Earlier today, I had the pleasure of learning that my company, Roni Lynn Deutch, a Professional Tax Corporation, won an award for outstanding achievement in web development. The award was given out by the Web Marketing Association, which honors sites in 96 industries every year with their WebAwards. RoniDeutch.com, my law firm’s website, won the Legal Standard of Excellence award. Check out a write-up of the awards, as well as a list of my fantastic team members who contributed to our website, at WebAward.org.
Wednesday, September 16, 2009
Signs You Might Need Help From A Tax Attorney
Earlier in the week my law firm’s Tax Relief Blog posted a helpful article on the signs that you might need help from a tax attorney. Listed below are a few of the signs, but you can find the full article here.
1. You Cannot Remember The Last Time You Filed A Tax Return
If you are earning income and have not filed a tax return for a few years, then you might want to consider hiring a tax attorney. Even if you do not think that you owe the IRS money, a tax attorney can provide you with a full review of your IRS account to determine if you are owed any refunds.
2. You Get An Assessment Letter From The IRS
If you receive an assessment letter in the mail from the IRS, then it means they have determined that you owe them money. The first letter they send informs you of the situation and outlines the penalties and interest they are adding to your debt. If you do nothing, your debt will continue to increase. Alternatively, if you retain a tax attorney, they can begin working to settle your debts.
3. The IRS Files A Lien Against Your Property
Post CFC Tax Incentives to Buy a Car
Now that the popular Cash for Clunkers (CFC) program has ended, consumers can no longer take advantage of a $3,500 or $4,500 rebate towards the purchase of a new car. However, the CFC program was just one of the many incentives the government has setup to encourage taxpayers to buy a new vehicle. For those of you debating whether or not you can afford a new car, check out the following list of Federal tax incentives.
New Car Purchase Deduction
To help stimulate the economy, earlier this year the IRS announced a new tax deduction for taxpayers who purchase a car in 2009. The new deduction allows you to deduct “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." Therefore, if you pay $2,500 in taxes when you buy that new car, then you can deduct those funds from your taxable income come next tax season. Just be sure to keep all of your sales documents so you have proof of the taxes you paid. Additionally, there is no word yet on whether the deduction will be extended or not. So, if you are planning to buy a car then you might want to do so before the end of 2009.
Hybrid Tax Credits
There are numerous tax credits that are still available for those of you hoping to purchase a hybrid, or alternative fuel vehicle. The highest of which is a $4,000 credit for taxpayers who purchase a Honda Civic GX that runs entirely on compressed natural gas. As opposed to the new car sales tax deduction, the hybrid incentives are tax credits, meaning it will lower your tax bill dollar for dollar. To see a list of all the qualifying vehicles, check out FuelEconomy.gov.
Electric Vehicles
Although somewhat less practical then a hybrid vehicle, electric powered automobiles come with the best set of tax incentives. As part of the Obama administrations American Recovery and Reinvestment Act of 2009, a new credit was created to encourage taxpayers to purchase electric vehicles. The credit is up to 10% of the purchase price, and depending on how much the vehicle costs, it could be a pretty significant tax credit. For those of you who might be hesitant, later in 2010 plug-in electric vehicles are expected to hit the market and will be eligible for a similar credit.
Vehicle Donations
If you decide to purchase a new vehicle, then you may want to consider donating your old car. In addition to knowing you are supporting a good cause, you can also reap certain tax benefits. There are several reputable charities that will take your still-running (sometimes even not running) vehicles. Just make sure that the charity you select has a non-profit status with the IRS, that way you can include the donation as a charitable contribution on your next tax return.
Conversion
If you are a mechanic, or are just handy with cars, then you might be able to take advantage of conversion tax credits. Another section of the American Recovery and Reinvestment Act of 2009 gives taxpayers who purchase a kit to convert their car to an electric vehicle a 10% tax credit, up to $4,000. Additionally, according to the IRS taxpayers may claim this credit even if they have already claimed a hybrid purchase credit.
Business Expense
Finally, if you are self-employed or own a business then you might be able to take advantage of certain business car credits. You could take a mileage deduction based on the amount you drive your car for business reasons. Alternatively, if you lease a vehicle then you could write off a percentage of the monthly payments that corresponds with the amount of time you use the car for work. These credits could save you up to $1,500 per year. However, business related vehicle expenses can be quite tricky, and if you intend to take this route then I highly recommend speaking with a tax professional before making any decisions.
Tuesday, September 15, 2009
Tax Evaders Rush to Beat Amnesty Deadline
Now that the government has reached a settlement with UBS, American tax evaders have until September 23 to reveal their overseas holdings or risk serious legal troubles if their names appear on the list UBS is preparing to turn over to the IRS. If taxpayers do decide to turn themselves into the amnesty program, they will still need to pay a fine but will not face criminal prosecution.
The IRS expects to find some tax evaders soon. UBS AG, the Swiss banking giant, agreed to hand over to the IRS the names of about 4,450 secret accounts as part of a court settlement reached last month.
"This is sort of their last, best chance if they are going to get off with lenient treatment," said Evan Stewart, a regulatory lawyer at the firm Zuckerman Spaeder.
"If you're sitting there and you've sheltered $50 million from the U.S. government, are you willing to gamble with the (list of) 4,500 (names) and live in terror for a year?" Stewart said.
The IRS said that, in one week of July, about 400 individuals turned themselves in under the amnesty program. That was four times higher than the number of tax evaders who stepped forward in all of 2008, according to the agency.
Thousands of Businesses Need to File State Tax Returns
From Business Wire.com:
The Franchise Tax Board (FTB) today announced it has begun contacting more than 35,000 companies that did business in California in 2007 but failed to file a state tax return for that year.
The FTB annually reviews more than 5 million income records from government agencies and financial institutions and matches them against tax records filed to determine whether some businesses have yet to file. As part of this annual effort, FTB collected approximately $31 million last year from businesses that failed to file tax returns.
Businesses contacted by FTB will have 30 days to file their delinquent tax return or show why one is not due. If no action is taken, the FTB will issue a tax assessment that may include penalties and fees. With the state`s automatic seven-month extension, companies doing business in California are provided up to 10 and one half months to timely file their California state tax return.
The failure to file tax returns is one part of the tax gap that is defined as the difference between taxes owed and taxes paid. California estimates its annual tax gap to be $6.5 billion per year.
IRS Approves Issuance by Tribes of First Tranche of Economic Development Bonds
According to their new press release, the IRS has announced their approval of the issuance of the first tranche of bonds by American Native Americans. The bonds were provided in Obama’s American Recovery and Reinvestment Act of 2009, and allow Native American tribes to apply for a maximum of $30 million in economic development bonds to sell. The profit can then be used to spur public infrastructure works within their communities. The act provided a total of $2 billion worth of bonds in total.
In Notice 2009-51, the IRS solicited applications for the allocation of $2 billion of national bond volume limitation authority (volume cap) to issue Tribal Economic Development Bonds under section 7871(f) of the Internal Revenue Code. Section seven of the notice provides that the volume cap is to be allocated in at least two tranches, the first of which would not exceed $1 billion in total with a $30 million limitation per Indian tribal government.
The IRS received 58 applications requesting a total of $1,329,487,364.88 in volume cap available under the first tranche. Pursuant to the notice, the IRS allocated pro rata amounts of volume cap to the projects described in the applications such that the total amount allocated under the first tranche did not exceed $1 billion.
Lower 401(k) Contribution Limits Likely in 2010
Earlier today I came across this new article from Boston.com discussing the likelihood that 401(k) contribution limits might get lowered next year. As the author explains, the main reason for the reduction in contribution limits is because of the U.S. dollar’s poor inflation rate in 2009.
Unless inflation really kicks up in the last few months of 2009, it appears that the amount that working individuals can contribute to their 401(k) will actually go down in 2010. In 2009, individuals under age 50 could contribute as much as $16,500 to their 401(k). Individuals age 50 and older were able to contribute $22,000. In 2010, it looks like individuals under age 50 will only be able to contribute $16,000 to their 401(k). Those age 50 and older will still be able to contribute an additional $5,500 to their 401(k) but the total amount they can contribute will now be $21,500. In addition, the amount one can contribute to a defined contribution plan will also fall -- to $48,000 in 2010.
All of this is happening because inflation is flat. When inflation is not increasing, a lot of things are impacted. Social Security is a big one. After a record increase in benefits last year, there will be no increase in benefits in 2010. Most people are still not aware of this but they really need to be planning accordingly. On the "plus" side, the Social Security wage base is expected to remain unchanged next year. Earnings in excess of $106,800 will not be subject to the 6.20% Social Security tax.
Monday, September 14, 2009
Questions for the Tax Lady: September 14th, 2009
Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!
Question #1: If I rent out a spare bedroom in my house do I need to report the income to the IRS?
Yes, you will need to report your income to the IRS. When you prepare your tax return you should complete a Schedule E and attach it to your IRS Form 1040. In addition to rent you will need to include any lease canceling payments, or other expenses paid by tenants.
Question #2: How do I change the amount of taxes that get taken out of my paycheck?
Death and Taxes
Last Friday, my team shot a new video for my Tax Tips Video Series. Check out the new video below where Edward Lester explains death and taxes. Click here to visit my YouTube channel to and subscribe to my videos.
Tax Inquiry Delays Pick by Obama at Treasury
From the Wall Street Journal:
President Barack Obama's nominee for the top international post at the Treasury Department has been sidetracked by a Senate committee's investigation into her personal tax returns.
Lael Brainard, nominated in March as Undersecretary for International Affairs, is the latest Obama appointee to be tripped up by the Senate Finance Committee. Of particular concern is Ms. Brainard's use of a home-office tax deduction, according to people familiar with the inquiry.
The delay in considering her nomination has left empty a treasury position responsible for negotiating with foreign governments as the U.S. gears up for the Group of 20 summit later this month, a meeting expected to focus heavily on financial regulation and economic stimulus programs. It is also reviving questions about whether a rigorous vetting process has gone too far and hobbled the administration.
"We're into September and with no confirmed undersecretary it seems to me that's a serious disadvantage," said John B. Taylor, a Stanford University professor who served in the post from 2001 to 2005.
March on US Capitol to Protest Spending
Over the weekend, thousands of Americans marched to the U.S. Capitol to protest the Federal government’s heath care plan, and “out-of-control” spending habits. According to the Associated Press, “the line of protesters spread across Pennsylvania Avenue for blocks, all the way to the capitol, according to the D.C. Homeland Security and Emergency Management Agency.”
People were chanting "enough, enough" and "We the People." Others yelled "You lie, you lie!" and "Pelosi has to go," referring to California congresswoman Nancy Pelosi.
Demonstrators waved U.S. flags and held signs reading "Go Green Recycle Congress" and "I'm Not Your ATM." Men wore colonial costumes as they listened to speakers who warned of "judgment day" - Election Day 2010.
Richard Brigle, 57, a Vietnam War veteran and former Teamster, came from Paw Paw, Mich. He said health care needs to be reformed - but not according to President Barack Obama's plan.
"My grandkids are going to be paying for this. It's going to cost too much money that we don't have," he said while marching, bracing himself with a wooden cane as he walked.
FreedomWorks Foundation, a conservative organization led by former House Majority Leader Dick Armey, organized several groups from across the country for what they billed as a "March on Washington."
Thursday, September 10, 2009
White House Reports 1 Million Jobs Saved, Created
A new report from White House’s top economists was published this morning and claims that over 1 million jobs have been saved or created by the Obama administration. The economists also said, however that the estimates must "be regarded as preliminary and understood to be subject to considerable uncertainty."
President Barack Obama has promised that his $787 billion stimulus plan will create or save 3.5 million jobs by the end of next year. But the economy has fared worse than the White House predicted when it pitched the jobs plan and officials have sought to beat back criticism that the results did not justify the huge combination of tax cuts, state aid and government spending.
In its first report to Congress on the stimulus, the White House Council on Economic Advisers said Thursday that the economy would have been far worse without the stimulus.
The report attributes the million job figure to the stimulus and other policy actions but says the driving force behind the job creation is the stimulus. Economists cautioned, however, that the estimates must "be regarded as preliminary and understood to be subject to considerable uncertainty."
Managing Debt: Get A Grip on Reality
From the Examiner.com:
Whether you spend more than you make or have borrowed too much along the way, it’s time to realize that you’re not the only person who has made this mistake or is faced with the payoff battle.
Whatever your case is, if you’re serious about getting out of debt, the bottom line in doing so is training yourself to live on what you earn versus living on what you want. To do that, you’re going to have to make a few modifications.
All the energy previously put into a lifestyle that’s virtually unaffordable, now needs to be put into paying down the debt. Below are several tips to get started.
The first thing you need to do is set up a budget. This way, you’ll know exactly where your money goes. Be sure to allow funding for an emergency fund.
If your situation permits, work overtime or get a part-time job. All additional money should be used to pay down debt.
Have a yard sale. This will cost you nothing and anything earned should be used to reduce current debt.
If you eat out three or four times a week, limit it to one or two.
Make changes to non-essential expenses in order to save money each month. Cable can be reduced to basic channels or cancelled. Contact your wireless telephone service provider and ask for a plan to reduce your monthly payment.
Stop using credit cards. Getting out of debt means no more debt. The sooner you stop using credit cards the better. Use a calendar to mark off each day without using a credit card as an incentive to continue this positive habit.
Credit Scores: What You Need to Know Now
Most people wrongfully assume that they have only one set credit score that anyone who runs a credit check will see. However, as this Washington Post article discusses, the average American actually has several different credit scores that creditors use to decide if you will qualify for a line of credit or not. Read the very informative article, below.
Are you keeping score?
Credit scores have been getting a lot of attention lately, as lenders tighten credit standards and contend with new legislation that has, among other things, reined in how credit-card issuers can raise rates.
Meanwhile, several firms, preying on our insecurities, are pushing credit scores and credit-score-tracking services for a monthly fee.
For all the attention they generate, though, credit scores are largely misunderstood. For instance, your precise score matters only when you're in need of new debt, like a home, auto or education loan or a new credit card, which should be a fairly rare occurrence.
You don't have just one score, but many. Your FICO score, the one developed by Fair Isaac Corp. that runs from a low of 300 to a high of 850, will vary depending on which credit bureau is reporting it and the kind of lender that requested it.
So the score that costs you $15.95 at MyFico.com may not be the score your lender sees. Beyond that, the three credit bureaus— Equifax, Experian and TransUnion— sell their own proprietary scores.
Special IRS Web Section Highlights Important Credits and New Additions
The IRS posted this new press release recently highlighting back to school tax breaks, an expansion of the 529 plan, and the relatively new $2,500 college tax credit. Check out an excerpt of the release below.
The new Tax Benefits for Education section on IRS.gov includes tips for taking advantage of long-standing education deductions and credits. The “one-stop” location for higher education information includes a special section highlighting 529 plans and frequently asked questions. The Web section also features two key changes that will be in effect during 2009 and 2010 that were included in the American Recovery and Reinvestment Act (ARRA), enacted earlier this year.
One change allows families saving for college to use popular 529 plans to pay for a student’s computer-related technology needs. Under the other change, more parents and students will be able to use a federal education credit to pay part of the cost of college using the new American opportunity credit.
Latest Good Reads:
Joint Tax Committee Releases Tax Reports
Income Gap Shrinks in Slump at the Expense of the Wealthy
Education, Taxes and the Future Of Democracy In the US
Cigarettes vs. Coffee - Which Is Financially Worse For You?
Treasury Department Releases Analysis of Section 529 College Savings Plans
Wednesday, September 09, 2009
Taxpayers Face Heavy Losses on Auto Bailout
A new report coming from a congressional oversight panel suggests that a majority of the $81 billion given in the auto bailouts last year may never get paid back. This means that U.S. taxpayers will have taken a decent loss in order to keep the American auto industry from collapsing.
The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.
"I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."
The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.
The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.
For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.
Obama: Explore soda tax
From the Times Union.com:
In an interview with Men’s Health Magazine, President Barack Obama says that the government ought to explore the idea of taxing soda or other sugary drinks, using essentially the same arguments that Gov. David Paterson used when he was pushing for the soda tax — that soda contributes to obesity.
In the end, the public didn’t like the idea of the tax and Paterson took it off the table early on in the budget process.
Obama also acknowledges the political difficulty of passing such a tax.
From the story:
“I actually think it’s an idea that we should be exploring,” the president says. “There’s no doubt that our kids drink way too much soda. And every study that’s been done about obesity shows that there is as high a correlation between increased soda consumption and obesity as just about anything else. Obviously it’s not the only factor, but it is a major factor.”
Report: Americans More Stressed About Finances
Even though the housing market seems to be improving and the trouble on Wall Street has settled down, reports are showing that Americans are more stressed now about their finances than they have been in nearly a year. As such, consumer confidence is at a yearly low (38.1) according to the September Consumer Reports Index. Check out the following article explaining why confidence is continuing to decline courtesy of Biz Journals.com.
Increased credit card, health care and personal loan issues are the drivers behind their dour demeanor.
When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse.
On a positive note, shopping for big-ticket items such as a home or car looks strong for September, the report noted.
"Despite the negative forces consumers are facing, we have seen some stabilization and improvement in key indicators that suggest we could see an improvement in consumer sentiment over the next month," said Ed Farrell, director of the Consumer Reports National Research Center.
More Than 350,000 Homeowners Aided by Federal Mortgage Program
According to reports released this morning, federal mortgage programs have aided a surprisingly large amount of homeowners in the country. So far, over 300,000 families have been helped by the program, which is getting close to President Obama’s goal of half a million. Check out the following clip from a WashingtonPost.com article on the topic.
Lenders have helped more than 350,000 homeowners reduce their monthly mortgage payments through a federal foreclosure prevention program, according to government data released Wednesday morning.
That brings the industry closer to meeting the Obama administration's goal of modifying the loans of at least 500,000 borrowers by Nov. 1. But the data illustrate that some large lenders continue to struggle to address the backlog of homeowners in need of help.
Under the federal program, known as Making Home Affordable, lenders are paid to lower the payments of troubled borrowers. Consumer advocates and homeowners have complained that it's still difficult to reach lenders for help and confusion remains about how the program works.
Since the initiative was launched in March, 12 percent of delinquent borrowers have received help under the program, according to the Treasury data. That is up from less than 10 percent last month.
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