New Scammers use Fax and E-mail to Pose as IRS

In a new press release, the IRS warns taxpayers to be aware of a few new scammers who are using fax and e-mail to pose as representatives of the IRS. Below are the main scams the IRS is warning about, but you can read the full release at Scammers Use e-Mail, Fax to Pose as IRS.

Refund e-Mail Scam

There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.

This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers.

Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the Where’s My Refund? interactive application on this Web site. IRS.gov is the only official IRS Web site.

Economic Stimulus Payments Scam

In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts.

In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail.

Substitute Form 1040 Fax Scam

This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.” It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport.

Company Report Scam

This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer.

There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage.

The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers.

Tax Court Scam

In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer.

There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer.

The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail.

Discussing Presidential Tax Views on the Thom Hartmann Radio Show

Earlier in the week, I was featured as a guest on the Thom Hartmann Radio Show. During the segment we discussed the presidential candidates’ tax policies and how they affect Americans. It was an honor to be a guest on the show, and to discuss a topic that I love so much. I had a great time, and hope they invite me to be a guest again! Click the image below to download an MP3 of the interview.

Interesting Opinion on Charitable Contributions

The New York Times posted an interesting new opinion on charitable contributions by Ray D. Maddiff. Below is a snippet of the opinion, but you can check out the full text at: Dog Eat Your Taxes?

“The latest news from the Palace, that Leona Helmsley left instructions that her charitable bequest of as much as $8 billion be used for the care and welfare of dogs, rubs our noses in the tax deduction for charitable gifts and its common vehicle, the perpetual private foundation. Together these provide a mechanism by which American taxpayers subsidize the whims of the rich and fulfill their fantasies of immortality.

The charitable deduction enables people to donate as much of their assets as they like for charitable purposes without paying a tax. While some choose to contribute to broad public goals, the law does not require it. In recent years, charitable status has been recognized for organizations with purposes as idiosyncratic as promoting excellence in quilting and educating the public about Huey military aircraft. Indeed, Mrs. Helmsley might have limited her beneficence to the Maltese breed of dogs she favored, and that, too, would have been allowed as a “charitable” purpose.

If this were only a matter of Leona Helmsley wasting her own money, no one would need to care. But she is wasting ours too.

The charitable deduction constitutes a subsidy from the federal government. The government, in effect, makes itself a partner in every charitable bequest. In Mrs. Helmsley’s case, given that her fortune warranted an estate tax rate of 45 percent, her $8 billion donation for dogs is really a gift of $4.4 billion from her and $3.6 billion from you and me."

How Many Economists Support McCain?

A few days ago the McCain camp announced that they had a document signed by 300 economists that “enthusiastically support” his “Jobs for America” economic plan. The immediate assumption was that McCain has built up a lot of support for his views, but upon further investigation, it appears that may not be the case. According to Politico.com, “it seems a good many of those economists don’t actually support the whole of McCain’s economic agenda. And at least one doesn’t even support McCain for president.

In interviews with more than a dozen of the signatories, Politico found that, far from embracing McCain’s economic plan, many were unfamiliar with — or downright opposed to — key details. While most of those contacted by Politico had warm feelings about McCain, many did not want to associate themselves too closely with his campaign and its policy prescriptions.”

To read the full story head over to Politico.com: In theory, economists support McCain.

National Taxpayer Advocate Sends 2009 Objectives to Congress

The other day National Taxpayer Advocate Nina E. Olson delivered a report to Congress identifying the priority issues the Office of the Taxpayer Advocate will address in the upcoming fiscal year. According to the IRS’ news release, the report addresses the three following key issues.

1. Tax-Related Identity Theft

The National Taxpayer Advocate’s 2007 Annual Report to Congress identified tax-related identity theft as one of the most serious problems facing taxpayers. The report stated that the IRS does not have adequate procedures in place to assist victims of identity theft and does not have adequate systems in place to quantify the number of tax-related incidents of identity theft that occur. The report made eight recommendations, including the creation of a centralized unit to handle identity theft cases and the development of a centralized set of procedures that cuts across IRS functions. The IRS has taken a number of steps to improve its procedures; notably, it has developed a Service-wide identity theft indicator and is studying the creation of a centralized unit to assist identity theft victims. During FY 2009, the Office of the Taxpayer Advocate will work with the IRS to improve its procedures in this area.

2. Cancellation of Debt Income

When an individual or business borrows money and the debt is cancelled, the borrower generally must include the amount of the cancelled debt in gross income. This requirement generally affects borrowers who lose their homes to foreclosure or who default on car loans or credit card debts. Taxpayers may exclude the amount of a cancelled debt from gross income under certain circumstances, but to do so, they must take the affirmative act of filing Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), with their tax returns. Very few taxpayers file Form 982, and the Office of the Taxpayer Advocate has focused and will continue to focus on increasing public awareness of the rules and exceptions. It has worked with the IRS to simplify the instructions for Form 982 and to develop an IRS publication that covers the tax aspects of cancellation of debt issues comprehensively, produced podcasts (known as “TAScasts”) that are available online, and provided specialized training for Low Income Taxpayer Clinic (LITC) practitioners. The Office of the Taxpayer Advocate will continue to work with the IRS to simplify reporting procedures and will continue to conduct outreach to affected taxpayers and practitioners in FY 2009.

3. IRS Collection Practices

The National Taxpayer Advocate’s 2006 Annual Report to Congress raised a number of concerns about IRS collection practices. Joint working groups have been established to work on five issues – levies, allowable living expense standards, installment agreements, offers in compromise, and early intervention techniques. However, the Office of the Taxpayer Advocate remains concerned about additional collection issues, including resorting to seizures before all viable collection alternatives have been exhausted, under-utilization of partial-pay installment agreements, and excessive delays in collection that exacerbate taxpayer delinquency problems because of the accumulation of interest and penalties. The IRS is working with the Office of the Taxpayer Advocate to address these concerns, and the collaboration will continue in FY 2009.

IRS’s July Tax Talk Today: “Retirement Plan Pitfalls”

According to a new IRS press release, their Tax Talk Today program will return on Tuesday, July 8, 2008 at 2 p.m. with a Web cast on “Retirement Plan Pitfalls.”

“Few issues are as important to the owner of a business and its employees as the proper administration of its retirement plans. Ensuring that the retirement plan is in good running order keeps the promise made in setting up the plan.

Attend this program to learn how to use the IRS Fix-It Guides to identify and correct frequently encountered errors the IRS sees in retirement plans. These correction programs help retirement plans operate within the law and protect participant benefits.

And they provide real incentives to identify and correct mistakes sooner rather than later. In addition, the IRS will provide tips on how these mistakes can be avoided in the future.

Tax Talk Today is a Web cast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax professionals are encouraged to watch and submit questions.

Viewers can register online to access the Web cast at no charge. Tax professionals in need of continuing education credits are eligible to receive one CPE credit by viewing the May 13 Web cast.”

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$60,000 Electric Sedan from Tesla

A few weeks ago Arnold Schwarzenegger, Governor of California, announced his support of Tesla Motors, who plan to produce a fully-electric, five passenger sports sedan that is expected to sell for $60,000. The vehicle is expected to run 225 miles on a full charge, and will be produced at a manufacturing plant in opening in Northern California. For more information check out Engadget.com.

Wesley Snipes Allowed to Travel

According to the BBC, Wesley Snipes, who was recently sentenced to three years in prison for tax fraud, was granted permission to travel abroad to work. Below is a snippet from the article.

“He will be allowed to visit the UK and Thailand for filming and editing on forthcoming movies. A travel ban request had been made on the grounds he might not return.

Federal judge William Terrell Hodges approved Snipes' request to visit London for three days to put the finishing touches to Gallowwalker.

He will go to Thailand for eight weeks to film Chasing The Dragon. The 45-year-old, whose screen credits include White Men Can't Jump and Jungle Fever, was accused by prosecutors of failing to pay tax or file tax returns on earnings of $38m (£19.2m) since 1999.”

Top 8 Effects Gas Prices have on Taxpayers

Everyone who has a car is already feeling the effects soaring gas prices are having on the economy. But with all this talk about gas, and the economy, I wanted to take a deeper look at how the gasoline prices are affecting the average American taxpayers. So please enjoy my list of the top 8 effects gas prices have on taxpayers.

1. Higher IRS mileage rate
To compensate for the increase in the cost of running a vehicle, the IRS recently approved a 20% increase in their mileage reimbursement allowance. Effective September 1, 2008 the mileage rate will increase from 40.5 cents to 48.5 cents a mile.

2. Higher taxes on everything
Because of increased costs of production and shipping, you are basically paying slightly higher prices on almost everything you purchase. Especially when you buy any items that have a % based sales tax levied on them.

3. Fuel Surcharges
In addition to increasing consumer prices, some businesses are passing on a fuel charge to purchasers. This charge varies depending on the type of product or service you are purchasing, but can quickly increase the amount of money you spend on necessary living expenses.

4. More difficult business travel
Even with the IRS mileage rate increase, business related travel is going to become a lot more difficult as gas prices increase. Air plans are tightening their flights, and car rental agencies are increasing prices as well. As travel becomes more expensive, it will become harder and more expensive for any one who needs to travel for business.

5. Less likely to vacation
According the Danita Blackwood of Small Business Television, “the number of Americans making plans to take a vacation over the next six months has fallen to a 30-year low." As more and more taxpayers delay their travel plans, areas that depend on revenue from tourism will also feel the pain of high gas prices.

6. Lower suburban house prices
Ten years ago it seemed like almost everyone was moving from larger cities to suburbia. However, people are beginning to move back to the cities as the cost of commuting has gotten far too expensive. As people continue to try to unload their suburban homes, the prices will continue to drop and it will get even harder for sellers.

7. Stress at work
With nearly all businesses feeling the pressure of the economy, studies show that employees are getting worried about their job stability. This is making life more stressful for taxpayers both at home and at the office.

8. Harder to save or pay off debts
When Americans taxpayers have extra money they generally use it to pay off debts or save up for a rainy day. However, as we continue to spend more at the pump many taxpayers are not reducing the amount they spend. Instead, they are building up more debt that will only get harder to pay off as our economy continues its march towards a reces

Back on Fox Business News

Yesterday, I was again a guest on Fox Business News’ Money for Breakfast. In case you missed it, I have embedded a video of the segment below. This time I was interviewed by Alexis Glick’s, who even posted this nice entry about me on her own blog. The segment’s topic was McCain vs. Obama Tax Plans, and we discussed both candidate’s personal tax returns, and the tax policies they support. I was happy to be invited to speak on this topic, as I frequently post about the candidates here on my blog. No matter which party you belong to, or who you intend to vote for, I think it is essential in today’s economy to fully understand their tax views.

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IRS Increases Mileage Rates

The IRS recently released this new press release announcing that they have increase the standard mileage rates as gas prices continue to skyrocket. According to the release, the rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of 8 cents from the 50.5 cent rate in effect for the first six months of 2008.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," claims IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

CBPP Criticizes New Legislation

The Center on Budget and Policy Priorities recently criticized legislation that the United States Senate is currently considering. Below is a snippet from the article, you can read the full text at CBPP.org.

Legislation that the Senate is considering in response to the ongoing foreclosure crisis (H.R. 3221) includes a provision that would allow non-itemizers to deduct property taxes up to an amount of $500 for an individual and $1,000 for a couple. It would deny the deduction, however, to residents of any locality that raises its property tax rate between the time of the enactment of the legislation and December 31 of this year. An exemption from this denial is granted to residents of some — but not all — localities that raise property tax rates, depending on how and why the rates are raised.

By preventing localities from raising tax rates to help compensate for shrinking property tax revenues resulting from declining home values, the provision could force many localities to cut police, schools, and other vital public services. It also would improperly interfere with local taxing powers and set a precedent of discriminating among localities on the basis of their method of enacting local property tax changes. Finally, it likely would be impossible for IRS to administer this complex provision.

Al Sharpton’s Tax Case Heats Up

According to NY Post.com, thing are getting interesting in Rev. Al Sharpton’s tax case. The IRS began sending out numerous subpoenas to Sharpton’s top donors. Below is a snippet of the article.

“Anheuser-Busch, the brewer of Budweiser and Michelob, confirmed yesterday that it received a federal subpoena in connection to its charitable giving to Sharpton's National Action Network. ‘We have received a subpoena and are cooperating with the IRS,’ the company said in a statement.

Sharpton blasted the subpoena as a ‘fishing expedition’ and said his donors are proud of their financial support. The St. Louis-based corporation donated between $100,000 and $499,000 to NAN in 2007 alone, according to its Web site, but declined further comment about its relationship with Sharpton. A knowledgeable source said several other corporate donors received or would soon receive subpoenas.

Sharpton himself, his business entities and his nonprofit civil-advocacy group owe millions in back taxes, documents show. The IRS and the US Attorney's Office in Brooklyn have an ongoing probe into Sharpton's finances going back to his 2004 run for president and stewardship of NAN.

Last year, state Attorney General Andrew Cuomo began a probe of NAN because it failed to follow state financial-disclosure regulations for nonprofits. Cuomo's office has since turned over its NAN file to the US Attorney's Office. As of 2006, the most recent year that financial documents for the group are publicly available, it owed $1.9 million in payroll taxes and penalties.”

More Information on Fielder’s Tax Problem

The Milwaukee Online Journal posted this article with slightly more information on the story I posted about yesterday, Milwaukee Brewers First Baseman Owes the IRS $409,149.

Many people in the professional sports industry refuse to comment on financial issues, and this case is no exception. However, the author does bring up a few interesting points. For example, Fielder recently turned down a new contract valued at around $60 million, so it seems likely that he will be able to repay the liability. However, there are no court records to support the idea that he has already settled the liability, meaning it could still be in IRS collections.

Milwaukee Brewers First Baseman Owes the IRS $409,149

Yesterday Detroit News broke the story that Prince Fielder, who plays for the Milwaukee Brewers, owes $409,149 to the federal government in unpaid taxes. Prince is the son of former Detroit Tiger great, Cecil Fielder, who currently manages the independent league Atlantic City Surf baseball team.

The apple apparently does not fall far from the tree as Cecil had financial problems of his own four years ago. According to public records, he lost $47 million through bad business decisions. However, Cecil and Prince have not spoken in years after Prince accused his father of money extortion.

Ways & Means Committee Passes AMT Patch

Earlier in the day, the House of Representatives Ways & Means committee passed a new patch to the Alternative Minimum Tax (AMT). The final vote was 22-16, with mostly Democrats in favor of the patch designed to protect taxpayers from the unpopular tax.

"The measure would deliver this tax relief to middle-class families," claims committee chairman Charles Rangel, "without adding to the deficit and without forcing future generations to pay for the decisions we make today."

If the bill is fortunate enough to become legislation, it would provide $61.5 billion in AMT relief. The lost revenue would be made up in part by taxing carried interest at standard income rates instead of the 15% capital gains tax rate. For more information, check out House panel approves a paid-for AMT relief bill on Google news.

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IRS Reminds Taxpayers to Report Certain Foreign Bank Accounts

Earlier in the week the IRS published a news release reminding taxpayers to report certain foreign bank and financial accounts by June 30, 2008. According to the release, thousands of taxpayers in the U.S. have foreign financial accounts, and there is nothing wrong with setting up or maintaining a foreign account. However, the IRS is concerned that U.S. taxpayers may overlook the fact that their accounts are large enough require them to report it to the IRS.

“There are responsibilities that go along with owning such foreign bank and financial accounts,” notes IRS Commissioner Doug Shulman. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”

Honda Sells First Hydrogen Powered Vehicles

According to BBC News, Honda has begun production on the first commercial, zero-emission, hydrogen fuel cell powered vehicle. The car will be a four-seater and will run on electricity produced by combining hydrogen with oxygen. Honda claims the vehicle will offer three times better fuel efficiency than traditional cars. Below is a quote from the article, to read the full article check out Honda makes first hydrogen cars on BBC.co.uk.

One of the biggest obstacles standing in the way of wider adoption of fuel-cell vehicles is the lack of hydrogen fuelling stations. Critics also point out that hydrogen is costly to produce and the most common way to produce hydrogen is still from fossil fuels.

Analysis of the environmental impact of different fuel technologies has shown that the overall carbon dioxide emissions from hydrogen powered cars can be higher than that from petrol or diesel-powered vehicles.

The first five customers are all based in southern California because of the proximity of hydrogen fuelling stations, Honda said. US actress Jamie Lee Curtis will be among the first to take delivery of the vehicle, the firm added.

The car will initially be available for lease rather than purchase in California, starting in July, and then in Japan later this year.

NTEU Calls for IRS Mileage Rate Increase

With taxes prices increasing a record rates, the National Treasure Employees Union has called on the IRS to issue a mid year adjustment to the IRS’ 2008 standard mileage rate. I have included the full text of the release below, but if you would like to download it in Word format head over to NTEU.org.

NTEU Leader Seeks Mid-Year Adjustment From IRS in Mileage Reimbursement Rate

Washington, D.C.—In the wake of record—and still rising—gas prices, the head of the nation’s largest independent union of federal employees has called on the Internal Revenue Service (IRS) commissioner to make a substantive mid-year adjustment in the reimbursement rate for personal use of a vehicle for business reasons.

In a letter to IRS Commissioner Douglas Shulman—who has the policy authority to make such a mid-year adjustment, which would impact everyone in the country—President Colleen M. Kelley of the National Treasury Employees Union (NTEU) noted that record levels of gas prices are “placing an especially heavy burden on those who must travel to perform their work duties.”

These include a great many NTEU members employed by the IRS, as well as those at a number of financial regulatory bodies and other federal agencies. The NTEU leader made the request in the interest of all federal employees and others who use their personal vehicle for business travel.

The federal government’s reimbursement rate is set by the General Services Administration (GSA), but cannot exceed the amount set by the IRS as the maximum rate allowed as a business deduction. That rate currently is 50 ½ cents per mile.

“Given the extraordinary rise in gasoline prices,” currently averaging more than $4 a gallon across the nation, President Kelley wrote, “I would request that the IRS make a mid-year adjustment to the mileage reimbursement rate to accurately reflect the actual cost traveling employees pay.”

Pending legislation in the Senate would raise the rate to 70 cents per mile, she noted, but said that action by the IRS “would provide much more timely relief than depending on the slow pace of the legislative process.”

While unusual, this would not be the first time the IRS has made such a mid-year change in the rate; in 2005, then-IRS commissioner Mark Everson used his authority to honor a request from NTEU that the maximum rate be increased. Then, as now, gas prices were rising rapidly and with little prospect they would moderate.

“The needed relief his action provided to private and federal sector employees,” Kelley wrote of the Everson decision, “helped save many employees from having to pay work-related traveling expenses out of their own pockets.”

As the largest independent federal union, NTEU represents 150,000 employees in 31 agencies and departments.

Top 10 Tips for New Entrepreneurs

As most of you may know, I am the founder and CEO of both a nationwide tax resolution law firm, and a tax preparation franchise. I opened my law firm from a one-bedroom apartment and built it up into a large corporation that allowed me to also open the tax preparation franchise.

People always ask me what advice I would give to new entrepreneurs looking to achieve success. Although everyone is different, and every business will require it’s own plan, below are the top 10 tips I have found helpful in my entrepreneurial experiences.

1. Do something you are passionate about
When you are deciding on the type and style of business you aspire to run, make sure it is something you are truly passionate about. Starting up a company can require long hours, 7-day workweeks, and a ton of energy. If you are not passionate about it then you can lose your drive quickly.

2. Always be original
Do something that will set your business apart from the competitors. There is no use in competing against a well-established competitor with a carbon copy of their products or services. In order to get interest in your business you need to set it apart from the competition and offer additional benefits.

3. Prepare a business plan & write it down
Even if you do not plan to get a business loan, you should still prepare a well-written business plan. Think about it – would you want to invest your hard-earned money in a new company that does not even have a written business plan?

4. Triple your anticipated startup costs
One of the biggest problems new entrepreneurs encounter is not properly anticipating start-up costs. It can take weeks, even months to begin generating revenue and you need to make sure you have ample funds to establish your company.

5. Do not even think about profits
When you think about opening a business, do not even begin to think about profits. When you prepare your business plan you obviously want to create a structure that produces a profit, but it should not be the main reason you open a business. You need to focus on generating capital for your business, not adding money to your personal bank account.

6. Live & learn, live & lean
Everyone makes mistakes, but it is important turn these into opportunities to learn. Do not spend time being depressed because your business is slow to take off, or you lose your first major client. Learn your lesson and move on.

7. Set goals and work towards them
It is one of my strongest opinions that in order to achieve success you need to have goals. You need to look forward to the future, and envision where you want your business to be in 3, 5, or even 10 years. Then you will have something to work towards.

8. Build professional relationships
Networking with other business owners is important as it can help your form professional relationships that can generate business for both parties. These alliances, such as exchanges of work or services, client referral systems, etc., can be highly valuable to new business owners with a tight budget.

9. Get help from others
You cannot try to do everything on your own. There are only 24 hours in a day, and only so much work you can complete in that time. If you have too much business then you should consider hiring employees to help or seeking help from a professional service.

10. Continue to educate yourself
You can never know everything about running a business, so continually educate yourself by reading books or business blogs. You may even consider writing a blog of your own, as writing entries on topics you are not familiar with can present excellent learning opportunities.

Myanmar Denies Cyclone Aid Taxes

According to a new article from the AP, Myanmar's has denied reports that they have been deducting a 10 percent tax from foreign donations to cyclone victims. Government officials claim that all incoming money is being spent on relief efforts. Below is a snippet of the article, to read the full thing check out Myanmar denies cyclone aid is being taxed from the Associated Press.

“The state-owned New Light of Myanmar newspaper said foreign radio broadcasts had wrongly accused the government of deducting the tax from donations deposited in the Myanmar Foreign Trade Bank.

The state bank, which usually deducts 10 percent from all foreign currency deposits, has opened special accounts to accept U.S. dollars, euros and Singapore dollars from which all donations would be fully channeled to cyclone survivors, the newspaper said.

Organizations and individuals that have misused relief funds sent from abroad will be punished, it said.

The United Nations estimates Cyclone Nargis affected 2.4 million people and that more than 1 million of them, mostly in the hardest-hit Irrawaddy delta, still need help. The cyclone, which struck May 2-3, killed more than 78,000, according to the government.

In separate reports, state media said there have been no outbreaks of contagious diseases in storm-hit areas and that 911 staffers from international aid organizations and neighboring countries were issued visas to enter the country between May 5 and June 5.

The junta has been criticized for dragging its feet on issuing visas and, until recently, not allowing foreign aid workers into the Irrawaddy delta, where most of the victims are.”

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ABA Accredits 199th and 200th Law Schools

Earlier in the week, the American Bar Association (ABA) granted provisional accreditation to Charlotte School of Law and Elon University School of Law. These two additions bring ABA’s total number of accredited law schools to 200, which is exciting for anyone in the field of law. To see their full list of accredited law schools check out ABAnet.org.

IRS Targets Billionaire Philip Anschutz

According to the Wall Street Journal, the IRS is going after billionaire Philip Anschutz to him to pay owed back taxes totaling $143.6 million. It is part of their broad attempt to crack down on taxpayers that use confusing strategies to avoid paying capital gains taxes. Below is an excerpt of the article, but you can read the whole thing at IRS Targets Billionaire's Lucrative Tax Strategy on WSJ.com.

"The imbroglio stems from transactions that Mr. Anschutz entered into involving shares he owned in Union Pacific Corp. and Anadarko Petroleum Corp. in 2000 and 2001. The deals netted him cash, as well as a share of any future rise in the stock price, with a total value of roughly $429 million. The arrangement is also set up to protect him against losses if the stock price falls.
He contends the deals technically weren't completed sales for tax purposes, and thus didn't trigger tax obligations, according to filings in U.S. Tax Court in Washington. Consequently, he has not paid capital gains taxes on the transactions.

Mr. Anschutz -- an oil, railroad and media investor identified as the 41st-richest man in the U.S. by Forbes -- isn't the only person to use such an arrangement. Executives at companies including Starbucks Corp., Costco Wholesale Corp., Tyson Foods Inc., IAC/interactive Corp., Cablevision Systems Corp. and Apollo Group Inc. have all used similar "variable prepaid forward contracts" to cash in shares in these companies and related entities, according to securities filings.

The tax treatment of these executives' arrangements isn't public, so it isn't clear whether the transactions involved deferral of taxes of the type the IRS is targeting. Experts say tax deferral is a typical component of such arrangements."

IRS Adds Functions to Online Payment Agreement Application

Earlier today the IRS introduced new features to their interactive Online Payment Agreement application. The changes will make it easier for taxpayers and their authorized representatives to make changes to existing installment agreements.

According to the news release, the system will now permit:

• Individuals to revise their payment due dates and/or amounts on existing agreements.
  Individuals to revise existing extensions to regular installment agreements and direct debit installment agreements.
• Individuals to revise existing regular installment agreements to a payroll deduction installment agreement or a direct debit installment agreement.
• Practitioners with valid authorizations to use the signature date found on their approved Form 2848, Power of Attorney and Declaration of Representative, or the caller ID as an alternate way to authenticate when requesting agreements for clients.

Unemployment Rate has Record Increase in May

According to a new article on CNN money, the unemployment rate increased from 5% to 5.5% in May. This represents the highest increase since 1986, and another sign of the looming economic recession. To read the full article, click here, or enjoy the excerpt below.

"A spike in the unemployment rate - the biggest in more than two decades - raised new concerns Friday that a weak labor outlook, high oil prices and continuing woes in the housing and credit markets are leading the U.S. economy into a painful recession.

The government said Friday that the unemployment rate soared to 5.5% in May from 5% in April - much higher than economists had forecast.

The surge marked the biggest one-month jump in unemployment since February 1986, and the 5.5% rate is the highest level seen since October 2004. Unemployment is now a full percentage point higher than it was a year ago.

‘You're not going to have a lot of people arguing "no recession" with this data,’ said Lakshman Achuthan, managing director of the Economic Cycle Research Institute. The prolonged job loss and jump in unemployment are better indicators that the economy is in a downturn than is the traditional thumbnail rule of two quarters of falling gross domestic product, he said.

The jobs report came on the same day that oil prices soared to $134 as the dollar lost value against the euro and the yen. It also comes the day after the Mortgage Bankers Association reported that homes in foreclosure crossed the 1 million mark during the first quarter, a record high."

Tax Exemptions of Charities Face New Challenges

The New York Times recently posted an interesting article on some of the new challenges tax exempt organizations are facing with recent changes to the tax code. I have included a snippet from the article below, but you can read the full thing at NYTimes.com.

“Authorities from the local tax assessor to members of Congress are increasingly challenging the tax-exempt status of nonprofit institutions — ranging from small group homes to wealthy universities — questioning whether they deserve special treatment.

One issue is the growing confusion over what constitutes a charity at a time when nonprofit groups look more like businesses, charging fees and selling products and services to raise money, and state and local governments are under financial pressure because of lower tax revenues.

And there are others: Does a nonprofit hospital give enough charity care to earn a tax exemption? Is a wealthy university providing enough financial aid?

In a ruling last December that sent tremors through the not-for-profit world, the Minnesota Supreme Court said a small nonprofit day care agency here had to pay property taxes because, in essence, it gave nothing away.”

IRS Issues Spring 2008 Statistics of Income Bulletin

Late last week the IRS released the Spring 2008 issue of the Statistics of Income Bulletin. The document features data from the 138.4 million individual tax returns filed for the 2006 tax year and data from high-income returns filed for the 2005 tax year.

According to the IRS announcement, the bulletin also features articles on the following:

• Trends in non-cash charitable contributions, including a big drop in car donations in 2005 that was likely related to tax law changes.
• Statistics on cash flows and holdings of Individual Retirement Accounts (IRAs). For example, at the end of 2004, almost 51 million taxpayers held roughly $3.3 trillion in IRAs.
• Repatriation of funds by U.S. corporations due to the one-time received dividend deduction enacted in the American Jobs Creation Act of 2004.
• Statistics on federal estate tax returns with gross estates greater than $1.5 million.
• Growth in the number and assets of taxable Real Estate Investment Trust subsidiaries.

To see all the information presented in the bulletin, check out it’s page on IRS.gov.

8 Reasons to Support a Gas Tax Holiday

In order to keep the content on my blog somewhat balanced, I wanted to make an effort to counter my recent entry, Top 10 Reasons a Gas Tax Holiday is a Bad Idea. I was trying to come up with a top 10 list of reasons to support the holiday, but there were only really 8 things I could come up with. However, without much support, and Memorial Day just around the corner, the idea of supporting a gas tax holiday seems moot. Nonetheless, I have composed the following list of 8 reasons to support it.

1. It Sounds Good
A federal “gas tax holiday,” it just sounds so nice. With record high temperatures, a weakening economy, and an increased cost of living, don’t we deserve an extra holiday this summer?

2. You’ll Save $30 Bucks
Some estimates actually say that the average American will save as much as $60-$100. However, no matter what the actual savings amount turns out to be, it is still free money.

3. Immediate Stimulus
In addition to the benefit of getting free money, it would also be immediate. Every time you pumped gas into your car you will get the discount. You will not have to wait months and months for a rebate check to arrive – instead you will get instant savings.

4. Everyone Benefits
Although not everyone would benefit equally from the gas tax holiday (people who use public transportation would not really benefit), the holiday is designed to give everyone who uses a car some relief.

5. Other Reduced Prices
Because of the increased gas prices the cost of other products is also being raised. In addition, some companies such as airlines or shipping stores are adding a fuel surcharge to their products. Hopefully the benefits of a gas tax holiday would pass down to those purchasing these other products as well.

6. Will Not Increase Costs
Many economists are arguing that the gas tax break would do nothing as it would increase demand and raise prices. However, supporters of the holiday claim that since fuel is traded on the world market the actual effects on demand would be negligible.

7. Revenue from Oil Companies
To make up for the loss of federal revenue some are hoping to raise taxes on the large oil corporations who are seeing billions in profits. This would mean that the federal government would not have to cut construction jobs.

8. Pressure on OPEC
In addition to taxes on the oil companies, another idea surrounding the gas tax holiday is to pressure OPEC to release more fuel and help lower the demand. Although it would help lower prices, this is probably more of a downside as it continues to encourage reliance on foreign oils.

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Economists Predict Credit Crisis Nearing an End

According to this article on CNN Money, economic experts are predicting that the credit and housing crisis will dissipate in the second half of this year. However, they are expecting the economy to continue it’s downward spiral, and the unemployment rate is likely to increase.

“A growing number of economists believe the country is on the brink of a recession or in one already, dragged down by all the problems in housing, credit and financial markets. Now 56% of the economists think the economy has started or will enter a recession this year. That's up from 45% in a survey in February. If there is a recession, it probably will be short and shallow, economists said.”

“Forecasters downgraded their projections for economic growth. They now predict the economy, which grew by 2.2% last year, will slow to 1.4% this year. That is lower than the 1.8% growth projected in February. If the new figure proves correct, it would mark the weakest growth since the last recession in 2001.”

Top 10 Reasons a Gas Tax Holiday is a Bad Idea

1. It’s Just a Gimmick
When it comes to campaigning, it is all about choosing the right words to use in your marketing. Anyone who remembers the phrases “weapons of mass destruction,” or “axis of evil” will know what I mean (how many times did we hear those phrases in the lead up to Operation: Iraqi Freedom?). In this election cycle, Senator Obama has made a strong effort to push the word “change,” which explains why the word is visible in almost every picture you see of Obama. Nonetheless the phrase “gas tax holiday” is merely another political slogan designed to encourage Americans to vote for a candidate.

2. Loss of Federal Revenue
If the federal government stopped collecting a tax on fuel, then it will be a direct loss of revenue for the government, plain and simple. With our economy continuing in a downward spiral, record breaking military expenses in the middle east, an ever increasing national debt, I doubt the government can afford to lose this source of revenue, let alone any.

3. Direct Impact on Working Families
If the government does not have revenue from gas taxes, then it is going to have a direct effect on people working in the construction industry. The tax levied on gasoline and diesel is what pays for highway and road construction. Without this money, the government would not be able to pay those working in this industry. Some estimates put the number of lost jobs at over 300,000, which does seem slightly inflated to me. However, any reduction of the tax collected from gasoline will definitely result in lost jobs.

4. Poor Quality Roads
The lack of federal transportation revenue will impact more then just those working in construction. The condition of our roads and highways is deteriorating, and without revenue to fix them the condition will only get worse. So a gas tax holiday may save you some money this summer, but you will probably regret the money this fall when you are stuck in hours of traffic on your way to work.

5. State Gas Taxes
The gas tax holiday only applies to the federal excise tax of 18.4 cents on gasoline and 24.4 on for diesel. However, these are not the only taxes that consumers pay on fuel. Nearly every state has their own tax, and some are upwards of 40 cents per gallon. The gas tax holiday would do nothing about these state fuel taxes.

6. Bad Message
Earlier in the week, polar bears were officially added to the added to the endangered species list. What does that have to do with a gas tax holiday? Well, exhaust fumes are bad for the environment and could lead to pollution and harm to the environment. Also, with the added threat of global warming looming, shouldn’t the government be discouraging motorists from using excess gasoline? In Europe, the taxes on fuel are higher then in the United States and consequently there is less gas consumption. If anything, our government should be encouraging people to reduce their gas consumption. How about increasing hybrid credits?

7. Increased Demand = Higher Prices
Many economists are claiming that lower prices will correlate directly to an increase in demand, which on the open market will likely increase the cost of fuel. Some argue that since gasoline is traded on the world market that we will not see a price increase. However, it is obvious that if gas was cheaper people would use more of it.

8. Continued Record Oil Profits
With the increased demand that would result from a gas tax holiday, some estimate that it would give even more revenue to the big oil corporations. These corporations already post record breaking profits every quarter for the last five years. Instead of lowering fuel taxes on consumers, why not increase taxes on the oil corporations?

9. Does Not Solve Anything
A gas tax holiday ignores the bigger problem; this country is dependent on foreign oil. It will do nothing to solve this problem. Gas prices are increasing at alarming rates and a small tax break is not going to stop prices from increasing in the long run.

10. Bottom Line: 30 Bucks
Let’s face it, all you really get under a gas tax holiday is about $30. Some estimates from Senator Clinton’s and Senator McCain’s camp say that this number is slightly higher, maybe $50. But what kind of effect is a $50 tax credit really going to have on the nation’s economy?

Sen. John McCain: a Deeper Look at his Tax Views

As the fight for the Democratic nomination continues, the voters decided that Senator John McCain would get the Republican nomination months ago. Although there were a few other conservative candidates, they all dropped out early on in the election cycle. However, other Republicans frequently criticize McCain for being too liberal and not representing the whole party. Who can forget when attention-starved, political author Anne Coulter announced she would vote for Hilary Clinton over John McCain?

This is the third and final entry in my deeper look at the presidential candidate’s tax views. Unlike Clinton and Obama, McCain’s economic views represent the views of conservatives with tax cuts for higher income individuals and no tax increases.

Make Tax Increases More Difficult
One of the most radical tax views of McCain is his desire to make additional tax increases more difficult. He hopes to follow California Republicans in requiring a 3/5 super majority for any tax increases. This will, in effect, give the minority in congress more power and leverage to negotiate trades for important votes. However, in given the current economic uncertainty, such a barrier could have devastating effects. This is especially the case under McCain’s plan to increase our military presence around the world. It will cost the government billions of dollars. But without proper funding, a war cannot continue. Yet, with McCain’s plan it would be difficult to pass tax increases to cover these military expenses.

Alternative Flat Tax System
Although McCain does not support an outright switch to a flat tax, he is making strides towards one. Like any Republican, McCain is not a big fan of our current progressive tax system. His plan is to expand the 15% tax bracket to lower taxes on millions of middle income Americans. Under his plan, the ceiling for the 15% bracket would increase from $43,050 to $70,000 for married couples filing jointly, and from $25,750 to $35,000 for single taxpayers.

The more revolutionary aspect of his plan is the offering of an optional flat tax system. This system would be held out as an alternative to the current progressive system and the myriad of credits, exemptions, deductions, carryover rules, and different tax rates for different forms of income. McCain’s plan would be to tax all taxpayers on all income sources at one single rate. The flat rate would be set at 19% for first two years, 17% thereafter.

McCain’s tax cut plan is estimated to cost the federal government about $240 billion in the next five years, and over $500 in 10 years. However, these are early estimates and with current inflation levels, his plan could cost even more.

When speaking about his plan to fix the tax code, McCain claimed that, "the tax code now requires $140 billion of American families' income to prepare their tax returns." Unfortunately, he greatly overestimated this number. The exact cost attributed to individual taxpayers was only $65 billion, and some estimate the total at a much lower $20 billion. Although McCain's camp said he was drawing his figures from a 2005 report by the President's Advisory Panel on Federal Tax Reform, the study was not just on families, it included both individual and business taxes

Gas Tax Holiday
The Gas Tax Holiday is one of the few tax proposals that are supported by both McCain and Clinton. As I have mentioned before, this plan is to stop the collection of federal taxes on gasoline and diesel from Memorial Day to Labor Day. Currently the federal government collects an excise tax in the amount of 18.4 cents for gasoline and a 24.4 cents for diesel. Some estimates have cited average savings of $70 per person, but the exact numbers are widely disputed.

Although the phrase “gas tax holiday” sounds good, this holiday is getting a lot of criticism for being nothing more then a campaign gimmick. Within a few days of the announcement 200 of the top economists came forward saying the plan was worthless. Many claim that lower prices would lead to more demand, and only the big oil companies would get anything out of the holiday.

Repeal Alternative Minimum Tax
In addition to lowering taxes on middle income families, McCain also wants to repeal the Alternative Minimum Tax (AMT), which would basically be a tax cut for the upper middle income taxpayers.

“I believe that we've got to simplify the tax code,” claims McCain. “But one of the first areas we've got to go after is the alternate minimum tax, which is going to eat in to 20 million American families if we don't eliminate it, and very quickly.”

Although the AMT is very unpopular it generates billions of dollars in federal revenue. In addition, remember that the president does not have the power to just remove a tax – only congress does. If McCain wants this tax fully repealed, then he is going to have to strike a deal with congress, and it seems highly unlikely that he would get enough support to make this drastic change.

Extend President Bush Tax Cuts
Although McCain had originally voted against the Bush tax cuts, he now claims to support an extension of the plan. “I voted to extend them because it would have the effect of having a tax increase,” claimed McCain when asked about his flip-flop. “The tax cuts have increased revenues enormously. They've been very beneficial. The problem is that spending has lurched completely out of control. My proposal was to restrain spending. I do not support tax increases. And the effect of not making them permanent would have the effect of a tax increase.”

Unfortunately, changing your view on important issues is suicide for a presidential hopeful. Think back to the 2004 election, and how strongly the Bush campaign pushed the flip-flop label on John Kerry. Voters do not tend to vote for someone they feel will flip on an issue, yet if McCain wants to win the election he is going to need to.

Cut Corporate Tax Rates
Another tax cut McCain supports is cutting the corporate tax rate from 35% to 25%. The United States has one of the highest corporate tax rates in the developed world. If we want businesses to stay in this country then we need to keep our tax rates competitive. McCain’s plan does just that.

Revisions to Charitable Contributions
Another controversial component of McCain’s tax plan is his hope to revise the current laws on charitable contributions. Under his plan, taxpayers that give charitable contributions in the form of stock, real estate, bonds, or artwork would not be able to take a tax deduction for the current, inflated value of the gift. Instead, they would only be allowed to take a deduction for the original cost of the asset.

McCain claims this would only affect the richest Americans who take advantage of this loophole to reduce their tax liabilities. However, the plan has been met with loud criticism. The current administration has publicly stated “anything that would take money away from a charity is a step in the wrong direction.”

“Wealthy Americans shouldn’t get a tax write-off for contributing a fancy painting or an overvalued stock,” responded a spokesperson for McCain. “Bush is protecting his wealthy donor base at the expense of the middle class.”

Health Insurance Tax Credit
When it comes to health care, McCain wants to give more responsibility and control to individual patients. His plan would remove current tax breaks given to employers to provide health insurance, and replace it with a $5,000 credit to families who purchase their own health care. He suggests that it would encourage choice and competition in the market, thus lowering current prices. “I’ll work tirelessly to address the problem,” Mr. McCain claimed in a speech at the University of South Florida. “But I won’t create another entitlement program that Washington will let get out of control. I won’t do it. Nor will I saddle states with another unfunded mandate.”

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Study Shows Capital Gains Increase Won’t Impact Investing

A study from Bloomberg has come out claiming that affluent investors are not likely to alter their investments if the capital gains tax rate were increased by a small margin. This study goes against claims from Sen. John McCain who has claimed that it would stop upper income Americans from investing.

According to the Bloomberg and Los Angeles Times investor poll, “69 percent of upper-income investors say a raise in the capital gains tax to 20 percent from 15 percent wouldn't cause them to sell assets they would otherwise hold.”

“The poll of 2,208 adults nationwide included 607 investors with household incomes of at least $100,000 and was conducted May 1 to May 8. The investor group has a margin of sampling error of plus or minus 4 percentage points.”

The nationwide poll has a large sample size, and was conducted by two credible news outlets. However, the poll does not mention how investors would react to Obama’s plan to nearly double the Capital Gains tax rate. I assume that it would be a lot lower then 69 percent.

Another Tax Case in the Media

With taxes and rebate checks still fresh on everyone’s mind, another story of unpaid taxes has gotten the attention of the national media. But this time it is not a celebrity, the defendant in question is the famous civil rights activist Reverend Al Sharpton. Records obtained by The Associated Press show that Sharpton and his businesses owe about $1.5 million in unpaid taxes and fees.

According to the report, Sharpton’s lawyers have been trying to negotiate with the federal government for about a year. They are disputing the total debt amount, and have been trying to pay off some of the debt related to unpaid workers compensation and unemployment insurance. However, Sharpton is not accepting full blame for the tax liability and points to problems in the government.

"Whatever retaliation they do on me, we never stop," Sharpton told the AP. "I think that that is why they try to intimidate us. The infrastructure was trying to keep up with that pace, and it was not a perfect fit. The National Action Network may not have been perfect, but nothing was going on that was untoward."

Local Teen Girl Plays on Boy’s Baseball Team

Check out this video on Yahoo, of a news report on a local teen girl. She is the only girl to play on the boy’s baseball team at a nearby high school. Gabby Sanchez is a freshman at Rio Linda High School and has already made it onto the Junior Varsity baseball team, playing along with older male students.

It warms my heart to hear stories like this one. For those of you who do not already know, I absolutely love baseball, and have been playing my entire life. At the age of 11, I became the first female in the history of California to play little league baseball on an all boys’ team. Then when I was 12, I was selected as an All-star player. But Gabby takes the cake.

I strongly encourage Gabby to continue doing what she loves, and to not be concerned about gender stereotypes or what anyone else has to say. Follow your dreams, and do not let anything stand in your way.

IRS Commissioner Douglas Shulman Speaks to ABA

The IRS’ website has posted the transcript of remarks made by current IRS Commissioner Douglas Shulman before the American Bar Association. Below are a few quotes I found particularly interesting.

“As I settle in to my new role, it becomes clearer to me each day what a privilege it is to be the Commissioner of the IRS. I am taking every opportunity to listen and learn — both internally with the IRS workforce, and externally with important constituencies: Congress, taxpayers, tax practitioners, foreign tax authorities, and other colleagues in the federal government.”

“We must continue on the path to modernizing the IRS. When I think of modernizing, I am not merely speaking about building new technology. We need to ensure that our systems, processes and people reflect the changing environment in which both individual taxpayers and businesses operate.”

“Another critical issue is our need to target the root causes of noncompliance, and look for opportunities to improve voluntary compliance rates.”

“In my view, a crucial part of the path forward is through increased transparency. When all parties are working from the same information, the opportunity for miscommunication and misunderstanding decreases dramatically. But transparency alone is not sufficient. With transparency comes the need for trust among the players in the tax system, and a responsibility of the tax authorities to use information appropriately.”

IRS Has Answers to Stimulus Package Questions

Yesterday the IRS put out this press release announcing that they had put together a list of answers to the most common questions about the economic stimulus package. Below are some of the questions and answers, but to see the full page check out Economic Stimulus Payments: Most Frequently Asked Questions on IRS.gov.

Q. When will I get my payment?
A. Payments are going out now for those returns processed by April 15 and will continue on a weekly schedule through mid-July. See the payment schedule for both direct deposit and paper checks for further information. Payments will continue through 2008 for returns filed after April 15.

Q. I filed after April 15 and the payment date for my Social Security number has passed. How long will it take for me to get my stimulus payment?
A. It will generally take a minimum of six weeks after you file your return to get your stimulus payment.

Q. Will the IRS allow me to provide it with direct deposit information, if I did not include that information on my original tax return?
A. You cannot correct direct deposit information or request a direct deposit after a return has been filed.

Q. Is there something I can do to prevent my stimulus payment from being automatically deposited into the account that I identified for the direct deposit of my regular refund?
A. Generally, if you designated direct deposit on a tax return, the stimulus payment will go to the account number you designated. If the account number is no longer active, the IRS will send you a paper check. This process may take several weeks.

Facts About the Gas Tax Holiday

After discussing the Gas Tax Holiday in my deeper look at Hilary Clinton’s tax views, I wanted to learn more about the proposal. Therefore, earlier today the tax experts of the Roni Deutch Tax Center™ posted an entry to the RDTC Tax Help Blog titled The Facts About A Gas Tax Holiday. Enjoy the snippet below, or check out the full article.

Over the past week, the phrase "gas tax holiday" went from something no one knew about to a phrase being blasted through all media outlets. But what exactly is a gas tax holiday? Is it a new federal holiday that will give us all another three-day weekend? And will a gas tax holiday do anything for our downward spiraling economy?

The phrase "gas tax holiday" refers to a proposal from presidential hopefuls Sen. Hillary Clinton and Sen. John McCain to suspend the federal excise tax on gasoline from Memorial Day to Labor Day. It is a direct result of the eve-rising fuel prices that are expected to surpass $4 per gallon later this summer.

Sen. Hillary Clinton: a Deeper Look at her Tax Views

With only a few primaries left many people are pointing to Sen. Barack Obama as the victor of the Democratic nomination. However, Sen. Hillary Clinton is still committed to finishing the race on the claim that she is more likely to beat Sen. John McCain in the general election, and she does have statistics from national polls to back up her claims. The only hope for Clinton is if the delegates decide to give her the nomination since neither candidate will get the required number of delegates through the election cycle. Nevertheless, since Hillary is still considered one of the candidates for the Democratic nomination, I included her in my in-depth look at the candidate’s tax plans.

Gas Tax Holiday
Clinton’s support of a gas tax holiday has become a key component of her campaign in the remaining primary elections, however it has caused her more negative criticism than positive. At first the idea of a gas tax holiday seems like a good one. People across the nation are complaining about increases in the cost of fueling their vehicles and they want to get relief. By endorsing the gas tax holiday, it seemed like Clinton was making a good campaign move by showing Americans that she understood their hardships and wanted to do something about it.

However, soon it was clear to many that a gas tax holiday was little more then just a good campaign talking point. If enacted, experts agree that the holiday would do little to help the American consumers. Federal excise taxes on gasoline are under 20 cents per gallon, and eliminating the tax would do little to counterbalance the ever-increasing price on fuel. Additionally, by eliminating the tax it would cost the federal government upwards of $125 million that would usually go to federal road repairs and infrastructure improvements.

Finally, there is the problem of supply and demand, which I personally think has been slightly over-exaggerated. The argument is that with lower prices the demand would increase and there would be little benefit to consumers. However, its important to remember that the tax holiday would only apply to American taxpayers, and that the effects on the world market would be negligible.

Let Bush Tax Cuts Expire
Clinton and Obama are on the same page when it comes to President Bush’s 2001 and 2003 tax cuts – let them expire. In a democratic debate Clinton took a firm stand on this issue claiming, "I will make it clear that the Bush tax cuts on the upper income, those making more than $250,000 a year, will be allowed to expire."

"I will let the taxes on people making more than $250,000 a year go back to the rates that they were paying in the 1990s," she continued. Hillary has gone to great efforts to promote the fact that she wants to increase taxes on only the wealthiest Americans, not the middle class. However, conservative and "Reagan Democrat" voters often react negatively to any type of tax increase, regardless if it will directly affect their paychecks. If Hillary does win the nomination, she will need to really drive home the fact that the increase will not affect middle to higher middle income Americans.

Extend Low Income Tax Credits
Although Clinton does not favor as much lower income credits as Obama, she still does support extending additional credits targeting people living on low wages. One of the tax credits Clinton supports is extending the Child Tax Credit to cover the first year of a child’s life. Clinton aims to make it easier for parents to stay home and care for newborn children. "Our tax policies do not reflect the cost of raising children," claims Clinton. "We should expand the child tax credit for the first year of a child's life to help parents stay home and give lower-income parents who receive government support for child care the option to sue the subsidies to cover the costs of staying home and caring for their own children." Clinton’s plan to increase low income tax credits may sound nice, but without reducing their overall tax burdens, small credits can only do so much to help someone get out of poverty.

Strengthening the Middle Class
The biggest part of Hillary’s tax proposal is to help strengthen the middle class. "I am absolutely committed to not raising a single tax on middle class Americans," claimed Clinton. "In fact, I have a very specific plan of $100 billion in tax cuts. My priorities are middle-class tax cuts and support for the middle class, to make college affordable, retirement security possible, health insurance affordable."

The phrase "strengthen the middle class" is a great campaign move on Clinton’s behalf as studies show that people like to consider themselves middle class regardless of their actual income. Both the phrases lower class, and upper class have negative connotations so targeting the "middle class" has helped Hillary appeal to the general public. However, the government needs to make money somehow, and Clinton cannot expect to only raise taxes on the highest income individuals. The public does not generally favor unbalanced tax increases, and it will be difficult for Clinton to drastically increase taxes on the wealthiest while lowering taxes for everyone else.

Revise AMT & Index to Inflation
Although Clinton previously voted against reducing the AMT (alternative minimum tax) in the Senate, she now appears to support some revisions to the highly unpopular tax. "I'll tell you something that we are going to have to deal with, the alternative minimum tax, which falls heavily on a lot of you and your families," claimed Clinton at the 2007 IAFF Presidential Forum. "You know, for six years I've been saying, with all due respect, do the billionaires in America need more tax cuts? Don't you think we ought to cut the taxes of middle income people, in particular those who are going to be hit by the alternative minimum tax?"

As the AMT impacts more and more families the tax is being considered widely unpopular, and is something that all the candidates are striving to fix. However, along with Clinton’s overall plan to strengthen the middle class, you have to wonder where all this extra money is coming from? All the tax cuts and credits would cost the government billions of dollars in lost revenue, and I am doubtful it could all be made up for with taxes on the rich.

Affordable College Education
At the heart of her plan to strengthen the middle class is Hillary’s tax cuts designed to make college more affordable for everyone. "When it comes to higher education – we shouldn’t be playing catch-up with the world – we should be leading it," claimed Clinton in a press release about her plan. "I believe that college shouldn’t just be a privilege for the wealthy – but an opportunity for anyone with the talent, determination and ambition to learn. And I believe that every American should have access to lifelong learning opportunities – from apprenticeships, to community college, to the most select four-year institutions."

Hillary’s college plan would basically boil down to a $3,500 credit which she claims is enough to cover more than 50% of the cost of tuition at the average public institution. But with rising community college prices, and ten thousand dollar per semester bills at many universities, I wonder how big of an impact this credit will actually have?

Small Capital Gain Increase
Although Clinton has not gave an official yes or no on increasing the Capital Gain tax rate, she has noted that if she did increase the rate it wouldn’t be by much. "I wouldn't raise it above the 20% if I raised it at all," notes Clinton. Although a small increase would not generate as much revenue as Obama’s plan to nearly double the tax rate, it seems much more "doable." The increase would still generate billions of dollars in new revenue but would not have a massive impact on Americans who invest.

Economic Military Changes
Although her military and security plans do not have a direct impact on the taxes paid by Americans, it will have an impact on the country’s budget that will trickle down to taxpayers. Included in Clinton’s proposal are a few costly measures, including: redeployment of troops in Iraq, increased commitment to Afghanistan and Pakistan, increased military research budgets, and a pay raise for wartime troops.

Sen. Barack Obama: a Deeper Look at his Tax Views

As we get closer to the general election, the candidates’ tax views are becoming major components of their respective campaigns. In the beginning of the primary election, no one was talking taxes. But because of my love of taxes, I frequently blogged about the candidates’ tax positions. Now, with the current economic state (i.e. mortgage crisis, ever-increasing gas prices, etc.), people are thinking about taxes.

With only three major candidates left in the election cycle, I figured it would be timely to take a more detailed look at each candidate’s individual tax views. In this first entry, I review Senator Barack Obama's tax plan, as well as some of his other proposals that will likely have tax consequences or an economic impact on the country.

Higher Taxes on Top Earning Americans
Senator Obama is a big believer in our progressive tax system – and he is not afraid to hide that. So one of the first things Obama is set to do is letting President Bush’s 2001 and 2003 tax cuts to selectively expire. "There's no doubt that the tax system has been skewed. And the Bush tax cuts – people didn't need them, they weren't even asking for them," claimed Senator Obama during a debate. By "selectively expire", Obama endorses extending those tax cuts on the rates for all but the top two income tax brackets.

In addition to letting the Bush tax cuts expire, Obama also advocates increasing the income cap on payroll taxes. This would essentially be a huge tax increase for taxpayers earning between $97,000.00 and $250,000.00, which goes against Obama’s prior commitment to not raise taxes on individuals making less than $250,000.00. Although higher taxes on the rich is a popular thought for many liberals, you cannot expect to only tax the rich and cut taxes for the poor. The American public is not likely to support unbalanced tax increases and this could harm his chances in the general election.

Close Corporate Loop-Holes
Another major component of Obama’s tax plan is to close hundreds of corporate "loop-holes" that allow massive corporations to questionably reduce their tax liability. "Instead of having all of us pay our fair share, we've got over $1 trillion worth of loopholes in the corporate tax code," he claimed. "This isn't the invisible hand of the market at work. It's the successful work of special interests." This plan would be highly efficient at creating new revenue for the federal government, but at what cost? Huge corporations are already moving factories and offices to countries with cheaper labor and more favorable corporate taxes. If the tax rates increase too much, then more corporations would likely move out of the country and it could result in thousands of lost jobs.

Senior Citizen Tax Breaks
Although it seems like an attempt to get the attention of the "senior voters" and the AARP, Obama is hoping to provide relief to millions of seniors struggling to make ends meet. His plan would eliminate federal taxes on seniors making less then $50,000.00 per year, which would account for $7 million dollars in total relief. It seems quite unlikely that the country would get behind this tax plan. I also have my own reservations – what about single mothers making less than $50,000 per year – that I expressed in a previous entry.

Make Work Pay Tax Credit
With his Make Work Pay tax credit, Obama is hoping to encourage Americans to take control of their lives, while providing tax relief to both low and middle income taxes. "I'd reward work by providing an income tax cut of up to $500 per person – or $1,000 for each working family – to offset the payroll tax that they're already paying," claimed Obama. "Because this credit would be greater than their income tax bill, my proposal would effectively eliminate all income taxes for 10 million working Americans."

Capital Gain Tax Increase
Obama’s desire to increase the Capital Gains rate is probably the biggest actual increase of his tax plan. The current tax rate on Capital Gains is 15%, and Obama hopes to raise it to 28%
"At a time when Americans are working harder than ever, we are taxing income from work at nearly twice the level that we're taxing gains for investors," Obama said. "We've lost the balance between work and wealth."

Although the Capital Gains tax rate is much lower today than it was a decade ago, it is being levied on a lot more people. Investing is not only for the rich, as there are millions of middle income Americans investing in stocks, retirement accounts, and mutual funds. In a time of a looming economic recession, we should be encouraging sound investment and savings strategies. Raising the capital gains rate is not going to do that.

Mortgage Relief for Homeowners
"Ten of the country's largest mortgage lenders spent $185 million lobbying Washington so they could keep engaging in destructive practices," claimed Obama. "And they got what they paid for. To help fix this problem Obama wants to create more accountability in the mortgage industry. In addition, he intends to pursue more tax breaks for current homeowners. Specifically, Obama announced intentions to "create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief."

Because it is a credit, individuals claiming the standard deduction would have access to it. Currently, mortgage interest is a deduction that can only be claimed by itemizing your deductions on your tax return. The credit would provide about $500 to 10 million homeowners in this country, mainly for individuals making less than $50,000 per year.

IRS & Tax Return Reform
One of the most interesting things about Obama’s tax proposal is his idea of reforming the IRS and the way American’s file their tax returns. The good thing about his suggestion is that it is a smaller form of revamping the IRS – unlike other candidates who want to dissolve the IRS completely. Obama claims that his simplified tax code would allow anyone with a bank account to complete their taxes in minutes – as long as they take the standard deduction. Part of his plan includes using pre-filled tax forms. "There's no reason the IRS can't send Americans pre-filled tax forms to verify," Obama said. "This means no more worry. No more wasted time. No more extra expenses for a tax preparer."

Although more realistic than completely dissolving the IRS, Obama’s plan is still fraught with problems. While in a perfect world, the IRS could send pre-filled tax returns and people could easily file their returns. However, we do not live in a perfect world. Implementing a plan to simplify tax returns could create large problems for the IRS. They already have enough trouble tracking down taxpayers, let alone sending them accurate pre-filled income tax returns. Additionally, this program would open the floodgates for large-scale identity theft problems. The information contained in a taxpayers return is highly sensitive and everyone knows that standard mail is not exactly 100% secure.

Revamp the AMT
Although Obama voted "nay" on repealing the Alternative Minimum Tax (AMT), he does support a revamp of the tax. The specific details of his plan are a bit hazy, but Obama has claimed he would like to index the tax according to inflation so that it does not affect middle-income Americans. However, with dozens of social plans that cost billions of dollars to operate, the idea of reducing a tax that generates so much revenue for the government seems unlikely.

American Opportunity Tax Credit
One of Obama’s more popular tax views is to help make higher education more affordable for Americans by creating a credit to reimburse taxpayers for the costs of obtaining a college education. According to his plan, the credit would reimburse taxpayers on the first $4,000.00 they spend on a college education, and will cover two-thirds of the cost of attending a public college or university.

Immigration Reform and Undocumented Immigrant Taxes
Obama wants to reform the way the federal government deals with undocumented immigrants. Obama’s plan does have tax consequences, as it would not only require illegal aliens to file tax returns and pay income taxes, but would also require them to pay back taxes and the associated penalties and interest. If this idea became reality, it could account for millions of dollars in additional federal revenue. And, by not including tax amnesty in his immigration reform, Obama preemptively "plucks" a feather from the anti-immigration reform movement. It also preemptively stops American citizens from lobbying for similar treatment for their own unfiled tax returns and IRS back taxes.

Increased Foreign Aid
Although not included in his tax plan, Obama does support a healthy increase for money the federal government provides in foreign relief. He has proposed a comprehensive African HIV / AIDS strategy that will provide $50 billion in relief by 2013, and a global poverty fighting strategy that will provide between $25 and $50 billion in relief by 2012. The source of these funds is still unclear, however we can assume the money will come from some of Obama’s tax increases on the wealthy.

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Another Tax Case in the Media

Lynda J. Mead, of Washington, pleaded not guilty in her initial appearance before the U.S. District Court in Seattle this morning. She is facing a total of eight counts of willful failure to pay her federal income taxes.

Ms. Mead has been accused of failing to pay the IRS over $357,000 that she withheld from employee’s paychecks. Her trial is scheduled on July 14 before Judge Ricardo S. Martinez.
Although payroll taxes can be confusing they are very important. My law firm gets dozens of calls per day from small business owners who are confused by payroll taxes and now find themselves in debt to the IRS.

While my firm can help, it is better to ensure that you never find yourself with IRS payroll tax liability in the first place. The best way is to ensure that someone who understands payroll taxes is administering your payroll. If you do not have a competent payroll administrator on staff and / or cannot figure out how to handle payroll taxes on your own, then seek-out a third-party payroll administrator.

Another Celebrity Tax Issue: Britney Spears

Wesley Snipes isn’t the only celebrity dealing with tax problems. Everyone’s favorite fallen pop star has also gotten into some tax trouble, but with the state of California. According to Access Hollywood, the state tax board has put a lien on one of Ms. Spears’ businesses, Britney On Line Inc. According to reports the company owes almost $24,000 in back taxes from the 2004 tax year.