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Showing posts from February, 2006

Sole Proprietors 10 times More Likely to be Audited

Sole Proprietors 10 times More Likely to be Audited

Sole proprietors, independent contractors, self-employed workers and others accounted for $68 billion in missing taxes, the IRS said, the Associated Press reported. “That is a very significant noncompliance rate,” an IRS spokesman told reporters. “We do not have specific conclusions as to how much of this is willful or confusion.”

Sole proprietors are at least 10 times more likely to be audited this year than other business entities, dailybreeze.com says. Last year, with more enforcement personnel available, the IRS audited almost twice as many individuals as five years previously.

Alternative business entities, such as LLCs and Corporations might be considered.

Lottery Winnings are Ordinary Income and Not Capital Gains

Lottery Winnings are Ordinary Income and Not Capital Gains

Lottery winners cannot claim a "capital gain" when they sell off the rights to future annual payments, but instead must treat that lump sum as "ordinary income," the 3rd Circuit has ruled, becoming the second federal appellate court to agree with the IRS' application of the "substitute-for-ordinary-income doctrine" in such cases. However, the panel said it agreed with the result, but not the reasoning, of the 9th Circuit's decision, and instead fashioned its own test for deciding the issue Click Here for the full article.

Homeowner Associations subject to Constitutional Free Speech Guarantees

Homeowner Associations subject to Constitutional Free Speech Guarantees

The New Jersey Superior Court, Appellate Division, ruled Feb. 7 that privately owned homeowner associations may be subject to free speech and other guarantees under the state’s constitution. Committee for a Better Twin Rivers v. Twin Rivers Homeowners’ Association, No. A-4047-03T2.

The ruling is significant because it extends to private entities such as condo associations the same state constitutional mandates that would apply to the actions of government bodies. New Jersey already is on the forefront of such law by allowing free speech rights in private shopping malls.

"In the exercise of fundamental rights, we discern no principled basis for distinguishing between the general public at large and the members of a community association," the court wrote.

A committee of homeowners in the association and three residents of Twin Rivers sued the association in a nine-count complaint. Among their complaints were…

Surprise! The Tax Burden is Increasing

Surprise! The Tax Burden is Increasing

Citing the typical excuses such as rising costs in Medicaid and education which in turn led to higher spending levels and ultimately higher taxes, state taxpayer burdens rose more than 40 percent between 1994 and 2004.

According to just-released data from the Census Bureau, individual tax burdens jumped in some 43 states with residents of Hawaii shelling out the most per capita to their state government with an average of $3,050 per person.

According to the Census Bureau, the top states behind Hawaii were in order: Wyoming, Connecticut, Minnesota and Delaware. Alabama was at the bottom of the list.

Meanwhile the only state to witness a decline in its tax burden was Alaska with a scant 1-percent drop to $2,035 per resident.

Isn't about time that taxpayers revolt to lower taxes so more of your hard-earned money can be spent as you see fit? Remember, the Boston Tea Party was over the British government's 3% tax on tea.

US Supreme Court hears challeng to Ohio's Tax Break

US Supreme Court hears challeng to Ohio's Tax Break

As challenges to corporate tax breaks percolate around the country, the U.S. Supreme Court is set to hear arguments next month in a case involving a $280 million tax incentive plan for DaimlerChrysler's Ohio expansion. The case has raised to a high profile a long-running debate over the tax incentives' constitutionality and their effectiveness as an economic development tool. Businesses predict "dire ramifications" if they lose the ability to use the incentives. Click Here for the full article.

New Law Restricts Medicaid Planning

On February 1st Congress passed the Deficit Reduction Act of 2005, intended to severely limit the ability of seniors to protect their assets and qualify for Medicaid coverage of their nursing home care. It significantly changes rules on transfers of assets, protection of homes, and the use of annuities.

The new law extends Medicaid's "lookback" period for all asset transfers from three to five years and makes those with valuable houses ineligible for Medicaid long-term care coverage. But the most significant change is that it also shifts the start of the penalty period for transferred assets from the date of transfer, as is the case now, to the date when the individual would qualify for Medicaid coverage of nursing home care if not for the transfer. In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts. Innocent gifts to grandch…

IRS Attacks Tax Exemption for US Territories

The Treasury Department issued rules on Monday requiring owners of companies based in U.S. territories to have set up shop and live there at least six months a year to benefit from corporate tax breaks amounting to up to 90 percent of profits.

The rules apply to Guam, Puerto Rico, American Samoa, Puerto Rico, the Northern Mariana Islands and the U.S. Virgin Islands. They went into effect Tuesday