Showing posts from November, 2005

Medicare Prescription Drug Benefits

The new Medicare Prescription drug benefits are confusing and state specific. A plan that is great in New Jersey may be not so good in Pennsylvania. AARP has a free online brochure that does a pretty good job of addressing the general issue. Click here for a pdf file of the brochure.

New Bankruptcy Law Requires Tax Return Filing

As a response to the political pressure of banks and credit card companies, Congress passed the new Bankruptcy Law with many onerous provions to prevent debtors from being discharged. Most debtors will be forced into a payment plan, Chapter 13, rather than a discharge of debts under Chapter 7. In order to have their payment plan confirmed, Chapter 13 debtors must also file all tax returns with the IRS for the four-year period before the bankruptcy petition. The debtor must establish filing by the first meeting of creditors.

Seven days before the first meeting of creditors, debtors must provide trustees a copy of their most recently filed federal tax return or a transcript of the return. Similarly, copies of amendments to such returns, and any past due returns filed while the case is pending, must also be filed with the court if requested. The returns or transcripts must be provided to the court at the same time they are filed with the IRS.

If the returns or transcripts are not filed, a …

Senate Democrats Block Capital Gain Rate Reduction Extension

Senate Democrats on November 15, 2005 blocked extension of the reduced tax rates on capital gains and dividends. The provision called for capital gains and dividends to continue to be taxed through 2009 at 15 percent (5 percent for low and middle-income taxpayers, reduced to zero percent in 2008). Those rates are currently set to increase after 2008. Click here for the full article

PayPal releases information to IRS

Paypal Names Names As IRS Chases Tax Evaders

PayPal, the internet money-transfer arm of eBay, is to disclose the identity of customers who use the service to evade paying US taxes.The US Internal Revenue Service (IRS) is demanding records of customers using PayPal through offshore accounts in all tax havens, including Jersey, Guernsey, Isle of Man,Gibraltar and other UK dependencies, says The independent newspaper.

It is part of an American clamp-down on the use of offshore centers for tax evasion. According to the IRS, PayPal's services have proved very attractive to tax evaders and the problem is growing.Customers can buy goods from eBay and many other shopping websites, pay for them from untaxed income held offshore and get the goods sent to their home address, says the newspaper. Tax authorities are also concerned that PayPal can be used to "launder" untaxed money between an individual's offshore and domestic accounts.

Click here for the full article.

New 6-Month Extension to File Tax Returns

The IRS has issued final, temporary and proposed regulations pertaining to the simplification of procedures for obtaining automatic extensions oftime for filing certain returns.

The regulations:
(1) extend from four months to six months the period for which individuals may obtain anautomatic extension of time; (2) extend from three months to six months the period for which partnerships, real estate mortgage investment conduits (REMICs) and certain trusts may obtain an automatic extension of time; (3) provide an automatic six-month extension of time to taxpayers that previously were required to file Form 2758, Application for Extension of Time to File Certain Excise, Income, Information, and Other Returns, in order to apply for extensions of time; and (4) transform current Form 7004, Application for Automatic Extension of Time to File Corporation Income Tax Return, which is used by corporations to obtain an automatic six-month extension of time, into new Form 7004, Application for Automa…

Power of Attorney for an Incompetent Person

===========Question: ===========1. If there are multiple names on checking accounts, bank statements, CD's, etc. and one of those parties is not a functioning party, can the state take that part of their money if that party needed the state to take care of them?2. How can I get Power of Attorney and what is the criteria?

===========Reply: ===========A Power of Attorney can only be created by a person who is mentally competent. Nevertheless, since you indicated the accounts are in joint names, if each party has the right to withdraw funds without the signature of the other, you could withdraw the funds. Whether the State or some other party may make claims is a different issue. Therefore, if you withdraw the funds, place them into a separate accont in your own name so they are available if a dispute arises. You will probably need the help of a good lawyer.

I you have further questions, please check my website at www.saveyourestate.comI hope this helps!

Ron Cappuccio

IRS Commissioner Brags About Increasing Tax Audits

At a November 3, 2005 press conference, IRS Commissioner Mark W. Everson reported that audits of high-income taxpayers, corporations and small businesses jumped dramatically in 2005. He proudly proclaimed IRS audits are "reaching the highest level in years for individuals and corporations." Everson said that the IRS has collected over $43 billion in revenues and increased audits by 20-percent over 2004.

Expect IRS audits to increase dramatically over the next several years so the government can wring out every last drop of tax dollars. For the full report, click here.

Presidental Panel Proposes Tax Simplification - Not Reduction

The Presidential Panel on Tax Reform proposed a complete overhaul of the Internal Revenue Code. The purpose would be to simplify the tax compliance process while collection the same taxes. Under the panel's plan, most deductions, credits and other tax breaks would be eliminated along with much of the paperwork and equations that baffle taxpayers under a drastically simplified income tax.

The proposal would abolish the Alternative Minimum Tax, a levy originally drafted to prevent wealthy individuals from escaping taxation but increasingly reaching into the middle class forcing them to pay at least 28% tax on their income. They also would eliminate federal deductions and credits for mortgage interest, state and local taxes and education, among others.

There is little chance this reform will be enacted in 2006 because it is an election year for Congress.

Click here for the complete report.

Tennessee Telecommuter taxed by New York

The US Supreme Court refused to hear an appeal from a Tennessee resident who telecommuted for a New York company. Even for the time the worker was not in NY, the Empire State taxed his wages. This certainly discourages telecommuting for NY companies and suggests that subsidiaries should be established in more tax friendly states. Click here for the full article about Huckaby v. New York State Division of Tax Appeals, 04-1734