Roni Deutch: The Tax Lady Blog

Buffett’s Wager on Economy May Give Boost for Obama Policies

2009-11-04T12:21:00.001-08:00

For years famed investor Warren Buffet has been in the financial spotlight for his high-risk, and often rewarding financial decisions. Therefore, his recent move take over of Burlington Northern Santa Fe Corp., a railroad near his home, has gotten people talking. Buffet even called the decision “an all-in wager on the economic future of the United States.”

Bloomberg.com wrote an article on how Buffet’s very noticed move could give a boost to Obama’s economic policy. You can find a section of their story below, or read the full text here.

Warren Buffett’s takeover of Burlington Northern Santa Fe Corp. today is a $26 billion bet on President Barack Obama’s economic policies at a time when the administration may need the help.

Buffett called the purchase of the railroad by his Berkshire Hathaway Inc. “an all-in wager on the economic future of the United States.” He’s making it at a time when discontent has grown in the U.S. about jobs and growth.

Public approval of Obama’s handling of the economy has slipped to 46 percent in an Oct. 30-Nov. 1 CNN poll from 59 percent in March.

Buffett’s comment “does seem like an endorsement of the president’s policies,” Zelizer said. Still, “most voters who would be paying attention to this statement probably already have made their minds up so it is hard to see this having a major impact today.”

House Panel Votes to Give SEC More Money, Power

2009-11-04T12:19:00.002-08:00

In the latest move to end corruption on Wall Street, the House of Representatives Financial Services Committee voted this morning to give more power and funding to Federal regulators. They hope the additional funds will help agents prevent future abuses, such as the high profile Bernie Madoff scandal. Check out the following coverage of the new legislation courtesy of the Associated Press.

The 41-28 vote was the panel's latest move to try to rein in abuses on Wall Street. It would give the Securities and Exchange Commission new enforcement powers, including the ability to offer bounty money to tipsters on fraud cases and the power to bar violators of the law from employment in any securities-related industry.

The bill also would double the SEC's budget in the next five years.

Rep. Paul Kanjorski sponsored the legislation after leading the panel's investigation into the government's failure to uncover Madoff's massive fraud scheme for nearly two decades. Madoff was sentenced in June to 150 years in prison.

"In the last five years, there's been a significant change and a greater sophistication in the financial service industry than has ever happened in the history of mankind," said Kanjorski, a Pennsylvania Democrat. "So we're going to have to change fast."

The proposal was part of a broader effort by the committee to tighten rules governing financial institutions after last year's market crisis. The full House was expected to vote on the bill and related proposals in early December.

Schwarzenegger's Budget Boss to Step Down

2009-11-04T12:19:00.001-08:00

From the LA Times:

Gov. Arnold Schwarzenegger's budget director is departing after nearly four years in one of the most influential posts in Sacramento.

Budget czar Mike Genest announced his departure Monday, as a financial crisis continued to grip the state. His Department of Finance has predicted a $7.4-billion deficit for the fiscal year that begins next summer.

The figure is expected to balloon -- perhaps tripling -- as a result of sagging revenues, court rulings blocking recent budget cuts and overly optimistic savings projections by the Legislature and governor.

Genest said in an interview that he would leave by year's end, or sooner if a replacement is found earlier.

"It feels like a good time for me to step back from the day-to-day fray of things," he said.

Red ink has plagued Sacramento during much of Genest's tenure, the second-longest for a budget director since Ronald Reagan was governor.

There have been deep cuts to education, and social services for the needy have been slashed.

Continue reading at LA Times.com…

Property Buyers in US Rush to Beat Deadline for First Time Tax Credit

2009-11-04T12:18:00.000-08:00

Realtors and buyers are in a dead rush to meet the deadline for the homebuyers tax credit at the end of this month. Since there has not yet been a final decision about extending the credit, thousands across the country are trying desperately to close escrow before the looming deadline. However, as PropertyWire.com reports, many of them are finding out that they are simply too late.

The latest figures from the National Association of Realtors (NAR) show that its Pending Home Sales Index rose to 110.1 in September, its eight consecutive monthly rise.

The index now stands at the highest level since December 2006 when it was 112.8 and is 21.2% higher than September last year, marking the largest annual gain on record.

But it could be a short-lived blip as many analysts believe that the recovery in the US housing market is being propped up by the first time buyer tax credit that was introduced by the Government to boost demand for houses.

‘What we’re witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month,’ said Lawrence Yun, NAR chief economist.

Meanwhile, the foreclosure crisis is moving into small towns and suburbs which have previously been untouched by the economic downturn, according to new research.

Bio-fuel in the Health Care Bill?

2009-11-04T12:17:00.000-08:00

Many of us in the tax industry are confused this morning, because of a $24 billion bio-fuel tax credit that was added to a health care bill making it’s way through Congress. The modification was made recently, but there already dozens of bloggers who have spoken out about this fishy addition to the health care reform bill. You can read coverage on this developing story from The New York Times here and here, or checkout a segment below.

A measure that could save the federal government $24 billion in bio-fuel tax credits over 10 years by restricting the eligibility of a controversial fuel was attached last night to health care reform legislation making its way to the House floor this week.

Language included in the manager's amendment would restrict the paper industry from claiming a lucrative incentive for use of a fuel known as "black liquor."

Rep. Chris Van Hollen (D-Md.), a member of the House Democratic leadership, introduced the measure as a stand-alone bill (H.R. 3985) this week that would formally restrict the paper industry from eligibility for the $1.01-per-gallon cellulosic bio-fuel tax credit included in the 2008 farm bill.

The estimated $24 billion in tax credit savings could be used to offset costs of the health care bill, Van Hollen said.

"In addition to supporting homegrown renewable energy, it is my hope that this legislation will be added to the manager's amendment for the House health care reform package making its way to the floor this week so that the savings generated by these improvements can help pay for health care for all Americans," Van Hollen said in a statement yesterday before the amendment was released.

Obama: More Job Losses to Come

2009-11-03T15:10:00.000-08:00

In a meeting with economic advisers on Monday, President Barack Obama stated that there would indeed be more job losses in the next few months. However, he claimed that this does not mean the economy is not recovering. There is “always a lag of several months between businesses starting to make profits again and investing again and them actually rehiring again,” he asserted.

Obama also said he's confident "that having moved the economy on the right track ... there's no reason why we're not going to be able to not only create jobs, but the kind of sustainable economic growth that everybody's looking for."

The White House has highlighted several indicators of economic stabilization over the past week. Among other things, administration officials have argued that the Democrats' controversial $787 billion economic stimulus program helped stave off a depression and spark 3.5% growth in the third quarter.

On Friday, the administration released a report claiming the program helped create or saved over 640,000 jobs.

Republicans questioned the validity of the White House report, saying it exaggerated the program's effectiveness. Each new job, critics charged, cost $248,000 to create.

The Commerce Department said construction spending rose unexpectedly in October by almost 1%. Economists surveyed by Briefing.com were anticipating a 0.5% decline.

Continue reading at CNN.com…

California Boosts Income Tax Collection by 10 Percent

2009-11-03T15:09:00.000-08:00

From the Associated Press:

California wage earners will soon notice a little less money in their paychecks.

Starting Monday, employers in the cash-strapped state are required to withhold 10 percent more in state income taxes to help ease the budget problems.

It's part of a plan to artificially inflate state revenue by $1.7 billion through next June.

Brenda Voet, a spokeswoman for the state Franchise Tax Board, says it's technically not a tax increase since workers will get their money back after April 15.

A single wage earner making $51,000 a year with no dependents will get about $4 less a week.

The Differences Between Tax Liens and Levies

2009-11-03T15:08:00.000-08:00

Last week, my amazing team shot another new episode for our tax tips video series. In this episode, host James Owens explains the differences between tax liens and levies. You can watch the embedded video below but be check out my YouTube channel to subscribe to my videos.

Increased Rental Car Taxes

2009-11-03T15:07:00.000-08:00

If you travel and rent vehicles often then you may have noticed that you are paying more for your car then you did last year. This is because many struggling local governments have increased the taxes levied on rental cars in attempt to fix budget problems. According to Gary Stoller of the Washington Post, legislators have been able to pass these increases since they can be sold as 'out-of-towners' taxes.

Anyone renting a car in Maine would be paying the state 12.5% of their bill in excise taxes starting last month if the legislature there had its way.

But residents blocked the state's new tax-reform law — which included a tax increase from 10% to 12.5% on rental car bills — by signing petitions in opposition. If the signatures on the petitions turn out to be valid, the increase will be put to a vote in June, says Sara Lewis, a Maine taxation official.

The action in Maine represents something of a victory for business travelers, corporate travel departments and rental-car companies who are increasingly upset over what's been an explosion in taxes imposed on renting a car.

Airline fees "are bad, but the worst are car-rental taxes," says frequent business traveler Tony Harrison, who has rented cars 75 days so far this year and paid upwards of 20% of his bill in taxes in some cities.

Top 10 End of the Year Tax Planning Tips

2009-11-03T15:00:00.000-08:00

Although you may be used to waiting until April to worry about your taxes, this could be a big mistake. Many tax breaks are secured through actions taken before January 1. And guess what – it is already November and the holidays are just a few weeks away! So, you need to take advantage of the pre-Thanksgiving lull to get your tax situation in order to maximize your tax savings come next April. And as you can see from the following paragraphs, there are plenty of things you can do now to make the upcoming tax season a little less stressful—and a finacially successful one.

1. Make Upgrades

If you were thinking about making energy efficient upgrades to your home, you may want to do so before the New Year. The deductions and credits available for energy efficient home upgrades are larger this year than they were in 2008, and it is unknown if Congress will extend or decrease those credits for 2010. For more information on this year’s “Green” tax incentives, check out this entry I posted earlier in the year.

2. Give Now

During the holiday season, most of us feel more charitable then usual, with toy drives for underprivileged children and Santa Clauses asking for donations on every street corner. However, this time of the year is also the last time you can make a charitable donation and deduct the amount from your 2009 taxable income. Be sure to take a minute to look over your donation receipts from this year so far to see if you making a few extra donations will significantly reduce your tax liability or not.

3. Make 529 Contributions

If you have children, then you might want to consider opening a 529 plan, or if you already have one setup then you could max out your contributions. There are two different types of 529 plans, but both have significant tax benefits. Using any extra funds you have at the end of the year to help pay for future college bills is a great, and tax friendly way to prepare for the future. To learn more about the different 529 plans check out this RDTC Tax Help Blog entry on tax friendly ways to save for your children’s education.

4. Offset Large Capital Gains

If you had a high amount of capital gains related income, then you may want to offset your profits by selling off a few bad investments or stocks. You can then claim a capital loss and reduce your taxable income. However, keep in mind there is a $3,000 limit—but the rest can be carried forward into future tax years. Alternatively, you can offset your losers by selling off some winners. If you are not experienced with capital gains and losses, then I highly recommend seeking the help of a qualified professional.

5. Non-Charitable Gifts

It is the season of giving, right? In addition to charitable contributions you can also give up to $12,000 ($24,000 for a married couple) to as many individuals as you wish without incurring a gift tax penalty.

6. Get in Order

With the New Year just around the corner, it is never too early to begin getting your financial records organized for next tax season. By knowing exactly how much money you have made this year, and projecting your total taxable income for the end of the year, you can decide if you need to take any actions concerning income and expenses to further lower your tax liability or not. You can also throw away any files that are old or unnecessary, and create a new folder in your filing cabinet for 2010.

7. Adjust Withholdings

If after reviewing your taxable income, you realize that your tax bill will be higher than you had expected, now is your last chance to have your employer adjust your withholdings. It will mean less cash in your remaining paychecks for the year, but at least you will not be hit with a massive tax bill come April. On the other hand, if you have overpaid your taxes throughout the year then you could lower your withholdings and get a little extra holiday cash.

8. Prepay Mortgage and Taxes

If you are looking for ways to increase deductions and lower your taxable income, then you can always prepay your next mortgage payment, or pay your property taxes early. Just remember though that this means you will have one less mortgage payment to make next year, which will result in a higher tax bill in April 2011.

9. Retirement Payments

If you have not contributed the maximum to your 401(k) or another tax friendly retirement account, then you want to do so before the years end. This will help lower your taxable income, and is also a good investment in your future.

10. Deferred Income

Deferring income is one of the most popular end of the year tax planning tips, and it is actually pretty easy. If you are retired then you could postpone an IRA withdrawal, or if you are self-employed then you can easily defer a payment from a client. However, before you defer any income you want to be absolutely sure that you will be in a lower tax bracket next year. Otherwise you could just be postponing a large tax bill.

Ask the Tax Lady: November 2nd, 2009

2009-11-02T11:51:00.000-08:00

Check out the following new Ask the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: If the expiring homebuyers credit is extended, will it be modified to include non first-time homebuyers?

Answer: It is still a little too early to tell. Congress has not yet passed a bill to extend the credit, although there are several bills going around aimed at doing so. It will probably be a few more weeks before they take any action, but it is rumored that when they do pass the legislation it will include a $6,500 credit for non first-time homebuyers.

Question #2: How can I get a wage garnishment removed?

In order to get an IRS wage garnishment removed, you are going to need to resolve your account with the IRS. Typically, that involves filing all past due tax returns and paying all past due amounts and assessed penatlies and interest.

If you cannot afford to pay the full amount due to the IRS, then you typically can negotiate a tax debt resolution. This can be either a full settlement through an Offer in Compromise, a monthly payment plan through an Installment Agreement, or temporary protection against IRS collection through Currently Not Collectible status. Click here to learn more about the tax debt settlement services offered by my law firm.

USA Tops International Tax Haven List, Thanks To Delaware

2009-11-02T11:50:00.002-08:00

Although the Federal government is going to great lengths to take action against taxpayers using Swiss bank accounts to avoid paying taxes, according to the U.K. based Tax Justice Network, Delaware is the biggest tax haven on the planet. Their report claims the state is "the most secretive financial jurisdiction in the world," based off an analysis “60 financial jurisdictions according to level of secrecy and cooperation with foreign tax authorities.”

Delaware even beat out Luxembourg, Switzerland, and the Cayman Islands who came in 2^nd, 3^rd, and 4^th place respectively. Check out the following facts about Delaware from the Tax Justice Network’s press release, thanks to Huffington Post.

According to the Delaware Secretary of State's office, their operating budget was $12 million in 2007 and they made $24 million in the fees for expedited incorporation filings alone.
There are currently some 695,000 active entities registered in Delaware, including 50 percent of the corporations publically traded on the U.S. stock exchange.
New business formations in Delaware are currently running at about 130,000 per annum.
The growth of private individual deposits by non-residents was most robust in the United States outranking other popular financial jurisdictions such as the Cayman Islands, United Kingdom, and Luxembourg with total non-resident deposits equalling $2.6 trillion in 2007.

The IRS Needs to Better Manage the Tax Debt Collection Process

2009-11-02T11:50:00.001-08:00

Last week, the Government Accountability Office published a report asserting that the IRS needs to do a better job of managing the tax debt collection process. I have included a segment of their report below, but you can download the full PDF at “Tax Debt Collection: IRS Needs to Better Manage the Collection Notices Sent to Individuals.”

According to the IRS, $23 billion in unpaid individual income tax debt existed in 2001, its most recent estimate. The notice phase is the first of IRS’s three-phase process to collect unpaid debt. IRS annually sends notices to millions of individual taxpayers about billions of dollars of unpaid tax debt.

Congress and others have questioned IRS’s collection process’s effectiveness. As requested, GAO is reporting on (1) how well IRS has established objectives, performance measures, and responsibility for reviewing notice-phase performance, and (2) how well IRS’s business rules for sending notices to individuals help assure that the collection notice phase is achieving desired results at the lowest costs. To address these objectives, GAO compared the evidence obtained from IRS documents and responsible IRS collection officials to applicable guidance for internal control standards.

Although the notice phase is a key part of IRS’s approach and strategy for resolving billions of dollars of individuals’ unpaid tax debt, IRS lacks certain internal controls to assure that notices to individuals are achieving the most benefits—such as debt collected or unpaid debt cases otherwise resolved—with the resources being used. Management controls like clearly defined objectives, performance measures, and clear responsibility for reviewing program performance help provide reasonable assurance that the objectives of an agency are being achieved effectively and efficiently. However, IRS has no documented objectives for the notice phase and no performance measures to indicate how well the phase is performing in resolving debt cases or achieving other potential desired results. Further, IRS has not established responsibility for reviewing the performance of the complete notice phase.

IRS lacks documentation for and evaluations of its business rules for notices to individuals to assure that the collection notice phase is achieving desired results. According to IRS officials, to make the best use of collection resources, IRS uses its business rules to—based on certain dollar thresholds and individual tax debt case characteristics—vary the number and types of notices sent to taxpayers and determine whether unresolved cases will be sent for further collection action or further action will be deferred. However, as shown in the table, in almost all cases, for the five business rules that IRS identified as affecting the most taxpayers, IRS did not have information on the date the rules were established, the rationale for the rule, or data supporting the rationale. IRS collection officials also lacked documentation describing the business rules and how they operate. Further, even though IRS officials estimated that the business rules had been established for years, IRS had documentation for an evaluation of only one of the five business rules. Without relevant evaluations IRS lacks assurance that the notice phase achieves desired collection results at the least cost.

California to Withhold a Bigger Chunk of Paychecks

2009-11-02T11:49:00.001-08:00

From LA Times.com:

Reporting from Los Angeles and Sacramento - Starting Sunday, cash-strapped California will dig deeper into the pocketbooks of wage earners -- holding back 10% more than it already does in state income taxes just as the biggest shopping season of the year kicks into gear.

Technically, it's not a tax increase, even though it may feel like one when your next paycheck arrives. As part of a bundle of budget patches adopted in the summer, the state is taking more money now in withholding, even though workers' annual tax bills won't change.

Think of it as a forced, interest-free loan: You'll be repaid any extra withholding in April. Those who would receive a refund anyway will receive a larger one, and those who owe taxes will owe less.

But with rising gas costs, depressed home prices and double-digit unemployment, the state's added reach into residents' regular paycheck isn't sitting well with many.

"The state's suddenly slapping people upside the head," said Mack Reed, 50, of Silver Lake. "It's appalling how brash that is."

Easing Impact of a Tax Rise

2009-10-29T12:01:00.001-07:00

Earlier in the week, David Johnston, of the New York Times, posted an article with advice for taxpayers earning more than $200,000 per year – who’s tax rates will likely go up in the next fourteen months. This is due to tax cuts sponsored by President Bush that are set to expire at the end of next year.

When the Bush cuts expire, the two top tax rates will move up from 33 percent and 35 percent to 36 percent to 39.6 percent. For a couple making $500,000, the added tax will be about $6,000 per year, for a couple making $1 million about $30,000.

The bite could be less than that for business owners, however. President Obama, on the campaign trail, proposed allowing founders of small businesses to sell their enterprises without owing capital-gains taxes. Congress has yet to act on this idea.

He also campaigned on the promise that there would be no tax increases on the bottom 98 percent of earners. Earlier this year, President Obama signed a two-year tax break that one of his economic advisers, Austan Goolsbee, said “included $63 billion for the Making Work Pay Tax Credit, a direct tax cut for 95 percent of workers and the magnitude of just about the largest middle-class tax cut ever.”

For high-income taxpayers, here are some steps to arrange your affairs to get the most benefit with the least tax when the Bush cuts lapse:

Check out the tip at the New York Times website...

Tax Challenges of Being a U.S. Citizen Abroad

2009-10-29T12:00:00.000-07:00

Yesterday the Roni Deutch Tax Center – Tax Help Blog posted a new article with advice for American taxpayers living outside the country. As the entry explains, even if you move to another country you are still going to have to deal with the IRS and U.S. taxes. I have included a section of the article below, but you can find the full text here.

The IRS Still Wants your Money

You may be surprised to learn that even through you may move out of the country, and work abroad, you are still required to pay taxes. Every year you will need to file a tax return claiming your worldwide income, even if you have already paid taxes on the income in the country you are living in. This applies to both earned income (such as wages or self employment income) and unearned income (such as capital gains, interest and dividends, etc).

Foreign Earned Income Exclusion

If you have been earning income while living abroad for more than a year, then you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. It would allow you to exclude up to $91,400 of foreign income for the 2009 tax year. The requirements depend on which country you are residing in, how many days you have been living there, and your worldwide income. This credit can be especially beneficial to taxpayers who might be subject to double taxation (those who have to pay taxes to both the U.S. government and their local tax authority). You can use the foreign income exclusion form (IRS Form 2555) to claim this deduction, but be sure you speak with a tax professional specializing in foreign income before sending off your return.

Foreign Tax Treaties

Fortunately, the United States has made tax treaties with several foreign countries to make paying taxes less difficult for some Americans living abroad. These treaties allow qualifying taxpayers to pay a reduced tax rate. Some are even allowed to be exempt from reporting foreign income. However, do not get too excited just yet. Not every foreign country has made an agreement with the U.S. government, so be sure to check out IRS Publication 901, and speak to a qualified expert before you begin taking advantage of treaty related tax benefits.

IRS Reminds Taxpayers of the Expanded Recovery Act Tax Credits

2009-10-29T11:59:00.000-07:00

As the seasons change, the IRS is reminding taxpayers that they can weatherize their homes and be rewarded for their efforts. According to this recent press release, homeowners making energy-saving improvements this fall can cut their winter heating bills and lower their 2009 tax bill as well.

The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the non-business energy property credit and the residential energy efficient property credit.

Non-business Energy Property Credit

This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count.

By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2009 federal income tax return. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.

Residential Energy Efficient Property Credit

Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property.

Latest Good Reads

2009-10-29T11:58:00.000-07:00

Estate Tax: Why don't the Dems get it?

Revamping Philadelphia’s Tax System.

Have You Heard of Groupon?

The Responsibilities of a Tax Preparer.

A Tax Credit So Silly Even a Four-Year-Old Can Exploit It.

IRS Advisory Committee Issues Tax Administration Report.

The 25 Most Powerful Women in Banking.

1st UBS Client Charged By US Gets Probation In Tax Case

2009-10-28T13:04:00.001-07:00

The results are in for the first U.S citizen to be tried in a UBS offshore banking case. Steven Rubinstein – an accountant from Florida – was ordered to pay a $40,000 criminal fine and sentenced to 3 years of probation after pleading guilty in court.

The sentence was lighter than the recommendation of prosecutors, who sought a one-year prison term for Rubinstein. He faced a possible sentence of 18 to 24 months under advisory sentencing guidelines.

Rubinstein was sentenced in a Florida federal court for filing a false tax return. Prosecutors charged him in April and he pleaded guilty in June.

Prosecutors said Rubinstein communicated with UBS bankers from 2001 to 2008 about the purchase and sale of securities worth more than 4.5 million Swiss Francs. They also said Rubinstein repatriated roughly $7 million into the U.S. to buy property and build a home in Boca Raton, Fla.

Continue reading at WSJ.com…

New York, New Jersey Counties Lead in Property Taxes

2009-10-28T13:03:00.001-07:00

From Bloomberg.com:

The counties of Westchester, New York, and Hunterdon, New Jersey, charged the highest property tax bills in the U.S. during 2006-2008, the Tax Foundation said. All of the 10 top-paying counties were in the two states.

The median annual tax bill in Westchester, north of New York City, was $8,404 in the three-year period, the Washington, D.C.-based research organization said today in a study based on U.S. Census data. Hunterdon homeowners paid $8,347.

“In seven New Jersey counties and three New York counties, the median property tax over 2006-2008 is more than 7 percent of median household income, compared with the national median of 2.85 percent,” the study said.

New Jersey’s property taxes are an issue in the state’s Nov. 3 election for governor. Democratic incumbent Jon Corzine said on Oct. 23 he would halt growth of property taxes if re- elected. Republican challenger Christopher Christie said he would cut taxes across the board.

New Jersey ranked first among states with a $6,320 median property tax bill in 2008, Census Bureau data last month showed. States with the lowest median real-estate taxes last year were Louisiana, $188; Alabama, $383, and West Virginia, $457, the bureau said.

“The Northeast remains the area with the highest property taxes,” Gerald Prante, a Tax Foundation economist, said at the time. “These states also have high per capita income, and the highest property tax bills, in terms of dollar amounts, are usually found in the areas with the highest incomes.”

The top 10 counties for property tax bills in 2006-2008 were: Westchester, New York, with $8,404; Hunterdon, New Jersey, with $8,347; Nassau, New York, at $8,306; Bergen, New Jersey, with $7,997; Rockland, New York, at $7,798; Essex, New Jersey, with $7,676; Somerset, New Jersey, at $7,676; Morris, New Jersey, with $7,310; Passaic, New Jersey, at $7,095, and Union, New Jersey, with $7,058. The national median is $1,854, the Tax Foundation said.

Hiring A Tax Attorney vs. Negotiating with the IRS on your Own

2009-10-28T13:02:00.000-07:00

Earlier this week we posted a new entry to my law firm’s Tax Relief Blog describing the benefits and advantages of hiring a tax attorney versus negotiating a settlement with the IRS on your own. You can check out a snippet of the blog entry below, or check out the full version at the Roni Deutch Tax Relief Blog.

Being faced with a huge back tax liability can be scary to say the least. The IRS can use aggressive collection tactics such as bank levies and wage garnishments to take your money. Fortunately, the IRS has a number of settlement programs designed to help taxpayers resolve their IRS tax debts including Offers in Compromise and placement into Currently Not Collectible status. Although taxpayers have the right to negotiate directly with the IRS, it is often a good idea to hire a professional, such as an attorney, to represent you in the negotiations. However, there are some instances where a taxpayer may be better off working directly with the IRS.

Knowledge and Experience

The biggest reason to consider hiring a tax lawyer to negotiate a tax debt settlement with the IRS is because of the knowledge and experience they bring to the table. Tax attorneys may spend years studying the IRS tax code and honing their negotiation skills. They usually have experience in successfully helping taxpayers resolve their debts. Negotiating a settlement will require a lot of knowledge of complicated IRS laws and tax codes. Therefore, if you are going to do it on your own, then you will need to spend a decent amount of time researching tax law before you begin. You might even want to purchase a few books on tax debt resolution so that you can be as familiar as possible with the process.

Convenience

Another reason to consider hiring a tax attorney is the convenience it brings. Not only can negotiating with an IRS agent be stressful, but it also requires a lot of work. In order to qualify for most tax settlement programs, you will need to present the IRS with full financial disclosure and convince them you cannot afford to pay for basic living expenses in addition to a tax payment. Compiling all of this data, calculating the correct expenses, and presenting a case to the IRS is a very complicated process, and can easily take weeks of effort to complete.

The only exception is if you are trying to get placed on a Streamlined Installment Agreement, which does not require a financial disclosure as long as the taxpayer’s debt is under $25,000 and they intend to repay the entire tax liability within five years. Therefore, if you meet the conditions for a Streamlined Installment Agreement then you may be able to negotiate your own settlement. However, if you are hoping to qualify for an Offer in Compromise or a standard Installment Agreement then you might want to consider speaking with an attorney.

Mortgage Activity Fell in U.S. Last Week

2009-10-28T13:01:00.000-07:00

According to UPI.com, the amount of mortgage applications fell by around 12% in the United States last week. The Mortgage Bankers Association made the announcement at the end of last week, and also reported that the Refinance Index fell by over 16%.

The average interest rate for 30-year, fixed-rate mortgages decreased from 5.07 percent to 5.04 percent with points rising from 1.13 to 1.25, the organization said.

Rates for the average 15-year, fixed-rate mortgage increased slightly from 4.51 percent to 4.53 percent. Points in 15-year, fixed-rate mortgages fell from 0.96 to 0.78.

The average interest rate for one-year adjustable rate mortgages fell from 6.86 percent with an average 0.31 points to 6.79 percent with 0.29 points, the report said.

What to Expect When Contacting the IRS

2009-10-27T14:36:00.000-07:00

My marketing team shot another video last week for our tax tips video series. In this episode, Edward Lester discusses what you should expect when contacting the IRS. You can watch the embedded video below and be sure to head over to my YouTube channel to subscribe to my videos.

3 Tips for a More Secure Retirement

2009-10-27T14:35:00.000-07:00

Planning for retirement is no simple or streamlined task. However, one of my favorite bloggers, The Motley Fool, posted 3 great trips this morning to help anyone with their retirement planning. You can check out a segment of his article below, or click here to read the full version

Successfully planning for your retirement takes a lifetime of hard work and dedication. After going to all that trouble to provide for your golden years, the last thing you want is to blow it by making mistakes when the time comes to start spending down your retirement savings.

IRAs, 401(k) plans, and other methods of saving for retirement give you valuable tools that you can use to boost the value of your portfolio. When you start taking money out of these accounts, though, you need to remember that there's more involved than just asking for a check. Smart planning can make a huge difference in how much of your hard-earned money you actually get to keep.

How the IRS gets its due

Some of the best features of retirement accounts are their tax benefits. Traditional IRAs and 401(k) plans, for instance, give you a current tax deduction that can save you thousands in income taxes year after year.

After you retire, though, it's payback time for the IRS. Every time you take money out of a traditional IRA or 401(k), you create taxable income that will usually increase your tax bill. In addition, if you decide to retire before you turn 59 1/2, then an additional 10% penalty may apply if the withdrawal doesn't qualify for one of many exceptions to the penalty rules.

Given this, many investors choose to go with Roth IRAs if they can. But even with Roths, you'll want to be careful: Once you take money out of the Roth, it no longer generates tax-free income for you.

Electric-Car Companies Grab U.S. Cash to Blunt Risks

2009-10-27T14:33:00.000-07:00

From Bloomberg.com:

Electric-car makers ranging from Ford Motor Co. to California startups are using $11 billion in taxpayer funds to supply a market that doesn’t yet exist.

Fisker Automotive Inc., backed by a $528.7 million U.S. loan, said today it will join the rush to the assembly line by buying a closed Delaware plant from the former General Motors Corp. for $18 million. It will spend $175 million to refurbish and retool the factory to build plug-in hybrid cars.

Obama administration aid to spur demand for more fuel- efficient autos is luring companies including General Motors Co. and Nissan Motor Co. into the electric-car push. The result may be a supply of new vehicles that outstrips demand, said Michael Omotoso, a senior manager for J.D. Power & Associates in Troy, Michigan.

“The U.S. government is saying we’ll have 1 million electric vehicles on the road by 2015; we’re saying it will take three to five years longer,” Omotoso said. “Realistically, manufacturers could be selling 80,000 to 100,000 by 2015.”

Investors betting on acceptance of electric autos include Kleiner Perkins Caufield & Byers, the venture-capital firm that employs former Vice President Al Gore and is backing Fisker.

“A huge amount of private capital is on the sideline, so a new locus for funding right now is the U.S. government,” said Ray Lane, a managing partner at Kleiner Perkins who works on the firms’ alternative energy investments. “The Department of Energy has stepped into the role of private capital, at least temporarily.”