Don't Mess With Taxes

Actually, we get e-mails. And the Labor Day break seemed a good time to share some of those communiques.

Let's start with Mary, who is curious about the new-found wealth of the late Leona's dog, Trouble:

"In the event she’s unable to spend the $12 million in her lifetime (less whatever estate taxes dogs are required to pay), does she get to decide who to leave the rest to? …just wondering. I have a new pack of hooves and while I love my dog, I’m thinking for a few million I may be able to convince her of the advantages of buddying up with Pooch Helmsley. Though I’m not so sure…not that often I pop for the hooves."

It looks like to me, Mary, that "Article Five, Ultimate Dispositions" in Leona's will covers this. It says: "If upon my death or upon the termination of any trust created under my Will there shall be no beneficiary then entitled to receive the residue of my estate or the remaining assets of such trust, as then constituted, shall be distributed to THE LEONA M. AND HARRY B. HELMSLEY CHARITABLE TRUST, to be disposed of for charitable purposes in accordance with the provisions thereof."

So Trouble's last will and testament will have no bearing on any money that might be in the account when she goes to join her master in the great hereafter.

Next, we have Pam, who starts her inquiry with "This doesn't seem fair. But I imagine that's how most of your blog responses begin..."

The seemingly inequitable situation that Pam has encountered is that her business' e-mail marketing provider has notified her that beginning Oct. 1, it will be collecting sales taxes from her for the service.

Unfortunately for Pam and others in the same predicament, as the economy became more service oriented, states were finding that simply taxing the sales of tangible goods just wasn't cutting it, cash flow wise. So they decided that they needed to also tax such services to keep their treasuries flush.

The Federation of Tax Administrators put together a comprehensive look at state taxation of services. It's a couple of years old, but it gives you a good idea of how widespread this practice is and is becoming. You can reach FTA's full survey results, as well as try out its searchable database to see which services your state taxes. The Center on Budget and Policy Priorities also has a good analysis of the issue.

Ricemutt from Experiments in Finance dropped me a note about possible tax consequences of a reward she got at work. Her particular situation was a bit unconventional, but I thought I'd use the inquiry to address the general issue of workplace extra pay.

Generally, the IRS expects added compensation you receive for outstanding work to be included in your gross income and shown on your Form W-2, regardless the type. Cash is obvious, but the rules say that the fair market value of an award of goods or services also must be counted as income to you.

There are some exceptions, known as de minimis gifts (e.g., the typical, small appreciations handed out at holiday time), but other awards, rewards or bonuses are taxable income.

What's that old saying? The reward for doing a good job is more work. Well, we can add "and taxes" to that!

Fellow personal finance blogger Dimes to Dollars didn't officially write, but rather left a comment on my foreclosure and taxes item. Her observation:

"I'm glad to finally be seeing some info about this stuff, because it is SO confusing. I really hope the law making mortgage forgiveness nontaxable income is NOT passed, because a lot of the people who would benefit will be undeserving (like Casey Serin and other failed flippers)."

Good news, Dimes. In my reading of the bills that are proposing that forgiven mortgage debt not count as taxable income, I see specific reference to residential real estate. Flippers, though, tend to not occupy the properties they buy and sell, rather holding them unoccupied or renting them.In these cases, it seems to me, that the real estate would be classified for tax purposes as investment property and therefore not eligible for the forgiven debt tax break.

The Administration seems to be reading the legislation that way, too, since Dubya mentioned "it's not the government's job to bail out speculators … " when he unveiled his support of efforts to help out folks facing foreclosure (blogged here).

Finally, Doug recently sent me a single word inquiry: Pagination?

Now I don't think this has anything to do with taxes, unless you consider that paper filers are asked to send in their multiple forms and schedules according to the documents numerical designation. Read more about this OCD penchant of the IRS here.

Rather, I took it to mean that Doug was wondering about how to get to previous pages of Don't Mess With Taxes postings that are no longer on the main page.

Well, I'm not really a tech whiz, which is why I use TypePad for my blog. I asked the support crew about this option, and was told that, unfortunately, it's not available and not likely to be for a while because they say it requires a lot of coding and formatting and they have other projects ahead of this.

Right now, there are a couple of "interior" ways to do read previous posts.

First, if you click on the last post shown on the home page, either the headline or the permalink tag at the end, it will republish that post only. At the top of it you'll find options to read the next item or the previous item.

It seems like to me that TypePad could take that existing feature and make it a header or footer option on all posts all the time, but, as I said, I'm not really a tech whiz. Anyway, you can use that to bounce around the blog.

Also, you can click on the monthly archives link in my right navigation bar. When the ones from the month you choose show up, at the top is an option to go to previous or past month postings.

Since getting Doug's question, I've been working on a manual fix that I hope to implement in a couple of days. I'll let all y'all know when it's ready. Until then, I appreciate your added efforts to dig deeper into the ol' blog.

And now, I return you to your regularly scheduled Labor Day holiday.