reason for the drop in the December unemployment rate was that the government no longer counts people as unemployed when they stop looking for work.

The decline in the jobless rate will have an important psychological effect, noted Torsten Slok, an economist at Deutsche Bank.

“The Fed has been worried about the unemployment rate, so the further it gets away from 10 percent, I think that’s good news,” Slok told CNBC Friday.

December’s overall payroll gain was smaller than the 145,000 that economists predicted. Still, more people were hired in previous months than the government first estimated.

The government’s revisions showed the economy added 210,000 jobs in October, above the previous figure of 172,000. November’s total was revised to 71,000, up from 39,000.

Over the past three months, the economy has added an average of 128,000 jobs. That’s just enough to keep up with the population growth. Nearly double is generally needed to significantly reduce the unemployment rate.

Some economists had predicted a far more optimistic reading on the job market Friday after a private payroll firm estimated earlier this week that companies added nearly 300,000 jobs in December.

Also encouraging was a report Thursday that fewer people applied for unemployment benefits over the past month than in any four-week period in more than two years.

A decline in layoffs has consumers feeling better about the economy and spending more freely. This past holiday shopping season was the best in four years.

And a payroll tax cut that goes into effect this month will give Americans even more money in the new year. Economists expect that will boost economic growth and give businesses more confidence to hire.

“Consumers are no longer as concerned about their job security, and that’s giving them a little more confidence to go out and spend,” said Ryan Sweet, an economist at Moody’s Analytics.

The economy needs to generate about 125,000 jobs a month just to keep up with population growth and prevent the unemployment rate from rising. More than double that amount is needed to reduce the rate.

Last year, the nation added an average of 86,500 jobs a month through November. The unemployment rate, meanwhile, actually rose — from 9.7 percent in January to 9.8 percent in November.

But many economists expect hiring to ramp up in 2011. Goldman Sachs projects that employers will add 2.2 million jobs this year, or about 180,000 a month, double last year’s amount. Moody’s Analytics puts the figure at about 250,000 per month.

Still, the recession left a deep hole in the job market. More than 7.3 million jobs were eliminated during the downturn. Most economists expect the unemployment rate will still be near 9 percent by the end of 2011.

Fewer people said they were out of work last month. The number of unemployed fell by more than 500,000 to just under 14.5 million, the lowest since April 2009.

The unemployment rate has topped 9 percent for 20 months, the longest such streak on record. And even with last year’s job gains, the unemployment rate fell only from 9.7 percent to 9.4 percent.

Through all of 2010, the nation added 1.1 million jobs, or an average of 94,000 jobs a month.

The health care and leisure and hospitality sectors showed the strongest job gains last month. Health care added about 36,000 jobs, while restaurants and hotels hired more than 29,000 new workers.

Retailers added 12,000 net new jobs, and manufacturers 10,000. The bleeding continued in construction, which cut 16,000 jobs.

Including those who are working part-time but would prefer full-time work, and those who have given up looking for work, the underemployment rate was 16.7 percent last month. That’s down from 17 percent in November.