Common IRS Tax Audit Myths

There are a lot of myths going around this tax season about IRS audits, fortunately the RDTC Tax Help Blog has posted an entry debunking 10 of the most common myths. Below are the first 5 items in the list, but you can view the full article at Top 10 IRS Tax Audit Myths.

1. Having a home office is an audit red flag.

This myth was more popular when fewer people had home offices, but is definitely not true these days. Home offices are quite common today, and it alone will no longer flag you for an audit. However, that does not mean the IRS turns a blind eye to home office deductions. They will review it to make sure that it makes sense. If there is any reason for the IRS to believe that you are improperly claiming the home office deduction, then look out.

2. The mailing documents the IRS sends you are coded with audit flags.

This is false. The IRS sends you those mailing documents to make the mailing process more secure and easier. Failing to send your return in their provided envelope will probably do nothing more than delay your return and cause you frustration.

3. You can avoid being audited by filing late, after "audit season".

You would be surprised by how many people swear this works for them every time. Sure it works, but only because you start off with the odds against you being audited. Filing late or early will not help or prevent you from being audited. The IRS can audit you three years after the tax return in question is received.

4. If you make under a certain amount then you cannot be audited.

Income levels also have no affect on your audit probability. The IRS not only sends random audits to all income levels, but they take the time to look at each and every return. No matter what you make, if they believe that you are evading taxes in any way, they will audit you.

5. You cannot be audited once you have received your refund.

Receiving your refund just means the IRS has reviewed your tax return and agreed with your calculations. However, if they receive a return from a separate party who names you and that information does not match your return, then you can still be audited. And remember, the IRS can audit a return up to 3 years after it is received.

Geithner's Tax History Muddles Confirmation

From the Wall Street Journal:

Timothy Geithner didn't pay Social Security and Medicare taxes for several years while he worked for the International Monetary Fund, and he employed an immigrant housekeeper who briefly lacked proper work papers.

Those issues, and a series of other tax matters, scuttled a tentatively scheduled confirmation hearing Tuesday for Mr. Geithner as Treasury secretary, Senate Finance Committee aides said. The tax matters were instead the subject of a closed-door meeting between the nominee, currently president of the Federal Reserve Bank of New York, and members of the Senate Finance panel, in whose hands his confirmation lies.

Several senators said after the meeting that they intended to remain supporters of Mr. Geithner, who has playing a central role in tackling the financial crisis. Senate Finance Chairman Max Baucus (D., Mont.) called the issue serious, but not disqualifying.

"I still support him," said Sen. Orrin Hatch (R., Utah) as he emerged from the meeting. "He's a very competent guy."

Sen. Charles E. Grassley of Iowa, the committee's senior Republican, didn't give Mr. Geithner a pass. "It's serious, and whether or not it's disqualifying is to be determined," Mr. Grassley said after the meeting.

New York Wins Case Against Amazon.com

Last year, Amazon.com sued the state of New York because of a new law requiring out of state businesses to collect sales tax. However, the state’s court recently ruled in favor of New York. Check out the article below from the Associated Press.

New York state won a round in court against Amazon.com over a new law requiring out-of-state online companies to collect sales tax from shoppers in New York.

The law applies to companies that don't have offices in New York, but have at least one person in the state who works as an online agent — someone who links to a Web site and receives commissions for related sales.

A state Supreme Court justice in Manhattan ruled the suit should be dismissed, saying Amazon had no basis for legal action.

Patty Smith, an Amazon spokeswoman, declined comment. The company sued last year, challenging the constitutionality of the legislation. It could still appeal.

The suit argued the change unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.

New York state argued that the law closes a "tax loophole."

Businesses with a physical presence in New York already collect the state sales tax on online purchases. The proposed law would apply to companies that have $10,000 or more in New York sales.

Officials estimated the state would gain nearly $50 million in the next two years from the tax. New Yorkers, like residents of many states, are currently on an honor system to report their online spending when they file state tax returns.

Booksellers in New York have long protested the lack of a sales tax on companies like Amazon.

"The state of New York was subsidizing sales on Amazon to the degree of 8 percent," said Oren Teicher, chief operating officer of the American Booksellers Association. "That was unfair. The government ought not ever be in the business of picking favorites among competing businesses."

Americans Failing Taxes 101

From CNN.com:

Americans may like to talk about taxes but according to an annual survey by The Tax Institute at H&R Block (NYSE: HRB), most can't answer even the most basic tax questions correctly.

"Given the current economic climate -- and the need for taxpayers to claim every tax credit and deduction they're due -- the survey results are alarming," said Amy McAnarney, executive director of The Tax Institute at H&R Block. "The bottom line: Americans are failing Taxes 101."

The Tax Institute survey assessed the knowledge and opinions of a nationally representative sample of more than 1,000 U.S. adults, and found the majority doesn't know a credit from a deduction and, even more surprising, they aren't completely sure how much they even pay in taxes.

"Americans will spend more this year on taxes than food, housing and clothing combined," said McAnarney. "While they may clip coupons or negotiate their mortgage, most don't pay attention to their largest bill -- their taxes. This could be especially troublesome for people who prepare their taxes themselves or don't check their tax professional's credentials."

Create Your Compelling Future in 2009 with Better Balance

Sylvia Warren of SimplytheBestCoaching.com recently authored a new article on one of my favorite blogs, the Glass Hammer, on how to improve your finances in 2009. Below is a snippet from the article, but you can read the full text at this link.

Busy beyond belief before you have had a chance to give your New Year’s resolutions a second look? Perhaps the title to that Paul Simon song - Still Crazy After All These Years - describes your January 2009.

If you are ready for better balance, yet not sure how to get it, you are not alone. A national survey of 500 full-time professionals, conducted in late November 2008, tells us that even amidst layoffs 47% of the respondents desire more life balance in 2009. In addition, 86 percent of survey respondents plan to pursue better balance in 2009.

Gaining better balance takes daily practice. T. Harv Eker of Peak Potentials Training says it best: “Practice does not make perfect. Practice makes permanent.” Wildly successful entrepreneurs, executives and professionals learn to leverage how they are creatures of habit. Their simple daily practices lead them to better balance habits.

With all the uncertainty and challenges of these times, a daily practice of life balance requires greater clarity, focus, and inspired action. Clarity frees you to define which life and work priorities are most important to you now. Knowing this includes understanding the hidden payoffs you received in the past from not having enough balance in your work and the rest of your life. Focus keeps your priorities in clear view so you stay on target. Attention to simple balance practices enables you to be flexible enough to avoid the burden of guilt or self-criticism. Action builds your sense of momentum.

Daily playful practices give you more and more experiences of the life balance you seek.

Obama Plans to Keep Estate Tax

From the Wall Street Journal:

President-elect Barack Obama and congressional leaders plan to move soon to block the estate tax from disappearing in 2010, suggesting the levy might outlive the "Death Tax Repeal" movement that has tried mightily to kill it.

The Democratic stance on the estate tax contrasts with Mr. Obama's reluctance to press forward with his campaign pledge to raise income-tax rates on top earners, which he worries could have an adverse economic impact during a recession.

But Democrats are determined to act quickly to prevent the estate tax's scheduled repeal. Elimination of the levy on big inheritances was approved by Congress under President George W. Bush in 2001, with rollbacks phased in slowly and its full elimination slated to take effect next year.

The Senate Finance Committee will move within weeks on legislation to reverse that law, and Mr. Obama is expected to detail his estate-tax preservation proposal in his budget next month, congressional tax writers said.

Under the Obama plan detailed during the campaign, the estate tax would be locked in permanently at the rate and exemption levels that took effect this year. That would exempt estates of $3.5 million -- $7 million for couples -- from any taxation. The value of estates above that would be taxed at 45%. If the tax were returned to Clinton-era levels, it would exclude $1 million from taxation with the rest taxed at 55%.

Lawmakers and Financial Experts Question Obama's Tax Cuts

Lee Woodall, a Roni Deutch Tax Center® franchisee and former NFL player, was recently featured in an article on Community Pub.com that discusses his transition from football to tax preparation. Below is a snippet of the article, but you can read the full text by clicking here.

Millions of armchair quarterbacks and fantasy football junkies spend their weeks locked up in a cubicle, daydreaming about winning the big Super Bowl game.

And Super Bowl champion Lee Woodall, a former linebacker for the San Francisco 49ers who was drafted from West Chester University, said in many ways being in it really was like a dream -- and that makes the adjustment to life after football especially difficult, and why he's been so lucky to find a satisfying career right here in northern Delaware.

The two-time Pro Bowl linebacker remembers the excitement of Super Bowl XXIX, when his 49ers team stomped the San Diego Chargers 49-26, cementing the franchise’s place in NFL history with an unprecedented five Super Bowl championships.

Getting there takes dedication, perseverance and toughness, said Woodall, 39, of Newark. And while he (like many pro athletes) never thought much about life after football, especially with a Super Bowl ring glittering on his finger, and never really worked a 9 to 5 job, he figured those traits would lend themselves to success in a number of careers.

Tips to Recession-Proof Your Practice

ABA Journal.com recently posted this interesting article with 10 tips to recession-proof your law firm. Below are a few of the tips, but you can see the full list here.

1. CASH FLOW

Proper management of cash flow is critical. Take a good, hard look at your balance sheet. Draft a worst-case, 12-month cash flow scenario by assuming a drop in revenues of as much as 25 percent. Identify what changes you could implement and when, should the worst occur.

If you have an office administrator who handles budget management, consider the addition of monthly or quarterly status reports. Such reports can prevent a tardy reaction should there be a drop in your monthly financials.

And while the going is still good, try to put cash aside to build a financial safety net.

2. CREDIT

A good credit rating is crucial now, especially for solo practitioners, since personal credit is what banks normally look to when determining risk for an entrepreneur. Before your worst-case scenario occurs, it may be wise to consider increasing your line of credit. It’s better to approach a lender with a positive financial forecast than when your balance sheet reflects a recession.

3. ACCOUNTS RECEIVABLE

Keep an eye on someone whose debt to you is increasing. Before allowing a substantial debt to accrue, a diplomatic yet candid discussion can be beneficial.

Remember, if a client goes under and your cash flow is tight, that will adversely impact your compensation more than a one-time, frank discussion about timely payment. Institut­ing a retainer requirement for new clients is a good policy, and also useful for those with a history of delinquencies.

4. SPENDING

Discretionary items such as complimentary bagels and sodas are usually what most managers think to cut. Yet chipping away at the perks of the workday does little if your firm is nursing credit card debt or incurring unnecessary travel and operational expenses.

Reduce business costs by implementing time-saving technological advances. Teleconferences in lieu of travel, effective use of Internet and subscription services, non-duplication of administrative and operations duties, and a staff that matches your needs are budget savers.

GAO Issues Report Card on 2008 Filing Season

Earlier today, the Government Accountability Office (GOA) released its report on the 2008-filing season. Below is a quote from the report, but you can download a PDF of the full report at IRS's 2008 Filing Season Generally Successful Despite Challenges, Although IRS Could Expand Enforcement During Returns Processing.

IRS successfully processed 150 million returns and issued 105 million refunds for $246 billion as of September 12, 2008. In addition, IRS issued 116 million stimulus payments totaling $94 billion. However, taxpayers’ access to IRS’s telephone assistors was substantially lower than last year because of an unanticipated increase in telephone call volume. Calls to IRS more than doubled to 118 million as many taxpayers had questions about the amount of their stimulus payment or its timing. IRS acted to answer the calls including shifting hundreds of staff from collection cases to telephone assistance. IRS took other actions such as adding features to its Web site that answered stimulus-related questions and likely diverted some calls. Regardless, taxpayers’ ability to get through to IRS telephone assistors declined from about 81% of waiting callers getting through last year to about 57% from January through June 30 of this year.

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Woman Sues IRS After She is Fired for Wearing Knife to Work

From WebCPA.com:

An internal revenue agent has sued the IRS for firing her after she insisted on wearing a ceremonial knife on the job.

The agent, Kawaljeet Kaur Tagore, filed suit against the IRS for discharging her in July 2006. She is a religious Sikh who wears a knife known as a "kirpan." The blunt knife is kept in a curved sheath at her side. Tagore initially began wearing a 9-inch knife when she was formally initiated into the Sikh faith in April 2005. The religion requires adherents to wear five sacred articles of clothing.

After her supervisor objected, she switched it for a 6-inch kirpan with a blunt 3-inch blade. According to her lawsuit, the blade never set off the metal detectors in the Leland Building in Houston, and was not able to inflict bodily harm. However, her supervisor pointed out that federal law prohibits people from carrying blades longer than 2.5 inches in government buildings.

"She was always able to go through the metal detector, and it never beeped," said Harsimran Kaur, legal director of the Sikh Coalition, which is helping represent Tagore. "She would come and go several times a day, but after she told her supervisor, he said we have a concern and we need you to not come to work if you wear your kirpan."

Kaur noted that Tagore's office at the IRS contained sharper objects, including scissors, letter openers, box cutters and kitchen knives. The IRS, she claimed, even required Tagore to bring her own scissors and letter opener to the offices of people she was auditing along with a kit of other office supplies, including a fax machine.

Top 10 Tips for Selecting a Tax Preparer

Choosing a tax preparer may seem like an easy task, but if you do not choose carefully, you could end up losing money. If you select an untrained preparer you could miss important deductions and credits, or, on the flip side, they could get you in trouble with the IRS by taking advantage of too many deductions. To assure you are making a smart choice, I have compiled the following list of tips to help you select a quality tax preparer.

1. False Guarantees

If a tax preparer promises you a big refund before looking at your financial information then you should go running the opposite direction! No one is guaranteed a refund, and if someone promises otherwise, they are probably going to do something unscrupulous. Use you best instincts to differentiate from real professionals and those trying to use black hat tricks to get leads.

2. Are They Current?

As you can imagine, you need a lot of training to become a tax preparer. Unfortunately it does not stop there. Each tax season bring a set of newly expired tax laws as well dozens of new deductions, credits, and regulations. Most tax preparers will enroll in some sort of update training before each tax season, but not all. Make sure your tax preparer is up to date on all tax policies.

3. Note Availability

It is always a good idea to check your tax preparers’ year-round availability before signing any papers. While some tax preparation offices are open all year (including Roni Deutch Tax Center® locations), others are open only during the tax season. While this may not seem like a nuisance, you must remember you should keep track of your taxes all year, and you never know when an important tax-related question or concern may come up.

4. Quality is Priceless

Do not jump for a tax specialist just because they are the cheapest. Although tax preparation can get a bit pricey, choosing a tax prep specialist just because they have low rates is not a good idea at all. Odds are, deciding on a slightly more expensive but more highly trained professional will probably end up making up for the difference anyway.

5. Above & Beyond

On top of having a year-round specialist, it is also good to have one who will go above and beyond just preparing your return. If the IRS sends you a notice or query, will your tax preparer be able to help you solve the problem or at least recommend you to someone who can? Whenever you are looking for a tax preparer, you always want to know what type of audit protection or assistance they provide.

6. Other Businesses

If you are a business or small business owner, having a business-tax-savvy preparer is a must. There are separate deductions, credits, and guidelines for business owners. In order to take advantage of every business deduction you can and prevent from breaking any rules, you need a highly trained tax professional to help you with these sorts of tax returns. When interviewing a potential prepare, ask if they have other business clients and see if you can get any reviews from said clients in advance.

7. E-File is a Must

With modern technology, there is no reason to hire a tax preparer that does not file electronically. It is both faster and more efficient. Perhaps the best advantages of filing electronically is that your return is likely to come much faster, and as soon as your preparer files it, you have proof that it has been filed.

8. Check Reviews

If your tax preparer is well established, it should be no problem finding at least a few reviews on their services online. You can also ask friends, family, neighbors, and coworkers who they chose to prepare their taxes. Some tax preparers even have a list of testimonials from previous clients available in their office or online.

9. Taxes Take Time

Unless you are filing a simple 1040 EZ, filing a tax return can be a long and strenuous process. If you are a small business owner and a tax preparer says they can get you in and out in 10 minutes, you probably are not getting the best service. It should take a couple of visits to get your taxes filed, depending on how much paperwork you have and how well you have kept track of everything throughout the year.

10. Questions Galore

Last but not least, your tax preparer should be eager and willing to know every financial aspect of your life. This means they will not only ask if you have children, but ask their ages, their education levels, whether they are your dependent, and so on. A good tax preparer will ask you dozens upon dozens of questions to get you the best quality of service, which you deserve.

Lawmakers and Financial Experts Question Obama's Tax Cuts

From Washington Post.com:

At least two tax cuts that are part of Barack Obama's stimulus package have been criticized by lawmakers, tax experts and economists for being potentially too expensive and ineffective, signaling that they are likely to face resistance on Capitol Hill as congressional leaders begin direct negotiations with the president-elect's team.

Both Democrats and Republicans have questioned a provision that would provide a $3,000 tax credit to companies for every job created and, possibly, for every job spared. They contend that the idea would be ripe for abuse and difficult to administer.

"I'm not that excited about that," said Sen. John Kerry (D-Mass.), as he left the first bipartisan Senate Finance Committee meeting this morning. A parade of lawmakers echoed the sentiment as they departed. "A lot of questions have been raised about the economic good it does," said Sen. Charles Grassley (Iowa), the senior Republican on the panel.

Lawmakers are also skeptical about a measure that would allow companies to deduct large portions of recent losses. The proposal would benefit companies that have been hit hardest by the recession, including in the banking and real estate sectors, but experts worry that costs could soar because so many would be eligible.

NFL Veteran Opens Tax Preparation Business

Lee and Rachel Woodall, Roni Deutch Tax Center® franchisees in Delaware, were recently featured in an article in the Delaware Business Ledger. The story discusses how Lee went from being a player on the San Francisco 49ers to owning a tax preparation business. Below is a snippet from the article, but you can read the full text by clicking here.

A former NFL player is opening a Newark-area franchise for the franchised tax service led by a California tax lawyer known for her TV commercials.

Lee Woodall, who went to two pro bowls, played nine seasons with the San Francisco 49ers, Carolina Panthers, and Denver Broncos, said he was attracted to the Roni Deutch Tax Center franchise based on its name credibility and ability to help professional athletes assimilate to life after sports by providing a recession-proof business opportunity that fits the lifestyle of the athlete. According to a release, the business is expected to operate on a year-around basis.

“As a former NFL player, I know first-hand that there are no organizations to help the player transition to life after football,” says Woodall. “By teaming with the Roni Deutch Tax Center, I plan to educate former professional athletes about this tax franchise opportunity because its business model closely matches their way of life. The high motivation, understanding of life’s ups-and-downs, and passion for competition, combined with elements of team work, dedication, training, and a familiar six month work schedule, make former athletes exceptional candidates for tax franchise owners.”

“We are thrilled to bring a Roni Deutch Tax Center location to Newark and become ingrained in the community as the go-to place for tax preparation and support,” said Roni Deutch. “Lee and Rachel Woodall exemplify exactly what we want in franchise partners – a professional tax center owner/operator and genuine people who have made a commitment to the community.”

Nation loses 524,000 jobs in December

From the Kansas City Business Journal:

The United States lost 524,000 jobs in December compared with November, and the nation’s December unemployment rate was 7.2 percent, up from 6.8 percent the prior month and the first rate higher than 7 percent since 1993, the U.S. Bureau of Labor Statistics said Friday.

The nation lost 1.93 million jobs between August and December. The manufacturing sector had the biggest December job loss, at 149,000. For all of 2008, the sector lost 791,000 jobs, an average of 66,000 a month.

The nation also lost 101,000 construction jobs in December and 632,000 in all of 2008, the Bureau of Labor Statistics said.

Employment in the retail trade sector declined on a seasonally adjusted basis, despite the holiday season. The sector had 66,600 fewer jobs in December than in November and lost 522,300 jobs for the year.

The only sectors to register increases between November and December were health care, which picked up 31,600 jobs nationally; educational services, up 7,000 jobs; and government, which added a total of 7,000 jobs at the federal, state and local levels.

The nation’s unemployment rate in December 2007 was 4.9 percent.

CA Court Rejects Lawsuit Against Tax Increases

There has been a lot of talk about the California budget here in my hometown of Sacramento. Recently, a State Legislator went a roundabout way of increasing the state’s revenue without needing a super majority vote to pass a tax increase. Almost immediately, anti-tax groups here in California filed motions with the Supreme Court. However, according to the Associated Press, the appeals court has rejected the motion:

A California appeals court has tossed out a lawsuit filed by anti-tax groups that sought to block a package of tax increases passed by Democrats in the state Legislature.

Citing separation of powers, the court ruled Wednesday it could not intervene because Gov. Arnold Schwarzenegger had not signed it into law.

Schwarzenegger eventually vetoed the $18 billion proposal to help close California's $42 billion budget deficit.

The lawsuit was filed by the Howard Jarvis Taxpayers Association, with support from most Republican state lawmakers.

They argued that the Democratic majority acted illegally when it passed the tax increases because it did so with a simple majority vote. The state Constitution requires a two-thirds majority for tax increases.

What Obama’s Proposed Tax Cuts Mean for Small Businesses

From BusinessWeek.com:

Here’s a welcome report for entrepreneurs this new year: President-elect Barack Obama’s massive stimulus plan is expected to include three key tax breaks for small-business owners.

Details are still emerging, but the plan could include a longer window for businesses to “carry back” losses; an incentive to invest in machinery, equipment and other capital improvements; and a tax credit for job creation.

How soon can that get money into your hands? Faster than you might imagine. I spoke with Barbara Weltman, a tax attorney in Millwood, N.Y., who says an extension of a carry back period for losses could significantly help businesses that had been profitable in years past, but struggled in 2008.

Here’s how it might work: If you experienced a downtick last year, you can claim a net operating loss or NOL, which is essentially when expenses exceed revenues. Current tax law allows you to use that NOL to offset the past two years’ income, which could win you an immediate cash refund. Under the Obama stimulus plan, that carry back period would be extended, allowing you to use that NOL to reduce the past five years’ tax bills. That’s “a big deal,” she says. “It allows you to get an immediate cash infusion that you can use to help you survive now.”

If you do get a cash refund, another proposed tax break might spur you to plow that money back into your business. The Section 179 (first-year expensing) deduction for purchases of new equipment or machinery is expected to increase to $250,000. Currently, the limit for 2009 is $133,000.

Another piece of the Obama stimulus package could be a one-year tax credit for job creation. The president-elect has pledged to create 3 million new jobs to offset 2008’s steep losses. Republican Congressional leaders have indicated they would support tax relief, although size and scope would need to be worked out. The emergency package could be passed within weeks of Obama’s inauguration.

Roni Deutch Tax Center on Entrepreneur.com

Elizabeth Wilson of Entrepreneur.com recently interviewed me, and I was ecstatic to see how well the resulting article turned out. Check it out below.

Roni Deutch attributes her success as a business woman to her mother, who raised seven children on her own while working three jobs. "She is my mentor, my idol, my friend and truly my greatest inspiration," Deutch says.

Nationally known as "The Tax Lady," Deutch started her law firm 18 years ago before branching out in 2005 into the tax preparation business, which soon became her franchise. In its first year, 15 Roni Deutch Tax Center locations were sold. Today, just two years after the first center was sold, there are 63 franchises in 22 states.

Deutch realized she wanted to start her own firm to help clients "fight the big bad wolf--the IRS" while still in law school. In 1991 at the age of 26, with $120,000 in law school debt, Deutch rented a two-bedroom condo in Sacramento start her firm. Entirely on her own and with no employees, she maxed out her credit cards to invest in the fledgling office and to buy local TV advertising time to make a name for her business. She felt lucky if 10 clients hired her in any given month.

As Deutch's law firm grew, her associates heard a common theme from their clients. "They said, 'My tax returns have not been prepared' or, 'My tax returns were prepared in a negligent manner.' We realized 'Why are we not providing tax return services?' Five years ago, we started researching it and started selling franchises in 2007."

"I attribute my growth at the tax center to brand-name recognition. Thirty-three percent of Americans know the name 'Roni Deutch.'"

Other ways the tax center differentiates itself, Deutch says: affordability (each franchise costs between $50,000 and $90,000 to start up) and flexibility (franchisees are allowed to market and provide their own services apart from the tax center's staple--tax return preparation--such as real estate, mortgages and insurance out of the Roni Deutch tax centers).

To differentiate itself from competitors, the tax center offers additional year-round business services: credit card restoration, bookkeeping, payroll, identify theft protection and pre-paid legal services.

Her main advice to other franchisors? Leverage the media to create brand recognition and an image. "As a tax attorney, I'm constantly on TV as a renowned tax expert. I fly all over the U.S., I appear on major TV shows and major radio shows. By keeping in the media, your name will always be exposed." Deutch adds, "I absolutely do not believe that we would have had the kind of success we've had without [brand recognition]. When you have a brand name out the door, you are kicking ass running. If you don't have a brand name, it's really hard; you've got to develop that name. Our brand was already developed from day one. I believe that brand helped propel me to the next level."

Legality of Proposed California Tax Plan in Question

From SacBee.com:

Any budget agreement between Democrats and Gov. Arnold Schwarzenegger that skirts the state's two-thirds vote requirement for new taxes will almost certainly be challenged in the courts – and there's a significant chance the state would lose, some legal experts said Monday.

It's not a slam-dunk case for either side, though, law professors say, because the Legislature is largely moving into uncharted territory with its plans to break the budget stalemate by effectively replacing a tax that is tough to increase with a fee that is much simpler to boost.

"The question is, 'What is a tax?’” said Jesse Choper, Earl Warren Professor of Public Law at the University of California, Berkeley. "It may be a simple little question, but like most things, it can be more complicated."

Democrats and the governor are trying to hash out a plan that would eliminate about half of the state's burgeoning $40 million deficit. The foundation of the plan is a measure passed by the Legislature last month that would raise some fees, lower some taxes and come up with an extra $10 billion or so in revenue – all without triggering the Proposition 13 requirement that any tax increase be approved by a two-thirds vote in the Legislature.

The governor threatened to veto the plan, then said he might go along with it if it contained several new provisions. Republicans, who didn't have the votes to kill the plan, nonetheless generally hate it and contend it violates the state constitution.

Daniel Simmons, a law professor at UC Davis who specializes in taxation issues, said it would be tough for Democrats to convince a court that a series of moves that results in a huge increase in revenue from citizens doesn't constitute a tax increase.

"It sounds an awful lot like a tax to me," Simmons said, echoing a similar sentiment from Choper. "If they are not raising revenue (with the proposal), something is very funny. It's very hard to make that claim."

Any court case involving the plan would likely focus on the differences between a fee and a tax, Simmons and others said.

IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers

According to their newest press release, the IRS has “kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.”

IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season and announced a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds.

“With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”

“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman continued. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”

On a wide range of situations, IRS employees have flexibility to work with struggling taxpayers to assist them with their situation. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.