Obama Auto Plan Raises Questions, Provokes Impatience

From USAToday.com:

Politicians are starting to weigh in on President Obama's plan for General Motors and Chrysler.

Democratic congressional leaders Harry Reid and Nancy Pelosi issued supportive statements. Republicans were more mixed.

Senate GOP leader Mitch McConnell is impatient. "How many times do the taxpayers have to provide bailout money on the promise of reform?" he asked.

McConnell said Republicans called for "true reform" last year and instead the Bush administration bailed out the companies. "The (Obama) administration says these reforms must now be taken seriously or the taxpayer bailouts will end. While that should have happened tens of billions of dollars ago, we agree that it’s time to get serious," McConnell said.

Bloggers are raising other issues. At The Atlantic, Marc Ambinder wonders if there was any way GM could have satisfied the government's demands. Conservative Ed Morrissey says the new government warranty on GM and Chrysler vehicles amounts to a new federal level DMV.

Doug Heye at The Hill says Obama has created a New Business Order. And the liberal Talking Points Memo wonders why GM CEO Rick Wagoner got the boot, but CEOs of struggling banks are still in their jobs and on the government dole.

Republican Sen. George Voinovich of Ohio said he feels for the two companies' insecure employees and is "extremely disappointed that the administration believes GM and Chrysler did not go far enough in their viability plans."

He also said, however, that he gives the administration credit for insisting on viability and hopes it will be "unrelenting" in its pressure on GM.

Varnum Tax Attorneys Feel the Impact of New IRS Settlement Offer

Tax attorneys from the Law Offices of Varnum recently published a press release on the impact the IRS’s new settlement offer is putting on their business. Check out a portion of the release below, or you can read the full text here.

Varnum tax attorneys are taking calls and client engagements, due to IRS offers of settlement with offshore income, as overseas banks begin to turn over tens of thousands of names and account information to the IRS.

Paul L.B. McKenney, who specializes in federal taxation for Varnum, said between phones calls, “We are stressing to most of the callers two points: first, the IRS settlement penalty of a onetime 20% of account balance versus up to 50% per year is a great deal. Second, you better bite-the-bullet because it is only a matter of time before the IRS receives the investor’s names and other identifying information. If you do not take advantage of this once-in-a-lifetime offer, you will likely face criminal prosecution at some point and it will not be in a Martha Stewart federal facility.”

The tax group received numerous inquiries as countries started turning over US taxpayer account numbers and records over the past few months. But the “Last Chance Compliance Initiative”, just announced by the IRS, has really increased the number of calls into Varnum offices.

McKenney went on to say, "Those that have not disclosed the accounts and not claimed the interest or investment income of these overseas accounts better understand the wording of the IRS agreement before they sign on the dotted line. Phrases like, "fully cooperate with the IRS both civilly and criminally," sound simple but mean much more. So before you go in to meet with the IRS, you should see a good tax attorney. "

The IRS settlement offer is good for six months. Varnum strongly suggests that those who have not been reporting taxable income heed the advice of the IRS Commissioner, Doug Shulman, when warned that for those, “who continue to hide their heads in the sand, the situation will only become more dire.”

IRS Agent Pleads Guilty In Tax Fraud

From The Los Angeles Times:

An IRS agent whose job entailed conducting audits of taxpayers agreed to plead guilty Monday to a federal charge of cheating on his own taxes, authorities said.

Jim H. Liu, 43, of Diamond Bar signed court papers admitting that he filed a false tax return for 2002 that cheated the government out of nearly $15,000, according to the U.S. attorney's office in Los Angeles.

According to a plea agreement filed in U.S. District Court in Santa Ana, Liu sold a property in Pomona for a profit of more than $48,000 that year. But he claimed on his taxes that the transaction resulted in a loss of $4,200.

Liu agreed to plead guilty to a tax fraud charge that carries a penalty of up to three years in federal prison.

He also promised to file an amended tax return for 2002 and agreed to pay $36,000 in unpaid taxes, penalties and restitution, according to the plea agreement.

"This case serves as a reminder that tax laws apply to all people," said Assistant U.S. Atty. Bayron T. Gilchrist, who prosecuted the case.

"It's especially egregious when you have somebody who's supposed to enforce those laws who instead willfully violates them."

Some of the wording in the plea agreement reinforced the notion that, despite his employment with the IRS, Liu was being treated like just another taxpayer. For example, it reminded Liu that nothing in the agreement prevented the IRS from further scrutinizing his amended return after it was filed.

Neither Liu nor his attorney could be reached for comment. His job status with the IRS was not immediately available.

IRS Announces Tax Deduction For New Cars

The Daily Journal recently posted an article announcing and discussing the new IRS auto tax break. You can find the text of their post below, thanks to the Daily Journal.

The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

“The vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction,” said New Jersey’s IRS Spokesperson Gregg Semanick.

The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.

For more information, go to the IRS.gov Web site home page and access the Update on Recovery Tax Provisions for Individuals and Businesses.

Are You Overpaying Your Taxes?

Jean Chatzky of Oprah.com recently posted a great blog discussing taxpayers who overpay their taxes, why, and how to avoid doing so. You can find a snippet of the post below, but the full story can be read on her blog.

At this point, you might be done with your taxes. If you haven't yet dropped your envelope in the mail—or clicked the button to e-file, which is the faster method—I hope you've at least gotten the ball rolling.

But it's not too early to start thinking about next year, particularly if you have a hefty refund coming to you from 2008. I know—getting a burst of money at once is exciting, particularly in this down and out economy, but financially speaking, it's just not smart.

When you get a tax refund, you're giving the IRS a free loan for an entire year, a year that you could have had that cash stashed in an interest-baring account, where it would have been working for you, not Uncle Sam. Not only that, but this year, because of budget trouble, some states, including California and Kansas, have had delays getting refunds out. "In California, this went back to January, so filing early wouldn't have helped. Truthfully, this is speaks more to being careful in your withholding," says Sherrill Gregory, an enrolled agent in California.

The idea, of course, is to configure your withholding on your W-4 so that the amount that is withheld from your paycheck each month more or less matches your estimated tax liability. That way, come April 15 of the following year, you don't get a refund, but you also don't owe. A good way to run your numbers is by using the Withholding Calculator on the IRS website (www.irs.gov/individuals/article/0,,id=96196,00.html).

Even if you've been with the same employer for years, it's not too late to make a change, says Roni Deutch, author of The Tax Lady's Guide to Beating the IRS. "You can adjust your withholding any day of the year. But the longer you fail to adjust it, the longer you're going to be addicted to getting that refund check in April."

She's right, of course. You've come to count on that little windfall once a year, but wouldn't you rather have some extra each month to save for retirement, or pay down debt, or just make ends meet? So let's not put it off anymore. Tomorrow, when you go into work, go straight to your human resources manager (or your boss, if you work for a small company) and ask that he or she help you adjust your withholding. Then, stay on top of it, because many of life's milestones call for another look at your W-4, including marriage, divorce, a second job, birth of a child, the purchase of a home, capital gains and retirement.

Taxpayers’ Fears of Errors and Oversights May Be Well Founded

Last week CCH published a new tax survey, which included a lot of interesting data about how much of the tax code Americans actually understand. According to their press release, some of the most shocking findings include:

• Less than one-fourth could identify that tax credits are generally more advantageous than deductions;
• Only about one-third identified the child-related tax break offering the greatest savings; and
• Less than one-half identified the education-related tax break offering the greatest savings.

You can read more details about the finding by checking out the CCH press release, or by downloading a PDF of the full study.

Tax Tips for the Stock Investor

Just before the weekend, one of my favorite blogs (TheWildInvestor.com) posted a blog entry with a list of helpful tax tips for stock investors, and even mentioned my book for further information. Check out a snippet of the entry below.

With the U.S tax deadline right around the corner (April 15), many people are looking for various deductions and other tax relief to help lower their taxes. If you have ever paid taxes on your gains from the stock market, then you probably know how demoralizing it can be. On the flip side, reporting losses aren’t always bad.

Some tax tips for the average stock investor:

Because you can’t distinguish your stock trading as a business expense there are not many deductions that can be made.

Capital Gains - The IRS considers short-term to be less than one year and long-term to be one year plus. Obviously the government would like you to hold onto your investments for longer, so it is no surprise that you will have to pay higher taxes on gains made on a stock you sold within a year. This can range from 15-35%. Gains made on stocks after a year are taxed a maximum of 15%.

If you are holding onto mutual funds, even if you didn’t sell, you may still have to pay capital gains tax if the fund itself sold off some of its holdings. Another reason to hate mutual funds.

Capital Losses - As bad as losses may seem they can actually bring you some tax relief. In the case you have more losses than gains, you can take $3,000 of losses against other types of income.

Special Accounts - Contributing to your IRA or 401k can reduce your taxable income and give you tax-deferred growth, where you’ll only pay tax when you take money out. For the most part, you do not need to pay tax on interests and dividends on Roth IRAs. Some other accounts to take advantage of are health saving accounts and 529 plans.

As you can see, Uncle Sam would prefer for you to hold onto your investments longer. While there are not too many tax breaks for the average investor, you as a whole might be qualified for some breaks you never knew. To learn more, you can check out Roni Deutch’s book, The Tax Lady’s Guide to Beating the IRS and Saving Big Bucks on Your Taxes.

Special Tax Break Available for New Car Purchases This Year

The IRS posted a new press release on their site today, announcing a new tax break available for car purchases this year. Check out the text of the release below.

“The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.”

Top 10 Last Minute Tax Tips

The April 15^th tax deadline is just around the corner, and with everything else going on in the country right now there are millions of taxpayers that still need to prepare and file their income tax returns. To help those of you who are rushing around to finish before the tax deadline, I have compiled the following list of the top 10 last minute tax tips.

1. Make sure it is all there

Be sure you have attached all W-2’s and all necessary documents to your return, and have completed them correctly. Your social security is the most important identifying number, so check and double check that it is correct on all documents. It is also a good idea to put your social security number on the top of every form.

2. Check the IRS’ website

New deductions and credits are created every year, for your benefit. While we all like to think our tax preparers know everything, it never hurts to double check their work. The IRS updates their website frequently with all new tax laws, credits, and deductions.

3. E-File

If you are running short on time and cash, you can e-file (electronically file) your taxes on your own online. All the information you need is on the IRS website, and there are multiple help lines you can call for assistance. However, the sooner the better, as the IRS gets very busy this close to the tax deadline.

4. Be honest

The most important rule of filing your taxes is to always be honest. The repercussions you may receive for lying to get a deduction you do not qualify for could be a lot more than you would have saved. Check over your return one last time before sending it off to make sure you only claimed deductions and credits you qualify for.

5. Joint or separate

If you are married, take the time to see if filing joint will benefit you or not. Changing tax laws and situations may change which works best for you, so do not just assume you should choose the same thing you did last year. Also be sure to keep your spouse informed about potential changes. If you choose joint and they choose separate, or your info does not match, you may have an audit coming your way.

6. Make copies of everything

Before you mail in that return, be sure you have a copy of every single document and page you are sending. If you want to be extra safe then you might even ask the post office to give or send you a receipt so you have proof of post-mark. This will be your proof of filing if the IRS sends you an audit, or missing document letter, in the mail.

7. Use IRS mailing materials

The IRS sends you your own mailing materials for a reason – it makes the process easier for them. If you fail to use their documents to mail your return, you could be running the risk of receiving a later return. If details on the mailing materials are inaccurate, the IRS prefers you make changes right on the labels, in pen.

8. Not ready? File an extension.

If you are not quite ready to file, for any reason, definitely file for an automatic extension. There are numerous reasons you may feel the need to file an extension, but any reason is better than not filing your return at all. However, if you are going to owe the IRS money then you still need to have your payment to them by the 15^th.

9. Seek professional help

If you are new to filing your own taxes, or have recently changed filing status (i.e. newlywed, new business owner, new parent, etc.), then you may want to enlist some professional help. However, if you are going to get help from a tax preparer then you will want to make an appointment as soon as possible. The closer to tax day it gets, the busier the tax preparer’s office is going to be.

10. Check your math

Last but not least, always double check your math. It is much easier to make numerical errors than grammatical ones, so go over each and every number before you seal the envelope. It may seem like a hassle, but trust me it is much better to notice your own errors then to have an IRS auditor point them out.

Cornering the Job-Hunting Expenses Deduction

With economy in a tailspin, many people are finding themselves looking for a new job—or a more secure one. Luckily, the federal government encourages the practice by providing a deduction for the costs associated with job-hunting. While not perfect, it does provide some tax relief to those who expend a lot of money finding that perfect job.

First of all, what are the rules?

Well, in order to be a deductible job-hunting expense, you’ve got to be looking for a job within the same occupational field. So, sorry, but if you are an attorney dreaming of being a movie director, your job hunting expenses in Tinseltown will not be deductible.

Additionally, you can not deduct your expenses if your job search follows a long absence (a year or more) from the work force. So, if you take a year off to travel, then get back to looking for work, you will not be allowed to deduct those job-hunting expenses.

Finally, you can not deduct expenses you incur if you are looking for your first job.

Second, qualified job-hunting expenses are miscellaneous itemized deductions, claimed on Schedule A. This means you only get to claim the amount of the expenses that exceeds 2% of your Adjusted Gross Income (AGI). Your AGI is found on line 38 of the IRS Form 1040. This means, if your AGI is $25,000, you are only going to be able to deduct the expenses that exceed $500.

So, if you meet the eligibility requirements and are not completely discouraged by the 2% of AGI floor, then you will find the following list pretty helpful. These are some items that may rack-up deductible job-hunting related expenses:

• Employment or Outplacement Agency Fees
• Résumé Costs – e.g. paper, ink, typing, envelopes, postage, résumé preparation services, online posting costs
• Portfolio Costs – e.g. portfolio or work sample preparation services
• “Want-Ad” Placement Fees
• Newspapers/Magazines – e.g. purchased to read want-ads
• Executive Recruiter Fees
• Job-Hunting Education – e.g. seminars and books on improving interviews, your résumé
• Career Counseling
• Attending Job Fairs or Networking Events
• Communication Expenses – e.g. telephone/cell phone, long distance, facsimile
• Travel Expenses – i.e. you can deduct the travel expenses if the trip is primarily to look for a new job; includes airfare, lodging, meals
• Transportation Expenses – i.e. you can choose to use the standard mileage rate to figure your mileage expenses (as of today’s date, $0.55 per mile)
• Legal Fees – e.g. to review an employment contract
• Research Costs for Starting Own Business – i.e. only if you are researching starting your own business in the same field you are currently employed in

The Audacity of the Audit

Audit.

Is there a more frightening word in the English language? Probably not, for most taxpayers. In the most recently completed tax year, the IRS used the audit to collect more than $23.5 billion, a 37% increase over the previous year. High-income earners and small business owners are especially suspect when it comes to audits.

But first things first. What is a tax audit? Well, it is basically a thorough examination into the background and substantiation of income, expenses, deductions, and credits claimed on an individual or business tax return. It is conducted to ensure that items claimed on the return are correct and can be proven through documentation (e.g. receipts, etc.).

There are a couple of types of audits, each with its own rules.

By far the most common type of audit is called a Correspondence Audit. Generally, the IRS will send you a letter, requesting more documentation from you. You provide the documentation, and can go on with your life. Though it can easily result in an increased tax liability.

The IRS also conducts Office Audits, where you are asked to bring documentation to the nearest IRS office for a review and interview. The IRS agent will request specific documentation. This is where deductions will be challenged, and if fail to back it up, you can end up with a much higher tax bill. Be sure you only bring what is asked, otherwise, you’re opening yourself up for an expanded audit. If you have it with you, the IRS agent will want to see it.

The Field Audit will strike fear in the hearts of even the most conscientious taxpayer. This usually occurs in more complex tax situations, such as with a business entity. In this case, the IRS agent will want to fully review your return and verify each and every deduction and income source. This can be a lengthy, involved process and can end up costing you thousands in increased tax liabilities. I guess the one piece of good news is that you are allowed to decide when and where to schedule the meeting. I recommend picking a neutral location — preferably in your tax professional’s office, since they probably know more about tax laws than you do.

Avoiding Tax Scams

Tax schemes can lead to many problems for taxpayers. So, here is my best advice on how to avoid tax scams this tax season:

• Be cautious of any unsolicited e-mails or phone calls asking for personal information – they are usually fraudulent.
• Be suspicious of anyone contacting you from a company with whom you have a bank or credit card account. If they ask for information, do not give it out. Call the company separately by using the contact number on your statement or back of your credit card.
• Remember that the IRS will not call you on the telephone and ask for bank or credit card information.
• Remember that the IRS will never e-mail you. Taxpayers who receive unsolicited e-mail that claims to be from the IRS can forward the message to a special electronic mailbox, phishing@irs.gov. They can use instructions contained in an article titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes” located at the IRS website. Remember: the only official IRS Web site is located at www.irs.gov.
• If you receive an e-mail which contains an official looking logo does not mean it is one. Always verify before providing any personal data, bank accounts or credit card information.
• Verify the authenticity of information received by contacting the IRS, your tax preparation service, or your bank. Use the contact number provided in your local phone book or known Web site that is provided in your bank statement.

In addition, if you are a victim, report it immediately. Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The identity of the person filing the report can be kept confidential.

If you believe you are a victim of tax fraud, also contact the credit bureau and place a fraud alert on your account. Putting a fraud alert on your credit file is one of the first things you should do if you suspect someone is trying to open credit accounts in your name. When someone tries to open up a credit account in your name by getting a new credit card, car loan, cell phone, etc., the lender should contact you by phone to verify that you really want to open a new account. If you are not reachable by telephone, the credit account should not be opened. This might be something you want to do, even if you do not think identity theft is an immediate threat.

IRS to Offer Deal to Tax Evaders

From The New York Times:

The Internal Revenue Service, under pressure to bring in money to the faltering economy, plans to give offshore tax evaders a big break.

The agency has drafted a plan that significantly lowers a penalty that applies to wealthy Americans who hide money overseas in secret accounts, a person briefed on the matter said Thursday. The plan is intended to lure out of hiding scores of wealthy people who must come forward and declare their accounts in order to take advantage of the lower penalty.

The plan was developed amid a widening investigation into wealthy American clients of UBS but will apply to clients of other banks as well.

Under the plan, according to the person briefed on the issue, the IRS will cut an onerous penalty for not filing a Report of Foreign Bank and Financial Account, known as an FBAR — something offshore tax evaders have not done.

The current penalty is 50 percent of the high balance of each account over the last three years — an amount that can wipe out an investor’s accounts in just two years — but the I.R.S. will reduce that penalty to 5 percent to 20 percent, depending in part on whether the wealth was inherited.

The I.R.S. will also require taxpayers to pay any taxes and interest owed over the last six years, as well as assess a standard, accuracy-related penalty of 20 percent. Taxpayers must also file amended returns for the last six years.

The proposal, which the IRS is communicating to its field agents who audit returns, does not allow taxpayers to escape potential prosecution, but it makes that outcome less likely, in particular for those covered under the 5 percent FBAR penalty, this person said.

“They need to get money back into the system, so they needed to sweeten the deal,” the person said.

Obama Asks Volcker to Lead Panel on Tax-Code Overhaul

This morning Bloomberg.com published an article discussing President Obama’s recent decision to put former Federal Reserve Chairman, Paul Volcker, in charge of a tax code review. You can find a snippet of the story below, or checkout Bloomberg.com.

President Barack Obama is putting former Federal Reserve Chairman Paul Volcker in charge of a tax-code review aimed at closing loopholes, streamlining the law and generating revenue, budget Director Peter Orszag said.

Volcker, 81, who heads the president’s Economic Recovery Advisory Board, is being asked to take a look at the laws in an effort to rebalance the tax system.

Orszag said the review, given a deadline of Dec. 4, is being ordered to make recommendations on steps to simplify the code, built over the last 96 years, in ways that would reduce tax evasion and what he called “corporate welfare.”

“There are hundreds of billions of dollars in uncollected taxes each year,” Orszag said in a conference call. The Volcker board “will be examining ways of being even more aggressive on reducing the tax gap.”

The tax gap is the difference between the amount of taxes owed by taxpayers and companies and the amount collected. Orszag cited academic studies suggesting that the difference is $300 billion or more. That is “ a lot of money,” he said, adding that the administration is going to be “as aggressive as possible” in reducing it.

Obama made a tax overhaul part of his platform during the presidential campaign. One goal is to close loopholes that he said reward companies that move jobs overseas.

Task Force

Austan Goolsbee, a senior economic adviser to the president, will be named staff director of the task force, which will report back to Volcker, Orszag said. Members of the panel will include Harvard University’s Martin Feldstein, former chief economic adviser to President Ronald Reagan; Laura D’Andrea Tyson, a professor of economics at the University of California at Berkeley and former economic adviser to President Bill Clinton; Roger Ferguson, chief executive officer of Teachers Insurance & Annuity Association and a former vice chairman of the Federal Reserve; and William Donaldson, a former chairman of the Securities and Exchange Commission.

Orszag said “the only constraint” on the task force review is that there be no tax increases during 2009 and 2010, and that the proposals shouldn’t raise taxes on families earning less than $250,000 a year.

White House Leans Toward Tighter Enforcement of Taxes

From The Wall Street Journal:

President Barack Obama's initiative to raise new tax revenue to pay for major policy changes likely will focus in the short run on tightening enforcement against businesses and wealthy individuals. In the long run, some experts believe it could lead to sweeping changes in the tax code itself.

White House officials disclosed the tax initiative on Tuesday, saying they intend to explore ways to better enforce the current code as well as improve it by eliminating corporate subsidies and untangling its many complexities. Mr. Obama has assigned the task to his President's Economic Recovery Advisory Board, an outside panel of economists and businessmen headed by former Federal Reserve Chairman Paul Volcker.

Administration officials said the group faces two limitations: no tax increases before 2011 and no tax increases on families earning less than $250,000 a year. The task force is to report its recommendations by Dec. 4.

The initiative reflects the Obama administration's re-evaluation of how the U.S. government pays for itself, as lawmakers drop some major proposals from Mr. Obama's budget plans for future years.

A growing number of experts and many lawmakers believe the current U.S. income-tax system isn't raising enough money because it is obsolete. They say the U.S. should consider switching to more efficient means of raising revenue -- for example, taxes on consumption.

"We're shooting ourselves in the foot economically by relying as heavily as we do on income taxes when the rest of the world relies on consumption taxes," said Michael Graetz, a Yale University professor and former Treasury official in President George H.W. Bush's administration. "I think you can tinker with the existing system, but anybody who believes they are going to get enough revenue simply by improving collection of taxes owed is fooling themselves."

Detroit's Hotel Doldrums

Detroit’s recently renovated hotel scene is struggling to keep up with tax payments as the town’s economy continues to deteriorate. Bizjournals.com published an article on the topic, and you can find an excerpt of their post below. Alternatively, the full story can be found here.

Just before a glittering new terminal opened at Detroit Metro Airport seven years ago, I flew out for an airport-arranged private tour. Then I drove downtown for my own self-guided view of the seamier side of Detroit's travel infrastructure.

Four of the city's once-famous deluxe hotels were ornate tombs, abandoned for decades and facing the wrecker's ball. Two starkly modern properties built in the 1960s were shabby and sorely in need of new ownership. Even the 73-story hotel in the Renaissance Center, opened in the late 1970s as part of a massive urban-renewal project, was dreary and depressing.

"TERRIBLE!" I scribbled in my notebook in 2002. "Someone should fix."

And fix they did. The Madison-Lenox and the Detroit Statler were demolished, but the Book Cadillac and the Fort Shelby received hundreds of millions of dollars worth of renovations and restorations. The Book, as locals call it, reopened to raves in October and the Fort Shelby came back to life two months later. One of the 1960s icons, the St. Regis, became a spiffy boutique property. The other, the Hotel Pontchartrain, was recently renovated and is now called the Riverside. The cylindrical skyscraper hotel at the Ren Center? It's a Marriott now, and it sparkles. And the city's three casinos have each opened upscale hotels with Vegas-style perks and amenities.

But this is Detroit, where hotel happy endings are always the start of the next lodging nightmare. If anything, the Motor City's hotel scene is in worse shape today than seven years ago.

More than half of Detroit's estimated 40,000 guestrooms are empty, and PKF Hospitality Research says lodging demand will fall further this year. The St. Regis is in receivership. The Riverside has been picketed by employees who say they haven't been paid, and the Detroit News says the hotel owes almost $700,000 in back taxes. One of the casinos is in bankruptcy and another is for sale. Only a handful of buyers have closed on the dozens of pricey condos atop the Book Cadillac. The Fort Shelby's new rental apartments are mostly empty too. And Detroit's REVPAR (revenue per available room), the key measure of financial health in the lodging industry, is one-third lower than the national average.

"The statistics are scary," admits Shannon Dunavent, general manager of the Doubletree Guest Suites hotel that was lovingly carved out of the carcass of the Fort Shelby. "I've been working in Michigan for 20 years and I won't lie to you. There's no new business in the market. We're all trying to steal from the other guy to survive."

It doesn't take a genius to figure out what's ailing Motown's hotels: The automotive business has been careening downhill for decades. Detroit has never been able to replace cars, and the thousands of related businesses that depend on the carmakers, as the city's economic engine. Hell, even Motown Records moved to Hollywood almost 40 years ago.

States Could Lose Billions In Taxes To Stimulus

From The Associated Press:

President Barack Obama told the nation's governors in February that the states' $229 billion share of the federal stimulus package "will ensure that you don't need to make cuts to essential services that Americans rely on now more than ever."

But while one hand of the federal government is offering Medicaid, education and other direct assistance to the states, the other hand could reduce state tax revenues by billions of dollars. That's because many states copy adjustments in the federal tax code into their own to make things less confusing for taxpayers — and the $787 billion stimulus package is heavily laden with federal tax breaks and incentives.

The changes could dwindle revenues at a time when states are facing their own fiscal crises.

"We have to balance our budget and the federal government doesn't," said Sen. David Hoyle, a co-chairman of the North Carolina Senate's Finance Committee. "So they can spend at length what they want and print more money. We can't."

The total potential losses are hard to calculate nationwide, because many states are still figuring out how to spend their money from the recovery plan and haven't closely studied the fine print of the tax provisions. But 17 states performing essentially back-of-the-napkin calculations told The Associated Press they could lose at least a cumulative $1 billion in revenues through 2011 if their tax codes imitate the federal changes.

Across all 50 states, it's could be much higher: Tax experts interviewed by AP estimated the total losses anywhere from $4 billion to $60 billion over the next two years.

Even at the high end, that's well short of the estimated $244 billion in budget gaps facing states through next year, according to the Center on Budget and Policy Priorities. But it comes at a time when every bit counts and could force some states into cuts they'd hoped the stimulus money would avert.

"There will be both economic and political judgments being made," said Jim Eads, executive director of the Federation of Tax Administrators, representing local taxing authorities and revenue departments.

White House Open to Global Currency?

The Obama administration has been clear of their support in the dollars strength in the past, but according to the Weekly Standard, there may have been a recent shift to the possibility of a global currency. I have included a snippet of their article below but the full post can be found here.

Last night, President Barack Obama expressed confidence in the dollar and declared: "I don't believe that there's a need for a global currency."

Normally, that would settle the issue. But in the past 24 hours two of Obama's top economic advisers have signaled an openness to such a new global currency -- in one form or another. What's going on?

Politico's Ben Smith reports that Treasury Secretary Timothy Geithner said this morning that he was open to a new global currency to replace the dollar, as proposed by a Chinese central banker. Geithner, according to Smith, said that the proposal -- which he has not yet read -- is less transformative that headlines have suggested. "We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," Geithner said.

Later, the moderator, per Smith "apparently sensing a gaffe," asked Geithner to clarify his remarks. Geithner walked back his earlier comments and said he does not see the dollar being sidelined by a new currency.

But Geithner wasn't the only top Obama adviser who refused to rule out a transition to a global currency. White House economic adviser Austan Goolsbee said much the same thing yesterday afternoon in an interview with CNN's Wolf Blitzer. Although he characterized such a change as "unlikely," Goolsbee twice declined to rule out such a global currency despite being pressed by Blitzer. "I haven't seen the details of the proposal," Goolsbee said. The entire exchange follows:

BLITZER: The Chinese suggesting today, this dollar, U.S. dollar, should be replaced as international currency, because they are beginning to have concerns that you are printing, the U.S. government is simply printing too many of these dollars and will lose its value as an international currency.

What's your reaction?

GOOLSBEE: It strikes me as probably unlikely.

Different people have in the past argued for world currencies or new -- new currencies before. I believe the U.S. at this point is the safest place to invest in the world. And it's likely to remain that the dollar is a critical currency in the years ahead.

BLITZER: So, you -- you don't like some new international currency that some Chinese are proposing?

GOOLSBEE: Well, look...

BLITZER: I assume that's right, right?

GOOLSBEE: I haven't seen the details of what they are proposing.

I mean, the dollar is the dollar. If people don't want to buy it, they don't buy it. But I think you have seen sort of a flight to the dollar in -- in times of trouble.

I don't know enough about monetary policy and currency to analyze the potential benefits and drawbacks of such a change, though several people I've spoken to believe it's an idea that's as undesirable as it is unworkable. But as a matter of instilling confidence in the U.S. economy at a time when such confidence is critical, it seems that Obama's answer was much better than the mixed messages coming from his top economic advisers.

Suozzi: Taxpayers Should 'Revolt' Over Property Taxes

From NewsDay.com:

Taxpayers should "revolt" if the state increases income taxes on upper-income earners without doing something to stabilize property taxes for all state residents, according to Nassau County Executive Thomas Suozzi.

"This country was founded on the rallying cry of 'No taxation without representation;' the rallying cry today should be 'No income tax [increase] without property tax relief,'" Suozzi said in an interview yesterday.

Suozzi has scheduled a news conference today to point out that while Nassau, Suffolk and Westchester counties combined have 18 percent of state's population, they account for 40 percent of the taxpayers in the state with incomes of more than $250,000 - the target of most discussions about taxing high earners.

New York State provides more revenue to Washington than it gets back, downstate provides more revenue to Albany than it gets back, and it would be unfair to the downstate counties with high property taxes to siphon more tax revenue without property tax reform, he said.

"If they do an income tax increase, and they don't to a property tax cap and property tax relief, we should revolt," Suozzi said, his voice rising. "We should rally behind an effort to make that change, and now is the time to do it."

Suozzi said he was convinced that both the state and federal governments would eventually have to increase taxes on higher incomes, but admitted there has been little public support for such a move in Albany beyond the Assembly.

Gov. David A. Paterson said earlier this week that he opposed the higher income tax - dubbed the "fair share tax" by labor unions and other supporters.

IRS Challenges AIG Unit Tax Deals: Report

The IRS is challenging certain unit tax deals structured by AIG, reports Reuters.com. Check out a snippet of their article explaining why the IRS would take such a position below.

The U.S. Internal Revenue Service is challenging some of the tax deals structured by AIG Financial Products Corp, the unit of the giant insurer that has caused political outrage over $165 million in employee bonuses, the Wall Street Journal said.

Some banks that received government-funded payouts to settle contracts with American International Group turned to the insurer for help cutting their income taxes in the U.S. and Europe, the paper said, citing court records and people familiar with the business. The company paid $61 million last year in disputed taxes stemming from the deals, but sued the U.S. government last month in federal court in New York, seeking a refund, the paper said, citing filings in the case.

Banks that worked with AIG on tax deals include France's Credit Agricole SA, Bank of Ireland and Bank of America Corp, the paper said, citing AIG's lawsuit. The banks declined to comment to the paper.

In general, AIG's tax deals permitted U.S. companies and foreign banks to effectively claim credit in their home country for a single tax payment, partly through the use of an offshore AIG subsidiary, the paper said.

In its lawsuit against the government, the insurer said it was told by the IRS that AIG hadn't shown that the transactions "had sufficient economic substance and business purpose" to justify tax benefits, the paper said. The IRS declined to comment to the paper.

An AIG spokesman declined to discuss with the paper the tax-cutting transactions in detail but asserted that the tax benefits were proper and justified, the paper said. AIG wants to "ensure that it is not required to pay more than its fair share of taxes," the paper cited the company spokeswoman as saying.

Taxing the Poor

From The Chicago Tribune:

A higher sales tax, new property taxes, gas taxes, sin taxes, utility fees, driving and parking rate increases, water taxes--even increased fees on coffee and tea and state fairs and library books!

Why do all new taxes seem to hit low-income people the hardest?

Illinois is one of the few states with a flat income tax rate. Most states have at least some adjustment of the rate as incomes get higher.

In April 2008, the Illinois House proposed a constitutional amendment to double the state income tax on people making more than $250,000 a year. It failed, partly because of concerns about then-Governor Blagojevich's money management. There is no excuse now.

It's the right thing to do. Internal Revenue Service figures show that almost half of our country's income goes to the richest 10 percent of Americans, those making at least $283,000 a year.

Also, the richest 1 percent of Americans pay about 5 percent of their incomes in state and local taxes, while the bottom 50 percent pay approximately 10 percent, according to the Institute on Taxation and Economic Policy and Citizens for Tax Justice. Governor Quinn should consider a graduated progressive tax that would keep middle-income families at their current level and raise taxes only on the wealthiest 10 percent.

Why do all new taxes seem to hit low-income people the hardest? Because it's easier than demanding a fair share from the rich who seem to yell a lot louder.

Our View: State Hires Workers as Taxes Rise

California has been having budget problems for a long time, and now some are beginning to criticize the state about the number of new government workers that are being hired. Check out the following article on the controversy courtesy of the Colusa Sun Herald.

Do you ever get the feeling that the public works for the government, rather than the other way around? That’s the sense we get, especially during tough economic times. The private sector is slashing jobs, and taxes are going up, thanks to the recently enacted state budget plan. Freedom Communications Inc., parent company to this newspaper, announced a furlough program Friday that mirrors similar cutbacks being made by the newspaper industry nationwide.

But the government isn’t tightening its belt. In fact, a Sacramento Bee analysis of the state government found that its “full-time workforce continues to grow despite Gov. Arnold Schwarzenegger’s order to freeze hiring amid a historic budget shortfall.”

Over an eight-month period, most state agencies expanded their workforce or kept the same number of employees. A fewer-than-promised number of part-time employees were laid off.

“The overall number of full-time state employees increased by roughly 2,000, or 1 percent, excluding the Department of Forestry and Fire Protection, or Cal Fire, which always shrinks sharply outside of fire season, the figures show,” according to the Bee. “While the increase is modest compared with other years, it clashes with the belief that the state workforce must shrink to meet the current economic downturn and resulting drop in state revenue.”

So once again we see Schwarzenegger’s promises are not to be believed. That should surprise no one given this supposedly anti-tax governor championed a huge tax increase. The same governor who promised to blow up the boxes of government is doing his best to make those boxes bigger. And now his promises to cut the part-time workforce are empty. The permanent bureaucracy seems to rule things in Sacramento, so even as the rest of the state contracts, its ranks expand.

The California Highway Patrol has expanded its workforce by an astounding 3 percent. At the local level, cities are still pushing for expanded pay and benefits for their workers. USA Today reported last year that, “State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far ahead of private workers.” It’s a nationwide trend, although no other state has the fiscal mess faced in California.

Federal Cigarette Tax to go up 62 Cents a Pack

From The Dallas News:

Lighting up in Texas – already a costly habit because of the state cigarette tax – is about to get more expensive.

A 62-cent federal tax increase on cigarettes starts April 1, but tobacco companies began raising prices this month in anticipation of the higher tax.

A big jump in the federal excise tax on cigarettes – from 39 cents a pack to $1.01 – is now being factored into prices charged by the major tobacco companies in advance of the April 1 effective date of the new rate.

Coupled with the higher state tax – $1.41 a pack – that went into effect two years ago, Texas smokers are paying $6 to $6.50 a pack for the more popular brands of cigarettes and hitting the $50 mark for a carton of the leading brands.

It's making some smokers wonder how much they're willing to pay.

Friday, Plano residents Mallory Carrick and Zach Mayer pulled casual drags from their cigarettes on a crowded Austin street corner, lamenting the tax hike just now hitting their pocketbooks.

"First we have to deal with the economy, and now the government," Carrick said. "I guess it's better that it's on cigarettes 'cause they're killing us, but still, what about our freedom?"

In town for the South by Southwest Music Festival, Carrick and Mayer said they're not heavy smokers, spending about $30 a week between them. But with the spread of local smoking bans, relatives battling cancer and now higher taxes, the 22-year-olds have plenty of reasons to stop.

Ronnie Freeman has been a smoker since 1973. Before the latest increase, he paid $4.75 for a pack of his favorite, Kool. Now he's paying a dollar more.

Congress on AIG and Banks: 'Oppressive, Unjust and Tyrannical.'

From: The Wall Street Journal:

When does a single policy blunder herald much larger economic damage? Sometimes it's hard to know ahead of time. Few in Congress thought the Smoot-Hawley tariff was a disaster in 1930, but it led to retaliation and a collapse of world trade. The question amid Washington's AIG bonus panic is whether Congress's war on private contracts and the financial system is a similarly destructive moment.

It is certainly one of the more amazing and senseless acts of political retribution in American history. In its bipartisan rage, the House saw fit last week not merely to punish the employees of AIG's Financial Products unit that the company still needs to safely unwind credit default swaps. The Members voted, 328-93, to slap a 90% tax on the bonuses of anyone at every bank receiving $5 billion in TARP money who earns more than $250,000 a year. A draft Senate version is even broader. Never mind if the bonus was earned last year or earlier, or under a legally binding employment contract. The confiscatory tax will apply ex post facto.

Never mind, too, that such punitive laws were expressly deplored by America's Founders. In Federalist 44, James Madison warned that "Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation."

In 1827 in Ogden v. Saunders, the U.S. Supreme Court issued a similar warning about legislative limits under Article I, Section 10 of the Constitution: "The states are forbidden to pass any bill of attainder or ex post facto law, by which a man shall be punished criminally or penally by loss of life of his liberty, property, or reputation for an act which, at the time of its commission, violated no existing law of the land," wrote Justice Bushrod Washington.

"Why did the authors of the Constitution turn their attention to this subject, which, at the first blush, would appear to be peculiarly fit to be left to the discretion of those who have the police and good government of the state under their management and control? The only answer to be given is because laws of this character are oppressive, unjust, and tyrannical, and as such are condemned by the universal sentence of civilized man."

Yes, Article I, Section 10 applies to the states, and this is a federal law. Congress may also figure it avoids the "bill of attainder" objection by applying the law to individuals at several companies receiving TARP money. But Congress's willingness to wreak such vengeance against a specific class of Americans is still as offensive as a matter of principle as Justice Washington and the Federalist Papers noted. The Founders feared the punitive whim of the legislative mob as much as they did the tyranny of a King.

IRS Seeks Volunteers for Taxpayer Advocacy Panel

The IRS posted a new press release today discussing their need for volunteers, to assist in taking comments from taxpayers in the Taxpayer Advocacy Panel (TAP). The panel “listens to taxpayers, identifies key issues and makes recommendations for improving IRS service.”

“TAP members are your friends and neighbors, walking in the shoes of the average taxpayer. A better understanding of how to serve the taxpayer well is a key to sound tax administration,” said Doug Shulman, IRS Commissioner.

TAP provides a forum for taxpayers from all 50 states as well as the District of Columbia and Puerto Rico. TAP is a federal advisory committee that reports annually to the Treasury Department, the IRS and the Office of the Taxpayer Advocate, which is an independent organization within the IRS. The Office of the Taxpayer Advocate provides oversight and funding of TAP.

“As the IRS continues to examine taxpayers’ needs in the area of service, the Taxpayer Advocacy Panel has emerged as a vital source for gathering and providing information from the perspective of taxpayers,” said Nina E. Olson, National Taxpayer Advocate. “TAP’s role will ultimately aid taxpayers by helping the IRS to provide them with the top quality service they deserve."

To be a member of TAP you must be a U.S. citizen, current with your tax obligations, able to commit 300 to 500 hours during the year and pass an FBI criminal background check. New TAP members will serve a three-year term starting in December 2009. Anyone chosen as an alternate would be considered to fill any vacancies that open during the next two years.

TAP members are being sought for the following states: Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Maryland, Minnesota, Missouri, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Tennessee and Texas.

Alternates are being sought for: Alaska, Arizona, Delaware, District of Columbia, Hawaii, Idaho, Indiana, Kansas, Massachusetts, Michigan, Montana, Nebraska, Nevada, New Hampshire, Puerto Rico, South Dakota, Vermont, Virginia, West Virginia and Wyoming.

Applications to become a member of TAP will be accepted until April 30. Applications are available online at www.improveirs.org. Applications can also be received through the mail by calling toll-free 1-888-912-1227.

Nonprofits Wrong to Oppose Obama Tax Changes

From Beyondchron.org:

Nonprofit organizations across the nation are expressing opposition to one of the most progressive parts of the Obama budget: reducing the tax break for itemized deductions, including charitable contributions, that are taken by individuals making over $200,000 a year or married couples earning over $250,000. Under the plan, a taxpayer in the highest bracket who gives $100,000 a year to charity can deduct only $28,000 a year, not $35,000. Obama’s plan directs the tax savings toward universal health care. Charities are concerned that reduced deductions will translate into reduced donations, hurting nonprofits just as foundation and government support declines. But nonprofits opposing this progressive reform miss the big picture. Government, not private donors, should decide how tax dollars are allocated. For too long, wealthy people have been allowed to redirect their taxpayer dollars away from serving education, health care and other pressing public needs to boosting symphonies, operas and elite institutions like Harvard, whose endowment alone exceeded $36 billion in 2008.

Having spent my entire career heading a nonprofit, I always find it sad when my fellow nonprofit leaders become fronts for campaigns by the wealthy to perpetuate social injustice. We saw this in San Francisco when groups like Project Open Hand opposed (unsuccessfully) the city’s living wage law, and we are now hearing that many nonprofits are opposing President Obama’s plan to raise revenue for universal health care by limiting tax deductions by the wealthy.

A Charity Revolt?

According to the Wall Street Journal, “from the Ivy League to the United Jewish Appeal, petitions and manifestos are in the works” to oppose Obama’s charitable deduction reform. Many of the charities opposing the reform are based in New York City, whose Congressmember Charles Rangel heads the House Ways and Means Committee and whose Senator Chuck Schumer is influential on tax issues.

But as White House budget chief Peter Orszag explained on his blog, "If you're a teacher making $50,000 a year and decide to donate $1,000 to the Red Cross or United Way, you enjoy a tax break of $150. If you are Warren Buffet or Bill Gates and you make that same donation, you get a $350 deduction -- more than twice the break as the teacher."

So proponents of the Obama reform see it as a progressive strategy for funding universal health care. Opponents accuse the Obama Administration of “turning even philanthropy into a class issue”.

Las Vegas Legislators Propose to Tax Prostitution

Cities all over the country are being affected by the recession, and one of the areas hit the hardest is Las Vegas, Nevada. Although the city’s economy was booming in the late 1990’s and early 2000’s, it is not struggling to find additional revenue. As such, a local politician has suggested a tax on the world’s oldest profession – prostitution. Check out the article below that discusses the proposal, thanks to KXNT.com.

Senator Bob Coffin of Las Vegas believes Nevada could pick up two million dollars annually if it imposes a tax on prostitution. He's introduced a bill in the state Legislature that would charge patrons five-dollars tax for each session. He notes that the state Department of Taxation would be allowed to publish how much it took in, only it didn't identify an individual business. Some of the money would go toward an "ombudsman for sex workers." It would provide assistance to prostitutes who have complaints or are looking for another profession.

Your 1040 Tax Form Really Is A Treasure Map

Most Americans are afraid of doing taxes, and think their Form 1040 is booby-trapped. And that just isn’t true! With a little knowledge and a shift in perspective, you might find that Form 1040 is actually a treasure map, riddled with hidden gems and golden nuggets. Each line is an opportunity to pay less in taxes. While you probably don’t qualify for all of these credits and deductions, I just bet that at least one will save you money come April 15.

Line 23. Educator Expenses

Educators working in Kindergarten through 12th grade can deduct up to $250 per year. Qualified Expenses include the cost of any educational material you might use in the classroom. And this deduction applies to teachers, aides, counselors, principals, and instructors working at least 900 hours during the school year. Even better, if you and your spouse are educators and you file jointly, that deduction bumps up to $500.

Line 29. Self Employed Health Insurance Deduction

Self-employed individuals who purchase health insurance can deduct the entire cost of the coverage. Of course there are some restrictions: the deduction can’t be more than the net profit of your business; and if you are covered by a spouse’s health care plan at work, you don’t qualify for the deduction.

Line 47. Foreign Tax Credit

Any income taxes you paid to a foreign country are allowed as a credit. Review your 1099 investment statements for any of these taxes, as these are often overlooked. Form 1116 does not have to be attached to the return if the foreign taxes paid are from interest and dividends reported on 1099 statements and the total is under $300 for single filers, $600 for married couples filing jointly. But, no double dipping! Foreign taxes you claim for the credit are not eligible for a refund from the other country.

And let’s not forget about Schedule A for those who itemize their deductions.

Line 5(a) State and Local Income Taxes Paid

You can deduct any State or Local income taxes you pay, whether from paycheck withholding or estimated tax payments made January 1, 2008 to December 31, 2008. If you make estimated tax payments, consider making your January payment early, before December 31, and it counts for 2008!

Line 13, Qualified Mortgage Insurance Premiums

We all know that mortgage interest is deductible, but you can also deduct your mortgage insurance premiums! Your lender reports the total insurance premium paid in Box 4 of Form 1098, sent out at year’s end.

Line 21 Unreimbursed Employee Expenses

The deductions here aren’t necessarily “overlooked” by taxpayers, but since this is a catchall for all employment-related expenses, people often forget some. This is where being organized saves the day. Be sure you include any job-hunting expenses, and union dues, and remember Form 2106, Employee Business Expenses must be filed with the return if you are including vehicle expenses, overnight travel and meals.

Line 23 Other Expenses subject to 2% AGI floor

The most common types of deductions on this line are investment expenses. But make sure you include any legal expenses associated with obtaining taxable income, custodial fees paid for a trust account, and casualty and theft losses on property used in performing services as an employee.

Taxes are nothing to be afraid of, especially when you think of all that “buried treasure” just waiting to be found!

A Breakdown of the American Opportunity Tax Credit

In this economy, there is no better way to prepare for the future than by getting a solid education. When Barack Obama chose Joe Biden, who is known for supporting more educational aid, as his Vice President I knew that they would make education a priority in their administration. Just as I had predicted, only a few weeks after taking office the Obama administration created the "American Opportunity Tax Credit". In addition to it’s fancy name, this new credit will provide much more incentive for students to obtain a higher education. To help the readers of my blog further understand the credit I have broken it down into basic terms so that you can see weather you will benefit from it or not.

What is it?

The American Opportunity Tax Credit is a new college tax credit, which was first proposed in the "American Recovery and Reinvestment Act of 2009" by President Barack Obama. However, the now passed credit is actually an expansion of the Hope Scholarship tax credit, with a higher maximum and a longer life span.

How much is the credit?

The new credit extends the previous maximum amount of $1,800 a year, to a new maximum of $2,500. The tax credit can also be claimed for up to 4 years, as opposed to the previous 2 years. The hope is that by increasing the credit it will enable more students to obtain a higher education in today’s difficult economy.

What are the eligibility requirements?

Only qualifying full-time college students are eligible for the credit. While it will be made available for 4 years for all qualifying applicants, the actual amount you receive will vary on your income level. It is not available to those with incomes over $180,000, and unlike past credits it is 40% refundable, meaning even families who do not pay income taxes will qualify. A CBPP.org survey estimates the new 40% refund will allow an additional 3,762,000 American college students to take advantage of the new credit.

What will it achieve?

Since the Hope credit was only available for 2 years, the new extension is likely to give students already enrolled more enthusiasm to stay in school longer. In addition, due to the financial crisis, student loans are getting harder and harder to obtain, which is leaving many without any opportunity to attend college. Although the credit will not pay for a full education, it can give struggling students a little bit of much needed support.

Cons?

Many experts feel the American Opportunity Tax Credit is a windfall for those students who were already planning on going to school anyways, many of who do not necessarily need the financial aid. Additionally, the credit is also gaining criticism for being refundable, and the amount of money all the new claims will cost the federal government.

Another important factor to remember is that some studies done on the Hope Credit found that it led to many colleges to raising their tuition and fees, which made the credit somewhat useless. However, it is definitely too early to tell if this credit will create the same problem or not.

Tax Season -- Great Reminder to Consult with Professionals.

After sending out a few copies of my new book to fellow bloggers and tax professionals, Jennifer Sawday, of California Estate Planning Blog, posted an entry on her blog about the book and about seeking professional help with taxes. Thanks, Jennifer!

Tax season has fully descended upon all Americans. (Also, Girl Scout cookies as well. Girl Scout cookies are much more palatable!)

I received a complimentary copy of Roni Lynn Deutch's book, The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes… It's a great book and very easy to read. Reading books like Roni's makes you aware of the value of hiring a tax professional to assist you with your taxes, tax planning and representation in case of an audit or other issues involving the IRS or local tax authorities. It also brings home the point that you should consider consulting with and later hiring a professional to assist you with other endeavors as well.

Be sure to do your homework on any important issue facing your family whether it be taxes, estate planning, financial advice and other such matters. Do your reading, Internet research and then consult with professionals as well to make sure you are taking the right steps to protect yourself and your loved ones.

When you decide to consult with a professional, ask at the outset if there will be a consultation fee and how much so you can be prepared. Some professionals do not charge a fee, will waive the fee or have reasonable fee depending on the nature of the consultation. Professionals have nothing to give you other than their time and with their time comes their knowledge, insight and wisdom that is often invaluable.

Receiving Roni's book and reading it reminded me to share this important point with our blog readers.

AIG Bonus Tax Bill May Be Delayed in U.S. Senate

From Bloomberg.com:

The U.S. Senate may wait until next month to vote on a proposed steep tax increase on employee bonuses at American International Group Inc. and other companies that got taxpayer bailouts.

Senate Majority Leader Harry Reid, a Democrat, said today that Republicans had asked for time to study a proposal to impose a 70 percent tax on bonuses like the $165 million paid out by AIG. The insurer received $182.5 billion in U.S. bailout funds, according to the Government Accountability Office.

“We will continue to work to right this egregious misuse of taxpayer dollars,” Reid, of Nevada, said on the Senate floor. “With Republican cooperation we can quickly and responsibly return these funds to the American people.”

This week and next week, Reid said, the Senate will work on a national-service bill and President Barack Obama’s budget proposal. Congress begins a two-week recess on April 6. Reid spokesman Jim Manley said the Senate would have to have unanimous agreement to proceed with the bonus tax legislation before the recess.

On March 19, the House voted overwhelmingly for a 90 percent tax on some bonuses paid by AIG and other companies that got bailouts. Later that day, four senators introduced a measure to impose a 70 percent tax on bonuses, split between the employee and company, in addition to existing income taxes. Reid sought immediate Senate passage, though Republicans objected.

‘Make Mistakes’

Arizona Republican Jon Kyl said today that lawmakers should hold hearings to consider options. “We can make mistakes” when lawmakers act too quickly, he said.

IRS Limits Home Mortgage Interest Deduction for Gay/Lesbian Couples

The Tax Professor Blog recently posted an entry discussing new IRS limits on mortgage interest deductions that would negatively affect some gay and lesbian couples. Check out the text of the entry below.

The TaxProf email discussion group has been abuzz lately about newly issued Chief Counsel Advisory 0911007 (Nov. 24, 2008; released Mar. 13, 2009), which held that the $1 million limitation on the deduction of mortgage interest on acquisition indebtedness under § 163(h)(3)(B) applies on a per-mortgage basis, rather than on a per-taxpayer basis. The ruling has enormous implications for both gay/lesbian and heterosexual couples who co-own their homes, particularly in states with high housing prices like California. Prior to the ruling, tax folks assumed that unmarried co-owners could each deduct mortgage interest on $1 million of acquisition indebtedness, thus permitting deduction of interest on one $2 million mortgage. The ruling appears contrary to the statute, as § 163(h)(4)(A)(i)(I) defines a qualified residence by reference to § 121, and Reg. § 1.121-2(a)(2) applies the $250,000 exclusion on a per-taxpayer basis in a co-owner situation.

Law Professor Who Advised Obama Says House AIG Bill May Be Unconstitutional

From ThePlumline.WhoRunsGov.com:

Laurence Tribe, who advised Obama during the campaign, [says] he’s leaning towards seeing the new House bill to tax back all the AIG bonuses as unconstitutional.

Tribe’s assertion could spell big trouble for the measure, because it could harden opposition within the Obama administration against the proposal at a time when Obama and his advisers are already expressing doubts about it.

Tribe had previously said that he thought the measure — which would slap a 90% tax on bonuses for executives whose family incomes exceed $250,000 — would pass constitutional muster. But now, after taking a closer look, he’s not so sure.

Tribe says the problem with the bill is that the Constitution forbids Congress from enacting a “bill of attainder,” which would essentially “legislate punishment of an identifiable class,” as he put it. Tribe noted that the Supreme Court had used that clause to slap down other laws.

Tribe says the main problem is that it’s hard to make the case that the law isn’t “punitive.”

“Its punitive intent is increasingly transparent,” Tribe says. “when you have Chuck Grassley calling on [executives] to commit suicide, and people responding to pitch fork sentiment, it’s hard to argue that this isn’t an attempt to punish an identifiable set of individuals who are the subject of understandable outrage.”

The whole point of opposing bills of attainder, Tribe says, is to prevent what some have called “trial by legislature.” Tribe concludes: “That’s the primary vulnerability.”

This could be a problem for House Dems. More on this soon.

10 Ways to Market your Small Business for Under $200

Earlier in the week WatchMeFranchise.com, a blog sponsored by the Roni Deutch Tax Center®, posted an entry on 10 ways to market your business for under $200. Check out some of the tips below.

1. Business Cards

Despite what many think, business cards are actually quite affordable. There are hundreds of sites online with all kinds of sales and discounts; just make sure to find one that lets you upload your company logo. Then give these cards out to everyone you meet. The person you give your card to might not need your services right now, but at least they will have your contact information in the future.

2. Mailers

Try creating mailers or a monthly newsletter to send out to your clients on a regular basis with special offers or news. You want to make sure you stay in touch with your clients so that they do not forget about your store. Also, by offering free information in a newsletter you can help establish trust with your clients.

3. Create a Referral Program

By creating a referral program you can basically put your customers to work for you! By offering a small discount to current clients you can generate dozens of new clients with almost no direct cost to you.

4. Newspaper Ads

Try taking an ad out in your local newspaper or magazine. This is a great way to reach out to local customer opportunities, and support your community at the same time. If your area newspaper is too expensive, then you could try a discount publication such as the Penny Saver. Even better, you could even reach out to your local paper and offer to write a new article on a subject related to your business.

5. Online Presence

Having an online presence these days is pretty much essential for a small business. If you do not already have your own website, or a page on a corporate site, then you should definitely consider creating one. It does not need to be a big budget production, just a simple page with a picture and some contact info. Remember, having a website means that you can put the address on your business cards, letterhead, etc.

6. Submit to Google Maps

Once you have your store location, you can submit your address to Google maps. You do not even have to have a website to do this, although we recommend you do. This will make it so that customers searching in your area will find your store when they check Google Maps.

7. Networking Events

Join your local chamber of commerce to mingle with other business owners and potential clients. Some networking groups or events have sign-up or admission fees, but if you bring enough business cards and work the crowd well, it will more than make up for it.

U.N. Panel says World Should Ditch the Dollar

From Reuters.com:

A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said.

Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value -- though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.

Some analysts said news of the U.N. panel's recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.

"Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollar's slide between 2002 and mid-2008," CMC Markets said in a note.

Russia is also planning to propose the creation of a new reserve currency, to be issued by international financial institutions, at the April G20 meeting, according to the text of its proposals published on Monday.

It has significantly reduced the dollar's share in its own reserves in recent years.

Tempting the Tax Auditor

BankRate.com posted a wonderful article on tax auditing, and the way the IRS is re-thinking them in the struggling economy. You can find a snippet of the post below, but the full story can be found here.

Dear Taxpayer,

Some of the information that you provided to us does not agree with the information we received from other sources. -- The Internal Revenue Service.

You've just joined an elite club, one whose initiation ritual is an IRS audit. Unfortunately, you can't refuse membership -- and the dues could be astronomical.

When the IRS Reform and Restructuring Act was enacted in 1998, lawmakers ordered the agency to focus more on taxpayer rights instead of collection activities. Not surprisingly, the number of audits -- or examinations, as the agency prefers to call them -- dropped dramatically.

The first year of the kinder, gentler IRS, about one of every 79 tax returns were audited. By 2003, it was even easier for tax scofflaws; that year, according to IRS data, only one of every 150 individual taxpayers were audited.

But the tax times, they are a-changing.

More audit attention

IRS Commissioner Doug Shulman says he wants to balance his agency's enforcement and service responsibilities. To that end, he has announced programs designed to take into consideration the financial struggles that many taxpayers are encountering in today's economy.

But balance doesn't mean taxpayers are off the hook. The IRS has made it clear it intends to ramp up enforcement among three groups of taxpayers: high-net-worth individuals, U.S. businesses with international operations and large corporations.

Some of those higher-income individuals have been under the tax gun for more than a year as the IRS has been investigating accounts held by U.S. taxpayers in European tax-haven countries such as Liechtenstein and Switzerland. In its most recent effort to get information on accounts that tax investigators believe are used to shield income from U.S. taxes, federal prosecutors have filed a lawsuit against Swiss banking giant UBS to force it to waive the country's secrecy rules and release the American account holder information.

But the rich and big business aren't the only targets. Overall in fiscal year 2008 (Oct. 1, 2007 through Sept. 30, 2008), the IRS took a second look at almost 1.4 million returns. That's the highest number of audits since 1998.

There are anecdotal reports that the IRS is paying closer attention to returns that contain large mortgage interest deductions on Schedule A. And if you're a small business person, either as a partnership or a Schedule C filer reporting self-employment income on your personal tax return, make sure you take extra care with your returns.

There's a good reason for the IRS' increased interest in small business filers. Because self-employment income typically has no verification mechanism (i.e., the IRS can't double check much of it in the way it can verify wage income via an employer-issued W-2), tax officials believe that many small business people underreport their income. That will change somewhat in 2011, when some new third-party reporting requirements kick in, but until then, the IRS will be on guard for any income overlooked by filers.

Bonus Tax not the Answer, Some Say

From CNN.com:

The Senate is taking up a controversial bill that would impose a hefty tax on bonuses paid out by companies propped up by taxpayer money.

But, as outrageous as the bonuses may seem, critics of the bill say the tax code should never be used as punishment.

Lawmakers cried foul after it was revealed earlier this week that ailing insurance giant American International Group doled out $165 million in retention bonuses, after claiming more than $170 billion in bailout funds.

The House of Representatives on Thursday passed a measure that would tax individuals on any bonuses received in 2009 from companies getting $5 billion or more in money from the Troubled Asset Relief Program, or TARP. Bonuses for people with incomes over $250,000 would be taxed at a 90 percent rate.

Most Democrats supported the bill, while Republicans were sharply divided.

House Speaker Nancy Pelosi, D-California, said the bill was necessitated by the poor judgment shown by firms receiving bailout money.

"We must stabilize the financial system in order to strengthen our economy and create jobs," she said. "We must also protect the American taxpayer from executives who would use their companies' second chances as opportunities for private gain."

First-Time Homebuyers Have Several Options to Maximize New Tax Credit

The IRS released a new press release recently, discussing tax options for first-time homebuyers. Check out the text of the release below.

As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.

What’s Brewing Next for the Tea Party Movement?

From Pajamasmedia.com:

The American tea party movement bears more resemblance to a rolling block party than a unified organized movement or cause. And that’s precisely why I love it. These people are nice. They’re smart. They come from all walks of life. And they’re sincere. I’ve met hard-hat wearing construction managers, accountants, schoolteachers, the unemployed, retirees, and even the nicest anarchist couple who are worried about their kids’ futures.

And the numbers of protests and protesters continue to stagger, from the consistent low hundreds to the thousands — in all types of political and meteorological climates.

But I’m wondering what’s next for this two-month-old movement, born of outrage and concern at what is arguably a very sudden and very abrupt left turn in America’s moral and economic direction.

Before discussing the future of the movement, we have to make an attempt to understand and demystify it.

Contrary to more than a few conspiracy theories being floated in the left-wing blogosphere, and counter to modern media mythmaking, the American tea party movement is a very un-A.C.O.R.N.-like, decentralized, non-Rick Santelli endorsed outpouring of conservative values and libertarian ideals. I’ve witnessed no one in Indian or Revolutionary War costumes. No Rush Limbaugh grabbing the bullhorn to utter the F-word (failure). I’ve seen very little in the way of actual tea.

In fact, all the tea partyers I’ve met think astroturfing is some sort of Arena League football penalty, rather than a term for grassroots political organizing conducted by some committee of dirty tricks. It’s ridiculous to think the GOP could Astroturf these events, because that would require a coherent message, credible leadership, and a nimble organizational and technological infrastructure.

No, the tea parties reflect the greatest characteristics of Americana: passion, resourcefulness, respect, pitching-in, and commitment to our founding principles. They could just as easily turn into barn raisings or quilting bees.

Taxing Bonuses

We are all angry about the AIG bonuses, rightfully so. By offering large bonuses to AIG leadership, we are rewarding gross incompetence. “You utterly destroyed this company. Nice job, here’s your stack of cash.”

What can be done about it now, though? A handful of lawmakers have suggested taxing these bonuses at an enormously high rate. Ok, that will effectively give the money back to the government. But this is using taxes to punish people. And that is not the purpose of taxes.

Taxes are paid to create revenue streams for operating government bodies. The tax code is not an alternative to jail time, nor should it be. This will create a dangerous precedent. What’s next? Drug dealers can avoid prosecution by paying a higher tax rate?

Bailed Out Companies Owed IRS Millions

News broke this week that at least 13 companies receiving TARP funds owe a combined total of $220 million in unpaid federal taxes. Frankly, since these companies were running into the ground, this is not really surprising. And, since 40 million individual taxpayers owe the IRS, these corporations are in good company. Where it gets a little trickier, however is that each company who accepted TARP funds signed contracts stating that they did NOT have unpaid taxes.

We are left with two possibilities.

1. These executives were even more out of touch with their companies’ functioning than we previously thought. That they truly did not know they owed the IRS millions of dollars. Ignorance, evidently, is bliss!

2. If these executives were not ignorant of their companies’ enormous debts to the government, then this is outright criminal. They signed their names, took billions of dollars in aid, all the while defrauding the government and American taxpayers.

Which is worse? Incompetence or dishonesty?

And where in this were their lawyers? As an attorney and a business owner, I certainly wouldn’t sign anything that hadn’t been reviewed by my attorney. It is just good common sense: read the contract before you sign it. But clearly, common sense is not so common anymore.

Dingell Unveils Plan to Tax AIG Bonuses

From Detnews.com:

Rep. John Dingell on Tuesday joined a growing list of lawmakers proposing legislation to recover the controversial bonuses paid to employees of insurance giant AIG.

Dingell, D-Dearborn, introduced a bill that he said would tax at a 95 percent rate any bonuses paid to any employees of companies receiving federal money from the Wall Street bailout fund.

"It is unconscionable that companies dependent upon the largesse of the federal government for their very existence should in turn pay the very employees partially responsible for our current calamity such irresponsibly exorbitant bonuses," Dingell said in a written statement.

On Monday, Rep. Gary Peters, D-Bloomfield Township, introduced his own bill, which would add a 60 percent surtax to the bonuses. Peters' staff said the surtax, plus federal income taxes and state and local taxes, would account for nearly 100 percent of the bonuses.

There was support from lawmakers of both parties and both houses of Congress on Tuesday for trying to recover the controversial bonuses by legislation. American International Group has received $170 billion in federal aid, designed to keep the company from collapse, which economists fear could drag down much of the global financial system.

Gimme My Money

Jean Chatzky, host of “Oprah and Friends” radio, wrote up a blog on the tax advice I recently offered on her show. You can find the full post and other great posts on her financial blog, here.

This morning, tax expert Roni Deutch was a guest on my radio show. First, I need to know what that woman eats for breakfast. She is a bundle of energy on a subject that puts way too many people to sleep. But she made a really important point about tax refunds. If you’re among the Americans who receives one each and every year — and tax refunds have been running, on average, about $2400 for the past few years — or even if you simply got one last year, I want you to think about changing your withholding. Here’s why: When you get a tax refund, that means you’ve been giving the government an interest-free loan.

As if that weren’t bad enough, this year some states have intimated they aren’t going to be giving you your money back — at least not right away. Kansas. Arizona. California. All have delayed the processing of tax refunds, again YOUR money, as a solution to their cash flow problems. And in other states, including New York, where governments have said this is not happening, we have started to see some anecdotal reports that refunds are slowing down.

So what do you do? Sit down with the payroll department at your company and adjust your withholding. If you get a tax refund you want to increase the number of dependents you are taking. The key is not to owe Uncle Sam at the end of the year, but to break even. Particularly when Uncle Sam is so poor, he wants to hang onto your green.

Taxing health benefits: A read-my-lips moment for Obama?

From The Minnpost.com:

What is a campaign promise? And how seriously do we expect them to be kept?

If, during your campaign for president, you criticize one your opponent's ideas, really, really rail against it, advertise against it, successfully convince the public that it's a reason to vote against your opponent, and you win, are you obliged to fight against that idea? To refuse to sign it into law? To rule it "off the table?"

OK, let's get down to cases. We're talking about President Obama, and about the idea of eliminating the tax-exempt status of employer-paid health insurance.

During the campaign, the elimination of this very significant tax benefit was a key part of John McCain's health care proposal. (McCain wanted to use it to offset the creation a big tax credit that would be available to every individual or family to use in buying health insurance.)

Obama denounced the idea. Really, really slammed it. Advertised against it. One 30-second spot, containing the tell-tale "I'm Barack Obama and I approved this message," called the McCain proposal "a multitrillion dollar tax hike. The largest middle class tax hike in history."

Tax Havens Not Safe Havens

Earlier in the week the Reason.com blog posted an article on the recent tax haven controversy, and expressed how they feel tax havens are never “safe havens.” You can find a snippet of the post below, but the full story can be read here.

Things are bad all over. Writers for The Wall Street Journal have retreated to their international gold- and lead-lined bunkers, from which they are writing articles in defense of tax havens. The usual suspects Sens. Carl Levin (D-Mich.), Bryon Dorgan (D-N.D.), and Max Baucus (D-Mont.), plus Treasury officials, are trying to snag tax money from some American companies that are incorporated and operate outside the United States. As things currently stand, these companies can defer U.S. taxes on money earned overseas until it is brought into the United States.

This is the government equivalent of scrounging in the couch cushions for change...at someone else's house. But hey, they need the money, right? That part at least sort of makes sense, although it will discourage certain useful kinds of reinvestment in firms that function abroad and have other negative consequences for people who really need financial privacy in the face of corrupt and kleptocratic governments. But then there's this:

In addition to charges of tax evasion, some members of Congress—echoing European politicians including France's President Nicolas Sarkozy and British Prime Minister Gordon Brown—have even tried to scapegoat the low-tax jurisdictions as somehow being responsible for the global recession. They are demanding that the G-20 countries come up with action proposals against them at their meeting next month.

Doctor pleads guilty to hiding $3M from IRS

From The Associated Press:

The business partner of a key witness in the federal investigation of corruption under former Illinois Gov. Rod Blagojevich has pleaded guilty to hiding $3 million in income from tax collectors.

Dr. Robert Weinstein of Northbrook, Ill., admitted Tuesday in a signed plea agreement that he and political fundraiser Stuart Levine siphoned $6 million out of a charity and that he didn't report the money to the Internal Revenue Service.

Levine was the government's star witness at the trial of political fixer Tony Rezko, and he's already admitted his part in the scheme.

Rezko was convicted of shaking down businesses seeking state contracts for campaign contributions.

Weinstein faces a sentence of two years or more. U.S. District Judge Ruben Castillo set sentencing for July 1.

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IRS Seeks to Recover $227 Million in Unpaid Taxes From Stanford

A financer from Texas is in big trouble with the IRS, and they are doing all they can to recover the money he owes. Check out the story below, thanks to Bloomberg.

Investors in R. Allen Stanford’s Antiguan bank may have to get in line behind the Internal Revenue Service as they seek to recover money from the alleged swindler.

The IRS asked a judge to let it continue to seek at least $226.6 million in back taxes from Stanford, the Texas financier accused of running an $8 billion Ponzi scheme.

The motion was filed on March 13 in the U.S. District Court in Dallas, where a court-appointed receiver is sorting out claims for more than $1 billion in assets frozen in customer accounts and in gold coins and bullion seized last month.

“The IRS shall file a fairly significant claim against R. Allen Stanford,” agency lawyer Manuel Lena Jr. wrote in the so- called motion to intervene in the case brought against Stanford by the Securities and Exchange Commission.

Stanford’s federal tax bill has swelled to twice the amount previously reported as penalties and interest piled up, and it may grow further because Stanford hasn’t filed his 2007 tax return, Lena said in the court filing.

Ralph Janvey, the court-appointed receiver, will file his response in court today, answering more than 45 groups of investors that have requested permission to join the SEC’s case against Stanford and his companies.

Janvey has already released $4.1 billion in frozen Stanford investor accounts. Only accounts linked to certain executives and employees, the bullion division, and accounts containing investments at Antiguan-based Stanford International Bank remain under the court-ordered freeze.

Six Ways to Fund IRS Payments

From CNBC.com:

If you're like millions of other small-business owners across the country, your business has practically fallen off a cliff in the past few months.

For some owners, there's even more bad news. A decline in business means that revenue you were relying on to fund a payment to the Internal Revenue Service April 15 won't be there when you need it.

The good news is that if you find yourself in that nail-biting situation, you may have at least six ways to free up money to pay the IRS.

1. 'Borrow' from the government

"You can ask the IRS for a payment plan," says Buz Aaron, CPA, senior tax manager at Braver PC in Newton, Mass., "and the government will allow you to apply for, in effect, a loan from it."

There is, of course, a downside to borrowing from the IRS. "Interest rates on IRS installment loans range from 7 (percent) to 12 percent," says Michael T. Hanley, CPA, managing partner at Merl & Hanley LLP in Smithtown, N.Y. "It varies based on the prime rate." You'll also have to pay a "user fee" that ranges from $43 to $105 depending on your financial condition.

There's also a process you must follow. "A lot of people say, 'I can't pay what I owe, so I'm not going to file my tax return,'" Hanley explains. "But the best option is to let the IRS know you can't pay. If you do that, the IRS will make a lot of concessions. A lot of times they'll stop assessing penalties from the day you've filed for the payment plan. Or maybe they'll fix the interest rate. So the best course is to be up front and work with the IRS."

If you owe $25,000 or less, you can request a payment plan online at IRS.gov through Form 9464, called an Online Payment Agreement. If you owe more than $25,000, you must print, complete and mail forms 9465 and 433-F.

"Because of tight credit, there are going to be a lot more business owners who'll be taking advantage of IRS payment plans than in the past," Aaron says. "It's easy credit because you don't have go through a credit check. You simply have to fill out a form."

73 AIG Bonuses Hit Million-Dollar Mark

Just months after getting bailed out by American taxpayers, AIG has once again made headlines by giving out millions of dollars in bonuses to their executives, many of which are no longer working for the company. CBSnews.com has posted an interesting article on the outrage sparked by these huge bonuses, and what President Obama and Congress are planning to do about it. Check out a portion of the article below.

Troubled insurance giant American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company, New York Attorney General Andrew Cuomo said Tuesday.

Cuomo subpoenaed information from AIG on Monday to determine whether the payments made over the past weekend constitute fraud under state law. He says contracts written in March 2008 guaranteed employees 100 percent of their 2007 pay for 2008, regardless of their performance.

President Barack Obama and Washington lawmakers have blasted AIG for paying more than $160 million in bonuses to employees of its Financial Products division, the unit primarily responsible for the meltdown that led to a federal bailout of the company, while the company has received billions in taxpayer bailout funds.

Cuomo said AIG mailed the bonus checks Friday.

The company and some federal regulators have said it was obligated by contract to make the payments. Cuomo said the bonuses might have been fraudulent if AIG officials knew the company couldn't afford them.

"You could argue if the taxpayers didn't bail out AIG, those contracts wouldn't be worth the paper it's printed on," he said Monday.

There was no immediate AIG comment following Cuomo's disclosure Tuesday of the bonus amounts. Cuomo did not release the names of the recipients.

AIG spokeswoman Christina Pretto had said Monday the company was in contact with Cuomo's office and would respond to his requests for information and the subpoena.

11 Tax Tips for Homeowners and Buyers

From TheChigaco77.com:

Tax season is looming and homeowners everywhere should know the opportunities available to them for tax breaks and incentives. This info is also valuable for potential home buyers so they are aware of what expenses are deductible and the ins and outs of new tax laws, since there are so many nowadays! Thanks President Obama!

So here’s the skinny and how to save yourself some dough…and hopefully headaches. As always, if you need assistance, please contact your friendly and professional tax adviser.

1. Deduct the interest you pay on your home loan on your tax return. A mortgage interest deduction reduces your taxable income. And because your mortgage payments for the first few years are heavily comprised of interest, they are almost entirely deductible.

2. Deduct property taxes and points you paid to lower your loan’s interest rate. The IRS offsets the expense of your state and local property taxes by allowing you to deduct those fees from your itemized income tax return. You may also get a tax benefit if you paid points at closing to lower your mortgage interest rate.

3. Take advantage of new laws in this challenging market. Look into new tax laws that may allow new homebuyers to get an $8,000 tax credit, short-sellers to escape penalty for forgiven mortgage debt, and homeowners to contest property taxes in a struggling market. Note, the $8,000 tax credit for first-time homebuyers is not immediately available. You must file your taxes to receive this credit and it’s only good on purchases from Jan. 1, 2009 to Dec. 31, 2009.

4. Request a property tax reassessment if your home’s market value has declined. If your property value is significantly lower now than when you bought it, show proof of your home’s current market value and recent comparable sales in your neighborhood to your local tax assessor for a tax adjustment. Your real estate agent can provide you these values through comparable properties (often called comps) that have recently sold or are currently on the market. For a good barometer on how far back to research, most lenders will only accept appraisals based on 3 months prior activity since the housing market is currently so volatile.

5. Research past and proposed assessments that may apply to your home. Understanding property taxes and assessments in your area will give you a more accurate homeownership cost, as well as help you predict and control your monthly expenses.

6. Get a reliable estimate of your property tax bill. Don’t rely on the old tax data passed down from your home’s previous owners. Depending on the circumstances of the sale, your tax bill can differ from their bill. (Now living in Cook county, we all know this is easier said than done because our taxes are paid in arrears, or more put more simply, a year late).

“The Tax Lady" Roni Deutch Offers Money-Saving Tips

The Wall Street Journal posted a new video of an interview I did over the weekend with Kelsey Hubbard. In the video I discussed my book, and also gave out some money-saving tax tips. Check out the embedded video below.

Getting Your Taxes Right, the Second Time Around

CNBC’s “On The Money” recently posted an article I penned titled, “Getting Your Taxes Right, the Second Time Around.” You can find a snippet of the post below, but the full article can be read on their site.

We all make mistakes, even on our taxes. An incorrect filing status, a missed credit or deduction, confusion about claiming dependents: any of these can happen to anybody. If you discover a mistake on your tax returns after you’ve filed you should immediately file an amended return.

The IRS will correct math errors or request missing forms—such as W-2s or schedules—when processing your original return. In these instances, do not amend your return. However, you should file an amended return if any of the following were reported incorrectly:

• filing status

• dependents

• total income

• deductions or credits

Amended returns allow you to fix errors on previously filed returns, which could result in an extra refund or an increased tax bill. Either way, you are better off getting it right the second time around than not at all. If your amended return shows you get an extra refund, well of course you’ll want to get your hands on that money.

But why would you amend your returns if it shows you owe more in taxes?

The IRS will look more favorably on your situation when you voluntarily fix it than if they discover the error and come to collect. Remember that they have the right to audit you for any reason for three years after you file your return. If they found out that you underreported your income and owe additional taxes they are going to want that amount plus interest and penalties. By bringing the mistake to light sooner, you may receive some leniency on penalties and be able to set up payments plans, depending on your individual circumstances.

10 Frustrating Things You Can Expect in Dealing Directly with the IRS

I recently put together an article on 10 frustrating things you can expect in dealing directly with the IRS for my law firm's blog. Check out a portion of the article below, but you can read the full version at RoniDeutch.com/blog.

1. No Contact Made by Representative

Although you may have obtained representation, the IRS will oftentimes contact you directly. When you inform the IRS that you are represented, do not be surprised if the IRS representative informs you that your representative has not made contact with them. While sometimes this may be true—e.g. early in the representation before you return your signed IRS Form 2848, Power of Attorney—oftentimes it is just a result of poor record management by the IRS.

If this happen to you, request the IRS representative’s contact information (name, IRS identification number, telephone number, and fax number), and then instruct the IRS representative that you have representation. Also, let the IRS representative know who your representative is and that your representative will be in contact with him or her shortly. Do not provide any additional information to the IRS representative even if requested. Thereafter, contact your representative and inform him or her of what occurred. Your representative can take the appropriate steps thereafter on your behalf.

2. Lost in the Mail

Although the IRS is not to contact you via telephone after you hire a representative, you will continue to receive correspondence from them in the mail. The IRS should also send a copy of this correspondence to your representative, but oftentimes it seems to get lost “in the mail.” Thus, to ensure that your representative is properly notified of any information provided to you by the IRS, you should immediately forward to your representative a copy of any IRS notices that you receive. This ensures that your representative remains informed as to what the IRS is doing or threatening to do regarding your IRS back tax liability.

3. Surprise At-Home or At-Work Visits

An IRS representative may show up at your home or place of business to confront you about your back tax liability. This may occur if you are missing many tax returns or if you owe the IRS a substantial sum of money. Typically, the IRS representative is a Revenue Officer assigned to your account.

In this situation, you should request the IRS representative’s identification number and contact information and inform him or her that you have representation to assist you in resolving your tax problem. Inform the IRS representative that he or she is to communicate solely with your representative. You need not answer any other questions. Once the IRS representative leaves your location, immediately contact your representative and inform him or her of the encounter. Your representative can take the appropriate steps thereafter on your behalf.

New Law Extends Net Operating Loss Carryback for Small Businesses

The IRS issued a new press release today, announcing a new tax law for small business owners.

The Internal Revenue Service announced today that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.

To accommodate the change in tax law, the IRS today updated the instructions for two key forms – Forms 1045 and 1139 -- that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.

The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.

Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.

For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.

To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.

There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.

If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.

Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.

Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.

The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.

In addition, Frequently Asked Questions have been posted on the IRS.gov web site. Small businesses that file Form 1040 can also call 1-800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.

Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.

Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions on www.IRS.gov provide more information on the accelerated refund option.

10 “Green” Ways to Use your Tax Refund

One great way to maximize your tax refund is by investing the money you get into going “green.” In addition to lowering your carbon footprint, you can also save money and take advantage of numerous tax incentives. To help all of you looking to go “green” this tax season, I have composed the following list of the top ten ways to use your tax refund to help the planet.

1. New windows

If you do not have them already, installing energy-efficient, or double=paned windows can be a great way to use your refund. Not only will installing these new windows keep the cold out and the heat in, but you can also claim federal tax deductions for qualifying installations, if installed before December 31st of 2009. You can deduct 10% of the cost, up to $200 for all windows, skylights, and storm windows.

2. Hybrid Vehicles

The arrival of new and updated hybrids in 2009 also brings with it a round of new green auto deductions. If you purchase one of the new plug-in electric vehicles, you will qualify for a new tax credit, between $2,500 and $7,500, based on the battery capacity. Get them quick though, as phase-outs begin after the first 250,000 vehicles are sold. Additional credits are also available to qualifying hybrid and biodiesel vehicles manufactured after 2006, depending on their battery capability, manufacture date, and hybrid ability.

3. Replace your Lights

Replacing one older bulb with a newer, more efficient one can save you up to $350 throughout the light of the bulb! Replacing all lights in your home (or office) with new, energy efficient bulbs is a great way to spend your refund because it will also save you money in the future. Additionally, if you are remodeling a building and purchase more efficient lighting for it, you may even qualify for a deduction or credit for doing so.

4. Start a Garden

A lot of people have dreamed of having a garden of their own, but simply the time or money to do so. Using your tax return to fund this new endeavor is a great investment that you will not regret. Not only will having a garden of your own give you a new and free therapeutic activity, but you will now have a supply of fresh fruits and vegetables (if that is what you decide to plant) free of charge!

5. Green Mutual Funds

Much like other mutual funds, “green” mutual funds take your money and invest it in to other companies, hopefully giving you a good return on investment over time. What makes “green” mutual funds different is that they only invest your money in companies who actively benefit the environment with their products, have projects running that help the environment, or have clean and sustainable business modules.

6. Recharge and Save

More than 3 billion batteries are purchased, used, and thrown away by Americans every year. That is a lot of money, and a lot of trash. Purchasing batteries and appliances that are rechargeable is a great way to save money and do good for the environment at the same time.

7. Treat Your Kitchen

Purchasing new appliances for your home will help you save energy and money, as well as give your Kitchen a new look! You might be surprised at how much energy old microwaves, ovens, blenders, coffeepots, etc. waste compared to new efficient models. Remodeling your kitchen will all new appliances is a great “green” way to invest your refund, while also increasing the value of your property.

8. New Heater or A/C

Updating to a new air conditioning and heating system will benefit you in many ways, including a nice tax benefit. As long as your new a/c and or heater was placed in to service between Jan. 1st 2009 and Dec. 31st, you can claim a credit of $300, or possibly even more depending on the system you used. Check the IRS website for a full list of credit qualifying products.

9. Alternative Energy Stocks

If you like to play the stock game, and you love the planet, then you may be interested in investing in alternative energy stocks. It can be confusing if you are a beginner, but as the trend spreads there will be more information available. For now, check out sites like AltenErgyStocks.com for more ideas and tips.

10. Home State Incentives

While there are a lot of green Federal tax incentives for both the 2008 and 2009 tax year, there are also many States who offer “green” State tax incentives as well. Be sure to check your States website for more details, or speak to a local tax professional.

Misdirected refund costs filer $2,696

A new article on one of my favorite blogs – Don’t Mess With Taxes – describes how a taxpayer’s refund went to the wrong person, costing him over $1,000. Check out the story below.

It is every taxpayer's nightmare. Your refund never arrives.

When that happens to a paper check, you can file Form 3911 the old-fashioned mailed-in way and the IRS will reissue your missing money.

But when the transaction is totally electronic, you're essentially out of luck.

Just ask Harry Rios of Des Moines, Iowa. His $2,969 tax refund check apparently was sent to someone else's bank account. (Hat tip to The Consumerist.)

Rios told the Des Moines Register that a tax preparer with H & R Block copied his bank account number incorrectly on his tax forms. Now Rios is trapped in a tax Twilight Zone where there's seemingly no way for him to get his rightful refund.

It seems the unintended refund recipient took Rios' money and ran. It's no longer in the account into which it was mistakenly deposited.

The police are involved. H&R Block is still in the loop. The bank is part of the investigation process. And, of course, there's the check issuer, good old Uncle Sam.

But Rios is still waiting for his money.

Happens every year: Rios' predicament is, unfortunately, not unusual.

In the not-so-olden tax days when the tax transactions were done on paper -- forms filed that way, actual checks sent out to taxpayers -- there was a system in place. It's still there, but more of us are going electronic.

Retirees Can Reap Some Tax Savings In Down Year

From The Associated Press:

Retirees reeling from the impact of the stock market's ruinous slide can take some solace from recent tax-law changes to help minimize their losses.

While the new options are no cause for wild celebration, taking advantage of them offers the chance to save on taxes in 2009 and regain some control over one's finances.

"Even with the market having gone down, you have the ability to cut some of your losses by using tax breaks," said Mitch Franklin, assistant professor of accounting at Syracuse University. "That can make your investment losses maybe a little less painful."

The biggest break for seniors is the one-year suspension of the required minimum distribution (RMD) rule, which Franklin called "a bit of light in this doom."

The rule mandates that those age 70 1/2 or over take a specified amount of money out of their IRA, 401(k) or similar retirement accounts annually. The total is based on their age and account value at the end of the previous year. But legislation passed by Congress late last year temporarily waives the whopping penalty for failing to take out the money: normally 50 percent on the amount that should have been taken out.

That gives seniors flexibility on how much to withdraw from their retirement accounts. They could choose not to touch their account and give their balance time to recover from the market downturn. They could take out whatever they need to help get by. Or they could take a distribution and just sit on it — getting it out of the account in order to lessen next year's required withdrawal.

N.J. Business Briefs

A Roni Deutch Tax Center® franchisee was recently featured in a business brief on NorthJersey.com, for giving free tax returns to the unemployed. Check out a snippet of the article below.

Free tax-return work for jobless

Roni Deutch Tax Centers in Bergenfield and Fair Lawn will prepare free tax returns through March 15 for Bergen County residents who show verification of unemployment.

Paul Nuti of Wyckoff, owner of the two new franchises, said he is offering the free help in response to rising unemployment. Nuti said the average cost of tax preparation at the centers is $200 for a married couple itemizing deductions. Roni Deutch, a California tax lawyer, began franchising tax centers last year. The tax centers are at 3 S. Washington Ave., Bergenfield, and 24-11 Fair Lawn Ave., Fair Lawn.

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Burns: Don't Let Voters Decide On Tax Hike

From MSNBC.com:

The top Senate Republican is shying away from putting two measures on a special ballot this spring, at least in part because he fears voters will not decide the issues the way he wants.

Senate President Bob Burns, R-Peoria, said Monday he has a "gut feeling" that a proposal for a temporary tax hike would turn into a one-sided campaign, with his personal position against the increase on the losing side. Burns said he believes that every group that hopes to get money from the taxes would pull out all the stops - and spend whatever it takes - to get it approved.

Burns also is balking at putting any plan to let lawmakers tinker with measures previously approved by voters on the same ballot, for the same reason: It might actually fail, which he does not want.

That position makes it murky, at best, whether lawmakers will agree to the calls made last week by Gov. Jan Brewer for a special election on both issues as a way to deal with the fact that state tax collections continue to run far below expenses.

Brewer also asked lawmakers to cut $1 billion in spending next year - with no specifics on which programs should be pared or eliminated - and said the state should expect another $1 billion in federal stimulus aid.

But the governor said that won't be enough to deal with an anticipated $3 billion deficit. So she asked lawmakers to raise an extra $1 billion a year for up to three years in new taxes.

The governor said lawmakers are free to do that themselves. But Burns said there isn't the necessary two-thirds margin in the House and Senate to do that.

Putting it on the ballot takes only a simple majority.

The New, Improved College Tax Credit

This year there is a new and improves college tax credit and Forbes.com has broken it down for everyone to understand. You can find a segment of their article below, but the full post can be found here.

There's a new $2,500 college tax credit for 2009, 2010 and possibly beyond. Even if your family hasn't qualified for earlier college tax credits, this one might put thousands of extra dollars in your pocket.

Called the American Opportunity Tax Credit, the new benefit was authorized for two years by the stimulus bill enacted in February. But President Barack Obama has already proposed making it permanent and it has some powerful Democratic supporters.

Technically, the new credit is an expansion of the old Hope college credit. But many more families (including both low-income and upper middle-income) qualify. Married couples filing jointly who have modified adjusted gross income of up to $160,000 ($80,000 for single parents) can claim the full credit for 2009 and 2010. Above that income level, the credit gradually phases out, with those earning up to $180,000 ($90,000 for singles) eligible to claim a partial credit. By contrast, the old Hope credit was available in full for 2008 only to couples with incomes below $96,000 ($48,000 for singles). The expanded credit can even by claimed by taxpayers paying the alternative minimum tax (AMT).

The new credit is also partially refundable. What that means is a family which doesn't earn enough to pay income taxes will get $1,000 back. A family which would otherwise owe, for example, $2,000 in income tax, should qualify for the full $2,500--it would have its $2,000 tax bill wiped out and get $500 back as part of the refundable credit.

Spend. Tax. Borrow. Repeat.

From The New York Times:

Congressional Republicans rolled out a new line of talking points today, declaring that President Obama’s proposed $3.6 trillion budget spends too much, taxes too much and borrows too much.

The House Republican leader, Representative John A. Boehner of Ohio, was first to utter those words, during a conversation with a small group of reporters at his office in the Capitol.

“On the budget, it’s really clear,” Mr. Boehner said. “It spends too much. It taxes too much. And it borrows too much.”

Mr. Boehner added: “It’s a continuing theme that I think you’ll hear from us in the days and weeks and probably months to come.”

Actually, in just a few moments, on the other side of the Capitol, at a news conference with Senate Republicans.

“Senate Republicans find the budget has three fatal flaws,” the Republican leader, Senator Mitch McConnell of Kentucky, said. “No. 1, it spends too much. No. 2, it taxes too much. And No. 3, it borrows too much.”

Mr. McConnell, elaborated just a bit. “So over the next three weeks, we’ll be talking about, first, the fact that it spends too much: it’s estimated that they could be hiring up to a quarter of a million new federal employees. Second, that it taxes too much – and, as you know, it’s going to include energy taxes as well as increases in tax rates. And number three, of course, the borrowing is astonishing. So with that, let me turn it over to our leader on the budget committee, who will further elaborate on our problems with this particular budget proposal.”

Senator Judd Gregg of New Hampshire, the senior Republican on the budget committee, stepped in just to make sure everyone had been paying attention. “Thank you, Mr. Leader,’ he said. “As you say, this budget spends too much, taxes too much and borrows too much.”

If there seemed to be an echo effect, it was no accident. Senate Republicans stunned the Democrats last week by unexpectedly blocking a $410 billion spending bill, and they were successful in part because some Democrats are also increasingly uncomfortable with the levels of government spending these days.

Senator Evan Bayh, Democrat of Indiana, announced that he would oppose the spending bill because it included an increase in discretionary spending of more than 8 percent – far outstripping the rate of inflation.

Covering Taxes, Covering Rallies

Some LA residents (8,000 in fact) are wondering why their huge taxes protest did not make local news. Check out an article about their protest via LATimes.com.

8,000 people show up to a 'Tax Revolt' rally in Fullerton and the L.A. Times fails to cover it because it's not newsworthy? Maybe if you covered the things important to the folks in the Southland, you'd sell more papers.

So said a number of others who wrote over the weekend asking why there was no story on a rally promoted by KFI-AM talk-show hosts to protest recent proposed tax increases. The rally drew (depending on who's counting) 3,000 to 15,000 people.

The Times noted the event with a short post on the L.A. Now blog on March 8. The rally was covered by the Orange County Register and San Gabriel Valley Tribune (which noted: "The radio station reported as many as 15,000 people attended, but a Fullerton police sergeant estimated 3,000 to 8,000 people were there").

Other events with similar numbers don't always get stories; an earlier post on this journal gave the thinking on that last year.

California Editor David Lauter wrote back to scores who asked about the event. The gist of his response: No, The Times didn't cover the rally. But yes, The Times has covered the issues that led to anger behind the rally.

Here's the e-mail Lauter sent out late Monday to many dozens who wrote:

Thanks to each of you for writing. I appreciate hearing from all of you -- even the ones who called me a moron.

We all agree that the tax issue is extremely important. That's why, in the last few weeks alone, the Times has run more than 30 stories about the tax and budget proposals being pushed by the Legislature and the governor. That's also why we ran a tax chart so you could see how much the new taxes would cost you.

Tax Day is April 15th. Are You Ready?

Earlier today, I received an email from Avvo.com, preparing tax lawyers for the approaching tax deadline. The email contained some tax tips for 2009, which I have included below. Additionally, my law firm’s Managing Attorney, Justin Hein, was even listed as a top contributing lawyer.

File Your Federal Tax Return for Free

Did you know that many U.S. taxpayers can file online, free of charge? Online filing not only has the benefit of minimizing errors, but it also has the added advantage of offering refunds within 10 days for those who e-file. Find out if you qualify and how to get started.

Claiming Dependents on Your Taxes

The Internal Revenue Service (IRS) allows you to take a tax deduction for each qualifying child or other relative you support. Learn more on the ins and outs of claiming dependents on your taxes in order to increase your overall deductions on your federal tax return.

Dealing with IRS Revenue Officers

If you have a history of not filing taxes, have not paid certain types of taxes (e.g. payroll taxes), or you owe a very large amount of money to the government, you may find someone from the IRS on your front steps one morning. Get helpful tips on what to expect and how to deal with IRS Revenue Officers if they show up at your home or office from California attorney Justin Hein.

Top Tax Attorneys

Here are a few of the more than 15,000 tax lawyers who are also top contributors currently on Avvo.

Justin Dain Hein

North Highlands (CA)

Avvo Rating: 8.1

Ellis McGehee Carter

Phoenix (AZ)

Avvo Rating: 8.1

Matthew J. Mcbride

Marine City (MI)

Avvo Rating: 7.0

Michael S Anderson

Mesa (AZ)

Avvo Rating: 6.2

Nicole S. Dandridge

East Lansing (MI)

Avvo Rating: 5.9

Putting a Bull’s-Eye on a Tax Loophole

From The New York Times:

Tucked away on Page 122 of President Obama’s budget is a proposal that has the fast money crowd up in arms: “Tax carried interest as ordinary income.”

It sounds like something only a certified public accountant would care about. But in fact, the Obama administration wants to close one of the biggest tax loopholes on Wall Street — one nobody seemed to notice in good times, when everyone was minting money.

As things stand now, private equity firms and hedge funds get a much better deal from the taxman than the rest of us. They are taxed at a mere 15 percent — the capital gains rate — on most of their income, instead of the higher regular income tax rate. For the past two years, they have scrambled to keep it that way. And with the economy swooning, the industry was hoping lawmakers might just forget about this little tax giveaway.

How do they justify it? Private equity types and other investors argue that they’re in the business of investing, so they should be taxed like investors who make money in the public markets. The “carried interest” in question — the bulk of these firms’ profits — refers to the 20 percent cut of profits they take when they sell, or exit, investments.

This tax deal always struck a lot of people as a little too sweet. One study commissioned last year by a Congressional committee estimated that executives would save $30 billion in taxes over the next 10 years if the rules did not change. (Of course, that was before the financial crisis began.) Buyout firms and their executives have some skin in the game, but mostly they invest using other people’s money, like pension funds. So their 20 percent cut of profits is closer to a commission than a true capital gain.

Warren E. Buffett has pointed out that this tax treatment has enabled ultrawealthy executives to pay a lower tax rate “than our receptionists do or our cleaning ladies.” (I know, I know: many people believe Mr. Buffett has managed to avoid taxes too, in part by giving away his fortune to charity, but that’s beside the point.)

And Robert E. Rubin, the former Treasury secretary who was a senior adviser at Citigroup, has also been a sharp critic.

“You can characterize it as a performance fee, you can characterize it as a carried interest, you can characterize it any way you want,” Mr. Rubin said in a controversial comment in 2007. “I think at the core there is a very good argument to be made for treating this as ordinary income.”

'Dear IRS' Rant Against Taxes Hits Nerve

The man who wrote a letter to his local paper titled “Dear IRS” is getting rave reviews from taxpayers all over, according to the Chicago Sun-Times. Check out a snippet of the article regarding the letter below.

It began as a joke, a way to let off a little steam -- now "Dear IRS" has infiltrated the nation's newspapers, Internet blogs and Web sites, and it continues to spread.

Once tax season hit, Ed Barnett was feeling sour. After simmering for a few weeks, he poured his frustrations into a letter to the Wichita Falls (Texas) Times Record News, which was published Feb. 6.

In it, the Wichita Falls native and former Times Record News staffer apologized to the Internal Revenue Service for his inability to pay income taxes this year.

After listing several dozen reasons why -- he's already paid cigarette, dog license and social security tax, to name a few -- he asked for the same treatment Democratic Reps. Charles Rangel of New York, Chris Dodd of Connecticut, Barney Frank of Massachusetts, ex-Sen. Tom Daschle, D-S.D. and Secretary of the Treasury Timothy Geithner received: "no penalties and no interest."

"I don't think people realize all the taxes we pay every day," Barnett said. "The letter wasn't meant to be a public service, but I think people are tired of the irresponsibility of Congress."

The nation's taxpayers seem to appreciate Barnett's cool sense of humor and playful jabs at government officials -- newspapers from Dallas to Florida have run his now-famous work. He's received calls from Arizona and Rhode Island for permission to share his letter. It's been forwarded back to his e-mail account multiple times from friends and family.

"It's pretty wild," Barnett said. "I'm sure it's going to get me audited! I had no idea this was going to happen."

While he's new to such widespread recognition and acclaim, this isn't Barnett's first letter to the paper, and it certainly won't be his last.

NYC Offers Tax Credit For Child Care

From Newsday.com:

The city is urging New Yorkers to claim the new Child Care Tax Credit when filing their taxes this season.

More than 50,000 New Yorkers claimed the credit last year, the first year the city credit was available. Mayor Michael Bloomberg's office says the average refund was $600.

Residents who earn $30,000 or less and pay child care expenses for children age three and under may qualify for the credit.

The mayor is urging families to call the city's information hot line, 311, to find out more information.

A Deeper Look at Obama's Stimulus and Budget

With the ongoing changes and updates to both Obama’s stimulus plan and budget, it is getting hard for even of us in the tax industry to keep up. The Obama team, however, seems confident in their final budget plans for the year. "This is a deep moral imperative to make our society more just. But it’s very good economic policy, too," Geithner told the House Ways and Means Committee, emphasizing that none of the tax hikes would take effect "until we are safely into recovery" in 2011.

Fortunately, more concrete details are emerging about Obama’s proposal and we can now sort through the legal mumbo jumbo to determine exactly who will benefit from it, and how. To help the readers of my blog gain a deeper understanding of President Obama’s financial plans for the economy, I have put together this in-depth analysis of his plan.

Business Taxes

Although small businesses are likely to get off the hook, big business and corporate can expect some new and higher tax rates coming their way. U.S. companies with international operations can also expect to get hit with a tax increase.

Small Businesses

Some critics claimed that Obama had planned to raise taxes on nearly all small business owners. However, the real issue has to do with personal income filing versus corporate income filings. While it is true that a portion of business owners do file their business taxes with their individual returns, often resulting in double taxation, most small businesses do not. In addition, estimates say that a mere 5% of small business owners make enough revenue get a tax hike.

Homebuyer Credit

It is no secret that the real estate market has been hit hard by the economy, so the stimulus obviously includes incentives in for first time homebuyers to purchase property in 2009. New homebuyers will be able to claim a credit in the amount of 10% of the sale price, up to $8,000. Additionally, unlike the homebuyer credit in 2008, the new incentive is a direct tax credit that does not have to be repaid.

Bonus Depreciation Extended

The bonus depreciation made for 2008 was set to expire last year, but it has now been extended for the 2009 tax year as well. This bonus allows you to deduct 50% off of qualifying purchased business assets, and then deduct the rest over time. This can be highly useful to new and troubled businesses struggling in the recession.

Extension of AMT Relief

Although we do not know how long the Alternative Minimum Tax (AMT) will be around, the 2008 AMT relief program will be extended though 2009. The extension will assure taxpayers who did not get hit by the AMT in 2008, but may in 2009, will not be left out.

Education Tax Benefits

In the past, the IRS’ Hope credit was available to college students during their first two years of higher education, in the amount of $1,800. However, as part of Obama’s new proposals students will be able to claim $2,500 in tax credits, for their first four years of college.

Tax Increases for Wealthy Americans

Taxpayers making over $250,000 will no longer be able to take advantage of the “Bush Tax Cuts” after 2011, when they are scheduled to expire. In addition, the highest income rate will increase from 35% to 36% for individuals and 39.6% for married couples. Obama also plans to raise the capital gains tax rate from 15% to 20%.

Another part of Obama’s budget is to put deduction limits in place for the highest earning taxpayers. The new limits would be put on the amount of mortgage interest they can deduct from their taxable income. It will also reduce the rate that the highest-earning Americans use to determine their itemized tax deductions. Currently, wealthy Americans get to write off 35 cents for every dollar of their deductible expenses. However, Obama would like to reduce that to 28 cents.

Tax Relief for Families & Individuals

In his American Recovery and Reinvestment Act of 2009, Obama introduced the new "making work pay" credit. The credit is available to qualifying taxpayers with earned income, and totals $400 for single taxpayers and $800 for married couples. However, the qualifications are very specific, and you should check with a professional before taking advantage of this new credit.

An increase in the Earned Income Credit (from 40% to 45%) is also part of Obama’s new reinvestment act. As well as huge tax break for families is the lowest threshold for the refundable child tax credit. The previous minimum income level was $8,500, but has now been decreased to $3,000, making it available to many more low-income families across the country.

Economic Recovery Payments

Another part of Obama’s proposal would give all individuals who receive Social Security and Supplemental Security Income benefits a one-time $250 payment in 2009 to recover from losses in 2008. Payments are expected to be issued in late May of 2009.

The Pros and Cons of Refund Anticipation Loans

In this economy, quick cash is in high demand. However, it is never a good idea to get into a new loan or financial venture without properly researching the topic. During tax season refund anticipation loans become popular as they allow you to borrow against a potential tax refund. However, these loans can be either good or bad depending on who you are and why you want one. To help decide if a refund anticipation loan is right for you, we have put together the following list of pros and cons.

Pro: Instant Cash

If you are low on cash and cannot wait for your refund to pay off some bills, a refund anticipation loan could certainly fill that role. While cash advances on a paycheck could pay for small bills that are due very soon, if you have a larger sum to pay off and no other way to do so, a refund advance loan could be very helpful.

Con: Interest and Fees

Unfortunately, the interest ad fees associated with these types of loans can be quite high. This is mostly due to the fact that the loan itself does not come from the preparers handling your taxes. Although you typically apply for and receive the loan through at a tax preparer’s office, they almost always outsource to third party lending banks.

Pro: Short Processing

As opposed to other large loans, a refund anticipation loan has a short application and approval process. Normally processing will take no more than a day, and the loan can be distributed within 24-48 hours. In comparison, traditional loans can take weeks to be approved and distributed.

Con: Payment Responsibility

Like with any loan, you are ultimately responsible for repaying the bank for the money they lent you. Therefore, if for any reason the lending bank does not receive the amount the full amount of your refund from the IRS then you will be held responsible for the difference.

Pro: No Tax Prep Fees

Usually if you decide to get a refund anticipation loan the tax preparer will deduct the cost of their services from your refund. This can be a great option for those who might not otherwise be able to afford the fees associated with professional tax preparation.

Con: Lack of Loan Education

Unfortunately, hundreds of people take advantage of refund anticipation loans every year without fully understanding their options. As with any major financial transaction you always want to carefully consider the pros and cons before making a decision, and when it comes to refund anticipation loans if you do not need the funds right away then you would probably be better off waiting for a check from the IRS.

Love in the Time of Taxes

Last week I wrote an article that has recently been published on CNBC’s “On The Money” Blog. For those of you who do not know, I have been a regular guest on the program for the past few months. You can find a snippet of the article I penned below, or the full article can be read here.

You’re in love! You’re getting married! Odds are taxes are the last thing on your mind. But, guess what? When you start filing joint tax returns, your spouse’s tax problems become YOUR tax problems. Having a few honest, frank discussions about your tax philosophy might just prevent some nasty arguments and tax problems down the road. What’s your strategy? Do you always get a big refund? Does your spouse always owe a good chunk come tax day? Get informed on tax laws and review your previous tax returns. Consult a tax professional if you feel out of your depth.

One of the smartest things is to make both partners responsible for the taxes. First, it is fairer than sticking one person with the entire chore. Second, being personally involved in your taxes makes both of you better stewards of your household’s financial situation. No matter how income is brought into your home, you are both ultimately responsible for paying taxes. Staying active in your tax situation helps keep you financially healthy.

In addition, never sign a return unless you know everything is true and properly stated. We all like to assume our partners are honest, but I can’t tell you how many people have no problem fibbing on their taxes. And little fibs can become huge tax problems. The IRS will hold you and your spouse both accountable for all taxes filed jointly even after a divorce. By signing the return you become complicit in any erroneous information. Best to challenge anything that doesn’t look right before filing.

But what can you do when it’s too late for prevention? What recourse do you have if you find the IRS is applying your tax refund to your spouse’s (or former spouse’s) liabilities?

Depending on your specific circumstances, you might be eligible for Injured Spouse Relief, or Innocent Spouse Relief.

House Bill For a Carbon Tax To Cut Emissions Faces A Steep Climb

From The New York Times:

Representative John B. Larson embarked again this week on his lonely quest to enact a national tax on carbon dioxide emissions.

His idea is to set a modest price on a ton of emissions, gradually increasing it each year until the desired reduction in heat-trapping-gas pollution is achieved. Under the bill he introduced this week, virtually all the revenues from the tax would be returned to the public in lower payroll taxes.

“The American people want us to level with them,” Mr. Larson, a moderate Democrat from Connecticut and a member of the House leadership, said in an interview. “We create price certainty without any new bureaucracies or complicated auction schemes.”

Many economists and academics, as well as a handful of Mr. Larson’s colleagues on both sides of the aisle and perhaps a few White House officials, if secretly, agree that a carbon tax is a simpler and more effective means of tackling global warming than the complex cap-and-trade scheme embraced by the Obama administration and most Democratic leaders in Congress.

The supporters of a carbon tax have watched as the new European cap-and-trade system has failed to achieve its emissions goals while prices for carbon permits have gyrated. They see taxing as a more effective means of cutting emissions than cap-and-trade or other hybrid plans now under consideration.

But for a variety of political, environmental and economic reasons, a national carbon tax is probably going nowhere.

Mr. Obama and Democratic leaders argue that cap-and-trade, in which polluters must either reduce emissions on their own or buy credits from more efficient companies, is a better system for assuring reductions, letting the market set the right to pollute.

But the main reason most in Washington recoil against a carbon tax is political: few are willing to openly advocate billions of dollars in new taxes at a time of economic distress, even though a cap-and-trade program also means higher energy prices.

Making Work Pay Payroll Considerations

Over the weekend I was reading up on my tax news, and I came across an interesting article on Don’t Mess With Taxes that outlines payroll considerations for Obama’s new Making Work Pay credit. You can find a segment of the post below, or the full article can be found here.

Not too long ago I talked about the possibility that you might need to coordinate your state withholding in light of the recently enacted American Recovery and Reinvestment Act, aka Obama's first stimulus package.

Well, the effects of the new Making Work Pay credit continue to give us a lot to ponder in this area, even before it starts be doled out in April via reduced paycheck payroll taxes.

In addition to the state withholding issues, folks who aren't eligible for the full $400 paycheck payout will face some tax considerations. Below is a quick look at such taxpayers.

Dependents

Work doesn't pay for dependents, at last not when it comes to this new tax credit. They're not eligible for Making Work Pay money, even if they otherwise qualify because they have a job. This could affect students who have part-time jobs.

In most cases, the employers of these workers will go ahead an adjust payroll withholding. That means that the kids who do get the credit will have to pay it back on next year's tax return they'll have to file.

Nonresident aliens

They face the same situation as dependents; that is, they also aren't eligible for Making Work Pay credit.

If they get the credit this year via payroll tax reductions, they also will have to pay it back when they file a return in 2010.

W-4 (2) In both situations, dependents and nonresident aliens might want to file revised W-4 forms to account for the credit.

The American Payroll Association suggests a single filer divide $400, the amount of credit to be paid out by the end of the year, by the number of paychecks they will receive between April 1 and Dec. 31. That amount should go on line 6 of their new W-4 so that it will offset the ineligible credit amount they'll be getting from the new payroll withholding tables.

Business Leery Of Obama’s Tax Plans

From MSNBC.com:

The nation’s most successful small business owners could pay higher taxes under President Obama’s budget plan.

The income of most small businesses is taxed at the individual level. The budget plan calls for increasing the top two tax rates to 36 percent and 39.6 percent in 2011, up from the current rates of 33 percent and 35 percent.

These higher-income taxpayers also would not receive the full value of their itemized deductions, and they would see their capital gains and dividends taxed at a 20 percent rate instead of 15 percent.

That’s bad news for small business owners who report more than $200,000 in income as individuals or more than $250,000 as joint filers.

Only 9 percent of taxpayers who report small business income make this much money, however, according to the Center on Budget and Policy Priorities. Plus many of these taxpayers are passive investors in small businesses, not owner/operators.

Most small business owners are middle-income individuals who would receive tax cuts under Obama’s budget and would benefit from his proposal for health care reform, said Robert Greenstein, the center’s executive director.

“In fact, small businesses would win under this budget,” Greenstein said.

Small business owners who make the most money, however, also are the most likely to invest in their businesses and hire additional workers, according to the U.S. Chamber of Commerce.

Geithner Pledges ‘Ambitious’ Crackdown on Tax Havens

From Bloomberg.com:

Treasury Secretary Timothy Geithner said the U.S. government will mount an “ambitious” program to crack down on companies that use offshore locales to avoid paying taxes.

Closing loopholes and hunting tax evaders are especially important at a time when the economy is deteriorating and the government is running a record budget deficit, Geithner told the Senate Finance Committee today in Washington.

“We’re going to have a much more ambitious effort to deal with offshore tax havens,” Geithner said in response to questions from the panel. Allowing companies and individuals to escape paying their share “isn’t fair, particularly given the scale of the fiscal challenges we inherited,” he said.

A congressional report released in January found that in 2007 83 of the 100 largest publicly traded U.S. companies had units in low-tax or no-tax jurisdictions like the Cayman Islands or the Isle of Man. They included American International Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, all of which were given taxpayer money through the $700 billion financial rescue.

Some of Geithner’s counterparts in Europe have vowed to take similar action, and the issue may be discussed when finance ministers for the Group of 20 industrial and developing nations meet next week in the U.K.

Yesterday, German Finance Minister Peer Steinbrueck said Switzerland should change laws that shield foreign tax dodgers from investigation in their home countries.

Recession, Tax Plans Worry Donors And Nonprofits

The Associated Press published an article recently discussing how some non-profits and donors are afraid that Obama’s newest tax changes will negatively affect them. You can find a snippet of the post below, but the full text can be found here.

Chicago philanthropist Richard Kiphart contributed generously to Barack Obama's campaign and is glad he backed a winner.

But he's among many donors and recipients in the philanthropic world worrying that Obama's new tax proposals could deter future giving at a time when many nonprofits already are in crisis mode.

"I just think they're wrong on this," said Kiphart, a corporate finance executive at global investment firm William Blair & Company. "All these organizations are crying: 'Why are they doing this to us?'"

Many wealthy Americans weren't shocked when Obama's budget proposal called for raising their income taxes. But there was surprise — and some alarm — over a separate proposal to limit the deductions that couples earning more than $250,000 can claim for charitable gifts.

Under the plan, a donor in the highest tax bracket would save $280 on a $1,000 charitable deduction, instead of $396.

Obama's budget director, Peter Orszag, says the change wouldn't occur until 2011, when the administration hopes a recovery will be under way, and there's a chance the proposal will die in Congress. But many in the nonprofit world are uneasy.

"This is a time of tremendous anxiety in the nonprofit sector," said Kathleen McCarthy, director of the Center for the Study of Philanthropy at City University of New York.

"A lot of these organizations are going to die in the next six or nine months," she said. "Saying you want to play around with the tax code only makes things worse psychologically."

Nonprofit officials and philanthropy experts interviewed by The Associated Press agreed that tax consequences are a secondary factor for many donors.

IRS Gives the Boot to Private Tax Collectors

From The Washington Post:

Nothing is certain but death and taxes. What's not certain is who is collecting your taxes.

If there's one thing you'd expect Uncle Sam to do for himself, it's collecting the money needed to run the government.

That's not always the case. The Internal Revenue Service hires private tax collectors to dun some of the folks who fall behind.

But no longer.

Last night, IRS Commissioner Douglas Shulman announced he is killing the program.

"I believe this work is best done by IRS employees," he said.

And there will be more of them to do the work. The IRS plans to hire 1,000 new collection personnel this year.

That's good news for Sam's tax collectors and his taxpayers.

In the parlance of Washington, collecting taxes would seem to be an "inherently governmental" function. As much as the IRS is the butt of jokes, it also has a reputation for being staffed by professionals who keep taxpayer information confidential, even from other government agencies.

When the IRS started using private collection agencies in 2006, that put them deep in the pockets and personal affairs of taxpayers.

"We're held to a different standard when it comes to protecting taxpayer information," Carla Thomas, an IRS employee, said between sessions at the National Treasury Employees Union legislative conference this week. "We could get written up, it could go in our evaluation. So, it's always in our best interests to protect taxpayer information."

Taxpayers Filing Earlier and Banking Larger Refunds in 2009

The IRS recently published a new press release discussing the recent statistic of taxpayers who file earlier receiving bigger refunds. You can find part of the release below, but the full post can be read here.

Taxpayers are filing earlier and receiving larger refunds so far this year, according to early filing season statistics released today by the Internal Revenue Service.

As of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year. And, the average individual refund was $2,869, a 9 percent increase or $232 more than the same time last year.

The IRS notes that possible reasons for the larger refunds may include taxpayers benefiting from the recovery rebate credit and other tax breaks such as the first-time homebuyer credit and the additional standard deduction for real estate taxes. The average refund amount generally will decrease slightly as the filing season progresses.

More taxpayers choose to receive their refunds through direct deposit each year. As of Feb. 27, more than 84 percent of all refunds were issued through direct deposit, up from 81 percent for the same period last year.

While the IRS has issued almost 3 percent more refunds this year compared to the same time last year, the number of taxpayers who choose to receive their refunds quickly and safely through direct deposit is up almost 7 percent compared to the same time last year. On Feb. 27, the average direct deposit refund totaled $3,063.

The IRS cautioned that year-to-year analysis of total returns filed will be an anomaly this year because last year’s results include those returns filed for the economic stimulus payment. As the year progresses, the IRS expects to receive and process more individual income tax returns during 2009 than in 2007 but fewer than in 2008.

FACT CHECK: Obama 'Tax Hikes' a Matter of Words

From The Associated Press:

President Barack Obama says he would lower taxes on 95 percent of Americans now and raise them on the rich in 2011. Republicans say he will increase taxes for all and in the midst of a recession to boot.

So who's right?

Yes, all Americans would pay more under the president's policies. His own aides concede that.

But no, Obama would not raise taxes in the midst of a recession, as long as his economic assumptions bear out.

The president's budget lowers taxes immediately for middle- and low-income Americans — about 95 percent of working families. It also raises taxes starting in 2011 on households that earn more than $250,000 a year.

But Obama also would impose a tariff on industries that pollute. Obama's top budget and economic advisers say those costs will get passed along to consumers. A tax? Indirectly, yes. Felt by most Americans? Yes, again.

Republicans also have asserted that Obama's tax increases would occur in the midst of a recession, a bad idea when the economy needs consumers to spend more.

But the tax increases won't occur for two years. The tariff on greenhouse emissions won't generate revenue until 2012, according to the president's budget. Obama's economists are counting on being out of the recession by then, and the chairman of the Federal Reserve Bank has said "there is a reasonable prospect" that 2010 could be a year of economic recovery.

But Obama is ANNOUNCING tax hikes and fee increases in the midst of a recession. And that, Republicans say, is bad enough.

"People may read it as a tax increase, even if, effectively, it's not for 18 months, let's say," said Sen. Charles Grassley of Iowa, the top Republican on the Senate Finance Committee.

THE CLAIM: "The president's budget increases taxes on every American, and does so during a recession," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee.

Obama's Trade Rep Pick Owes Almost $10,000 In Taxes

From CNN.com:

Former Dallas, Texas, Mayor Ron Kirk, who is President Obama's nominee to be the U.S. trade representative, owes nearly $10,000 in taxes. He's the fourth Obama pick that has come under fire for tax issues.

Kirk's tax returns for 2005, 2006 and 2007 were reviewed by the Senate Finance Committee as part of the vetting process, according to a report released by the committee Monday.

The committee found that Kirk failed to report as income $37,750 in honoraria collected for 16 speaking engagements at Austin College over those three years. One year, he deducted honoraria from four events as charitable donations though he hadn't reported them as income, according to the committee report.

He also deducted too much for the cost of tickets to see the NBA Mavericks, reporting the entire $17,382 as business expenses, the report says.

Kirk has agreed to pay the $9,975 he owes from amended returns, according to the report.

"The mayor is working with the Finance Committee on a few minor issues," White House spokesman Ben Labolt said, adding that the "nomination is on track."

IRS Eyes Wider Net To Catch US Tax Cheats

The IRS is considering getting involved with other governments in order to catch US tax evaders. You can find a snippet of a Reuters article discussing the topic below, or the full text can be read here.

The U.S. Internal Revenue Service may team up with other governments to crack down on tax cheats as it faces pressure to toughen rules on Americans who try to conceal income at offshore tax havens, a senior IRS lawyer told Reuters on Tuesday.

"We are concerned about U.S. people hiding their assets and not reporting their correct worldwide income," Steven Musher, IRS associate chief counsel for international issues said in an interview on the sidelines of a banking conference.

At the same time, Musher said the IRS does not want changes to be burdensome for banks and financial institutions. "We are trying to achieve the balance between increasing the reliability and quality of documentation to serve these various competing purposes," he said.

Musher declined to discuss the agency's lawsuit seeking to obtain the names of thousands of American clients with accounts at Swiss bank UBS AG (UBSN.VX)(UBS.N).

The IRS is preparing a proposal to change rules for its so-called Qualified Intermediary Program, which helps the government keep track of U.S. funds invested in foreign banks.

Renewable Energy Companies Look For Tax Equity Revival

From CNNmoney.com:

The financial crisis has opened a void in financing for renewable-energy projects as troubled investment banks have pulled back, potentially providing opportunities for smaller banks, investment funds and utilities as new government backing for clean energy starts to flow.

Some non-traditional firms are expected to step up their investment in renewable-energy projects, which had been dominated by big players like Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and Morgan Stanley (MS). But money hasn't come fast enough for many developers of wind, solar and other clean-energy projects, which are scrambling to secure funds, even as the U.S. government promises a flood of money in the hope of kick-starting investment in a sector seen key to rejeuvenating the economy and weaning the country off of fossil fuels.

Lending was fluid when the banks had large balance sheets and could make use of a 30% renewable energy investment tax credit. The banks would invest in clean-energy projects in exchange for the developing company's tax credit and a related tax write-off called accelerated depreciation, but as losses have mounted, the big investment banks still standing have cut back on their tax- equity financing.

This has hurt companies like OptiSolar and eSolar, privately held solar power developers in California that have had to sell their project development businesses due to a lack of financing.

Medium-size banks like U.S. Bankcorp (USB) and Mitsubishi UFJ Financial Group Inc. (8306.TO) unit Union Bank N.A. say they plan to expand their tax equity investments in renewable projects, and utilities like California's PG&E Corp. ( PCG) and Sempra Energy (SRE) have said they're interested in financing such projects for the first time. The firm has spoken to U.S. House Banking Committee Chairman Barney Franks about its proposal, in which the Treasury Department would provide investor-note financing to eligible corporations that have tax capacity, said Jack Casey, the firm's vice chairman in Washington.

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IRS Has $1.3 Billion for People Who Have Not Filed a 2005 Tax Return

The IRS recently posted a new press release with some intriguing information for non-filers in 2005. Check out the text of the release below.

Unclaimed refunds totaling approximately $1.3 billion are awaiting over a million people who did not file a federal income tax return for 2005, the Internal Revenue Service announced today. However, to collect the money, a return for 2005 must be filed with the IRS no later than Wednesday, April 15, 2009.

Especially in these tough economic times, people should not lose out on money that is rightfully theirs," said IRS Commissioner Doug Shulman. “People should check their records, especially if they had taxes withheld from their paychecks but were not required to file a tax return. They may be leaving money on the table, including valuable tax credits that can mean even more money in their pockets."

The IRS estimates that half of those who could claim refunds for tax year 2005 would receive more than $581. Some individuals may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2005 returns, the window closes on April 15, 2009. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2005 refund that their checks will be held if they have not filed tax returns for 2006 or 2007. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

One-Time Tax Credit Offered By IRS

From MSNBC.com:

There's a one-time tax credit available for people who didn't get a full economic stimulus payment in 2008. If your circumstances have changed making you newly eligible, the recovery rebate credit may be worth pursuing.

The IRS will figure what the credit will be for individual filers or you can do the figuring yourself. Among those who might be eligible are families who had an additional child last year, and people who didn't have a Social Security number in 2007, but obtained one last year.

Unlike the stimulus payments that were made by check or direct deposit, the credit adds to the amount of a tax refund, or decreases the amount of taxes owed. The maximum payment was $600 per taxpayer, or $1,200 for those married filing jointly.

Obama Budget Chief Defends Tax Hikes In Plan

Earlier today the Associated Press posted an article on the tax hikes in Obama’s plan, and his budget chiefs’ remarks on them. You can find a snippet of the post below, but the full text can be found here.

White House Budget Director Peter Orszag on Tuesday defended President Barack Obama's $3.6 trillion federal budget and its proposal to raise taxes on more affluent Americans.

"We have lived through an era of irresponsibility," Orszag told the House Budget Committee. "Looking forward, we must change course."

Lawmakers in both parties have questioned Obama's call to reduce high-income earners' tax deductions for the interest on their house payments and for charitable contributions. Also drawing fire is his proposal to start taxing industries on their greenhouse gas pollution — a move sure to raise consumers' electric rates.

Rep. Paul Ryan, R-Wis., called Obama's plan "a truly sweeping transformation of the federal government, the likes of which we have not seen since the New Deal." Ryan also warned that tax increases on small businesses earning more than $250,000 a year would stunt a possible recovery.

But, countered Orszag, "The new administration has inherited an economic crisis unlike any we have seen in our lifetimes."

Obama dispatched both Orszag and Treasury Secretary Timothy Geithner to Capitol Hill to defend the budget, with its proposed tax increases and the whopping $1.7 trillion annual budget deficit it would generate for 2009.

In Twist, AIG Sues Its Benefactor Over Taxes

From The Wall Street Journal:

In the midst of its negotiation with the federal government over revised terms of its bailout, American International Group Inc. sued the U.S. on Friday over a disputed $306 million in taxes, interest and penalties.

The suit steps up a battle with the Internal Revenue Service largely over AIG's use of a controversial type of "tax arbitrage" transaction that authorities are challenging across the world.

With the company essentially suing its owner, the suit highlights the awkwardness of national control of AIG, which the government rescued from potential bankruptcy in September. If through litigation "you're moving money from one pocket to another, why should we be paying lawyers to do that?" says David Weisbach, a tax law professor at the University of Chicago.

"AIG is taking this action to ensure that it is not required to pay more than its fair share of taxes," said a company spokeswoman. An IRS spokesman declined to comment.

In its lawsuit, filed in U.S. District Court in Manhattan, AIG for the first time laid out significant details about its role in the so-called "foreign tax generators" in dispute with the IRS. The general nature of the disagreement was previously disclosed in company securities filings and reported by The Wall Street Journal in May.

The foreign tax credit transactions detailed in the lawsuit took place in 1997, but AIG said in a securities filing that it also expects the IRS to challenge similar deals from more-recent years. The company paid the amounts in dispute and is now suing for a refund.

How to Reduce Stress this Tax Season

With all the organizing, filing, writing, researching, and calculating involved, many Americans find themselves over stressed every year over their tax returns. Tax season has always been a stressful time, but with the current economic situation, some people are getting stressed to the point of exhaustion. However, there are several steps you can take to reduce your stress this tax season, and still file with plenty of time to spare.

1. The early bird...

Once tax season begins, it is never too early to get started on organizing and filling out your tax documents. Hopefully you saved most of your tax records from last year, so that you can just copy the information from it. But even if you do not, it is always a good idea to get an early start on your tax returns. If you wait until too close to the deadline then you will find yourself overstressed trying to get everything taken care of before the cutoff.

2. Enlist a friend... or two

While most people prefer to handle their financial business solo, having a spouse, close friend, or family member around to help with your taxes can be helpful. Just because they’re around does not mean you need to share specific numbers. Rather, you can have them for support or answering simple tax questions. Trying to figure something out on your own can be difficult, and having the help of someone you trust can make the problem solving less difficult.

3. Read up on tax help

If taxes are confusing to you, it may just be due to a limited amount of knowledge about taxes. When it comes to tax returns, the more you know about the topic in general, the easier it will be for you to complete. There are dozens of articles, blogs, and even books dedicated to educating you on taxes and how to work the system to benefit your particular situation. I even penned a comprehensive book on the topic, which you can check out at TaxLadyBook.com.

4. Put aside time

If you are the type of person who just likes to sit down and get a job done, be sure to set aside enough time for this important task. It can take hours to fill out and compile some trickier returns, so be sure to give you’re a healthy chunk of time, preferably a weekend when you know you will have time.

5. Ask around at work

Since the bulk of taxes revolve around your income taxes, it only makes since that asking around at the work place would be a good source for tax knowledge. You can ask specific coworkers about their tax returns, or even ask around at lunch to see if any one has finished their taxes yet this year and what they think. You may be surprised to see how many of your coworkers are willing to help!

6. Treat yourself... occasionally

Before you start on your tax returns, it is a good idea to make a few "stopping points", where you can take a break from working on your taxes and reward your self. Maybe pick up a box of your favorite cookies, or just have a new episode of your favorite show up and ready to watch for a nice little break. The idea is to reduce your stress and take the task slowly, so you do not rush through and make costly mistakes.

7. Update your tax knowledge

No matter how much you claim to know about last year’s taxes, there are always new updates to the United States tax code. Be sure to check the IRS website every year for information on new credits, deductions and rules. You may also find that some of your favorite credits or deductions have expired, which can help you avoid costly mistakes.

8. Remain Vigilant

In this economy, owing the IRS more than you expected can be quite a set-off. A lot of people stay ahead of the game by keeping money to pay taxes in a separate savings account. Make sure you remain vigilant with adjusting your withholdings or making your estimated tax payments throughout the year. If you still unexpectedly find yourself owing then you should probably meet with a tax professional.

9. Better Safe than Sorry

If you feel unsure about your return, take it to a professional to review. If you feel you may be taking too risky of a position in claiming a deduction or that you missed a credit or two, you might as well have a professional take a peek and/or a whack at it. Remember, the tax preparation fees may be deductible next year when preparing your return, so what are you waiting for?

10. Save everything for next year

Saving your tax documents and making copies of everything (especially your completed return) will help you a lot next tax season. If done correctly, next year all you need to do is look up updated tax codes and change the numbers.

Anti-Tax Haven Bill Coming: U.S. Senate Aides

From Reuters.com:

Offshore tax havens used by rich Americans in Switzerland, the Cayman Islands and other nations are targeted for shutdown by a bill to be offered in the U.S. Senate on Monday, said senior Senate aides.

In legislation that expands on a bill co-sponsored last year with then-Senator Barack Obama, Senator Carl Levin will propose a broad crackdown on tax avoidance schemes estimated to deprive the U.S. government of more than $100 billion a year.

The bill comes just two days ahead of a Senate hearing where a senior UBS AG executive is due to testify about an investigation of the Swiss banking giant.

"Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system," said Levin in a statement given to Reuters. "We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.

"We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will."

Companion legislation is expected to be introduced in the U.S. House of Representatives, the aides said.

Both bills will face committee review and some political opposition. Bankers at UBS and other financial institutions have long been among the largest contributors to U.S. politicians' campaigns.

Since last year, three provisions have been added to the Senate bill. One would classify U.S.-controlled foreign corporations as domestic for income tax purposes. Another would close an offshore tax dividend loophole that lets people dodge payment of U.S. taxes on U.S. stock dividends, the aides said.

The third provision would expand tax-reporting requirements for passive foreign investment corporations, they said.

IRS Updates the Allowable Living Expense Standards for 2009

The IRS recently published a new press release discussing the new allowable living expenses standards. You can find part of the release below, but the full post can be found here.

The Internal Revenue Service will release the 2009 update to the Allowable Living Expense Standards on March 1. The ALE standards are used to reduce subjectivity in determining what a taxpayer may claim as basic living expenses necessary to avoid undue hardship when the taxpayer must delay full payment of a delinquent tax. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for citizens in similar geographic areas.

More information on the ALE standards is available at the Collection Financial Standards Web page.

Tax Scandals Of The Rich and Famous

Tax season is here, and so are new tax scandals. Boston.com recently posted a timeline with pictures about tax scandals of both the past and present. You can find clips from the time line below, but be sure to check out the full post here.

Tax season is here again, along with the stress of calculations, forms, and deadlines. Need some inspiration as you keep the IRS at bay, or maybe just a reminder that things could be worse?

Here are a few celebrities whose tax woes could serve as a guide -- of what not to do.

Timothy Geithner

The treasury secretary hasn't even played by IRS rules. Geithner failed to pay $34,000 in self-employment taxes, including Social Security and Medicare taxes between 2001 and 2004. Geithner contended the mistakes weren't intentional, but that he should have known better.

Tom Daschle

Daschle had to withdraw his nomination for health and human services secretary once he was accused of failing to pay more than $128,000 in taxes. The back taxes involved unreported consulting fees, questionable charitable contributions, and failure to pay taxes on the use of a limousine and driver, according to a "confidential draft" report prepared by Senate Finance Committee staff.

Helio Castroneves

The racecar driver and "Dancing with the Stars" winner was accused of hiding about $5.5 million in income from the IRS in October. His sister Katiucia and attorney Alan Miller were also charged. Castroneves's trial is set to take place in March.

Tax Trial Opens For 'Dancing With The Stars' Champ

From the Associated Press:

On top of the world a few months ago, Brazilian race car driver and "Dancing with the Stars" champ Helio Castroneves faces possible prison time if convicted at a tax evasion trial that began Monday with jury selection.

Castroneves, a two-time winner of the Indianapolis 500, smiled broadly as he entered Miami's downtown federal courthouse. Prosecutors say Castroneves, his business-manager sister Katiucia and Michigan attorney Alan R. Miller conspired to hide about $5.5 million in income from the Internal Revenue Service using offshore accounts.

Castroneves claims he relied on experts to advise him on handling finances. He also says his father controlled a Panamanian entity called Seven Promotions at the heart of the prosecution's case.

Castroneves claims the money Seven Promotions received wasn't his tax liability because the income was for his father, who had financed and promoted his son's career for over 10 years.

Castroneves, his sister and Miller also deny acting "willfully" to evade taxes and that they took improper deductions.

Under federal sentencing guidelines, Castroneves, 33, could get more than six years in prison if convicted of conspiracy and tax evasion from 1999 to 2004. That would short-circuit a brilliant racing career that began in Sao Paulo, Brazil, where a youthful Castroneves broke into the sport by driving go-carts.