Smart TaxesSmart Taxes

Strapped states are keeping taxpayers' money longer to solve cash-flow problems.

By Kay Bell Feb 23, 2010 11:45AM

Remember when everyone was snickering at California for issuing IOUs instead of tax refunds?

 

Quit laughing. More strapped states are holding on to their residents' tax refunds longer.

 

North Carolina's Revenue Secretary Kenneth Lay has announced that his office is delaying  refund checks that both individuals and businesses are due. Holding on to the money is a cash-flow necessity, Lay said, because the state is facing a shortfall due to "anemic" collections, a common problem across the United States.

Even paradise is having refund-money issues.

 

The auditor was not amused when the taxpayer removed his eye and then removed his -- never mind.

By Jeff Schnepper Feb 22, 2010 12:43PM

We all have our stories about audits from hell.

 

I’ve had cases where auditors refused to meet with me and disallowed all of my client’s business deductions. We had to go to court, where we easily won every issue -- except for the cost for my poor client.

 

I’ve even had a case where an auditor took my client’s Law Diary and removed stapled substantiation. Fortunately, Appeals noticed the staple holes.

 

But, in over 40 years in the tax business, one audit stands out as my worst.

 

Scammers caught after collecting $2 million in tax returns using identities of the deceased.

By Jeff Schnepper Feb 19, 2010 3:36PM

I hear heavenly music from the grateful dead.

 

I’d be grateful, too, if I were getting $2 million in tax refunds.

 

No stiffs themselves, Haroon Amin of Upland, Calif., and Ather Ali of Diamond Bar, Calif., filed more than 250 tax returns for deceased individuals.

 

Retirees' returns are rejected, and some workers face surprise tax bills because of problems with stimulus measures.

By Teresa Mears Feb 18, 2010 2:15PM

This news article is by Ashlea Ebeling and Janet Novack from partner Forbes:

 

The big stimulus bill that Congress passed last year included a tax break called the "Making Work Pay" credit. As it turns out, a more accurate name would have been simply the "Making Work" credit.

 

Recently retired seniors and some who work part-time are having their electronically filed returns claiming this credit rejected by the Internal Revenue Service's computers in large numbers.

 

Why? The credit -- usually paid through lower tax-withholding rates of $400 per worker (or $800 per couple) -- is supposed to be reduced by the also-new $250 per person (or $500 per couple) "Economic Recovery Payment" sent to Social Security recipients and veterans on disability. Supposedly, the senior filers didn't accurately state whether they got the $250 payment when filling out the new Schedule M for the Making Work Pay credit.

 

New study says the president's proposed budget would shift $112 billion away from the nation's top earners in 2012.

By TheStreet Staff Feb 17, 2010 1:26PM
TheStreetBy Joe Mont, TheStreet

 

President Barack Obama's proposed budget would shift $112 billion away from the nation's top earners in 2012, according to the Tax Foundation, a nonprofit organization that monitors federal and state fiscal policies.

 

The group analyzed the impact of the 10-year budget proposal on various income groups. The study, released last week, said higher-income families would lose the most because of the expiration of Bush administration tax cuts and the proposed 28% cap on certain deductions. Low-income and middle-class families stand to benefit from the redistribution.

 

"We asked two simple questions," says Tax Foundation Senior Economist Gerald Prante, co-author of the report. "'How much in federal taxes does a given income group pay under a given set of tax policies?' and 'How much in federal taxes would that income group pay under a benefit principle system of taxation, in which a family's tax share is equal to its share of government spending benefits?'''

 

 

Letting the fire department burn down your old house to clear land for McMansion is usually deductible.

By Jeff Schnepper Feb 17, 2010 12:21PM

Before the real estate market cratered, it was fashionable to buy an old home on a huge lot, tear down the building and construct a new McMansion. Since this was a personal expense, the destruction of the old house was not deductible.

 

Then, some taxpayers got creative.

 

It seems that many fire departments need homes to practice their search-and-rescue procedures, sharpen their firefighting techniques and test their equipment. Give your old house to the fire department to torch and you’ve made a deductible charitable contribution. You’ve also cleared your land for your new McMansion.

 

Toyota recall has some shoppers looking at other brands, but be sure to check out any potential hybrid purchase.

By Kay Bell Feb 16, 2010 12:50PM

With Toyota's troubles, General Motors and Ford are hoping to get new customers who now want to give the domestic car makers another shot.

 

And some of those who might have had their hearts set on a Prius are perhaps looking at other hybrid options.

 

If you are a Blue Oval fan, then you might want to go shopping for a fuel-efficient Ford sooner rather than later.

 

You won't get rich, but tax laws will give you some profit -- if you make the right investments.

By Jeff Schnepper Feb 16, 2010 12:37PM

OK – I confess.

 

I like pushing the envelope, as long as I stay well within the sometimes elastic boundaries of fraud.

 

Here’s an idea that I like because it’s clearly legal and very simple to understand:

 

Borrow $100,000 secured by the equity in your home. The interest on a home equity loan of up to $100,000 is deductible. The IRS doesn’t care what you do with the money.

 

Let’s assume you borrow $100,000 at 5%. You pay interest of $5,000. But, if you’re in the 35% bracket, your tax bill shrinks by $1,750. So, you’re really only out of pocket $3,250.

 

Now take that $100,000 and invest it in a stock with a 4% dividend yield. That puts only $4,000 in your pocket.

 

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