The Internal Revenue Service has announced a new warning letter it will be sending to taxpayers. It's replacing a letter than used to go out which suggested changes to income, deductions and credits. The new letter will simply tell taxpayers to check their tax returns, and if they think they've made a mistake, they should file an amended tax return.

With the old letters, the IRS calculated an amount due and included that with the notice. Now, no such estimate of taxes due will be calculated. The IRS computers are still doing the same thing they did before, which was to match tax return information against documentation received from outside sources, such as W-2s, 1099s, and K-1s. The difference is that the IRS will no longer be telling taxpayers what differences have been identified.

It seems a little counterproductive to just send taxpayers letters that hint that they've done something wrong. The old letters seem much more useful in that they identified the actual reason for sending the letter -- we think you've made a mistake and here is what it is. Now, taxpayers are instead told the IRS thinks they may have made a mistake, but the taxpayer is left to guess at what the error might be.

How does this new letter enhance the tax collection process? I have no idea. I can't imagine that it helps at all. The tax code in the United States is incredibly complicated, and playing an additional guessing game with taxpayers seems to be a waste of time. The IRS has said that they are going to test the new letters and see if they result in additional collection of taxes. If they work, their use will be expanded.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Lawyers in Wisconsin are fighting over $200 million that was withdrawn from a medical malpractice fund and spent on an unrelated government program. On one side of the debate are the lawyers who say that lawmakers should be able to spend taxpayer money in whatever way they see fit. On the other side of the debate are those who paid into the fund who are now seeing their money squandered elsewhere.

I'm squarely on the side of the doctors who paid into the medical malpractice fund. The fund was started in 1975, and doctors practicing in Wisconsin are required to pay into it each year. Doctors must have malpractice insurance that covers claims up to $1 million, and the fund pays awards in exceess of that.

I don't find a gray area in this case. The doctors paid a special tax (called a fee, but we know it's really a tax) for a special purpose. They deserve to have their dollars directed at exactly what the dollars were collected for.

When John McCain picked Alaska Governor Sarah Palin, wildlife lovers cringed for two reasons. The first is that she seems like just the kind of smart, young leader who has battled corruption and government waste that could get not so environmentally friendly Republicans elected. The second is that Palin herself has been on the side of hunters instead of wildlife watchers--even when the fiscal numbers are not on hunting's side.

Palin--in addition to vowing to sue to stop the listing Polar Bears as an endangered species--has put the weight of the state behind defeating a ballot measure that would have limited the aerial shooting of wolves. Nationwide aerial hunting has been banned since 1972's Airborne Hunting Act, but Alaska gets around that by saying the hunters are working for the state to control predators. The idea is to produce more moose and caribou to hunt.

The Alaska Fish and Game Department has been allowing aerial wolf hunting--even though voters said no to it twice--for since 2003. (The legislature later overturned the voters' decision.) But this time Alaskans voted 92,781 to 74,124 to allow it.

A couple of weeks ago I wrote about the latest report from our government on corporate income taxes: About 2/3 of corporations pay no income tax. That report is somewhat misleading because certain corporations (like the one I own) don't pay income tax on earnings, but the owner personally reports that income and pays the taxes. Technically the corporation is not paying, but the owner is paying on its behalf.

I also argued at that time that corporations don't really pay taxes anyway. Consumers do. As taxes are raised, prices consumers pay for goods go up to cover them. So if we're looking to "stick it" to the corporations, we have to remember that we're the ones really paying for it. (And do we really need higher prices now?) My third argument against making corporations pay hefty income taxes is the effect it has on innovation and the creation and maintenance of a company. The more costs involved in doing business, the less attractive it is to start a company, and the more likely it is that the companies (and jobs) will go elsewhere.

One think tank suggests that corporate income taxes will be the next big "scandal" in business. (And don't news watchers love scandals?) There are many legitimate loopholes in the tax code, and companies pay big bucks to consultants and tax experts who help find them. But then there's the fine line that can be crossed... over into the illegal world of tax evasion.

Boy, were there some serious fireworks in the Dolan household over this one!

Very seldom do Daria and I VEHEMENTLY disagree on an issue...much less about something that involves things we are both passionate about -- food and good health. But we had a hot debate about this one.

Here's the issue: The state of Alabama is giving its state employees, all 37,527 of them, one year to get fit. If they don't, they start paying $25 a month for health insurance that they get currently get free.

If you're thinking about installing wind or solar power units to your home, time may be running out. The federal alternative energy tax credit, allowing you up to a $2,000 tax credit to help cover the cost of going green, will expire at the end of the year and renewal legislation is currently gridlocked in the Senate. Democrats want to include fees adequate to offset the expense of the program, $1.7 billion or more and sure to climb with the higher proposed cap in the new energy bill. Republicans are opposed to such charges and in favor of other issues in the bill, including expanded oil drilling.

Most experts believe the tax credit will be renewed before the end of the year, but time is running out; Congress adjourns in October.

If you decide to move forward with your own project, you might find qualified installers in short supply, as commercial builders rush to complete large solar and wind projects.

Even if this incentive should disappear, however, a number of state incentives will still be available. This database pulls together the info on where you might turn for help in funding your own windmill or solar farm.

Sharon Kukhan is known for selling a tax "decoder" scheme to help taxpayers avoid paying federal income taxes. She claimed she could "decode" the taxpayers' tax records to show that they were not required to pay income. Her system was based on the lie that clients did not have to pay income taxes unless they lived in a U.S. territory, and that residents of the United States could only be taxed with an excise tax on an excise-taxable business. The cost for this misinformation? $1,750 to $3,195.

The scheme had several names, including IMF Decoder, Paralegal Research Advocates, and Advocates for Justice, Liberty and Freedom. Kukhan's now defunct website IRScodebusters.com reportedly used to claim: "IRSCodebusters is a team of researchers including a federal lawyer (not an attorney) and a certified paralegal. This team specializes in utilizing the Freedom of Information Act and Privacy Act to provide a detailed decoding and examination of the Individual Master File and other secretly coded files the IRS keeps on you."

But the scam will run no more. A federal court has permanently barred Kukhan from selling her program, and the IRS estimates her work cost them about $4.9 million from taxpayers who failed to file returns or pay taxes.

If you participated in this scam, you can look forward to the IRS contacting you. Kukhan was required to turn over a list of her clients, and you can bet the government will be sending out audit notices. My advice? Find a competent tax lawyer and go to the IRS before they find you. Many times, they are more lenient with taxpayers who voluntarily report problems with their tax returns and work with the IRS to pay any taxes owed.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

The Environmental Group WildEarth Guardians says an anachronistic part of the Department of Agriculture spent $117 million last year to kill 2.4 million animals. The Wildlife Services has changed names plenty of times, but dates back to the days when the prevailing wisdom was just to wipe out any animals that got in the way of people. In its defense, the agency says it saves up to four times what it spends in agricultural losses. Of course, those would be private losses and we're spending tax money.

The agency just agreed to start putting out its data in a readable form after pressure from WildEarth Guardians. Meanwhile the animal group estimated that about half of those exterminated were starlings (an invasive bird) but 122,000 were carnivore mammals (like coyote and bear). The Wildlife Services program accidentally knocked off reindeer, pronghorn sheep, foxes, and bald eagles, says WildEarth Guardian's Wendy Keefover-Ring. Their sloppy application of poisons has killed off pet dogs, like Jenna, a lab mix poisoned while hunting rabbits. Most tragically, 10 people have died in aerial shooting programs.

Sure, some ranchers should be compensated for wildlife losses. The government should cooperate so frustrated ranchers don't take matters into their own hands. But the wildlife bureacracy has spread to cover all kinds of entrepreneurs from the cost of doing business. They also kill bears to protect logging companies (bears like seedlings). Federal agents bumped off 300,000 blackbirds who's big crime was eating sunflowers grown for birdseed. Fish farmers get protection from birds, too.

By now you may have heard about help for first-time home buyers in the Housing and Economic Recovery Act of 2008. I'm not a big fan of this legislation in general, but I still think it's important for consumers to know what it offers and how they can benefit.

If you're a first-time home buyer, the federal government is essentially offering you a $7,500 loan, interest-free, to be paid back over 15 years. Not a bad deal at all!

To be eligible, you must meet the following requirements:

• Be buying your first home (rental properties and vacation homes purchased in the past don't count against you, but if your spouse owned a home before, that does count against you)
• Purchase the home between April 9, 2008 and July 1, 2009
• Not have income greater than $75,000 (single) or $150,000 (married)

When I quit smoking, almost three years ago, my main reason for doing so was the birth of my daughter. Both of my parents had died from smoking-related illnesses, and I decided that I wanted to be around when my kid graduated from high school. Beyond that, I also wasn't a big fan of the seasonal bouts of bronchitis that I had every year, the occasional coughing fits, the lack of stamina, and the assorted other health miseries. The final nail in the coffin was the price: because of the ever-increasing taxes levied on cigarettes, it had gotten to the point where I was spending over $5 a day on my habit.

It's hard to find that ultimate reason to quit, and I have numerous close friends who simply can't make the final step to nicotine independence. With that in mind, I've been getting excited about the array of smokeless tobacco options that are now entering the market.

By combating the smoke that causes most smoking-related health problems and the taxes that bankrupt smokers, these companies are finding ways to make nicotine addiction less expensive and more socially acceptable. Of course, quitting is still the ideal, but if smokers can't find that final reason to push them over the edge into nonsmoking, these are some other options:

This week journalists and bloggers were lamenting the fact that a full two-thirds of United States corporations pay no income tax to our federal government. Boo-hoo.... They're apparently getting away with something horrible in the eyes of these writers.

I see it completely differently. First of all, corporations don't really pay any income taxes at all. People do. Every time a company decides to sell something to you, the price depends on a lot of things, including how much it costs to make the item, how much profit the company wants to make, and how high the company's tax bill is. You, the consumer, end up paying the corporate income tax with higher prices. And you want more of that?

My second big problem with people demanding more corporate income taxes is the result that would have on U.S. businesses. Our country really doesn't need anything else to make us less competitive in manufacturing. The same people moaning about big businesses making too much money and not paying enough taxes are the same ones belly-aching about jobs going overseas.

All those who filed extensions for their 2007 tax returns, both business and personal, are probably starting to panic about now. They filed the extensions, and now they're trying to remember when the tax returns are actually due. It was much easier to put off filing even longer once the extension was sent in.

Here's a rundown of the dates you'll need to keep in mind:

• Personal taxes (Form 1040) -- If you filed an extension, you've got until October 15 to file your return. Don't wait any longer than that. If you're eligible for an economic stimulus check, you can only get it if you meet the October 15 deadline. You won't get a check if you file after October 15.
• Sole Proprietorship (Schedule C) -- If you file your business taxes as a sole proprietorship, you'll be filing a schedule C with your Form 1040, and therefore will also be subject to the October 15 deadline.
• Partnerships and LLCs (Form 1065) -- You have until October 15 to file if you sent in an extension.
  
• Corporations (Form 1120) - You have until September 15 to file if you sent in an extension.

This page provides a handy calendar regarding due dates for tax returns and estimated tax payments. Don't forget that filing an extension did not give you an extension on time to pay your taxes. All taxes due on income earned in 2007 should have been paid by January 15, 2008. If you still owe money, you will be assessed interest and penalties on any amount that was paid late.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Yesterday I blogged about a recent study by The Tax Foundation ranking state by the rate of state plus local taxes residents of each state paid. One commenter mentioned that there was a correlation between education and taxes paid- that is, better funded schools product better educated students. I thought I'd take a look-

Scott and Kathleen Morgan publish a yearly rating of U.S. Education by state, Education State Rankings, in which they use 21 criteria to create an overall score showing how far above or below the national average each state's students fall. in 2007, their smartest states were:

1. Vermont 18.57
2. Massachusetts 16.09
3. Connecticut 14.46
4. New Jersey 14.35
5. Maine 10.79
6. Virginia 10.07
7. Montana 9.55
8. Wisconsin 9.04
9. Iowa 8.82
10. Pennsylvania 8.69

Compare this with The Tax Foundation's ten highest state/local tax burdens-

1. New Jersey, 11.8%
2. New York, 11.7%
3. Connecticut, 11.1%
4. Maryland, 10.8%
5. Hawaii, 10.6%
6. California, 10.5%
7. Ohio, 10.4%
8. D.C., 10.3%
9. Vermont, 10.3%
10. Minnesota, 10.2%

Three states appear in both; Vermont, New Jersey and Connecticut. Of course, this is a very simple comparison of a complex problem, but a 30% correlation would cause me to at least ponder the question more.

Morgan's ten least smart states were (#50 is the least)

41. Georgia -6.92
42. Hawaii -9.31
43. New Mexico -10.6
44. Louisiana -10.95
45. Alabama -11
46. Alaska -11.91
47. California -13.1
48. Mississippi -14.78
49. Nevada -15.81
50. Arizona -17.61

Compare this with the ten lowest state/local tax burden states:

41. Alaska, 6.4%
42. Nevada 6.6%
43. Wyoming 7.0%
44. Florida 7.4%
45. New Hampshire 7.6%
46. South Dakota 7.9%
47. Tennessee 8.3%
48. Louisiana 8.4%
49. Texas 8.4%
50. Arizona 8.5%

Four of ten appear on both lists; Louisiana, Alaska, Nevada and Arizona.

Today's July retail sales report shows what we've been saying for some time--people seem to be spending their government stimulus checks on necessities such as food and gas, and not on shopping sprees.

President Bush's economic stimulus program--which doled out up to $600 per person to over 130 million households--might not have had the desired impact on the economy, but an extra $600 bucks surely helped your bottom line, right?

What's that you say...you haven't gotten your stimulus check yet?

Well, if you filed your 2007 tax return--which you must do in order to be eligible--more than 8-12 weeks ago, it's time to track down your missing money. Maggie B., one of our Dolans.com readers, followed the advice we're about to give you and discovered her stimulus check was collecting dust at the IRS because it was returned as "undeliverable" by the post office.

So take 5 minutes right now to visit www.irs.gov and click on the button right smack in the middle of the screen that says "Stimulus Package."

We're shocked to hear ourselves saying this, but the IRS has put together pretty useful, easy-to-understand information that can help you track down your check. The most common reason people don't receive their checks is because the check was returned to the IRS as undeliverable.

And that doesn't just apply to this year's stimulus checks. The IRS is holding BILLIONS of dollars of unclaimed tax refunds. In 2006 alone, the IRS owed a whopping $110 million in refunds to more than 155,000 people they couldn't find!

So download Form 8822, which is the IRS' official change of address form, right from that main stimulus package web page and find out if you have any unclaimed refunds coming to you.

The site also lists all the eligibility rules and reasons why you might not have received a check (for example, Uncle Sam kept it to pay back taxes you owed). The IRS will even put a trace on your check to help you track it down if it's been more than 8 weeks since you filed your return.

(By the way, if you haven't filed your 2007 tax return, it's NOT too late! You have until October 15th to file and still be eligible for your rebate. After that, say sayonara to a quick 600 bucks.)

Like the idea of finding lost money you didn't even know you had? We can show you more where that came from! Check out our new video, How to Find "Missing" Money at Dolans.com.

Personal finance experts Ken and Daria Dolan help people like you learn to save more, spend less and live richly at Dolans.com.

Hate high taxes? Then the just-released results of a study by the Tax Foundation might help you decide where to live. The study compiles, state by state, the actual state plus local tax burden for each resident.

Ten highest state/local tax burdens are found in

1. New Jersey, 11.8%
2. New York, 11.7%
3. Connecticut, 11.1%
4. Maryland, 10.8%
5. Hawaii, 10.6%
6. California, 10.5%
7. Ohio, 10.4%
8. D.C., 10.3%
9. Vermont, 10.3%
10. Minnesota, 10.2%

The ten best 'bargain' states for state/local taxes:

1. Alaska, 6.4%
2. Nevada 6.6%
3. Wyoming 7.0%
4. Florida 7.4%
5. New Hampshire 7.6%
6. South Dakota 7.9%
7. Tennessee 8.3%
8. Louisiana 8.4%
9. Texas 8.4%
10. Arizona 8.5%

What does this mean in real money? These states' residents, based on the state's per capita income, pay this amount less than the national average:

1. Mississippi $(1,459.24)
2. Alaska $(1,420.83)
3. West Virginia $(1,303.16)
4. South Dakota $(1,203.50)
5. New Mexico $(1,193.97)
6. South Carolina $(1,175.77)
7. Alabama $(1,164.65)
8. Tennessee $(1,131.17)
9. Montana $(1,128.44)
10. Kentucky $(1,064.77)

These pay more than the national average:

1. District of Columbia $2,992.55
2. Connecticut $2,718.12
3. New Jersey $2,329.05
4. New York $2,146.10
5. Maryland $1,399.93
6. Massachusetts $1,090.16
7. California $716.49
8. Hawaii $637.63
9. Minnesota $410.17
10. Virginia $378.63
    

How does this impact the standard of living in these states? The educational system? The infrastructure? At a glance, there seems to be a clear progressive nature to these taxes.

Among those who might be most interested in this list are retirees on a fixed income. Looks like the South has tax bargains galore.