Gubenatorial Candidate Wants to Lower Taxes?!?

Posted on September 16, 2009 by Russ

In what is likely a first for California, a candidate for Governor, Steve Poizner, told the Sacramento Bee that if elected he would work to slash personal income taxes, corporate taxes, and sales taxes by 10%. That would mean reducing the top California personal income tax bracket from 9.55% to 8.60% and the corporate tax rate from 8.80% to 7.92%. The sales tax rate would also drop, likely (in Orange County) from 8.75% to 8.00%.

Poizner is running in the Republican primary next year; he faces (among others) Meg Whitman.

The reality is that while such a plan would be a boon for California in the long-run (increasing tax rates decreases tax collections), it has no chance of passing the legislature.

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If You’re a Celebrity, Pay Your Taxes

Posted on September 16, 2009 by Russ

Yet another celebrity has gotten into trouble with the IRS. Golfer Jim Thorpe didn’t pay his taxes of about $1.5 million. He’s going to plead guilty to two counts and will pay all of his back taxes, penalties, and interest. The Tax Lawyer has more.

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Deducting Prostitutes Doesn’t Work Well (Nor Does Deducting Porn)

Posted on September 16, 2009 by Russ

Supreme Court Justice Potter Stevens famously uttered about pornography, “I shall not today attempt further to define the kinds of material I understand to be embraced . . . [b]ut I know it when I see it….” That’s a subject matter that rarely gets to the Tax Court, but it did earlier this week.

William Halby, a 78-year old tax attorney from New York, attempted to deduct his visits to prostitutes and his pornography purchases as medical expenses. The Tax Court was having none of that. Besides the obvious dubious nature of the deduction, there is no deduction allowed for illegal activities and prostitution is illegal in New York.

Hat Tip: April15.com and Roth Tax Updates.

Posted in Tax Court | 1 Comment

Deadline Day

Posted on September 14, 2009 by Russ

Tuesday, September 15th is a big tax deadline.

  • 3rd quarter estimated payments for individuals are due;
  • 3rd quarter estimated payments for corporations are due;
  • Calendar year corporate returns on extension are due (both C Corporations and S Corporations);
  • Partnership and LLC returns on extension are due; and
  • Trust/Fiduciary returns on extension are due.

For estimated payments you need to either have paid electronically (using EFTPS and/or your state’s electronic payment system, if available) or postmarked by the 15th. There are a few states which give a few extra days for estimated payments. For example, Hawaii gives you until the 20th.

For corporate, partnership, and LLC returns, you need to either have your returns electronically filed or postmarked by the 15th.

Trust and fiduciary returns need to be postmarked by the 15th.

Finally, if you use the US mail spend the extra $5.10 on certified mail, return receipt requested. It’s the only method you have of proving you timely filed your return.

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No Use for this Tax

Posted on September 14, 2009 by Russ

If you’re a business in California that doesn’t maintain inventory or sell products—that is, you’re a service business—you haven’t had to register with the Board of Equalization. The Board of Equalization administers California’s sales tax laws. That may change, though. As part of the most recent budget deal California service businesses that have gross receipts over $100,000 will soon get a “Dear Valued Soon To Register with the BOE” letter. That’s right, if your gross receipts are over $100,000 you will have to register with the BOE and file an annual Use Tax Return.

The Use Tax is the equivalent of the sales tax for items purchased where no sales tax is charged. You are supposed to remit to the state Use Tax when you buy that book from Amazon.com or any other out of state retailer that doesn’t charge sales tax.

Of course, most individuals don’t comply with the Use Tax. The hope of the state legislature is that by forcing firms to register with the BOE and file a Use Tax Return that $26 million would be found in additional revenue. Consider, though, the cost to businesses in the state. More paperwork and a higher regulatory burden for California. It certainly doesn’t make this state seem golden for businesses.

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Christopher Kelly, Blagojevich Crony, Dies Before Prison

Posted on September 13, 2009 by Russ

Christopher Kelly, a fundraiser for disgraced Illinois Governor Rod Blagojevich, died on Saturday in Chicago. Mr. Kelly late last year pleaded guilty to tax fraud charges related to gambling debts. Last week he also pleaded guilty to fraud against United Airlines and American Airlines related to work on hangers at O’Hare International Airport in Chicago. None of the pleas required Mr. Kelly to testify against Mr. Blagojevich so the federal prosecution of the former governor should not be impacted.

My condolences to Mr. Kelly’s family.

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Drip, Drip, Drip on Rangel

Posted on September 7, 2009 by Russ

For embattled Congressman Charlie Rangel (D-NY), is time running out?

Byron York thinks it is. He notes that Congressman John Carter (R-TX) has introduced the “Rangel Rule”: “The brainchild of Rep. John Carter, a Texas Republican who spent two decades as a judge before coming to the House in 2002, H.R. 735 would require the IRS to give everyone the same kid-glove treatment it gave Rangel.” There’s no chance that will pass.

The New York Post notes in an editorial, “All of which makes Rangel’s continued role as chairman of the House Ways and Means Committee — Congress’ primary tax-writing body — a mockery.”

Glenn Thrush, writing in Politico, notes that Speaker of the House Nancy Pelosi (D-CA) is very unlikely to remove Rangel as Chair of the House Ways and Means Committee as it would cause even more problems for her.

That said, Democrats ran successfully against Republican corruption in 2006 and 2008. It now appears certain that Republicans will run successfully against Democratic corruption in 2010. Speaker Pelosi and other Democrats would be wise to ditch the corruptocrats…but perhaps that’s just not possible for a Congresscritter.

Posted in Legislation | Comments Off on Drip, Drip, Drip on Rangel

Updates From the Blogosphere

Posted on September 6, 2009 by Russ

Over the past week there’s been some interesting stories posted around the tax Blogosphere:

The IRS posted a page titled “Keeping Good Records Reduces Stress at Tax Time.” I cannot stress this enough. If you have good records (especailly good records that corroborate your tax return), an audit may be annoying, time consuming, and a pain. That said, you will likely survive it just fine. Without those records, you should expect to be writing a check.

Joe Kristan and the Federal Tax Crimes Blog both spotlighted the IRS creating a new group to look at “…wealthy taxpayers who use offshore arrangements for tax evasion..” It’s pretty clear to those of us in the tax profession field that you really need to declare those foreign bank and financial accounts by September 23rd. If you’ve been hiding money from the IRS for a number of years, I’ll echo what Joe said: “Folks pondering whether to own up to their offshore accounts need to get in touch with their lawyers quickly. Three weeks isn’t a long time.”

Jerry Koosman was sentenced to six months at ClubFed. Had he not admitted that he was duped by tax protesters, the sentence would likely have been far longer. Joe Kristan has more.

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Impersonating an Accountant?

Posted on September 1, 2009 by Russ

Who in their right mind would want to impersonate an accountant? It’s not as if we live glamorous lives. For example, today I sent out my quarterly newsletter, gave a speech, and prepared tax returns.

Of course, I should never underestimate the Bozo Criminal mind. Daniel Ford (of Glendale, California) wanted to be a Certified Public Accountant. Rather than obtain a degree and a license from the California Board of Accountancy, he allegedly just decided to open his tax preparation business.

Mr. Ford also allegedly had a partner, Gregory Edwards, of Culver City, California. Mr. Edwards and Mr. Ford allegedly persuaded satisfied clients of Mr. Ford’s tax preparation business to invest with them. The money invested apparently went to a bottom line—the bottom line of Mr. Edwards and Mr. Ford. Mr. Ford allegedly earned $1.3 million and Mr. Edwards $961,000 from the scheme.

All was fine and good until the Franchise Tax Board and the California Department of Justice found out about the alleged scheme. Mr. Edwards and Mr. Ford have been arrested and are charged with multiple felonies including elder financial abuse, grand theft, state income tax evasion, and state income tax fraud. Oh yes, Mr. Ford and Mr. Edwards managed to ‘forget’ to pay state income tax on their illegal income. As the Franchise Tax Board noted, illegal income is just as taxable as legal income.

As for the alleged perpetrators, they’re sitting in jail in Los Angeles. It’s tough to impersonate a CPA and get away with it.

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Tax Fraud Night at the Ballpark Canceled

Posted on September 1, 2009 by Russ

Well, it was a bad idea to begin with. The Mahoning Valley Scrappers, the Class A (short season) affiliate of the Cleveland Indians, have canceled Wednesday’s James A. Traficant, Jr. Release Night. The actual cancellation was made on August 14th.

The Youngstown Vindicator reported, “‘It’s been a fun couple of days,’ Smith said with sarcasm in his voice.’ That’s Dave Smith, General Manager of the Scrappers.

But for those of you with tickets to see the Scrappers battle the Jamestown Jammers on Wednesday, don’t despair. It’s still All You Can Eat Wednesday at Eastwood Field in Niles, Ohio.

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