Showing posts from 2003
No Change in Interest Rates for the First Quarter of 2004

WASHINGTON —The Internal Revenue Service today announced there will be no change in the interest rates for the calendar quarter beginning Jan. 1, 2004. The interest rates are as follows:

four (4) percent for overpayments [three (3) percent in the case of a corporation];

four (4) percent for underpayments;

six (6) percent for large corporate underpayments; and

one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

For full announcement Click Here
In Memoriam

My friend and a mentor in the practice of law, The Hon Joseph M. Nardi, Jr., died on November 23, 2003. He was a wise and generous person. He is missed already. read Judge Nardi's obituary

Social Security benefits will increase 2.1% next year, starting with the payments made in January. The maximum wage base for the combined employer/ee12.4% Social Secuirty tax will increase from $87,000 (in 2003) to $87,900 (in 2004). Wages in excess of this amount will not be subject to the Social Secuirty tax. Thus, the maximum Social Security tax(the combined amount for employer/ee and for a self-employed person) will rise from $10,788.00 (in 2003) to $10,899.60 (in 2004). All wages are subject to the 2.9% Medicare tax.
Fed Chairman Suggests Interest Rates have Bottomed
The increase in job creation and economic growth may mean no further reduction in interest rates. Chairman of the Federal Reserve, Alan Greenspan, indicated that the Fed's concern is shifting away from fears of slow/no growth to fears that the budget deficit should be reduced.NY Times Article
This is the time for Congress to consider deficit reduction by cutting government expentiures.
Unclaimed Refund Information Online
Taxpayers who think they may be missing a refund or advance child tax
credit should check, the IRS Web site which lets taxpayers track
both their refund and their advance child tax credit. "Where's My Refund?"
provides information about refunds and "Where's My Advance Child Tax
Credit?" provides information about the tax credit. Both are available on
the IRS home page.
New Jersey Can't Tax Companies That Have No Physical Presence in State

New Jersey's corporate tax on businesses that draw revenue from the state but have no employees or tangible property there violates the federal constitution, a state judge has ruled. Tax Court Judge Peter Pizzuto rebuked the state's efforts to tax a Wilmington, Del., company that owns the trademarks of the Lane Bryant clothing stores and collects royalties for their use. The ruling is significant since many businesses are organized similarly.

The issue of "tangible" versus "intangible" assets is becoming contested more frequently in audits in NJ and other states. Because of state budget deficits, it is probale there will be a push to tax everything!
Internet Tax Ban Expires
The Senate failed to re-enact the ban on the States Taxing Internet Sales. The temporary ban was first enacted in 1998 and has previously been extended. The big tax and spend states want to get their hands on sales taxes from internet sales and have heavily lobbied Congress to let the ban lapse. I anticipate Congress reauthorizing the ban. <a href="> Click here for more information</a>
PC Sales Slowing in 4th Qtr
The November 3, 2003 issue of investor's Business Daily reports a significant decline in anticipated PC purchases for the 4th quarter. This estimate is for both consumer and business spending. There may be an attempt to bolster the technology sector, but most likely not this year.
U.S. Economy Growing Fast

During the third quarter the economy expanded at an annual rate of 7.2%, more than twice the rate in the previous three months and far ahead of what most observers had expected. My clients have not seemed to experience this trend, although there is a definite economic upswing. More Details
IRS To Focus on "Tax Cheats"
Surprisingly, only 12% of Americans think it is okay to cheat on taxes. Compared to Italy and most countries, this low figure would be considered a huge governmental success. Nevertheless, the Commissioner of Internal Revenue wants to increase tax law enforcement against taxpayers at all income levels. Full Article
Application Fee for Offers in Compromise
Beginning November 1, 2003, the IRS will charge a $150 application fee for
the processing of offers in compromise. The IRS expects that this fee will
"help offset the cost of providing this service, as well as reduce
frivolous claims." In other words, make it more expensive to try and pay something to the government.
Federal Reserve Board may lower Funds Rate to 0%
One Governor of the Fed indicated that if inflation continues to hover under 1%, the Fed might have to reduce interest rates. The current 1% rate could be lowered to 0%. See the full Article: Fed Rate Artilce
BigBrother comes to Walmart

Wal-Mart will put Radio Frequency I.D. sensors on shelves stocked with RFID-tagged Gillette products, but they'd rather you didn't know about it, because, you might not like it, and then you might make noise and then they'd have a big PR mess on their hands.

You might even stop buying Gillette products or, say, refuse to shop at Wal-Mart.

These chips, researched at M.I.T.'s Auto-ID Center are about the size of a grain of sand. Chipsters say the technology will only be used to help retailers keep track of inventory - like bar codes. But privacy-loving consumers question the very concept of a device that sends out radio waves to "readers" that not only identify the article, but where and with whom it's going.

Wal-Mart is starting this at its Brockton, MA store which is in a low-income, minority area.
BigBrother comes to Walmart

Wal-Mart will put Radio Frequency I.D. sensors on shelves stocked with RFID-tagged Gillette products, but they'd rather you didn't know about it, because, you might not like it, and then you might make noise and then they'd have a big PR mess on their hands.

You might even stop buying Gillette products or, say, refuse to shop at Wal-Mart.

These chips, researched at M.I.T.'s Auto-ID Center are about the size of a grain of sand. Chipsters say the technology will only be used to help retailers keep track of inventory - like bar codes. But privacy-loving consumers question the very concept of a device that sends out radio waves to "readers" that not only identify the article, but where and with whom it's going.

Wal-Mart is starting this at its Brockton, MA store which is in a low-income, minority area.
Jobless Rate 6.4%
The jobless rate hit 6.4 per cent - a much worse reading than the 6.2 per cent projected by private economists. It was up 0.3 of a percentage point from May's 6.1 per cent, to a level not reached since April 1994, according to the U.S. Department of Labor. Even though the service sector is employing more people, total payrolls have lost 400,000 jobs since January.
States Add Nuisance Taxes
The cash strapped states are refusing to lower expenditures. Instead, the states are raising "user fees" such as filing deeds, matters in court, transferring property and obtaining building permits. So-called "sin taxes" such as cigarettes and alcohol are also facing huge increases.
EU Robs Consumers by adding VAT TAX to Internet Sales
Starting July 1, 2003, the European Union will require non-E.U. firms selling digital products into the E.U. via the Internet to collect Value Added Tax (VAT) on behalf of E.U. member countries. The purpose of this legislation is to attack US internet companies and make them comply with the vast array of different tax schemes in Europe. Most likely, smaller US internet sites will ignore the regulations. Larger companies will probably be forced to charge European customers the very high VAT taxes.
Bartering is Taxable
Tax laws that apply to bartering! The IRS says that you must include in your income the fair market value of property or services you receive through bartering, at the time received. Typically, you must report his income on Schedule C or Schedule C-EZ. Because there are some gray areas in bartering, any small business owner expecting to generate significant income this way should consult with a tax lawyer. There's no sense trading services to save money if you're only going to pay penalties to Uncle Sam later.
IRS Preparing to send out Child Tax Credit Checks
The Internal Revenue Service is gearing up to mail advance payment checks to 25 million taxpayers eligible for a tax credit for their child in 2003. The payments will be mailed out starting July 25 and are part of the Jobs and Growth Tax Relief Reconciliation Act of 2003, signed by President Bush last month, according to the IRS. Who qualifies for the credit? The IRS and U.S. Department of the Treasury are figuring that out right now.
IRS Shuts-Down "National Trust Services" Scheme
(202) 514-2007
TDD (202) 514-1888


Justice Department Alleged Roderick Prescott sold hundreds of sham

WASHINGTON, D.C. - A federal court in San Diego yesterday
permanently barred Roderick Prescott and his business, Trust Educational
Services, from selling trust schemes falsely claiming that personal
expenses incurred by customers can be paid through a trust in order to
obtain tax benefits not available to individuals. Prescott agreed to
the court order and is required to give the Justice Department records
showing the names of customers who attended his workshops or used his
"trust system."
"The Department of Justice is vigorously pursuing tax
schemes based on bogus trusts," said Eileen J. O'Connor, Assistant
Attorney General of the Tax Division.
Commercial Real Estate Tax Appeals are Increasing

The commercial real estate market has fallen in the past few years, and many corporations are looking for breaks on their property taxes. Appeals of commercial property levies have nearly doubled in New Jersey, tripled in San Francisco, and jumped from less than 17,000 to about 20,000 in Dallas County, according to The Associated Press TH\he time to appeal in NJ usually ends April1, but added assessments can still be appealed. Because of the complexity of commercial Tax Appeals, good appraisals are needed.
Bankruptcy Discharges Corporate Officers
Corporate directors facing crushing judgments for leading their companies down the path to ruin can still find shelter in bankruptcy court, the 9th U.S. Circuit Court of Appeals ruled Wednesday. Though most liens are dischargeable under bankruptcy law, those incurred as a fiduciary trustee are not. But a unanimous panel held that a former Cal Micro Inc. executive isn't subject to that exception and wiped clean $1.3 million in debt.
Click Here for the full Article
Jobs and Growth Tax Relief Reconciliation Act of 2003
Capital Gains Tax Cut

The Jobs and Growth Tax Relief Reconciliation Act of 2003 (HR 2), approved by the House and Senate on May 23 and was signed by President Bush on May 28, 2003. The key provisions of the JGTRRA is a dividend and capital gains tax cut. The top rate is reduced from 20% to 15% through 2008. The 10% capital gain rate is reduced to 5% for taxpayers in the lower two tax brackets through 2007 and eliminated for 2008,. Congress will probably extend this tax cut and may ultimately make the tax cut permanent.

2003 -2004 Individual Tax Cuts

For 2003 and 2004, the JGTRRA accelerate some tax reductions previously scheduled for later tax years. The Act:

�œ increases the child tax credit from $600 to $1,000;
�œ accelerates the expansion of the 10 percent tax bracket, thereby lessening the tax rate for some taxpayers;
�œ eliminates the marriage tax penalty by increasing the maximum amount of income included in the 15% income t…
The New Tax Law Reduces some Business Taxes
The new tax law expected to be signed by President Bush allows small businesses to write off $100,000 in investments this year. This is an increase from the $25,000 write off limit. All businesses could depreciate half their assets this year, recouping their money faster. For example, a small business that spends $150,000 on new equipment this year can write off $100,000 immediately and recoup half of the remaining expense through depreciation this year. As a result, a business can immediately write off as an expense at least $125,000 of its equipment purchases.

Investors will see the tax rates they pay on dividend income and capital gains fall to a top rate of 15 percent through 2008. Low-income taxpayers will pay 5 percent now through 2007, and nothing in 2008. Investors currently pay taxes on dividends at the same rates as ordinary income, as high as 38.6 percent, and capital gains held for more than one year are taxed at 20 percent. In …
The New Tax Bill Proposal
Would cut taxes by $330 billion through 2013. Also provides $20 billion to state and local governments for Medicaid and other programs, to be paid over next two years.

-Corporate dividends, capital gains: Would lower the top rate to 15 percent on taxes paid by stockholders on corporate dividends and the taxes on capital gains. Current top rate is 38.6 percent for dividends, 20 percent for capital gains. Lower income people would pay a 5 percent rate on both. The new rates would run through 2007; in 2008, the lower rate would drop to zero. In 2009, today's current, higher rates would return.

-Personal income taxes: Would accelerate several tax reductions that had been scheduled to occur later this decade. Increase child credit to $1,000 per child, instead of current $600. Highest income tax brackets would be reduced to 35 percent, 33 percent, 28 percent, 25 percent. The lowest, 10 percent bracket would be expanded. For married people filing joint returns,…
IRS wants $15mil to Hire Collection Agencies!
The IRS plans to eventually place 2.6 million delinquent taxpayer accounts annually with private collection companies, according to Pamela J. Gardiner, acting Treasury inspector general for tax administration. It will need to make an initial $10 million to $15 million investment to launch the proposed initiative. If permitted by Congress, the IRS to hire private bill collectors to dun people on Uncle Sam's behalf. For their efforts, the outside agencies would get to keep up to 25 percent of the taxes they collected.
Next year, the U.S. Treasury a popular tax shelter for holders of U.S. Savings Bonds.
Starting in mid-2004, the Treasury will stop issuing Series HH bonds.

As a result, bondholders will no longer be able to roll over their Series E and Series EE bonds into Series HH bonds.

So they'll no longer be able to postpone the tax that'd otherwise be due on all the interest accumulated on their old Series E and EE bonds.
Real Tax Cuts Appear Doomed.

President Bush's $750 bil tax reduction is doomed. The House (controlled by Republicans) limited the cuts to $550 bil over 10 years. The Senate Bill of $350 bil over 10 years is mired in amendments and politically manuevering. Somehow the politicians in Washington seem to think it is THEIR money rather than OURS!
3rd Circuit Tightens Rules for Discharging Student Loans

In a ruling that promises to make it much more difficult for bankruptcy
debtors to win forgiveness of their student loans on "undue hardship"
grounds, the 3rd U.S. Circuit Court of Appeals has ruled that such debtors
must prove that they made good faith efforts to repay the loans over the
"entire" period from the first due date of the loans to the bankruptcy
filing date.

The court's unpublished per curiam opinion in Pelliccia v. U.S. Department
of Education is a significant narrowing of the court's 1995 decision that
established the undue hardship test, Pennsylvania Higher Education
Assistance Agency v. Faish.
This is a question I received today and is similar to many questions I receive:
I found your web site yesterday, and would like your opinion. I and my partners are interested in incorporating in Nevada for the purpose of privacy. We have been talking to Nevada Corporate Headquarters, and they assure us that a Nevada Corporation with Nominee service will ensure us complete privacy. Of the four partners, two would like to remain "silent". One concern is that, in the event of a lawsuit, would Nevada law prevail and protect the names of these partners? Our business would actually be in Washington and surrounding states.
This is my answer:
Thank you for the note. Frankly, nothing will do what you want - complete privacy. Let's make an example:
You setup Nevada Corp - Nevco. Inc. and want to do business in WA. You must file as a foreign corporation in WA. Even if there is a nominee owner, who will be the officers? Suppose the corporation is charged by a governmental agenc…
State Taxes - Because the States have radically increased their spending in the past decade, there has been a push to increase taxes imposed on business. State tax issues are now an important consideration since states are charging higher taxes and decoupling from the Federal Tax treatment of LLCs.
Watch out for the IRS "Sneak Attack." Revenue Officers (the IRS collection team) calls your tax attorney at lunch time and then immediately calls you saying "I could not speak with your attorney." Simply tell the IRS to call your tax attorney and do not say anything other than "You will have to speak with Mr. Cappuccio." Do not tell them anything because it could be used against you!
Welcome to My Weblog! This is dedicated to quick notes about the IRS, tax matters, and business law issues.