Jerry Brown Dreams of a Tax Increase and Other California Tidbits

Posted on July 1, 2012 by Russ

Quite a few things to report on from the Bronze Golden State.

First, the budget was signed by Governor Jerry Brown. The budget only “works” if voters approve the new taxes he proposed and that will be on the November ballot. However, if a competing measure proposed by activist Molly Munger passes (or if neither passes), there will be major problems with California’s budget.

One of the budget “trailer” bills changed the placement of measures on the ballot, and moves Governor Brown’s tax proposal to the top (with others falling underneath). Molly Munger has sued the California Secretary of State stating that you can’t change the rules in the middle of the game.

Even if a tax increase passes at the ballot box–and that’s definitely uncertain–taxes almost never bring in the money that politicians think they will. Individuals modify their behavior. California continues to drive businesses out of state (like mine), and the fix is one that is anathema to Democrats in Sacramento: Regulations and taxes must be cut, not increased, to make California more competitive economically with other states.

If I were a development officer in Arizona, Nevada, Colorado, Texas, or Utah, I’d be ready to make some phone calls as there will likely be plenty of businesses ready to head east.

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eFile an FBAR? Use Internet Explorer, Not Firefox or Chrome

Posted on June 28, 2012 by Russ

Some of my clients have had problems efiling the FBAR on the BSA system. The FINCEN support group have confirmed that the system works only using Internet Explorer. So if you need to file an FBAR, use Internet Explorer, not Firefox or Chrome (or any other browser).

As a reminder, if you need to file an FBAR you have until Saturday, June 30th to file the form. Note that is a receipt deadline, so if you’re putting it in the mail do it now, not later.

Posted in International | Tagged | 1 Comment

IRS Announces New Procedure on RRSPs; Jaywalkers Apparently No Longer Subject to Firing Squad

Posted on June 27, 2012 by Russ

The IRS announced yesterday a new procedure to deal with “low compliance risk” taxpayers who have innocently not filed FBARs or tax returns noting their RRSPs (a Canadian retirement account similar to a 401(k) or IRA). While the full details have not been released (the plan will go into effect on September 1st), it appears that the IRS has heard the complaints from tax professionals and others regarding the “one size fits all” voluntary disclosure plan.

Of course, the devil is in the details but they look reasonable at this point:
– Taxpayers will need to submit delinquent tax return for the last three years;
– Taxpayers will need to submit delinquent FBARs for the last six years; and
– Pay any tax and interest due with the submission.

Note that to qualify for the plan your unpaid taxes will need to be less than $1,500 per year.

Once the full details are announced (probably in late August) I’ll report on them.

More: Roth Tax Updates, Janet Novack

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Can Online Gambling Help Solve State Debt Woes?

Posted on June 25, 2012 by Russ

That’s the question this FoxBusiness report asks. (I am quoted in the story.) Of course, convincing politicians that enacting something that the public actually wants and that brings in tax revenues that the public wants to pay should be a no-brainer.

Yet in the recent California legislative session the state could not enact legislation. Nevada has already licensed two online poker sites (play is likely to begin in early 2013). Other states are almost certain to follow. The big question is will federal legislation be enacted. The odds are against it, but something could happen in the Lame Duck session following the November elections.

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Stockton Likely to File Chapter 9 Bankruptcy This Week

Posted on June 25, 2012 by Russ

I used to work in Stockton, California. It’s a city east of the San Francisco Bay Area in central California. It’s in the San Joaquin Valley, and in recent years grew into a bedroom community for the Bay Area. And therein lies the problem.

When cities grow, planners have a bad tendency to think the growth will continue forever. It didn’t. Add in California’s ridiculous pension scheme and you have a recipe for disaster. It’s likely that Stockton will file Chapter 9 bankruptcy later this week.

And it’s not just Stockton that’s in deep financial trouble. Los Angeles is in very poor financial shape. When I lived in Irvine I paid $36 a quarter for trash pickup; my mother pays $36 a month within Los Angeles. The difference is the generous pay and pensions provided to public employees within the City of Angels. The money to support such pay no longer exists, and the day of reckoning is approaching for municipalities throughout the Bronze Golden State.

Will the Democrats who run the largest cities in California (and the legislature) realize you can’t spend money you don’t have? Based on the last ten years, probably not.

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49ers Sacked by Santa Clara County

Posted on June 25, 2012 by Russ

The San Francisco 49ers want a new stadium instead of playing at Candlestick Park. And in 2010 voters in Santa Clara approved the financing of a stadium. However, a monkey wrench was thrown into the plans last week when Santa Clara County eliminated $30 million in funding for the stadium. The funding for the stadium included $40 million from redevelopment agencies; the total cost of the stadium is estimated at $1.2 billion. The $30 million is from property taxes out of redevelopment zones.

City of Santa Clara officials claim the vote was done in spite of public notice laws. The only certainty is that lawsuits are sure to follow.

Posted in California, Property Taxes | Tagged | 1 Comment

Charging Money for Canadians to Commit US Tax Fraud Doesn’t Work Well

Posted on June 24, 2012 by Russ

Have I got a deal for you! Did you know that even if you have never submitted a tax return in the US that you can get a refund? Yes, thanks to the magical (and mythical) bank account sitting at the Department of the Treasury you can get a tax refund through Form 1099-OID!

The above statement is completely false, of course. There is no “bank account” (or any other account) sitting at the Department of the Treasury in your name. It doesn’t exist. If you try to obtain a tax refund in this manner, it’s frivolous and will get yourself in trouble.

Of course, where most don’t go some deliberately head. From Seattle comes a report on Ronald Brekke, of Orange County, California. Mr. Brekke “aided” nearly 1,000 individuals in three countries in attempting to obtain $763 million in tax refunds. Mr. Brekke’s scheme came to light in 2010 when two Canadians were arrested in Bellingham, Washington after trying to cash tax refund checks for over $350,000. Most of his clients were Canadians.

Mr. Brekke had public seminars on his methods. He helpfully (to the FBI and prosecutors) let individuals know that, according to this Department of Justice release, “…some of the filings would slip through resulting in a big payout for some of the filers.” Mr. Brekke had been earlier warned by the IRS and the FBI that was he was doing was illegal.

But that didn’t stop him. He continued to sell his scheme, and even after his conviction in March filed liens against the Court and and IRS employee. As the judge who sentenced him stated, he can either “[tilt] at windmills [and] squander his remaining time on earth” or understand that laws are, “rules that citizens of this country have made.” He’ll have 12 years to think about that at ClubFed. He’s also $291,064 poorer, as that was seized from his PayPal account and forfeited. Given his actions since March, I suspect I’ll be able to write about Mr. Brekke again in 13 years.

Posted in Tax Fraud | 1 Comment

California Cigarette Tax Voted Down

Posted on June 24, 2012 by Russ

Proposition 29 on the June ballot in California would have increased cigarette taxes in the state by $1 per pack. On Friday, supporters officially threw in the towel and conceded defeat. Though there are 110,000 votes still to be counted, the measure trails by 28,000 votes and passage appears mathematically impossible.

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Indians Win One Against New York

Posted on June 24, 2012 by Russ

No, it’s not the Cleveland Indians beating the Yankees; rather, the St. Regis Mohawk Tribe beat the New York Tax Department. After the New York cigarette tax on name-brand cigarettes sold on Indian lands some tribes decided to make their own cigarettes. The Mohawk tribe sold some of their cigarettes to a Nebraska tribe; New York seized the cigarettes because they didn’t pay the tax. A New York judge ruled that the state couldn’t do that.

Taxdood has more.

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FBAR Due Next Saturday, June 30th

Posted on June 24, 2012 by Russ

Anyone with $10,000 in one or more foreign financial accounts (determined by taking the maximum balance of each account at any time during the year, summing the maximums, and comparing the sum to $10,000) must file Form TD F 90-22.1 (the FBAR). The form must be received on or before June 30th, so that means you need to take care of this now if this reporting requirement applies to you. There are no extensions available for the FBAR.

You can file the FBAR electronically; you start by registering here.

There are very large penalties for not filing an FBAR when you are required to do so. If you need to file an FBAR, this needs to be on your to-do list now, not later.

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