The key, of course, is that the newly purchased home needs to be a primary residence—no rental properties or vacation homes, thank you. Current homeowners within the income guidelines can receive a $6,500 credit after purchasing a new home—new homeowners will still receive $8,000.

Expanded First-Time Home Buyer Tax Credit Becomes Law [U.S. News & World Report]

(Photo: nicolas.boullosa)

Sure, you could make friends with a lawyer, invite her to a cookout, then corner her in your kitchen. But this book was co-authored by a lawyer, so it's an even less expensive way to find out some answers—and you don't have to go through the embarrassment of explaining why the relationship didn't work with that ex.

Here are three sample questions:

Q: Hard to believe, but my boyfriend's credit is even worse than mine. If he asks me to become "Mrs. Sucky Credit" does joining in holy matrimony mean I'll be saddled with his debts as well?

A: Ah, romance. Though taking on his debt would be a real sign of true love, luckily for you, debts that were individually incurred before marriage don't become part of your credit history. If you get joint credit cards or joint bank accounts, though, keep in mind that debts accrued during marriage will have your name on them even if you weren't the one who made the purchase. Credit reports are individual, so debt that was brought into the marriage stays on the report of the one who accrued it. But remember you can, even after marriage, continue to get credit cards in your name alone.

At some point you two might want to buy a home or make a big purchase like a car together. To make joint loans possible, you should encourage your mate to regain good credit by paying bills on time and establishing a better record. After all, it would be a shame after getting married to find out that it's till debt do you part.

Q: Uh-oh, after buying that set of fancy cookware I remembered something very important: I can't cook. Now it's sitting there in my kitchen mocking me. Can I just cancel payment and send it back?

A: Anyone who's ever watched late night infomercials knows there's no shortage of truly useless products. And anyone who's ever watched late night infomercials also knows that the later it gets, the better idea these products seem-until you wake up the next day wondering if you really bought it or if it was just a bad dream. While there are protections for consumers against unauthorized charges on your credit card, most people assume you can't dispute a credit card purchase you actually made.

Turns out that's not true. You can dispute a credit card purchase even if you did make it, but before you buy something find out the return policy. Contact the merchant first and put your complaint in writing. If the merchant refuses to take the product back and reverse the charge, then call your credit card company. Often the charge will be removed during the investigation. But if the credit card company ultimately sides with the merchant, you will have to pay the cost and the finance charge.

What you must keep in mind is that there is no legal obligation for a store to take back items you purchased except pursuant to the return policy it has stated. There are, however, a few types of retail contracts that by law you have the right to rescind. If a salesperson comes to your door to sell you a product for more than twenty-five dollars, under federal law you can automatically return it for up to three days after purchase. In many states you also have three days to rescind a health club membership when you realize there's no way you're hauling tail to that gym, and under the law of many states, you have five days to cancel the purchase of a time-share. These are all things to weigh when you're considering making your next purchase, either for that crock of cookery or that unused ab machine now doubling as a towel rack.

Q: I just made a ton of money selling my ex-boyfriend's clothes, stereo, TV, and almost-brand-new video game console on eBay! I don't have to pay taxes on the money I earned, do I? (And please keep in mind, having dated that jerk for a year I really do believe I earned the money.)

A: Interesting question, and it's one that a lot of "creative entrepreneurs" find themselves pondering. As you can well imagine, the IRS is not likely to say, "Oh, you made money on your old junk? Good for you and enjoy your pocket change!" Rather, all income-including gambling earnings; lottery, raffle, and horse and dog race winnings; church bingo payouts; profits from illegal activities (recall Al Capone was put away for tax evasion); and small business profits-is taxable. Your first move is to figure out if you're actually making a profit. If you're just looking to clean out your garage, you are likely selling the items for less than you bought them and so would not be making a profit. But if you are buying goods from a wholesaler and reselling, or if you are producing the goods and selling them like a business for more than the cost of manufacturing, then you are running a profitable business. On eBay, one man's trash may be another man's treasure, but to the IRS, that treasure can and will be taxed.

Our readers seem to be pretty interested in what is and isn't allowed under the law, so we thought you might find it interesting. Here's the website and Amazon page.

So Sue Me official site

As part of the tax settlement, U.S. tax authorities will file a treaty request with the Swiss government to obtain the data on the American UBS clients, IRS Commissioner Doug Shulman said on a conference call with reporters. The Swiss government will then direct UBS to turn over the account data to the IRS, the agency said.

Mr. Shulman said the legal agreement allowed the IRS to obtain substantially all the information it was interested in.

The methodology used to choose the names has not been disclosed, but there is some speculation that "violations of Swiss law would be a factor." Supposedly, the action doesn't violation Swiss banking secrecy laws.

UBS to Give 4,450 Names to U.S.[WSJ]

The timing of the rule changes, which lets defrauded investors claim investment fraud losses stretching back five years rather than two, is important because Oct. 15 — the tax filing deadline for those who filed for an automatic six-month extension — is only weeks away.

David Earley, tax senior manager for New York-based Deloitte LLP, explains the benefits for fraud victims:

Under the IRS' revised rules, investors defrauded in any Ponzi scheme after Jan. 1, 2008, can declare their net operating loss from the investment a "theft loss," which may be carried back five years instead of two, which was the case under the old rule. That is important, Mr. Earley said, because a theft loss is considered an ordinary loss that allows taxpayers to offset other types of income fully.

"It's a very beneficial loss," he said. "If you have to take a loss, that's the kind of loss you want to have."

"Beneficial loss" has the hollow ring of "moral victory" to it. But it must be better than an "unbeneficial loss" or "immoral defeat."

IRS rules for victims of fraud in focus as deadline looms [Investment News]
(Photo: stuartpillow)

Step 1: Trust your life savings to a man who seemed nice at the Beth-El potluck supper.

Step 2: Find out that the nice man is in fact a demon who took all of your money and either used it to put gold accents on his boat or throw it in the toilet.

Step 3a: Prepare your taxes. No income this year? How about last year? 2007? 2006? Great! You get that back too!

Step 3b: No income in the past but, now that you're broke you need to get a job? Don't worry! If you lost enough money, you can carry the loss forward and live tax free for the next 20 years.

Step 3c: Read this article if any of this is unclear.

Step 4: Keep your eye out for a new financial guru at the next potluck.

Tax Breaks for Ponzi-Scheme Victims [SmartMoney]
(Photo: fimoculous)

1. Graduating from college
2. Getting your first job
3. Getting married
4. Birth of a child
5. Buying your first home
6. Sending your child to college
7. Changing jobs
8. Working at home
9. Selling your home
10. Buying a second home
11. Getting hit with a major illness or injury
12. Getting divorced
13. Retiring
14. Death of a spouse

(Photo: tjean314)

"We found evidence of only 2 instances where IRS personnel conducted visitations to shred/burn facilities in the past 2 fiscal years," the report notes. "Not all Territory Managers were even able to identify the contractor who provided their shred/burn services or where they were located. None of the four contractor sites we visited had ever received a request from the IRS to inspect their facility or onsite records."

In response, the IRS says it will keep close watch on both its dumpsters and contracted employees. Honest!

Increased Management Oversight of the Sensitive but Unclassified Waste Disposal Process Is Needed to Prevent Inadvertent Disclosure of Personally Identifiable Information (Audit # 200830008) (pdf) [Treasury Inspector General For Tax Administration]
Report: IRS Created Dumpster-Diver Swimming Holes [The Washington Post]
(Photo: sonyaseattle)

The Chicago Tribune gives the following example: "For a husband and wife who each earn $75,000, the new tables might mean a cut of $1,228 cut in payroll taxes. But their maximum new tax credit is only $800. So next year, they'd have to pay the extra $428 back."

So, as soon as you're done with last year's taxes, double check the new amount of your withholding here.

Pay close attention to your paycheck [Chicago Tribune]

(Photo: bknittle)

(Photo: stuartpilbrow)

via IRS Press Release:

"Phishing

Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim's identity, access bank accounts, run up credit card charges or apply for loans in the victim's name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Taxpayers who receive unsolicited e-mails that claim to be from the IRS can forward the message to phishing@irs.gov. Further instructions are available at IRS.gov. To date, taxpayers have forwarded scam e-mails reflecting thousands of confirmed IRS phishing sites. If you believe you have been the target of an identity thief, information is available at IRS.gov.

Hiding Income Offshore

Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through other entities. Recently, the IRS provided guidance to auditors on how to deal with those hiding income offshore in undisclosed accounts. The IRS draws a clear line between taxpayers with offshore accounts who voluntarily come forward and those who fail to come forward.

Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans. The IRS has also identified abusive offshore schemes including those that involve use of electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

Filing False or Misleading Forms

The IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to. Frivolous information returns, such as Form 1099-Original Issue Discount (OID), claiming false withholding credits are used to legitimize erroneous refund claims. The new scam has evolved from an earlier phony argument that a "strawman" bank account has been created for each citizen. Under this scheme, taxpayers fabricate an information return, arguing they used their "strawman" account to pay for goods and services and falsely claim the corresponding amount as withholding as a way to seek a tax refund.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Return Preparer Fraud

Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients' refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of the positions on the list are subject to a $5,000 penalty. More information is available on IRS.gov.

False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is "Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service."

Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into IRAs or companies owned by their IRAs at less than fair market value to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity which is considered prohibited.

Disguised Corporate Ownership

Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising the ownership of a business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a "corrected" Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to divert income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623."

Beware of IRS' 2009 "Dirty Dozen" Tax Scams [IRS] (Photo: numberstumper)

16. Attach everything you're supposed to, sign where you're supposed to, and use good penmanship. If your return looks sloppy, they're going to think your numbers might be sloppy.

15. Use exact numbers on your non-cash contributions

14. You say it's a business, the IRS says it's a hobby, you deduct big losses from it, and they audit you. And then you cry like a little girl.

13. This is a no-brainer but if you mess it up, it's a big red flag: What you report as income must match the income forms the IRS is getting from the people who gave you the income.

12. Conformity is good. If your deductions are way out of line with the national average, sound the klaxons. For someone earning $50-$100k, that's $5,812 in deductible taxes, $2,703 in charitable gifts, and $8,946 in interest.

11. All your 1099s are belong to them. Report all interest, dividends and miscellaneous income. If you got a 1099, they're getting it too.

10. Round numbers belong in math problems, not on your tax return. Unless it really was a round number. But it probably wasn't. Just use an exact number, and if you can't remember it exactly, make it look like a real number. You should round cents to the nearest dollar. Just don't round your dollars, if you know what I'm saying. Joe Francis, the guy behind "Girls Gone Wild" does not know what I'm saying and that's why the IRS busted him when he claimed $333,333.33 in false expenses.

Here's some more things that might prod the IRS to go jihad on your return:

9. Claiming tax shelter investment losses

8. Claiming complex businesses expenses

7. Your business involves lots of cash and tips

6. Claiming rental expenses

5. You were audited in the past and had to cough up because of it

4. You're a shareholder or partner in a company that got audited

3. Complex tax transactions without much explanation

2. You're just too nice! and claimed large cash contributions to charities compared with how much you make.

1. Someone finked on you.

We could also call this, "16 reasons I use an accountant."

(Photo: azrainman)

Form 4868 [IRS] (Photo: Alberto Cueto)

* The 11 Most Overlooked Tax Deductions — There's no need to pay more taxes than you owe, and this piece will help identify deductions often overlooked. We even found one that could save us some nice coin.

* 5 Hidden Tax Breaks for Homeowners — At least there's some good news on the housing front — being an owner gets you several tax breaks. We especially like the "energy efficient home improvements" tax credits. If you didn't take advantage of them in 2008, you now have another year to do so. And 2009's options are much broader thanks to the recent government stimulus. New windows, anyone?

* 10 Things the IRS Won't Tell You — The most pertinent for those of you still waiting to do your taxes is #8: "April 15 isn't necessarily a hard deadline." Really? Yep. But you still need to file if you want to go past the 15th. One simple form will get an extra six months for those ultra-procrastinators out there.

So, now that we've covered paying our taxes, isn't it about time to discuss the more fun topic of what to do with the refunds we receive?

— FREE MONEY FINANCE (Photo: Alberto Cueto)

CNN says:

Those most likely to be overpaid are:

Anyone who holds more than one job. You will get paid the Making Work Pay Credit twice, up to $400 ($800 for a joint filer) from your first employer and up to $400 ($800 for a joint filer) from your second employer.

Joint filers whose spouses work. Each spouse will end up being paid the credit for married couples by each of their employers.

There's a twist, too. Because of the way the withholding tables were set up, each working spouse may be paid up to $600 this year — instead of up to the $800, Mezistrano said.

In other words, the husband would receive $600 at his job and the wife $600 at her job, for a total of $1,200. Since they're only entitled to $800 total as a couple, that means they would have to pay $400 back to the IRS — or see their refund reduced by that amount.

Anyone who receives income from a rental property or investment, such as interest and dividends. Your employer only knows about the income you earn at the company. If you receive other income that increases your modified adjusted gross income — or even pushes you past the income limits for the credit — you may end up owing the IRS some or all of the credit you received in your paycheck.

Anyone who started receiving their credit at the end of Febuary or anytime in March. The withholding tables are structured so that payments starting in April will add up to $400 for single filers and $800 for joint filers by year end. If payments start sooner than that a tax filer may actually receive a bit more than he's due by Dec. 31.

Conversely, if your employer doesn't start your payments until the end of April or in May — there's no penalty if an employer doesn't meet the April 1 deadline — you may end up getting a little less of a credit than you're entitled to, in which case you can claim the rest when you file your 2009 tax return.

Wondering if you've got your withholding right? Use this IRS calculator to find out. The CNN article has more information about the credit, who is eligible, and who isn't.

Here comes your stimulus bonus [CNN]

For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year," said IRS Commissioner Doug Shulman. "This deduction enables taxpayers to buy now and get cash back later on their tax returns."

The vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, and the deduction cannot be taken on your 2008 returns. For more information about how to qualify for this deduction, click here.

From the Washington Post:

The House bill would tax 90 percent of bonus income for individuals with a household income of at least $250,000. Senate Finance Chairman Max Baucus (D-Mont.) said the Senate bill would impose excise taxes of 35 percent each on both AIG employees and the company. Combined with the personal income tax paid by the executives, the Senate levy would capture more than 90 percent of the bonuses.

Separate provisions would target recipients who are foreign nationals. Both the Senate and House taxes would apply broadly to bonuses paid to employees of firms receiving government aid under the $700 billion Troubled Asset Relief Program (TARP), approved last year by Congress to prevent the collapse of the financial sector.

We suppose when all else fails, make the IRS do your dirty work....

House to Consider Tax on AIG Bonuses [WaPo]

"The IRS truly wants to go the extra mile to help taxpayers during these difficult economic times," said Jim Dupree, the IRS spokesman for Maryland, Virginia and the District of Columbia.

Among other services provided on Super Saturday, tax filers will be able to get copies of tax returns and assistance with letters, notices and levies on their wages or bank.

Make sure to bring along the following information:

• Valid driver's license or photo identification (self and spouse, if applicable)
• Social Security cards for all persons listed on the return
• Dates of birth for all persons listed on the return
• All income statements: Forms W-2, 1099, Social Security, unemployment, or other benefits statements, self-employment records and any documents showing taxes withheld
• Dependent child care information: payee's name, address and Social Security Number or Taxpayer Identification Number.
• Proof of account at financial institution for direct debit or deposit (i.e. cancelled/voided check or bank statement)
• Prior year tax return (if available)
• Any other pertinent documents or papers

Super Saturday - Get Free Tax Help March 21! [IRS]
IRS staff gets more flexibility to help struggling taxpayers [The Seattle Post-Intelligencer]
(Photo: Paul Keleher)

Expanded Tax Break Available for 2009 First-Time Homebuyers [IRS]
(Photo: sssteve.o)

Sen. Charles Grassley of Iowa, the top Republican on the Senate Finance Committee, blasted the decision to end the program, saying the IRS was caving in to "union-driven political pressure."

"The administration has decided that after spending nearly a trillion dollars in the stimulus bill to keep people working across the country, they are going to cut a program that provides jobs to hundreds of people during the middle of a recession, including 60 in Iowa," Grassley said in a statement.

[..]

Under the privatized program, the IRS turns over delinquency cases, often in the $5,000 to $10,000 range, that the IRS lacks the manpower to pursue.

The program costs about $7.6 million a year to administer, and private contractors are allowed to keep about a quarter of the taxes they collect.

The contracts the private agencies were working under expire Friday. The IRS has been reviewing the program for the past month to determine whether to extend the agreements.

Private debt collectors are notoriously ruthless, and cutting them loose is a big win for taxpayers. The federal government plans to replace the private debt collectors with 1,000 new federal tax collectors.

IRS to drop private debt collection program [AP]
PREVIOUSLY: I.R.S. Employ Of Private Debt Collectors Criticized
(Photo: olarte.ollie)

Stand Up to the IRS [The Tax Law Offices of Fred Daily via Lifehacker]

The Trib says:

Missing from the Kenmore Avenue property are the Ferrari coupe, Lamborghini convertible and a collection of nine other luxury and high-performance vehicles worth about $2.8 million that federal agents seized in November and December.

An investigation by the Internal Revenue Service, FBI and U.S. Postal Service that triggered the seizure was spurred by a "multiyear, multimillion-dollar online bid-rigging scheme," according to the documents.

Abby Cole, Russell Cole's wife started a computer chip supply business in the basement of her home in Arlington Heights in 1988. The business took off, and through 2003-2007 the Coles reported about $15.5 million on their income taxes.

Now investigators say that $14.2 million of that income was from fraud.

The scheme worked like this, Chip Factory, the Cole's company, would submit winning low bids to Best Buy, but then later charged a much higher price. Objections from Best Buy were quieted with gifts to employees.

In one example outlined in the documents, Chip Factory won a bid for 20 computer parts at $42 per part, while the next lowest bid was $72. Chip Factory later charged Best Buy $571 per part, according to documents.

The Coles have not been charged with a crime, but their fleet of sports cars have been confiscated.

Deerfield couple swindled $31 million from Best Buy, federal court documents say [Chicago Tribune]
(Tribune photo by David Trotman-Wilkins / February 17, 2009)

UBS has admitted that it worked in cahoots—in cahoots!—with its American customers to defraud the U.S. government, going so far as to encourage them to hide valuables in Swiss safe deposit boxes and use Swiss credit cards to evade the IRS. It seems they finally agreed to turn over the names to avoid indictment, which would have been disastrous for the bank.

It's unclear what will happen next when the names are released, but Marketwatch reported that the IRS plans to go after the American citizens who have used UBS accounts to avoid paying taxes:

"These taxpayers should note that today's agreement states that the U.S. Government will continue to seek enforcement of the summons," IRS Commissioner Doug Shulman said in a statement.

"People who have hidden unreported income off shore need to get right with their government," he added.

"A Swiss Bank Is Set to Open Its Secret Files" [New York Times]
"UBS to pay $780 million in tax conspiracy case" [Marketwatch]
"UBS pressed for 52,000 names in 2nd inquiry" [International Herald Tribune]
(Photo: Allie_Caulfield)

Free money from the IRS? [Consumer Reports Money Blog]
(Photo: hagner_james)

The LA Times says that the high stakes gambler was extended millions of dollars in credit from the various Las Vegas casinos that flew him in on private jets, and put him up in opulent suites. Court records show that Siddiqui, who earns a salary of $225,000 a year, lost as much as $167 million at casinos over the last decade.

Here's how the scam allegedly worked: Siddiqui convinced Fry's to eliminate the independent broker who was supplying their products — and instead demanded that vendors pay him through a fraudulent company.

According to the criminal complaint filed by U.S. Atty. Joseph P. Russoniello, Siddiqui deposited at least $167.8 million in PC International's bank account between 2005 and 2008. The IRS alleges that $65.6 million came from just five vendors. It is still investigating where he got the rest.

Some in the electronics industry say Siddiqui dictated what would — and would not — be sold at the giant electronics chain.

One company, Phoebe Micro Inc., sold Fry's $80 million worth of goods between 2003 and 2008. The firm gave Fry's a $4 million discount, the IRS said, but paid Siddiqui's company $24 million.

The IRS also documented six cases in which Siddiqui received $1 million to $5 million from vendors, then paid identical, or nearly identical, amounts to casinos within one to three days.

Debt finally topples a Las Vegas high roller [LA Times] (Thanks, kimdog!)

1. AMT Exemption
AMT exemption for individuals increased to $69,950 for married individuals filing a joint return; $46,200 for singles; $34,975 for married people filing separately.

2. Nonrefundable Personal Tax Credits
Allowed to the full limit of your regular tax and AMT liability, for tax years beginning in 2008.

3. Real Property Taxes
Homeowners can claim up to $500 as an additional standard deduction for tax years beginning 2008, 2009.

4. State and Local Sales Taxes Deduction Election
The ability to choose to deduct state and local general sales tax instead of state and local income taxes has been extended to apply to tax years prior to Jan 1, 2010.

5. Tuition Expenses Deduction
Deduction for this extended to December 31, 2009.

6. Eligible Educator Expenses Deduction
Teachers can do an above-the-line deduction of up to $250 for supplies, and this has been extended to apply to tax years starting 2008 and 2009.

7. Allowable Child Tax Credit
If the total of your child tax credit is greater than your total tax liability, you can get a refundable child credit worth up to 15% of your earned income over $8,500 up to the per child credit amount.

8. MACRS REcovery Period
15-year recovery period for qualified leasehold improvement property extended to property up and running in 2008 and 2009.

9. Electric Car Credit
For tax years starting after Dec. 31, 2008, there's a new credit for plug-in electric cars: $2,500 plus $417 for every kilowatt hour over four hours of battery capacity.

10. Disaster-Related Personal Casualty Losses
Those related to Federally-declared disasters are deductible regardless of if it is over 10% of your adjusted gross income.

(Photo: afagen)

10 Tax Deductions Freelancers Can Make [Freelance Switch via Lifehacker] (Photo: NabityPhotos)

Although only 56 senators responded to the survey, ten reported errors on their tax returns, and six have paid back taxes. Two of the senators that reported errors, Chris Dodd and Amy Klobuchar, had overpaid their taxes.

Our favorite response comes from the office of the reliably wacky Tom Coburn of Oklahoma:

After Dr. Coburn left the House, the House continued to pay him for three months. Apparently, they were very pleased with his service. However, because the payments were made in error Dr. Coburn returned all of the checks to Treasury. Yet, the House sent a W-2 to the IRS, but not to Coburn, reporting income that had been returned. After a long fight, the House and the IRS admitted their error and the IRS sent Coburn a corrected W-2. This is the government in charge of "stimulating" our economy.

(Photo: EricGjerde)

Free File Fillable Tax Forms is for tax ninjas who know exactly which forms to use, and whose incomes would otherwise disqualify them for free tax help. These are the same people who are likely to use either accountants or tax preparation software, but as IRS director of electronic tax administration David Williams points out: "... a lot of people say you have to provide [the online-forms option], so we've worked with the private sector to provide it, for free." It's a nice option to have, and the price is certainly right.

Free File [IRS]
Now taxpayers can file online free regardless of income [Seattle Post-Intelligencer]

8 Tips For Choosing A Tax Preparer

• Find out what the service fees are before the return is prepared. Avoid preparers who base their fee on a percentage of the amount of your refund or who claim they can obtain larger refunds than other preparers.

• Only use a tax professional that signs your tax return and provides you with a copy for your records.
• Avoid tax preparers that ask you to sign a blank tax form.
• Choose a tax preparer that will be around to answer questions after the return has been filed.
• Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
• Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys. Find out if the preparer belongs to a professional organization that requires its members to pursue continuing education and also holds them accountable to a code of ethics.
• Determine if the preparer’s credentials meet your needs. Does your state have licensing or registration requirements for paid preparers? Is he or she an Enrolled Agent, Certified Public Accountant, or Attorney? If so, the preparer can represent taxpayers before the IRS on all matters – including audits, collections, and appeals. Other return preparers can represent taxpayers only in audits regarding a return signed as a preparer.
• Before you sign your tax return, review it and ask questions.

If you think your tax preparer is shady, you can write a letter to the IRS or report them using this form (PDF).

Read This Before Choosing a Tax Preparer [IRS]
Be sure to make friends with Tax Cat on Facebook. Meow.

Postponement of Collection Actions:
IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.

Added Flexibility for Missed Payments:
The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.

Additional Review for Offers in Compromise on Home Values:
An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay may not be accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new second review of the information to determine if accepting an offer is appropriate.

Prevention of Offer in Compromise Defaults:
Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.

Expedited Levy Releases:
The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases for levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

First-Time Homebuyer Credit: Those who bought a principal residence recently or are considering buying one should take note. This unique credit of up to $7,500 works much like a 15-year interest-free loan. IRS.gov has more details and answers to common questions.

The Recovery Rebate Credit:
This credit is figured like last year's Economic Stimulus Payment except that Recovery Rebate Credit amounts are based on tax year 2008 instead of 2007. Most people already received their full benefit in the form of the Economic Stimulus Payment. However, a taxpayer may qualify for the Recovery Rebate Credit, if, for example, he or she did not get an Economic Stimulus Payment, had a child in 2008 or had a change in income level. If you receive this credit, it will be included in your refund and will not be issued as a separate payment. See the Form 1040 Instructions, Fact Sheet 2009-3 or the information center on IRS.gov for details.

Standard Deduction for Real Estate Taxes:
Taxpayers can claim an additional standard deduction, based on the state or local real estate taxes paid in 2008. The maximum deduction is $500, or $1,000 for joint filers.

Mortgage Workouts and Foreclosures:
For most homeowners, these are now tax-free. Eligible homeowners can exclude debt forgiven on their principal residence if the balance of the loan was less than $2 million. The limit is $1 million for a married person filing a separate return. See Form 982 and its instructions for details.

1. Pay deductible expenses by credit card
Charge a business expense, make a charity donation, or make another deductible expense in December, and it still counts for 2008. This way you don't have to actually pay it until the bill comes in January.

2. Put your holiday bonus in an IRA
For low-to-mid income earners, you may be able to deduct all or some of your IRA contribution from your taxes under the IRS "Saver's Credit." More info here.

3 .Give to charity
Give to the needy, cash or clothes, and follow proper documentation procedures. It feels good, and you can deduct it from your taxes. IRS Publication 526 has the info you need.

4. Incorporate!
If you have a second income, think about incorporating yourself as an "S" corporation and possibly getting big tax benefits. You can get Social Security/Medicare tax advantages. "The tax reduction, say, for a reservist with his own small business can be $3,000 to $8,000 per year, depending o the volume of the business and type of industry," a CPA told USAA mag.

5. Make An Extra Mortgage Payment
Make your January '09 mortgage payment now and deduct its interest this tax year.

'Tis the Season — For Tax Prep: A little work now can pay off next spring. [USAA Magazine]

If you have a friend who's working overseas, let her know to watch out for this:

I'd like to tip you about a scam going around Japan right now, and possibly Asia (I live and work in Japan), and maybe other places. It's a fax from being sent to foreigners, and in my case to schools. I've received it once and many of my friends have too.

The form is attached [pdf], claiming to be from "Internal Revenue Service IRS.gov", and prompts the recipient to complete form W-8BEN, which is a tax withholding form. Sure, sounds legit at first, but scroll to the 2nd page (page 1 of the fax) which has a W-8BEN "Substitute Form" that asks for personal info including your bank account number, SSN, and a copy of your passport among other things.

Then it asks the person to fax the form back to +1-206-888-1766 within one week to get a ficticious w-9095. Please inform your readers that this is a scam! I (nor my boss) don't know how this person got the fax numbers, and one of my friends recieved this even though she's from England so perhaps they are trying random numbers.

If you receive one of these faxes, report it to the Treasury Inspector General for Tax Administration at ustreas.gov/tigta.

"I don't think that any bank that goes to the extent that UBS has gone through to avoid doing what their agreements with the United States require them to do, should be allowed to continue to do business unless they clean up their act," Levin said.

The Senator also revealed a list of "sneaky tricks" that the bank was using to skirt U.S. laws and provide services that it was not licensed to offer. Here's the list:

Tax Haven Bank Secrecy Tricks

• Code Names for Clients
• Pay Phones, not Business Phones
• Foreign Area Codes
• Undeclared Accounts
• Encrypted Computers
• Transfer Companies to Cover Tracks
• Foreign Shell Companies
• Fake Charitable Trusts
• Straw Man Settlors
• Captive Trustees
• Anonymous Wire Transfers
• Disguised Business Trips
• Counter-Surveillance Training
• Foreign Credit Cards
• Hold Mail
• Shred Files

Prepared by the U.S. Senate Permanent Subcommittee on Investigations, July 2008.

One UBS banker has already plead guilty and admitted to (among other things) smuggling diamonds purchased using a US client's Swiss bank account into the country by hiding them inside tubes of toothpaste. Classy!

Sen. Levin: Shut Down Giant Swiss Bank UBS
Investigation Reveals Secrecy Tricks Allegedly Used by Swiss Bankers [ABC News]

From ABCNews:

In court documents, federal prosecutors say UBS bankers helped set up many of the secret accounts in Liechtenstein and, overall, hid as much $20 billion belonging to US citizens.

"Sums are enormous and UBS appears to have been particularly aggressive in the way they marketed their activities in the US and elsewhere," said Christensen. "So UBS is extremely vulnerable to losing their license in the US."

One UBS banker, Bradley Birkenfield, pleaded guilty last month and admitted to smuggling cash and diamonds for Americans trying to hide their wealth from the IRS.

In federal court documents obtained by ABC News, federal prosecutors allege that Birkenfield's bank trained bankers traveling to the US in "techniques to avoid detection" by law enforcement authorities, "including training bankers to falsely state on customs forms that they were traveling into the United States for pleasure and not business".

There will be Senate committee hearing tomorrow and ABC says that "among those called to testify are foreign bank account holders, including one of the wealthiest men in Los Angeles," and that the tax dodgers could face criminal prosecution.

Hundreds of Super Rich Under Investigation [ABCNews]

Kieber reportedly sold three CD's full of names and data to tax authorities to 12 countries including Germany, Great Britain, France, Italy and the United States.

Tax authorities in Italy published the full list of names.

In Germany, the disclosures led to the arrests of several prominent CEO's on charges that had evaded millions of dollars in taxes.

A former UBS private banker, Bradley Birkenfeld, has agreed to a plea deal and is reported to be cooperating with US authorities in bring charges against American citizens on tax evasion charges.

The Liechtenstein bank, LGT, is owned by the tiny country's ruling family led by Prince Hans-Adam II.

Kieber's Washington lawyer, Jack Blum, says Kieber should be considered a whistleblower and a hero, not a thief, for revealing how the super rich hid billions of dollars using the Liechtenstein bank.

Whatever you think of thieves (we're not fond), you have to admit that it takes serious balls to be comfortable pissing off a fairly large percentage of the world's super-rich and powerful tax evaders.

Day of Reckoning? Super Rich Tax Cheats Outed by Bank Clerk [ABC News]

IRS Increases Mileage Rates through Dec. 31, 2008 [Press Release]

(Photo: beebo wallace)

Elijah writes:

During the Tax year 2007 I got married, and also moved to a new state. This added a few extra levels to my tax returns, so I decided to buy a copy of TurboTax to speed the process.

I entered all of the data for myself and my wife, and on the last step the software ran through a process to see if I was in danger of an audit. After checking all my stuff it gave me a "Green" rating, meaning that I was at very low risk of an audit. It also told me that my wife and I would get approx $4,000 as a return. I was pretty stoked.

Before I eFiled I printed off the return to check it over manually and boy, was I glad I did. When you get to the "Moving Expenses" page within TurboTax you have 3 boxes to enter individual expenses. We had a freight company, which cost $1,635 and hotel stays which were $335. What I hade done without noticing was miss the TAB between boxes, so my tax return showed a moving expense of $1,635,335. I can not, for the life of me, figure out why the software wouldn't have some sort of upper limit for deductions that would catch something like this, or why it seemed to think a 7 figure deduction wouldn't get me audited. After correcting the error my return was calculated to be about $2000.

Between that and all the last minute online filing fees I think I will take my tax preparations to a reputable accountant next year, rather then trusting lackluster software.

Whatever you choose to do, remember, tax prep fees are tax deductible.

(Photo: Getty)

JK Harris wasn't just misrepresenting its services. It also made it very difficult for customers to resolve any questions or complaints:

According to Cooper's complaint, JK Harris regularly advertised it had more than 450 offices nationwide. However, the complaint contends that only the main office in Charleston handled consumers' files.

If a consumer wanted to meet with a JK Harris representative about their file they had to physically travel to Charleston.

The other offices were staffed only by sales representatives who could not help consumers with their tax problems.

JK Harris also claimed consumers' cases would be handled by "tax experts" or "ex-IRS agents" when in fact the people handling the cases did not fit those descriptions and did not have tax expertise.

JK Harris case managers changed frequently, and consumers complained they often had to provide the same information to the company several times.

Under the terms of the agreement, JK Harris now has to:

• pay refunds to customers if it can't help them with their tax debts, or if the IRS doesn't accept the OIC;
• provide accurate information on when a customer can qualify for an OIC and how frequently the IRS accepts such claims;
• stop lying with its advertising and sales practices;
• never offer or perform credit repair services.

If you know someone who lives in one of the following states, they should contact their attorney general's office for more information on how to qualify for a refund from JK Harris (we have the number for NC because that's where the article was published):

If you owe back taxes and aren't sure what to do about them, the best thing to do is pay a visit to an experienced and knowledgeable accountant for help. He or she should be able to help you figure out how much you owe (in some cases you may have actually overpaid, and simply filing the appropriate forms for the missing years will solve your problem) and help you set up a repayment plan that fits within your budget.

"'Pennies On The Dollar' Tax Relief Company Ordered To Pay Refunds" [Digtriad]
(Photo of sneaky snake: Getty)