"Tax the Rich, Feed the Poor, Till There Are No Rich No More"

Obviously this verse from Ten Year's After "I'd Love to Change the World" is this Congresses' theme song. In their latest attempt to do so, the House of Representatives has proposed a surcharge of 5.4% on Taxpayer's who earn more than $1 Million a year to pay for Health Care Reform. Coupled with the President's stated plan to restore the top tax rate to 39.6%, and the maximum federal tax rate would be 45%. According to the Tax Foundation, this would mean that residents in 39 states would face marginal tax rates of over 50%.

In addition, businesses would be subject to "pay or play rules" requiring them to provide health insurance to their employees (more on this subject in a later post).

What will we receive in return? Well, if you believe the accompanying Chart produced by the Republican members of the Joint Economic Committee, we will have "31 new federal programs, agencies, commissions and mandates that will be in between patients and ...their doctor".

Richard Hatch Wants to Leave the Country

One of my all time favorite tax felons is back in the news. Richard Hatch, aka "The Fat Naked Guy" and winner of the original Survivor, has requested that he be released early from the end of his sentence so he can compete in the tenth anniversary season. Only one problem. Mr. Hatch still owes the Government over $400,000 and since the filming will take place in Samoa, the Government fears that he might not return.

Hatch, who is currently serving out the last three months of his sentence under house arrest in Newport, Rhode Island, however claims that his potential winnings will give him the funds to pay off this debt. Although the judge overseeing his case previously turned down his request that he be allowed to serve out the last of his sentence in Argentina (where his husband is from) I for one hope the judge relents so that we can once again all see his digitally altered naked butt in HD.

Cash for Clunkers!

Even though final regulations won't be issued until later this month, the "Cash for Clunkers" Program is getting a lot of publicity from auto dealers anxious to make a deal.

Since I first blogged about this subject, I have found a number of websites that provide vehicle specific examples of how the new law works. Among the best is Kelly Blue Book's site. Here I found that my 2006 Lexus SUV is rated as getting an average of 15 MPG. Not only that, but the site also gave me a list of over 60 brand new SUVs that would allow be to qualify for the credit AND, possibly put money in my pocket as my Lexus may be worth more than the cost of the new of a new SUV!

One other interesting point about the Cash for Clunkers program is that if you choose to lease your vehicle instead of purchasing out right, the lease must be for at least 60 months to qualify. For the apparent reasoning behind this lengthy requirement, follow this link.

More information may also be found here at the Government's official website, or here at a very well produced consumer website.

IRS Document Matching Letters

Commonly known as CP 2000 Notices, the IRS sends out these letters to taxpayers where they determine that there is a potential mismatch between the income or deductions reported on a return and the information that the Service receives from third parties such as employers, banks, and mortgage companies.

Unfortunately, many of these notices are incorrect, but because the Notice a balance due, many taxpayers simply pay them and are grateful that the matter is over and done with. However, many times theses Notices are just plain wrong. For example, I just reviewed a CP 2000 where the IRS was proposing to increase my clients tax liability because they had received a Form 5498 showing that my client had made a IRA contribution, but it was not claimed on the return when in fact it was. To make matters worse, somehow the Service turned this into my client owning over $1,000 tax and interest!

Obviously, the moral is just because you receive a Notice from the IRS, or for that matter any tax agency, don't automatically assume that it is correct.

California Starts Issuing IOUs in Lieu of Tax Refunds

For the second time in history, California has had to resort to issuing IOUs in lieu of tax refunds and other payments. Since the IOU's will carry an interest rate of 3.75%, several of the largest banks have agreed to accept them as deposits. According to Bloomberg, Wells Fargo, JPMorgan Chase, Citigroup and Bank of Aerica have all agred to accept the warrants through at least July 10th. Consequently, as of now, the IOUs (technically "Registered Warrants") are better than the delayed refunds we dealt with back in February.

For more information on the IOU's (as well as the IOU image that accompanies this post) check out this article from Don't Mess With Taxes.

Here Is One List You Don't Want To Be On!

Each year, the Franchise Tax Board is required by law to publish a list of the 250 Taxpayer's with the largest unresolved tax liabilities. This year's winner is Winson T. Lee of Lafayette who owes a whopping $9,940,513.49!

Notably missing from this years list are last year's "winner" Michael S. Fitzsimmons and two time top 20 member, O.J. Simpson. However, just because they are missing from the published list, doesn't mean that they fully paid their obligation. In fact, we know they did not as at the bottom of the list, the Board states that only two Taxpayers that appeared on last year's list paid in full, and those payments totaled only about $143,000. Rather, it is likely that both Mr. Fitzsimmons and Mr. Simpson either reached a repayment agreement with the Board or filed for Bankruptcy, thereby getting their names removed from the public list.

Two other names appearing toward the top of the list warrant mentions. First is singer Dionne Warwick who comes in at Number 5, with a balance due of just north of $2.1 Million. Also in the top 25 is a former client of mine. I will leave his or her name out of the blog post, but I will say this, you know who you are, and you know who can help you!

California Home Buyers Tax Credit Expires Today

As I mentioned back on May 16th, the $10,000 California Tax Credit for New Home Purchases was about to expire. Well, unfortunately, today is the day!

According to the on-line addition of the Sacramento Bee, the Franchise Tax Board announced today that it has received 11,925 applications for the 10,000 allowable tax credits. (The Board has stated that it would accept 2,000 extra applications in case some home deals fall out of escrow or otherwise are not complete). Consequently, the fax line that is the only way to transmit applications will be disconnected as of midnight tonight.

All is not lost however, the California Building Industry Association is pushing for an extension of the credit. In addition, a Federal Tax Credit is still available. For details on how the federal credit works, click here.