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March 2011

Updated March 30, 2019 When your children are babies, it's easy knowing that they are your tax dependents. But actually, there are several tax rules that determine whether you can claim your kids on your tax return. Children can add a lot to your life. Love. Pride. Expenses. That last child-related factor can be substantial. Data compiled by the U.S. Department of Agriculture indicate that it costs almost $234,000 to raise a child today and that's not even counting college. However, children also can help parents reduce their annual tax bill. The key is making sure that your kids meet... Read more →


In January, tax professionals were searching in about equal amounts for business and individual tax terms. That changed in February. Last month Intuit ProLine Tax Research revealed (thanks to AccountingWEB) that users of Intuit ProLine tax products were decidedly focused on business returns. "Eligible Small Business" was the most searched for tax topic by a huge margin in February. The dominance of that phrase is clear in the search cloud graphic. The larger the letters, the more searches for the topic. Next in the searched-for list is "student loan interest," but a couple of other business topics, "bonus depreciation" and... Read more →


Another attempt to raise taxes on the rich

As the debate about the deficit continues, some lawmakers are again talking about raising the income tax rate on the wealthy. The latest proposal is the Fairness in Taxation Act, introduced by Rep. Jan Schakowsky, D-Ill. The measure would significantly hike the taxes paid by millionaires and billionaires. Those rich folks now pay taxes at a 35 percent rate. Under Schakowsky's bill they'd pay the IRS 45 percent on incomes of $1 million to $10 million. 46 percent on incomes of $10 million and $20 million. 47 percent on incomes of $20 million and $100 million. 48 percent on incomes... Read more →


No tax refund donation, no communion?

A Texas pastor has been accused by his congregation of holding communion hostage in return for their tax money. Pastor Calls Flock Devils, Demons: MyFoxHOUSTON.com Parishioners at Houston Unity Baptist church say that the Rev. John Goodman told them that if they didn't donate their tax refunds to the church, he would withhold the usual Sunday rite. And he did just that. Goodman acknowledged that he refused communion to his flock. The pastor also admitted that he referred to some in his 30-member church as devils and demons. But Goodman told a Houston television station the name calling and withholding... Read more →


A whistleblower who exposed a tax fraud scheme by Enron and Wall Street firms has been awarded a $1.1 million reward by the Internal Revenue Service. The payout came from the new IRS Whistleblower Office, but was made under prior, less generous guidelines. Those older rules, which still apply in some instances, call for a reward of up to 15 percent of the money that the IRS recovers based on the information. The whistleblower office was revamped in 2006. Now when whistleblower information about alleged tax cheating leads to IRS collection of unpaid taxes and the subsequent recovery amount exceeds... Read more →


You knew I couldn't let St. Patrick's Day slip by without reminding you of the many green tax breaks out there that could be almost as valuable as a leprechaun's pot of gold at the end of a rainbow. Let's start at home. If you made energy home improvements to your residence last year, be sure to claim your generous tax credit. It could save you $1,500 on your tax bill. But 2010 was the last year for such a big energy and environmental tax break. The residential energy-efficient tax credit that took over on Jan. 1 is a much... Read more →


Happy St. Patrick's Day! On this day of celebrating all things Irish, NASA's Aqua satellite brings us this out-of-this-world view of the truly Emerald Isle. NASA image of Ireland courtesy Jeff Schmaltz, MODIS Rapid Response Team, Goddard Space Flight Center I'm a big space program fan. One of my early childhood dreams was to be an astronaut. But even after I grudgingly let go of that career goal, I've still followed NASA closely. Now I'm watching sadly as the space shuttle program winds down. I don't like the United State hitching rides from other countries to go into a realm... Read more →


Education tax credits comparison table

If you've looked in the upper right corned of the ol' blog, you've seen that Today's Tax Tip deals with education tax credits. In connection with that tip, I thought it would be helpful to put the high points of the American Opportunity and Lifetime Learning credits in a table format. American Opportunity Lifetime Learning Up to $2,500 credit per student; 40 percent of credit may be refundable (limited to $1,000). Prior Hope Credit claims must be taken into account when figuring eligible expenses. Up to $2,000 credit per tax return. Covers course-related books, supplies and equipment for first four... Read more →


Third Way, a left-to-center think tank in Washington, D.C., has long touted the benefits of a taxpayer receipt. Now with the change in Congressional makeup, general public concerns about government spending and the growing federal deficit, the idea of an itemized receipt showing where our tax dollars go is getting more support. It definitely could help correct some spending misconceptions. Although tax expenditures cost the government more than Medicare and Medicaid combined or Social Security, most folks still think that we can program cut our way to fiscal solvency. The truth is that it will take you and I (and... Read more →


Everybody is looking for more tax money to cover ginormous budget gaps. At the federal level, it looks like the search for additional revenue should start at home. The Treasury Inspector General for Tax Administration, or TIGTA, says existing practices within the IRS let tax agency contractors get paid even though they owed back taxes. Eleven IRS contractors received more than $356 million in payments from Uncle Sam in 2009 despite owing a combined $3.8 million in back taxes, according to the new TIGTA report bluntly titled Existing Practices Allowed IRS Contractors to Receive Payments While Owing Delinquent Taxes. TIGTA... Read more →


It's a crazy fun time for college basketball fans. Why shouldn't tax folks enjoy the same thrills? We can! We started the Big Dance with the tax code tournament. And now we have Tax Carnival #83: March Tax Madness. There's no big trophy for just one champion. Instead we have lots of tax tip scoring and everybody makes it through filing season a winner. Enough pregame preblog warm-up. To the Tax Carnival! Tax tip off We start with an impending filing issue. Wendy Litten says if you can't make the March 15 corporation filing deadline, here are tips for Late... Read more →


I am not a basketball fan, pro or college, so I just muddle through NCAA March Madness, flipping around to channels showing late-season hockey matches and Major League Baseball spring training games. But Robert G. Nassau has come up with a way that even I can enjoy all this talk of hoops and brackets (not to be confused with chutes and ladders; told ya, not a fan). Nassau, director of the Syracuse University College of Law Low-Income Taxpayer Clinic and a professor of practice at the college, has selected 64 (no play-in games in his competition!) of the "finest, taxpayer-friendly... Read more →


Experts on both taxes and American history were quick to note that my By the Numbers post on states tax filing deadlines that diverge from the IRS due date neglected to discuss the locales that recognize Patriots' Day. This legal holiday in Maine and Massachusetts commemorates the first battles of the Revolutionary War at Lexington and Concord on April 19, 1775. Image courtesy Boston University School of Education Patriots' Day was originally celebrated on the actual day that Americans fired their first musket shots for freedom, but the holiday eventually was moved to create a three-day weekend. It's now officially... Read more →


The annual tax filing deadline is five weeks away. Most taxpayers also have to meet that same timetable for their state tax returns. But residents of 12 states don't have to worry about double duty on April 15 -- or April 18 this filing season, thanks to the convergence of the usual deadline and a special D.C. holiday -- because their states don't follow the IRS filing due date. And those tax calendar renegades represent this week's By the Numbers figure, an even dozen. Of course, folks who live in seven of those 12 states don't have to worry at... Read more →


Rental real estate tips, audit outlook

Is it just a coincidence that the IRS issued an information sheet about rental income and expenses just as the office that oversees the IRS put out a report saying some landlords were skating when it comes to taxes? I don't think so. Here's what probably prompted the IRS to try to educate landlords: An audit report from the Treasury Inspector General for Tax Administration (TIGTA) released to the public last week detailing the extent of tax reporting problems when it comes to rental property. TIGTA's investigation, "Actions are Needed in the Identification, Selection, and Examination of Individual Tax Returns... Read more →


Not to spoil the ending of this season's Celebrity Apprentice, but it looks like Richard Hatch won't be Donald Trump's new right-hand man. Hatch, the "fat, naked guy" from the first season of the CBS television reality show Survivor, was ordered back to federal prison to serve nine months for failing to pay tax on the $1 million he pocketed as the show's first winner. Hatch had spent more than three years in jail when he was released in 2009 to serve three more years under supervised release. While free, Hatch was supposed to refile his questionable tax returns and... Read more →


Texting Japan earthquake donations

In January 2010, phone technology and philanthropy came together, with millions donated via texts to help survivors of the Haiti earthquake. That new-style contribution infrastructure is being put to use again in the wake of the 8.9 earthquake and ensuing tsunami that struck Japan today. Several groups are accepting text donations: American Red Cross, text REDCROSS to 90999 Salvation Army, text JAPAN to 80888 Convoy of Hope, text TSUNAMI to 50555 GlobalGiving, text JAPAN to 50555 World Relief, text WAVE to 50555 The last three groups on the list are featured SMS, or short message service, relief efforts at mGive... Read more →


I grew up in tornado country. I lived six years where hurricanes regularly hit (Frances and Jeanne did slam us in 2004). But earthquakes scare the devil out of me. No warning. Your world just starts rocking and not in a good way. My heart goes out to everyone in Japan who's suffered losses of friends, family and property today following the 8.9 earthquake, subsequent aftershocks and tsunami. I used to work for a multinational company with offices in Japan. Many of the people I met in our Japan operations became more than coworkers; they are friends and I hope... Read more →


Medical marijuana subject to new LA tax

The voters of Los Angeles have spoken and they've overwhelmingly said tax medical marijuana. If only it were that easy. Sure, the March 8 vote easily approved Measure M, which will let the city collect a 5 percent tax on gross reimbursements from medical marijuana dispensaries. But some say that despite the potential new revenue, some say the city might come to regret passing the pot tax. Anti-marijuana folks see this move as legitimizing the weed. There's also the question as to whether the proposal is legal. "If marijuana is supposed to be medicine, you can't tax medicine.," said L.A.... Read more →


When 2010 ended, did you leave some money unspent in your medical flexible spending account, usually referred to as an FSA? Well, you might have a second chance at using that pretax cash. If your company allows you the IRS-approved two and a half month FSA grace period, then you still have time to use up last year's money. But not much time. First a quick refresher. With an FSAs you put money into the accounts, via automatic payroll deductions, before taxes are taken out. That lessens your tax bite. Then you get to use that pre-tax money to pay... Read more →