The Franchise Tax Board is in its second year of the “Ready Return Program.” Under this program, the FTB prepares returns for individuals who have very simple returns — just wage income, single, no dependents. But the program has been quite controversial.
Professor Maule today gives an excellent review of the program. If you’re at all interested in the controversy, read it all.
Proposition 82 on the June 6th California Primary Election Ballot is titled, “Preschool Education. Tax On Incomes Over $400,000 for Individuals; $800,000 for Couples….” A better name for this misguided statute is the “Preschool Education Bureaucracy. Driving Jobs from California Act.” Because that’s what this initiative would do.
As noted yesterday, California already ranks 40th among the states in business climate. This initiative, if passed, would increase taxes for the wealthy. It sounds great—use the money for mandatory preschool, help our kids, it only impacts the rich, etc.—but if it passes the impact would be felt only slightly among the wealthy. The true impact would be on the lower and middle class.
If you’re a business owner, and you have a choice of hiring one more person in California (which will have an impact on growing your business, increasing your revenues, etc.) or hiring that employee in another state, what would you choose if the tax rate in California is quite high? I’m sure the Nevada Development Authority, Phoenix Development Authority, and the Metro Denver Economic Development Corporation are rooting for passage.
Not only is this initiative bad from a tax standpoint, it’s bad for our children. Does anyone honestly believe that California needs another bureaucracy to run our childrens’ lives? Don’t we, the parents, do a better job of choosing what’s right for our children than the state? For example, parents who want to “home school” preschool would be prohibited from doing so under Proposition 82.
I hadn’t planned on writing about this initiative in late February when the primary ballot won’t be until June 6th. However, two items caused me to pen this entry. First, the Wall Street Journal wrote an editorial today on this measure. Second, the measure’s leading proponent, Rob Reiner, has been in the news. As Hugh Hewitt noted Reiner has taken a leave of absence from First Five, the state agency spending money from a cigarette tax. Maybe you caught the commercials that ran over the holidays, “Preschool is good for our kids.” Hmmm, that’s not a leading message with a ballot initiative upcoming….
The Tax Foundation today released its business climate survey of the 50 states. For the record, here are the top ten states:
California ranks 40th, just missing out from the bottom ten. The bottom five are Vermont, Ohio, Rhode Island, New Jersey, and New York.
The last time the Tax Foundation ran their list (2004), California ranked 45th, so the state has managed to improve. Well, perhaps. Or perhaps some other states have managed to fall below the Golden State. Here’s what the Tax Foundation says about New York: “New York has the worst individual income tax in the country, in addition to the 7th and 3rd worst wealth and unemployment taxes respectively. New York receives its highest score on its business tax, 18th best.” California, for the record, ranks 39th for business tax, 47th for individual income tax, 38th for sales tax, 20th for unemployment insurance tax, and 7th for wealth tax.
The report is quite illuminating, and I recommend perusing it. You can find it here.
Thanks to the TaxProfBlog for pointing this survey out.
One of my clients called me this morning and asked about an email he received, purportedly from the IRS. I told him that, in general, the IRS doesn’t send out emails. The email he received told him that he had a “small” refund coming, and to click on a hyperlink to enter in some “minor” personal information to get the refund.
It’s a phishing scam. According to snopes, this has been around for a year or so. The Washington Post ran a story on this last week. And the IRS itself has issued its own warning.
So don’t click on the link. Never give out your social security number, bank account information, or other personal information to a website. Because if it sounds too good to be true, it probably is.
Do you remember when Intuit and H&R Block sued each other? Well, H&R Block now has some egg on their face.
H&R Block admitted that they made some miscalculations on their own tax returns. They were only off by $32 million on their state income tax filings.
Of course, $32 million is a drop in the bucket for H&R Block. But announcing a tax miscalculation when you’re in the tax preparation business in the middle of tax season is too good to pass up (for me).
I keep saying that if it sounds too good to be true, it probably is. Offshore trusts formed just to shelter income tax sound too good. For Michael Diesel of St. Marys, Kansas, they were.
On the advice of Aegis Co., a now discredited Illinois vendor of offshore trusts, he invested in the scheme to avoid taxes. He was convicted of three counts of filing false income tax returns. Diesel faces up to three years in prison and fines of $250,000 on each count when sentenced in May.
Irwin Schiff won’t be muttering “There is no income tax” to his gullible victims clients anymore. The 78-year old Schiff was sentenced yesterday to 13 years in prison. He must also make restitution of $4.2 million. Schiff, during his sentencing, still claimed that there is no income tax.
He’ll have the rest of his life to think that one over.
George Washington, the father of our country, was born February 22, 1732 (274 years ago) in Westmoreland County, Virginia. Our first President, Washington didn’t have to deal with an Internal Revenue Bureau (or Service).
Unfortunately, our school-age children no longer get to celebrate a holiday dedicated to this leader. Instead, we have the bastardized “Presidents Day,” celebrating both Abraham Lincoln and George Washington. Both men deserve their own day—there can be holidays where schools are open, after all.
Additionally, in February this blog is celebrating its one-year anniversary. While I’d love to say that the tax code is now simplified, and fewer people are evading their taxes, and California has started to decrease regulations and attract businesses, the more things change, the more they stay the same.
The Tax Court also looked at whether an attorney must go to the closest law library for research. In the case, the petitioner lived fairly close to Southwestern Law School in Los Angeles. However, he preferred the law library at Chapman University in Orange, about 25 miles further than Southwestern. Did the petitioner go to Chapman because it had better facilities or because it was close to his family?
The Tax Court ruled for the petitioner on this issue. “Upon the basis of the record in this case, we find that the primary purpose for petitioner’s trips to Chapman Law School Library was to conduct legal research for his business clients, and, therefore, said travel is directly connected to petitioner’s business. Petitioner’s visits to his family, if such visits occurred, were a secondary consideration.”
What happens when you don’t file your tax return, the IRS sends you notices to two different addresses (but you’ve moved), and then the IRS tries to put a lien on you? Today, the Tax Court ruled on such a case.
The petitioner last filed a tax return in 1997. Based on paperwork that the IRS received, the IRS believed that the petitioner owed taxes, mainly from a capital gain. The IRS sent out notices to the petitioner, but he had moved. The IRS then assessed the tax that they thought was owed. After still not being able to reach the petitioner, they put a lien on some of his assets.
The petitioner, in early 1994, finally contacted the IRS. He had never received any of the notices. He requested a hearing with the IRS, and then went to Tax Court. The questions the Tax Court faced were, (1) Since the taxpayer did not notify the IRS of his move, could the taxpayer dispute the tax and lien; (2) If he could, then did the taxpayer owe tax?
The Tax Court ruled that the taxpayer could indeed dispute the lien and tax, because he never received the documents. The taxpayer was also able to prove that he actually had a capital loss rather than a capital gain and did not owe tax.
There’s a caution here, though. It’s much, much easier to file your taxes on time and not go through the hassles that this taxpayer went through. It’s cheaper, too.
