Tea-Party Activists Stage Tax-Day Rallies

While some taxpayers were rushing to get their returns filed last Thursday, others attended tea-party rallies across the country to show their dissatisfaction with the American tax system. According to the Wall Street Journal, the organizers chose the tax deadline to hold rallies in order to highlight “onerous taxes and a bloated federal government.”

The activists protested Democratic policies and displayed varying attitudes toward prominent Republicans. Some groups invited marquee conservatives, such as former Republican House Speaker Newt Gingrich, who addressed around 500 people in Austin, Texas.

Other organizers refused to invite politicians of any stripe, reflecting the deep distrust many in the movement feel toward elected officials.

In Wisconsin, several tea-party groups protested a decision to let former Republican Gov. Tommy Thompson address a rally in Madison. Saying it was "time for new voices and new faces," Mr. Thompson used his speech to announce that he would not challenge Wisconsin Democratic Sen. Russ Feingold in his bid for re-election.

The rallies in town squares and hotel ballrooms from Philadelphia to San Diego came a year after a similar spate of April 15 protests put the small-government, anti-tax movement on the national map.

Continue reading at WJS.com…

5 Lessons from the Obamas’ Tax Return

President Barack Obama – and wife Michelle – released their 2009 joint tax return and many financial experts are praising the first couple for setting a good example for U.S. taxpayers. In addition to handing over his full $1.4 million Nobel Prize award to charity they also donated $329,100 to charitable causes and put $49,000 into retirement plans. MoneyWatch.com put together a list of the 5 most important lessons to learn from the Obamas’ tax return. I have included a section of their article below, but you can find the full text here.

Target your charitable giving.

The Obamas gave to a total of 50 organizations, everything from Book Worm Angels (a Chicago literacy program) to the Central Asia Institute. Yikes! Of course, as a politician and president of all of the people, Barack Obama has an incentive to spread his gifts far and wide. More to the point, he has someone to open his mail for him. If you or I gave away money to 50 different groups, we’d be buried in renewal notices and new solicitations, and never again able to eat a dinner uninterrupted by phone calls. For the rest of us, it makes more sense to carefully choose a handful of groups we particularly care about — one disease, one alma mater, one church, and one special issue — and focus. It makes even more sense to give locally, as the Obamas did in their old Chicago neighborhood.

A side business is nice.

Their return shows a mere $374,000 in salaries, and $5.1 million in business income, mostly from book royalties. Your business might be smaller — say, an eBay-selling project or consulting gig. But it opens the door to deductions and savings (not to mention income) that you wouldn’t otherwise have.

No deduction is too small to capture.

Barack Obama wrote off $866 in office expenses against his business income. And $279 that he had to return in overpaid royalties. So… save every receipt!

Home Buyer Tax Credits Spark IRS Audits

From SunSentinal.com:

If you claimed a home buyer tax credit, don’t be surprised if your friends at the Internal Revenue Service ask for an audit.

The Associated Press reports that National Taxpayer Advocate Nina E. Olson told a congressional committee Thursday that about a fifth of all IRS audits done by mail in the past six months were for people claiming the credit. The audits can mean major delays -- up to five months -- in getting refunds, AP says.

Lawmakers approved an $8,000 credit for first-time buyers last year to help the beleaguered housing market. It was supposed to expire Nov. 30, but Congress extended and expanded the program. Existing homeowners looking to buy new principal residences now are eligible for $6,500.

First-time and repeat buyers must sign sales contracts by April 30 and close by June 30 to be eligible for the credits. And in case you were wondering, don’t expect any more extensions.

10 Arguments Against Paying Taxes (that will not work)

In honor of Tax Day, I saw a list on JD Supra of “10 arguments against paying taxes” (as seen on the IRS website and written in the blog, Mental Floss). “Most of these arguments have gone to the courts numerous times and found to be without merit. So if you don’t want to pay your taxes, you’ll have to dream up something more creative than these 10 examples.” Enjoy!

1. Taxes are “voluntary”
This argument comes from a misunderstanding of the word “voluntary,” which appears in a few tax-related sources, including the instructions that come with your 1040 tax form. Unfortunately, the legal definition of the word “voluntary” in this case refers to the process by which taxpayers report and pay taxes on voluntarily reported income, as opposed to a system where the government just tells you what to pay and you fork it over. And don’t think that you can be tricky and say that filing a tax return might be mandatory but paying the taxes is voluntary. They’ve already thought of that one, too.

2. Compensation is not income
Here’s the argument: If I work for compensation, then I’m not actually profiting. I’m just bartering my time for money, which is a zero-sum transaction, and, consequently, I have no gain or profit that can be legally taxed. This can be misconstrued as an “exchange” and not actually income. The IRS rebuttal: Clever, but not convincing.


3. Taxes in America aren’t for Americans
Apparently there’s a sentence or two in the tax code (which is over 50,000 pages, by the way) that discriminates between U.S. and non-U.S. source income. It’s just a small point explained so that folks don’t pay double taxes if they happen to have income from multiple countries. A few individuals have plucked this one little idea and claimed that no taxes are due on income earned in America by Americans. Only aliens have to pay. The IRS rebuttal: Read the other 49,999 pages and get back to us.

4. Money isn’t legal tender
Some folks are a little peeved that they can’t take a couple of Benjamins into their local banks and exchange them for equal amounts of silver or gold. They therefore claim that the income they earn paid in such “worthless” tender cannot be taxed, as it inherently has no value. Truth is, they’ve got nothing to be peeved about. Article I, Section 10 of the Constitution says that the states cannot declare anything as legal tender other than gold and silver, but imposes no such limits on the Congress. 


Read the rest of the arguments by clicking here.

What’s in a Nickname? The Origins of MLB Team Names

As many people know, I love baseball. Go Giants! And, with the Major League Baseball season getting underway, I thought it would be fun to write about how some of the league’s teams got their name (from Mental Floss):

Arizona Diamondbacks
In 1995, the expansion franchise’s ownership group asked fans to vote from among a list of nicknames that included Coyotes, Diamondbacks, Phoenix, Rattlers, and Scorpions. Diamondbacks, a type of desert rattlesnake, was the winner, sparing everyone the mind-boggling possibility of a team located in Phoenix, Arizona, called the Arizona Phoenix.

San Francisco Giants
The New York Giants moved to San Francisco in 1957 and retained their nickname, which dates back to 1885. It was during that season, according to legend, that New York Gothams manager Jim Mutrie referred to his players as his “giants” after a rousing win over Philadelphia.

San Diego Padres
When San Diego was awarded an expansion team in 1969, the club adopted the nickname of the city’s Pacific Coast League team, the Padres. The nickname, which is Spanish for father or priest, was a reference to San Diego’s status as the first Spanish Mission in California.

Find the story about your favorite team’s name by clicking here.

IRS Spending More Time Auditing Small Businesses

Syracuse University's Transactional Records Access Clearinghouse (TRAC) highlights an upsetting fact in a new report. As if April 15 isn’t stressful enough for small-business owners, over the last five years, the Internal Revenue Service has increased the hours it spends auditing small businesses with less than $10 million in assets, by 30%, while in the mean time reducing the time it spends auditing large corporations with $250 million or more in assets by 33%. During the same period, audit hours devoted to mid-size corporations ($10 million to $250 million in assets) grew by 13%.

The author of this article on Forbes.com, Dean Zerbe, says he has “just scratched the surface of this insightful report, which should be available to the general public Monday morning, [April 19th, 2010] at TRACs website."

Read Dean Zerbe’s full article about this audit increase here: IRS Audits Small Biz More, Big Guys Less Forbes.com.

What a Recession Means for Your Business

I know many small business owners are feeling the effects of the recession. Business is most likely slow or perhaps even non-existent. It’s difficult, but I want to congratulate you for doing what it takes to own your own business in the first place and for taking the risk of capturing your piece of the American Dream. Here are a few ways the recession may be affecting your business and some measures you can take right now to help keep your business afloat.

Maybe your sales are down, and once that happens, then it doesn’t take long for profits follow. Well, one way to stay afloat is to lower your profits in an attempt to achieve higher sales figures. The other way would be to spend more on marketing and advertising while keeping your profit margins. Yes, your profit figures will lower, however, you would be increasing your presence in the market which could make you the first to reap the benefits as soon as the economy emerges from the recession.

So just because you need to cut expenses, cutting marketing would be the worst idea. Have you tried marketing within social media websites? Many sites that allow you to post status updates such as Facebook, Twitter, LinkedIn and Myspace are free way to advertise! Create a Fan Page for your business within Facebook and let people know what you do. You only need to spend a few minutes a day updating your status, inviting people to “fan” you or perhaps offer a coupon for followers. Go to business chamber events or other networking events to find more people to “follow” you. By meeting people and gaining their friendship and trust, they will know who to call when someone is looking for your type of business.

Your monthly expenses are probably increasing when a recession accompanies high inflation. This could eat into your savings and you may start to face financial problems.
Avoid unnecessary expenses and attend only to those expenses related to your business, evaluating them on a priority basis.

More business advice, some adapted from Business Recession: What a Recession Means for Your Small Business, an article on MoreBusniess.com:

Learn to rotate your inventory faster so your profits can increase instead of maintaining a large inventory. Use the latest technology available to keep track of your inventory. Dispose of all your slow moving products through “fire sales” if necessary. A fire sale is the sale of goods at extremely discounted prices, typically when the seller faces bankruptcy or other impending distress.

Get familiar with “Just in Time” methods to maintain your stock and delivery schedules. And last, but not least, don’t make the mistake of assuming demand for everything in a recession goes down. Maybe you have to switch a product out for one this is selling now.

Tax Day Freebies!

The tax deadline has finally arrived, and although today is not usually a day that taxpayers associate with saving money, many businesses are running tax day promotions to help out consumers strapped for cash. This year there are dozens of businesses offering freebies such as Starbucks, IHOP, and P.F. Chang’s, among others. The Associated Press put together a comprehensive collection of tax day discounts, check out a few of my favorites below or click here for the full list.

• CINNABON: Get two free bite-sized cupcakes from 6 p.m. to 8 p.m. Thursday at participating mall locations as part of "Tax Day Bites!" Flavors include Chocolate Passion, 24-Carrot Cake, Vanilla Bliss and Cinnacake Classic.

• MAGGIEMOO'S: Get one free slice of ice cream pizza — ice cream with red frosting to look like sauce and white chocolate to look like cheese — at participating locations from 3 p.m. to 7 p.m. Thursday.

• STARBUCKS: Get free brewed coffee all day Thursday if you bring your own mug, a promotion the cafe chain says is friendly to the environment as well as taxpayers.

• BOSTON MARKET: For a "last-minute tax break" — one free meal for each one you buy Thursday through Sunday — show this coupon: http://bit.ly/d1YlRO

• IHOP: Expanding on the tax deduction parents get for kids, the restaurant chain is offering free dinner for one child age 12 or younger with each adult meal purchased 4 p.m. to 10 p.m. all month long.

• P.F. CHANG'S: Get 15 percent off food purchases for dine-in or take-out, excluding alcohol and happy hour food and beverages.

• HYDROMASSAGE: Get a free massage Thursday through Sunday at participating locations. The mall-based massage chain suggests calling ahead to book an appointment. Find a location at http://www.hydromassage.com/taxday.

Last Minute Tax Tips on the Today Show

I was on the Today Show yesterday to share some very last minute tax tips with host Merideth Vieira. In case you missed the segment, I have included an embedded video of my appearance courtesy of TodayShow.com.

Visit msnbc.com for breaking news, world news, and news about the economy

Tax Day 2010: How the Income Tax Put Al Capone behind Bars

From the Huffington Post:

As this year's tax deadline approaches, let's skip the usual grumbling and look at the bright side: Income tax has helped the government put some of the country's most notorious criminals behind bars.

In 1931, when Al Capone was convicted of income tax evasion and sentenced to 11 years in prison, the legendary gangster complained that he got a raw deal.

"I've never heard of anyone getting more than five years for income tax evasion," said the man known as "Scarface." "It's a blow to the belt."

At the time, Capone's sentence was by far the stiffest ever made in a tax-evasion case. It put the Chicago mob boss forever out of business and crippled his criminal enterprise.

A reasonable argument can be made that Capone was punished for his long list of perceived and actual crimes, not just for his failure to pay income tax. The income-tax charge wasn't the most precise weapon for bringing Capone to justice, but it was the quickest and surest, and the government preferred not to waste time.

Today, while Capone remains American history's most iconic gangster, his greatest legacy may be his punishment. Tax cases are used routinely to go after suspected criminals--including drugs dealers, spies, embezzlers and, most recently, terrorists--who might otherwise escape punishment. In today's cases, as in Capone's, a quick prison sentence is often deemed more important than a lengthy one, in order to prevent future crimes.

IRS Data Show Tax Agency Audits Big Firms Less Often

According to new data from the IRS, there has been a 20% drop in number of audits being performed on companies with more than $250 million in assets over the past decade. As Kevin McCoy of USA Today explains, although these numbers are surprising, the data could be somewhat misleading as the total number of returns filed changes every year.

The data confirm a downward trend identified in a critical analysis this week by the Transactional Records Access Clearinghouse, a non-partisan research organization based at Syracuse University. The IRS provided the data to USA TODAY after questioning TRAC's conclusions.

"There's been a steady decline in IRS audits of the largest corporations," said TRAC co-director Sue Long.

The drop is significant for taxpayers — who face a midnight deadline to file their personal income tax returns — because TRAC found the IRS identified nearly $28.6 billion in tax-underreporting by the nation's largest firms in fiscal year 2009.

The IRS said audit percentages are an imperfect measure because they include tax returns filed, a changing number the agency can't control. The annual number of large corporation audits rose more than 22% in the last decade, IRS data show.

Continue reading at USA Today.com…

My Appearance on FOX Business Yesterday

As those of you who follow me on Twitter already know, I have been on an extensive media tour with appearances on the Today Show, CNN, FOX, etc. Yesterday I stopped by FOX Business Network to discuss the implications of value-added and flat taxes. For those of you who might have missed my segment I have included an embedded video of it below, courtesy of FOX Business.com.

Taxes: Are You Crossing the Line?

Most taxpayers who have not yet filed their returns with the IRS are probably feeling a lot of stress and pressure to beat tomorrow’s deadline. However, as Nicholas Narlis explains in this article for Washington Post.com, last minute filers need to be extra cautious to avoid taking undeserved credits and deductions.

Nowadays, the process of filing tax returns online makes the actual signing where you attest to the accuracy of each filing feel less eventful. But do not kid yourself: The magnitude of placing your own "John Hancock" on these documents is the trigger to your own smoking gun. You will be held responsible to the letter of the law for its contents regardless of who assisted in preparing those forms. There is good reason why tax authorities require all applicable parties to sign in ink.

Life is filled with similar dilemmas where a decision (or inaction) could produce a very positive or extremely negative outcome. Everyone has a different tolerance for risk vs. reward. Having a keener sense of where you stand and what could eventually end up on your personal life map is paramount to effective risk vs. reward management.

The essence of this particular dilemma lies in answering this initial question: Even if the upside appears to be a sure thing, can you afford to accept your fate in the event that the worse-case scenario of a life decision implodes on you? In other words: If you can’t do the time, then don’t do the crime in the first place.

You will not be the first (or last) person to think you will luckily escape drawing the short stick in being put to the test via a tax audit. All too often, you can lull yourself into thinking the ritual of doing your taxes is more than what it is. After all, it is expected that every law-abiding citizen will complete an accurate tax return each year. But somehow people lose proper perspective and in the process also lose their own purpose in life.

Continue reading at Washington Post.com…

Haiti Relief Workers Qualify for Combat Zone Extension

In a new IRS press release, the IRS announced that Haiti relief workers would qualify for combat zone tax deadline extensions. Along with military personnel and designated civilians, Haiti relief workers are now being given an additional 180 days to file returns and pay any taxes due.

Deadlines for taking care of a variety of federal tax matters are automatically extended for persons serving in a combat zone or a contingency operation. Operation Unified Response is a contingency operation, thus giving designated persons providing earthquake relief in Haiti the same extensions that are available to military and support personnel serving in Iraq, Afghanistan, and other combat zone localities.

This relief applies to members of the military, Red Cross personnel, accredited correspondents, and civilian support personnel acting under the direction of the Armed Forces. In most cases, the relief also applies to spouses.

Normally, eligible taxpayers have at least 180 days after they leave the combat zone or contingency operation area to take care of various tax-related matters. For Operation Unified Response and the Haiti earthquake, these tax-related matters include:

• Filing a 2009 federal income tax return,
• Paying tax due for 2009,
• Making a 2009 IRA contribution, and
• Making a quarterly estimated tax payment for 2010

Check out the full release at IRS.gov….

Washington Lawmakers OK $1-Per-Pack Cigarette Tax Hike

From BusinessWeek.com:

The Washington Legislature is adding $1 to the price of a pack of cigarettes.

The House and Senate both passed a higher tobacco tax on Monday night, as lawmakers worked to wrap up their special legislative session.

It's part of the Legislature's plan to raise close to $800 million in revenue for the state budget. The bill now goes to Gov. Chris Gregoire for final approval.

Starting on May 1, the tax of a pack of cigarettes increases to slightly more than $3. Taxes also will be raised on other products, such as cigars and chewing tobacco.

Democrats said the measure would raise money and discourage smoking, while Republicans said it could just drive tobacco purchases to other states or online.

9 Very Last Minute Tax Preparation Tips

April 15^th is just a few hours away, and millions of Americans are rushing to get their tax returns filed on or before this Thursday. To help any of my readers who are trying to beat the deadline, I have put together this list of tips to get your tax returns prepared on time.

1. Use your Tax Return from Last Year as a Guide

Before you start working on your new tax return you should go and find your tax return from last year. Unless your financial situation has changed drastically over the past year you should be able to use your old return as a guide for completing your new return.

2. To Itemize or Not?

Itemizing your return opens up the door for dozens of tax deductions, although taking the standard deduction is easier, itemizing your deductions may be more tax beneficial to you. If you do not know if you would benefit from itemizing or the standard deduction then you might want to speak with a qualified tax professional.

3. Consider an IRA to Lower your Liability

If you are looking for a last minute way to lower your adjusted gross income from last year, then you should consider making a contribution to a traditional IRA. As this article on the RDTC Tax Help Blog explains you can make retroactive contributions to an IRA up until the tax deadline to lower your taxable income for 2009.

4. Making Work Pay Credit

This year there is a new $400 Making Work Pay Credit for most taxpayers who worked during the last year. You will need to complete Schedule M to calculate the value of your credit. For more information checkout this IRS press release from earlier today.

5. Be Honest and Review Everything Twice

One of the most important rules of preparing a tax return 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. You should also give yourself time to thoroughly review your return for errors before filing.

6. E-Filing your Return

You should always try to e-file your tax return, unless you have a legitimate reason not to. E-filing is fast, and can get your return to the IRS in a few minutes. Plus, you can avoid both the drive to the post office and having to pay for shipping.

7. Direct Deposit / Splitting your Refund

When you file your return, even if you do not e-file, you can select to have your tax refund directly deposited into your bank account. You can even have the refund split between multiple different accounts.

8. Consider an Automatic Extension

If you are not quite ready to file – for any reason – you should file for an automatic extension from the IRS. 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 15th.

9. Get Professional Help

If you are confused, or worried about getting your return completed by the deadline then you might want to enlist 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. Even if you do file an extension, you should make an appointment to get your return completed shortly after the tax deadline as many tax preparation offices close during the off-season.

Can the U.S. learn from New Zealand when it comes to taxes?

Is it time for the U.S. to consider the value added tax (or VAT)—the consumption tax widely used across the Atlantic? I guarantee, it will be a big debate. The head of President Obama’s Economic Recovery Advisory Board, Paul Volcker, stated in an article on CNN, “If at the end of the day we need to raise taxes, then we need to raise taxes.” So, the United States happens to be the only developed country that does not have this VAT (value-added tax), as it is called. Yet, the United States has a $1.5 trillion federal deficit and a debt of more than $12 trillion. Economist argue this tax would “pack a less potent punch” than a rise in income taxes or corporate taxes.

So, what country does it best? Tax experts and economists point to New Zealand, where a 12.5 percent goods and services tax applies uniformly to nearly everything with very limited exceptions--only rent paid for a private home, charitable contributions and interest earned are exempted. (The government offers clear details, too, on its website). “People think it’s fair because it doesn't exempt some folks and not others."

The VAT is essentially a sales tax, except that it's charged at each stage in the development of a product instead of at the moment when the product is sold.

You can bet that deciding what model to use in the United States, or whether the tax will be imposed at all, “will be a furious political debate in the coming months”. Conservatives and tax opponents hate it of course. "There's nothing to love. It will only lead to bigger government," says Daniel Mitchell of the libertarian Cato Institute.

In New Zealand, the value-added tax contributes about 25 percent to the government's bottom line, and the Tax Policy Center in December projected that a 5 percent VAT tax here would generate over $3 trillion in revenue by 2019. That's not enough to cover America's huge debt obligations, of course, but it could be a start. I feel the VAT would cause business owners to be ultimately “holding the bag”. Other things to ponder are what would be exempt from the tax and how it will affect low income Americans versus the wealthiest.

Read the full article here.

Another CNN article explaining the VAT

Watch my appearance on FOX Business regarding the topic from Monday, April 12, 2010.

5 Least Tax-Friendly States to Live In

With tax season coming to an end, some taxpayers are satisfied with their tax bill or refund, while others are wondering if they might have paid more or less had they been living in another state. Using information collected by the Tax Foundation, Wallet Pop made a list of the five least tax-friendly states to live. I have included the first two states below, but be sure to checkout the full list here.

1. New Jersey. Not only does New Jersey have the worst NBA team record this year, they have the worst tax record as well. Taking into consideration state and local property, sales and income taxes, those in the Garden State pay out a whopping 11.8% in taxes.

It was no surprise that voters booted existing Governor John Corzine (D) out of office last fall in favor of GOP challenger Chris Christie. Voters cited the economy and the state's high tax burden as their biggest concerns -- a particularly timely gripe since taxes in the state had just gone up (again).

New Governor Christie initially received praise for his handling of what was, all agreed, a fairly substantial economic challenge. He cut spending and made some painful decisions on raising taxes to get the state's budget in order. But his "we're all in this together" stance took a beating when he refused to extend the tax rate to top earners.

Hopefully, the tax burden will turn around in the next four years ... or Christie may find himself joining in a revolving door of New Jersey governors.

2. New York. The Empire State just missed the dubious honor of getting the top spot with a total burden of 11.7% -- just 0.1% behind its neighbor, New Jersey. New York is generally regarded as an expensive place to live because of the cost associated with living in New York City, which has a total population of more than many states (about 19 million). But tax woes aren't limited to the city: The state of New York has been struggling to close an estimated $9 billion deficit. That means no tax cuts for residents. In fact, adding to its already high tax burden, New York is likely to see some additional taxes on everyday items shortly -- a tax on soda tops the list.

Tax Resolution Programs

Over the weekend my team shot another tax tips video for my YouTube channel. In this episode, host James Owens shares some useful information on tax resolution programs. You can enjoy the embedded video below but be sure to check out my YouTube channel and subscribe to my future videos.

Nation's Soaring Deficit Calls for Painful Choices

From USAToday.com:

Erskine Bowles realized how tough his task will be leading President Obama's war on the federal budget deficit when he told his 90-year-old mother of his appointment.

She was proud of him. Then she said, "Don't mess with my Medicare."

It won't be the last threat Bowles gets this year as he directs an 18-member, bipartisan commission through an ocean of red ink that has never been deeper or more foreboding.

Under Obama's budget plan, the USA's debt in 2020 would be nearly the size of the entire economy then. Interest costs would be $900 billion, five times today's level.

The White House, Congress, budget experts and typical Americans are growing anxious about the nation's mounting debt, which is helping to fuel the rise of the anti-tax, anti-big government Tea Party movement.

Yet the only solutions capable of raising enough money are politically dangerous for the president and Congress: tax increases and major reductions in Medicare, Medicaid and Social Security.