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October 2010

Rum tax pits islands against each other

Yo ho ho and a generous rum tax break! A long-standing U.S. tax policy has liquor manufacturers making off like bandits, or rather like pirates, since the tax subsidy and booze production are based in Caribbean Islands. Uncle Sam collects a $13.50 per proof gallon excise tax on distilled spirits imported into the United States. However, "locally produced" liquor -- that being alcohol made in the U.S. territories of Puerto Rico or the U.S. Virgin Islands -- gets special treatment. Those island governments each get back $13.25 per proof gallon of that tax for rum produced there and sold in... Read more →


No increase in 2011 Social Security benefits, but a $250 check possible

2011 will be the second consecutive year that Social Security recipients won't get any cost-of-living increase in their monthly checks. They might, however, get a bit of relief in the form of a $250 payment. First, the bad news about continuing flat Social Security benefits. January 2010 marked the first time since automatic cost-of-living adjustment, or COLA, calculations began in 1975 that recipients of Social Security, Supplemental Security Income, Veterans Administration Pension and Disability Compensation and Railroad Retirement benefits did not receive a hike in their government checks. Continued stagnation of these benefits will continue in 2011. There won't be... Read more →


Your taxes, now in plain language

It's now law. Federal government documents must be in "plain writing." And yes, that includes the Internal Revenue Service. The mandate comes from H.R. 946, the Plain Writing Act of 2010, which was signed by Obama last week. Actually, the IRS has about a year to revise its documents. The new plain writing law's provisions don't take effect until Oct. 13, 2011. So what exactly is plain writing? PlainLanguage.gov uses the famous Supreme Court porn standard: You know it when you see it. The website says there's no one way to put things into plain language. Rather, plain language is... Read more →


Happy Fourth Annual Blog Action Day. Oct. 15 is the day that thousands of bloggers worldwide focus on one topic in the hopes of sparking a global discussion and motivating readers to take action. For 2010, we're all blogging about water. Why water? Across the planet, one in eight of us doesn't have access to clean water. And too often, those of us who do have plenty of clean water waste this resource. But some tax laws encourage water conservation. Several states conduct sales tax holidays that offer savings to buyers of energy-efficient appliances. Earlier this month, for example, Virginia... Read more →


Don't miss these Oct. 15 tax deadlines!

Taxpayers face three key deadlines today. File that 1040: The first deadline is the most well-known. Oct. 15 is the last day for taxpayers who got a filing extension to submit their Form 1040s. If you continue to procrastinate and owe taxes, things could get expensive. IRA recharacterization: Next up is the deadline to recharacterize IRAs. This do-over opportuity could save some retirement account holders tax money. That's the case for folks who converted a traditional IRA to a Roth account, paid taxes on the converted funds and then watched the value of their IRA sink. If that happened to... Read more →


Have you recently been hearing more about the new health care law? Of course you have. The midterm election is less than three weeks away and in most Congressional campaigns, the Patient Protection and Affordable Care Act, aka health care reform, is a hot topic. The health care measure was signed into law in March, but its many provisions are being phased in over several years. Its full effects won't be in place until 2014. In April, the IRS allowed parents to add their uninsured dependent adult children, age 26 or younger, to their medical insurance coverage. Then on Sept.... Read more →


Much of the IRA talk this year has been about converting a traditional account into a Roth now that the $100,000 earnings limit is history. But as Oct. 15 nears, attention also is being paid to recharacterizing retirement accounts. You're able to change the new Roth retirement account you converted in the previous tax year back to a traditional IRA by your tax-filing deadline plus extensions. If you filed your tax return on time (by April 15), the IRS automatically gives your six months to recharacterize your IRA. That makes the recharacterization deadline Oct. 15. So why would you want... Read more →


IRS encounters technical problems as Oct. 15 final filing deadline looms

Whenever I procrastinate, it seems that my lolly-gagging has a tendency to come back and bite me. So when I write about e-filing and the option to wait until the last minute to send in your tax return, I also warn people about the possibility that some technical difficulty could pose a problem. Maybe your computer will freeze up, forcing you to shut it down and start over, possibly from scratch if you haven't saved your tax-filing data. If that happens at 11:55 p.m. on filing deadline day (or rather, night), you're screwed. Your Internet service provider run into a... Read more →


The hubby and I are pretty happy with our investments, most of which are in mutual funds. We don't fixate on them, although I have been known to stomp around the house when the market takes a dip. But we do try to stay on top of what's going on in the financial world in general and how that specifically affects our holdings. We do, after all, want to retire sooner rather than later. So that's why we spent some time yesterday reading the New York Times special section on mutual funds. Yes, we got our fingers dirty scanning the... Read more →


Another 10-10 tax tidbit: Agnew resigns

Before 10/10/10 completely slips away, I wanted to share an historic tax fact. On this day 37 years ago -- Oct. 10, 1973 -- Vice President Spiro Agnew resigned after being charged with federal income tax evasion. Agnew had been formally charged with having accepted bribes of more than $100,000 while holding office as Baltimore County executive, governor of Maryland, and as U.S. vice president in the Richard Nixon administration. Agnew was allowed to plead "no contest" to a single charge that he failed to report $29,500 of income he received in 1967. Part of the plea deal was that... Read more →


I'm not a numerology freak. And I don't have any particular financial superstitions. But I just couldn't let the 10th day of the 10th month of 2010 go by unmentioned. So of course I decided to go the list, and easy headline, route. Even though we're all still waiting for Congress to finalize our 2010 tax laws -- those tax extenders still hanging out there -- as well as what our 2011 taxes will be, there are some tax moves we still can take. Here goes! 1. Meet the Oct. 15 filing deadline -- If you got extra time to... Read more →


Do we really have to keep saying this? Apparently so. A New York state tax appeals board has denied a retired Brooklyn lawyer's attempts to claim hundreds of thousands of dollars he spent on prostitutes, massages, pornography and other sex-related activities as deductions for "medical expenses." Law.com reports that William G. Halby's disallowed deductions included $40,588 on his 2002 return for "therapeutic sex," $70,776 for "massage therapy to relieve osteoarthritis and enhance erectile function through frequent orgasms" and $2,173 for "pornography to enhance sexual performance in lieu of taking Viagra." "Patronizing a prostitute is illegal in New York and, thus,... Read more →


We're all too familiar with the natural disasters that destroy property. We've recently seen the damage from tornadoes in Arizona, flooding from heavy rains in the Northeast and wildfires that have ravaged Colorado. In these and other types of casualty losses, natural or otherwise, property owners might be able to get some relief by claiming them on their tax returns. But a new threat to homes cropped up a few years ago: defective or tainted drywall. Much of the construction product was fabricated in China and imported for use in U.S. houses between 2001 and 2009. And while not all... Read more →


Attention Virginia shoppers who want to save electricity and water. Over the long Columbus Day weekend, certain Energy Star appliances and WaterSense fixtures will be tax-free. As long as each item purchased costs $2,500 or less and is for noncommercial use, you won't have to pay the Old Dominion's combined state and local sales tax rate of 5 percent. This special environmentally-friendly sales tax holiday begins today, Friday, Oct. 8, and runs through Monday, Oct. 11. Exempt Energy Star items include dishwashers, clothes washers, refrigerators, air conditioners, ceiling fans, dehumidifiers, compact fluorescent light bulbs and programmable thermostats. Just make sure... Read more →


Did you send in your comments about the impending rule that will require beau coup new 1099 forms to be issued? Me neither. But at least we didn't get blasted by a U.S. Senator for not taking a stance. You remember this requirement, scheduled to begin in 2012. It was devised as a way to help pay for health care reform. Lawmakers think a lot of untaxed money is changing hands. By forcing such transactions to be documented on more 1099 forms, the new third-party reporting will add previously uncollected tax dollars to the Treasury. Or so the thinking goes.... Read more →


Ron Howard brother Clint stars in Heritage Foundation tax video

It must be fun at at Howard family reunions. In 2008, child actor turned Academy Award winning director Ron Howard supported Obama, producing and staring in a video recalling his Mayberry and "Happy Days" days. After Obama was elected, Howard enlisted Saturday Night Live stars (plus Jim Carrey) for the Presidential Reunion video that urged the new prez to put some muscle behind creation of the Consumer Financial Protection Agency, which was at the time being hotly debated. But it looks like such liberal candidates and causes are not supported by Ron's younger brother Clint Howard. Clint is starring in... Read more →


A tax expert's take on illegal political activity by tax-exempt organizations

I love it when the tax stars align. Yesterday I noted that some political watchdog groups and the head of the Senate's tax-writing committee have asked the IRS to look into whether tax-exempt groups are illegally engaging in political activities. Then today, TaxProf points me to Election Law @ Mortiz, where Donald Tobin, senior fellow for election law at Moritz College of Law at Ohio State University, examines whether these tax-exempt groups are as clever as they seem. These Section 501(c)(4) organizations are, according to the section of the Internal Revenue Code that gives them their name, "social welfare organizations."... Read more →


I'm not a math whiz. That's probably not something that someone whose life is taxes should admit, since taxes are all about the numbers. To that I say, thank God for calculators, tax and otherwise! But I don't need extra math help to add up this equation: When the economy stinks, folks lose jobs or take any job regardless of how low the pay, and that means Uncle Sam's tax collections are lower. If you want the actual figures, though, the Tax Foundation has them in its latest analysis of federal individual income tax data. 2008, the year of the... Read more →


Karl Rove group, other tax-exempt orgs under fire for alleged political activities

You've got to love the theater that is U.S. politics even if you don't like the actual results. As the Nov. 2 midterm election day nears, mud (and other organic material) definitely is being slung. And some folk are worried that not only are aspersions being cast, but that they're being done so improperly. So they asking the IRS to look into suspected improper political activities. Democracy 21 and the Campaign Legal Center contend that Crossroads GPS, a conservative group back by Karl Rove, is violating tax laws meant to limit political activity by nonprofit groups. In a letter to... Read more →


One thing I like about Obama is the fact that he likes to keep a devil's advocate or two around. Even if he isn't persuaded by their points of view, he at least gets them. That happened yesterday in connection with the pending decision on what to do about the expiring Bush tax cuts. Washington Wire reports that during a meeting Monday between the prez and his outside advisers on ways to boost the economy, they engaged in a "protracted public debate … over whether to extend the Bush-era tax breaks for upper-income taxpayers." The final word, of course, comes... Read more →