Do you itemize your deductions? Do you take the Tuition and Fees Deduction? If you take those are several other deductions and credits you will not be able to file your tax return until mid to late February.
Why? Because Congress waited until the last minute to decide what to do with the Bush Tax Cuts, and the IRS computers have to be reprogrammed. As this IRS press release states, if you’re one of those impacted–and one-third of all taxpayers will be–you will need to wait to file your return.
The City of Miami has had financial difficulties, and faced a large budget deficit. The economy in South Florida isn’t doing well, so raising taxes would be a last resort, right?
Of course not–it’s the first choice. Mayor Carlos Alvarez proposed a 14% property tax increase, and Dade County Commissioners approved the increase (Miami and Dade County share government). Voters were not amused.
Bankrolled by automobile dealer Norman Braman, citizens forged a recall effort. This terse announcement in the New York Times notes that there will be a recall vote early in 2011. People aren’t happy about tax increases, and that’s especially true when the economy is down.
The real villain in South Florida (and in California) are wages for public employees. I’ve said this before, but it bears repeating. When I was growing up, public employees didn’t make a lot of money but did have generous benefits and pensions (pension relative to their salaries). Today, many (most?) public employees make better salaries than comparable employees in private industries, have better pension, and better benefits. That’s not sustainable, and there’s no way this can continue–in South Florida or in California.
Jerry Brown is basically saying the same message as Mayor Alvarez did: Either raise taxes or I’ll have to cut what the state (of California) does. There’s an alternate solution, but that’s not what his constituency wants, and that’s to cut pay and benefits for state employees.
Meanwhile, Miami also has possible corruption problems. Mayor Alvarez may not be around to see the end of this investigation, though.
On a rainy night here in Irvine (but a happy night for Chicago Bears fans) I’m quite tranquil. However, somehow I missed a news story last week which is anything but tranquil.
John Gauruder of Trementon, Utah was a chiropractor. Indeed, he was a very successful chiropractor. Somehow, though, he failed to pay a penny in tax from 1995 to 2001. The trouble was he should have paid over $200,000 in tax for those years. What did Mr. Gauruder do?
Well, he transferred assets to The Order of Tranquility. That’s described as, “purportedly a religious organization operated by Rulon DeYoung.” Well, Mr. DeYoung is enjoying 36 months at ClubFed for, as the Department of Justice notes, “four counts of tax evasion and one count of corrupt interference with the due administration of the internal revenue laws.” But I digress….
Among the assets that Mr. Gauruder had transferred was his home…but he continued to live in it. He transferred funds into a bank account for The Order of Tranquility. The IRS showed a total tax loss of over $1.2 million, and that buys a lot of tranquility.
Mr. Gauruder had earlier been convicted of one count of tax evasion. He was sentenced last week to 42 months at ClubFed and must also make restitution of $408,685. Our usual line about tax evasion applies here: It’s a whole lot easier to just pay your tax in the first place…but if everyone did that I wouldn’t get to write these stories.
There’s a rule that I’ve stated over and over in this blog: If it sounds too good to be true, it probably is. If you hear of an investment that pays 30% when the typical investment is paying 3%, there’s a problem. If you hear of a method of turning your lead into gold, it’s time to look again. And if someone tells you he has a “foolproof” method of turning your large capital gain into a non-event for taxes, it’s time to talk to someone else.
The last item is what got Quellos into trouble. There were parts of the firm that were very legitimate (those are now part of Black Rock, Inc.). However, their tax shelter business probably should have been renamed their tax fraud business because that’s what it was.
Eventually, the IRS and Department of Justice got word of the tax shelter tax fraud. With a huge loss to the government, two individuals–Jeff Greenstein and Charles Wilk–pleaded guilty to tax fraud. Besides agreeing to pay $7 million in fines, the two also agreed to give talks at their alma maters on tax fraud.
Mr. Greenstein spoke to the University of Washington business school last week. And the talk made people wonder how in the world people are so gullible. Bill Resler, who teaches tax research, is quoted by the Seattle Times, “The nature of the tax shelter was ridiculous; and even though they’d only been in graduate school for six weeks, they could tell that it stunk,” says Resler. “They could see that this so-called sophisticated tax shelter was a house of cards.”
Mr. Greenstein is the former CEO of Quellos; Mr. Wilk, who was a tax attorney for Quellos, won’t be talking to his alma mater, New York University. That school declined to have Mr. Wilk speak.
In any case, I was glad to see Mr. Resler noting that my truism applies in the real world: If it sounds too good to be true, it probably is. The sniff test is applied in the real world, too.
It’s time once more for nominations for the Tax Offender of the Year. To be considered for the Tax Offender of the Year award, the individual must do more than cheat on his or her taxes. It has to be special; it really needs to be a Bozo-like action or actions.
For your reference, here’s a list of prior winners:
2009: Mark Anderson
2008: Robert Beale
2007: Gene Haas
2005: Sharon Lee Caulder
If you have a nominee, feel free to send me an email (use the Contact button on the right side of the page).
After huffing and puffing and bloviating some more, Congress passed the compromise measure extending the Bush Tax Cuts for two years. It will be signed by President Obama in the next few days. Here’s what’s in and out and what this means for you.
So Merry Christmas, taxpayers, and enjoy the gift that Congress has left in your stockings for the New Year.
The world of cellphones has changed markedly over the past 20 years. I remember my first cellphone: It was a carphone, and it must have weighed 15 pounds. The service on it wasn’t that great, but it was a necessary evil when moving between orange groves in the San Joaquin Valley.
Today, cellphones do just about everything. They have calculators, do email, browse the Internet, and even make phone calls. The iPhone store has thousands of apps, those wonderful add-ons that do just about everything. Android phones offer nearly as many apps.
There’s a website called appitalism.com, and they’ve decided to market a new app…the Wesley Snipes Jail Breaker App. From the Orlando Sentinel comes word of the new app. It’s a game where you would try to tap (or click) on $100 bills that appear on jailbars. The new app will be available for both the iPhone and Android phones.
And if Mr. Snipes endorses the new app, there’s a reward for him: $10,000. Of course, Mr. Snipes will owe tax on that but Appitalism.com promises to pay the tax, too. Neither Mr. Snipes nor his attorney have responded to the offer according to the Sentinel.
Meanwhile, Mr. Snipes is likely braving the snow and cold in the federal prison camp near Erie, Pennsylvania.
Jerry Brown will soon (again) be California’s governor. When he became governor in the 1970s, California was in excellent financial shape. When Jerry Brown becomes governor again on January 3rd, California will face something like a $25 to $30 billion budget deficit.
Over the last several years, California’s budget has been balanced only through accounting gimmicks. The reality is that California has been operating with a large budget deficit since the early 2000s. Jerry Brown has stated that Californians will be faced with a choice between service cuts and tax increases likely in another special election. During current Governor Schwarzenegger’s term, there were two special elections dealing with taxes. Additionally, taxes were on the general election ballot on various occasions. What is interesting to note is that, in all cases tax increases were voted down by the electorate. I have no doubt that the electorate will continue to vote down any tax increases. So what should Jerry Brown do?
Well, here’s what I would do:
First, everyone in California politics needs to recognize that California’s business climate is dreadful. The Tax Foundation ranks it just about on the bottom of all fifty states. Yes, California has some advantages (Silicon Valley, a wonderful climate, etc.) but tax policy is definitely not one of those. Tax increases are not the answer.
For the short-term, revenues will be whatever they are. Call that number x. Why not take that dollar amount, and match it to the prior budget with that amount of revenue? Yes that’s simplistic, and it would require cutting of programs and bureaucracies, but it’s the simplest solution to painful problems.
The reality is that California desperately needs tax cuts to attract business. Until that happens, California will continue to lurch from budget crisis to budget crisis.
I’m in Las Vegas (I have an audit here tomorrow morning), and it’s definitely a good locale given the fight over the Obama/GOP compromise on the Bush Tax Cuts. The 111th Congress has but a couple of weeks left, but one major issue still exists: Will the compromise pass as is, will it be modified in some manner, or will it fail and tax rates rise for everyone?
I haven’t a clue which whey this will end, and it’s very hard for me to give good tax advice when the tax rate could be x or y. Will certain items be extended or not?
Las Vegas is a perfect place to discuss this as it’s definitely the location for any discussion of betting odds. But I don’t know what those odds are, and I think it will be much wiser for me to just see the results in a week.
The same is true for poker aficionados who are waiting to see if Senator Harry Reid (D-NV) will insert into the compromise or some other piece of ‘must-pass’ legislation a measure that would clearly legalize and regulate online poker in the United States.
I’ll let you know when we have facts rather than speculation.
Senate negotiators and President Obama reached an agreement on temporarily extending the Bush Tax Cuts for two years. Included with this will be two years of a $5 million estate tax exclusion with estates over this amount taxed at 35%. Also included was an extension of unemployment benefits.
There’s also a new tax reduction: The social security (FICA) tax one employees will be reduced for one year from 6.2% to 4.2%. The employers’ share would remain at 6.2%.
What was apparently agreed to is an outline; the exact details must still be worked out. Still, perhaps it’s a compromise both sides can live with. Or as Peter Pappas notes, perhaps its a measure that ideologues on both sides will reject. The very liberal wing of the Democratic party in the House is the most likely to balk at this agreement.
Still unknown at this point is the annual AMT patch and online gambling legislation. We’ll likely know more on both of these by week’s end.
