Rumors are flying that a vote will occur this week on a new California budget that contains no new taxes. Of course, until the proposal is read no one knows what “user fees” and other disguised tax increases are within the budget.
The Flash Report indicated that there’s lots of borrowing from local governments…who will be forced to increase taxes or cut services. Local governments are already suing the state over this taking.
I’ll keep you informed if and when there’s a budget.
That’s the headline in the Rutland (Vermont) Herald. Denise Hall was employed by psychic Rosemary Altea. Ms. Hall pleaded guilty to wire fraud and filing a false tax return.
It seems that Ms. Hall was Ms. Altea’s bookkeeper. Ms. Hall needed some extra money, so she wrote checks from some of Ms. Altea’s credit cards…without letting Ms. Altea know. That’s fraud. And Ms. Hall didn’t report the extra income on her tax return; that’s filing a false tax return.
Of course, there’s an obvious question that must be asked. If Ms. Altea is a psychic, shouldn’t she have known about the fraud? Well, from reading her website it appears she’s a faith healer….
News reports indicate that some progress has been made on the California budget meltdown. That said, the headline notes that “the thorniest issues remain.”
Meanwhile, the liberal Los Angeles Times continues with its attacks on Proposition 13. It’s just not true. Dan Walters of the Sacramento Bee penned a column that demolishes that argument. An excerpt:
Dave Doerr, chief consultant to the California Taxpayers’ Association and a leading expert on taxation, has calculated that commercial property subject to local assessment by Ting and his colleagues in other counties is actually bearing a slightly larger share of the property tax burden than it did 30 years ago – and, interestingly enough, residential property’s share has also been rising.
I hope for a quick solution but I’d like a solution that’s real and not paper windowdressing. We’ll have to wait and see what comes from Sacramento.
Lots of questions have come in during the past few weeks. Here are a few that might interest you.
1. I recently settled a lawsuit for wrongful termination, and was awarded $100,000 after attorney fees of $50,000. How much of this will be taxable?
Generally, all proceeds of lawsuits are taxable. There’s an exception for physical illness or injury under Section 104(a) of the Tax code. Emotional distress is another exception. Punitive damages aren’t, though.
To add to the complexity of this issue is that you generally have to include the attorney fees in your income. If your wrongful termination is based on unlawful discrimination, you will be able to deduct the attorney fees as an itemized deduction.
This is a complex area, and I strongly advise you to seek professional tax advice.
2. I recently relocated to South Korea from California. Will I have to pay California income tax?
Probably. Generally, your domicile doesn’t change if you move outside of the United States. California will assume that you plan on returning to the Golden State. If you’re a Korean citizen returning to Korea then you won’t, of course, have to file a California tax return.
If you’re not, though, I have a second piece of bad news. On your federal tax return you’re eligible for the foreign earned income exclusion. California does not conform to this deduction; you will owe California income tax on the entirety of your income.
Again, this can be a complex tax area and you should seek professional advice.
3. I play in a [poker] home game series of tournaments. I won an entry into the $10,000 buy-in main event of the World Series of Poker. Will I have to report that on my tax return? If the entry I won for the 2010 WSOP would I have to report it on my 2009 tax return or my 2010 return?
This is actually a complex question. First, all income, including gambling income, is taxable in the United States. If you had won your entry through a satellite at the WSOP, you would have won a piece of paper. You would be required to enter the main event. In that case, your result in the tournament itself would determine whether or not you have any gambling income to report. It’s like a parlay bet; you won the first half but in order to make any money you must cash in on the second half of the bet.
However, you won the entry in a home game. And this is where it gets tricky. You could make the same argument (as above). If you have a written agreement among the participants and/or the funds were wired directly to the Rio Hotel in Las Vegas (where the WSOP is held) you’d have a better case. The IRS could try to argue that you won $10,000 in cash (less your buy-in), and that you need to report the win as gambling income. Of course, if you don’t cash in the main event of the WSOP, you will have a $10,000 gambling loss.
This gets even more complex if you win an entry into the 2010 main event, and you receive $10,000 in cash in 2009. The IRS could argue, and likely would argue, that you won $10,000 of gambling income in 2009. You would then potentially have a $10,000 gambling loss in 2010. But remember, you can only take gambling losses up to the amount of your wins.
Of course, this may be a hypothetical question, but it does illustrate a couple of important points. First, all gambling income is taxable, even amounts won in home games. Second, paperwork counts! If there’s a written agreement that pre-dates the tournament you played in you have a much better case for the parlay bet.
If your situation is complex you should seek professional assistance with your tax return.
The Wall Street Journal is reporting that the IRS and Swiss bank UBS will jointly request a postponement of a court hearing on Monday in Miami. The Journal is also reporting that UBS and the IRS are “…deep in talks to settle a major tax-evasion case that could require the Swiss bank to reveal some — but not all — of the 52,000 or so account-holder names the U.S. has sought….”
That’s basically all the news that’s available on this. If you have a foreign bank account that you haven’t reported, there’s a limited IRS amnesty that’s ongoing. You have until September 23rd to take advantage of it.
Or perhaps this should be titled, no news isn’t good news.
First, income tax collections were $1 billion under projections in June. That shouldn’t be a surprise to anyone; when people aren’t making as much money they don’t pay as much in taxes.
There’s no news of any progress in budget talks. That should also not come as a surprise. Hard choices must be made, and that’s not what Democrats want. I’m taking the over on when California will have a balanced budget in place.
Many cities (and a few states) in the United States have business and professions taxes. The tax rate usually depends on what occupation you’re in. The taxes can be low, or high.
I used to run West Coast operations for two different telecommunications companies. When I joined the first business, I urged the ownership to move from Sherman Oaks (part of Los Angeles) to Burbank. The business would face a flat $150 license fee rather than spending thousands on taxes. It was a no brainer. The second company was, at one point, looking at acquiring a business in Los Angeles and moving into that office. But the city’s high taxes kept us out.
Creators Syndicate is a Los Angeles based distributor of content; they syndicate newspaper columns, comic strips, and similar material. Its owner isn’t happy with the City of Angels.
As the column I’ve linked to notes, several years ago Creators fought a battle with Los Angeles as to which occupation they should be considered to be in. They won. Now, years later, bureaucrats in Los Angeles have changed their mind. Creators has filed a lawsuit against the city and will likely end up moving if the lawsuit is unsuccessful.
The whole article deserves your reading. Here are two quotes from it:
We work with hundreds of outside agents, consultants, independent contractors and support services — many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city’s economy. Yet I suspect many companies like ours already have quietly left town in the face of the city’s taxes and regulations. This would help explain the erosion of jobs….
As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves and Los Angeles is teetering on the brink of bankruptcy?
When I counsel entrepreneurs about where to locate their businesses, I stress that you have to investigate local taxes. It can mean the difference between success and failure.
I’ve been saying for some time that California has a bad business climate. The current budget battle is only making things worse. I’m not the only one whose come to this conclusion.
The California Manufacturing and Technology Association (via The Flash Report) has some nice charts that show the problem. This chart shows what jobs have been created and lost this decade:
If things continue in this manner, there won’t be a California Manufacturing and Technology Association in a decade. Meanwhile, no progress in Sacramento….
In what is anything but a surprise, other states are looking to grab businesses located in the Bronze Golden State. This story from the Sacramento Bee highlights activities of development agencies in Nevada and Colorado.
Given the current economic difficulties, and given Democrats’ desires to further increase taxes, it’s no surprise that businesses are again considering fleeing the state. Regulations have driven many manufacturing jobs out of Southern California. Will Sacramento drive the rest out?
You’re the Speaker of the California Assembly. The state faces a $24 billion deficit, and is broke. The state has had to issue registered warrants (IOUs). The political leadership—the governor, the majority and minority leaders of the state senate, the minority leader of the assembly and you—are supposed to meet. Do you:
(a) Attend the meeting, advance your positions, and be unwilling to compromise;
(b) Attend the meeting, advance your positions, and compromise so that a solution can be found;
(c) Boycott the meeting because you’re unhappy about where the discussions are going.
Welcome to California, where the tough run away from the problems. I know that Speaker Bass doesn’t like the Republican position (she’d prefer tax increases to spending cuts). Does she remember the election in May where voters said “Hell No” to the idea of tax increases and told the state to live within its means? Yes, the Speaker of the California Assembly actually on Monday boycotted the meetings aimed at ending the crisis.
I guess Ms. Bass doesn’t remember the May election.
It appears that Speaker Bass has absolutely no desire to make the hard choices that are necessary to end this crisis. At the end of July I head on my annual vacation. I now expect that the budget fiasco will be lasting through the summer.
