Tax Law Blog | IRS Tax Attorneys

Student volunteers are offering free tax preparation.
More than 60 collegians at Rutgers University in Camden are participating in the Volunteer Income Tax Assistance (VITA) program. Sponsored by the Rutgers School of Law in Camden, the program offers help from students trained in preparing federal and New Jersey State tax returns.
According to a Rutgers-Camden spokesman, the volunteers assist clients in completing income tax returns on time and identify as many deductions as possible. Last year, about 300 clients were assisted by VITA with students helping to secure more than $350,000 in refunds above the amounts owed by clients.
Medford resident Jonathan Klein, a third-year law student at Rutgers-Camden, has been volunteering since 2008 and is one of the student coordinators this year. In a statement, he said the students do not handle “overly complicated” returns, but help low-income residents to be sure they received the largest tax return possible.
The VITA program offers assistance on Tuesdays and Wednesdays, from 4 to 7:30 p.m. on the Camden campus through April 7, and on Saturdays from 9 a.m. to noon on March 6, March 27 and April 4. The sessions are held in the West Conference Room A on the lower level of the campus center on Third Street.
For more information about the VITA program, call 856-225-6406.

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Joseph Stack’s methods were unthinkable — he is accused of ramming a plane into an Internal Revenue Service building in Texas — but his views on taxation follow a long line of protesters who believe tax laws don’t apply to them.

While their numbers aren’t large, according to experts, their arguments are so enticing that the IRS has published a guide to debunk their claims. In 2008, the Justice Department was concerned enough to start the “National Tax Defier Initiative” to better coordinate prosecutions.

“You would think a little light bulb would go on in their head and they would say, ‘Why in the heck is everybody else paying taxes?’” said Peter R. Zeidenberg, a former federal prosecutor who is now a litigation partner at the law firm DLA Piper in Washington. “There are people who are peddling this stuff. It’s a way to get people to believe something that’s too good to be true.”

A 3,000-word manifesto posted on a Web site registered in Stack’s name rails against the IRS and accuses the agency of ruining his life. Stack’s bitter feud with the IRS apparently drove him to commit suicide Thursday by slamming his single-engine Piper PA-28 into an Austin office building where the IRS has offices.

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House Ways and Means Committee Chairman Charles Rangel said lawmakers are considering paying for health-care legislation by imposing a new tax on unearned income such as capital gains, a measure aimed at wealthier Americans.

The New York Democrat, whose panel writes tax law, said the idea of expanding the Medicare payroll tax to cover unearned income was preferable to a Senate proposal backed by President Barack Obama to tax the most-expensive health benefits, which labor leaders say will hurt many workers.

“There’s a big problem in the way the administration wants to pay for this in terms of the tax on the higher premiums,” Rangel told reporters last night before a meeting of House Democrats on Capitol Hill.

He said he would discuss how to pay for the legislation, which calls for the biggest overhaul of U.S. health care in more than four decades, during a meeting today with Obama at the White House.

Rangel said applying the Medicare tax to unearned income for the first time would be “comparable to the surtax” that House Democrats want to impose on the highest-income people and which has drawn opposition in the Senate. The House health-care bill calls for a 5.4 percent income surtax on singles who earn more than $500,000 and couples who make more than $1 million. An expanded Medicare tax “covers the same people,” Rangel said.

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Come the turn of the calender we will see a series of changes in federal tax laws. Some of them include:

New vehicle sales tax - Effective January 1, 2010, individuals will no longer be able to take the itemized deduction or increase in standard deduction for sales tax on the purchase of a new motor vehicle.

Sales tax – Individuals will no longer be able to take an itemized deduction for state and local sales tax.

Educator expenses – Teachers will no longer be allowed to deduct out of pocket expenses incurred for school supplies. In the past, a deduction from adjusted gross income of up to $250 was allowed.

Roth IRA conversion – There are no income limits in 2010 for individuals that would like to convert a traditional IRA to a Roth IRA. Also, for any conversions in 2010, the tax will be paid in 2011 and 2012.

Phase outs - In 2010, there will be no phase out of itemized deductions or personal exemptions. This change will greatly benefit high income earners.

Unemployment income – In 2009, those receiving unemployment benefits can exclude up to $2,400 from their taxable income. This tax benefit will no longer be available in 2010.

Charitable distributions / contributions – Charitable distributions made directly from an IRA account to a qualified charity will no longer be excluded from your income

Home buyers credit – If you got on the home buyers tax credit gravy train back in 2008, you are required to start paying the credit back in 2010.

Alternative Minimum Tax – The AMT exemption is scheduled to decrease to $33,750 for single filers and to $45,000 for those filing a married joint return.

Retirement contributions - There is no change in the maximum contribution and individual can make to a 401(k) plan in 2010. This remains at $16,500. The catch up contribution of $5,500 for individuals age 50 + also remains the same.

Mileage reimbursement rates – Theupdated mileage reimbursement rates effective for January 1, 2010 are $0.50, $0.165 and $0.14 for miles incurred for business purposes, medical purposes and charitable purposes, respectively. These rates just changed yesterday.

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California resident J.D. won over $50,000 playing video poker online this year. Wow! She couldn’t do that well in Las Vegas, and at home she can play anytime without having to drive for hours. Plus, she can play any number of different “machines” without waiting for one of them to be free. But J.D. spent over $40,000 before cashing out $50,000. Are her losses deductible?

First, a brief overview.

Online gambling offers advantages to both casual hobbyists and serious gamblers. After all, you never have to sit next to a smoker, you aren’t subject to the casino cacophony, and you can take a break without worrying about someone stealing your machine.

But the legality of online gambling in the U.S. is not really clear. There is no overall federal law that defines illegal gambling. So whether your playing is legal is defined at the state level. Some states — including Illinois, Indiana, Louisiana, South Dakota and Washington — have explicitly outlawed online gambling or some form of it. Other states have no specific law addressing Internet gambling.

You’ve probably heard of the Unlawful Internet Gambling Enforcement Act and Regulation GG which became law in 2006 and become effective on Dec. 1. That certainly sounds like a federal law that makes Internet gambling illegal, doesn’t it?

Ironically, this law turns bankers into policemen and forces them to enforce a non-law. Banks are required to return or block illegal-gambling deposits into their clients’ accounts, or even to close accounts.

However, the UIGEA doesn’t define unlawful Internet gambling. In fact, there is so much dispute over the definition that the House financial services committee wrote to Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke asking them to delay enforcement of the UIGEA for one year, until Dec. 1, 2010. See the letter.

Congress is battling over outlawing online gambling altogether, or limiting it to certain games. At present, the only thing that’s clear is that online sports betting is illegal.

Article in its entirety: Online Gambling Poses Tax Conundrum

On its Web site, Talbots boldly says it offers clothing “to flatter women of all shapes and sizes.” But the preppy Massachusetts-based retailer just failed in its effort to hide something else: taxable income from its home-state taxman.

In a recent little-noticed opinion full of fascinating detail, the Massachusetts Appellate Tax Board said Talbots ( TLB - news - people ) improperly avoided paying the 9.5% Massachusetts corporate excise tax on as much as $392 million of revenue by using “sham” transactions that “lacked economic substance.”

Specifically, the quasi-judicial board said the company set up a Delaware subsidiary with a single office in Illinois to hold the various Talbots trademarks. Making “royalty” payments to the subsidiary for use of the marks, Talbot then deducted the sums on its Massachusetts tax returns. Neither Illinois nor Delaware tax such revenue if legitimately structured in this fashion.

“Tax avoidance was the driving force,” and the “motive behind the formation of a wholly owned holding subsidiary,” the board declared.

It was not clear from the 54-page opinion how much Talbots might owe Massachusetts in back taxes covering 1994 to 2001, the years at issue in the case. Simple math using the $392 million figure at the 9.5% rate suggests $37 million, or 67 cents per Talbots share, plus any interest and penalties. However, in an e-mail, Julie Lorigan, a Talbots spokeswoman at the corporate headquarters in Hingham, Mass., said “only a portion” of the $392 million “is related to Massachusetts,” and presumably taxed there, and that any taxes owed would be further reduced by offsetting expenses.

Asked about the existence of similar tax litigation in other jurisdictions, Lorigan said, “There could be other states, but I have no further comment.”

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UBS AG and the Swiss government, rocked by months of embarrassing details about bank secrecy and guilty pleas for UBS clients, agreed to settle a tax-evasion probe with U.S. authorities.

The agreement appears to signal that thousands of U.S. client accounts, hidden in offshore shadows, will be turned over to U.S. revenue agents.

The settlement, announced during a teleconference with a federal court judge Friday ahead of a scheduled hearing in Miami on Monday, closes one chapter in the long-running case that centered on the Internal Revenue Service’s demand that UBS turn over the identities of 52,000 UBS accounts that belong to U.S. citizens.

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A federal judge is due for an update on negotiations aimed at settling the government’s tax evasion lawsuit against Swiss bank UBS.

A hearing is scheduled Wednesday morning in Miami federal court so the judge can find out more about the chances of a deal from lawyers for the bank, the Swiss government and the U.S. Justice Department.

Without an agreement, a full-scale hearing is set to begin Monday on a U.S. effort to obtain the names of some 52,000 wealthy account holders believed to be hiding assets and dodging U.S. taxes. The Swiss and UBS insist they can’t turn over all the names without violating Switzerland’s bank secrecy laws, a position the U.S. rejects.

Switzerland’s foreign minister is to discuss the case later this week with Secretary of State Hillary Clinton.

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Ben Bernanke says the Federal Reserve was “extremely uncomfortable” about last year’s bailouts of big financial companies, but the Fed chief believes the central bank’s strategy to ease the financial crisis is working.

Bernanke referred to the Fed’s unprecedented decisions last year to step in and financially back JPMorgan Chase’s takeover of then-troubled investment house Bear Stearns, and throw its first of four financial lifelines to insurance giant American International Group.

In remarks to a Fed conference in North Carolina, he says the Fed was forced to take action because the collapse of those companies would have dealt a serious blow to the financial system and the broader economy. The situation underscores the need for new powers to allow the government to safely wind down such huge firms.

A good Chicago tax lawyer is hard to come by.

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U.S. Sen. Max Baucus, a Montana Democrat and chairman of the Senate Finance Committee:

* Repeats objection to provision in the Senate’s $14 billion auto rescue bill that would reinstate tax loophole for banks in transit agency leaseback deals.

* Says he was prevented from offering amendment to Senate auto bailout bill to strike the unrelated tax provision.

* Says measure is ‘an abusive tax shelter’ and would undermine negotiations now underway by the U.S. Internal Revenue Service in related cases.

* Says ‘this provision has no business being in the auto bill.’

Source: Forbes