Other Executive Nominations that had Tax Problems

Over the past month, there has been a lot of controversy surrounding the tax problems of Obama’s executive nominations—and their inevitable withdrawals. In the discussions online, many have questioned Obama’s choices, and potential decision-making skills. However, if you look at the history of executive nominations, you will see that Barack Obama was not the first to President to choose candidates with tax problems for his cabinet.

1. Zoe Baird

Former President Bill Clinton's first nominee for Attorney General withdrew her name for the position after it came in to the light that she had been evading taxes. She had been employing a Peruvian couple, who were illegal immigrants, to clean her house and provide nanny services. However, Baird was not paying the required social security and employment taxes for the couple, and broke federal law by hiring undocumented workers.

2. Kimba Wood

A mere two weeks after Baird withdrew her name for the nomination, her new replacement (Kimba Wood) withdrew her name as well. Wood had similar problems surrounding taxes and undocumented workers, and the term "nanny gate" began to spread. As it turned out many high-ranking officials had been taking advantage of illegal immigrants for domestic services for several years.

3. Linda Chavez

President Bush's 2001 pick for labor secretary was forced to withdraw due to tax evasion and an illegal worker in her home as well. Chavez had been employing a Guatemalan woman for two years and had paid only paid her a total of around $1,500. In addition to breaking tax laws, Chavez had also broken numerous employment and immigration laws.

4. Bernard Kerik

As a highly respected former police commissioner, Bernard Kerik was chosen as Bush’s 2004 nominee for homeland security secretary. Unfortunately, Kerik had gone years without paying the proper employment and social security taxes on his nanny and housekeeper.

5. Shirley Chater

Ironically chosen as Clinton’s nominee as head of the Social Security Administration, Chater had failed to pay social security taxes on a part-time babysitter for a decade or so before her nomination. However, before her nomination, Chater paid the back taxes, and saved herself from having to withdrawal.

6. Charles Ruff

Ruff did not make it long as Clinton’s nominee for deputy attorney general, as it quickly was discovered that he had failed to pay social security taxes on a woman he employed to clean his house for eight consecutive years.

7. Stephen Breyer

Nominated for the Supreme Court in 1994, Breyer took the smart route and came clean about his tax evasion in order to avoid being dropped for consideration. Like Chater, he had failed to pay social security taxes on a woman performing domestic services for him, but paid the back taxes prior to his nomination.

8. Bobby Ray Inman

Clinton’s 1994 nominee for defense secretary, Bobby Inman, had no choice but to withdraw as he too had failed to pay social security taxes on a housekeeper.

9. Ron Brown

Clinton’s commerce secretary was also under the media light for failing to pay social security taxes. Like many before him, Brown was under the impression that he did not have to pay taxes on employees that only worked so few hours.

10. Michael Carns

Last on my list is Michael Carns who was a former Air Force general chosen by Clinton in 1995 to head the central intelligence agency. Unfortunately, he too had evaded social security taxes on a household employee, and even had a pending lawsuit failure to pay a former employee.

Obama Previews His Budget, Talks About Taxes

From CBSnews.com:

President Obama will release his first full budget on Thursday, but he previewed parts of it during his speech tonight to Congress.

One of the main headlines from this section of the speech is his call to change the way the budget deficit is counted.

"I am committed to restoring a sense of honesty and accountability to our budget," he said. "That is why this budget looks ahead ten years and accounts for spending that was left out under the old rules – and for the first time, that includes the full cost of fighting in Iraq and Afghanistan. For seven years, we have been a nation at war. No longer will we hide its price."

He also said his team is going to "go line by line through the federal budget in order to eliminate wasteful and ineffective programs." He said the administration has found "two trillion dollars in savings over the next decade."

Lastly, in this section of the speech, Mr. Obama addressed taxes and his campaign promised most often mentioned by Republicans – to raise taxes on the wealthy.

"Let me perfectly clear, because I know you’ll hear the same old claims that rolling back these tax breaks means a massive tax increase on the American people: if your family earns less than $250,000 a year, you will not see your taxes increased a single dime," Mr. Obama said. "I repeat: not one single dime. In fact, the recovery plan provides a tax cut – that’s right, a tax cut – for 95% of working families. And these checks are on the way."

IRS Outlines Tax Savings

The IRS Spokeswoman, Sue Hales, recently explained the some new tax credits in an article on the Daily Journal. You can find a clip of the article below, but the full post can be found here.

Housing Credits

The America Recovery and Reinvestment Act, which Obama recently signed into law, will affect 2009 tax returns more than 2008, Hales said, but it does include a new deduction for first-time homebuyers that can be applied this tax season. Additional real estate tax deductions of up to $500 for singles and $1,000 for married couples are available for those who file standard deductions.

Disaster Relief Credits

Net losses suffered in federally declared disasters can be deducted on tax filings.

Additional relief is being offered for victims of federally declared disasters in the Midwest that occurred between May 20 and July 31, 2008.

Qualified disaster victims can deduct casualty and theft losses without subtracting $100 plus 10 percent of adjusted gross income from that amount.

Income Tax Credit

Earned income tax credit, a refundable credit for eligible low- to moderate-income individuals, has increased to $4,824 for families with two or more children; $2,917 for families with one child; and $438 for individuals between 25 and 64 years old who have no children. If the income tax credit amount exceeds taxes owed, the difference will be refunded to the taxpayer.

Free tax filing through the IRS is available for those with a 2008 adjusted gross income of $56,000 or less. The program, available through the IRS Web site, has 20 participating tax companies, and three offer service in Spanish.

"We encourage people to e-file. There are many benefits for people to e-file," Hales said. "You can request to have it deposited in a bank account, and receive it in 10 days or less, which is much faster than mail. E-filing is far more accurate than paper filing. The error rate on e-file returns is usually less than 1 percent. The error rate on paper returns is around 20 percent."

A recovery rebate credit -- an extension of last year's stimulus payment -- is available to eligible taxpayers. Hales noted that the stimulus payment is not taxable or deductible, and only used to determine if an individual will receive a recovery rebate credit, and what amount it will be.

"Most will not be eligible for the recovery rebate credit this year," Hales said. "But if you did not receive the maximum (stimulus) amount for your financial situation last year, if your income changed in 2008, if you could be claimed as dependent in 2007 but not in 2008, or if you adopted a child in 2008, then you are eligible for recovery rebate credit."

Like Having Medicare? Then Taxes Must Rise

From The New York Times:

Toward the end of Monday’s meetings on fiscal responsibility at the White House, Senator Kent Conrad stood up and produced a little bolt of honesty. “Revenue is the thing almost nobody wants to talk about,” said Mr. Conrad, the chairman of the Senate Budget Committee. “But I think if we’re going to be honest with each other, we’ve got to recognize that is part of a solution as well.”

Mr. Conrad’s frankness was delivered in the cryptic language of budget experts, and many people might have missed the point. So allow me to translate:

Your taxes are going up.

They will probably go up in the coming decade, and the increase will be permanent. For a half-century, federal taxes have remained fairly constant relative to the size of the American economy — equal to about 18 percent of gross domestic product. But the 18 percent era has to end soon.

It won’t end because President Obama is some radical tax and spender, either. It will end because of a basic economic reality.

Americans have made it clear that they want a certain kind of government, one that can field a strong military and also maintain popular programs like Medicare. Yet we are not paying nearly enough taxes to maintain those programs. Even major changes to the health care system — the single most important step for closing the budget gap — will not close it entirely. Taxes must rise, too.

Republicans agree, even if they do so with euphemism. “We are on an unsustainable path,” says Peter Orszag, Mr. Obama’s budget director. Judd Gregg, the ranking Republican on the Senate Budget Committee, has said, “Revenues are going to have to go up.” Douglas Holtz-Eakin and Dan Crippen, budget experts who advised the McCain campaign, have quietly acknowledged the same.

Californians Cling To Easily Dispelled Tax Myths

From The New York Times:

Seems like only yesterday that I was at the Orange County fairgrounds to watch Arnold Schwarzenegger drop a wrecking ball on a car, symbolically crushing the auto tax to the delight of supporters who never asked how the governor-to-be might cover the lost revenue.

Since then, he's continued to put that wrecking ball to use, crushing one campaign promise after another.

But not until the governor signed on to raising taxes, including the car tax, did GOP leaders and good citizens get angry, vowing to go after not just Arnold but any Republican legislators who voted with him on a budget that includes the new revenues.

It didn't matter that state services of every type were threatened from Chico to Chula Vista, that the bus was headed for the cliff, that inmates were packing their bags for early release, or that firing every state employee wouldn't have balanced the budget without new revenue.

All that mattered were taxes.

"California has the highest taxes in the country," a reader named Mary wrote to me.

"I guess it's our patriotic duty, as residents of California, to pay the highest taxes (or close to it) in the country, for the most incompetent government in any state," wrote Art.

Most incompetent government? We're probably in the running, but two other states I've lived in were at least as screwed up, with Pennsylvania actually taking pride in its monumental incompetence.

As for the claim that Californians pay the highest taxes of any state or close to it, I'm sorry to disappoint, given the great joy so many people seem to derive from hyperventilating.

Expanded Tax Break Available for 2009 First-Time Homebuyers

According to their newest press release, the IRS has announced today that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

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Reasons to be a Multiple Unit Franchise Owner

WatchMeFranchise.com, a blog sponsored by RDTC Inc., posted an interesting article last week on reasons why it is beneficial to be a multiple unit franchise owner. Check out a portion of the article below, or check out WatchMeFranchise.com for the full version.

1. More Profitable

The biggest reason to open multiple units of a franchise is because you have the opportunity to make much more money. There is only so much money to be made from owning a single location, but if you begin to expand then the income possibilities are essentially limitless.

2. Franchise Incentives

Depending on the franchise you own, there may be incentives offered by the franchisors for owning multiple units. Incentives could be a reduced price, free services for your store, or even prime store locations. Franchisors will usually offer these incentives for multiple-unit owners, as it saves them time and money as well for you to have multiple locations.

3. Advertising Savings

If you own multiple franchises, you can save on advertising by running one set of ads, but providing two (or three, or four, etc.) contact sections. You have probably seen this in ads all over the place, but had never considered it as an advantage to the franchise owners.

4. Multiple-Unit Management

Managing one store can be hard enough at times; so many people get quite concerned about the idea of managing multiple stores. However, most multiple-unit franchise owners will decide to hire a store manager for each location. That way, as the owner, you become more of an over-seer and will not need to handle as many day-to-day operations.

5. Higher Success Rate

It has been proven that multiple-unit franchise owners have a much higher success rate than that of single-unit owners. While all franchises have a statistically higher success rate than other small businesses, multiple-unit franchisees have an even higher success rate.

Take a Look At Tax Law When Converting An IRA

The News Tribune recently published a great article examining the tax laws surrounding the conversion of a Traditional IRA to a Roth IRA. You can check out a portion of the article below, but the full post can be found here.

Over the next two years, you are likely to see more people convert assets from Traditional Individual Retirement Accounts to Roth IRAs.

Three considerations make understanding the IRA to Roth conversion more important for many investors:

• Lower values of most IRAs as a result of the market correction.

• The prospect of increased taxes in our future.

• The elimination of an income limit in 2010.

With a Traditional IRA, when you take withdrawals of your contributions and earnings, they are subject to ordinary income tax. Also, once you reach 701/2 you are forced to take annual distributions. (These required minimum distributions have been waived for 2009.)

With a Roth IRA, as long as you’re over 591/2 and have held the account for five years, the assets grow tax free, there’s no tax on withdrawals and no requirement to take annual distributions if you don’t need the income. This way, more potential growth may be available for your later years or for beneficiaries of the account.

Determining whether or not to make this conversion can be complicated. You need to weigh the short-term consequences vs. the long-term impact. In order to make the conversion, you have to pay income tax on the amount converted. But if you can afford that hurdle, the long-term benefits may be worthwhile.

For many, a Roth conversion makes sense if you expect income tax rates, or those of your heirs, to rise. An increasing personal tax burden seems likely given the rapidly growing fiscal deficit due to bailout and economic stimulus packages.

There are different reasons driving Roth conversion decisions in 2009 and 2010. This year, investment declines during this recession have presented a more immediate opportunity. If your modified adjusted gross income is less than $100,000 in 2009 (filing jointly or single), you are eligible to make the move from Traditional to Roth IRA. And for many, the tax bill associated with the conversion will be significantly less than it would have been to make the same conversion at this time last year.

Obama: People Should See Tax Cut Help By April 1

From The Star Tribune:

The latest: President Obama said Saturday that most Americans will start seeing the benefits of the new tax cuts by April 1. "Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans," Obama said in his weekly address. In tandem, the Treasury Department began directing employers to reduce the amount of taxes withheld from people's paychecks as soon as possible.

His address: Obama said he was grateful to Congress, governors, mayors and all the people who supported the $787 billion economic stimulus measure, which including both tax cuts and new spending. Still, he added: "It is only a first step on the road to economic recovery. And we cannot fail to complete the journey." He said the country also must stem foreclosures, repair the banking system and revamp financial regulations.

What to expect: The tax credit -- up to $400 for individuals and up to $800 for married couples -- will be doled out through the rest of the year through a payroll tax cut reflected in paychecks. Most workers should see about a $13 per week increase in their take-home pay. But the credit is phased out for higher-income taxpayers. People who do not earn enough money to owe income taxes can file for their share.

New details: The IRS released new withholding tables on its website (www.irs.gov) to help guide employers in reflecting the new credit. It says more instructions about tax provisions in the law will be available soon and will be mailed to more than 9 million employers next month.

Your Share of Stimulus Tax Breaks

Earlier this morning I saw an article on kcbd.com discussing the tax breaks the new stimulus offers, and who qualifies for what. A segment of the article can be found below, but the full post can be read here.

A study of the recovery plan shows most households will qualify for a tax break. Boost for some could be worth several hundred to several thousand dollars.

Roughly 97% of American households could see tax savings as a result of the American Recovery and Reinvestment Act, according to a new analysis by a nonpartisan research group.

The Tax Policy Center crunched the numbers and concluded that the average savings would be $1,179. But how much a household actually gets depends on income, marital status and whether a filer has children. The savings range from a few hundred dollars to several thousand.

The law, which President Obama signed on Tuesday, contains a range of tax breaks for individuals. Those likely to affect the greatest number of households are the new Making Work Pay credit worth up to $400 ($800 for joint filers); a patch to protect middle- and upper-middle-income families from having to pay the Alternative Minimum Tax; and expansions of the earned income tax credit and the child tax credit for low-income families.

There are also breaks that address specific situations: a new credit for first-time home buyers, a sales tax deduction for car buyers and a new credit to help pay for college tuition. For people receiving unemployment benefits, the first $2,400 will be tax free.

On Saturday, Obama said the government had already taken action on the broadest of the law's cuts -- the Making Work Pay.

The Treasury Department has told employers to reduce the amount of taxes withheld from paychecks by April 1. Treasury estimates that a typical family will begin taking home about $65 more per month, according to Obama.

"Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans," Obama said in his weekly video and radio address.

Tax Breaks Could Spur Business Investment

From The Washington Bureau:

The American Recovery and Reinvestment Act gives companies two reasons to invest in new equipment this year, and it provides many small businesses a way to find the money to make these purchases.

The economic stimulus package extended two tax incentives for business investment through the end of this year. Companies can write off 50 percent of the cost of new equipment immediately instead of following the usual depreciation schedules. Small businesses can expense up to $250,000 of new equipment purchases this year.

These breaks can be a powerful incentive for business investment, especially when combined, said Bill Smith, director of the national tax office for CBIZ MHM.

Smith cites an example of a small business investing $500,000 in equipment that normally is depreciated over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50 percent bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.

That's good for cash flow, but many companies may not have the cash or credit to make this kind of investment, especially in such a weak economy.

Business tax breaks

Under the economic stimulus package:

Businesses can immediately write off 50 percent of the cost of new equipment purchased in 2009

Small businesses can immediately write off $250,000 for capital expenditures made this year

Small businesses with gross receipts of $15 million or less can carry back net operating losses for five years instead of two years

Some companies can defer taxes on certain types of business debt repurchased before 2011

Source: Senate Finance Committee

"A lot of small businesses aren't going to have the capacity to do it right now," said Clint Stretch, managing principal for tax policy at Deloitte Tax.

The economic stimulus package provides a solution, however, to businesses with less than $15 million in annual revenue. The new law allows these businesses to carry back net operating losses for five years, instead of the previous two-year limit. A business that currently is losing money could apply these losses to a previous profitable year and then claim a refund for taxes paid that year.

10 Tips for Other Attorneys to Market Themselves Better Online

I am always taken aback when I come across an attorney who is not a part of the online marketing game. A huge portion of my law firm’s clients come from online outreach. To help some of my fellow attorneys boost their business and their name brand awareness, I have put together my top 10 tips for other attorneys to help market themselves online.

1) Create an Avvo.com profile

Avvo is a Web 2.0 property completely dedicated to lawyers, law advice, and lawyer reviews. This is a great place to strut your stuff and show others how much you know about the law. Answer questions, review other’s advice, and make a free profile for yourself and your practice.

2) Maintain a blog

Writing—and most importantly, maintaining—a blog is a great way to both give helpful advice and generate high quality customer opportunities. You can either put an actual blog on your site, or sign up for a free blog service such as Blogger.com. However, once you start the blog, it is important to make sure you do not forget it and post at least one entry every week.

3) Create social community profiles

Having a profile on social communities such as MySpace, FaceBook, or LinkedIn will help you connect with both other lawyers and potential clients. Keep the page professional though, and be sure to have all of your contact and business information on the pages.

4) Answer questions on advice sites

Becoming a notable legal expert is just a click away. By answering questions of potential clients looking for guidance, you are becoming regarded as a trustworthy expert in your field. There are tons of advice sites out there, but I would suggest starting off with Yahoo Answers, LawGuru.com, and Avvo’s advice section.

5) Send out e-newsletters

Sending out an e-newsletter is a great way to let clients, potential clients, and business colleagues know what you are currently offering. It is also a great way to monitor what people find the most intriguing. By adding a few tracking parameters to any hyperlink in your email, you will know which articles are the real attention grabbers.

6) Network, network, network

There are plenty of great ways to network with other professionals to get the word out about your services. One very helpful and easy way to network is to join your local chamber of commerce. If you do not have time for an extra monthly meeting, there are always more networking events available, do not pass too many of them up! When you do go to a networking event, bring a pocketful of business cards, a well-practiced pitch, and a friendly smile.

7) Google yourself

Do you ever "Google" a person or a business to see what kind of life or business they run? Well, do not hesitate to think others will do the same with your name and business. Make a habit of routinely "googling" yourself and your business, and see what comes up.

8) Refresh your website

In order to get online visitors to become clients, your site needs to be fresh and modern. If your site design is more then two years old, then you should probably consider having it redesigned. Web design is constantly evolving and you want to make sure your site’s design stays current. Additionally, you will also want to keep your site updated with blog entries, news, pictures, advice, etc. so that users know you are making a strong effort to be active online.

9) Stay in touch with clients

Keeping in touch with former clients will always benefit you in the future. Always collect your clients full contact information (including their e-mail address) so that this will be possible later down the road. You can use a list of client e-mails to send out an occasional "new tips" article, or news about your firm. Even if they do not need your services at that time, they may know some one else who does.

10) Regular press releases

Using free press release sites online to get the news out on your firm and your lawful opinions is a great marketing tactic. Create several "articles" of advice, news, and helpful hints to post on the sites later on. Press release sites always have an about section for your firm and website link. Ideally, you should try to draft and release at least one press release per month.

I’m On the Money, I’m On the Money

That is right, I have two appearances on CNBC’s On the Money, with Carmen Wong Ulrich. Last night, I was on the telephone talking about Refund Anticipation Loans and Tax Scams. You can catch my appearance by clicking here to access CNBC’s website.

Tonight, I am going to be on via satellite discussing tax information only a tax attorney would know. I also will be answering callers’ questions, ensuring that they are “Armed and Dangerous” come this tax season. Check me out at 7:00 PM (Pacific).

Radio Appearances This Week

This week, I will be featured on two different radio shows to talk about taxes. Today, I will be on the Thom Hartmann radio program at noon, to offer tax advice and take questions from callers. I will also be promoting my book and offering tax advice on Oprah and Friends radio with Jean Chatzky this Friday. Be sure to check your local listings and listen in for free tax advice!

New Withholding Tables Now Available on IRS.gov; Most Workers Will See Bigger Paychecks this Spring

According to the IRS’ newest press release, they have released “new withholding tables that will result in more take-home pay this spring for millions of American workers.”

The new tables incorporate the new Making Work Pay credit, one of the key tax provisions included in the American Recovery and Reinvestment Act of 2009 that became law earlier this week.

“For most taxpayers, the additional credit will automatically start showing up in their paychecks this spring,” said IRS Commissioner Doug Shulman. “Since employers and payroll companies will handle this change, people typically won’t need to take any additional action. The IRS will continue working to implement this and other provisions of the new law as quickly as possible.”

The new withholding tables, along with other instructions related to the new tax law, will be incorporated in new Publication 15-T. This publication will be posted to this Web site next week and mailed to more than 9 million employers in mid-March. The IRS asks that employers start using these new tables as soon as possible but not later than April 1. Most workers will see a boost in their take-home pay soon thereafter.

Eligible workers will get the benefit of this change without any action on their part. This means that workers don’t need to fill out a new W-4 withholding form to get the Making Work Pay credit reflected in their take-home pay. A Form W-4 will not need to be submitted for the automatic withholding change. Individuals and couples with multiple jobs may want to submit revised Form W-4 forms to ensure enough withholding is held to cover the tax for the combined income. Publication 919 provides additional guidance for tax withholding.

Obama To Increase Taxes In A Recession

Earlier this morning, the SF Examiner posted an article discussing Obama’s plans to raise taxes on individuals and businesses, to reduce the size of the Federal budget. A snippet of the post can be read below, but the full text can be found here.

President Obama announced today that he will reduce the size of the federal budget, cutting $513 billion in his first term by increasing taxes on individuals and business who make over $250,000 and by slashing spending on the wars in Iraq and Afghanistan. He cited concern over a burgeoning federal deficit that he himself helped to create with a $787 billion stimulus package, admitting that large deficits will make it hard for the economy to grow over time.

The announcement may have been ill-timed. So far, the stock market has shown little confidence in the administration's handling of the economy and is poised for another down day on Monday. Raising taxes while cutting government spending reduces liquidity that can be used to create investment. Businesses will immediately adjust their plans to compensate for reduced demand and investment capital. As Alan Greenspan said today at the Economic Club of New York, a fiscal stimulus plan that only increases GDP through temporary government spending will fail unless it "primes the pump" and increases demand. If the stimulus package does not work, permanent tax increases could put more strain on economic activity.

Schwarzenegger Defends Tax Hikes, Applauds Stimulus

From The Los Angeles Times:

Gov. Arnold Schwarzenegger on Sunday defended his decision to raise taxes as a necessary step to stem California's staggering economic crisis.

During appearances on morning news shows in Washington, D.C., Schwarzenegger said he would gladly accept money from the federal stimulus package approved by Congress last week even though some fellow Republican governors had balked at the program. And he predicted that although California's economy would begin rebounding next year, it would take "years from now to get back to where we were."

"I don't think that we have turned a corner yet," Schwarzenegger said on CNN's "State of the Union With John King."

The $130-billion state budget signed Friday by Schwarzenegger has earned the second-term governor jeers from state Republicans, some of whom argued for more spending cuts over tax hikes, which include across-the-board sales- and income-tax increases for the first time in 17 years. Schwarzenegger said that he drastically slashed spending in the new budget and that elected officials who disagree with his approach are "not in touch" with the public.

"It's very simple. Listen to the people," Schwarzenegger said on ABC's "This Week With George Stephanopoulos."

The governor called the federal stimulus plan a "terrific package" and said Republican leaders throughout the nation needed to shelve party ideologies in the face of the ongoing economic crisis. He cited, for example, South Carolina Gov. Mark Sanford, who has said he may refuse federal stimulus money for his state.

Obama Launches $75 Billion Foreclosure Rescue Plan

Earlier today, JS Online posted an article on Barack Obama’s new foreclosure rescue plan outlining what it is and whom it will help. I’ve included a portion of the article below, thanks to JS Online.

President Barack Obama threw a $75 billion lifeline to millions of Americans on the brink of foreclosure Wednesday, declaring an urgent need for drastic action - not only to save their homes but to keep the housing crisis "from wreaking even greater havoc" on the broader national economy.

The lending plan, a full $25 billion bigger than the administration had been suggesting, aims to prevent as many as 9 million homeowners from being evicted and to stabilize housing markets that are at the center of the ever-worsening U.S. recession.

Government support pledged to mortgage giants Fannie Mae and Freddie Mac is being doubled as well, to $400 billion, as part of an effort to encourage them to refinance loans that are "under water" - those in which homes' market values have sunk below the amount the owners still owe.

"All of us are paying a price for this home mortgage crisis, and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said.

The new president, focusing closely on the economy, in his first month in office, rolled out the housing program one day after he was in Denver to sign his $787 billion emergency stimulus plan to revive the rest of the economy. And his administration is just now going over fresh requests for multiple billions in bailout cash from ailing automakers.

Wall Street has shown little confidence in the new steps, declining sharply on Tuesday before leveling off after Wednesday's announcement. The Dow Jones industrials rose 3 points for the day.

Success of the foreclosure rescue is far from certain.

The administration is loosening refinancing restrictions for many borrowers and providing incentives for lenders in hopes that the two sides will work together to modify loans. But no one is required to participate. The biggest players in the mortgage industry temporarily had halted foreclosures in advance of Obama's plan.

Complicating matters, investors in complex mortgage-linked securities, who make money based on interest payments, could still balk, especially those who hold second mortgages or home equity loans. Their approval would be needed to prevent many foreclosures.

A New California Budget: Program Cuts And $12 Billion In Tax Hikes

From The Los Angles Times:

After a three-month impasse, the California Legislature has approved a budget package that addresses the state's massive deficit with billions of dollars in new taxes and program cuts. There are billions of dollars in cuts to schools, healthcare institutions, higher education and programs for the poor.

If signed by Gov. Arnold Schwarzenegger, who helped devise the package, the plan also would raise personal income taxes and the state sales tax, although a 12-cent-per-gallon increase in gasoline taxes was eliminated in the final hours. The gas tax would be replaced with federal economic stimulus money.

The final version of the plan would raise the state sales tax by 1 percentage point and nearly double the vehicle license fee, to 1.15%. The plan would reduce the dependent credit that Californians are allowed to claim on their taxes. The package also would increase personal income tax rates by 0.25 of a percentage point.

California Vet Tax Defeated

Earlier today I came across this post on VeterinaryNews.com that discusses the final California budget and pet owner relief. Apparently the California legislature did not include veterinary tax in their final budget, although it had been included in prior versions. Check out the full story below.

Legislators finally passed a 17-month budget during after overnight session Feb. 19 after months of negotiation. The final bill, approved by state Senate and Assembly, does not include a veterinary service tax included in previous versions of the budget proposed by Gov. Arnold Schwarzenegger.

The governor's plan was harshly criticized by veterinary, who say the tax would have put a huge burden on pet owners and compromised public health. The California Veterinary Medical Association (CVMA) also opposed the tax on the grounds that it would have made veterinary medicine the only taxed healthcare service in the state.

"Requiring pet owners to pay a tax to care for their animals is bad public policy," says Bill Grant II, president of the CVMA. "We are pleased the members of the 'Big Five,' including the governor, recognized that and that the proposed tax was removed from the final budget bill." The CVMA organized a large-scale grassroots campaign to oppose the tax, which was first proposed in November to help close California's $42 billion budget deficit. The veterinary service tax would have added about 10 percent to veterinary bills and, along with other non-medical service taxes, provide about $350 million in new revenue for the state.

"The opposition of veterinarians, pet owners and concerned citizens was so intense, a special extension was added to the governor's budget voicemail line to handle the opposition to the tax on pets," Grant says, adding thousands of calls and letters flooded the governor's office. "We believe the overwhelming number of calls delivered an emphatic message to the governor that taxing pet owners would be hugely unpopular and inequitable."

The California Legislative Analyst's Office, which reviewed versions of the state budget proposals agreed in a recent analysis, saying the veterinary tax would "create inequities in the tax structure by taxing some services while leaving other similar services untaxed."

A full version of the new budget was not available at press time, but it does include other tax increases outside the veterinary tax. There is no word yet on when the governor plans to sign the new budget into law.

UBS To Pay $780 Million In Tax Conspiracy Case

From Marketwatch.com:

UBS AG agreed to pay $780 million for helping U.S. customers avoid taxes, the Department of Justice said Wednesday.

Switzerland's largest bank also agreed to turn over the identities and accounts of some of its U.S. clients to the American government, in an unprecedented move that could shine a light into the country's secretive banking industry, the DOJ added.

UBS entered into a deferred prosecution agreement on charges of conspiring to defraud the U.S. by impeding the Internal Revenue Service. The government will dismiss the charges if the bank fulfills its obligations under the agreement, the DOJ explained.

Chart of UBS

"A veil of secrecy has been pulled aside," John DiCicco, acting assistant attorney general of the Justice Department's Tax Division, said in a statement. "We will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so."

In June, a U.S. District Court gave the IRS permission to serve UBS with a so-called John Doe summons. The summons demands information that would help track down U.S. taxpayers with UBS Swiss bank accounts that they've been trying to hide from the IRS. Usually, such summonses have to specifically name individuals, so the broader John Doe version has the potential to uncover many more possible tax evaders.

Gov. Sarah Palin To Pay Back Taxes

According to the Miami Herald, former Vice Presidential candidate and current Alaskan Governor, Sarah Palin, must pay back taxes on thousands of dollars in expense money she received over the past few years. A snippet of the article can be found below, but the full text can be found here.

The governor's office wouldn't say this week how much she owes in back taxes for meal money, or whether she intends to continue to receive the per diem allowance. As of December, she was still charging the state for meals and incidentals.

"The amount of taxes owed is a private matter," Sharon Leighow, Palin's spokeswoman, said in an e-mail. "If the governor collects future per diem, those documents would be a matter of public record."

The revelation about Palin comes as U.S. senators, including Sen. Mark Begich, D-Alaska, are under scrutiny over back taxes. A survey by the political newspaper and Web site Politico found that Begich was one of seven senators who acknowledged owing back taxes.

Some other state employees also owe back income taxes for travel payments and will be getting revised tax forms, Annette Kreitzer, state administration commissioner, said in an e-mail.

She wouldn't say which, or how many, employees will be receiving the notifications.

The payments became a touchy issue for Palin last fall when she was running for vice president and campaigned as a budget watchdog.

Cities and States Press Travel Sites to Collect Hotel Taxes

From The New York Times:

There is a reason some online travel sites can offer cheap hotel rooms: State and local governments contend that the sites are not paying all of their taxes.

And faced with fast-shrinking budgets, those governments want the online travel services like Expedia Inc., Priceline, Orbitz and Travelocity to hand over what could amount to tens of millions of dollars.

The issue arises because the travel sites use a two-step process for billing and paying for hotel rooms. The site first bills the consumer for the cost of a hotel room, plus a service fee. Separately, the hotel pays taxes to local governments based on the price actually paid by the travel company — an amount less than the price the consumer pays.

Lawyers for the various governments argue that the travel companies owe hotel occupancy taxes based on the higher price consumers pay.

“That’s the insidious nature of this scam,” said Patrick O’Connell, a lawyer at Baron & Budd, a firm based in Dallas that represents municipalities seeking tax revenue. “The hotel pays tax on the amount that the hotel was paid. The city doesn’t have a clue that the transaction was actually conducted by the online travel company.”

Anaheim, Calif., is one of dozens of state and local governments trying to collect from the online travel services. This month, a city hearing officer concluded that travel companies owed Anaheim $21.3 million in back taxes, interest and penalties.

“There is no reason why online travel companies should be paying a different amount of taxes than others who book the same hotel rooms,” Mayor Curt Pringle of Anaheim said in a statement.

IRS Offers Tips to Avoid Recovery Rebate Credit Confusion

According to their newest press release, the IRS is urging taxpayers and tax preparers to make sure they properly determine eligibility for the recovery rebate credit before they file their 2008 federal tax returns.

Some individuals who did not get the economic stimulus payment, and a smaller number of those who did, may be eligible for the recovery rebate credit. However, most taxpayers who received the economic stimulus payment last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.

An early sampling of tax returns shows about 15 percent have errors involving the recovery rebate credit. Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line.

To avoid delays in tax refunds, it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now.

The amount of the stimulus payment will not be entered directly on the tax return. For people using a paper tax return, the stimulus payment amount will be required when completing a related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.

GOP Leader Ousted Over Tax Hikes; Still No State Budget Deal

From The Mercury News:

The Senate Republican leader who agreed to a budget deal with billions of dollars in tax increases was ousted by his GOP colleagues in a late-night coup early this morning, injecting another dose of uncertainty into the high-stakes battle over the state budget.

Around midnight, the Senate Republican caucus voted to boot Dave Cogdill of Fresno, one of the so-called "Big 5" leaders who reached a pact last week to close the state's staggering $40 billion deficit with a mix of steep tax hikes, spending cuts and borrowing.

Cogdill, who was chosen to lead the caucus last year in large part because of his conservative anti-tax credentials, angered his GOP colleagues last week when he brought them a budget package that included $14.3 billion in tax increases. The measure remains a single Republican vote in the Senate shy of approval.

"It's a shame it ended this way," the usually straight-faced Cogdill said with a hint of emotion after learning the news. "But we did what we thought was right. I love this state." Voted in as the new Republican leader was Dennis Hollingsworth, R-Murietta, who wasted no time emphasizing his opposition to higher taxes while criticizing the budget deal.

What effect Cogdill's ouster will have on the search for the final budget vote wasn't immediately clear. But it did not go unnoticed that the two Republicans targeted as the most likely possibilities for casting the decisive vote in favor of the deal — Abel Maldonado of San Luis Obispo and Dave Cox of Fair Oaks — opposed Cogdill's removal.

Ford to get $55 Million State Tax Credit for Battery Development

From Crain’s Detroit:

Some $55 million in tax credits for Ford Motor Co. to continue work in electric vehicle and battery development were among items that on Tuesday morning were to go before the Michigan Economic Growth Authority board.

In a news release, Ford said the refundable tax credits will be used to accelerate its plans to produce next-generation hybrids, plug-in hybrid electric vehicles and battery electric vehicles.

According to state briefing memos, other Southeast Michigan projects up for state tax breaks at the MEGA board include:

• A $17.2 million Macomb Township investment by aerospace industry supplier Global Tooling Systems. The Utica-based company plans to relocate operations to Macomb Township, creating 184 jobs, according to state documents.

• An $8.9 million expansion at McLaren Performance Technologies in Livonia. The firm, which specializes in the design, development, integration and validation of powertrain systems, plans to create 34 jobs in an expansion to support power transfer unit business.

• A $2.23 million investment by Patrick Energy Services Inc. in Livonia. The company, which provides services that support utilities, transmission system operators and industrial clients, proposes to relocate its offices in Livonia to a larger building in Novi, adding 90 jobs.

• A more than $1 million investment by Michigan Seamless Tube L.L.C. in South Lyon, a manufacturer of carbon and alloy seamless cold drawn pipe and tube. The company is entering a technology collaboration with OG Technologies Inc. in Ann Arbor, for a tube inspection system. OG Technologies plans to create 20 jobs.

• A $946,000 investment by Royal Oak-based RIIS, L.L.C., a consulting and services firm. The company plans to expand its headquarters in Royal Oak or Southfield to accommodate new software and application development contracts, creating 40 jobs.

• A defense-related business and development center being established in Sterling Heights by BAE Systems Land and Armaments L.P. The $44 million project, creating 460 jobs, was approved for a $22 million MEGA tax credit in April 2008.

The element of the project before the MEGA board Tuesday was a brownfield redevelopment work plan proposing nearly $1.5 million in local and school tax capture to support the project.

• A 7.4 acre redevelopment in Hazel Park to include a new retail center featuring a Save-A-Lot grocery store, restaurant and retail/commercial space. The project by Hazel Park Development Company L.L.C. is expected to create 250 jobs, 150 of which would be permanent.

The project was approved in early February for a $497,293 state brownfield tax credit and seeks approval of a brownfield work plan that includes more than $1 million in local and school tax capture to support the project.

Obama Set To Sign Stimulus Bill Into Law

After weeks of renovation and a long approval process, Obama is now making his way to Denver, to sign his Stimulus Bill into law at a science museum. NECN.com posted a video and article discussing the plan and how it went. A portion of the article can be found below, but the video and full post can be viewed here.

As President Obama boarded Air Force One this morning for Denver, he left behind Washington D.C., where the stimulus bill faced nearly unanimous Republican opposition.

Instead, he'll sign the bill at a science museum, and focus on investment in green jobs and technology like wind and solar power.

It's a massive bill combining spending and tax breaks -- $787 billion dollars in all.

Some of the first money, $27 billion, will go to states for projects like road and bridge repair.

The bill also includes a $400 tax credit and incentives to buy first homes and new cars.

There's $100 billion in new spending for schools and colleges.

Unemployment and food benefits will be extended, a bit of help for these auto industry employees, who learned just yesterday, they're losing their jobs.

But will it work, and how fast? So far, stocks have tumbled as Wall Street investors worry it may be some time before the stimulus money helps turn the economy around.

GM and Chrysler, which have already received billions in federal loans, must submit plans to the government for staying viable by the end of the business day.

While the Obama administration reviews the proposals, the automakers will ask for another $7 billion dollars.

International Tax: The New Hunt For Tax Havens

From Web CPA:

Congressional leaders are looking to clamp down on offshore tax havens after a Government Accountability Office report found that 83 of the 100 largest publicly traded U.S. corporations have subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions, while 63 of the 100 largest publicly traded federal contractors reported having subsidiaries in such jurisdictions.

"This report shows that some of our country's largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And some of those companies have even received emergency economic funds from the government," said Sen. Byron Dorgan, D-N.D. "I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that."

Sen. Carl Levin, D-Mich., echoed Dorgan: "We must get to the bottom of activities such as the following: Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Hundreds more tax haven subsidiaries operate under strict secrecy laws in places like Switzerland, Hong Kong, Panama and Maurituius."

Levin, who chairs the U.S. Permanent Subcommittee on Investigations, has made offshore tax abuse a major subject of its investigations.

Robert Gallagher, managing editor of WG&L Journal of International Taxation at Thomson Reuters, observed that the GAO study "correctly notes that there is no agreed-on definition or list of 'tax havens.' Instead, they cobbled together their list from three old ones."

The GAO said that while there is no agreement on a definition, various governmental, international and academic sources used similar characteristics to define and identify tax havens: "Some of the characteristics included no or nominal taxes; a lack of effective exchange of information with foreign tax authorities; and a lack of transparency in legislative, legal or administrative provisions."

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Taxes 101 For Domestic Parents & Same-Sex Couples

As Benjamin Franklin famously said, "nothing in this world is sure but death and taxes". Unfortunately, this is more than true for domestic parents and same-sex couples all across the country. What many people do not realize is that there are significant tax disadvantages for non-married couples that nearly all gay couples face every year. Even though dozens of states and over 50% of Fortune 500 companies offer domestic couple benefits, the federal government does not offer any.

This tax season I am reaching out to LGBT Americans by providing insightful tax tips and advice. A few weeks ago I posted an entry with generic tax tips for members of the LGBT community, and to follow up I decided to take a closer look at the tax and financial issues faced by domestic partners and same sex couples in this country.

Civil Marriages vs. Legal Documents

To understand the importance of tax equality, I think it is first important to understand the common misconceptions surrounding same-sex couples and taxes. You have probably heard before that civil marriages and same-sex marriage are not even necessary, that you can have any lawyer draw up the necessary documents. However, this is false. While it is true you can have a power of attorney appointed for certain asset-sharing and finances, it does not assure your partner access to your full wealth like a marriage would. Additionally, we all know lawyer fees are not cheap. In fact, it can cost a same sex couple thousands of dollars in legal fees to get similar financial rights as those awarded by a marriage. While a marriage license on the other hand, usually costs under about $50.

Taxes for Same-Sex Couples with Children

Perhaps the biggest tax inequality concerning the LGBT community affects couples who have children. Since the federal government does not recognize same sex marriages, couples who have children, or adopt, do not always qualify for the benefits most married couples would. Due to this large disadvantage, many same-sex couples with children can only take advantage of tax benefits for single parents.

Can Gay Marriage Save the Economy?

M.V. Lee Badgett, an economist at the University of Massachusetts’ Institute for Gay and Lesbian Strategic Studies did a study that found "...over the next three years about 32,200 same-sex couples would travel from other states to marry in Massachusetts, which became the first U.S. state to legalize gay marriage in 2004." All of these couples will be spending their weddings, and money, in Massachusetts, and will greatly help stimulate the state’s economy.

According to studies the U.S. gay community spends a whopping $174 billion annually within the country, and just imagine how high that number would be if those couples were allowed to wed. With that much money being spent you would think the federal government would want a piece of the pie. Although the US economy may not be saved by gay marriage's legalization, it could certainly help.

Social Security Tax Disadvantage

The LGBT community, like everyone else, must pay their social security taxes every tax season. The difference is, no matter how many years they have been with their partner, they cannot take spousal benefits or survivors’ benefits. Reports from the census 2000 found "when a gay, lesbian, or bisexual senior dies, his or her surviving partner faces a financial loss that can amount to tens of thousands of dollars.”

LGBT Real Estate Taxes

Another financial difficulty same sex couples face has to do with the transfer or property between one another. An article by the Advocate Online found that "when someone puts his or her same-sex partner on the title to a home, it often constitutes a transfer of 50% of the value of the home -- as if the two were strangers -- and is taxed accordingly. Different-sex married couples do not pay this tax. Inheritance taxes apply when a taxpayer dies and leaves assets to another person. Different-sex spouses receive a complete exemption from such inheritance taxes, but same-sex partners do not. Because thresholds for state inheritance taxes are much lower than the federal threshold, inheriting the couple’s common home (or even the half of it that belonged to the deceased partner) can trigger inheritance tax."

Connecticut and Massachusetts Residents

Since these are the only two states where same-sex marriages are recognized, different tax incentives apply to same-sex couples there. In these two states, married same-sex couples can claim all marriage tax incentives, on their state returns. However, on their federal returns, since same-sex marriage is not federally recognized, same-sex couples must file separately.

As Tax Season Continues, Beware of Scams

From The Washington Post:

As sure as the taxman cometh each year, so do the scam artists.

The Internal Revenue Service is warning U.S. taxpayers to be prepared for a steady increase in scams and virus attacks via e-mail, telephone and the Web as the April 15 tax-filing deadline approaches.

"We see a big upswing in complaints about these phishing emails January through April during the tax filing season," IRS spokeswoman Nancy Mathis said.

The most common type of scam arrives via e-mails claiming to come from the IRS or Treasury Department. They typically try to either scare consumers into thinking there is an error with their tax filing, or that they are eligible for a tax rebate or benefit from the government economic stimulus package that just passed on Capitol Hill.

These so-called "phishing" e-mails typically arrive in an e-mail that urges users to visit a site, which in turn prompts visitors to enter their personal and financial data, information that is then sent off to identity thieves.

Regardless of the type of come-on used in these scams, the IRS wants taxpayer to hear one message loud and clear:

"The Internal Revenue Service does not communicate with taxpayers via unsolicited e-mail," said J. Russell George, treasury inspector general for tax administration. "Some of these bogus e-mails are so sophisticated that people who are uninformed can and do fall prey to this type of scam. That is why it is so imperative that we continue to get this message out to people."

On Feb. 6, the U.S. Computer Emergency Readiness Team (US-CERT), warned Americans about a phishing scam that spoofed the IRS, offering recipients stimulus package payments. These e-mails include text that attempts to convince users to follow a link to a Web site or to complete an attached document.

These types of attacks, which prompt people to click on e-mailed links and download documents, also are frequently attempts to install malicious software that steals sensitive and financial information from infected systems, the government warns.

Since 2005, George's office has received nearly 2,000 complaints about phishing, and it estimates that at least 11,000 taxpayers have been victimized by these scams to date.

Survey: Many Small Business Owners Favor Tax Cuts Over Asset Plan

The Dallas News posted an article earlier today discussing a poll of small business owner’s opinions on tax cuts to stimulate the economy. Check out a portion of the study’s findings below, or check out the full text here.

Many small business owners disagree with the U.S. government’s allocation of funds from its Troubled Assets Relief Program (TARP) and think tax cuts are a better way to stimulate the stalled economy, according to a survey released on Monday by online payroll service SurePayroll.

“Small business owners are screaming for a different solution," Michael Alter, president of Glenview, Ill.-based SurePayroll, which conducted the survey this month. "They know firsthand the challenges their businesses are facing, and have seen no relief from Washington."

Nearly three-quarters of the survey respondents disapproved of TARP, which was set up last year to funnel $700 billion to financial institutions hurt in the subprime mortgage crisis. Survey respondents blamed Congress, U.S. Treasury Secretary Henry Paulson and lobbyists for the mishandling of TARP disbursements. Only 3 percent deemed TARP effective.

Nearly three out of four small business owners think the government should take a different approach to boost the economy, with about half saying the answer is to cut taxes. Other suggestions included:

• A massive stimulus program (11 percent).

• Easing the small business health care burden (10 percent).

• Forcing banks to lend money (9 percent).

Compromise Stimulus Bill Trims Tax Break for Car Buyers

From The Los Angeles Times:

Congress has downsized a proposed tax break for new-car buyers. The compromise version of the ginormous economic stimulus bill includes a Senate-approved provision that would allow consumers to claim a federal income tax deduction for sales taxes and excise taxes paid on new vehicles.

But the compromise worked out between House and Senate negotiators deletes another provision that senators had approved, which would have made interest on new-vehicle loans deductible as well.

Under the new version, a family could save between $300 and $600 on a new car, according to a statement released by Sen. Barbara A. Mikulski (D-Md.), who sponsored the original tax break.

Mikulski had said her original version would have saved buyers $1,500 on a $25,000 new-car purchase.

According to Automotive News, the tax break was scaled back to appease lawmakers concerned about the high cost of the $790-billion stimulus package. Trimming the interest deduction from Mikulski's proposal cut the cost of the tax break from $11 billion to $2 billion.

Congressional leaders said Thursday that they hoped to vote on the stimulus package today and send it to President Obama by Presidents Day, which is Monday.

Calif. Legislators Try Again To Reach Budget Deal

California officials have been trying to come to an agreement on a budget plan, and have recently taken to trying to pin down some decisions. The associated press recently posted an interesting article discussing the newest developments in their decisions. A snippet of the post can be found below, but the full article can be found here.

California lawmakers are still trying to pass a massive $42 billion budget-balancing plan after a marathon weekend session that produced some last-minute fireworks but no agreement on a key part of the plan — $14.4 billion in higher taxes.

Senate President Pro Tem Darrell Steinberg planned to bring lawmakers back Monday to try to salvage the combination of spending cuts, tax hikes and additional borrowing designed to erase the deficit after angrily adjourning the proceedings Sunday night without a deal.

"We're going to come back at 11 o'clock tomorrow morning, and we're going to stay and we're going to work again and we are going to come back every day until we get this done," he said. "This will get done, and it will get done with the framework that has been presented to you as a result of 90 days of work by your elected leaders."

The proposed tax hikes include an increase of 1 cent on the dollar in the state sales tax, a 12-cent-a-gallon hike in the gasoline tax and a boost in vehicle licensing fees.

The measure also includes a one-time, 5-percent income tax surcharge for taxpayers who owe money to the state at the end of 2009. The surcharge would drop to 2.5 percent if California gets its expected share of money from the federal stimulus bill.

Many of the tax hikes would remain in effect through the 2013-14 fiscal year if voters approve a cap on state spending at a special election Gov. Arnold Schwarzenegger plans to call in May. That deal is designed to limit opposition to the spending cap, which was sought by Republicans as part of the budget deal.

Steinberg said that the Assembly was ready to approve the tax bill, but that Republicans refused to supply enough votes to get it out of the Senate. It needs a two-thirds majority to reach the governor's desk.

Schwarzenegger and legislative leaders from both parties warned that California faces insolvency unless the Legislature enacts a midyear budget fix.

"I don't know what it takes for people to believe this really is a crisis," said Senate Budget Committee chair Denise Ducheny, a Democrat. "Maybe with a little sleep folks will appreciate the fact the governor and the leaders and many of us believe we have a budget."

How To Keep The IRS Out Of Your Investment Portfolio

As I mentioned yesterday, last night I made an appearance on CNBC’s On The Money. During the interview I spoke with Carmen Wong and gave advice on keeping the IRS out of your investment portfolios, and saving on your taxes. You can watch a video of the entire interview by checking out the link below on CNBC.com.

http://www.cnbc.com/id/15840232?video=1030958346

Stimulus Includes GM Tax Break

From The Associated Press:

General Motors Corp. would receive a tax break in the $790 billion stimulus bill after the automaker argued its government-led restructuring would unintentionally lead to at least $7 billion in tax liabilities.

General Motors, which received a $13.4 billion lifeline from the Bush administration last year, would have been required to pay additional income taxes from its government loans, potentially undermining its turnaround plan.

GM received $9.4 billion in federal loans and is expected to receive another $4 billion, while Chrysler LLC has received $4 billion in loans and hopes to get another $3 billion. The companies must submit plans next week showing how they will restructure their companies and become profitable.

President Barack Obama, in an interview Wednesday with about a dozen selected reporters from news organizations, said he was committed to helping the U.S. auto industry and more help could be available if the plans are realistic.

If not, Obama said, "Then we're going to have to ask them to go back to the drawing board."

"Get me a plan that works," Obama said, according to the Detroit Free Press and The Detroit News.

How You Can Still Get Last Year's Tax Rebate

The Chicago Sun Times posted a article discussing last years tax rebate, and how those who did not yet receive it can still do so. A snippet of the article can be found below, but the full text can be read here.

If you lost your job last year, you could probably use some extra cash. Here’s a source of money you may have overlooked: last year’s tax rebate.

In 2008, the IRS sent more than 119 million taxpayers rebate checks of $600 per person, or $1,200 for couples. Parents received an additional $300 for each dependent child younger than 17. The checks were part of an economic stimulus package enacted in February 2008. But many taxpayers didn’t receive a check, or received a reduced amount.

One reason was the income cutoff: The rebates were phased out for single taxpayers with 2007 adjusted gross income of more than $75,000, and married couples with AGI of more than $150,000. Congress based the rebates on 2007 tax returns to get the money in taxpayers’ hands more quickly, says John W. Roth, senior federal tax analyst for tax publisher CCH.

But the rebate was really a credit against 2008 taxes. As a result, taxpayers who didn’t receive a rebate in 2007 may be able to claim it when they file their 2008 tax returns. Likewise, taxpayers who received a reduced rebate may be able to claim the balance.

Congress Cuts Big Business Tax Break in Stimulus Bill

From Bloomberg.com:

House and Senate negotiators all but eliminated the biggest tax cut for businesses in the compromise agreement on an economic stimulus bill, Senator Max Baucus of Montana said.

The provision, a top priority of business groups including the National Association of Manufacturers and the U.S. Chamber of Commerce, would let companies convert losses into tax refunds.

Baucus said today that the provision, under which companies could have claimed an estimated $67.5 billion in tax refunds this year and next, was sacrificed to help keep the final package under $800 billion.

“It was a casualty of the overall limit,” said Baucus, a Democrat and chairman of the Senate Finance Committee. Congressional negotiators announced today an accord on a plan totaling $789 billion.

The provision, which would have let companies of any size amend up to five years of tax returns to deduct net operating losses they realize now, had been Companies under current law can carry losses back only two years.

In its place, Baucus said, negotiators agreed to let small businesses with annual receipts under $5 million carry back losses for five years.

IRS Amnesty Would Stimulate Economy, Give Struggling Taxpayers a Fresh Start

One writer from the Cincinnati News recently posted an article urging Congress to offer amnesty to taxpayers that have not filed because of unpaid taxes. The author suggests that by doing so, the IRS would stimulate the economy. A portion of the article can be found below, but the full text can be read here:

Congress is looking for ways to raise money as well as stimulate the economy. Many hard-working Americans, despite good intentions, have fallen behind on their taxes - it could be divorce, medical problems, or the challenges of a business during hard times. These life situations often lead to an unfortunate dropping out of the tax system. If the taxes cannot be paid, the returns are often not filed.

I urge Congress and the Secretary of the Treasury to offer amnesty to the 6.1 million IRS non-filers if they come forward and pay the taxes they owe.

The non-filing is usually accompanied by a feeling of helplessness. Once behind, interest and penalties escalate to the point that a taxpayer can never catch up.

The failure to act is magnified by the fact that interest and penalties double the original tax liability every five years. Someone paying $100 monthly on a $20,000 IRS debt will find that the amount owed actually increases, not decreases, because of the interest and penalties.

For honest taxpayers that come forward with their taxes, provide relief from the interest and penalties if the tax is paid when the returns are filed. To ensure future compliance, implement a five-year probationary period to stay current on all future obligations. Those suspected of tax crimes would not be eligible.

American Bar Association offers Woman Lawyers “Blueprint” for Success

From the American Bar Association:

Lawyers, whether law firm practitioners or in-house counsel, are working hard to improve the status of women in the profession. Law students had been an untapped, competitive pressure point to improve the retention and promotion of women in the profession. But, in 2006, that changed when Flex-Time Lawyers LLC co-sponsored a forum with the New York City Bar Committee on Women in the Profession that focused on educating women law students on how to select women-friendly employers and the key ingredients for success. Attendees left the forum with “The Cheat Sheet,” a guide to selecting, creating, and ensuring a women-friendly employer (view “The Cheat Sheet online at www.abanet.org/yld/publications/home.shtml).

When we introduced The Cheat Sheet, we had a number of goals in mind: First, educate women law students on how to avoid the traditional stumbling blocks of their female predecessors before those same patterns repeat themselves. Second, capitalize on the power in numbers as a means to shape how law firms and other legal employers refocus their women-friendly efforts and programs. Third, create a venue for information-sharing by inviting all of the interested parties to the forum and having them in the same room to brainstorm and play a role. Fourth, create an open dialogue and external motivation among legal employers and law schools to compete on these issues to attract, retain, and promote the most talented women students and practitioners. Fifth, initiate a reverberating effect across the country.

The Cheat Sheet provides questions for women law students to consider as indicia of a legal employer’s commitment to the retention and advancement of women. The questions are not meant as a script but as a guide to enable women law students to decipher an employer’s attention to such issues as female representation, partnership and advancement, mentoring, leadership, workplace flexibility, and business development. It also offers suggestions for additional steps women law students could take once an offer is in hand. For legal employers, those same questions have been used as a checklist to determine employers’ strengths and weaknesses to improve the future role of women. Additionally, The Cheat Sheet provides tips for legal employers and law schools and a resources section that lists key Web sites providing information on work/life balance and women’s issues in the law.

How to Do Your Taxes If You've Been Laid Off

Entrepreneur.com provided some useful tips recently to individuals who have recently been laid off, and how to go about doing their taxes. Check out a snippet of the post below, or you can read the full article by clicking here.

Around 2.6 million people lost their jobs in 2008.

Close to 600,000 more jobs disappeared in January 2009.

Horrible.

But there is a little good news. Believe it or not, Uncle Sam offers some tax breaks to folks in this unfortunate position.

So whether you lost your job in 2008 or 2009, listen up. You deserve these perks.

First, your income.

If you were a salaried employee, you’ll have your normal W-2 income and withholdings to report on your 2008 tax return.

If you received any severance pay, you should see that too on your W-2, also subject to federal income tax withholding.

Now let’s talk about your unemployment benefits. Remember, that’s taxable income too. So if you starting receiving benefits in 2008, hopefully you elected to have federal tax withheld. Now unfortunately, the government will only withhold up to 10%, so if you’re in a higher tax bracket, you will be underwithheld. But it’s certainly better than nothing.

If you are still on unemployment in 2009 and haven’t had any federal tax withheld yet -- stop what you’re doing! Go file Form W-4V -- Voluntary Withholding Request right now and request to have 10% withheld for federal taxes.

Again, this may not cover your whole federal tax bill -- and it doesn’t even touch your state tax bill -- but it’s better than nothing.

You should still be conservative and set a little bit of that unemployment check aside each week. Put that money in a little savings account and hold it till tax time so you’re not totally floored with a big tax bill.

Gov. Paterson Waffles on Tax Hikes for Wealthy

From NY Daily News:

Gov. Paterson suggested Tuesday he may veto any plan to hike taxes on the wealthy.

"Everybody is trying to find a way that they can keep spending," Paterson complained. "If people think that they are going to create a false economy here by raising taxes ... I am just not going to support this."

Asked specifically if he would veto an income tax hike, Paterson said, "I think I would if there was the type of tax increase that was just designed to re-create spending."

But, in typical Paterson style, he hedged shortly afterward.

"I didn't say that I would veto an income tax hike for all time," the governor said.

Paterson said he wants the Legislature to enact $11 billion in cuts "and not use the [federal] stimulus money as a substitute for spending cuts."

The federal money should be used to protect against future deficits, he said.

Meanwhile, Sen. Eric Schneiderman (D-Manhattan) introduced a bill that would increase the 6.85% income tax to 8.25% for people making more than $250,000. Those making more than $500,000 would pay 8.97%, and those earning over $1 million would pay 10.3%.

The changes would raise more than $6 billion in additional revenue for the state, Schneiderman said.

Senate Minority Leader Dean Skelos rejected tax hikes, saying Democrats "do not know how to stop taxing."

Roni Deutch appearance tonight, on CNBC’s On the Money

I will be appearing on CNBC’s On the Money with Carmen Wong Ulrich tonight, at 7:00 pm PST. Be sure to check your local listings to be sure you know what time the program airs. However, if you miss it then be sure to check back in a few days. I am hoping to post an embedded video of my appearance later this week.

Unemployed? You Could Qualify For Tax Breaks

From USA Today:

If you're unemployed, your tax bill will probably decline. That's small consolation — sort of like suggesting that going bald isn't so bad because you'll save money on shampoo. Given a choice, most people would rather have a full head of hair and a job.

Still, if you were laid off last year, you could be eligible for a host of tax deductions and credits that could put money in your pocket when you need it most. Tax breaks that could become available when your income is down:

•Deduction for medical expenses. Co-payments, deductibles and other unreimbursed medical expenses are deductible only if they exceed 7.5% of your adjusted gross income.

The income cut-off prevents most people with jobs and employer-provided health insurance from deducting medical expenses. But if your income has declined and you're paying more for health care, the threshold could become easier to cross.

Under a federal law known as COBRA (Consolidated Omnibus Budget Reconciliation Act), you can continue your former employer's coverage for at least 18 months. To maintain coverage, though, you must pay the entire premium, plus an administrative fee. These expenses qualify for the medical expense deduction, says Leslie Laffie, tax analyst for Thomson Reuters.

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Many employees who can't afford COBRA opt instead to buy an individual insurance policy. Premiums for these policies are also deductible, Laffie says. And if you're required to pay a specific amount out-of-pocket before your insurance kicks in, those payments also count toward the medical expense deduction.

Miscellaneous itemized deductions. Expenses that fall into this category include tax preparation costs, safe deposit box fees and — significantly, for unemployed people — job search expenses. To claim this deduction, your combined miscellaneous expenses must exceed 2% of your AGI, so this is another break that becomes more accessible when your income has declined.

Your can deduct job-hunting costs even if your search was unsuccessful, Laffie says. However, you must seek a job in the same business or trade where you were previously employed to deduct those costs.

"If you were a teacher, you have to be looking for a job as an educator, vs. looking for a job as an engineer or accountant," she says.

Plan to Raise Taxes on the Rich Is Gaining Momentum

The New York Times posted a recent article on a plan to raise taxes on wealthy New Yorkers, and its growing popularity. A section of the article can be found below, but the full post can be found here.

A plan to raise income taxes on wealthy New Yorkers is gaining momentum in the State Legislature as lawmakers continue to grapple with the state’s gaping budget deficit.

A group of Senate Democrats plans to introduce a bill on Tuesday that would impose an income tax of 10.3 percent on the highest-earning New Yorkers, a rise of 3.45 percentage points, and increase taxes on all households that earn more than $250,000 a year.

The plan, which supporters estimated could bring in up to $6 billion annually to the depleted state treasury, is one of several options Albany lawmakers are considering as an alternative to the reductions in social services and smaller, more focused tax increases that Gov. David A. Paterson has proposed.

State legislators and the governor are finding themselves under increasing pressure — from the state’s powerful labor unions and liberal groups in particular — to raise taxes on the wealthy.

Although an income tax increase on the state’s highest-earning residents passed the State Assembly last year, its fate in the Senate is less certain. Republicans, who controlled the chamber until January, blocked it last year.

With the Democrats now in control, the bill seems to stand a better chance of passing. But not all 32 Democratic members have signed on, including Malcolm A. Smith, the majority leader, who said on Monday that he was not convinced a tax increase was the right solution for New York’s budget crisis.

“Let’s talk about what the problem is,” Mr. Smith said to reporters as he was leaving a conference of the New York Bankers Association in downtown Albany on Monday afternoon. “The problem is foreclosures. The problem is a $15 billion deficit. The problem is trying to figure out how do we create jobs in this economy. So in that regard, I’m not sure if taxes is the way you do that.”

Among the bill’s supporters, there is a sense that they face considerable — but not necessarily insurmountable — skepticism from Senate Democrats.

Congress Loads Up on Tax Cuts

From Kiplinger.com:

To get consumers spending, Congress will OK even more tax cuts. The $275 billion in breaks approved by the House in January as part of its economic stimulus package wasn't enough for senators, so they've added a few new easings to entice folks to buy houses, cars and so forth. When the dust settles, most of those add-ons will make it into the final bill that's supposed to land on President Obama's desk before end of February.

Among the Senate's goodies: a juicier credit for buying a primary home. Under the Senate proposal, the current credit of $7,500 for first-time home buyers would be expanded to 10% of the purchase price, but no more than $15,000, and would not be limited to first-time home buyers. In addition to that, unlike the current credit, the new one would not be phased out for higher-income taxpayers. The new credit also would not have to be repaid to IRS over a 15-year period, as long as the purchaser didn't turn around and sell the house within two years.

If you want to get a souped-up homebuyer's credit, don't jump the gun. The current credit, along with the repayment obligation and phase-out for upper-incomers, continues to apply until the stimulus bill is signed into law. Once it's in effect, taxpayers would have 12 months to buy a home before the credit expires. Another reason to wait: Because of the provision's $35-billion price tag, it's very possible that the break will be scaled down when the two chambers meet to hammer out a final version of the bill. Conferees could add any of several limitations: phasing out the break for high-incomers, limiting it to first-time homebuyers or reducing the maximum credit amount to $10,000.

Are you in the market to buy a car instead? You're in luck, too. The Senate is proposing to boost sagging auto sales by allowing interest paid on loans to buy autos or light trucks to be deductible for 2009, even if the purchaser doesn't itemize deductions. This would apply to vehicles bought after Nov. 12, 2008, and before Jan. 1, 2010, although the House may insist on moving the start date to 2009. The benefit would begin to phase out for married couples with adjusted gross incomes over $250,000 and single filers with AGIs over $125,000. The Senate also proposes to give car buyers an above-the-line deduction for any state sales tax or excise taxes that were paid on the vehicles. The income phase-out is the same for this break.

Relief from the alternative minimum tax (AMT) is another Senate add-on. To keep millions more filers off the AMT rolls in 2009, the Senate would increase the minimum tax exemptions to $70,950 for joint filers and $46,700 for single taxpayers. Right now, the 2009 exemptions are at pre-2001 levels: $45,000 for married couples and $33,750 for singles. Congress won't let that stand.

Valentines Day & Taxes: 7 Tax Tips for Married Couples

It is almost Valentines Day, and love is in full bloom. Unfortunately, so is tax season, which is one of the busiest time of the year for millions of married couples. Between the ever-evolving tax code, dozens of new credits and deduction, it can hard for married couples to know where they stand. In the spirit of Valentines Day, I decided to put together the following list of my favorite tax tips for married couples.

1. The Marriage Penalty

The marriage penalty is a word that is commonly thrown around during tax season, but most people do not have a clue what this penalty is. The so-called penalty is levied on couples that make enough money to put them above the 15% tax bucket. It causes personal exemptions to phase out, reductions in itemized deduction limits, and a phase out of child tax credits for those with an adjusted gross income of $110,000 or more. However, there are several ways couples can still make the best of their marriage financially, and find other ways to save in their taxes.

2. Filing Status

Since you have the choice to file jointly or separately, you should always see which one costs less. However, figuring out which filing status benefits you most can be very difficult and confusing to figure out. If you are seriously considering changing your filing status, then I highly recommend you speak with a tax professional who can evaluate the pros and cons of every option.

3. Newlyweds

The first and foremost tax rule for newlyweds is to make sure that you are married, in the correct year. In order to qualify as “married” for tax purposes, you and your spouse must be married by December 31st of that year. If you changed your last name during marriage, you will also need to get an updated social security card with the new name for tax season.

4. Medical Expenses

If you or your spouse accumulated a lot of medical bills in the tax year, then filing separately may benefit you greatly. Taking the burden on in a joint return could result in less deduction choices, as well as probable overall return loss. But as with all changes to filing status, you want to make sure to thoroughly investigate your options before making a decision.

5. Tax Debt

Unpaid tax debts can be tricky once you become married, because it could expose your spouse to liability for some of your mistakes. Especially if you file a joint return. If your spouse was expecting a significant tax refund, he or she will be in for a rude awakening if the refund is held to pay-off your old debt. Luckily, the IRS has relief for this situation—Injured Spouse. However, if you have a large amount of unpaid taxes that you will not be paying off any time soon, then you should definitely consider filing separately. You should also consider informing your spouse of the underlying debt to avoid any unnecessary surprises.

6. Update Withholdings

After getting married you want to make sure to remember to adjust your withholdings at work, so that you do not overpay the government. Overpaying by a little bit is okay, but you want to make sure that your withholdings are as accurate as possible. No need to pay Uncle Sam any more money than necessary.

7. Consider Hiring a Pro

Unless you or your spouse works in the tax industry, I highly recommend hiring a professional to help you with your taxes. Even if you have been married and filing together for years, tax codes are always updating and changing. At least check with a specialist before sending your forms in make sure you have taken advantage of any and all credits and deductions.

What to Do If You Owe the IRS

From CNBC.com:

If you owe the IRS, you need to take action or they will levy your bank account, garnish your wages or seize your property. Here are three tips that will help you if you are in debt to the taxman, courtesy of tax attorney Roni Deutch:

1. Offer in Compromise: If you cannot afford to full pay the IRS but can afford to settle your debt for less money than what’s owed, you should file an offer in compromise with the IRS. The OIC program is wonderful and if you qualify, your tax debt is eliminated for far less money than what you owe. The IRS will evaluate your income, expenses and asset value before settling your tax matter for less money.

2. Installment Agreement: If you do not qualify for an Offer in Compromise then you should enter into an affordable monthly payment plan with the IRS until your liability is paid in full. Many people make monthly payments to the IRS but they will never full pay the debt. By making monthly payments, you are making a good faith effort to contribute something toward your debt and you will not be garnished or have money taken from your bank account.

3. Currently Not Collectible: If you owe the IRS and have absolutely nothing, they will classify you as CNC and they will leave you alone! Again, you continue to owe the taxes but at least they have thrown you into a black hole and you will no longer be bothered. When you get a job or land on your feet again, you must call the IRS and work out a payment arrangement or file an OIC.

Tax Court Takes Swipe at Daschle-Geithner-Killefer-Solis

The Tax Professor blog recently posted an entry discussing the tax courts taking an evident swipe at the recent surge in publicized famous tax evaders. You can find a segment of the article below, but the full post can be found here:

The Tax Court yesterday held that the IRS did not abuse its discretion in refusing to accept her proposed offers in compromise, upheld the IRS's tax lien and levy against her, and upheld the IRS's refusal to abate tax penalties. Taylor v. Commissioner, T.C. Memo. 2009-27 (Feb. 5, 2009). In its conclusion, the Tax Court appeared to take a swipe at Tom Daschle, Tim Geithner, Nancy Killefer, and Hilda Solis:

Both petitioner and respondent repeatedly commented on petitioner's stature as a beloved and well-known professional singer as support for their respective positions in these consolidated cases. We disagree with both parties insofar as they contend that a taxpayer's celebrity status is somehow relevant to what this Court must do in deciding whether the Commissioner's collection action may proceed. Every taxpayer, no matter how famous or notorious, has a legal obligation to honestly report and pay his or her income tax liability each year and is entitled to fair enforcement of Federal tax laws. ... Respondent gave petitioner ample opportunity to rectify her failure to pay estimated tax when due and considered petitioner's collection alternatives in accordance with applicable administrative and legal requirements.

FAQ: Senate Stimulus Bill’s Home Buyer Tax Credit

From the Wall Street Journal:

Readers are posing many different questions about the proposed $15,000 homebuyer tax credit that is in the Senate version of the economic stimulus bill. It’s important to remember that the proposed credit is far from a done deal. The bill still has a couple of big hurdles, including tomorrow’s scheduled vote in the Senate. (Read the Senate version.)

If it passes, it will have to be reconciled with the House version of the stimulus bill, which modifies an existing $7,500 homebuyer credit, repealing a provision that requires buyers to pay it back.

There are some big differences between those two versions. The Senate version is nonrefundable, meaning you can only receive the credit if you owe federal income taxes. The existing credit is refundable, meaning you get a check from the government even if you don’t owe income tax. Moreover, the current credit applies to first-time home buyers, defined as anyone who has not bought a house in three years. The Senate version is open to existing homeowners.

Here are some more Frequently Asked Questions. Please note that the answers may change as the Senate bill changes:

If I bought a home and used the $7,500 homebuyer tax credit, can I retroactively receive $15,000 credit if it becomes law? No.

Are there any income restrictions on the tax credit? The Senate version currently has no income limits. The current $7,500 tax credit phases out on buyers with incomes exceeding $75,000 for individuals and $150,000 for married couples.

When will the new tax credit go into effect? The Senate version would take effect when the bill is signed by the president into law, and it would last for one year.

Can I take the tax credit this year? Yes. The Senate proposal would allow buyers — even those who purchase in 2009 — to claim the credit on their 2008 taxes.

The proposed tax credit is nonrefundable. What does that mean? You can only receive the credit to the extent that you owe federal income taxes. The Senate proposal would give home buyers two years to claim the credit, so buyers could claim a $7,500 credit in 2009 and a $7,500 credit in 2010. A family of four that makes less than $82,000, for example, could have a tax liability of less than $7,500 and they would not receive the full value of the credit.

Are there any repayment requirements on the tax credit? No. The Senate proposal does not require the credit to be paid back. The House proposal eliminates a 15-year repayment provision on the existing $7,500 tax credit.

If I am eligible for the current $7,500 credit, am I also eligible for the $15,000 credit? While the $15,000 credit has fewer restrictions than the existing credit, there is one big difference: because the credit is nonrefundable, if you have a low federal income tax liability, you could end up receiving more money with the current credit than the larger, proposed credit.

Are there any increased down payment requirements on the proposed tax credit? No. A separate measure has been introduced in the House that would expand the tax credit to $15,000 but would require a 5% down payment on mortgages. The Federal Housing Administration currently requires a minimum 3.5% down payment.

Can I use the tax credit to buy a second home? No.

How long do I have to live in my home after I purchase it with the tax credit? The Senate version requires buyers to pay back the credit if they sell the house less than two years after they buy

Labor Secretary Nominee Has Tax Problems Too

Web CPA recently discussed another of Obama’s cabinet nominee’s who is having tax problems, Hilda Solis. A snippet of the post can be read below, but the full text can be read here.

In the latest sign of tax trouble in the Obama cabinet, Labor Secretary-designate Hilda Solis’ husband had tax liens filed against him.

Confirmation hearings for Rep. Solis, D-Calif., were delayed after news of the tax problems surfaced. The White House admitted to the latest tax snafu after USA Today discovered 15 tax liens dating back to 1993 from the State of California and Los Angeles County totaling $7,630, some of which have since been paid. The tax liens had been filed against Solis’s husband, Sam H. Sayyad, and his business, Sam’s Foreign and Domestic Auto Center. Sayyad paid $6,400 this week to settle the outstanding tax liens, but still plans to appeal them.

Solis is the fourth nominee to the Obama administration to face tax questions in recent weeks. Earlier this week, former Senate Majority Leader Tom Daschle withdrew his nomination for secretary of Health and Human Services after he was forced to pay $140,000 in taxes and interest, mainly for the use of a car and driver provided by a private equity firm between 2005 and 2007.

Treasury Secretary Timothy Geithner also needed to pay over $42,000 in taxes, interest and penalties for self-employment taxes that he owed from work he did between 2001 and 2004 for the International Monetary Fund.

The Pros and Cons of President Obama’s New Stimulus Proposal

Although President Obama’s new stimulus bill has been on the table for a while now, it “new” bill nonetheless. Constant revisions and bi-partisan oppositions are making the bill an ever-changing and ever-controversial subject on Capitol Hill. Even politicians are having trouble keeping up on the status of the bill, and we as busy Americans have to rely on the media to provide information on the bill. To help some of my readers who are having trouble making a choice on how they feel about the bill, I have put together the following list of pros and cons.

Pro: Job Creation

The main goal of Obama’s stimulus proposal is to create jobs, however not everyone aggress that the package will do so. The Obama team compares the plan to Franklin D. Roosevelt’s “New Deal,” in that it will directly create millions of jobs by funding constructions projects such as repairing bridges, roads, water systems, levees, schools, and electric grids, etc. The idea is that by giving construction workers back the jobs they had lost due to canceled projects and stringent state budgets that they will leave their current positions creating other job openings for Americans to fill. However, decades later people are still debating whether FDR’s new deal was effective or not.

Con: Use of Scare Tactics

Unfortunately, in order to get the legislation passed as quickly as possible the Democratic leadership has resorted to using a wide variety of scare tactics. I’m sure everyone has heard about Nancy Pelosi’s gaffe the other day where she said that 500 million Americans lose their jobs every month and that this legislation needed to be passed as soon as possible. Keep in mind that there are only 300 million Americans currently living in the country.

The point is that with the amount of money being put into the stimulus proposal it should not be rushed using scare tactics. Look what happened with the federal bailout of the banking industries. Congress rushed legislation and to this day there are still billions of dollars in funds that are unaccounted for. Additionally, news just came out the other day showing that the federal government wasted billions of dollars by purchasing the assets at highly inflated prices.

Pro: Obama Open to Compromise

While there are plenty of disagreements on certain aspects of the proposal, on January 27th, Obama stated that he was "open to compromise". While this may not seem like a pro to some, it is definitely a good thing that the President publicly announced that he was open to compromise. Unfortunately, he was quite hesitant to actually make changes to the legislation.

Con: Lack of Support

Although Obama was able to get his proposal to pass the House of Representatives, without a single Republican vote, many are worried about the fate of the bill in the Senate, where the Democrats do not have a filibuster proof majority. Additionally, according to a recent Rasmussen Reports survey, about half of Americans think that the package will make the economy worse instead of better.

Pro: Mortgage Relief

One of the largest problems Republican leaders had with Obama’s original stimulus package was that it did not do enough to provide relief to the house and mortgage industry, which was a leading cause of the recession. Fortunately, Obama’s team listened to the suggestions, and have added multiple different measures to help struggling homeowners including a $15,000 credit for anyone who purchases a house in 2009.

Con: Strong Conservative Opposition

The Republican leadership has been fighting hard against the bill since before it was officially drafted. They argue that spending upwards of a trillion dollars is a dangerous move in our country’s current economic state, and have been working to reduce the total cost of the legislation.

Pro: Energy Efficiency

As part of Obama’s proposal, $54 billion is being dedicated to clean power and energy efficiency. Although it may seem like wasteful spending to some, this is the first step in many steps Obama promised during his campaign to reduce our reliance on oil. The plan will include $32 billion for renewable energy, smart grid technology, and transmission lines, $16 billion to make essential eco-friendly retrofits and repair public housing, and $6 billion to efficiently weatherize modest-income homes. Weather or not you agree with Obama’s plan to reduce our dependence on oil, it is definitely good that he is following up on a campaign promise.

Con: The Looming Trillion

The goal for the stimulus package is to stay "under the trillion dollar mark". However, as the package price tag creeps up in to the $900 billion area, financial experts are beginning to worry. New changes and discrepancies arise every day, as new sections are being reviewed every hour. However, it seems like although changes are being made, the total cost is increasing, not decreasing.

Pro: Computer Centers at Community Colleges

Although there has been some controversy about the $200 million for public computer centers at community colleges in the bill, there is good reason to support it. Providing more computer access to community colleges will provide students with the unlimited resources that the Internet has to offer. Obama has said that we need create more scholars and promote growing minds if we want to get this country back on track.

Con: Buy America

Unfortunately, when Obama launched his campaign to get the legislation passed, he angered international groups including the European Union with his “Buy America” package. The idea behind it would be to encourage people to purchase and use American made products, however this is bad news for international trade and intensified international fears of a trade war. Fortunately, Obama was quick to remove this section from the legislation once it garnered international criticism.

Save Big Bucks on your Taxes

For those of you who do not already know, I am releasing my first book on the 15^th of the month, The Tax Lady’s Guide to Beating the IRS and Saving Big Bucks on your Taxes. To coincide with the release, we have launched a new website TaxLadyBook.com, where you can find tons of information about the book and upcoming media appearances. You can also download a free digital copy of the first chapter. So be sure to check out the link below, and check out my book when it hits stores later this month!

On The Money, with Carmen Wong Uhlrich

Yesterday, to my surprise, I was added as a last minute guest to CNBC’s On the Money, with Carmen Wong Uhlrich. Via satellite, I answered specific viewer’s tax questions. See the clip by clicking here: http://www.cnbc.com/id/15840232?video=1022085138.

Departures Tarnish President’s Ethics Drive

The Financial Times recently posted an article discussing Obamas’ nominees that have recently withdrawn due to tax problems, and how they affect his presidency and the country. A section of the article can be read below, but the full post can be found here.

There could not have been a worse time of year for revelations to emerge about unpaid taxes by Tom Daschle and other prospective members of Barack Obama’s administration.

Over the next few weeks, millions of people will go through the onerous process of preparing their annual tax returns before the April 15 filing deadline.

The more sympathetic-minded might empathize with Mr. Daschle’s mistake, given the head-scratching complexity of US tax rules.

But many others are likely to feel angered that a Washington power broker skipped more than $140,000 of taxes, while ordinary people scramble to meet their liabilities at a time of mounting economic hardship.

“Tom Daschle, like Leona Helmsley, believes that only ‘the little people’ should pay taxes,” said Grover Norquist, president of Americans for Tax Reform, quoting a notorious New York real-estate investor. “He thinks he’s too important for that, and he gives the word hypocrisy a bad odor.”

Mr. Daschle is hardly the first nominee for high office to be tripped up by tax irregularities. President George W. Bush lost two nominees – Linda Chavez for labor secretary and Bernard Kerik for homeland security chief – after it emerged that they did not pay Social Security taxes on the salaries of domestic employees.

President Bill Clinton saw his first two nominees for attorney-general – Zoe Baird and Kimba Wood – withdraw because of similar “nanny tax” violations.

Mr. Daschle might have survived his scandal had he been the only Obama nominee to face tax problems.

Treasury Overpaid For Bank Stocks

From Breitbart.com:

A government watchdog group says the federal government overpaid for stocks and other assets from financial institutions under its $700 billion rescue program.

The chairwoman of the Congressional Oversight Panel for the bailout funds told the Senate Banking committee Thursday that Treasury in 2008 paid $254 billion and received assets worth about $176 billion.

The figures were reached by extrapolating the results of a study of 10 government transactions.

The Treasury by Jan. 23 had spent about $294 billion on more than 300 companies under the Troubled Asset Relief Program. In one bright spot, the inspector general in charge of reviewing the funds said the federal government has received more than $271 million in dividends from preferred shares obtained through the program.

Senate Adds Homebuyer Tax Credit to Stimulus Bill

Last night the United States Senate added yet another revision to Obama’s massive stimulus package. To help gain bi-partisan support, Democratic leaders have listened to conservative experts and added new credits for taxpayers who purchase a home in 2009. The New York Times posted an article this morning discussing the revisions, check out a section of the article below.

The Senate on Wednesday voted to expand the economic stimulus package with a tax credit for homebuyers of up to $15,000, a provision championed by Republicans as addressing a root cause of the recession.

The vote to add the tax credit, at a cost of about $18.5 billion, came as Senate leaders seemed to be nearing completion of negotiations. The majority leader, Senator Harry Reid of Nevada, suggested that a final vote on the stimulus plan could come on Thursday.

Moderate lawmakers in both parties are pushing to reduce the overall cost of the measure and to focus it more tightly on provisions that will quickly spur spending and create jobs. The vote came as President Obama met with centrist lawmakers to address concerns about the package.

Mr. Obama, while expressing willingness to compromise, also issued a warning to some Republican critics who have said they will press for major changes to the bill, including the removal of many spending programs in favor of wider tax cuts.

“I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis, the notion that tax cuts alone will solve all our problems, that we can ignore the fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive,” he said.

“I reject that theory,” Mr. Obama continued, “and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay.”

Higher Cigarette Tax Is Very Sensible

From The Wall Street Journal:

The Feb. 2 editorial "The New Poor Tax" is based on the same old faulty logic that manufacturers have been making for decades whenever cigarette tax hikes are suggested as a means of paying for social programs. There is no argument that cigarette taxes discourage consumption especially among the poor, who can least afford to be addicted to cigarettes.

Ninety-five percent of those who smoke say they regret their decision ever to start. The majority of smokers say they want to quit, so why is it so bad for the government to provide an economic incentive to help move smokers to cut down or quit? The U.S. has one of the lowest tax rates on tobacco in the world and the meager 39 cents-per-pack tax is hardly enough to pay for the massive annual medical bill caused by smoking.

By boosting the federal tax by the proposed 61 cents-per-pack to pay for the children's insurance fund, Congress will not only maintain a much-needed health insurance program but will also help reduce smoking.

Confusion Over Recovery Rebate Tax Credit for 2008 Tax Returns

Although tax season just stated, the IRS is already reporting mistakes on tax returns, 15% of which are associated with the recovery rebate tax credit, writes MSNBC.com. You can find a portion of the article below, but the full article can be found here.

IRS staff say they have seen many errors on 2008 tax returns already. 15% of the mistakes are over the recovery rebate credit. The recovery rebate tax credit is an extension of last year's economic stimulus payment.

That money was spent in 2008, so the IRS is giving people whose situation changed more money. The IRS wants taxpayers to make sure they're eligible for the credit before they file their 2008 tax returns.

IRS representative Judy Monahan says most people won't receive additional money. She explains, " We paid out 119-million stimulus payments last year, so that's why most tax payers got all they were to get, but there could be certain circumstances where you could get more now."

Those circumstances include people who didn't file a 2007 tax return, had a kid in the last year, and were dependents last year, but can no longer be claimed.

Nominees' Tax Problems Could Prompt More People To Cheat

From USA Today:

The high-profile tax missteps of three of the Obama administration's key nominees could make it more difficult for the IRS to enforce the law, tax preparers and academicians say.

Numerous studies have shown that taxpayers are less likely to comply with the law if they believe other taxpayers are cheating, says Jason Mazzone, associate professor of law at Brooklyn Law School. "Taxpayers don't like to be suckers," he says.

On Tuesday, tax problems derailed the nominations of former Senate majority leader Tom Daschle for secretary of Health and Human Services, and Nancy Killefer as the government's chief performance officer. Earlier, Treasury Secretary Timothy Geithner's nomination was delayed by revelations that he had failed to pay self-employment taxes.

"I think a number of Americans will take a look at this and say, 'If they're getting away with it, why shouldn't I?' " says Scott Sandstrom, associate professor of accounting at the College of the Holy Cross in Worcester, Mass.

Americans are among the most law-abiding taxpayers in the world, in part because the IRS uses computer matching programs that make it difficult to cheat, says Walter Pagano, a former IRS agent who is a partner at accounting firm Eisner.

According to a new survey by the IRS Oversight Board, 89% of Americans believe it's unacceptable to cheat on taxes.

Still, the IRS estimates that $300 billion in taxes owed goes uncollected every year.

Tax Issues Force Nancy Killefer To Bow Out

Nancy Killefer, who Obama had in consideration for federal government's chief performance officer, has just resigned from consideration due to tax issues, writes the Washington Business Journal. The article can be read below, but you can find the full text here.

Tax troubles have tripped up another Obama administration official.

Nancy Killefer withdrew from consideration to be the federal government's chief performance officer -- a new position -- because of her past failure to pay unemployment taxes for household help at her D.C. home.

"I recognize that your agenda and the duties facing your chief performance officer are urgent," Killefer wrote in a letter to President Barack Obama Tuesday. "I have also come to realize in the current environment that my personal tax issue of D.C. unemployment tax could be used to create exactly the kind of distraction and delay those duties must avoid. Because of this I must reluctantly ask you to withdraw my name from consideration."

Killefer has been a senior director at McKinsey & Co. and worked in the Treasury Department during the Clinton administration.

Obama created the chief performing officer position to set performance targets for federal agencies and hold managers responsible for reaching these targets.

IRS Raids Vegas Casino As Part of Investigation Into Former Fry's Executive

From The Mercury News:

The Internal Revenue Service (IRS) has expanded its investigation into a former Fry's executive, with agents seizing financial records and interviewing employees from at least one Las Vegas casino last week.

Federal agents on Thursday visited the Venetian, a casino and hotel along the Vegas Strip which Ausaf "Omar" Siddiqui, 43, had frequented, IRS spokeswoman Arlette Lee confirmed Monday.

She declined further comment, saying the search warrants have been sealed.

Siddiqui was charged in mid-December on allegations that he was part of a $65 million kickback scheme, where he supposedly charged vendors exorbitant fees to place their products on Fry's shelves, and pocketed the money to pay off huge gambling debts. He was formally charged in January on nine counts of wire fraud and money laundering. The Palo Alto resident is on house arrest and is scheduled to appear in San Jose's federal court Wednesday morning.

John Beckmann, 47, of Las Vegas and Siddiqui's "casino host" at the Palms Casino, told the Mercury News on Monday in an exclusive interview that he was questioned for "a couple of hours" by two IRS agents Wednesday afternoon. Beckmann essentially catered to Siddiqui's every need when he gambled at the Palms for three years.

Tom Daschle Asks President Obama To Withdraw His Nomination for Health And Human Services Secretary

Daschle, who has been fighting for his Health and Human Services Secretary seat, has just requested his name be withdrawn from Obama's list, writes CNN.com. A segment of the article can be found below, but the full story can be found here.

Former Sen. Tom Daschle has withdrawn his nomination to head the Department of Health and Human Services, according to a statement from the White House.

Daschle had been fighting to save his nomination as HHS secretary following controversy over his tax records and questions over his work in a field that some consider lobbying.

In a statement announcing his withdrawal, Daschle said it was an honor to be chosen to lead the reform of America's health care system.

"But if 30 years of exposure to the challenges inherent in our system has taught me anything, it has taught me that this work will require a leader who can operate with the full faith of Congress and the American people, and without distraction," he said.

"Right now, I am not that leader, and will not be a distraction. The focus of Congress should be on the urgent business of moving the President's economic agenda forward, including affordable health care for every American."

The Obama administration had stood by his side, and fellow Democrats lined up behind him, but Daschle's problems, coupled with other nominees' issues, gave critics ammunition to question President Obama's call for a "new era of responsibility."

The president said Tuesday he accepts Daschle's decision "with sadness and regret."

"Tom made a mistake, which he has openly acknowledged. He has not excused it, nor do I. But that mistake, and this decision, cannot diminish the many contributions Tom has made to this country, from his years in the military to his decades of public service. Now we must move forward, with our plan to lift this economy and put people back to work," Obama said in a statement.

Daschle's resignation followed Nancy Killefer's withdrawal as Obama's chief performance officer, a new post in the administration.

Officials said privately the reason for Killefer's withdrawal was unspecified tax issues. The much-touted post was designed to scrub the federal budget.

Daschle, the former Senate majority leader, apologized Monday for failing to pay his taxes in full. He said earlier he was "deeply embarrassed" for a series of errors that included failing to report $15,000 in charitable donations, unreported car service and more than $80,000 in unreported income from consulting.

Daschle recently filed amended tax returns and paid more than $140,000 in back taxes and interest for 2005-2007.

A New York Times editorial on Tuesday called for Daschle to withdraw.

The paper's editorial board particularly took issue with Daschle saying he identified the unpaid taxes in June but did not pay them until his nomination for the top post at the Department of Health and Human Services.

The editorial also criticized Daschle for generating a sizable income from health-related industries while working in the private sector.

IRS Seeks Members for Electronic Tax Administration Advisory Committee

According to the IRS’ latest press release, they “are accepting applications to fill vacancies on the Electronic Tax Administration Advisory Committee. The committee members provide the IRS with constructive observations about current or proposed policies, programs and procedures in electronic tax administration.

Applicants should submit a resume and complete an application form by April 3, 2009. A notice in the Federal Register contains more details about the committee and application process.

The ETAAC provides an organized public forum for the discussion of issues in electronic tax administration. The ETAAC supports the overriding goal that paperless filing should be the preferred and most convenient method of filing tax and information returns. The ETAAC's members are approved by the Secretary of the Treasury and serve a three-year term. Each June, the ETAAC submits an annual report to Congress about the IRS’ progress with electronic transactions.

Membership will include tax practitioners and preparers, transmitters of electronic returns, tax software developers, large and small businesses, employers, payroll service providers, financial industry representatives, system integrators (technology providers) and academics (marketing, sales and technical perspectives).

Requests for more information or completed applications should be sent to etaac@irs.gov or faxed to 202-283-4845. This is not a toll-free number.”

Treasury Faults IRS in Handling Tax Evaders

From The New York Times:

An Internal Revenue Service (IRS) effort to flush out wealthy investors in abusive tax shelters has fallen short, according to a government watchdog report released on Monday.

The report, by the Treasury inspector general for tax administration, concerned investors in what was known as Son of Boss, one of the most sophisticated and widely used abusive tax shelters of the late 1990s through recent years.

It said that for the shelter, more than one in four, or 27 percent, of investors who enrolled in an IRS program intended to root them out had later failed to pay their taxes on time, filed their returns late or failed to file them at all.

While the IRS did not dispute the data in the report, it called unfounded its comparison of the Son of Boss settlement program with a broader initiative, known as offer in compromise, which allows ordinary taxpayers to settle their tax bills for a percentage of the amount owed.

The report said that 96 percent of its survey of a tiny sample of taxpayers who had made offers in compromise for 2004 ended up paying their taxes on time — far more than the 73 percent of Son of Boss investors.

“The comparison presented in the report is flawed as it compares offers in compromise, which involve a much simpler administrative process for taxpayers that do not dispute that they owe taxes to the government, with the Son of Boss initiative, where numerous taxpayers were involved in complex disputes over the tax due,” the IRS said in a statement.

It added that the 27 percent of investors who had agreed to the settlement but were still behind schedule in paying faced about $30 million in fines.

The IRS announced its settlement for Son of Boss investors in 2004 and said Monday that it had prompted more than 1,100 wealthy taxpayers to come out of the shadows and pay more than $3.8 billion in federal income taxes that they had been evading illegally.

The agency said previously that it had known the names of about 2,000 investors who bought the shelter to evade a total of $6 billion in federal taxes, out of a total estimated 5,000 users.

"Girls Gone Wild" Creator Arrested In LA For Tax Evasion

Reuters recently discussed the arrest of Joe Francis, creator of the “Girls Gone Wild” videos, for tax evasion. A snippet of the article can be read below, but the full article can be read here.

"Girls Gone Wild" founder, Joe Francis, was arrested by U.S. marshals on Monday when he arrived five hours late to a court hearing over a request by his law firm to withdraw as his legal counsel in a tax case.

U.S. District Judge S. James Otero issued a warrant for Francis' arrest on Monday morning, when he failed to appear for the hearing at the set time, said Thom Mrozek, a spokesman for the U.S. Attorney's Office.

Francis finally arrived at the hearing in the afternoon, indicating he was suffering from the flu, and U.S. Marshals arrested him, said defense attorney Melissa Weinberger.

Weinberger said that she would try to have Francis released after he is processed.

Francis became a multimillionaire by selling the "Girls Gone Wild" videos of young women baring their breasts, usually at parties with free-flowing alcohol. He could not be reached for comment on Monday.

He is facing charges in a tax evasion case that was filed in 2007 by authorities in Nevada but transferred to L.A. because that is where he lives.

Francis is accused of failing to pay taxes on more than $20 million in business expenses. The tax trial is due to start in March. If convicted, he faces up to 10 years in prison.

60 Seconds With Roni Deutch

The New York Post recently posted an article on me titled “60 Seconds With Roni Deutch.” The interviewer, Brian Moore, asked me about tax breaks for Americans looking for new employment, check out the interview below.

W-2s and 1099s went out at the end of last week. How can those looking for work cut into what they owe the IRS?

Uncle Sam lets you deduct expenses related to the search for a new job. But here's the caveat: It's got to be in the same line of work.

Here's what you can deduct: employment and outplacement agency fees. Resume services. Print and mail costs, including overnight mail. Any type of ad you place to find a job. Telephone calls, including long distance. Any travel expenses - hotels, food, rental cars, plane tickets.

Is there a catch?

Expenses are only deductible if you itemize them on your tax return, so you can't take the standard deduction. And you can only deduct expenses that exceed 2 percent of your adjusted gross income. So if you had an AGI of $30,000, you can only deduct expenses over $600.

Also, the IRS wants you to look for your new job either a) while you still have your current job, or b) very quickly after you left your old job. If there was a substantial break between your last job and the time you finally got off your butt to look for your new job, they're not going to let you take any deductions.

Are moving expenses deductible, if you relocate for a job?

Yes - unless your new employer paid them. If they reimburse you for any job-hunting expenses, you've got to include that as income, because the employer is going let the IRS know. Don't get caught with your pants down.

GM Pleads for Relief on Taxes

The NY Times discussed GM and their newest financial problems in a recent post. GM is asking for more financial relief, in their taxes. A segment of the article can be read below, but the full post can be found here.

General Motors (GM), which is borrowing $13.4 billion from the federal government to remain solvent, is pressing Congress to waive a tax liability of as much as $7 billion related to the overhaul plan that it is completing this month, people with knowledge of the discussions said on Sunday.

The tax bill, which could be enough to force the company into bankruptcy, would be a consequence of the terms that the Treasury Department required as part of the rescue package approved last month by the Bush administration. In accepting the loans, GM pledged to persuade its creditors to swap a large chunk of the automaker’s debt for equity in the company.

The equity-for-debt exchange is aimed at ensuring GM’s viability in the future, but under corporate tax law, the swap would amount to debt forgiveness and count as income for G.M. The resulting tax bill could take GM’s cash level below the minimum needed for daily operations.

GM is lobbying Congress to reduce or eliminate the tax liability, said people with knowledge of the effort, who spoke on the condition of anonymity because the discussions were private. The Detroit News first revealed the lobbying effort on Friday.

More States Considering Tax Breaks to Woo Jobs

From the Wall Street Journal:

Rising unemployment has touched off a race among state governors to woo companies with tax breaks and financial incentives, even as budget shortfalls force cuts in education, health care and other services.

Governors from both parties and from states large and small are counting on the federal stimulus package—passed by the House last week and headed for the Senate—to perk up their economies and create tens of thousands of new construction jobs, but they're not convinced it will be enough. So they've laid out urgent calls to chase private-sector jobs with public money.

Under Gov. Jon Corzine, a Democrat, New Jersey has promised to send small businesses a $3,000 check for every new hire. Minnesota Gov. Tim Pawlenty, a Republican, calls for an expansive package of business tax cuts, including tax-free zones for companies that create "green jobs."

Other states are considering establishing multimillion-dollar loan funds for entrepreneurs, phasing out the corporate income tax, and pledging financial backing to banks willing to extend lines of credit to small businesses.

As he prepared his budget last week, Missouri Gov. Jay Nixon, a Democrat, could hear the chants from a rally of child-welfare advocates outside his office window. Mr. Nixon said he expected anger over his plan to slash the state work force by 1,300 and eliminate or trim dozens of programs. Among his proposals: a $14.6 million cut for university extension courses, a $3.4 million cut for rural health care, and a $250,000 cut for early-childhood literacy programs.

Mr. Nixon says he needs those savings to balance the budget while still expanding—by about $20 million—incentive funds that underwrite corporate job creation. Mr. Nixon's staff cites a deal announced last July with Orgill Inc., a national hardware wholesaler, which received more than $7 million in state aid to build a distribution center in rural Sikeston with a goal of creating 350 jobs.

That amounts to a subsidy of $20,000 per job, but officials expect the state treasury to recoup that many times over in taxes paid by the newly employed.

"Everything stems from jobs," Mr. Nixon said. "Now is not the time to back off the field of economic development."

Daschle Apologizes for Income Tax Errors

From Washington Post.com:

Thomas A. Daschle, fighting to defend his nomination to be secretary of health and human services, released a letter early today apologizing to the top lawmakers on the Senate Finance Committee for mistakes on his personal income tax returns that resulted in $146,000 in back payments.

"I am deeply embarrassed and disappointed by the errors that required me to amend my tax returns," he wrote to Sen. Max Baucus (D-Mont.) and Sen. Charles E. Grassley (R-Iowa). "I apologize for the errors and profoundly regret that you have had to devote time to them."

Daschle, who served as majority leader of the Senate, had once been expected to be confirmed easily by his former colleagues. But the tax problems, which were first reported Friday night, could pose a potential obstacle to the former senator from South Dakota.

Appearing briefly before reporters this morning at a White House meeting, President Obama, a close Daschle ally, said he "absolutely" stands by his nominee.

That support was reiterated by White House spokesman Robert Gibbs at his briefing with reporters today.

"We believe that the committee and the Senate as a whole will examine not just one mistake in [Daschle's] career but look at that longer, three-decade career of public service, of serving this country, serving the constituents both in South Dakota and across America," Gibbs said. "The president believes that Senator Daschle is the right person for the very important job of ensuring that we cut costs, reform our health-care system and finally give the American people, in health care, the outcomes that they deserve."

Top 9 Tax Tips for the LGBT Community

Taxes have become a major financial issue for members of the LGBT community over the years. 11 million unmarried couples living in this country are missing out on the over 1,100 federal laws benefiting married couples. For this reason, many couples around the country get stressed every tax season with the task of saving on their taxes, without the benefits of federally recognized relationships.

Last month, my law firm joined the Sacramento Rainbow Chamber of Commerce. Throughout tax season, both the Roni Deutch Tax Center® and my law firm are reaching out to members of the LGBT community who need help with taxes. To kick-start our efforts, I have compiled the following 9 tax tips for members of the LGBT community.

1. Mortgages

When it comes to mortgages, the best way to save money on your taxes is to plan in advance which person should take the mortgage out. If you are making $45,000 a year and your partner is making $150,000, it makes more sense for your partner to take out the mortgage. This is because the higher income-earning partner can then claim the mortgage interest deduction over the years, and save more due to being in a higher tax bracket.

2. LGBT Friendly Help

Ask friends, family, and community members if they know of a tax professional that specializes in LGBT taxes. When it comes to taxes for unmarried couples, you can use all the advice you can get! Most tax professionals will be able to help you to some extent, but having a specialist in your area will ensures you are doing all you can to make your taxes as low as possible. It also improves your chances of taking advantage of any benefit you do get.

3. Gift Tax Exclusion

A married couple has the great benefit of being able to give gifts to each other without having to pay gift or estate taxes. Unfortunately, couples within the LGBT community cannot do the same. There is however, the annual gift tax exclusion, which when used properly, can make up for some of this injustice. The annual gift tax exclusion allows you to gift $13,000 worth of assets without paying taxes on them.

4. Charity Contributions

Charitable contributions can greatly help you reduce your tax liability. Much like the mortgage interest, you are going to want the partner with the highest income making your charitable contributions—and getting to claim the resulting deduction.

5. Be Prepared for Anything

When living with a partner that you cannot legally marry, it is important that you are both vigilante when it comes to your finances. No one wants to think it, but if your relationship ends, you are not protected the same way as a married couple is for purposes of dividing assets. If there is no agreement governing the relationship, asset ownership is pretty much going to come down to who bought or funded what. This may not seem fair, as you may have made purchases based upon who benefited most, taxes-wise. When you begin building up many valuable assets, hiring a lawyer to draw up documents is smart. Consider entering a cohabitation agreement to govern your finances during the relationship and providing the framework for splitting assets if your relationship goes sour.

6. Asset Shifting

You should also consider moving assets between you and your spouse to save on interest. Since you have the lower income ($45,000), you will want to shift more income-earning assets towards yourself. This way, you will be taxed at a lower rate on the income earned than your partner ($150,000) would. The ability to asset shift is actually a huge benefit when compared to married couples, who cannot asset shift if filing jointly.

7. Inheritance Taxes

If you and your partner are registered civil partners and your partner passes away, you do not have to pay inheritance taxes at all. However, if your state does not recognize registered civil partners, your partner may, in fact, be subject to estate taxes before the bequest.

8. Separate Accounts

Separate accounts will simplify financial management for you and your partner. You may also consider three accounts—one account for yourself, one for your partner, and one joint account. Use your separate accounts to pay individual bills and taxes from. Also, use the separate accounts to deposit your income into. Then, each of you can fund the joint account to pay shared expenses (e.g. groceries, trips, etc.).

9. Capital Gains

If you and your partner are registered domestic partners, then you can give assets to your civil partner and not pay any capital gains taxes whatsoever. Along with inheritance taxes, this is one of the few big tax advantages civil partners get over unmarried heterosexual couples.