New York Times, In Prison for Taking a Liar Loan, by Joe Nocera:
Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans. ...
It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. ...
As a young man, Mr. Engle had been a serious drug addict, but after he got clean, he became an ultra-marathoner, one of the best in the world. In the fall of 2006, he and two other ultra-marathoners took on an almost unimaginable challenge: they ran across the Sahara Desert, something that had never been done before. The run took 111 days, and was documented in a film financed by Matt Damon, who served as executive producer and narrator. ...
The film, Running the Sahara, was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the IRS. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the IRS to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.) ...
Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.
In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.
After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.” Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”
Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.
Lying on a stated-income loan is, without question, a crime, and one ought not to excuse it even though, as Mr. Engle says, “everybody was doing it” — usually with the eager encouragement of their brokers. But the Engle case raises questions not just about the government’s priorities, but about something even more basic: did he even commit the crimes he is accused of? ...
But the more I looked into it, the more I came to believe that the case against him was seriously weak. No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.
Perhaps anticipating that problem, when Mr. Nordlander finally arrested Mr. Engle in May 2010, he claims to have elicited a stronger, better confession while Mr. Engle was handcuffed in the back seat of his car. Mr. Engle fervently denies this. This second supposed confession, however, was never captured on tape.
Wednesday, March 30, 2011
Seven Facts about Injured Spouse Relief
Tax Tip 2011-60, March 25, 2011
If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.
Here are seven facts the IRS wants you to know about claiming injured spouse relief:
1. To be considered an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and not be legally obligated to pay the past-due amount.
2. If you live in a community property state, special rules apply. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
4. You may file form 8379 along with your original tax return or your may file it by itself after you are notified of an offset.
5. You can file the Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.
For more information about the Injured Spouse and Innocent Spouse Relief, visit www.IRS.gov.
If you file a joint return and all or part of your refund is applied against your spouses’ past-due federal tax, state income tax, child or spousal support or federal nontax debt, such as a student loan, you may be entitled to injured spouse relief.
Here are seven facts the IRS wants you to know about claiming injured spouse relief:
1. To be considered an injured spouse, you must have made and reported tax payments, such as federal income tax withheld from wages or estimated tax payments, or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and not be legally obligated to pay the past-due amount.
2. If you live in a community property state, special rules apply. For more information about the factors used to determine whether you are subject to community property laws, see IRS Publication 555, Community Property.
3. If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation.
4. You may file form 8379 along with your original tax return or your may file it by itself after you are notified of an offset.
5. You can file the Form 8379 electronically. If you file a paper tax return you can include Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs.
6. If you are filing Form 8379 by itself, it must show both spouses' social security numbers in the same order as they appeared on your income tax return. You, the "injured" spouse, must sign the form.
7. Do not use Form 8379 if you are claiming innocent spouse relief. Instead, file Form 8857, Request for Innocent Spouse Relief. This relief from a joint liability applies only in certain limited circumstances. IRS Publication 971, Innocent Spouse Relief, explains who may qualify, and how to request this relief.
For more information about the Injured Spouse and Innocent Spouse Relief, visit www.IRS.gov.
Tuesday, March 29, 2011
RP-2011-26
Revenue Procedure 2011-26 provides guidance on the new 100 percent bonus depreciation from the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Specifically it explains the eligibility requirements for qualified property to be eligible for the 100 percent additional first year depreciation deduction. Also, Revenue Procedure 2011-26 provides the method for a taxpayer who already timely filed the 2009 tax return to amend it to include qualified property.
Revenue Procedure will be IRB 2011-16, dated April 18, 2011.
Revenue Procedure will be IRB 2011-16, dated April 18, 2011.
IRS Issues Interim Guidance on Informational Reporting of Employer-Sponsored Health Coverage; Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012
WASHINGTON — The Internal Revenue Service today issued interim guidance to employers on informational reporting on each employee's annual Form W-2 of the cost of the health insurance coverage they sponsor for employees. The IRS is also requesting comments on this interim guidance. The IRS emphasized that this new reporting to employees is for their information only, to inform them of the cost of their health coverage, and does not cause excludable employer-provided health coverage to become taxable; employer-provided health coverage continues to be excludable from an employee's income, and is not taxable.
The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In today's guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
The 2011 Form W-2, prior IRS Notice 2010-69 deferring the reporting requirement for 2011, and Notice 2011-28 containing the new guidance are available on IRS.gov.
The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. Notice 2010-69, issued last fall, made this requirement optional for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). In today's guidance, the IRS provided further relief for smaller employers (those filing fewer than 250 W-2 forms) by making this requirement optional for them at least for 2012 (i.e., for 2012 Forms W-2 that generally would be furnished to employees in January 2013) and continuing this optional treatment for smaller employers until further guidance is issued.
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
The 2011 Form W-2, prior IRS Notice 2010-69 deferring the reporting requirement for 2011, and Notice 2011-28 containing the new guidance are available on IRS.gov.
Eight Tips from the IRS to Help you Determine if your Gift is Taxable
If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are not more than the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
For more information see Publication 950, Introduction to Estate and Gift Taxes. Both Form 709 and Publication 950 can be downloaded on this website or ordered by calling 800-TAX-FORM (800-829-3676).
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are not more than the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
For more information see Publication 950, Introduction to Estate and Gift Taxes. Both Form 709 and Publication 950 can be downloaded on this website or ordered by calling 800-TAX-FORM (800-829-3676).
Monday, March 28, 2011
States weigh cuts to earned income tax credit for working poor
By Pamela M. Prah
Rohnalda Hollon, a single mother of three in Beaverton, Michigan, and an Iraq war veteran, worries that state budget cutbacks will wipe out the refund she gets from a program aimed at helping the working poor.
“The $400 from the Earned Income Tax Credit could mean the difference between paying my Consumer’s Energy bill or not,” says Hollon, who works full-time for the Army National Guard Military Funeral Honors program, and has been put forward as one of the faces of an advocacy campaign called Save Michigan’s Earned Income Tax Credit.
Hollan is typical of the recipients of the Michigan credit, which returns an average of $432 to families, most with children. Governor Rick Snyder wants to eliminate the program, along with a slew of other tax credits, in a bid to make the state tax system “simple, fair and efficient.” Eliminating the credits also would help close the state’s $1.8 billion budget deficit. Just scrapping the Earned Income Tax Credit, or EITC, would save the state at least $340 million a year.
“We cannot afford sacred cows,” Michigan state Senator Roger Kahn said when he introduced legislation to eliminate the EITC. With the budget expense from the credit growing each year, Kahn said, it’s important to ask: “ ‘Do we need it? Can we afford it? What is it worth?’ For the EITC the answers are no, no and not enough.”
Hollon, who earns $37,000 a year, says she lives paycheck-to-paycheck and has earned her refund. “I would like legislators to know that there are people like me — from all walks of life — that depend on this,” she said in a video with other supporters of the Michigan credit.
Hard choices in budget cuts
Facing yet another tight budget year — but this time, without federal stimulus dollars — state lawmakers are looking everywhere they can for cost savings. That has led a growing number of states to target their earned income tax credits. Those credits are patterned after a federal program of the same name that supporters say reduces poverty and encourages work. State policymakers in Kansas, North Carolina and Wisconsin are among the 23 states with EITCs that are considering scaling back those programs.
According to the Center on Budget and Policy Priorities, which advocates for state earned-income tax credit programs, the people who qualify for the benefit usually come from working families with children. Their annual incomes are below about $36,000 to $49,000, depending on marital status and the number of children in the family.
The way it works is that those who qualify for the federal credit also receive a state refund, which is calculated as a percentage of the federal rebate. The percentage ranges from 3.5 percent in Louisiana to 40 percent in Washington, D.C. (see sidebar). All but three of the states with EITC programs are “refundable.” That means low-income families can receive the credit even if they pay little or no income tax.
Proponents of the credits say the programs have a strong, proven track record and for years have garnered bipartisan support. Supporters like to tout that even President Ronald Reagan endorsed the EITC, calling it “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”
Now, however, some fiscal conservatives are balking at the idea of giving tax breaks to people who earn so little that they may not pay any state income taxes. Pete Sepp, executive vice president of the National Taxpayers Union, a group that advocates lower taxes, is one of them. “Our primary concern with the EITC,” Sepp says, “is with its outlay effects resulting from the ‘refundable’ portion that allows recipients to receive more money back than they paid in income taxes.”
Advocates of the working poor say cutting the EITC is counterproductive. Families typically spend the money quickly on local purchases — whether it’s paying the electric bill in Hollan’s case or on auto repairs or medical bills. Either way, the money is spent in the community, helping to stimulate the local economy, says Amy Greene, a senior policy associate at the Hatcher Group, a public affairs firm that manages the website taxcreditsforworkingfamilies.org.
In Greene’s view, the movement in the states to reduce tax credits on earned income conflicts with the pledges many governors have made to not raise taxes. Wisconsin Governor Scott Walker, for example, is proposing changes to the state EITC that would cost a single mom who has two children and is making the minimum wage $302 per year, according to the Wisconsin Budget Project. Likewise, New Jersey Governor Chris Christie last year reduced his state’s EITC to 20 percent from 25 percent. “That’s a tax increase,” says Greene.
Sepp acknowledges that a change like the one made in New Jersey likely does result in a tax increase for some people. For many others, though — those who have been getting the credit but don’t owe income tax — he says it’s not accurate to say their taxes are going up.
Moves to expand, not cut, EITC
Not all states are eying cutting back on the earned-income credit. In fact, Connecticut may go the opposite direction. The governor there, Democrat Dannel P. Malloy, wants to create one. For a family of four with an income of $20,000, the governor’s proposal would generate an additional $1,500 a year.
“For those who won't take a low-wage job in the hopes that something better will come along, this is an incentive to take that job — because you will only get the credit if you’re working,” Malloy said when he unveiled a sweeping and controversial budget plan that includes raising taxes on alcohol, tobacco and the general sales tax. He figures the program would cost $110 million a year and help 190,000 low-income citizens.
Likewise, Iowa has been discussing increasing the state’s earned income credit. The state Senate has approved the idea, but the state House has not. Meanwhile in Virginia, Governor Bob McDonnell recently signed legislation that advocates say strengthens the state’s EITC by ensuring that it conforms with any changes at the federal level. It is expected to cost the state $6 million a year.
“It’s a well-spent $6 million,” argues the Center on Budget and Policy Priorities’ Nicholas Johnson, “that will benefit 114,000 Virginia children and families.”
Rohnalda Hollon, a single mother of three in Beaverton, Michigan, and an Iraq war veteran, worries that state budget cutbacks will wipe out the refund she gets from a program aimed at helping the working poor.
“The $400 from the Earned Income Tax Credit could mean the difference between paying my Consumer’s Energy bill or not,” says Hollon, who works full-time for the Army National Guard Military Funeral Honors program, and has been put forward as one of the faces of an advocacy campaign called Save Michigan’s Earned Income Tax Credit.
Hollan is typical of the recipients of the Michigan credit, which returns an average of $432 to families, most with children. Governor Rick Snyder wants to eliminate the program, along with a slew of other tax credits, in a bid to make the state tax system “simple, fair and efficient.” Eliminating the credits also would help close the state’s $1.8 billion budget deficit. Just scrapping the Earned Income Tax Credit, or EITC, would save the state at least $340 million a year.
“We cannot afford sacred cows,” Michigan state Senator Roger Kahn said when he introduced legislation to eliminate the EITC. With the budget expense from the credit growing each year, Kahn said, it’s important to ask: “ ‘Do we need it? Can we afford it? What is it worth?’ For the EITC the answers are no, no and not enough.”
Hollon, who earns $37,000 a year, says she lives paycheck-to-paycheck and has earned her refund. “I would like legislators to know that there are people like me — from all walks of life — that depend on this,” she said in a video with other supporters of the Michigan credit.
Hard choices in budget cuts
Facing yet another tight budget year — but this time, without federal stimulus dollars — state lawmakers are looking everywhere they can for cost savings. That has led a growing number of states to target their earned income tax credits. Those credits are patterned after a federal program of the same name that supporters say reduces poverty and encourages work. State policymakers in Kansas, North Carolina and Wisconsin are among the 23 states with EITCs that are considering scaling back those programs.
According to the Center on Budget and Policy Priorities, which advocates for state earned-income tax credit programs, the people who qualify for the benefit usually come from working families with children. Their annual incomes are below about $36,000 to $49,000, depending on marital status and the number of children in the family.
The way it works is that those who qualify for the federal credit also receive a state refund, which is calculated as a percentage of the federal rebate. The percentage ranges from 3.5 percent in Louisiana to 40 percent in Washington, D.C. (see sidebar). All but three of the states with EITC programs are “refundable.” That means low-income families can receive the credit even if they pay little or no income tax.
Proponents of the credits say the programs have a strong, proven track record and for years have garnered bipartisan support. Supporters like to tout that even President Ronald Reagan endorsed the EITC, calling it “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress.”
Now, however, some fiscal conservatives are balking at the idea of giving tax breaks to people who earn so little that they may not pay any state income taxes. Pete Sepp, executive vice president of the National Taxpayers Union, a group that advocates lower taxes, is one of them. “Our primary concern with the EITC,” Sepp says, “is with its outlay effects resulting from the ‘refundable’ portion that allows recipients to receive more money back than they paid in income taxes.”
Advocates of the working poor say cutting the EITC is counterproductive. Families typically spend the money quickly on local purchases — whether it’s paying the electric bill in Hollan’s case or on auto repairs or medical bills. Either way, the money is spent in the community, helping to stimulate the local economy, says Amy Greene, a senior policy associate at the Hatcher Group, a public affairs firm that manages the website taxcreditsforworkingfamilies.org.
In Greene’s view, the movement in the states to reduce tax credits on earned income conflicts with the pledges many governors have made to not raise taxes. Wisconsin Governor Scott Walker, for example, is proposing changes to the state EITC that would cost a single mom who has two children and is making the minimum wage $302 per year, according to the Wisconsin Budget Project. Likewise, New Jersey Governor Chris Christie last year reduced his state’s EITC to 20 percent from 25 percent. “That’s a tax increase,” says Greene.
Sepp acknowledges that a change like the one made in New Jersey likely does result in a tax increase for some people. For many others, though — those who have been getting the credit but don’t owe income tax — he says it’s not accurate to say their taxes are going up.
Moves to expand, not cut, EITC
Not all states are eying cutting back on the earned-income credit. In fact, Connecticut may go the opposite direction. The governor there, Democrat Dannel P. Malloy, wants to create one. For a family of four with an income of $20,000, the governor’s proposal would generate an additional $1,500 a year.
“For those who won't take a low-wage job in the hopes that something better will come along, this is an incentive to take that job — because you will only get the credit if you’re working,” Malloy said when he unveiled a sweeping and controversial budget plan that includes raising taxes on alcohol, tobacco and the general sales tax. He figures the program would cost $110 million a year and help 190,000 low-income citizens.
Likewise, Iowa has been discussing increasing the state’s earned income credit. The state Senate has approved the idea, but the state House has not. Meanwhile in Virginia, Governor Bob McDonnell recently signed legislation that advocates say strengthens the state’s EITC by ensuring that it conforms with any changes at the federal level. It is expected to cost the state $6 million a year.
“It’s a well-spent $6 million,” argues the Center on Budget and Policy Priorities’ Nicholas Johnson, “that will benefit 114,000 Virginia children and families.”
Tax Tip: Deduct Nursing Home Expenses
NEW YORK (MainStreet) -- Many senior citizens choose to spend their golden years in a continuing-care retirement community providing options for independent living, assisted living and nursing care.
In such a community residents can move from one venue to another as their situation changes and additional levels of care may be needed. Once accepted into the facility, residents are often guaranteed health or long-term care coverage for life. In most cases a resident must pay a sizable entry fee, plus a monthly maintenance fee to the home.
That part of a lump-sum entrance fee paid to a "life-care" or "continuing care" facility specified in the residential agreement as a condition for the facility's promise to provide lifetime medical care can be deducted.
The deduction must be made for the full amount on the Schedule A form for itemized deductions as a medical expense in the year it is paid, even though the medical care will be provided at some time in the future.
Similarly, a one-time upfront medical payment paid to a nursing home for a lifetime of medical care can be deducted in full in the year it is paid, despite the fact much of the medical care will be provided in future years.
In such a community residents can move from one venue to another as their situation changes and additional levels of care may be needed. Once accepted into the facility, residents are often guaranteed health or long-term care coverage for life. In most cases a resident must pay a sizable entry fee, plus a monthly maintenance fee to the home.
That part of a lump-sum entrance fee paid to a "life-care" or "continuing care" facility specified in the residential agreement as a condition for the facility's promise to provide lifetime medical care can be deducted.
The deduction must be made for the full amount on the Schedule A form for itemized deductions as a medical expense in the year it is paid, even though the medical care will be provided at some time in the future.
Similarly, a one-time upfront medical payment paid to a nursing home for a lifetime of medical care can be deducted in full in the year it is paid, despite the fact much of the medical care will be provided in future years.
No death penalty means job cuts in appellate defender's office
By DOUG FINKE
THE STATE JOURNAL-REGISTER
Three dozen jobs in the State Appellate Defender’s office are being eliminated, a result of the state’s decision to abolish the death penalty.
State Appellate Defender Michael Pelletier said layoff notices have already been issued to employees whose jobs focused on providing assistance in death penalty cases.
“It’s bittersweet,” said Pelletier. “Obviously, our position would be to abolish the death penalty. We’ve had lawyers working their entire careers on it -- and then all of a sudden, guess what? I’ve saved a life and now I’ve lost a job.”
In all, 37 positions will be eliminated from the Appellate Defender’s office, although the number of layoffs comes to only 28, because not all of the positions were filled.
Eleven of the positions are in the Springfield office, where six people will lose their jobs.
The cutbacks will save a total of $4.7 million, Pelletier said, counting salaries and other associated costs.
The bulk of the cuts are in the capital trial assistance unit, which helped lawyers who represented defendants in death penalty cases. All 28 positions in that unit are being eliminated, Pelletier said. They include not only attorneys, but also investigators, paralegals and “mitigators,” social workers who searched for factors that could mitigate a death sentence.
A handful of jobs in the capital post-conviction unit will be spared, but only for a year. The unit will continue to represent 10-11 clients on post-conviction petitions that were already filed.
Pelletier said there is an ethical obligation to continue that work. As those issues are resolved over the next year, he said, he hopes some of the six lawyers in the unit can be absorbed elsewhere in the office.
The office handles criminal appeals for defendants who cannot afford their own attorneys. Pelletier said the office takes about 3,000 cases a year.
Copyright 2011 The State Journal-Register. Some rights reserved.
THE STATE JOURNAL-REGISTER
Three dozen jobs in the State Appellate Defender’s office are being eliminated, a result of the state’s decision to abolish the death penalty.
State Appellate Defender Michael Pelletier said layoff notices have already been issued to employees whose jobs focused on providing assistance in death penalty cases.
“It’s bittersweet,” said Pelletier. “Obviously, our position would be to abolish the death penalty. We’ve had lawyers working their entire careers on it -- and then all of a sudden, guess what? I’ve saved a life and now I’ve lost a job.”
In all, 37 positions will be eliminated from the Appellate Defender’s office, although the number of layoffs comes to only 28, because not all of the positions were filled.
Eleven of the positions are in the Springfield office, where six people will lose their jobs.
The cutbacks will save a total of $4.7 million, Pelletier said, counting salaries and other associated costs.
The bulk of the cuts are in the capital trial assistance unit, which helped lawyers who represented defendants in death penalty cases. All 28 positions in that unit are being eliminated, Pelletier said. They include not only attorneys, but also investigators, paralegals and “mitigators,” social workers who searched for factors that could mitigate a death sentence.
A handful of jobs in the capital post-conviction unit will be spared, but only for a year. The unit will continue to represent 10-11 clients on post-conviction petitions that were already filed.
Pelletier said there is an ethical obligation to continue that work. As those issues are resolved over the next year, he said, he hopes some of the six lawyers in the unit can be absorbed elsewhere in the office.
The office handles criminal appeals for defendants who cannot afford their own attorneys. Pelletier said the office takes about 3,000 cases a year.
Copyright 2011 The State Journal-Register. Some rights reserved.
State to online, out-of-state shoppers: Pay up
By NOMAAN MERCHANT
The Associated Press
CHICAGO — Illinois tax collectors have a message for residents who skirt sales taxes online and out of state: Start paying up.
The cash-strapped state will step up enforcement this year of the decades-old "use tax," which applies to many items bought online or in another state. Officials have added reminders on this year's paper and online tax forms about the tax.
The state has made a recent push to collect sales taxes from retailers like Amazon.com and Overstock.com, approving a law this month that led both companies to drop affiliates in the state.
But Susan Hofer, a spokeswoman for the Illinois Department of Revenue, says auditors will target "big ticket" purchases, like boats sold in Florida, over smaller purchases online.
"If you go online and buy a book on Amazon, it's your conscience that you have to live with," Hofer said.
The tax applies to any purchases made with a sales tax rate lower than Illinois' 6.25 percent, to protect in-state retailers that charge the tax.
For shoppers who didn't keep their receipts, the state has published a list of suggested "use tax" amounts based on income: $15 for people who made $20,000 last year, $27 for people making $50,000, and $52 for people making $100,000.
That's not including taxes on major purchases like boats or cars.
Residents can also pay back taxes on purchases as far back as 2004, thanks to state law passed last year.
The revenue department estimates that Internet shopping could have generated $153 million last year if online retailers were taxed at the state rate. Illinois lawmakers have tried to collect from Amazon and others, which say they shouldn't pay taxes in the state because they don't have offices there.
Gov. Pat Quinn signed a bill this month that charges sales taxes on online purchases made through Illinois affiliates of online companies. That led to Amazon announcing it would end its relationships with state affiliates.
Hofer acknowledged the difficulty revenue auditors face with online shopping.
"How would I or one of our enforcers know if you went home every night and spent five hours shopping on Amazon?" she said.
The state won't have statistics on how many residents will pay until the end of tax season, Hofer said. But interviews with accountants suggest most people either haven't made untaxed purchases or aren't reporting them.
"I've had one client out of 300 volunteer to pay it," said Julie Herwitt, a Chicago accountant. She said she believes most of her clients don't know the tax exists.
At the Bird Armour LLC accounting firm in Springfield, fewer than 5 percent of the 350 returns finished so far have made "use tax" payments, managing member Michael K. Armour said.
"I must admit that I am surprised at the number of people that have come forward," he said.
Last year, the state collected an estimated $4 million to $6 million from the tax. The department hopes that will double this year, Hofer said.
"We expect that people will pay what they owe, recognizing this is part of their responsibility as a citizen," she said.
Associated Press writer Zachary Colman in Springfield contributed to this report.
Copyright 2011 pjstar.com. Some rights reserved
The Associated Press
CHICAGO — Illinois tax collectors have a message for residents who skirt sales taxes online and out of state: Start paying up.
The cash-strapped state will step up enforcement this year of the decades-old "use tax," which applies to many items bought online or in another state. Officials have added reminders on this year's paper and online tax forms about the tax.
The state has made a recent push to collect sales taxes from retailers like Amazon.com and Overstock.com, approving a law this month that led both companies to drop affiliates in the state.
But Susan Hofer, a spokeswoman for the Illinois Department of Revenue, says auditors will target "big ticket" purchases, like boats sold in Florida, over smaller purchases online.
"If you go online and buy a book on Amazon, it's your conscience that you have to live with," Hofer said.
The tax applies to any purchases made with a sales tax rate lower than Illinois' 6.25 percent, to protect in-state retailers that charge the tax.
For shoppers who didn't keep their receipts, the state has published a list of suggested "use tax" amounts based on income: $15 for people who made $20,000 last year, $27 for people making $50,000, and $52 for people making $100,000.
That's not including taxes on major purchases like boats or cars.
Residents can also pay back taxes on purchases as far back as 2004, thanks to state law passed last year.
The revenue department estimates that Internet shopping could have generated $153 million last year if online retailers were taxed at the state rate. Illinois lawmakers have tried to collect from Amazon and others, which say they shouldn't pay taxes in the state because they don't have offices there.
Gov. Pat Quinn signed a bill this month that charges sales taxes on online purchases made through Illinois affiliates of online companies. That led to Amazon announcing it would end its relationships with state affiliates.
Hofer acknowledged the difficulty revenue auditors face with online shopping.
"How would I or one of our enforcers know if you went home every night and spent five hours shopping on Amazon?" she said.
The state won't have statistics on how many residents will pay until the end of tax season, Hofer said. But interviews with accountants suggest most people either haven't made untaxed purchases or aren't reporting them.
"I've had one client out of 300 volunteer to pay it," said Julie Herwitt, a Chicago accountant. She said she believes most of her clients don't know the tax exists.
At the Bird Armour LLC accounting firm in Springfield, fewer than 5 percent of the 350 returns finished so far have made "use tax" payments, managing member Michael K. Armour said.
"I must admit that I am surprised at the number of people that have come forward," he said.
Last year, the state collected an estimated $4 million to $6 million from the tax. The department hopes that will double this year, Hofer said.
"We expect that people will pay what they owe, recognizing this is part of their responsibility as a citizen," she said.
Associated Press writer Zachary Colman in Springfield contributed to this report.
Copyright 2011 pjstar.com. Some rights reserved
Industry Urges Third-Party Reviews of Security Risks for E-File Providers
By Diane Freda
The Internal Revenue Service should require electronic tax filing providers to undergo third-party assessments every three years of whether they comply with information security controls, an industry group that advises the IRS said March 24.
Industry participants are hoping to head off a major security breach by the hundreds of data transmitters, software developers, online providers, and intermediate providers that routinely handle taxpayer accounts and personal taxpayer information that is sent to the IRS.
Such assessments would involve senior management annually certifying that the company has reasonable assurance of the security, confidentiality, and integrity of personal information, said CCH Small Firm Services Director Dave Olsen, a member of the IRS Electronic Tax Administration Advisory Committee working group.
However, the group's recommendations are likely to be controversial since the e-file industry is currently under a self-assessment model and is not required to undergo third-party assessments.
All authorized IRS e-file providers are required by the Federal Trade Commission Safeguards Rule to have a comprehensive information security program, but the working group is looking to bump that up a notch by requiring independent and more frequent assessments.
Among the working group's recommendations was that e-file providers—with the exception of tax preparers who have been deferred for later consideration—conduct annual self-assessments of their security controls, and that an independent third party assess the controls every three years.
Adapting Current Rules
The working group is proposing to match up the FTC Safeguards Rule with requirements of the IRS safeguards program—two different security programs, said Philip Piorier, vice president for the government consumer tax group with Intuit.
The IRS safeguards program manages the security risk associated with the IRS providing data to third parties such as states and municipalities. It requires that participants follow National Institute of Standards & Technology (NIST) controls, self-assess and get third-party assessments. However that program applies only to taxpayer information going out from IRS to third parties, not information going out from taxpayers to third parties. Therefore it would need to be adapted to the e-file provider community.
Companies should be required to report the result of their annual self-assessments and any periodic third-party assessments to IRS, and IRS should conduct spot checks of company and assessor performance, the working group said.
Adverse spot checks should have consequences including suspension of a company from the e-file program, or other IRS enforcement actions with a prohibition on assessors being used for third party assessments.
If adopted by the full ETAAC, the working group said IRS should issue guidance around its recommended security controls, while not being too prescriptive.
The complete text of this article can be found in the BNA Daily Tax Report, March 25, 2011.
© 2011, The Bureau of National Affairs, Inc.
The Internal Revenue Service should require electronic tax filing providers to undergo third-party assessments every three years of whether they comply with information security controls, an industry group that advises the IRS said March 24.
Industry participants are hoping to head off a major security breach by the hundreds of data transmitters, software developers, online providers, and intermediate providers that routinely handle taxpayer accounts and personal taxpayer information that is sent to the IRS.
Such assessments would involve senior management annually certifying that the company has reasonable assurance of the security, confidentiality, and integrity of personal information, said CCH Small Firm Services Director Dave Olsen, a member of the IRS Electronic Tax Administration Advisory Committee working group.
However, the group's recommendations are likely to be controversial since the e-file industry is currently under a self-assessment model and is not required to undergo third-party assessments.
All authorized IRS e-file providers are required by the Federal Trade Commission Safeguards Rule to have a comprehensive information security program, but the working group is looking to bump that up a notch by requiring independent and more frequent assessments.
Among the working group's recommendations was that e-file providers—with the exception of tax preparers who have been deferred for later consideration—conduct annual self-assessments of their security controls, and that an independent third party assess the controls every three years.
Adapting Current Rules
The working group is proposing to match up the FTC Safeguards Rule with requirements of the IRS safeguards program—two different security programs, said Philip Piorier, vice president for the government consumer tax group with Intuit.
The IRS safeguards program manages the security risk associated with the IRS providing data to third parties such as states and municipalities. It requires that participants follow National Institute of Standards & Technology (NIST) controls, self-assess and get third-party assessments. However that program applies only to taxpayer information going out from IRS to third parties, not information going out from taxpayers to third parties. Therefore it would need to be adapted to the e-file provider community.
Companies should be required to report the result of their annual self-assessments and any periodic third-party assessments to IRS, and IRS should conduct spot checks of company and assessor performance, the working group said.
Adverse spot checks should have consequences including suspension of a company from the e-file program, or other IRS enforcement actions with a prohibition on assessors being used for third party assessments.
If adopted by the full ETAAC, the working group said IRS should issue guidance around its recommended security controls, while not being too prescriptive.
The complete text of this article can be found in the BNA Daily Tax Report, March 25, 2011.
© 2011, The Bureau of National Affairs, Inc.
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