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IRS tries to collect 4-cents in back taxes at car wash

Kelly Phillips Erb — Sat, 20 Mar 2010 10:00:00 EST

Filed under: Tax

We all know that times are tough. As a result, the IRS has made collections -- and audits -- a priority in an effort to put more revenue in the Treasury.

How much of a priority? So much so that the IRS sent a couple of agents to Harv's Metro Carwash in Sacramento, California, to collect back taxes ... of 4 cents.

According to the owner, Aaron Zeff, the IRS agents showed up last week demanding payment. When Zeff took a look at the letter, he noted the amount: "I looked at the letter and I couldn't believe what I saw. The number was astonishing. Four cents."

Of course, that was the original amount owed. Over time, together with failure to file penalties and interest, the amount at issue had grown to $202.35. And the IRS wanted to be paid.

According to Zeff's attorney, Ashley West, Zeff knew nothing about the back taxes. West claims that they only learned about the delinquent debt this week.

Zeff claims that he had notice that he owed nothing as of last year. He says, "I have a letter from the IRS just from October of (last) year, stating that my returns have been filed and my tax balance is zero."

Of course, Zeff's experience is far from normal. In the large majority of cases, the IRS doesn't show up on your doorstep. In most cases, if you owe money to the IRS, you'll receive a notice advising you of the amount and your right to appeal. If you ignore the notice, the IRS may take further steps to collect, including placing a lien on your real property or garnishing your wages.

What exactly inspired the IRS to stop by Harv's hasn't been made public. The IRS doesn't comment on private collection matters. But Zeff has his own idea: "The good men and women of the IRS said, 'Let's go down to Harv's car wash and get our car washed.' "

IRS tries to collect 4-cents in back taxes at car wash originally appeared on WalletPop Blog on Sat, 20 Mar 2010 10:00:00 EST. Please see our terms for use of feeds.

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What you need to know about the dreaded Alternative Minimum Tax

Kelly Phillips Erb — Fri, 19 Mar 2010 08:45:00 EST

Filed under: Tax, Tax - AMT, Tax - Basics

The Alternative Minimum Tax (AMT) was introduced in 1969 as a way to ensure that extremely high-income taxpayers paid their fair share. For the 1967 tax year, just before the tax was first enacted, 155 taxpayers with incomes of more than $200,000 (indexed for inflation, that's roughly $1.3 million today) didn't pay a dime in federal income tax. Of those 155 taxpayers, 20 were considered millionaires, with incomes that would be valued at more than $5.9 million in today's dollars.

But something strange happened with the AMT. The government never indexed the tax for inflation, meaning it started affecting a growing number of people as wages and other earnings kept pace with inflation. Additionally, a number of traditionally "high wage earner" tax preference items, like stock options, became more popular with middle class taxpayers. By 1970, more than 19,000 taxpayers were affected by the tax.

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What you need to know about the dreaded Alternative Minimum Tax originally appeared on WalletPop Blog on Fri, 19 Mar 2010 08:45:00 EST. Please see our terms for use of feeds.

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How will we pay for health care reform? An increase in Medicare tax

Kelly Phillips Erb — Thu, 18 Mar 2010 15:15:00 EST

Filed under: Tax, Health

As the House prepares for a vote on health care reform, the overwhelming question is how to pay the estimated $940 billion price tag on the plan. The obvious -- but not so politically popular -- answer is to raise taxes. Even better? Raise taxes so taxpayers don't notice it as much by including it in mandatory withholding.

That explains why the current proposal in the House under HR 3590 would add an increase in the form of payroll taxes. The bill, as it stands currently, would add .9% to the Medicare payroll tax to those individual taxpayers earning over $200,000 ($250,000 for married couples filing joint tax returns). That would bring the total tax rate to 2.35%.

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How will we pay for health care reform? An increase in Medicare tax originally appeared on WalletPop Blog on Thu, 18 Mar 2010 15:15:00 EST. Please see our terms for use of feeds.

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Cadillac tax: Is health insurance a luxury?

Kelly Phillips Erb — Thu, 18 Mar 2010 14:15:00 EST

Filed under: Tax, Health, Insurance - Health Insurance

One of the most controversial pieces of the current health care reform bill is the introduction of the so-called "Cadillac tax" -- an excise tax on premium insurance plans that would be used to offset the estimated $940 billion price tag for health care reform.

The term "Cadillac tax" was coined after the idea was introduced as part of President Clinton's health care proposal in the 1990s. The tax targets high dollar insurance plans provided by employers that are thought to be a luxury when compared to most insurance plans.

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Cadillac tax: Is health insurance a luxury? originally appeared on WalletPop Blog on Thu, 18 Mar 2010 14:15:00 EST. Please see our terms for use of feeds.

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5 tax moves that may trigger an audit

Kelly Phillips Erb — Fri, 12 Mar 2010 11:00:00 EST

Filed under: Tax, Tax - Audit

When I was a kid, I wanted to look like everyone else. I wanted to have the same feathered bangs, the same tapered jeans, and the same white Keds as every other girl. The thought of looking even a little different felt like the end of the world. My mom would humor me, all the while explaining that normal was overrated and being original was a good thing.

But my mother's advice only goes so far. You see, when it comes to taxes, being normal is a good thing. You want to blend in -- you don't want to be the kind of taxpayer who attracts attention. Here is a list of five red flags that might call attention to your return (and that's rarely a good thing):

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5 tax moves that may trigger an audit originally appeared on WalletPop Blog on Fri, 12 Mar 2010 11:00:00 EST. Please see our terms for use of feeds.

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State sales taxes continue to rise

Kelly Phillips Erb — Wed, 10 Mar 2010 18:00:00 EST

Filed under: Tax

If you flip on the news or thumb through a newspaper these days, it's no secret that the federal government is facing a mounting deficit. Spending has outstripped revenues for years now, and the current recession has cut deeply into the biggest source of income: taxpayers.

What hasn't been touted as much is how the same financial crisis is affecting states. As the federal government cuts back on funding state projects (although many, such as those related to education and homeland security, are mandated by the feds), states are scrambling to make up the difference.

Unfortunately, like the federal government, states are facing a similar dilemma: too much spending compared to revenue. The result? In the current fiscal year, at least 41 states are facing budget shortfalls in the current fiscal year. Even worse? Unlike the federal government, many state governments have laws on the books requiring that states operate in the black. Those "shutdowns" you keep hearing about? It's often because the state isn't allowed to spend money it doesn't have (apparently, a novel concept in government).

Continue reading State sales taxes continue to rise

State sales taxes continue to rise originally appeared on WalletPop Blog on Wed, 10 Mar 2010 18:00:00 EST. Please see our terms for use of feeds.

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10 expenses you may think you can deduct on your taxes, but can't

Kelly Phillips Erb — Tue, 09 Mar 2010 13:00:00 EST

Filed under: Tax, Tax - Advice, Tax - Deduction

At tax time, there is plenty of advice out there about how to maximize income tax deductions. With so much publicity focusing on what you can properly deduct, it's easy to think that almost anything you spend money on during the year can be a potential tax deduction. Not so fast. That type of thinking can get you into some pretty hot water with the IRS.

Below is a list of expenses that might seem as if they should be deductible on your tax return -- but really aren't.

Continue reading 10 expenses you may think you can deduct on your taxes, but can't

10 expenses you may think you can deduct on your taxes, but can't originally appeared on WalletPop Blog on Tue, 09 Mar 2010 13:00:00 EST. Please see our terms for use of feeds.

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Could some of the IRS's $1.3 billion in unclaimed tax refunds belong to you?

Kelly Phillips Erb — Tue, 09 Mar 2010 08:30:00 EST

Filed under: Tax

As April 15 creeps closer, many taxpayers are focusing on refunds. While those taxpayers rush to file their returns on or before Tax Day, the tax deadline takes on a whole other meaning for others. April 15 is not only Tax Day for the 2009 tax year -- it's the last day to claim a refund for the 2006 tax year.

The Internal Revenue Service may be holding more than $1.3 billion in refunds for taxpayers who failed to claim them in 2006. More than 1.4 million taxpayers are due a refund, the IRS said, with the median refund totaling $604.

Continue reading Could some of the IRS's $1.3 billion in unclaimed tax refunds belong to you?

Could some of the IRS's $1.3 billion in unclaimed tax refunds belong to you? originally appeared on WalletPop Blog on Tue, 09 Mar 2010 08:30:00 EST. Please see our terms for use of feeds.

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Rangel is out; Levin is in. What does it mean for you?

Kelly Phillips Erb — Sat, 06 Mar 2010 07:00:00 EST

Filed under: Tax, In the News

Rep. Charlie Rangel (D-NY), the enigmatic Representative from Harlem, has won every political challenge to his seat since 1971, often by as much as 90%. This week, however, he faced a challenge he couldn't possibly win: a vote by the Republicans to oust him as Chairperson from the powerful House Ways and Means Committee. With defeat almost a certainty, Rangel backed down from perhaps the most important vote of his career. Despite announcing the night before, "You bet your life," when asked if he was going to remain as chair, Rangel resigned as Chairperson of the Committee on March 3.

Rangel ascended to what is considered the most powerful seat in Congress (perhaps more powerful than Speaker of the House) in 2006 after a major shift in Congress. The Democrats took control of the House, and Rangel was voted in as Chair of House Ways and Means Committee; he was the first African American to hold that distinction.

Rangel would not be seated long before controversy would find him. The most damning charges, however, would come in 2008 when Rangel admitted, after an investigation, that he did not report $75,000 in rental income for a property in the Dominican Republic on federal income tax. He claimed the oversight was the result of not understanding the tax laws. It was, however, a particularly embarrassing admission for the Democrats, considering Rangel's post meant he headed the committee that wrote tax policy for the nation. What kind of example was he setting for taxpayers?

Continue reading Rangel is out; Levin is in. What does it mean for you?

Rangel is out; Levin is in. What does it mean for you? originally appeared on WalletPop Blog on Sat, 06 Mar 2010 07:00:00 EST. Please see our terms for use of feeds.

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Senators say no to checks for elderly, disabled

Kelly Phillips Erb — Fri, 05 Mar 2010 11:00:00 EST

Filed under: Tax

In February 2009, Congress voted in the American Recovery and Reinvestment Act of 2009. A significant part of the ARRA was the Making Work Pay Credit, but there was one catch: Retirees, veterans, and the disabled were not eligible for the credit. Instead, Congress elected to authorize one time payments of $250 for eligible retirees, veterans and the disabled.

So, of course, with the economy still slow, Congress would do it again ... or not. On Wednesday, the Senate rejected a measure to issue the checks for a second year. Despite support from President Obama, the measure still did not pass. The Senate defeated the measure by a vote of 50 to 47. The vote was largely along party lines, with only one Republican, Sen. Olympia Snowe (R-MAINE), and one Independent, Sen. Bernie Sanders (I-VT), voting in favor. Three Senators did not join the vote: Sen. Kit Bond (R-MO.), Sen. Kay Bailey Hutchison (R-TX) and Sen. Johnny Isakson (R-GA.).

Those who supported the bill were disappointed with the outcome, noting that Social Security payments will otherwise not increase this year. This is because Social Security payments do not receive an automatic Cost of Living Adjustment (COLA) increase. Instead, adjustments are tied to consumer prices; there was no increase in the Consumer Price Index (CPI-W) over the last year.

In an election year, this won't be the last you hear about Social Security benefits. The powerful American Association of Retired Persons (AARP) has already responded, with Executive Vice President Nancy LeaMond saying she was "disappointed" there had been no action. It is highly likely that another bill will be introduced to benefit seniors in some way over the next several weeks. However, with a major hole in the budget, it won't be an automatic pass: Expect to see a lot of give and take in any bill that includes more benefits in 2010.

Senators say no to checks for elderly, disabled originally appeared on WalletPop Blog on Fri, 05 Mar 2010 11:00:00 EST. Please see our terms for use of feeds.

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Are you an unwitting tax cheat?

Kelly Phillips Erb — Fri, 05 Mar 2010 10:00:00 EST

Filed under: Tax

With just over a month to go until the April 15th tax deadline, the IRS is ramping up efforts to get the message out to taxpayers about the importance of filing returns correctly.

The focus on accuracy has grown more intense as the estimated tax gap (the difference between what taxpayers owe and what they actually pay) has grown to $300 billion each year. And, in a bad economy, many Americans are feeling the burden of paying what they perceive to be more than their fair share of taxes -- causing some to be more prone to cutting corners. In fact, the IRS Oversight Board reported that 13% of the people it polled last year said it was acceptable to cheat, up from 9% in 2008.

While some taxpayers may think it's okay to cheat, others do so without even realizing it. Here are seven common ways that taxpayers cheat (deliberately or otherwise) on their tax returns:

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Are you an unwitting tax cheat? originally appeared on WalletPop Blog on Fri, 05 Mar 2010 10:00:00 EST. Please see our terms for use of feeds.

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Should you get married for tax purposes?

Kelly Phillips Erb — Mon, 01 Mar 2010 12:00:00 EST

Filed under: Family Money, Tax, Celebs & Money, Tax - Advice

Though activist and model Jenny McCarthy has been together with actor Jim Carrey for five years, marriage has not seemed to be in the cards. In 2008, McCarthy announced on The Ellen DeGeneres Show that she did not intend to marry Carrey, saying the couple "didn't need a certificate."

That may be changing. McCarthy recently told Us Magazine that marriage is a possibility. "We say 'never,' but I don't know. Maybe for tax purposes, someday, when we are old."

But wait ... what about the so-called marriage penalty? Isn't getting married for tax reasons a bad idea? Isn't that what we've been told?

It depends on whom you ask. The Tax Code has flip-flopped over the years to make adjustments for a changing demographic and changing priorities. But no one "fix" has fit every situation.

Prior to World War II, the general rule was one income equaled one return. This made sense in traditional one income families where most women opted not to work. During World War II, the increasing numbers of women in the workplace (remember Rosie the Riveter?) resulted in the need for a change. In 1948, Congress adopted a joint tax return. Married couples combined their incomes and received deductions and exemptions worth roughly twice that of single filers. That structure stayed in place for more than 20 years until it was replaced in 1969.

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Should you get married for tax purposes? originally appeared on WalletPop Blog on Mon, 01 Mar 2010 12:00:00 EST. Please see our terms for use of feeds.

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Last day to claim special tax relief for donations to Haiti

Kelly Phillips Erb — Sun, 28 Feb 2010 18:00:00 EST

Filed under: Charity, Tax - Deduction

If you want to take advantage of the opportunity to claim Haiti relief donations on your 2009 return, time is running out to make a donation. Qualifying contributions must be made after January 22, 2010, and before March 1, 2010 -- that makes today your last chance. You have until midnight to make a contribution. That means you have to text or charge your payment by the end of the day; additionally, checks need to be in the mail (with sufficient funds in your account to clear).

The rush is on because of special, temporary tax provision. On January 22, 2010, Congress passed a new law to benefit those who donate to Haiti relief efforts. The provision allows taxpayers who itemize deductions to deduct charitable donations to qualified Haiti relief organizations on their 2009 tax returns. The donations must be in cash or cash equivalent. This means cash, check, credit card or debit card contributions -- as well as text message donations. In-kind donations, such as donations of water or medical supplies, won't count for purposes of the accelerated deduction; those deductions will have to be claimed as they normally would, on a taxpayer's 2010 return.

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Last day to claim special tax relief for donations to Haiti originally appeared on WalletPop Blog on Sun, 28 Feb 2010 18:00:00 EST. Please see our terms for use of feeds.

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Taxpayers sound off about refunds

Kelly Phillips Erb — Sun, 28 Feb 2010 17:00:00 EST

Filed under: Tax, Technology

As tax season plugs along (just 45 days until April 15), more and more taxpayers are talking about refunds. Some are finding that they are due more than they expected, while adjustments in withholding have resulted in a balance due for other taxpayers who have come to rely on money back at tax time.

Last year, just a few weeks after tax day, the IRS reported that it had issued a whopping 96,673,000 individual taxpayer refunds worth $259.348 billion. The average individual income tax refund was $2,683.

Of the refunds processed in 2009, over 70% of those were by taxpayers who elected to receive their money by direct deposit. Those taxpayers who received their refunds via direct deposit had, on average, a slightly higher refund of $2,948.

Continue reading Taxpayers sound off about refunds

Taxpayers sound off about refunds originally appeared on WalletPop Blog on Sun, 28 Feb 2010 17:00:00 EST. Please see our terms for use of feeds.

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Check on the status of your tax refund in seconds

Kelly Phillips Erb — Fri, 26 Feb 2010 16:30:00 EST

Filed under: Tax, Tax - Online

Checking on the status of your tax refund is easier than ever. You have two options: calling the IRS or checking online.

If you want to check the status of your refund online, you can do so directly on the IRS Web site. Visit the IRS' online refund tool or the Spanish version of the tool. The Web sites are available 24/7.
To check on the status of your refund, you'll need the following information:

Social Security Number or Taxpayer Identification Number.
The filing status you used when filing your return.
Your expected refund amount (in whole dollars).

Continue reading Check on the status of your tax refund in seconds

Check on the status of your tax refund in seconds originally appeared on WalletPop Blog on Fri, 26 Feb 2010 16:30:00 EST. Please see our terms for use of feeds.

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3 tax mistakes people make every day

Kelly Phillips Erb — Wed, 24 Feb 2010 10:00:00 EST

Filed under: Tax, Tax - Advice, Tax - Deduction

Last week, our family made a now familiar trip to the hospital for my five-year old. She's been diagnosed with a form of vasculitis known as Henoch-Schonlein Purpura. It is a nasty and invasive -- but fortunately, not contagious -- illness that attacks the joints and blood vessels in your body. As a result, we have been making regular trips to her pediatrician and occasional trips to the hospital.

As I got into the car, my mind was simply fixed on getting her better. At no time did I note the odometer. On the way out of the parking garage, I was so thrilled to be leaving after a long five-hour day that I didn't bother to get a receipt. We stopped at the pharmacy on the way home to pick up some medication to ease her inflamed joints and while we were there, I picked up a few things I needed for the office that I had been too distracted to get earlier in the week. Back home, I breathed a sigh of relief. Our stressful day was done.

But I was also a little annoyed at myself. I had managed to commit a host of tax sins throughout the day. In fact, many taxpayers do exactly the same thing. It's easy to make tax mistakes every day, and no one, not even a tax professional, is immune. Here are three common mistakes that taxpayers make (almost) every day:

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3 tax mistakes people make every day originally appeared on WalletPop Blog on Wed, 24 Feb 2010 10:00:00 EST. Please see our terms for use of feeds.

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Overlooked deductions: Home office expenses

Kelly Phillips Erb — Mon, 22 Feb 2010 11:00:00 EST

Filed under: Tax, Tax - Advice, Tax - Deduction

When my husband and I first started our business, we turned part of our house into a proper office. It was furnished with two desks, computers, and a copy machine on one side; a small conference table and chairs on the other. A separate phone line and fax ran only to that part of the house.

Ten years -- and three kids -- later, our old office is now our master bedroom. My "home office" is now a spot on the couch where I desperately attempt to get work done at odd hours. Fortunately, we've expanded outside of the home into a much larger office, so our dedicated work space is a few miles up the road. Even though I work from home quite a bit these days (it's part of what comes with being a parent and owning a business), we no longer claim a home office deduction on our tax return. We simply don't meet the criteria anymore.

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Overlooked deductions: Home office expenses originally appeared on WalletPop Blog on Mon, 22 Feb 2010 11:00:00 EST. Please see our terms for use of feeds.

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Business mileage deductions could cut your tax bill

Kelly Phillips Erb — Fri, 19 Feb 2010 14:00:00 EST

Filed under: Tax, Tax - Basics, Tax - Deduction

A few years ago, it appeared any company that required you to drive for your business would just hand over the keys to a new car -- my friends in sales or service seemed to magically have a new vehicle every few months. In this economy, however, that has changed. While more jobs require reliance on a car (some for multi-tasking), fewer companies are footing the bill for it. But there's still some relief available; If you use your car for business or your job, you can deduct car-related expenses on your tax return.

Continue reading Business mileage deductions could cut your tax bill

Business mileage deductions could cut your tax bill originally appeared on WalletPop Blog on Fri, 19 Feb 2010 14:00:00 EST. Please see our terms for use of feeds.

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Are you eligible for the Making Work Pay tax credit?

Kelly Phillips Erb — Fri, 19 Feb 2010 12:00:00 EST

Filed under: Tax, Tax - Basics, Tax - Credit

The highly touted Making Work Pay tax credit is proving to be a headache for many taxpayers this season. Despite a PR campaign by the IRS designed to provide information about the credit, taxpayers are still struggling to understand who is eligible for the credit and how it affects their 2009 federal income tax return. Following are answers to some of the most popular questions about the Making Work Pay credit:

Who is eligible to claim the credit?

The Making Work Pay credit is intended to provide tax relief for working and middle class families. This means most taxpayers will be eligible for the credit, but there are some exceptions:

Continue reading Are you eligible for the Making Work Pay tax credit?

Are you eligible for the Making Work Pay tax credit? originally appeared on WalletPop Blog on Fri, 19 Feb 2010 12:00:00 EST. Please see our terms for use of feeds.

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When are you not liable for your spouse's taxes?

Kelly Phillips Erb — Fri, 19 Feb 2010 09:00:00 EST

Filed under: Tax, Tax - Advice

Each year, many married taxpayers are surprised to see that an expected refund check is a bit smaller than anticipated. This is often the result of an offset for an outstanding liability of some sort attributable to one spouse, even though the other spouse has no connection to the obligation.

Here's how it happens: Congress has authorized what's known as the Treasury Offset Program through the Financial Management Service (FMS). Under the Offset Program, refunds may be reduced to pay any past-due child or spousal support, federal non-tax debts (such as past due or defaulted student loans), state income tax obligations, or unemployment compensation debts owed (usually due to amounts paid out and later discovered to be fraud).

Continue reading When are you not liable for your spouse's taxes?

When are you not liable for your spouse's taxes? originally appeared on WalletPop Blog on Fri, 19 Feb 2010 09:00:00 EST. Please see our terms for use of feeds.

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