Tax
OMMMMMmg! California could start giving IOUs tomorrow
Looks like even the Terminator can't help them right now. A whopping $24 billion budget deficit and a legal stalemate between California's Democratic and Republican lawmakers over whether or not to raise taxes to balance the budget has led to this: Starting tomorrow, instead of paying its bills, the suddenly not-so-Golden State will be doling out IOUs to some of its vendors as well as agencies that work with the state, including those that provide support for the elderly and college students. Barring any last-minute agreement between the battling legislative factions, California plans to give out $3.36 billion in IOUs this month alone. It's saving what little cash it does have to pay more urgent expenses, including its general obligation bond, which is sort of like a mortgage for municipalities; blow off that bill and you open up a huge can of worms. Ratings agencies have already downgraded California's debt rating, which is sort of like the state's credit report. A lower rating makes it more expensive for California to borrow additional funds in the future, something the state is expected to have to do.
Even if there is a budget agreement eventually settled on, it doesn't mean California's out of the (red)woods yet; lawmakers say it will still have to sell another $7 to $9 billion in short-term debt just to balance the books, which of course will have to be paid back at a higher interest rate thanks to the state's poor debt rating.
Ohio city issues tickets to cars parked in driveways
That's exactly what happened in Toledo, Ohio. where last week Mayor Carty Finkbeiner supported the city safety director's decision to issue $25 fines to seven vehicles for parking on a gravel driveway; an action prohibited by the city charter.
While $175 is a drop in bucket compared to the city's budget troubles, residents are rightfully upset at the move, and feel that the city is simply trying to get more of their money. In many of the cases the vehicles were parked several car lengths away from the street, ruling out public safety as a motivator for writing the ticket. The safety director actually had to ignore a no-trespassing sign and pass through a fence to write some of the tickets!
However you look at it, the ticketing of cars parked on private property, which are not nuisance vehicles, is asinine. Even the city police union feels that the tickets are wrongfully issued; pointing out that the city's impound lot is covered in gravel and also in violation of the city charter.
The fact that Toledo's Mayor backed the move is a further testament to his Daily Show-worthy legacy and illustrates the lengths some officials will go to keep money in the city's coffers.
Call failed: IRS supports repeal of un-enforced cell phone law
Filed under: Tax, Technology
On Monday, I went on the Doug Stephan Show to express my outrage over a new plan by the IRS to start taxing employer-provided cell phones as a fringe benefit. Doug and I enjoyed a fun session of venting about greedy bureaucrats, and I explained why the idea made no sense in a post on WalletPOP.Now the IRS and the Treasury Department have reversed course a week after the initial announcement, and are instead asking to repeal the widely-ignored law that requires employer-provided cell phone minutes used for personal calls to be taxed.
"The current law, which has been on the books for many years, is burdensome, poorly understood by taxpayers, and difficult for the
Britain may tax for universal broadband. Why can't the U.S.?
Filed under: Tax, Technology
Britain is moving toward a 50-pence-a-month tax on all fixed telephone lines to help bring next-generation broadband to the entire country.The small levy would establish an independent national fund to ensure "maximum next-generation broadband coverage" by 2012, when the Olympics come to London, said Ben Bradshaw, the Culture Secretary, as quoted in the London Telegraph.
My question is why can't this be done in the United States? Why not pay a similar fee for fast Internet service everywhere, such as at public parks, coffee shops and every rural area in America?
Hold a garage sale? Be prepared to pay double for the permit
Filed under: Bargains, Budgets, Home, Tax, Recession
Garage sales are a popular way for people to earn some quick cash while getting rid of stuff they no longer want. But some towns are hiking their fees for holding yard sales, cutting into residents' profits.
Bloomfield, N.J., more than doubled its garage sale permit fee this year to $25 from $10. So what happens if residents don't pay? They could be fined up to $100 and imprisoned for up to 10 days, according to the town's ordinance. But Glenn Domenick, Bloomfield's director of community development, told the Star-Ledger, "We try not to prosecute people for something like that."
Raising garage sale fees can bring in a little more revenue for local governments, but in most cases the increase would be pretty insignificant. In Bloomfield the $10 garage sale fee raised $2,340 last year. Even if the town saw the same number of garage sales this year, it would only generate an extra $3,510 in revenue.
IRS to tax work cell phones: Get a life!
Filed under: Tax
FierceWireless reports that the Internal Revenue Service is mulling a plan to tax employer-provided cell phones as a fringe benefit."The IRS is proposing that employers declare 25 percent of an employee's annual cell phone expenses as a taxable benefit," the site reports. "However, the tax collector said employees could avoid being taxed under the proposal if they were able to prove they used personal cellphones for non-work-related calls during work hours."
Holy crap. What a waste of time.
According to JD Power & Associates, the average monthly cell phone bill is $73. Twenty-five percent of that is $18.25. Multiply that by 12 months per year and you get $219 in annual fringe benefits from the use of a cell phone. For someone earning between $33,950 and $82,250, we're talking about an additional annual tax liability of $54.75.
And to collect that extra money, we're going to require employers and employees to do tons of extra paperwork, keep track of annual cell phone bills and what percent of calls are personal and which are work.
If you call a client who's also a friend and talk partly about business and partly about family, how does that break out? You could just divide it in half, but what if some of the small talk is necessary for keeping a good client relationship? So perhaps is 75% work and 25% personal? It's all very complicated.
Isn't the tax code already complicated enough? With all the cash being stuffed into companies like AIG to allow them to go on spa retreats, isn't it a little lame to start hounding the little guy over his cell phone use? It's especially stupid because we're talking about such a small amount of revenue.
Congress plans to eliminate health insurance tax break
Filed under: Insurance, Tax, Health, Recession, Stimulate US
Currently, tax-free health benefits from employers are the largest tax break in the nation. The estimated 2010 cost of this tax advantage is $155 billion and is projected to increase to $924 billion by 2014, according to the White House office of Management and Budget.Note that these costs are just estimated potential revenue gains if the Treasury were to tax employer health insurance benefits.
Tax writing committees in Congress are busy drafting a plan that will place a cap on these tax breaks that currently benefit high income employees with top notch insurance policies. Their plan will call for these individuals to pay taxes on part of their received benefits. Congress plans to unveil this health care proposal next week.
Smokers -- taxed to death? Grow your own
As Tracy Coenen reported last month, the federal government has joined local officials in piling the responsibility for balancing their budgets on the backs of smokers. With the feds now taking over $1 a pack for smokes, many U.S. smokers are paying more than $7 a pack. At those prices, many will be forced to make a hard choice; quit ... or grow their own.
Yes, it is legal to grow your own tobacco, and while not easy, our nation has shown adeptness at growing other toke-able herbs, so tobacco should be feasible. In fact, (little-known fact) the first settlers in Midwest states like Ohio grew tobacco, because it was one of the few cash crops that could be transported on horseback to the markets of the East.
Each tobacco plant produces about half a pound of dried leaf, enough to make roughly a dozen packs of smokes. Even with the cost of seed and fertilizer, you should be able to bring this crop in for WAY less than $188 a pound (24 packs x $7 per pack). If you're worried about additives in your commercial butts, growing your own can provide some peace of mind.
Bailout blooper: bank seized for failure to pay taxes
Filed under: Banks, Tax, Bankruptcy
A lot of people are having a tough time paying their taxes these days, but that's still not likely to generate much sympathy for the former Wachovia bank in Shoemakersville, Pennsylvania. After the branch -- the rural town's only bank -- closed last month, an enterprising local reporter started digging through public records and discovered that the property was sold at auction the previous September after the bank blew off its tax bills for two years.Wachovia, a big player in the mortgage market before the credit crisis hit, had been on the rocks and was bought by San Francisco banking giant Wells Fargo last September. Wells Fargo took $25 billion in TARP bailout money from the government, yet the subprime scofflaw managed to avoid paying a comparatively measly $9,600 in back taxes.
Ask the Dolans: How do tax credits for new car buyers work?
Filed under: Saving, Tax, Transportation, The Dolans
Click here to ask Ken and Daria your question.
Chrysler is bankrupt and GM is close behind. Once a symbol of American ingenuity and determination, the auto industry is in tatters thanks to plunging sales. As part of its efforts to save American automakers, the Obama administration has introduced some new tax credits to entice new car buyers into the market. Get the low down on how they work from Ken and Daria Dolan of Dolans.com.
Dear Ken and Daria,
I've heard about new tax incentives being offered if you buy a new car. How do they work and who qualifies?
--Marie
There are a slew of new tax breaks that you need to know about! Learn about all the new tax rules that can save you money at Dolans.com.
If you owe the IRS money, do not offer the agent pizza
Filed under: Tax, Relationships
Today's tax tip is simple: If you owe the IRS money and an agent comes knocking at your door, there are a number of ways to handle the matter. Offering the agent free pizza and cash in exchange for reducing your tax liability? Probably not the best approach.Ramesh G. Khilnani, 51, a Houston-area resident and a native of India, offered an IRS agent free pizza and "work" after he was told he owed $49,000 in back taxes for the years 2004-2007 as the result of an audit.
WebCPA reports that after the auditor reported the incident to her supervisor, "Agents from the Treasury Inspector General for Tax Administration arranged for the recording of subsequent meetings – via telephone and in person -- between the agent and Khilnani. During the course of these contacts, Khilnani offered the agent $2,500 and delivered $2,000 in exchange for having his tax liability reduced from $49,000 to around $500. In addition to financial compensation, Khilnani repeatedly offered the agent pizza from his restaurant as part of the deal."
Khilnani pled guilty to bribery charges and was sentenced to two years in federal prison and could face deportation once he is released.
Three new things I learned about taxes since being laid off
I'm no stranger to the 1099 and Schedule C. Since 2004 I've been a here-and-there freelance writer, in addition to working full-time as a salaried employee -- first for NY1 News, then most recently for TheStreet.com. I know it's important to keep organized, to hold onto invoices and business receipts and to tuck away a considerable chunk of my freelance dough to avoid surprises come tax season.
But two months ago I got the pink slip and immediately joined a quarter of the workforce in the "freelance economy." I am now a full-time, self-employed worker and am discovering there is so much more to know when it comes to my taxes.
Here's a sampling:
IRS notifications coming soon, but don't panic
Filed under: Tax
While the Internal Revenue Service sends letters to taxpayers year-round seeking more information on the tax returns they filed for the previous year, there's an uptick in IRS letters in June and July to people who waited until April 15 to file, said Brittney Saks, a partner in PricewaterhouseCoopers' Private Company Services, or PCS.
Taxes in the News
Gov. Arnold Schwarzengger tells reporters that he and lawmakers will try to quickly solve the state's $21.3 billion budget deficit without taxes, gimmicks or much borrowing, after appearing at a prayer breakfast in Sacramento, Calif., Thursday, May 21, 2009. (AP Photo/Rich Pedroncelli)
AP
Gov. Arnold Schwarzengger tells reporters that he and lawmakers will try to quickly solve the state's $21.3 billion deficit without taxes, gimmicks or much borrowing,after appearing at a prayer breakfast, in Sacramento, Calif., Thursday, May 21, 2009. (AP Photo/Rich Pedroncelli)
AP
SAN RAFAEL, CA - MAY 20: Six packs of beer are displayed on a shelf at liquor store May 20, 2009 in San Rafael, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN RAFAEL, CA - MAY 20: Six and twelve packs of beer are displayed on a shelf at liquor store May 20, 2009 in San Rafael, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 20: Six packs and single bottles of beer are displayed on a shelf at the City Beer Store May 20, 2009 in San Francisco, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 20: A customer shops for beer at the City Beer Store May 20, 2009 in San Francisco, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 20: Six packs and single bottles of beer are displayed on a shelf at the City Beer Store May 20, 2009 in San Francisco, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 20: Six packs and single bottles of beer are displayed on a shelf at the City Beer Store May 20, 2009 in San Francisco, California. Federal lawmakers are considering an increase on tax paid for beer, wine, liquor and sugary sodas to help fund health insurance for an estimated 50 million uninsured Americans. Under the proposal, taxes on beer would be increased by 48 cents a six-pack. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 19: Cigarette butts are seen in the cracks of the sidewalk May 19, 2009 in San Francisco, California. San Francisco mayor Gavin Newsom is proposing a 33 cent tax on cigarettes purchased in San Francisco to offset the more than $44 million a year that the city spends on cleaning up discarded cigarette butts. (Photo by Justin Sullivan/Getty Images)
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SAN FRANCISCO - MAY 19: A smoker takes a puff off of a cigarette as he smokes in a park May 19, 2009 in San Francisco, California. San Francisco mayor Gavin Newsom is proposing a 33 cent tax on cigarettes purchased in San Francisco to offset the more than $44 million a year that the city spends on cleaning up discarded cigarette butts. (Photo by Justin Sullivan/Getty Images)
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"I think people just get nervous when they see the IRS letterhead," Saks said in a telephone interview from her Chicago office.
Congressman Paul says no Gold Medal for Arnold Palmer
Filed under: Extracurriculars, Tax
The United States House of Representative voted 422 to 1 to award a Congressional Gold Medal to golf legend Arnold Palmer.The lone no vote was, as you might have guessed from the title of this post, none other than former Presidential Candidate Ron Paul, a Republican from Texas. His spokeswoman Rachel Mills explained the decision:
"It is certainly nothing personal against Mr. Palmer. In fact, Congressman Paul admires him greatly. Dr. Paul opposes using public monies for any and all of these gold medals given to private citizens, just on principle. Not to mention, it is unconstitutional to use taxpayer dollars in this way. He even suggested on the House Floor before he voted against Rosa Parks's medal that if it meant so much to the Members of Congress, why not fund the award out of their own pockets? He pulled $100 out of his own wallet, but had no other takers. At a time like this when all budgets are stretched so thin, it seems especially inappropriate to lavish gifts like this on private citizens, as much as he may admire the individual."
Paul's explanation makes perfect sense, and it's yet another example of the reason he's built such a strong, almost cult-like base of support: He stands on principle. Congressional Gold Medals are a waste of taxpayer money -- Who could possibly argue with that?
It's nice to have one person in Washington keeping an eye on our money, even if there are 422 others willing to expand the national debt to buy trinkets for millionaire athletes.
Providence mayor wants to tax college students
Providence, R.I. Mayor David Cicilline wants to place a $150-per semester tax on students at the city's private colleges, which include Brown, Providence College, Johnson & Wales University and the Rhode Island School of Design."It's really about a shared commitment to the well-being of your community that you're a part of," Cicilline told the Associated Press. "Everyone should be doing their part and coming to the table."
No, actually it's all about imposing a junk fee on the people who are the lifeblood of Providence's economy. It's also unfair that the proposal only targets private colleges. Providence's Rhode Island College has 9,000 students (which is more than Brown), so the idea of a tax on students at private schools but not public ones reeks of protectionism.It's understandable that Providence needs more cash, but it just seems strange to go after the people who don't have any meaningful income in search of that cash. Wouldn't it be better to require Providence college students to contribute a certain number of hours of community service each year? A proposal like that could probably generate the support of colleges, which might be able to offer some academic credit for it.
College students possess human capital in spades but very little monetary capital, which is why a tax doesn't make sense. It's altogether fitting and proper that Mr. Cicilline should be looking to students to give more back to the community, but more junk taxes isn't the way to do it.
