It has arrived.
The event that summons feelings of dread in even the most stoic has snuck up again this year.
Tax season.
And that means that, for the next few months, Palm Beach County and Treasure Coast residents are going to be bombarded with commercials, signs, people dressed up as Statues of Liberty — all advertising the services of various tax preparers.
Indeed, almost 60 percent of Americans use paid tax preparers to do their taxes, according to the Internal Revenue Service.
But not all tax preparers are created equal. Choosing one who is inept or fraudulent could cost a lot, since it's you who's legally responsible for the information on the tax forms.
"There are several classes of preparers out there," said Ronald Warner, a
West Palm Beach-based certified public accountant and former IRS field agent. He said there are many reputable tax preparers out there, but that there are also "those people who just decide they know tax law and hang out a shingle. They have no requirements; they may not be caught up with current laws and regulations."
Only three states — California, Oregon and Maryland — require all tax preparers to register, according to Tobie Stanger, a senior editor at Consumer Reports.
In addition, some professionals, such as lawyers, certified public accountants and enrolled agents, are licensed by their states or enrolled to practice by the IRS.
Still, the majority of the estimated 900,000 to 1.2 million paid tax preparers undergo no vetting or registration before they do your taxes for you.
The IRS has announced plans to require tax preparers to register with the government, pass a competency test, adhere to ethical standards and take continuing education courses. The IRS says it hopes to have all preparers registered by 2011, meaning that the new regulations will not affect this year's tax season.
So if you're thinking of having someone prepare your taxes for you, consider these tips from experts:
CONSIDER YOUR LIFE AND FINANCES BEFORE DECIDING WHAT TO DO.
"If you have a one-paycheck job, and don't plan to itemize, that's pretty simple," Stanger said. "You may just want to do it yourself and use free tax software to help you."
People or businesses with more complicated filings should also look at their situation, though.
"Identify your needs as a taxpayer," said Jill Senso, education coordinator for the National Association of Tax Professionals. "If you don't have a small business, you may decide you don't need a CPA to do your taxes, since they tend to be a little more expensive."
Pete Sepp of the National Taxpayers Union said people or businesses with complex situations may want to look for specialists.
"If you're a dentist, you may be able to find someone who specializes in dental tax forms, who knows that some piece of equipment depreciates strangely or understands different exemptions," he said.
GET REFERRALS. CHECK ON THEIR COMMUNITY TIES.
"A reputable tax preparer will have no problem giving you references," said Kay Bell, a contributing tax editor at Bankrate.com.
Experts said to make sure to get more than one reference, and to ask how long the preparer has been in the community.
"Make sure they'll be around after filing season is over, in case the IRS comes back to you with questions," Bell said.
ASK ABOUT EXPERIENCE AND TRAINING.
Only CPAs, enrolled agents and attorneys are allowed to represent a taxpayer in front of the IRS in case of an audit, collection, appeal, or other matter. These three professions are also bound by ethical standards and must undergo education and registration or licensing requirements.
But even those with such designations may not deal with taxes on a regular basis. Find out whether the preparer is affiliated with a professional organization with a code of ethics and that provides its members with continuing education.
"Ask questions," Warner said. "Did you attend seminars to get up to date on the latest tax laws? If so, how many hours? Who sponsored it?"
Senso said that continuing education is the only way to find out about certain tax credits — credits that taxpayers often won't know to ask for themselves.
Bell also suggested that taxpayers find someone with at least 10 years of experience. "That's not to say a new person couldn't be good, but someone more experienced will be more comfortable with the process," she said.
LOOK TO SEE IF YOU MIGHT BENEFIT FROM FREE TAX FILING PROGRAMS.
The United Way of Palm Beach County sponsors a Volunteer Income Tax Assistance program that works with the IRS for people whose household income is $49,000 or less. Spokeswoman Dianne Laubert said about 55,000 people in Palm Beach County are eligible.
More than 200 volunteers for the program have to go through training and take a test with the IRS before helping people with their forms.
The AARP also has a free tax assistance program, designed for people ages 60 and up, although tax counselor Bobby Caruso said they won't turn anyone away.
For families and individuals making less than $57,000, the IRS offers Free File computer software programs that help taxpayers prepare their returns at no charge.
WATCH OUT FOR SHADY PRACTICES OR CLAIMS.
The experts said to walk away from anyone who says they can get a bigger refund than other people, or from preparers who try to base their commission as a percent of your return. Remember: you are the one ultimately liable for what goes on the forms.
In addition, shy away from those who try to get you to sign blank returns or who refuse to sign the returns themselves.
Source
Sunday, March 28, 2010
Monday, March 15, 2010
IRS rules are changing for paid tax preparers
Filing your taxes is getting so complicated that even the commissioner of the Internal Revenue Service hires somebody to do it.
"I use a preparer," Doug Shulman said in an interview on C-SPAN last weekend. "I find it convenient and I find the tax code complex, so I use a preparer."
Turns out he’s not alone. Around 80 percent of Americans seek help with their taxes. Roughly 60 percent use a paid preparer and 20 percent use tax software, Shulman said. The IRS estimates that there are 900,000 to 1.2 million paid tax preparers in the country.
Those preparers include professionals like certified public accountants, tax lawyers and enrolled agents who undergo years of education, background checks and continuing education. Or, it could be someone with little or no credentials working out of a temporary storefront or a spare bedroom in their house.
"Right now there are no minimal standards," Shulman said.
That’s about to change.
Having studied the issue since June, the IRS announced sweeping changes last week to regulate paid tax preparers. The action could be good for consumers.
Among the changes, preparers will have to:
Register and pay a user fee. Upon registration, the IRS will perform a tax compliance check to make sure preparers have filed and paid their own federal personal, employment and business taxes. From that registration, a database will be available to the public to check preparers.
Pass a competency test. Three different tests covering individuals, small businesses and larger businesses will be created by the IRS. A transition rule will give preparers up to three years to pass the test. While attorneys, CPAs and enrolled agents won’t have to take the test, the IRS said it will be studying their accuracy to make sure the exemption is warranted.
Take continuing education. Preparers will be required to complete 15 hours each year — three hours of federal tax law updates, two hours of tax ethics and 10 hours of other federal tax law topics.
Be subject to ethical standards. The IRS is recommending that all signing and nonsigning tax preparers be subject to Treasury Department standards for unethical and unprofessional conduct, with the same disciplinary measures for infractions.
The regulations, which will start being rolled out next year, could have a big effect on the tax preparer industry, said Tom Karsten, an enrolled agent and owner of Karsten Tax and Financial Management in Fort Worth.
"I think it’s pretty significant for consumers and consumer protection," said Karsten, who has prepared tax returns for 18 years. "The test is not going to be terribly hard, but it will be taking out the most poorly trained preparers straight out of the pool."
Jim Keller, senior tax analyst at the Fort Worth office of Thompson Reuters, said the IRS action is a way to push oversight of individual returns down to the preparer level.
"I think this is an effort to deal with the brain drain at the IRS," he said. "In the next five to 10 years, there is going to be a hefty exodus of IRS employees. At the same time, the agency is being asked to do a lot more than they used to do."
Source
"I use a preparer," Doug Shulman said in an interview on C-SPAN last weekend. "I find it convenient and I find the tax code complex, so I use a preparer."
Turns out he’s not alone. Around 80 percent of Americans seek help with their taxes. Roughly 60 percent use a paid preparer and 20 percent use tax software, Shulman said. The IRS estimates that there are 900,000 to 1.2 million paid tax preparers in the country.
Those preparers include professionals like certified public accountants, tax lawyers and enrolled agents who undergo years of education, background checks and continuing education. Or, it could be someone with little or no credentials working out of a temporary storefront or a spare bedroom in their house.
"Right now there are no minimal standards," Shulman said.
That’s about to change.
Having studied the issue since June, the IRS announced sweeping changes last week to regulate paid tax preparers. The action could be good for consumers.
Among the changes, preparers will have to:
Register and pay a user fee. Upon registration, the IRS will perform a tax compliance check to make sure preparers have filed and paid their own federal personal, employment and business taxes. From that registration, a database will be available to the public to check preparers.
Pass a competency test. Three different tests covering individuals, small businesses and larger businesses will be created by the IRS. A transition rule will give preparers up to three years to pass the test. While attorneys, CPAs and enrolled agents won’t have to take the test, the IRS said it will be studying their accuracy to make sure the exemption is warranted.
Take continuing education. Preparers will be required to complete 15 hours each year — three hours of federal tax law updates, two hours of tax ethics and 10 hours of other federal tax law topics.
Be subject to ethical standards. The IRS is recommending that all signing and nonsigning tax preparers be subject to Treasury Department standards for unethical and unprofessional conduct, with the same disciplinary measures for infractions.
The regulations, which will start being rolled out next year, could have a big effect on the tax preparer industry, said Tom Karsten, an enrolled agent and owner of Karsten Tax and Financial Management in Fort Worth.
"I think it’s pretty significant for consumers and consumer protection," said Karsten, who has prepared tax returns for 18 years. "The test is not going to be terribly hard, but it will be taking out the most poorly trained preparers straight out of the pool."
Jim Keller, senior tax analyst at the Fort Worth office of Thompson Reuters, said the IRS action is a way to push oversight of individual returns down to the preparer level.
"I think this is an effort to deal with the brain drain at the IRS," he said. "In the next five to 10 years, there is going to be a hefty exodus of IRS employees. At the same time, the agency is being asked to do a lot more than they used to do."
Source
Sunday, February 28, 2010
Cordray Alerts Ohioans to Instant Tax Return Schemes
(COLUMBUS, Ohio) With tax return season upon us, some tax preparation companies, payday lenders and even car dealers advertise tax refund products as "fast cash refunds" or "instant refunds." Ohio Attorney General Richard Cordray today warns that, unfortunately, the only "fast" things about many of these "refunds" are the fees that go with them, often turning what would have been extra cash into a high-interest loan.
Commonly referred to as refund anticipation loans or RALs, these products sound good but can be very costly. The loans are provided by companies based on a consumer's expected tax return. The companies then charge filing fees, tax preparation fees and interest that can eat up 25-percent of a consumer's tax refund. If the tax refund winds up smaller than anticipated, the consumer will have to pay the difference in addition to the fees.
"These operations are gouging Ohioans out of hard-earned money," said Cordray. "It is imperative that consumers protect themselves. Read the fine print and research alternative assistance options."
To avoid the scam, Cordray advises consumers to file their own tax returns electronically for free and have the refund directly deposited in a bank account. The average turnaround time is two weeks for refunds. He also reminds Ohioans that they may be eligible for the Earned Income Tax Credit (EITC) and can get free help in filing tax returns if they make approximately $49,000 and below.
Cordray asks Ohioans to report any unfair or deceptive practices by these operations that may include:
Advertising RALs but failing to clearly disclose that they are loans, not early refunds.
Failing to explain that when a consumer takes out a RAL, the IRS will send the tax refund to the RAL provider, not to the consumer.
In advertisements, failing to make clear that by taking out a RAL, the taxpayer is borrowing against the expected refund, not obtaining the refund itself.
Failing to inform consumers that RALs are interest-bearing loans and not a quicker way to receive their refunds from the IRS.
Charging fees as a percentage rather than as a flat rate.
Failing to advise consumers that they may be liable to the lender for additional payment, interest and other fees (as applicable through the RAL) if the refund is delayed or is smaller than anticipated.
Source
Commonly referred to as refund anticipation loans or RALs, these products sound good but can be very costly. The loans are provided by companies based on a consumer's expected tax return. The companies then charge filing fees, tax preparation fees and interest that can eat up 25-percent of a consumer's tax refund. If the tax refund winds up smaller than anticipated, the consumer will have to pay the difference in addition to the fees.
"These operations are gouging Ohioans out of hard-earned money," said Cordray. "It is imperative that consumers protect themselves. Read the fine print and research alternative assistance options."
To avoid the scam, Cordray advises consumers to file their own tax returns electronically for free and have the refund directly deposited in a bank account. The average turnaround time is two weeks for refunds. He also reminds Ohioans that they may be eligible for the Earned Income Tax Credit (EITC) and can get free help in filing tax returns if they make approximately $49,000 and below.
Cordray asks Ohioans to report any unfair or deceptive practices by these operations that may include:
Advertising RALs but failing to clearly disclose that they are loans, not early refunds.
Failing to explain that when a consumer takes out a RAL, the IRS will send the tax refund to the RAL provider, not to the consumer.
In advertisements, failing to make clear that by taking out a RAL, the taxpayer is borrowing against the expected refund, not obtaining the refund itself.
Failing to inform consumers that RALs are interest-bearing loans and not a quicker way to receive their refunds from the IRS.
Charging fees as a percentage rather than as a flat rate.
Failing to advise consumers that they may be liable to the lender for additional payment, interest and other fees (as applicable through the RAL) if the refund is delayed or is smaller than anticipated.
Source
Monday, February 15, 2010
Swiss Banker Blows Whistle on Tax Evasion
From his home in the quiet village of Rorbas, outside Zurich, Rudolf M. Elmer is chipping away at the centuries-old traditions of Swiss banking secrecy.
Mr. Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his former employer.
Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.
Mr. Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets, pushing it toward a settlement with the United States government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities.
Mr. Elmer’s disclosures are attracting particular interest as the Internal Revenue Service and the Justice Department embark upon a strategy of “it takes a rogue to catch a thief” to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers.
Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.
Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said.
Mr. Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
“What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up,” Mr. Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The I.R.S. declined to comment on Mr. Elmer’s case but said in a statement that it was “investigating other banks that have enabled Americans to evade taxes.”
Source
Mr. Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his former employer.
Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.
“It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth,” Mr. Elmer, 54, wrote in a recent e-mail message. “Offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets.
Mr. Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank’s secrets, pushing it toward a settlement with the United States government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities.
Mr. Elmer’s disclosures are attracting particular interest as the Internal Revenue Service and the Justice Department embark upon a strategy of “it takes a rogue to catch a thief” to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers.
Lawyers and Congressional investigators who have begun to review Mr. Elmer’s claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.
Mr. Elmer has given documents to the I.R.S., a Senate subcommittee investigating tax evasion and investigators for Robert M. Morgenthau, then the Manhattan district attorney, his lawyer Jack Blum said. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002, Mr. Blum said.
Mr. Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands.
“What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up,” Mr. Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The I.R.S. declined to comment on Mr. Elmer’s case but said in a statement that it was “investigating other banks that have enabled Americans to evade taxes.”
Source
Monday, December 28, 2009
IRS nixes tax deductions for houses donated for firefighter training
UPPER ARLINGTON, Ohio - The battered house on Sherwin Road was put to good use before the fire department burned it to the ground.
SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they torched the whole place.
Five years later, though, a dispute still smolders over the homeowner's attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.
The Internal Revenue Service is trying to stop homeowners from claiming such deductions.
Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home.
In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn't an act of charity.
The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with "live burns" — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits.
Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation's firefighters. And some fear that the tax disputes will discourage donors from coming forward.
Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.
"We need to keep our skills current. Those opportunities are going to become fewer and farther between," said Fire Chief Mitch Ross in Upper Arlington, the wealthy Columbus suburb where the Sherwin Road home owned by James Hendrix burned down in 2004.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).
It's impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.
Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.
"The whole idea of a charitable deduction is that you give something to charity and you don't get anything back, right?" said Paul Caron, a tax scholar at the University of Cincinnati. "When you give $100 to the Catholic Church, you don't get anything for that $100."
The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a "partial interest" in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.
But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in "erroneously collected" taxes. Hendrix built a new house on the property.
"They have to, in fact, pay their mortgage off. They have to make sure there's no asbestos in the house," Grady said. "And you know, conversely, the benefits to the fire department are just immense."
Although the demolition is free, the homeowner is responsible for clearing away the debris.
ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star's claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.
A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.
Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.
"Their arguments didn't make any sense," he said.
At Rolfs' house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs' attorney, Michael Goller.
Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.
Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.
Source
SWAT teams barged through the front door in an exercise on dealing with domestic violence. Rescue crews scattered mannequins around the house and blew smoke through the halls to simulate a meth lab explosion. Firefighters set fires in one room after another and practiced putting them out. Then, in one last drill, they torched the whole place.
Five years later, though, a dispute still smolders over the homeowner's attempt to claim a $287,000 charitable tax deduction for donating the house to the fire department, which has burned down at least 32 such homes in Upper Arlington since 1988.
The Internal Revenue Service is trying to stop homeowners from claiming such deductions.
Lured by the prospect of free demolition, homeowners around the country sometimes offer their houses to the local fire department for training purposes. The department burns down the house, clearing the way for the owner to build a bigger and better home.
In court cases in Ohio and Wisconsin, the IRS is arguing that because such houses are already slated for demolition, donating them for fire training isn't an act of charity.
The dispute adds a new element of controversy to the decades-old debate over whether the risks associated with "live burns" — more than a dozen firefighters have been killed in the past two decades — outweigh the training benefits.
Fire chiefs say live burns supply invaluable training for volunteer departments, which make up the bulk of the nation's firefighters. And some fear that the tax disputes will discourage donors from coming forward.
Nobody tracks the number of live burns each year, but fire officials say they are increasingly rare because of mounting safety and environmental restrictions and because fewer homes are up for demolition in this slumping economy.
"We need to keep our skills current. Those opportunities are going to become fewer and farther between," said Fire Chief Mitch Ross in Upper Arlington, the wealthy Columbus suburb where the Sherwin Road home owned by James Hendrix burned down in 2004.
Churches, corporations and cities with vacant properties also donate buildings for fire training. Sometimes it is a dilapidated old barn, other times a sprawling suburban house. (The Hendrix home, not including the land, was appraised at $287,400).
It's impossible to know exactly how many people have tried to claim such deductions; the IRS would not comment.
Steven Willis, a professor at the University of Florida who studies income tax law, said a charitable deduction can be no greater than the value of whatever was donated, and a house given to a fire department has negative value, since the owner was going to have to pay somebody to get rid of it.
"The whole idea of a charitable deduction is that you give something to charity and you don't get anything back, right?" said Paul Caron, a tax scholar at the University of Cincinnati. "When you give $100 to the Catholic Church, you don't get anything for that $100."
The IRS maintains in court papers in the Wisconsin case that the homeowners do not qualify for a deduction because they are donating only a "partial interest" in their home, rather than the entire property. The agency also says homeowners are letting firefighters only use the property, not donating it in full.
But a lot of work goes into preparing a house to be burned down, including a detailed inspection by environmental authorities, said Terry Grady, a lawyer representing Hendrix, who wants the IRS to refund him $100,590 in "erroneously collected" taxes. Hendrix built a new house on the property.
"They have to, in fact, pay their mortgage off. They have to make sure there's no asbestos in the house," Grady said. "And you know, conversely, the benefits to the fire department are just immense."
Although the demolition is free, the homeowner is responsible for clearing away the debris.
ESPN commentator Kirk Herbstreit, who also lives in Upper Arlington, let firefighters burn his home in 2004. The former Ohio State football star's claim of a $330,000 tax deduction was rejected a year later. Herbstreit declined to comment.
A case similar to the Hendrix dispute has also unfolded in Chenequa, Wis., where Theodore Rolfs filed for a $76,000 tax deduction on his lakefront home that was burned in 1998. The trial concluded in 2006. Rolfs is still waiting for a verdict.
Rolfs, who had been told it was common practice to receive the deduction, was taken aback when the IRS rejected his.
"Their arguments didn't make any sense," he said.
At Rolfs' house, firefighters wheeled a truck down to the shore and practiced pumping lake water onto the flames, a crucial training exercise in Chenequa, which has no fire hydrants, said Rolfs' attorney, Michael Goller.
Environmental laws in some states ban live burns. In other states, most fire departments adhere to safety guidelines that say windows should be boarded up, floors inspected for sturdiness and shingles and carpets stripped away.
Three firefighters were trapped by flames and perished in a 100-year-old farmhouse in Milford Township, Mich., during a controlled burn in 1987. In February 2007, a fire recruit was killed in a training exercise in a Baltimore rowhouse.
Source
Tuesday, December 15, 2009
SC gov's state flights may raise tax liabilities
COLUMBIA, S.C. — South Carolina Gov. Mark Sanford's use of state planes for personal and political trips could open him and the state to federal tax penalties because the flights never were recorded as taxable fringe benefits.
Tax experts who reviewed an Associated Press analysis of more than 100 flights since 2003 said numerous trips could have triggered Internal Revenue Service rules that require adding the value of flights to the governor's wages, making them subject to taxes. The analysis shows nine flights since 2008 alone could be worth $19,019 in taxable benefits.
"The state appears to take the position that they assume that all of these are business flights," said Marianna Dyson, a former IRS fringe benefits lawyer and one of the nation's leading experts on the topic. By doing that, the state "ignored the rules applicable to the use of an employer's aircraft."
The governor's office contends the need to report any of Sanford's trips as income is preposterous because every flight is official business. "It's all working condition fringe benefits that we don't believe is taxable," said Sanford spokesman Ben Fox.
An AP investigation this summer showed Sanford traveled to numerous personal and political events even though state aircraft only are to be used for official business. While the governor has said he did nothing wrong, he has yet to explain how he properly used state planes for all those flights.
The governor on many occasions mixed official business — such as a meeting with newspaper editors — with a political event like a speech to a GOP group — and tax experts say those trips could require Sanford to pay taxes on some flights. It would be up to the IRS to decide, though an agency spokesman would not comment on how governors and states comply with fringe benefit laws.
Plus, Sanford likely needs to pay taxes on the flights taken by his children because they have no official role in state government.
The two-term governor's travel has been under scrutiny since he returned from a secret June rendezvous in Argentina with a woman he later called his soul mate. He has reimbursed the state $3,300 for travel related to a 2008 trip during which their longtime friendship became physical.
Ensuing AP investigations have shown Sanford flew in pricey commercial airline seats despite state requirements for low-cost travel; failed to disclose on ethics or campaign finance documents his use of private planes; and spent $63,000 for charter jets on European trade trips when commercial travel was available for a fraction of the cost.
Sanford's travel is being investigated by the State Ethics Commission, and lawmakers who've urged him to resign are considering whether to try to force him from office. The governor, who says he is trying to save his marriage, insists he's staying.
His spokesman was given detailed information on more than 100 trips with potential tax implications but refused to detail why each was not taxable.
"These claims defy common sense, and the governor stands where he stands — which is right there with literally hundreds upon hundreds of elected officials who also include their family on trips to public events, just as it falls squarely in line with former governors," Fox said.
Sanford, a legend of frugality for telling staff to use both sides of Post-It notes, took his children with him on yearly taxpayer-funded flights from the family's coastal plantation to Columbia to light the state's Christmas tree and to national governors conferences. Experts said the children's flights were nearly always subject to fringe benefit rules.
Bob Kamman, a fringe benefits expert in Phoenix who reviewed the AP research, which was based on flight logs and schedules, said at least 68 flights could be taxable.
He said business and personal travel can mix without tax consequences as long as the primary reason for a trip is business.
In August 2005, Sanford flew to the northwestern part of the state and spent less than two hours meeting with different newspapers before being driven to North Carolina for two nights and a day of "personal time" at a private lodge. The plane returned to Columbia without the governor.
"You have to draw the line somewhere on 'primarily personal' and 'primarily business,' and this is where it should be drawn, especially when the plane has to fly back to Columbia before picking him up again," Kamman said.
Other governors have faced similar scrutiny. An AP review in December estimated former Illinois Gov. Rod Blagojevich could owe more than $60,000 on non-business flights worth at least $225,000. Former Alaska Gov. Sarah Palin's settlement of an ethics investigation for trips taken with her children included a promise to pay any back taxes.
As with private employers, a state is supposed to report taxable benefits for its employees. But in South Carolina, the agencies that manage state aircraft and submit tax forms say the value of state aircraft use has never been reported. That's in part because the agencies rely on officials to verify they use the aircraft properly, and then assume that all of them do.
Failing to report benefits as income could subject the state to a penalty of 25 percent of what wasn't reported. For the flights since 2008, that tab could approach $5,000.
Dyson, the former IRS fringe benefit lawyer, said the idea was to protect taxpayers by using rules aimed at curbing abuses of corporate executives. She said most states have lagged the corporate world in properly reporting the benefits.
"These rules, which are designed to be fair, protect shareholders," she said. "By the state ignoring these rules, I think it encourages more personal use of the aircraft."
Source
Tax experts who reviewed an Associated Press analysis of more than 100 flights since 2003 said numerous trips could have triggered Internal Revenue Service rules that require adding the value of flights to the governor's wages, making them subject to taxes. The analysis shows nine flights since 2008 alone could be worth $19,019 in taxable benefits.
"The state appears to take the position that they assume that all of these are business flights," said Marianna Dyson, a former IRS fringe benefits lawyer and one of the nation's leading experts on the topic. By doing that, the state "ignored the rules applicable to the use of an employer's aircraft."
The governor's office contends the need to report any of Sanford's trips as income is preposterous because every flight is official business. "It's all working condition fringe benefits that we don't believe is taxable," said Sanford spokesman Ben Fox.
An AP investigation this summer showed Sanford traveled to numerous personal and political events even though state aircraft only are to be used for official business. While the governor has said he did nothing wrong, he has yet to explain how he properly used state planes for all those flights.
The governor on many occasions mixed official business — such as a meeting with newspaper editors — with a political event like a speech to a GOP group — and tax experts say those trips could require Sanford to pay taxes on some flights. It would be up to the IRS to decide, though an agency spokesman would not comment on how governors and states comply with fringe benefit laws.
Plus, Sanford likely needs to pay taxes on the flights taken by his children because they have no official role in state government.
The two-term governor's travel has been under scrutiny since he returned from a secret June rendezvous in Argentina with a woman he later called his soul mate. He has reimbursed the state $3,300 for travel related to a 2008 trip during which their longtime friendship became physical.
Ensuing AP investigations have shown Sanford flew in pricey commercial airline seats despite state requirements for low-cost travel; failed to disclose on ethics or campaign finance documents his use of private planes; and spent $63,000 for charter jets on European trade trips when commercial travel was available for a fraction of the cost.
Sanford's travel is being investigated by the State Ethics Commission, and lawmakers who've urged him to resign are considering whether to try to force him from office. The governor, who says he is trying to save his marriage, insists he's staying.
His spokesman was given detailed information on more than 100 trips with potential tax implications but refused to detail why each was not taxable.
"These claims defy common sense, and the governor stands where he stands — which is right there with literally hundreds upon hundreds of elected officials who also include their family on trips to public events, just as it falls squarely in line with former governors," Fox said.
Sanford, a legend of frugality for telling staff to use both sides of Post-It notes, took his children with him on yearly taxpayer-funded flights from the family's coastal plantation to Columbia to light the state's Christmas tree and to national governors conferences. Experts said the children's flights were nearly always subject to fringe benefit rules.
Bob Kamman, a fringe benefits expert in Phoenix who reviewed the AP research, which was based on flight logs and schedules, said at least 68 flights could be taxable.
He said business and personal travel can mix without tax consequences as long as the primary reason for a trip is business.
In August 2005, Sanford flew to the northwestern part of the state and spent less than two hours meeting with different newspapers before being driven to North Carolina for two nights and a day of "personal time" at a private lodge. The plane returned to Columbia without the governor.
"You have to draw the line somewhere on 'primarily personal' and 'primarily business,' and this is where it should be drawn, especially when the plane has to fly back to Columbia before picking him up again," Kamman said.
Other governors have faced similar scrutiny. An AP review in December estimated former Illinois Gov. Rod Blagojevich could owe more than $60,000 on non-business flights worth at least $225,000. Former Alaska Gov. Sarah Palin's settlement of an ethics investigation for trips taken with her children included a promise to pay any back taxes.
As with private employers, a state is supposed to report taxable benefits for its employees. But in South Carolina, the agencies that manage state aircraft and submit tax forms say the value of state aircraft use has never been reported. That's in part because the agencies rely on officials to verify they use the aircraft properly, and then assume that all of them do.
Failing to report benefits as income could subject the state to a penalty of 25 percent of what wasn't reported. For the flights since 2008, that tab could approach $5,000.
Dyson, the former IRS fringe benefit lawyer, said the idea was to protect taxpayers by using rules aimed at curbing abuses of corporate executives. She said most states have lagged the corporate world in properly reporting the benefits.
"These rules, which are designed to be fair, protect shareholders," she said. "By the state ignoring these rules, I think it encourages more personal use of the aircraft."
Source
Saturday, November 28, 2009
Reputed mobster Rudy Fratto charged with tax evasion in new federal case
Reputed mobster Rudy Fratto has been charged with tax evasion in a new federal case, the IRS Criminal Investigation Division said Tuesday. Fratto, 65, of Darien, has previously been identified by authorities as a lieutenant in the mob's Elmwood Park street crew. New information filed in federal court alleges that Fratto failed to report nearly $200,000 in income in 2005. Fratto this year was among the targets in a civil racketeering claim filed by Joseph Fosco, son of the late Teamsters treasurer Armando Fosco, who alleged that Fratto, reputed Chicago Outfit figure John "No Nose" DiFronzo and others tried to extort $400,000 from him. Lawyers for the men have contested the suit. An attorney for Fratto was not immediately available Tuesday to address the new criminal case.
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