Law Could Allow IRS to Help Find Kids

In a continuing battle between taxpayer privacy and protecting children, we may finally strike a compromise. A new bill sponsored by Senator Amy Klobuchar would allow the IRS to give police addresses of people who claimed missing children as tax dependents. Currently the agency is barred from providing this information, a law that has hampered police investigations for year.

From StarTribune.com:

"This is a great tool for law enforcement," said Patty Wetterling, mother of Jacob Wetterling, who disappeared near St. Joseph, Minn., in 1989 and still has not been found. Wetterling, who is vice chairwoman of the National Center for Missing and Exploited Children and was a candidate for Congress in 2006, accompanied Klobuchar at a news conference Sunday in Hopkins.

Klobuchar said there are numerous examples of noncustodial parents or other child abductors who have sought tax deductions by claiming the children they've taken as deductions. The adults may have changed their own names but use the child's Social Security number on tax returns.

A 2007 study by the Treasury Department, which includes the IRS, examined the Social Security numbers of 1,700 missing children and the relatives suspected of abducting them, and found that more than one-third had been used in tax returns filed after the abductions took place. But the IRS cannot release any information on the returns unless a parental abduction is being investigated as a federal crime and a federal judge orders the information released. Most parental abduction cases are investigated by state and local prosecutors.

Hopkins Police Chief Mike Reynolds said that the setup amounts to "a one-way street" between the IRS and authorities searching for missing children. "This is a bill that just makes sense," said Reynolds, who also spoke at the news conference.

Continue reading at StarTribune.com...

Top 10 Everyday Legal Tips

Being an attorney, I get asked legal questions every day, since pretty much everyone has an issue with the law at some point in their lives. Entrepreneur.com put together a list of 10 everyday legal tips. This list covers the questions I hear the most, so nice job! Hopefully this list will save me from giving free legal consultations at every party I attend. You can check out a portion of the list below, or head over to Entrepreneur.com for the full text.

1. Make a will.

Things can get messy if you don't, and you won't be around to sort it all out. You should decide now who will inherit from you, and who won't, and name a guardian for your children, among other things. Additional estate planning documents are often made at the same time as a will: a trust (if needed), powers of attorney and a living will (saying whether you want them to pull the plug). Estate planning allows you to control what happens to you and your assets, and it can save your family from having to make some difficult - and often contentious - decisions.

2. Sign a prenup.

You don't have to be rich or famous. If you own a business or have children from a previous marriage, or simply want to keep some of your property separate, give it some thought. A prenuptial agreement can spell out what happens in the event of divorce or death. But don't write it up on your own. Make sure you and your soon-to-be spouse each consult with an attorney. Be upfront and disclose everything. An invalid prenup will get thrown out by the court.

3. Know your rights.

If you are pulled over by the police, be cooperative and polite. You'll probably be asked for identification, registration and proof of insurance, and you should comply. If the officer asks you questions about where you were, where you're going or whether you've had anything to drink, you do not have to answer. If they ask to search your vehicle

Tax Beatdown Continues for Alicia Keys Husband

From DET news.com:

A giant tax bill makes a pretty poor baby shower gift, but that's what the IRS and New York gave singer Alicia Keys's husband, record-producer Swizz Beatz, who owes more than $2.6 million in delinquent taxes, records show.

Beatz, 32, and Keys welcomed a baby son in mid-October. Days later, the state of New York slapped yet another tax lien on Beatz, real name Kasseem Dean. Not to be outdone, the IRS sent its regards this week.

What's owed:

• The IRS filed a $283,562 lien against Swizz Beatz on Monday with the New York City Register.
• The state of New York filed a $134,738 tax warrant against him and his ex-wife, R&B singer Mashonda on Oct. 23. The warrant is filed with the New York County Clerk.
• The IRS filed a $652,727 lien against Swizz Beatz, real name Kasseem Dean, on June 3 with the Rockland County (N.Y.) Clerk. According to the lien, which you can see here, he owes income taxes from 2008.
• The state of New York filed a $162,300 tax warrant against Dean and his ex-wife Feb. 4, 2009, with the New York County Clerk.
• The IRS filed a $556,986 lien against Dean and his ex-wife on Aug. 18, 2008, in Rockland County. They owe 2007 income taxes, according to this public record.
• The IRS filed an $842,645 lien against Dean and his ex-wife March 4, 2008, with the Somerset County (N.J.) Clerk. According to this lien, they owe income taxes from 2006.

Continue reading here

Consumer Bankruptcies Hit 5-Year High in 2010

According to estimates, the number of American taxpayers who filed for bankruptcy protection in 2010 was the highest in nearly half a decade. Experts predict these numbers could increase in 2011 as Americans continue to struggle with debt and an uncertain economy.

Reuters reports:

Roughly 1.53 million consumer bankruptcy petitions were filed in 2010, up 9 percent from 1.41 million in 2009, according to the American Bankruptcy Institute, citing data from the National Bankruptcy Research Center.

Filings in December totaled 118,146, up 4 percent from a year earlier and 3 percent from November's total.

The full-year total is the highest since the 2.04 million recorded in 2005, when there was a rush to seek bankruptcy protection ahead of a stricter federal law taking effect in October of that year.

Samuel Gerdano, executive director of the ABI, said filings are rising even as consumers try to cut spending and debt after the 2008 financial crisis and accompanying recession, and with the unemployment rate at 9.8 percent.

He said there is usually a 12- to 18-month lag between declines in consumer spending and bankruptcy levels.

According to the Federal Reserve, U.S. consumer credit outstanding has fallen in 19 of the last 21 months for which data are available, declining to $2.41 trillion in October 2010 from $2.57 trillion in January 2009.

"Consumers have been on sort of a strike when it comes to taking on more debt, as they become more aware of the dangers of high debt burdens in a weak economy," Gerdano said.

Continue reading at Reuters.com...

5 Steps on How to File For Chapter 7 Bankruptcy Successfully

These days millions of Americans are looking to bankruptcy as a solution to their financial problems. For some, bankruptcy provides the fresh start they so desperately need; however, it is a decision that should not be taken lightly. If you and your family do decide that bankruptcy is the right decision, here are the 5 steps you will need to take, courtesy of Mortgage11.com.

Consult a competent bankruptcy lawyer

Proper bankruptcy information could be essential before you actually file for chapter 7. Hence, it could be vital for you to consult a competent bankruptcy attorney who is well versed with the new bankruptcy rules and regulations as well as filing procedures. But you need to furnish complete information regarding your current financial position during the free consultation.

Do your home work thoroughly well

You need to do some preliminary homework after knowing chapter 7 bankruptcy requirements from your bankruptcy lawyer. Normally, you are required to submit copies of past 6 pay stubs, statements from bank or on retirement accounts, credit card statements, copies of tax returns for the previous 3 years, details of property assets and credit report too. In addition, you need to answer a lengthy questionnaire and even undergo credit counseling which is mandated by the new bankruptcy laws.

Prepare the paperwork and sign the petition

Once you are ready with the required information, your lawyer would prepare a petition. All that you need to do is just review and sign it. In any case, while doing so you need to verify that every information provided in the petition is correct and accurate. After you sign the documents, the bankruptcy attorney would file your case in the court. In the next step, you would come to know what happens when you file bankruptcy.

Attend the “341 hearing”

The entire bankruptcy filing process can give you a lot of anxiety. After you have filed the case, you could be required to attend a “341 Meeting” involving your lawyer, creditors and the court appointed “Trustee”. Usually, such a meeting lasts for hardly 3 minutes and could be over within no time.

Go for post-filing class and wait for 60 days

You need to go for a post-filing class at the earliest. This could be important otherwise all your hard work could go in vain. And after the “341 Meeting” is over, you could be required to wait for about 60 days, as per bankruptcy rules, during which your creditors or even Trustee can file an objection. If there are no objections, you could qualify for a discharge of debts.

Read more here

IRS Releases 2010 Taxpayer Attitude Survey

Yesterday the IRS Oversight Board released the results of its most recent Taxpayer Attitude Survey. There were 1,000 respondents, and here are some of the most interesting findings.

How much, if any, do you think is an acceptable amount to cheat on your income taxes?
A little here and there, 8% (down 1 percentage point from last year).

How important is it to you, as a taxpayer, that the IRS does each of the following to ensure that all taxpayers honestly pay what they owe:

Ensures high-income taxpayers are reporting and paying their taxes honestly? Very important, 78% (all-time low, down 5%)
Ensures small businesses are reporting and paying their taxes honestly? Very important, 73% (down 3%)

How much influence does each of the following factors have on whether you report and pay your taxes honestly –

Fear of an audit? Great deal of influence, 35% (down 4%)

Belief that your neighbors are reporting and paying honestly? Great deal of influence, 21% (up 4%)

Hat tip TaxProf Blog

Delinquent on Your Taxes? You Can Still Get a Federal Contract

From Washington Examiner.com

Federal contractors receive an estimated $377.5 billion in taxpayer funds, and now the IRS inspector general reports that the tax agency isn't bothering to complete tax checks and financial capability surveys before awarding contracts. According to a new report, the Treasury Inspector General for Tax Administration (TIGTA) reviewed 135 contractors with an award equal to at least $250,000. Fifteen percent (20) of those reviewed had delinquent tax liabilities totaling $5.2 million. And tax checks were not completed for seven of those 20 contractors.

In other words, 13 contractors still got awards despite being known to be delinquent.

From the report:

TIGTA believes IRS contractors should be held accountable to the same tax compliance requirements as IRS employees. If IRS employees fail to file accurate and timely income taxes, it can result in disciplinary action, and even loss of employment.

Guidelines do not require IRS employees to complete tax checks or financial capability surveys at the time a contract is up for renewal. Our analyses showed the IRS renewed the contracts for 17 contractors, of which six had delinquent tax liabilities that totaled over $943,000 at the time of the original award. As of March 2009, the delinquent tax liabilities increased by more than 500 percent to approximately $4.9 million.

Read more here

5 Tales of Overnight Millionaires

MSN Money put together a list of five individuals who suddenly struck it rich. How these people made it big runs the gamut from entrepreneurial spirit, to inventive natures, to being just plain lucky. You can find a snippet from their article below, or click here for the full list.

Andrew Mason, entrepreneur

Andrew Mason, 30, is the brains behind the newest social-media sensation, Groupon.

Playing off the words "coupon" and "group," the site offers daily discounts on services and products. Revenue for 2010 is expected to have hit an estimated $350 million.

Pierre Le Guennec, electrician

For Pierre Le Guennec, a retired French electrician, it was who he worked for that turned him into an instant megamillionaire.

According to recent media reports, while Le Guennec was employed by Pablo Picasso before Picasso's death in 1973, the artist gave him 271 previously unknown pieces over the course of his employment. Although there is some controversy over these works, the collection of drawings, lithographs, cubist collages and notebooks is valued at an estimated $78 million.

Sandy Stein, inventor

At 52, airline flight attendant Sandy Stein invented accessorized key clasps to help women avoid losing their keys in their purses. She called the product Finders Key Purse.

Within four months of launching the product, Stein's company reached had $1 million in sales; at the eight-month mark, more than one million units were sold. Parent company Alexx expected 2010 earnings to total about $6.5 million.

Continue reading at MSN.com...

Economists Foretell of U.S. Decline, China's Ascension

According to many prominent economists, the short and long term outlook for the U.S. economy isn't looking good. Who do they think will become the next economic super power? China.

Reuters reports:

Leading thinkers in the dismal science speaking at an annual convention offered varying visions of U.S. economic decline, in the short, medium and long term. This year, the recovery may bog down as government stimulus measures dry up.

In the long run, the United States must face up to inevitably being overtaken by China as the world's largest economy. And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger.

On the one hand, Harvard's Martin Feldstein said he believes the outlook for U.S. economic growth in 2011 is less sanguine than many believe.

First, the boost to growth from government spending will be drying up this year, he said. Renewal of expiring tax cuts is no more than a decision not to raise taxes, and the impact of one-year payroll tax cut is likely modest, he said.

"There's really not much help coming from fiscal policy in the year ahead," he said. Woes from the dire situations of state and local governments may actually be a drag on growth, he said.

Read more here

The Tax Lady Roni Deutch Reviews 2010 Accomplishments

Every New Year I like to take some time to reflect on last year’s successes.

Check out this new press release from my law firm:

The Tax Lady Roni Deutch welcomes the New Year by reviewing the milestones reached by her law firm in 2010.

“My law firm reached some incredible goals in 2010. The one I’m most proud of is helping a record number of clients successfully resolve their IRS tax debts. During these difficult times, more people than ever are looking for help with their tax debts; I’m proud that my law firm was able to help so many taxpayers get the help they so desperately needed,” states Roni Deutch.

2010 also marked Roni Deutch, A Professional Tax Corporation’s entrée into the world of bankruptcy representation. The law firm is now accepting new clients considering Chapter 7 or Chapter 13 bankruptcy in the Eastern District of California. To learn more about the law firm’s bankruptcy practice visit RoniDeutch.com.

“Rolling out bankruptcy services has been a goal for our firm for a long time,” explains Deutch. “So many of our clients are struggling with more than tax debt, and I’m thrilled to be able to offer bankruptcy services to Northern Californians.”

Roni Deutch released a new book in October. "Surviving the Coming Tax Disaster shows taxpayers exactly how we got into this economic mess, what they can expect the IRS and our government to do, and how to protect their wallets from aggressive tax collections. This topic is so important to American taxpayers, who are struggling to rebuild their finances in the face of overwhelming economic uncertainty,” explains Deutch.

Read more at PRweb.com...

Questions for the Tax Lady: January 10th, 2011

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: Roni, I read that your firm is now offering bankruptcy representation, what states are the services available in?

Answer: Yes, my law firm recently rolled out bankruptcy services. Our firm can represent people in the Eastern District of California. For more information on bankruptcy and our services you can visit http://bk.ronideutch.com/.

Question: What is the difference between filing Chapter 7 and Chapter 13 bankruptcy?

Answer: Great question! Depending upon a person’s current financial situation, one chapter will be better suited to their needs than another. Here’s the main difference:

Chapter 7 Bankruptcy is set up for people who have severe financial difficulties, and cannot repay their debts at all. A successful Chapter 7 filing will result in debts being “discharged,” meaning, you are not obligated to pay back the debt, and the creditors cannot try to collect from you.

Chapter 13 Bankruptcy is designed for people who have a regular source of income, but are having trouble paying their debts. A successful Chapter 13 filing may result in some debts being discharged, but most debts will be restructured so that you can afford to make regular payments to reduce your debts.

There are restrictions for each chapter type, and not everyone will qualify for either type of filing. Anyone considering a bankruptcy filing is strongly encouraged to talk to a qualified bankruptcy attorney.

Californians Braces for 59% Health Premium Hike

Bad news for residents in my home state. Wasn’t the health reform supposed to help keep rates lower? If other health insurance companies want to increase their market share, now would be a great time to advertise lower premiums. Who wouldn’t switch companies with a hike like this?

From CNN:

One of California's largest health insurers - Blue Shield - announced plans to hike its premiums by as much as 59%.

The jacked up premium rates are set to take effect on March 1, pending review from state insurance regulators. The move impacts 193,000 Blue Shield policy holders.

The company, a member of the Blue Cross Blue Shield Association with 3.3 million members, which announced the move late Thursday, stressed that its decision has "almost nothing to do with the federal health reform law" and that ultimately the law will help slow down health care costs.

But responding to this most recent increase the company said, "our individual market medical costs are rising rapidly due to higher provider prices, increased utilization, and the fact that healthier people are dropping coverage during a bad economy," the company said.

Despite the steep double-digit hike, the insurer maintained it still expects to lose tens of millions of dollars on its individual healthcare business in both 2010 and 2011.

Continue reading at CNN.com...

Momentum Builds for Corporate Tax Overhaul

From the Wall Street Journal:

The White House and congressional Republicans are moving from different directions toward a consensus that the U.S. corporate tax code needs a fundamental overhaul, a goal high on corporate leaders' agenda.

Specific proposals for retooling the complex corporate-tax system aren't on the table and the debate over the issue is sure to be lengthy and difficult. But President Barack Obama and Republican congressional leaders are separately sounding the same broad theme that corporate tax rates should be lower.

"Tax reform could be a significant boost to our competitiveness," Rep. Eric Cantor (R., Va.), the new House majority leader, said this week. "I'm hopeful and expect the president to put some action behind his statements."

The movement on the corporate-tax issue comes as Mr. Obama and his aides are pushing a broad effort to repair relations with U.S. business leaders. Since Democrats lost control of the House in November, Mr. Obama has met with chief executives to solicit their ideas on job growth, negotiated a free-trade pact with South Korea widely supported by business, and begun searching for figures with strong ties to the business world to take top White House jobs.

The White House is also advancing a rapprochement with the U.S. Chamber of Commerce, the capital's biggest, richest business lobby, which has clashed repeatedly with the administration on a range of issues. On Wednesday, the White House said Mr. Obama would address members of the chamber for the first time at the group's Washington headquarters on Feb. 7.

Continue reading here...

IRS Takes Nissan to Court Over Bermuda Tax Shelter

The IRS recently won a federal case against Nissan North American, when a federal court ordered the automaker to surrender paperwork on contracts worth $45.9 million. The company has been battling the IRS for months because of their tax complicated international tax strategy. The crackdown on evasion, and even tax avoidance, is gaining steam. We’ll see what pans out, but expect to see more stories like this.

Jalopnik reports:

Nissan denies any wrongdoing, and has been fighting with the IRS since March over the paperwork, saying the IRS was on "the epitome of a fishing expedition." But U.S. District Judge Todd Campbell in Nashville ordered Nissan to cough up the documents, saying the automaker's arguments weren't persuasive.

In court filings, the IRS doesn't say how much it thinks Nissan's North American arm avoided paying in taxes, or spell out exactly which of the numerous techniques corporations use to avoid U.S. taxes Nissan might have used. The data it wants involve Nissan's contracts with 31 accounting, insurance and law firms, covering taxes filed in fiscal 2006 and 2007.

According to the agency:

"The IRS has reason to believe that Nissan has moved all or some of its U.S. extended service contract business offshore to Bermuda, a tax haven country, with the possible purpose of structuring payments to outside professionals so as to avoid U.S. taxation of the company's gross receipts."

Read more here

December Jobs Report: Unemployment Rate at 9.4%

According to the Labor Department, unemployment rates dropped from 9.8% to 9.4% in December. Sounds like great news! However the economy only added 103,000 jobs; significantly fewer than experts had predicted. So far, I’m calling “Cautious Optimism” the theme for 2011.

CNN reports:

While a sharply lower unemployment rate was a welcome surprise, some experts said that drop was mostly due to a shrinking workforce.

"A lower unemployment rate is a mixed blessing," John Silvia, chief economist at Wells Fargo said in a note. "Yes, we are getting more people employed but we appear to be losing people into the woodwork -- not a good sign long term."

Economists surveyed by CNNMoney were expecting the unemployment rate to ease to 9.7%, from 9.8% in the previous month.

The payroll number was a clear disappointment. Economists predicted a gain of 150,000 jobs, and many had boosted their forecasts earlier in the week, after private payroll processor ADP released a shockingly strong report.

While that report is often seen as a bellwether for the Labor Department's number, this is the second month in a row that the government figures came in disappointingly lower.

Tycoon’s Death Ducks Tax a Century After Family Case

From Bloomberg.com:

Textile tycoon Roger Milliken avoided the taxman upon his death almost a century after his grandfather lost a landmark legal fight with the U.S. government over sheltering a fortune from the estate tax.

The 95-year-old Milliken, chairman of Milliken & Co., one of the world’s largest closely held textile, chemical, and floor-covering manufacturers, died in a Spartanburg, South Carolina, hospice on Dec. 30, less than 48 hours before a temporarily lapsed federal tax on multimillion-dollar estates was to be reinstated.

Milliken’s fortune now will pass to his heirs with no estate tax.

“The timing of his death surely benefited his heirs and the company,” said Jock Nash, Milliken’s Washington lobbyist on trade issues for 25 years. “His timing was impeccable.”

In 1916, his grandfather, company co-founder Seth Milliken, sought to avoid the newly created estate levy by giving shares of the company to his children. He died in 1920. The U.S. Supreme Court in 1931 ruled that Seth Milliken’s gifts were subject to the estate tax.

Continue reading at BusinessWeek.com...

Here's your Chance to Help Fix the Nation's Tax System

Everyone loves to complain about the U.S. tax system, and as part of her report Nina E. Olson has created a new way for taxpayers to share suggestions to improve the complicated tax code. Think you’ve got the answer? Join in!

From TodayShow.com:

On Wednesday, the National Taxpayer Advocate launched a suggestion box where taxpayers can offer their ideas for reforming the tax system.

“There has been near universal agreement for years that the tax code is broken and needs to be fixed,” National Taxpayer Advocate Nine E. Olson said in a statement announcing her annual report to Congress “Yet no broad-based attempt to reform the tax code has been made.”

Olson said tax reform is the No. 1 priority facing the tax administration, but any attempts to change the system have hit massive roadblocks.

In the release, Olson said she’s hoping to hear what taxpayers would be willing to give up in favor of a more simplified system. She also wants to know what aspects of the current system seem particularly burdensome or unfair.

The Taxpayer Advocate Service helps taxpayers who are experiencing economic problems, need help resolving problems with the IRS or believe the IRS isn’t working the way it should. It’s an independent organization that operates within the IRS.

Read more here

Tax Waste: 6.1 Billion Hours Spent Complying with Federal Tax Code

Earlier today the National Taxpayer Advocate Nina E. Olson issued her new report to Congress. She called the ever-growing tax code's complexity as the most serious problem facing both the IRS and taxpayers. Nina’s got it just right: this is inefficient and leads to frustration, honest mistakes, and widespread evasion. But will her plan to fix it work?

Forbes reports:

As a measure of how unwieldy the law has become, Olson’s staff found the tax code had grown to 3.8 million words as of Feb. 1, 2010, compared to the 1.4 million words the Joint Committee on Taxation reported in 2001. (That doesn’t include tweaks Congress made to the tax code in 2010—some 579 in all, according to a count kept by tax publisher CCH, a division of Wolters Kluwer.)

While the burden of complying with all those words has been calculated in different ways, Olson multiplied the IRS’ own estimates of how much time taxpayers spend collecting data for and filling out each individual tax form by the number of forms filed to estimate that Americans (both individuals and businesses) spend 6.1 billion hours a year complying with the code. That’s the equivalent of more than 3 million workers toiling away full time, all year. By way of comparison, the Federal government employs the equivalent of 2.1 million full-time civilian workers and Wal-Mart, the nation’s largest private employer, has 1.4 million workers in the U.S., although not all are full time.

Complexity is also raising individual taxpayers’ out-of-pocket costs for filing their 1040s, Olson noted. About 60% of individual taxpayers now pay CPAs, enrolled agents, H&R Block or other services to prepare their returns while another 29% use software, such as Intuit’s TurboTax. According to a recent IRS study, the median individual taxpayer (as measured by income) spent $258 in 2007 for tax prep, up from $220 in 2000, in constant, inflation-adjusted dollars.

Continue reading at Forbes.com...

Tax Deadline Extended to April 18, 2011

Yesterday the IRS officially opened the 2011 tax filing season and announced that taxpayers would have until April 18th to file their tax returns. The IRS is giving us three extra days when they will take up to a month and a half to fix their own processes and forms. Does this seem fair?

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties.

“The IRS has made important strides at stopping tax avoidance using offshore accounts,” said IRS Commissioner Doug Shulman. “We continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”

The IRS also reminded tax professionals preparing returns for a fee that this is the first year that they must have a Preparer Tax Identification Number (PTIN). Tax return preparers should register immediately using the new PTIN sign-up system available through www.IRS.gov/taxpros.

Read more at IRS.gov

Incoming House Majority Leader Considers Tax Overhaul for Bipartisanship

From the Wall Street Journal:

A top House Republican leader on Tuesday identified an effort to overhaul the country's tax code as a significant policy area that the GOP and Democrats could work together on.

Rep. Eric Cantor (R., Va.), who will become House Majority Leader when Republicans assume control of the House on Wednesday, said changes to the tax code could "be a significant boost to our competitiveness."

He said Republicans would be looking at President Barack Obama's State of the Union Address and subsequent budget request to see what ideas he has in terms of changes to the tax code.

"This tax code has brought on way too much cost in terms of compliance and preparation," Cantor said, at a weekly press conference. "It has put this country and our businesses in a less competitive posture vis a vis the competition."

Cantor declined to mention specific measures Republicans would pursue as part of a drive to increase U.S. competitiveness.

The Virginia Republican's call for bipartisan cooperation on efforts to simplify the tax code echo similar statements Rep. Steny Hoyer (D., Md.), the outgoing House majority leader, made last year.

Hoyer expressed hope last year that the two parties would be able to agree on a significant package of changes to the tax code. He said that he would make it his No. 1 priority in the coming year.

Continue reading at WJS.com...

TIGTA: IRS Refuses to Take Steps to Cut Down on Prisoner Tax Fraud

The Treasury Inspector General for Tax Administration (TIGTA) released a new report about fraudulent tax returns from prisoners. TIGTA calls out the IRS for failing to take action on the tens of thousands of fraudulent tax returns filed by people who are currently incarcerated. While average taxpayers are being hounded for innocent mistakes, the IRS is just letting prisoners commit fraud without doing anything. This is simply absurd.

Check out a snippet from the report below.

The IRS has not shared prisoner tax return information with Federal and State prison officials to help combat tax fraud by inmates. ... The Inmate Tax Fraud Prevention Act of 2008, signed October 15, 2008 and amended in July 2010, provides the IRS with the authority to disclose information on prisoners who have filed a false tax return to the head of the Federal Bureau of Prisons and State departments of corrections. The law also requires TIGTA to provide Congress with a report on the IRS’s progress in sharing prisoner tax information.

TIGTA found that the IRS had not provided any information on prisoner returns to either the Federal Bureau of Prisons or State Departments of Corrections as of October 2010. Prison officials told TIGTA that receiving Federal tax return information on prisoners would help reduce both tax fraud and other illegal activity....

TIGTA also found that the IRS may have understated the amount of prisoner tax fraud in a 2009 report to Congress. In that report, the IRS identified 44,944 false/fraudulent prisoner tax returns during Calendar Year 2009. However, the IRS’s report was limited to only those tax returns the IRS identified and chose to evaluate for fraud. TIGTA identified 540,984 tax returns that were filed by prisoners in 2009, of which 54,410 were not identified by the IRS as having been filed by a prisoner.

In addition, TIGTA found that the process used by the IRS to compile its annual file of individuals in Federal and State prisons lacked managerial oversight to ensure accuracy and reliability. Even though the prisoner file is the IRS’s single most effective tool to identify potentially fraudulent prisoner tax returns before refunds are issued, key data in the 2009 prisoner file were inaccurate and/or incomplete.

Hat Tip: Tax Prof Blog

Red to Black Debt Attack

When I finished law school, I had a lot of debt. Hey, law school ain’t cheap. Then I started my business, which also doesn’t happen without some funding. Pretty soon, I was buried in debt. Finally, I’d had enough, and I put all my efforts into getting out of the red and getting rid of my debts, once and for all.

It wasn’t easy, but I did it. Now, I look around and see millions of other people struggling like I did. So, I put together Red to Black Debt Attack, focusing on the tried and true method I personally used to pay off more than $100,000 in debts faster than I thought possible. Many thanks to the amazing folks and iAmplify for helping me bring some relief to all those miserable souls living with crushing debt.

Check out the downloadable audio Red to Black Debt Attack here!

Questions for the Tax Lady: January 5th, 2011

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: When is the earliest that I can file my tax return with the IRS?

I love that you want to get a jump on filing your taxes. In theory, you can file your taxes as soon as you receive all your W-2s, 1099s, or other tax-related documents. However, this filing season you might have to wait until mid-February to file. Congress waited until the very last minute to pass the “tax compromise” which means the IRS is still scrambling to update the tax forms and processing systems. So, who will have to wait?

1. Taxpayers who itemize deductions on Schedule A.
2. Taxpayers who claim the Higher Education Tuition and Fees Deduction.
3. Taxpayers claiming the Educator Expenses Deduction.

In addition to the delays, the IRS is urging anyone who falls into any of the three categories above to file electronically. With all the changes to the forms, filing electronically will ensure you file the updated versions of the forms and help you detect any mistakes before you file. No specific date has been given yet, but the IRS should announce it shortly.

So, if you claim the standard deduction and do not plan to claim the tuition and fees deduction, or the educator expenses deduction, you are free to file as soon as you receive all your tax information. Otherwise, you can spend the next month and a half getting organized so filing will be a snap!

Question: I am currently on a payment plan with the IRS, but my income has been reduced significantly over the past few months. Is it possible for me to renegotiate with the IRS to lower my monthly payment?

I commend you for getting out ahead of your financial issues, instead of waiting until you default on your installment agreement with the IRS.

Most IRS tax debt programs are based on your financial situation right now. So, when you income declines or you lose a job, you may be able to negotiate a lower payment. Your first step is to call the IRS (800-829-1040) as soon as you think you have a problem.

You will probably have to provide documentation for your decreased income, such as your W-2s or an updated profit and loss statement for your business. So, gather your documents and call the IRS. And good luck on getting a little relief in this still-shaky economy.

Tax and Finance Savvy New Years Resolutions

The New Year has begun and it is a time when people all over the world set goals or resolutions for themselves. Lots of people join gyms or decide to start a new diet, but in addition to resolutions that are good for your health, I think it is a good idea go with a few that are good for your wallet. Here are my favorite tax and finance savvy New Years resolutions.

Don't Wait until April to Think About Taxes

Most Americans wait until March or April to start worrying about their taxes. However, I recommend making a short term goal to start working on your tax return this month, and try to get it filed some time in February. That way you can get your refund nice and early, and also avoid crowded tax preparation offices if you are going to seek professional help for your return.

Stay on Top of your Tax Planning

You shouldn't let the whole year go by without thinking about taxes again. By staying on top of your tax planning throughout the year then you can help keep your liability as low as possible. Also, you can prevent being faced with an unexpected tax bill next April.

Give More of your Time to Charity

In addition to donating your unwanted household items, which all will result in a tax deduction, why not give more of your time to charity this year? Since the recession began many nonprofit organizations have been struggling, and by spending a few hours volunteering won't cost you anything out of pocket. Additionally, if you do have to purchase supplies, or drive while volunteering then you can deduct these expenses.

Don't Rely on Credit

Cutting back on credit cards is always a good New Years resolution. In fact, in 2010 fewer Americans used credit then in years prior. Now is a great time to jump in on the trend. Instead of relying on credit try to make a strict budget and use your ATM card instead of your Visa or MasterCard.

Live a Greener Year

These days there are plenty of incentives to living a greener life. In addition to helping the planet you may also be able to qualify for a federal tax credit. For more information on which purchases qualify, check out EnergyStar.gov.

Start Planning for your Retirement

It is never too early to start planning for your retirement. If you do not already have an account, then make it a resolution to start an IRA or 401(k) in 2010. If you already do have a retirement account, then you could make it a goal to max out on your contributions.

Save for a Rainy Day

These days many Americans are struggling to pay their bills. However, if you can afford to do it, then try to begin setting aside money from each of your paychecks. You never know when a rainy day will hit, and you will be better equipped to deal with it if you have a little extra money set aside.

10 Tax Friendly Cities for Small Business Owners

Although some experts suggest that the economy is improving, many small business owners are still struggling, while also nervous about the possibility of an across the board tax increase next year. Fortunately, there are some places in this country that offer significant incentives to small businesses. To help all of the entrepreneurs reading my blog, I have put together the following list of tax friendly cities for small business owners.

Anchorage, AK

Although Alaska may not be the ideal climate for everyone, it can be a great place to do business. Both the income and sales tax rates are zero, and property taxes are normal compared to other cities in the country. Another benefit of living in Anchorage is the dividend payments each resident receives from oil-drilling taxes.

Seattle, WA

Seattle may be one of the wettest cities in the country, but it is also one of the best to do business in. Seattle is also the home of some of the most innovative companies in the world, including Boeing, Microsoft, and Amazon. The state has no income tax, and Seattle is even planning to revise their already business-friendly tax code to encourage more small business owners to move to the city.

Cheyenne, WY

Cheyenne is known for how windy it is, but for business owners a little wind is worth the great tax laws. Cheyenne has one of the lowest property taxes in the country, no income tax, and a low local tax burden.

Eugene, OR

Oregon is infamous for their nonexistent sales tax, and low home prices. Additionally, there is also no retail business license fee in Eugene. Portland is just a couple of hours away, with plenty of great entertainment and dinning options.

Las Vegas, NV

The state of Nevada has the lowest overall tax rate in the country, with no income, estate, franchise corporate, or gift taxes. The city of Las Vegas has an even more favorable tax climate, with low property and sales tax rates. Although the city has been plagued by high foreclosure rates, businesses continue to thrive as tourists continue to pour in from around the world despite the economic downturn.

Des Moines, IA

The city of Des Moines, Iowa has been rated one of the most affordable places to do business in the country. Household incomes are on the rise, as well as employment rates. The cost of doing business in Des Moines is about 15% below the national average, making it the perfect place for a new business owner to set up shop.

Raleigh, NC

North Carolina has a few cities that have been rebounding well through the recession, but Raleigh outshines all of the other nearby cities. Business friendly tax rates, combined with a low cost of living, make the recovering city very appealing to business owners.

Sioux Falls, SD

Like many of the cities on my list Sioux Falls, South Dakota has continued to develop through the recession, attracting new residents and higher business revenue. The city strongly appeals to business owners because of the lack of a state income tax, and other local corporate tax incentives.

Fort Worth, TX

The city of Fort Worth, may be smaller than Dallas, but in many ways it is much better for business owners. They do not charge a license fee for businesses, and property taxes are extremely low. Forth Worth is also the birthplace of American Airlines, and boasts an unemployment rate that is 14 percent below the national average.

Manchester, NH

Manchester offers a very favorable tax structure for business owners and residents alike. Close enough to reap the tourism from Boston, but more affordable to live and run a business in, Manchester is the last tax friendly city on my list. With no income tax, no sales tax, and low property and auto taxes, Manchester is definitely a great city to open a small business in.

How to Break Bread With Republicans

In a new opinion piece for the New York Times Gregory Mankiw has put together a list of ways that President Obama can work with the new Republican majority in the House. I’m thinking President Obama will not be so keen on these tactics.

From NYTimes.com:

FOCUS ON THE LONG RUN

Charles L. Schultze, chief economist for former President Jimmy Carter, once proposed a simple test for telling a conservative economist from a liberal one. Ask each to fill in the blanks in this sentence with the words “long” and “short”: “Take care of the ____ run and the ____ run will take care of itself.”

Liberals, Mr. Schultze suggested, tend to worry most about short-run policy. And, indeed, starting with the stimulus package in early 2009, your economic policy has focused on the short-run problem of promoting recovery from the financial crisis and economic downturn.

But now it is time to pivot and address the long-term fiscal problem. In last year’s proposed budget, you projected a rising debt-to-G.D.P. ratio for as far as the eye can see. That is not sustainable. Conservatives believe that if the nation credibly addresses this long-term problem, such a change will bolster confidence and have positive short-run effects as well.

Fortunately, the fiscal commission you appointed assembled a good set of spending and tax reforms. The question you now face is whether to embrace their sensible but politically difficult proposals in your own budget.

THINK AT THE MARGIN

Republicans worry about the adverse incentive effects of high marginal tax rates. A marginal tax rate is the additional tax that a person pays on an extra dollar of income.

From this perspective, many of the tax cuts you have championed look more like tax increases. For example, the so-called Making Work Pay Tax Credit is phased out for individuals making more than $75,000 a year. That is, because many Americans lose some of the credit as they earn more, the credit reduces their incentive to work. In effect, it is an increase in their marginal tax rate.

Read more here

Little Fockers Teri Polo Joins Ranks of Stars Who Owe the IRS

She's starring in the number one movie in the country, and apparently she owes over $450,000 to the IRS. Teri Polo is joining a long list of celebrities who can’t seem to cover their tax liabilities.

From Yahoo News:

Teri Polo of Little Fockers has joined the ranks of stars such as Val Kilmer, Nicolas Cage, Wesley Snipes and Marc Anthony who've had trouble with Uncle Sam. According to a report by RadarOnline.com Polo owes over $458,000 in past due taxes which cover a period of four tax years.

Polo, 41, is best known for her role as 'Pam Focker' from the movie series of Meet the Parents (2000), Meet the Fockers (2004) and of Little Fockers (2010).

Apparently, the IRS has placed several liens against Polo including one filed on January 25, 2010 in LA for $116,620, a lien filed in Kent County Delaware on August 7, 2009 for $114,844, another lien in LA for $91,748 filed on April 28, 2008, and finally a lien for $227,144 filed in Kent County on February 20, 2008.

Polo's business manager, Bob McGowan, spoke to the Detroit Free-Press stating that Polo went into debt after a costly divorce and several years of not working. McGowan said that the star has worked out an agreement with the IRS to repay her debt.

Continue reading at Yahoo News...

Poll: To Reduce Deficit, Most Americans say Tax the Rich More

According to a new CBS survey, given a limited set of choices the majority of Americans would prefer to see tax increases on the wealthy. Will this data have an impact on the new Speaker's goal of reducing the deficit? Only time will tell.

As many as 61 percent said they would prefer increasing taxes on the rich over three other options: cutting defense spending, cutting Medicare or cutting Social Security. Another 20 percent chose cutting defense spending as the best option. Just 4 percent said they would cut Medicare, and just 3 percent said they would cut Social Security.

Perhaps not surprisingly, those with higher incomes were less inclined to say increasing taxes on the wealthy would be the best option. Nevertheless, as many as 46 percent of Americans making more than $100,000 said it was the best option -- 26 points higher than the next-preferred option, cutting defense spending.

The poll comes as Congress considers a future vote to raise the national debt ceiling. Several Republicans are hoping to use the debt ceiling vote as leverage to pass spending cuts. Sen. Lindsey Graham (R-S.C.) on Sunday threatened to vote against raising the debt ceiling unless Social Security is reformed. He cited some means of reforming the program that have gained bipartisan support such as raising the retirement age -- a move that would cut off Social Security for a segment of the population.

In a CBS News poll released in early December, as many as 73 percent of Americans called the budget deficit a very serious problem. More than half of Americans said at the time that Congress should let the Bush-era tax cuts for the wealthy expire. However, President Obama cut a deal with Republicans to extend the tax cuts for everyone. The deal, which included other spending measures, won strong bipartisan support, even though it increases the deficit by hundreds of billions of dollars.

Continue reading here

Tax Reform Won’t Happen in 2011 (or 2012)

Expecting major revisions to the tax code in 2011, or 2012? Well don't hold your breath. According to Howard Gleckman from TaxPolicyCenter.com, tax reform isn't likely to happen any time soon.

Here are his main reasons:

Obama isn’t on board. The President could have used the tax reform plans offered by his own fiscal commission or the Bipartisan Policy Center as an opportunity to jumpstart the debate. But he was decidedly cool, calling only for a national conversation on taxes. As Ronald Reagan showed with the 1986 Tax Reform Act, a major rewrite of the revenue code requires a full-court press by the White House. To get a bill moving, Obama would have to send a complete reform plan to Congress and keep up the pressure for passage. There is no sign he’s ready to do that.

Hill Republicans are not on board. Incoming Ways & Means Committee Chairman Dave Camp (R-MI) says tax reform will be one of his priorities, and that’s a good thing. But speaker-to-be John Boehner (R-OH) has little interest in supporting real reform. In the Senate, Democrat Ron Wyden (D-OR) still has his rewrite, but his GOP cosponsor, Judd Gregg, has retired and Republicans are not exactly lining up to take his place. Republicans would surely back further rate reductions, but they have no interest in cutting tax subsidies—the hard part of reform. It is easy enough for a pol to embrace the concept of repealing loopholes. It isn’t so easy to actually cut the mortgage interest deduction. And does anyone seriously think the GOP would give Obama an historic victory on tax reform on the eve of a presidential election campaign?

Hill Democrats are not on board either. After their battering in this year’s elections, Democrats want only one thing between now and November, 2012—a plummeting unemployment rate. And they don’t see how a nasty protracted debate over tax reform will create many jobs. Besides, these days Dems are just as enamored of targeted tax subsidies as Republicans.

There is no agreement on how much money the new tax code should raise. The ’86 Act passed, in part, because it produced the same amount of money as the tax code it replaced. But in the face of a $1 trillion-plus deficit and growing fiscal pressures down the road, the next reform would have to raise more revenues. Democrats, of course, will be fine with that. But the idea was red meat for Republicans even before the 2010 elections. The growing clout of the anti-tax activists who make up much of the tea party movement will make it even tougher for GOP lawmakers to budge on new revenues.

Continue reading at TaxPolicyCenter.com...

The Top 20 of 2010 - Celebrities Who Owe the IRS

Examiner.com put together a list of 20 celebrities who found themselves in debt to the IRS last year. I've included the top 5 below, but you can check out the full article at Examiner.com.

For all the money they earn, you’d think they could buy better accountants…

5. Wesley Snipes

Although not the largest of the IRS celebrity debtors, perhaps none are as well known for such storied tax problems as the Blade star Wesley Snipes. Snipes fell into a trap that many taxpayers unfortunately get involved with – tax evasion. Snipes lost an appeal over the summer and is currently in jail for failing to report income earned to the IRS. He currently has a $2.7 million tax bill, and is serving 3 years at the minimum security Federal Prison Camp in Bradford, Pennsylvania.

4. Marc Anthony

The 41-year-old singer, who married Jennifer Lopez in 2004, was recently hit with a tax lien after reportedly owing $3.4 million to the IRS. Love may not cost a thing for Jennifer Lopez, but having a spouse who's a tax scofflaw sure sounds expensive. To be fair, Anthony just announced this year that he has ‘settled’ his tax debt with the IRS.

3. Chris Tucker

Chris Tucker, known best for his role as ‘James Carter’ in the three Rush Hour movies, was identified by the IRS as owing $11.5 million in delinquent tax debt from tax years 2001, 2002, 2004 – 2006. For his roles in Rush Hour, Tucker was reported to have earned $20 - $25 million per movie. It’s easy to earn that much when you don’t pay your taxes.

2. Nicolas Cage

Here’s a refreshing change – a celeb that admits the balance and is doing something about it. When you owe $14 million to the IRS, you certainly can’t just sit on your treasure chests. Cage told People magazine last year that he is “under new business management and am happy to say that I am current for 2009, all taxes will be paid including any to be determined state taxes."

1. Joe Francis

The number one IRS nonpayer on the list shows that the cliché is true – sex does sell. The owner of the Girls Gone Wild franchise owes a whopping $30 million to the IRS, after he allegedly fell behind with payments in 2001, 2002 and 2003. Maybe he should ask some of his drunk and topless girls to lend him some cash – now that would be a classy move.

Full list here

Website lets Taxpayers Redirect Breaks

GiveItBackForJobs.com is a new website that allowings high income taxpayers to donate the money from their extended tax breaks to charity. According to the site, they intend to both "make it easy for those with extra moolah to donate and to send a political message that they are doing so." I’m really curious to see who will donate, especially after all those millionaires’ “raise my taxes” media campaigns.

From CNN.com:

Three Ivy League professors, a law student and a designer created the site out of opposition to the extension of tax benefits for the wealthy, the founders write on the site.

"GiveItBackforJobs enables joint action, by all visitors to this site, to redirect our Bush tax cuts to the wise and just programs that our government would promote if it had not been hijacked," they write.

"As more and more Americans do so, GiveItBackforJobs will begin to replicate good government policy, outside the government and free from the grip of Senate Republicans."

Users simply select their filing status (single, married filing jointly, etc.) and enter their adjusted gross income. The site calculates the tax savings under the law. The resulting amount can then be donated on the same page to Habitat for Humanity, the Salvation Army, the Children's Aid Society, Nurse Family Partnership, or a charity of the user's choice.

Read more here

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Trick Daddy in Debt to the IRS for More than $157K

According to new reports, Miami rapper Trick Daddy has gotten behind on his taxes. The musician apparently owes the IRS over a hundred and fifty thousand dollars.

Trick Daddy (real name: Maurice Young) reportedly had his Miami home foreclosed on it May, and sold off months later in October. And now, he reports owes the IRS more than $157,00 in delinquent federal taxes.

The government agency placed several liens against Trick and his wife over the past summer, amounting to $85,366 for money earned from 2007-09, $16,709 for 2006, and $53,979 for unpaid income taxes owed in 2002.

He's not alone though. Over the past year, the IRS places liens against several other high-profile musicians, including Doug E. Fresh, Kelly Rowland, Omarion, Nas, Wyclef Jean, and Swizz Beatz, among others.

Read more here

A Green Technology Wish List for 2011

2010 was a good year for the green energy industry, but what lies in store for the industry in 2011? Fortune recently put together a list of things they'd like so see happen in green technology, as well as a list of what might actually happen. Check out a portion of their article below.

Things We'd Like to See Happen in green technology:

The U.S. establishes long-term energy policies. Investors, utilities, manufacturers, landlords and consumers all need long-term guidance. A national policy, ideally, would include carbon regulations, but tax credits and renewable power standards would be a tremendous help.

Time-of-use pricing begins to spread. Demand for power soars in the afternoon, but the price for most consumers stays the same. Time-of-use pricing would create a market-based incentive to conserve. Utilities could finally justify their smart meter investments too.

Coal peaks. Rising demand, particularly from China, could mean the end of cheap coal. Sustained hikes could change the renewable debate from "how much?" to "how quickly?"

Greentech Stops being a dirty word. In 2010, Mississippi gave $169 million in loans and grants to three green startups to build plants in the state. Indiana is recruiting electric car companies. Even in red states, green will become a job machine.

The Holy Grail in storage appears. Investors are prowling for a breakthrough technology—solid state batteries, ammonia fuel cells—that will make energy as cheap and easy to store as gravel. It's the Google opportunity.

Investors gravitate toward water, food, and recycling. The "little three" of green technology. (Transportation, power and efficiency make up the "big three.") Notable startups: Ostara, Lehigh Technologies, Bioplastech, iGPS, NanoH20.

Things we think will happen in 2011:

Solar expands. Solar companies will ship 18 gigawatts of panels in 2011 (compared to 170 megawatts in 2000) while growing number of companies will saunter under the magic $1 per watt mark in manufacturing.

Continue reading here