Tuesday, November 30, 2010

Tax Court Disagrees with IRS on Loss Claim

After a ten year long battle, the U.S. Tax Court has reversed an IRS decision to deny a tax loss claimed by a company that bought a manufacturing plant from Nortel. The court issued is decision earlier this month (November 8).

According to CFO.com, the case involved a so-called basis bump transaction, designed to provide a U.S. taxpayer with a stepped-up basis in assets without the usual cost associated with such a phenomenon. Indeed, the cost is a U.S. tax imposed tied to the transferor of the assets.

    In a case of first impression, the Tax Court ruled that such a transaction ought to be "respected" for tax purposes. The case facts are as follows: On May 28, 1998, Canadian Parent (CP) and Northern Telecom Inc. (Nortel) executed an asset purchase agreement with respect to a property owned by Nortel, namely, the Creedmoor manufacturing facility. Pursuant to the agreement, CMAC-I, a Canadian subsidiary of CP, was authorized to purchase the inventory of the Creedmoor facility. On July 2, 1998, CMAC-I, using working capital and borrowed funds, paid Nortel $12.1 million for the inventory. On the same date, Nortel executed a bill of sale and assignment providing for the sale of its rights and title to — and interest in — the inventory to CMAC-I.

    On July 7, 1998, CMAC-I borrowed $5.4 million and CMAC-GP, a CP affiliate, borrowed a total of $46.2 million. On that same date, CMAC-I pledged the inventory of the Creedmoor facility as security for payment of the $51.6 million in liabilities (incurred by CMAC-I and CMAC-GP).

More than 8 Million Drop out of Credit Card Use

According to an analysis from credit reporting agency TransUnion about 8 million taxpayers stopped using credit cards over the past year. Currently, 62 million Americans have a card featuring a MasterCard, Visa, Discover, or American Express logo compared to 70 million last year. This represents an 11% decline.

Breitbart.com reports

    The Chicago Company found that consumers in the subprime category, or those with low credit ratings, were believed to be without cards mostly because they were shut down by banks after payments fell behind or balances were written off.

    "One can quite reasonably infer that's not voluntary," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. Banks have written off record amounts of credit card balances in recent years.

    But a significant portion of the decrease in card usage reflects decisions by cardholders to stop using credit, Becker said. "They're simply either not purchasing as much or paying down balances."

    Many of these individuals may have shifted to using debit cards. In the past several years the use of debit cards has grown steadily and now surpasses credit card use in both the number of transactions and dollar volume. Interest rate increases by credit card companies and reduced credit lines have contributed to that trend.

Read more here

Hoyer: Military Should Also see Pay Freeze

From The Hill.com:

The second-ranking House Democrat said Monday that President Obama’s move to freeze the pay of civilian federal employees should also be extended to military personnel.

Majority Leader Steny Hoyer (D-Md.) said including the military would have increased savings and add “an element of fairness." He made the comments in a statement about he president’s announcement of a two-year pay freeze.

“While I appreciate that the president reduced the length of his proposed pay freeze from three to two years,” Hoyer said in a statement, “it would have produced significantly more savings had that sacrifice been shared between federal civilian and military personnel — with a strong exception for the members of our military and civilian employees risking their lives on our behalf in Afghanistan, Iraq, and anywhere else they are serving in harm's way.”

Hoyer will become the Minority Whip of the 112th Congress. He has made budgetary reform a signature issue, and he said he would review Obama’s proposal “for its balance between fiscal responsibility and the need to recruit and retain a federal workforce able to provide the level of service that the American people expect.”

The Maryland Democrat also urged the administration to back a more comprehensive program to reduce the nation’s soaring deficit, along the lines of proposals from the president’s fiscal commission and a separate debt panel.

Senate Blocks Repeal of Health Care Provision

Yesterday, the Senate blocked an effort to repeal part of Obama's health care reform package. The tax provision would require nearly 40 million businesses to start filing tax forms for every vendor that sells them more than $600 in goods.

The Associated Press reports:

    The provision was included in the new health care law passed last year, but even Democrats who supported the law now acknowledge that the filing requirement would be a paperwork nightmare for businesses.

    Most senators support repealing the requirement, but they couldn't agree Monday on whether to make up the lost revenue. The filing requirement raises an estimated $19 billion over the next decade.

Read more here

Black Friday Retail Sales Edge Up Only Slightly

Last week was Black Friday and according to new reports, Americans spent slightly more than last year. Retail spending for the day after Thanksgiving rose 0.3% to $10.69 billion, up from last year's $10.66 billion.

Yahoo news reports:

    Two factors behind the slim increase, a disappointment following bullish reports from stores Friday, were heavy discounts earlier in November and online shopping, which saw a big increase.

    Chicago research firm Shoppertrak, which tallies sales in more than 70,000 retail outlets across the country, said the total was still a record for the day. It stood behind its prediction for spending to rise 3.2 percent for the season.

    "It's hard to say Black Friday wasn't a success, it's just not the success we saw in the mid-2000s, when the day really became a phenomenon," ShopperTrak founder Bill Martin said.

Read more here

FDIC: List Of 'Problem' Banks Grows In Q3

From Huffington Post.com:

The number of banks on the Federal Deposit Insurance Corp.'s "problem" list grew over the summer, even as the industry posted solid net income and fewer loans soured.

The number of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter. That's the most since 1993, during the savings and loan crisis.

The FDIC also said banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion.

The FDIC said earnings fell because Bank of America Corp took a one-time hit of $10.4 billion. That was because of new limits on debit card swipe fees that retailers pay to banks.

The industry's third-quarter results were well above the $2 billion that banks earned a year earlier.

The troubled banks were smaller, on average, holding $379.2 billion in assets. That's down from $403.2 billion in the April-June quarter.

Destiny's Child Star Kelly Rowland Ducks 'Bills, Bills, Bills'

Earlier this month the IRS filed a lien against Grammy-Award winning singer Kelly Rowland, former member of Destiny's Child.

According to DET News.com, the lien was filed with the New York City Register in the amount of $98,634.

Rowland, 29, rose to fame in the girl group, which broke through with the 1999 hit tune "Bills, Bills, Bills." After the group broke up, she released a few solo albums and maintains an acting career that included portraying Motown legend (and ex-Detroit Councilwoman/tax delinquent) Martha Reeves in a 2003 episode of the TV show "American Dreams."

Continue reading at DET News.com...

Obama Calls for Federal Wage Freeze

According to CNN Money, President Obama will call for a two-year federal employee wage freeze. It is expected to save the country an estimated $60 billion over 10 years, which would only make a small dent in the forecast deficit totaling nearly $9 trillion over the next decade.

CNN Money reports

    "It's a real money issue and a psychological first step," said Maya MacGuineas, fiscal policy director at the New America Foundation.

    Obama was scheduled to announce the proposal later Monday.

    According to the administration, the two-year pay freeze would save $2 billion for the remainder of fiscal year 2011 and $28 billion over the next five years.

    The freeze would not apply to military personnel, but would apply to all civilian federal employees, including those in various alternative pay plans and those working at the Department of Defense.

    Federal workers shouldn't feel singled out: The White House says more tough choices are on the way.

Read more here

Friday, November 26, 2010

10 Fascinating Facts About U.S. Currency

WalletPop.com posted an interesting article earlier in the week with some fascinating facts about U.S. currency. Over the past 200 years our currency has gone through many changes, and it's interesting to think that there is so much history behind those bills we all carry in our wallets. Check out a few items from WalletPop.com's list below.

    1. What is the typical lifespan of a dollar bill?

    That depends on the denomination of the note. Here are the average lifespans according to the U.S. Bureau of Engraving and Printing (or the BEP):

    $1 bill - 22 months

    $5 bill - 16 months

    $10 bill -18 months

    $20 bill - 24 months

    $50 bill - 55 months

    $100 bill - 89 months

    Bills that get worn out from everyday use are taken out of circulation and replaced. Coins usually survive in circulation for about 25 years.

    2. What percentage of bills are $1 notes?

    Just under half of the notes printed by the Bureau of Engraving and Printing are $1 notes. In fiscal year 2009, the exact percentage was 42.3%.

    3. Has a woman's portrait ever appeared on U.S. paper money?

    Martha Washington is the only woman whose portrait has appeared on a U.S. currency note. It appeared on the face of the $1 Silver Certificate of 1886 and 1891, and the back of the $1 Silver Certificate of 1896.

Read more here

Hate the Black Friday lines? Score deals online

I love getting a deal as much as the next person, but I’m really not willing to risk being trampled to save a buck. Luckily CNNMoney.com is letting us in on some online bargains. All the savings, none of the waiting in line at 3 am!

From CNN Money.com:

It has become as traditional as turkey, stuffing and pumpkin pie: On the day after Thanksgiving, shoppers bundling up and heading out before dawn for retailer's eagerly awaited Black Friday doorbuster deals.

And after two years of dismal holiday sales, retailers are upping the ante to bring shoppers into the stores this season. This year the National Retail Federation estimates that holiday sales will increase 2.3% to $447.1 billion, much improved from last year's 0.4% uptick and the dismal 3.9% sales decline in 2008.

But for those who don't want to face the stores, don't despair. Many of the doorbuster deals will be available online, too.

"This Black Friday, I would like to stay in the comfort of my bedroom possibly online bargain shopping for maybe a table and some things to decorate my new apartment," said Kaitlynn Blyth, who waited outside last year from 7 p.m. until midnight to get Zhu Zhu pet accessories for her younger sister.

Here's where to score the deals:

Best Buy: The same products promoted in its Thanksgiving Ads -- including doorbusters -- will be available on BestBuy.com starting Thanksgiving Day. Best Buy is also offering free shipping on online orders through Dec. 21, excluding laptops, iPads, iPods and some major appliances.

Welcome to the Tax Blogosphere: Pat Cain's Same Sex Tax Law Blog

Santa Clara Law professor Patricia A. Cain has launched a new blog, the Same Sex Tax Law Blog. This should be an extremely valuable resource for all the same-sex couples who are looking for some advocacy and equity in our tax system. Check out her inaugural post courtesy of The Tax Prof Blog.

    The Internal Revenue Code provides numerous special provisions for spouses. At the current time none of these provisions applies to same-sex couples. Even legally married same-sex couples, residing in states where their marriages are recognized, cannot claim spousal status under the federal tax laws. The Defense of Marriage Act (DOMA) prohibits the federal government from recognizing same-sex couples as spouses. Until DOMA is either repealed or found unconstitutional, the tax treatment of many same-sex couples is a subject of much confusion and contention.

    I have been thinking about these issues for a long time and am creating this blog to enable me to share those thoughts more broadly with tax practitioners who are interested in this topic. As issues arise or as questions occur to me, I will write individual blog posts on each issue or question. Short "white papers" dealing with specific topics in more detail will be linked to the blog. And important IRS rulings and cases that affect tax questions for same-sex couples will also be linked.

Welcome to the tax blogosphere Patricia!

Thursday, November 25, 2010

Happy Thanksgiving

Cute Viral Thanksgiving Video

A friend sent me this cute stop motion video so I thought I would share it with all of you. Happy Thanksgiving!

Wednesday, November 24, 2010

8 Cities that want your Business!

Every city says they want to encourage new business growth, but there are at least eight cities putting their money where their mouths are. Some offer compelling tax breaks, others use incredibly innovative new business incubators to nurture burgeoning businesses.CNN put together a list of the top 8 business friendly locations, you can find a snippet of the article below or check out the full list here.


    Pittsburgh may not be Silicon Valley, but the state's second-largest city hopes to recapture some of its former steel-era glory by becoming a hub for technology start-ups.

    Bill Gates wannabes can get advice and capital from InnovationWorks, an economic development organization designed to help tech start-ups that could boost the southwest Pennsylvania economy.

    The region's largest seed-stage investor, InnovationWorks has provided more than $45 million in financing to more than 125 technology start-ups since it started ten years ago. Business consulting also is available for start-ups, while a grant program helps small manufacturers boost their efficiency and universities develop ideas that could turn into viable products.

    Meanwhile, IT entrepreneurs focused on starting web, mobile, gaming or hardware firms can get free office space, mentoring and $25,000 in funding via its 20-week AlphaLab. AlphaLab companies include Careerimp, which helps users create resumes targeted to specific jobs fast, and Devotee, which sets retailers up with mobile loyalty programs.


    The recession and housing bust hit Florida hard, but The Launch Pad is looking to help turn the region's economy around.

    The assistance network is designed to encourage and support University of Miami students and alumni who want to start ventures -- particularly in south Florida.

Continue reading at CNN.com...

IRS Announces New Members for the Electronic Tax Administration Advisory Committee

In their newest press release, the Internal Revenue Service announced the selection of seven new members and a chairman for the Electronic Tax Administration Advisory Committee (ETAAC).

From the IRS Press Release:

    ETAAC provides an organized forum for discussion of electronic tax administration issues and supports the goal of increasing electronic interactions between tax professionals and the IRS.

    “The IRS is pleased with the continued support of the ETAAC,” said Cecille M. Jones, deputy director, IRS Electronic Tax Administration and Refundable Credits. “ETAAC offers constructive observations and suggestions about current or proposed policies, programs and procedures.”

    The new members will replace the outgoing members whose terms expired and will ensure continuity of the committee. The new members are:

    Sean Brennan of Philadelphia, Pa., is president of Brennan and Associates. He is a certified public accountant (CPA) e-filing both individual and business tax returns. Brennan has been teaching accounting and taxes at the college level for the past 13 years.

    Alice Burnett of Lawrenceville, Ga., is the owner of Burnett & Associates. Her consulting firm offers operational expertise regarding electronic payment options, and she worked on the implementation and operation of the Electronic Federal Tax Payment System (EFTPS).

Continue reading at IRS.gov...

Fed Predicts Weak Recovery for Several Years

Yesterday the Federal Reserve slashed its predictions for economic recovery, they are now projecting it could be several years before conditions improve. More than half of the central banks are warning that it could take up to six years for unemployment, and inflation to return to normal levels. Like everyone else in America, I’m left wondering if we can all stand a few more lean years.

CNN Money reports

    The much weaker forecast is the major reason that policymakers decided earlier this month to announce a plan to try and jumpstart growth by pumping an additional $600 billion into the economy through the purchase of long-term bonds. That plan, known as quantitative easing, has been criticized by several economists, politicians and foreign central bank officials.

    The Fed now expects the economy to grow between 2.4% to 2.5% this year, compared to an earlier forecast of growth between 3.0% and 3.5%.

    The Commerce Department reported Tuesday that the economy grew at a 2.5% rate in the third quarter, up from 1.7% in the second quarter but well below the increase of 3.7% in the first three months of the year.

Read more here

Tuesday, November 23, 2010

Top 5 Falsehoods About the Bush Tax Cuts

PolitiFact.com put together an informative list of largest misconceptions of the Bush tax cuts, which are due to expire in just over a month. I have included a section of their article below, but you can find the full list of falsehoods here. There’s so many misstated facts and overblown declarations about the cuts, it’s amazing all of Washington isn’t walking around with their pants on fire.

    "Should Democrats get their way, every income tax bracket will increase on Jan. 1, 2011. Every single one."

    We've noticed that those who favor extending all the tax cuts will sometimes say that their opponents want to see all the tax cuts expire. But this is not the case. It's not President Barack Obama's position, nor of the Democratic leadership in Congress. And some Democrats think it might be a good idea to extend the Bush tax cuts for everyone, at least until the economy has recovered. Rep. Mike Pence, R-Ind., said this one, and we rated his statement False.

    "Ninety-four percent of small businesses will face higher taxes under the Democrats' plan."

    Republicans often say they're opposed to the tax increases because they will hit small businesses, but the numbers don't really support that. Under the Democratic plan, a small business owner would have to report profits of more than $250,000 before the tax increases kicked in. (Rates would rise for the top two brackets, from 33 percent to 36 percent and from 35 percent to 39.6 percent.) But most small businesses aren't nearly that profitable. In fact, Internal Revenue Service data shows that of all taxpayers who declare business income, only 2 to 3 percent declare that much. We rated this Pants on Fire when Rep. Randy Neugebauer, R-Texas, said this back in August.

    Small businesses that have "$250,000 in gross sales for the business ... They're the ones that are looking at massive tax increases."

    This is another variation on the claim that tax increases will hit small business. This statement is wrong because gross sales are all the money a business takes in. Under longstanding IRS rules, businesses get to deduct most expenses before reporting their final taxable income. That includes things like employees' pay, supplies, a car or truck, fuel costs, advertising, and more. Rep. Michele Bachmann said this on Nov. 16, and we rated it Pants on Fire.

Continue reading at PolitiFact.com...

Higher Taxes Won't Reduce the Deficit

Could all the rhetoric and arguing be a moot point? The Wall Street Journal ran a story stating that historically, more tax revenue just leads to more spending by Washington.

From the Wall Street Journal:

The draft recommendations of the president's commission on deficit reduction call for closing popular tax deductions, higher gas taxes and other revenue raisers to drive tax collections up to 21% of GDP from the historical norm of about 18.5%. Another plan, proposed last week by commission member and former Congressional Budget Office director Alice Rivlin, would impose a 6.5% national sales tax on consumers.

The claim here, echoed by endless purveyors of conventional wisdom in Washington, is that these added revenues—potentially a half-trillion dollars a year—will be used to reduce the $8 trillion to $10 trillion deficits in the coming decade. If history is any guide, however, that won't happen. Instead, Congress will simply spend the money.

In the late 1980s, one of us, Richard Vedder, and Lowell Gallaway of Ohio University co-authored a often-cited research paper for the congressional Joint Economic Committee (known as the $1.58 study) that found that every new dollar of new taxes led to more than one dollar of new spending by Congress. Subsequent revisions of the study over the next decade found similar results.

We've updated the research. Using standard statistical analyses that introduce variables to control for business-cycle fluctuations, wars and inflation, we found that over the entire post World War II era through 2009 each dollar of new tax revenue was associated with $1.17 of new spending. Politicians spend the money as fast as it comes in—and a little bit more.

Warren Buffett: Read My Lips, Raise My Taxes

Yesterday famed billionaire Warren Buffet spoke with ABC News' Christiane Amanpou and said that he supports letting the Bush tax cuts expire for wealthy taxpayers.

"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further," Buffett said. "But I think that people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it." While about 40 other super-rich taxpayers have jumped on this “tax me, please!” bandwagon, I’m sure there are dozens more rich folk who would just as soon pay less in taxes.

Check out a video of Buffet's interview below, or click here for the full article on ABC News.com.

Did Dolce & Gabbana Forget To Pay $1 Billion In Taxes?

Fashion designers Domenico Dolce and Stefano Gabbana have been accused of tax evasion by Italy’s taxing agency. According to Guardia di Finanza the famed designers misstaked the value of their design house when they sold it, evading $1 billion in taxes. Are the designers really evading taxes, or is the Guardia di Finanza just looking for an easy payday?

Stylite.com reports

    Sources confirmed that the designers were recently indicted in a tax evasion case that’s been under investigation since 2008. The indictment alleges that the designers and the house they built fudged the real value of their company when they sold it to their Luxembourg-based holding firm Gado Srl. in 2004. If they’re found guilty, the two could be personally liable to over $1 billion in back taxes and fines.

    Of course, the designers vehemently deny the charge — and they have been since they were made aware of the investigation. In May 2009 they issued a statement saying that they’ve paid all the taxes they owe, and that the tax police aren’t getting a single additional lira of their hard-earned money.

    “It’s a paradox! Since when does one have to pay taxes on money one never actually collected,” the designers said in a personal statement. “It’s an absurd demand based on a completely abstract calculation. This higher taxable sum…is a virtual figure we have never received, the result of a theoretical accounting exercise.”

Read more here

Questions for the Tax Lady: November 23rd, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, can I deduct all of my gambling losses on my tax return?

Answer: Unfortunately, the answer is no. You are allowed to deduct gambling losses on your tax return, but only to offset the amount of gambling winnings you report.

For example, if you report $2,000 in gambling winnings (as miscellaneous income on your tax return), you could only deduct up to $2,000 in gambling losses.

Question: I keep hearing about the expiring Bush tax cuts in the news, and how Congress still hasn't voted on them. How late into the year will we have to wait before we find out if the tax rates are going to change next year or not?

Answer: Get ready to wait some more! Congress has now said they will not vote until “after Thanksgiving.” How long after that, no one is sure. It could be their first order of business, or their last before the Winter break. I do think that no matter when they start discussing, they’re going to be arguing for quite a while.

The worst part is that no matter what is decided, you will likely see more taxes being withheld from your paychecks for the first part of 2011. The reason is the IRS has to print and distribute the tax charts to employers. Printing and distributing take time. So, the tax withholding charts had to be made as the laws are written right now: all cuts expire. Oh, you’ll get the money back, but in the meantime it will be confusing quagmire.

Monday, November 22, 2010

Wesley Snipes Ordered To Surrender For 3-Year Prison Sentence

It looks like Wesley Snipes has reached the end of the road in his tax evasion case. The Judge just rejected his last appeal request and has ordered him to start serving his three year prison sentence. Reports are rolling in that Snipes surrendered to authorities on Friday and is in lockup as I write.

    "The defendant Snipes had a fair trial; he has had a full, fair and thorough review of his conviction and sentence. ... The time has come for the judgment to be enforced," the judge wrote in his 16-page decision.

    The 48-year-old star of the "Blade" trilogy and Spike Lee's "Jungle Fever" was convicted in 2008 on three misdemeanor counts of willful failure to file his income tax returns. He was acquitted of two more serious felony charges.

    The Federal Bureau of Prisons would not say where Snipes was to surrender until he was in custody, though inmates generally are placed within 500 miles of their residence, said spokesman Edmond Ross.

Continue reading at Huffington Post.com...

The Blur Between Spending and Taxes

While Congress is getting back to work, and deficit reduction is a high priority, there’s a lot of rhetoric being bandied about. Spending cuts and tax cuts are a big focus. But what does it really mean? The NY Times tries to deep dive to see what the big difference really is.

From NYTimes.com:

Should the government cut spending or raise taxes to deal with its long-term fiscal imbalance? As President Obama’s deficit commission rolls out its final report in the coming weeks, this issue will most likely divide the political right and left. But, in many ways, the question is the wrong one. The distinction between spending and taxation is often murky and sometimes meaningless.

Imagine that there is some activity — say, snipe hunting — that members of Congress want to encourage. Senator Porkbelly proposes a government subsidy. “America needs more snipe hunters,” he says. “I propose that every time an American bags a snipe, the federal government should pay him or her $100.”

“No, no,” says Congressman Blowhard. “The Porkbelly plan would increase the size of an already bloated government. Let’s instead reduce the burden of taxation. I propose that every time an American tracks down a snipe, the hunter should get a $100 credit to reduce his or her tax liabilities.”

To be sure, government accountants may treat the Porkbelly and Blowhard plans differently. They would likely deem the subsidy to be a spending increase and the credit to be a tax cut. Moreover, the rhetoric of the two politicians about spending and taxes may appeal to different political bases.

But it hardly takes an economic genius to see how little difference there is between the two plans. Both policies enrich the nation’s snipe hunters. And because the government must balance its books, at least in the long run, the gains of the snipe hunters must come at the cost of higher taxes or lower government benefits for the rest of us.

Millionaires to Obama: Tax us

For months we have seen anti-tax activists who are calling on legislators to extend all of the Bush tax cuts. However, a group of wealthy taxpayers have emerged that are actually asking to be taxed. More than 40 of the wealthiest people in the U.S. are asking the government to raise their taxes; saying they have more than they can ever need, so why not spread it around?

Yahoo News reports

    More than 40 of the nation's millionaires have joined Patriotic Millionaires for Fiscal Strength to ask President Obama to discontinue the tax breaks established for them during the Bush administration, as Salon reports.

    "For the fiscal health of our nation and the well-being of our fellow citizens, we ask that you allow tax cuts on incomes over $1,000,000 to expire at the end of this year as scheduled," their website states. "We make this request as loyal citizens who now or in the past earned an income of $1,000,000 per year or more."

    The group includes many big-time Democratic donors such as Gail Furman, trial lawyer Guy Saperstein and Ben Cohen of Ben & Jerry's ice cream (pictured). The list remains open to millionaires who want to sign on.

Read more here

Saturday, November 20, 2010

Latest Good Reads

New Bill Requires Landlords to Report Contractor Information

Does Cutting Tax Expenditures = Reducing Spending?

What About the Gift Tax?

Tax Cuts and Deficit Commissions

GAO: Compliance Costs of ObamaCare's 1099 Reporting Requirement Are Low

Middle Class Tax Cuts: Democrats To Hold Votes On Letting Bush Tax Cuts Expire For Wealthy

Just what we were all hoping for, more deadlock from our leaders in Washington. Now Democrats have stated they are still pushing to extend only the Bush tax cuts that affect middle-income taxpayers, while letting cuts for the wealthy expire. Of course, the Republicans will try to block the moves and we will continue in this fashion on into eternity. At least, that’s how it seems right now.

From Huffington Post.com:

After meeting with President Barack Obama Thursday, Democratic leaders in Congress said they plan to hold a series of politically charged votes to extend middle-class tax cuts while letting tax cuts for the wealthy expire.

Republicans are expected to block the plan, leaving both sides back at square one as they try to negotiate a deal to spare families at every income level from a big tax increase in January.

Democratic officials said Obama did not embrace a particular approach to the tax cuts in his Oval Office meeting with Democratic leaders. He indicated he wanted to wait for a meeting with Democratic and Republican leaders on Nov. 30 before staking out a position.

"I think there's a reality here which is that while it might be best to continue the middle-class tax cuts and raise taxes on higher income people, the votes are not there to do that," said Sen. Joseph Lieberman, a Connecticut independent who caucuses with the Democrats. "I think everybody's got to deal with a stark reality which is, are we going to leave here knowing that we haven't come to an agreement and that everybody's taxes are going to go up Jan. 1?"

Senate Majority Leader Harry Reid, D-Nev., said he would like to schedule competing votes on the Senate floor. One would be on Senate Republican Leader Mitch McConnell's bill to make all the tax cuts permanent; the other would be on a Democratic plan to extend only the middle class tax cuts. Neither is expected to pass.

Brace Yourself: It’s Almost Holiday Season

Can you believe Thanksgiving is less than a week away? We all love the holidays, but they certainly don’t make themselves. Making the holidays memorable for your family takes a lot of work, and with that work comes a hefty amount of stress. The Glass Hammer.com posted a great entry with advice on how to have a relatively "frazzle-free" November and December.

    1. Start Planning Your Calendar Now

    True story: For a few summers in college, I worked at a large craft supply store – working the register, designing store displays, and stocking merchandise. Mid-July every year, as soon as we packed up our Independence Day craft supplies, up went the DIY Christmas ornaments and decorations.

    About half of our customers complained – it’s too early! But the rest of them jumped on board. While these overzealous crafters maybe had too much time on their hands, we can learn something from them.

    Start planning your calendar for the next two months now. That way, you won’t double book yourself. Or if you do, at least you won’t be caught off guard. If your December work party, your partner’s office holiday drinks, and your kid’s winter play all fall on the same evening, it’s best to know now, right?

    2. But Don’t Get Too Serious

    There’s a not-so-fine line between being prepared and being inflexible. Acknowledge that the unexpected WILL happen. Staying flexible will help you maintain calm – both outside work and in the office. Everyone is stressed this time of year – and that means missed deadlines and last minute rescheduling. Keeping this in mind will help avoid some headaches.

Continue reading at The Glass Hammer.com...

Friday, November 19, 2010

8 Advantages of Investing in a Franchise

Opening your own business can seem scary when you are first starting out, but it does not have to be. There are actually plenty of advantages of investing in a franchise business, as opposed to opening a brand new business.

Roni Deutch Tax Center recently authored a guest blog entry for FranchiseBusinessReview.com explaining 8 of the biggest advantages of opening a franchise. You can find a few items from the list below, or click here for the full text.

1. Tried and True

When you invest in an already created business model, you can have confidence the business will be successful if you work hard and follow the franchisors instructions. Franchised businesses typically have a proven track record of success, and can support nationwide expansion.

2. Trusted Brand

Another big advantage of owning your own franchise business is that you are investing in an already recognizable brand. Unlike other small business owners who have to build up recognition and a reputation, your business is likely to already be nationally known and recognized.

3. Higher Success Rate

According to the Department of Commerce, franchised businesses are more likely to avoid failure. Therefore, investing in a franchise business can be considered a more secure investment then opening up a new business.

4. Quick Cash

Getting financed for a franchise business loan can be drastically easier than it would be if you were seeking a loan to start an independent business. Banks know the lower risk involved in a franchise investment and love to be involved with secure and profitable ventures.

Thursday, November 18, 2010

Low-Tax States will Gain Seats, High-Tax States will Lose Them

From the Washington Examiner:

Migration from high-tax states to states with lower taxes and less government spending will dramatically alter the composition of future Congresses, according to a study by Americans for Tax Reform.

Eight states are projected to gain at least one congressional seat under reapportionment following the 2010 Census: Texas (four seats), Florida (two seats), Arizona, Georgia, Nevada, South Carolina, Utah and Washington (one seat each). Their average top state personal income tax rate: 2.8 percent.

By contrast, New York and Ohio are likely to lose two seats each, while Illinois, Iowa, Louisiana, Massachusetts, Michigan, Missouri, New Jersey, and Pennsylvania will be down one apiece. The average top state personal income tax rate in these loser states: 6.05 percent.

The state and local tax burden is nearly a third lower in states with growing populations, ATR found. As a result, per capita government spending is also lower: $4,008 for states gaining congressional seats, $5,117 for states losing them.

And, as ATR notes, “in eight of ten losers, workers can be forced to join a union as a condition of employment. In 7 of the 8 gainers, workers are given a choice whether to join or contribute financially to a union.”

Jobless Benefits Cost so Far: $319 Billion

According to a CNN Money analysis of federal records, unemployed Americans have collected $319 billion in unemployment benefits since the recession began three years ago. This number is likely to be the center of a debate to extend benefits for the fifth time this year. But just as important, in 2009 alone, those payments kept 3.3 million people from poverty. Congress must act on unemployment before the end of this month or 2 million taxpayers will begin losing benefits.

CNN Money reports

    The federal government has already footed $109 billion of the bill, and lawmakers are super-sensitive to adding further to the deficit. But advocates are turning up the pressure to extend the deadline to file for federal benefits.

    Regardless of what Congress does, employers big and small will be paying the tab for years to come.

    Businesses traditionally cover the cost of state unemployment insurance and up to 20 weeks of federal benefits, which kick in when a state experiences high levels of joblessness. At issue now are a third level of emergency benefits -- lasting up to 53 weeks -- first authorized by Congress in mid-2008.

    Soaring unemployment has drained the state accounts that typically fund jobless benefits, forcing many states to borrow money from the federal government to cover their payouts. Currently, 31 states have $41 billion in loans outstanding.

Read more here

IRS Seeks to Return $164.6 Million in Undelivered Checks to Taxpayers

In their newest press release, the IRS announced that they have $164.6 million in undeliverable tax refund checks. There are over 100,000 taxpayers that are due a refund, and the IRS is encouraging taxpayers to check the "Where's My Refund" section of their site to see if they are owed a check. If only the IRS were so dedicated to finding taxpayers to whom they owe money, as when the taxpayer has a debt, eh?

“We want to make sure taxpayers get the money owed to them,” said IRS Commissioner Doug Shulman. “If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

A taxpayer only needs to update his or her address once for the IRS to send out all checks due. Undelivered refund checks average $1,471 this year, compared to $1,148 last year. Some taxpayers are due more than one check.

The average dollar amount for returned refunds rose by just over 28 percent this year, possibly due to recent changes in tax law which introduced new credits or expanded existing credits, such as the Earned Income Tax Credit.

If a refund check is returned to the IRS as undelivered, taxpayers can generally update their addresses with the “ Where’s My Refund?” tool on IRS.gov. The tool also enables taxpayers to check the status of their refunds. A taxpayer must submit his or her Social Security number, filing status and amount of refund shown on their 2009 return. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Continue reading at IRS.gov...

Troubled California to Restructure Debt Sales

In another desperate attempt to reign in an out of control budget, my home state of California announced yesterday that the state government would restructure upcoming bond issues to raise $14 billion.

CNBC reports:

    The decision to shift more of the sale to a government-subsidized market for municipal bonds would lower the cost of the new debt. This follows other local borrowers who have delayed or downsized bond deals in a market downturn that has produced some of the largest one-day rises in yields on “munis” since the height of the financial crisis.

    At the heart of the gloom is both the recent rise in US Treasury bond yields and the looming expiry of the Build America Bonds (BAB) program, which has buttressed the $2,800 billion market where states and municipalities have raised money since the financial crisis.

    Most munis offer tax breaks that make the bonds attractive largely to wealthy US individuals. In an effort to ease credit to muni borrowers after the crisis, the federal government introduced the BAB program to subsidize taxable debt to attract a wide range of institutional investors.

    The BAB program expires at the end of the year. This has resulted in wave of issuance and concerns about how the traditional market will fare under the renewed weight of the full borrowing needs of states and municipalities at a time when local governments are still under pressure from the recession.

Read more here

Wednesday, November 17, 2010

Taxing Soda to Close the Deficit

A bipartisan panel tasked with finding a way to reduce the deficit has latched on to the “Soda Tax.” The problem with sin taxes is this: they are designed to increase the cost of a specific “bad thing,” like smoking, drinking, or in this case, consuming sugary beverages. The aim is to raise revenue, and to dissuade people from partaking of the “bad thing.” The problem comes in when people actually stop buying the taxed thing. Fewer people buying, means less tax revenue raised. This is exactly why sin taxes cannot be depended on to fund anything long term. I’m hard pressed to find an example of a sin tax that actually raised as much revenue as was projected.

From NYTimes.com:

The second bipartisan panel to issue a big deficit report has come out in favor of a tax on soda and other sweetened beverages.

The panel — chaired by former Senator Pete Domenici, a Republican, and Alice Rivlin, a Democrat and former White House budget director — said a soda tax would “help reduce long-term health care spending to treat obesity-related illnesses – including diabetes, heart disease, cancer, and stroke.” The tax would be “an excise tax on the manufacture and importation of beverages sweetened with sugar or high-fructose corn syrup.”

The tax would raise more than $15 billion in 2015, the panel estimated — similar to the amount of savings the government might get from eliminating all earmarks.

We’ve written about a soda tax before here at Economix. The beauty of it is that it falls on the very behavior — the gallon-a-week-per-person national soda habit — that imposes costs on society: namely, higher medical bills. Unlike so many other beverages and foods, Coke and Pepsi have no nutritional benefit, as food researchers often emphasize. Yet per-capita consumption of sugary drinks has nearly tripled in the last 30 years, accounting for about half the total rise in calorie intake over that period.

A big reason Americans are drinking more soda is that it’s so much cheaper than it used to be. The American Heart Association, which has also endorsed a soda tax, notes that children and teenagers are especially price-conscious consumers and are also especially big soda drinkers today.

Holiday Gifts for Employees

Last week the RDTC Tax Help Blog posted a new entry in the deduction of the week series on holiday gifts for employees. Fortunately for employers, some expenses related to holiday gifts for workers are indeed tax deductible.

Must be a Gift

According to the U.S. Supreme Court, in order to be considered a "gift" the item must be given with "respect, admiration, charity or like impulses." It cannot be given as a way to reward past performances or serve as an incentive for future performance.

De Minimis

The IRS will only allow an employer to deduct a gift given to an employee if it meets the requirements of a de minimis fringe benefit, which is "any property or service the value of which is so small as to make accounting for it unreasonable or administratively impracticable after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees." According to the Internal Revenue Code Section 132(e)(1), birthday and holiday gifts can qualify as a de minimis fringe benefit as long as its value does not exceed $100.

Easily Exchangeable for Cash

If you give an employee gifts of cash, or items that are "easily exchangeable for cash" (such as a gift card) then the funds are subject to payroll taxes. You will need to report these earnings to the IRS, and your employees will be responsible for paying the associated income taxes.

Continue reading at RDTC.com…

NYC Mayor's '09 Tax Forms Show More Offshore Money

In 2009 Michael Bloomberg's philanthropic foundation invested over $75 million in offshore tax havens. Although not illegal, off-shoring reduces the amount of money the government has to function. Mayor Bloomberg says all his money is held in blind trusts, meaning he has no idea where his money is invested. This practice is designed to eliminate any conflicts of interest as he serves as Mayor.

The Associated Press reports:

    The Bloomberg Family Foundation's 2009 tax forms were filed to the state Monday after two extensions.

    Bloomberg's foundation, which gives away hundreds of millions of dollars, has maintained offshore investments for years — typically more than $100 million annually — but that only came to light earlier this year.

    Bloomberg spokesman Stu Loeser declined to comment on the latest foreign investments.

    When first confronted with questions about the investments last spring, Bloomberg defended the tactic but said he has no control over the money. His investments are maintained in a blind trust that prevents him from knowing his specific holdings to guard against conflicts of interest.

    "As far as I know," he said last spring, "the investments that my money managers make are perfectly legal, they're fully disclosed and they're appropriate to maximize the assets which I'm giving away to charities."

    The mayor signs his own tax forms, which clearly list the offshore investments.

Read more here

China Raises US Debt holdings as Others Offload

While other countries are dropping US debt holdings like a hot potato, China and Japan are buying them up. Beijing increased its US holdings to almost $884 billion. Is it time to start learning Mandarin yet?

From Yahoo News:

The United States' top creditor China increased its stockpile of American debt in September, official figures showed on Tuesday, even as other nations slashed their holdings.

Both China and Japan bucked the trend of foreign investors cutting their exposure of US assets.

Overall holdings -- known as net long-term capital inflows in financial jargon -- fell 37 percent from elevated levels in August.

Amid political sensitivities over the level of US bonds held by Beijing, the emerging market giant -- excluding Hong Kong -- increased its holdings by 1.7 percent to nearly 884 billion dollars.

Japan meanwhile raised its Treasury holdings to 865 billion dollars, a more than three percent increase.

"The strong interest in Treasury bonds and notes points to a still-high level of risk aversion in global financial markets," said Tu Packard of Moody's Analytics.

Official Statement

I am optimistic about the outcome of the preliminary injunction hearing. Although the court has not yet issued its final ruling, I take comfort in my integrity, the integrity of my employees, and the services that my law firm provides to our clients. For nearly 20 years, we’ve helped thousands of clients resolve their IRS tax debts. I look forward to helping many more taxpayers in the years ahead.

Tuesday, November 16, 2010

Government Employees Owe Billions in Delinquent Taxes

As the IRS is getting more aggressive in their collection efforts – tax liens and levies are increased, even while the number of taxpayers who owe is going down – reports of government employees with tax debts keep rolling out. Some estimates put the total owed by federal employees at a whopping $3 billion. So, before we start raising taxes or cutting programs, maybe we should ask our government to lead by example?

From CNBC.com:

Need a quick three billion dollars, Uncle Sam? How about looking in your own pockets?

Deficit cutters struggling to make ends meet in Washington are eyeballing an unusual pot of potential revenue: back taxes owed to the government by federal employees themselves.

According to an IRS study last year, those employees and federal retirees owed a staggering $3.3 billion dollars in delinquent tax payments to the government.

The federal agency with the largest back-tax bill? The US Postal Service, where hundreds of thousands of employees owed a total of more than $283 million, said the report.

Also high on the list is the Department of Veterans Affairs, where employees had more than $156 million in back taxes.

The biggest group, though, is retired military personnel. That group owed more than $1.5 billion dollars.

10 FAQs About End of the Year Tax Planning

I know, the holidays are upon us, and the last thing anyone is thinking about is tax season. But as New Year’s creeps into view, this is your last chance to make money-saving moves for your taxes. Earlier this week the RDTC Tax Help Blog posted an entry with answers to 10 common questions about year end tax planning. You can find a snippet of the article below, or click here for the full text.

1. Why should I start planning now?

Most taxpayers do not plan ahead for the coming tax year, simply because they do not want to start stressing about taxes during the holidays. However, choosing to plan ahead will actually make things easier and less stressful come tax season. You should look at tax planning as a stress-preventative measure.

2. What are the advantages tax planning?

Besides reducing stress, end of the year tax planning can also save you a lot of money. Tactics like making an extra mortgage payment or paying state taxes in advance can quickly and easily reduce your tax liability. If you wait until the New Year begins, it will be too late to take advantage of these strategic tax moves.

3. What tools do I need for end of the year tax planning??

Year-end tax planning does not need to be difficult, especially if you have your financial documents organized. You should also get a copy of your tax return from last year as well as a calculator and pencil. It is also a good idea to have access to a computer with Internet so that you can research deductions and credits.

IRS Commissioner Doug Shulman's Statement on UBS / Voluntary Disclosure Program

IRS Commissioner, Doug Shulman, gave his wrap up report on the UBS investigation and related Voluntary Disclosure Program. According to Shulman, during the Voluntary Disclosure Program, more than 15,000 taxpayers came forward; each case involved an average of $200,000 in unpaid taxes. Shulman also stated that the John Doe Summons that was issued to collect information from UBS has been withdrawn, since the IRS and Department of Justice have received all the information they were looking for. He also explains new changes in the agency's efforts to crack down on international tax compliance. You can find his full statement at IRS.gov.

    Today, I’m pleased to announce the IRS has withdrawn the John Doe Summons in the UBS AG matter. We are taking this action in light of our success in obtaining the account holder information we sought through the summons and obtained under the August 2009 agreement with the Swiss government and UBS. We appreciate the help and assistance of the Swiss government and UBS during this process.

    In addition, I’d especially like to thank the team at the U.S. Justice Department, for its tremendous work and support. We could not have done this without them. Working together, we were able to assure that the agreement was successfully implemented and the United States expectations under this landmark agreement were realized. We look forward to continued partnership with Justice as we continue our work.

    Today’s announcement is yet another milestone in our ground-breaking efforts in the international tax compliance arena. Not only are we breaking through the walls of international bank secrecy, we are producing real results for U.S. taxpayers.

    I can’t say this enough: When people cheat on their taxes, the vast majority of honest U.S. taxpayers suffer the consequences and have to make up the difference.

    The John Doe Summons in the UBS case was just one piece of a much larger effort underway here at the IRS on international issues. There are many elements to it.

    As part of our efforts, we have renamed and reshaped our large corporate division into the Large Business and International Division in order to further emphasize and specialize our international and offshore banking efforts. We also continue to work closely with other governments through the Organization for Economic Co-Operation and Development.

    Today, I want to give you an update on our high-profile efforts that touch on our continuing offshore banking efforts.

    First, here is an update on our offshore voluntary disclosure program:

    We have had thousands more taxpayers come in through our voluntary disclosure program since our special program ended last year. We had approximately 15,000 voluntary disclosures from individuals who came in before the VDP program ended.

Continue reading at IRS.gov...

5 Easy Ways to Save Money this Thanksgiving

Yesterday my team uploaded a new video to my YouTube channel. In this new episode Edward explains a few tips for saving money this Thanksgiving. Check out the embedded video below, or visit YouTube.com/RoniLynnDeutch for more informative videos!

Barclays to Reimburse Gay Workers for Taxes on U.S. Benefits

Barclays Plc, the third largest bank in the United Kingdom, is joining the likes of Google by offering to reimburse gay workers for the taxes they pay on health benefits provided to their domestic partners. Good for Barclays, but shame on the government for continuing inequitable practices. Legally married same-sex couples are still not able to file a joint federal tax return, potentially costing them thousands in tax savings.

Bloomberg reports

    The aim is to offset the tax on benefits for same-sex partners that doesn’t apply to spouses in heterosexual marriages because same-sex partnerships aren’t recognized as marriages under U.S. law, the London-based bank said today in a statement. The change will take effect Jan. 1, according to the bank, which bought the U.S. business of bankrupt Wall Street firm Lehman Brothers Holdings Inc. in 2008.

    Barclays may be leading the U.S. financial-services industry in offering such tax-equalization payments. Google, in Mountain View, California, Cisco Systems Inc., based in San Jose, California, and San Francisco-based Kimpton Hotels & Restaurants are the only other for-profit companies to publicly disclose such reimbursement benefits, according to the Washington-based Human Rights Campaign.

    “We are introducing this payment to proactively offset the additional tax,” Mark Lane, a spokesman for Barclays Capital, said in an e-mailed statement. “We believe that by offering this, we will further our efforts to promote an inclusive environment.” Barclays will reimburse employees through a separate payment rather than an increase in base salary, Lane said.

Read more here

IRS Sits on Data Pointing to Missing Children

Tax privacy is important. Your tax records have a lot of very personal information; information that, in the wrong hands, can be used to hurt you. We get it. But should tax privacy laws trump a criminal investigation? The answer depends on who you ask. Ask someone whose child has been abducted, and the answer is a resounding “NO.”

It turns out that the IRS frequently has information about missing children but does not aid investigators. How can we protect children while still maintaining the privacy of innocent taxpayers?

From NYTimes.com:

For parents of missing children, any scrap of information that could lead to an abductor is precious.

Three years into an excruciating search for her abducted son, Susan Lau got such a tip. Her estranged husband, who had absconded with their 9-year-old from Brooklyn, had apparently filed a tax return claiming the boy as an exemption.

Investigators moved quickly to seek the address where his tax refund had been mailed. But the Internal Revenue Service was not forthcoming.

“They just basically said forget about it,” said Julianne Sylva, a child abduction investigator who is now deputy district attorney in Santa Clara County, Calif.

The government, which by its own admission has data that could be helpful in tracking down the thousands of missing children in the United States, says that taxpayer privacy laws severely restrict the release of information from tax returns. “We will do whatever we can within the confines of the law to make it easier for law enforcement to find abducted children,” said Michelle Eldridge, an I.R.S. spokeswoman.

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