A Hole in 365

Posted on January 24, 2010 by Russ

Golfer Jim Thorpe was sentenced last week to one year at ClubFed. As we reported last year, Mr. Thorpe pleaded guilty to two counts of tax evasion. Mr. Thorpe has agreed to make complete restitution to the IRS of the taxes, penalties, and interest totaling more than $2 million.

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Payroll Tax Companies & Registration of Tax Professionals

Posted on January 24, 2010 by Russ

The IRS came out with a FAQ on the new regulations of tax professionals. Among the nuggets on the FAQ is that payroll tax companies will have to register (though they may not have to take the competency exam) and that California CTEC practitioners will have to take the new exam. It also appears that California isn’t going to be dropping the CTEC requirements, so tax practitioners who are not CPAs, EAs, or attorneys in California will have dual requirements.

Hat Tip: Roth Tax Updates

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New York: $1 Billion in New Taxes Proposed

Posted on January 21, 2010 by Russ

The headline says it all: Yet another politician who doesn’t understand what voters want. New York governor David Paterson (D) proposed a $134 billion budget that contains $1 billion in new taxes:

  • A $1 increase in the cigarette tax to $3.75/pack;
  • A new tax on sodas of $0.01 per ounce; and
  • 50 speed cameras that will issue tickets at $100 a pop.

Governor Paterson is up for re-election this fall. I suspect voters will remember the proposed budget and the speeding cameras at election time.

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Kansas: E-File or Wait for Godot

Posted on January 21, 2010 by Russ

Kansas announced that if you file a paper return, you could wait 16 weeks for your refund. The Sunflower State is having budget troubles, and the Kansas Department of Revenue responded by not hiring temporary workers for this tax season. The temporary workers normally process the paper returns, but not this year. Full-time employees will have to do them as they have time.

There is an opportunity here if you owe money, though. If you file a paper return, your return may sit gathering dust for four months. That’s quite a bit of float on what you owe. However, if you file a paper return and are expecting a refund, you may be Waiting for Godot.

Hat Tip: Don’t Mess With Taxes

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Are the Democrats in Sacramento that Blind?

Posted on January 21, 2010 by Russ

There was an election in Massachusetts on Tuesday. As I’m sure you’re aware, Republican Scott Brown is the new Republican Senator from Massachusetts. Apparently, Democrats in Sacramento are blind to the obvious.

The voters in Massachusetts, a state more liberal than California, had enough of tax and spend, and the Democrats’ health care plan. They wanted fiscal responsibility. So what happened in Sacramento today?

SB810, a $220 billion healthcare plan, passed on a party-line vote today in Sacramento. The bill would create a one-payer system, is far more intrusive than any of the proposals in Washington, and is one that would officially bankrupt California. The good news is that it is extraordinarily unlikely that Governor Schwarzenegger would sign the measure.

Still, why this measure even saw the light of day says a lot about the dysfunction in Sacramento and why I expect more smoke and mirrors to be the “solution” to the budget crisis in the state capital.

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Senate Passes Haiti Charitable Contributions Bill

Posted on January 21, 2010 by Russ

As expected, the Senate quickly and unanimously passed a bill allowing Americans who make charitable contributions to Haitian earthquake relief to take those charitable contributions on their 2009 tax returns. I expect President Obama to sign the measure very quickly.

As I’ve mentioned before, do not expect conformity in California. Our legislature has its own issues (see the next post), and there are more important things on its agenda.

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House Passes Haiti Charitable Donation Law

Posted on January 21, 2010 by Russ

The House of Representatives unanimously passed a law allowing individuals to take 2010 contributions toward earthquake relief in Haiti on their 2009 tax returns. I expect the Senate to pass the law very quickly, perhaps by the State of the Union address next week. I do not expect California to conform to the federal change.

Whether you should take the deduction in 2009 is another question, though. For most individuals, it won’t make a huge difference. For high income individuals, given that 2010 tax rates figure to be higher, you will likely get more bang for the buck by waiting until you file your 2010 taxes to take the deduction.

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They’re Mad as Hell and They’re Not Going to Take It Any More!

Posted on January 20, 2010 by Russ

Many of you may remember the movie classic Network:

On Tuesday, voters in Massachusetts sent a message to politicians. Massachusetts elected a Republican Senator. To put that in perspective, the last time a Republican was elected to the Senate in Massachusetts was in 1976, nearly forty years ago.

Massachusetts elects Democrats the same as the Sun rises in the eastern sky every day. But that didn’t happen on Tuesday. The why of that has to both directly and indirectly with taxes.

Massachusetts has been known informally for years as “Taxachusetts.” Actually, the Commonwealth is no longer among the “leaders” in high taxes in the U.S. It’s not that Massachusetts has gotten better; rather, other states, California included, have gotten worse. Still, Massachusetts recently had an initiative to eliminate its income tax (it failed). The current governor, Democrat Deval Patrick, has proposed tax increases. The voters in Massachusetts haven’t shown much love for that idea.

With the Massachusetts legislature and the governship in the hands of Democrats, wouldn’t voters in liberal Massachusetts be happy? Not hardly. Now add in Congress–completely in the hands of Democrats–and a Democratic President. During the past year, they have spent like there’s no tomorrow. Massachusetts residents may be liberal, but they’re not dumb. Sooner or later the bill for that spending must come due.

The last straw was the current health care “reform” measure. It doesn’t take a genius to see the money being wasted in this legislation. To get enough votes so that it would pass the Senate, giveaways (measured in billions of dollars) were done for Louisiana, Nebraska, and Connecticut; there are probably many, many more that no one knows about. After all, the legislation runs over 2,700 pages. I, and other bloggers, have noted, “It’s unpopular, unworkable, and insane, so naturally they’re in a hurry to pass it.”

Voters in Massachusetts and elsewhere want a small, nimble government. What they see coming out of Washington and the local state house is bloated bureaucracy. If you are a politician running for office this year a message has been sent. Imagine you’re going through a tunnel, and you see a light getting brighter and brighter. For those politicians who will embrace what voters want, the tunnel is at an end. I believe that for many politicians the light is an oncoming train.

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The Mess in California

Posted on January 17, 2010 by Russ

There is some good news in California this weekend. We’re apparently about to be hit with a lot of rain. The television stations are saying we’ll get four to eight inches this coming week. That doesn’t sound like much, but it’s a lot when the average annual rainfall in Irvine is just over ten inches. The El Nino rainfall should help end the drought that’s hit Southern California (and the entire state). If only Mother Nature could help California’s budget.

That, though, isn’t going to happen. We still have the Democrats who want to tax our way out of the problem and the Republicans who want to cut [spending] their way out of the problem. When I took physics in college, the professor asked, “When the unstoppable force meets the immovable object, what do you get?” I now know the answer: California.

The Republican analysis of the budget situation is available. Governor Schwarzenegger’s budget hopes for $6.9 billion from the federal government. California’s Legislative Analyst, Mac Taylor, doubts we’ll see that money.

The problem is that this budget, and the budgets for the last several years, have used gimmicks, slight-of-hand, and everything but looking at the core issue. It’s simple, really: California spends too much money. We need to drastically cut government spending. This means that public employees need to get less, public employee pensions need to be cut, and staffing needs to be cut. Costs shifted from the federal government to California need to be shifted back to the federal government. It’s time to be realistic about what we have coming in, and not spend a penny more.

It really is that simple. Unfortunately, there’s almost no chance of the state legislature actually dealing with the issue. Instead, more gimmicks will be in the future.

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Busted for CodeBusters

Posted on January 17, 2010 by Russ

If someone tells you there’s no such thing as an income tax, run, don’t walk, in the other direction. If someone tells you that all you have to do to avoid the IRS is submit a report of your IRS decoded individual master file to the IRS, run very fast in the other direction. Unfortunately, Lin Bartee and his wife Christine Wenger-Bartee didn’t heed this advice.

Back in 2001, the IRS and Department of Justice allege that the Bartees earned $472,933 from income and liquidating their assets. They filed an extension, but didn’t get around to filing their actual return. Then they allegedly transferred $240,000 to Ms. Wenger-Bartee’s parents who then sent much of that money on to Costa Rica.

In February 2003, they allegedly sent a letter to the IRS noting that they didn’t have to pay taxes because they had decoded their tax file, or some such nonsense. In April of the same year, they declared bankruptcy; however, they allegedly left off the IRS from their list of creditors. In 2004, the bankruptcy court refused to discharge their case. The Bartees then left to join their money in Costa Rica.

The Bartees were arrested in 2009 in Costa Rica but fought extradition. They lost that battle; they’re back in Sacramento as I write this. They’ve been arraigned on charges of tax evasion and bankruptcy fraud.

News Story: The Union
Department of Justice Press Release

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