Obama Auto Plan Raises Questions, Provokes Impatience

From USAToday.com:

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

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

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

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

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

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

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

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

Varnum Tax Attorneys Feel the Impact of New IRS Settlement Offer

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

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

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

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

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

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

IRS Agent Pleads Guilty In Tax Fraud

From The Los Angeles Times:

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

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

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

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

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

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

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

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

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

IRS Announces Tax Deduction For New Cars

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

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

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

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

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

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

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

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

Are You Overpaying Your Taxes?

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

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

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

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

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

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

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

Taxpayers’ Fears of Errors and Oversights May Be Well Founded

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

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

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

Tax Tips for the Stock Investor

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

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

Some tax tips for the average stock investor:

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

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

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

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

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

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

Special Tax Break Available for New Car Purchases This Year

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

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

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

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

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

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

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

Top 10 Last Minute Tax Tips

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

1. Make sure it is all there

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

2. Check the IRS’ website

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

3. E-File

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

4. Be honest

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

5. Joint or separate

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

6. Make copies of everything

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

7. Use IRS mailing materials

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

8. Not ready? File an extension.

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

9. Seek professional help

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

10. Check your math

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

Cornering the Job-Hunting Expenses Deduction

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

First of all, what are the rules?

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

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

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

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

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

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

The Audacity of the Audit

Audit.

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

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

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

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

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

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

Avoiding Tax Scams

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

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

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

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

IRS to Offer Deal to Tax Evaders

From The New York Times:

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

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

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

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

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

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

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

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

Obama Asks Volcker to Lead Panel on Tax-Code Overhaul

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

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

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

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

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

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

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

Task Force

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

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

White House Leans Toward Tighter Enforcement of Taxes

From The Wall Street Journal:

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

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

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

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

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

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

Detroit's Hotel Doldrums

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

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

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

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

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

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

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

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

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

States Could Lose Billions In Taxes To Stimulus

From The Associated Press:

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

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

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

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

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

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

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

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

White House Open to Global Currency?

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

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

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

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

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

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

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

What's your reaction?

GOOLSBEE: It strikes me as probably unlikely.

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

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

GOOLSBEE: Well, look...

BLITZER: I assume that's right, right?

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

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

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

Suozzi: Taxpayers Should 'Revolt' Over Property Taxes

From NewsDay.com:

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

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

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

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

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

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

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

IRS Challenges AIG Unit Tax Deals: Report

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

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

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

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

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

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

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

Taxing the Poor

From The Chicago Tribune:

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

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

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

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

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

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

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

Our View: State Hires Workers as Taxes Rise

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

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

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

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

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

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

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

Federal Cigarette Tax to go up 62 Cents a Pack

From The Dallas News:

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

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

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

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

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

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

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

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

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

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

From: The Wall Street Journal:

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

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

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

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

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

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

IRS Seeks Volunteers for Taxpayer Advocacy Panel

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

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

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

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

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

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

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

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

Nonprofits Wrong to Oppose Obama Tax Changes

From Beyondchron.org:

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

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

A Charity Revolt?

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

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

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

Las Vegas Legislators Propose to Tax Prostitution

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

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

Your 1040 Tax Form Really Is A Treasure Map

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

Line 23. Educator Expenses

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

Line 29. Self Employed Health Insurance Deduction

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

Line 47. Foreign Tax Credit

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

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

Line 5(a) State and Local Income Taxes Paid

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

Line 13, Qualified Mortgage Insurance Premiums

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

Line 21 Unreimbursed Employee Expenses

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

Line 23 Other Expenses subject to 2% AGI floor

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

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

A Breakdown of the American Opportunity Tax Credit

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

What is it?

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

How much is the credit?

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

What are the eligibility requirements?

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

What will it achieve?

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

Cons?

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

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

Tax Season -- Great Reminder to Consult with Professionals.

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

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

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

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

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

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

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

From Bloomberg.com:

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

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

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

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

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

‘Make Mistakes’

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