Shortly after I posted this piece about IRS cutting ties with ACORN, I received an email asking me, among other things, if I thought this was a good thing and if we should “get rid” of the VITA program altogether because of the potential for giving bad advice. I didn’t immediately respond to the email because I wanted to give it some thought. And then I thought it that it might my response be worth sharing. So here’s my take on the whole mess:

I absolutely think that the IRS decision to cut ties with ACORN’s VITA program was a good one. But not because a couple of folks gave bad tax advice – if that were the criteria, there are quite a number of tax preparers that would be out of a job. Rather, it’s because I share Commissioner Shulman’s concern that: [i]t is absolutely critical that taxpayers have trust in our Volunteer Income Tax Assistance program partners. I don’t think that’s the case right now – and that’s why stepping away was a good thing.

As to the question of whether the VITA program should be canned altogether – I couldn’t be more vehement that I think that’s a terrible idea. The implication in the email was that the population which is being served might have “complicated” tax issues that can’t be properly addressed by volunteers; the further implication was that those tax issues might be related to fraud.

I understand where that’s coming from because I saw the video and it was distressing to see that the ACORN staffers didn’t even flinch at some of the information delivered by the potential “taxpayers.” But that shouldn’t be interpreted as the norm.

A little explanation about VITA may be in order. First of all VITA, which stands for Volunteer Income Tax Assistance, offers free tax help to low- to moderate-income taxpayers. Being poor or living paycheck to paycheck isn’t a crime. Don’t be misled by a staged video (and yes, while I think the reaction was terrible, the video was clearly a set up) to believe that the only folks who would seek free tax help are those who want to commit fraud. These are people, for the most part, who want to pay their taxes. They want to be compliant.

Last year, VITA volunteers prepared 2.8 million tax returns, or about 2% of the total individual returns filed. These taxpayers were seniors, students, single parents… It well could have been you and I. They were also military – the military has a very active VITA program. Our Navy, Army, Marines, Air Force and National Guard – and their families – can get free tax assistance from volunteers who understand issues that matter to military personnel, like combat zone tax benefits, through VITA.

So the market that VITA serves is broad base that includes many, many good people. I can’t stress enough how unfair it would be to assume that those seeking free help are cheats.

As far as the character and competence of the volunteers go, I can speak to that firsthand. For years, I helped coordinate the VITA site at our local senior center. The volunteers at our center were first rate – many were actually tax attorneys, accountants and tax preparers who just wanted to give something back to the community. Others were retirees, engineers, students, bankers… you name it. Just good folks who gave up their time to help other people. Those folks received training which generally included how to prepare returns, new developments (like the rebate checks from last year) in tax law that affect taxpayers, and how to use the IRS tax prep software – there’s even a test! Additionally, there are supervisors on site to help out with more difficult questions – and hotlines to call when there are problems.

It’s a really wonderful program. Are there problems? Of course there are. Do folks occasionally screw up? Sure. Does that happen almost anywhere? Absolutely. I dare you to find one tax prep service that has never, ever made a mistake. You can’t.

I would encourage you to find out more about VITA if you have questions – and perhaps even become a volunteer. Don’t let some edited video and some bad behavior by ACORN color your impression of the more than 100,000 people who show up every tax season to try and do the right thing.Similar Posts:

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Just days after offering some “interesting” tax advice on film, ACORN was hit with a House bill that would deny federal funds to the group. Rep. Eric Cantor (R-VA) explained:

ACORN has violated serious federal laws, and today the House voted to ensure that taxpayer dollars would no longer be used to fund this corrupt organization.

The group touts itself as an advocate for low- and moderate-income people on fair wage, education and housing issues.

Earlier in the week, the Senate voted to block HUD funding to the group as part of an amendment to a larger bill. However, at least one Senator took issue with the vote: Sen. Dianne Feinstein (D-CA) felt that the vote was merely ceremonial since the attached bill didn’t include any funding for ACORN in the first place. She said, “All of this is really, I guess, to show people.”

Sen. Feinstein was clearly in the minority with respect to opposing the bill. Both her colleagues in the Senate and those in the House voted overwhelmingly in support of withholding ACORN funding.

Of course, don’t expect the ban to take effect immediately. The bills are not retroactive and would apply to future funding, likely beginning in 2010. The funding could be significant: over the last 15 years, the group has received an estimated $53 million in federal aid.

ACORN’s chief executive officer, Bertha Lewis, noted that ACORN primarily relies on funding from private, not government sources, and indicated that the organization would continue to operate. Despite such optimism, concessions, including reduced hiring, are expected. And ACORN’s woes may not stop there – the FBI has made noise that it may be considering an investigation after the “tax tape” was made public.

I tried to see what kind of response ACORN would offer to the public but their web site was down for the evening (despite repeated attempts to access it). Funding woes already?Similar Posts:

• House Approves “Bonus Tax”
• New “House” Rule: Let’s Not Approve Anything the Senate Agrees On
• IRS Cuts Ties with ACORN
• Everything But the Kitchen Sink
• Costly Immigration Bill Dies

It’s time for the Census!

According to best estimates, there are 307,216,361 people in the US as of the publishing of this blog entry. The ticker on the US Census web site was plugging along quite nicely as I was writing, so chances are, there will be a few hundred more by the time you see this post. To get the most accurate numbers, we depend on the official US Census.

The Census is taken every ten years. The first one was taken in 1790 and the next one will be in 2010. The Census is mandated by the Constitution and participation is mandatory.

Of course, mandatory participation means that, like taxes and other government programs, there are unscrupulous folks out there trying to take advantage of people. In other words, scammers are on the rise.

Be smart and remember a few things:

1, The Census Bureau will mail or deliver questionnaires to your house in March 2010.

2, An official US Census worker will have a badge, a handheld device, a Census Bureau canvas bag, and a confidentiality notice. Ask to see ID before answering any questions.

3, An official US Census worker will verify address and other demographic information. Do not give out your Social Security number, credit card or banking information – this is not needed for the Census.

4, Census workers will not contact you via email. They may call, visit or send you something in the US mail but they will not contact you via email.

5, The IRS and the US Census Bureau are separate entities. An official US Census worker will not ask you about your tax returns or other confidential tax information. Additionally, the US Census does not have access to your confidential tax information – any claims made regarding taxes owed or other inconsistencies will not be raised by a US Census worker.

To steal a line from one of my mom’s TV favorite shows, “Let’s be careful out there!”Similar Posts:

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• IRS Changes Gears on Rebate Checks

The sky is falling! The sky is falling!

Okay, not really. But revenues are falling. And it feels just as dramatic.

As the economy slowly begins to recover, another challenge looms on the horizon: how to pay for of this “stimulus.” Cash for Clunkers? Stimulus checks for the disabled? TARP relief for banks? Extended unemployment benefits? Just where is the money coming from? If you said “taxes”, you’re only sort of right.

The money for all of these programs – as well as spending on Iraq, Afghanistan and other big budget items – is supposed to be drawn from tax revenues. There’s just one teensy problem: we don’t have much in the way of tax revenues.

If the current pace continues, tax receipts for 2009 will be almost 20% less than last year. That’s before the tax cuts expire. It is the steepest decline since 1932, during the Great Depression.

According to the AP, individual taxes, Social Security and Medicare revenues are all down from the same time last year. Even more striking? Corporate revenues are down more than 50%.

What’s particularly scary about these numbers is that, even before the $1 trillion health care bill gets passed, spending continues to rise. Despite attempts to scale back in Iraq, military spending is still up from last year. Together with other spending, increases are set to hit more than 10%. That’s right: increases in spending, decreases in revenues.

You do the math.Similar Posts:

• Surprise! Your tax dollars are being wasted!

Earlier today, ten of the nation’s largest banks received permission from the Treasury to repay a fraction of the amounts loaned out.

I know, it’s kind of bizarre. Permission to pay back a loan early? You’d think the feds would be thrilled.

Here’s the scoop. While some of the banks were begging for funds, others were forced to take the funds at the insistence of the Bush administration in an attempt to stabilize the financial system. The idea was that forcing banks to take the money would free up capital for small business loans and home mortgages. Whether that happened or not has been argued at length. But at least ten banks have convinced the Obama administration that they now have sufficient capital to begin repayment efforts. Those banks are: American Express, Bank of New York Mellon, BB&T, Capital One, Goldman Sachs, JP Morgan, Morgan Stanley, Northern Trust, State Street and U.S. Bancorp have all been approved by the Treasury to return some funds. None of the banks have disclosed when and exactly how much they will repay. My money’s on soon.

Why the rush to pay it all back? Congress has put limits all over financial institutions with TARP funds – from tax limitations to executive comp caps to restrictions on immigration visas. Not surprisingly, private corporations don’t like the politics so much and they want to get out.

The feds expect to get about $68 billion back from those banks. Smaller banks have already repaid about $2 billion (sad, isn’t it that we’ve gotten to the point where $2 billion seems like a tiny amount of money?). This means that more than a third of the money initially handed out to banks will be coming back to the Treasury. The $200 billion bank hand out is part of the overall $700 billion bail out using federal dollars to boost the economy.

Despite the “good” news, the Dow did not rally today, ending just slightly lower. It’s hard to know what that means – the market is so volatile these days. Is the worst over? We can hope.Similar Posts:

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I’m a big fan of parks and green spaces. Maybe this is because I grew up in the country. But while I love the amenities that the City has to offer, there’s something ultimately satisfying about taking a walk along a tree lined alley, clamoring over boulders to see what’s on the other side and yes, occasionally stepping over a venomous snake of death (okay, it was really a nonpoisonous Northern water snake but it felt like a venomous snake of death).

We’re lucky in the US to have a fairly significant system of local, state and national parks. They come in all shapes and sizes. And they’re largely funded with taxpayer dollars.

I try to patronize as many as I can. In fact, we’re traipsing up to go camping in one of our state parks this weekend… I figure, since we have them, why not use them?

The Department of the Interior realizes that taxpayers may be feeling the crunch this summer and might skip national parks as a vacation site. In an effort to stimulate travel, all 147 National Park Service sites that charge entry fees will waive them for three weekends this summer.

The fee free weekends are:

Mark your calendars for fee-free weekends this summer:

• June 20-21, 2009 (Father’s Day weekend – hint, hint)
• July 18-19, 2009
• August 15-16, 2009

Some parks have gone even further and are offering additional savings throughout the summer.

Originally created in 1916, the NPS now comprises 390 areas covering more than 84 million acres in 49 States (sorry, Delaware!), the District of Columbia and a number of US territories.

In 2007, the NPS had a budget of $2.289 billion dollars, with revenues of just over $300 million. However, the NPS is estimated to bring more than $10 billion dollars to local economies each year. With a nod to those numbers, Secretary of the Interior Ken Salazar announced the NPS promotion by saying, “National parks also serve as powerful economic engines for local communities, and we hope that promoting visitation will give a small shot in the arm to businesses in the area.”

In a year when many small businesses are struggling, consider paying a visit to your local park – and buy an ice cream or bird book from a local merchant. Think of it as your own stimulus package.Similar Posts:

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It’s Fix the Tax Code Friday!

Remember that study that I cited from the Tax Foundation earlier in the week? That same report offered another statistic. In 2007, the cost of balancing the budget would have cost each taxpayer an additional $1,789 in taxes. This year, due to “the bailouts and the Troubled Asset Relief program under the Bush administration, as well as the stimulus and fiscal year 2009 omnibus spending bills under the Obama administration”, that number has skyrocketed to $8,798. Yep, $8,798 extra to balance the budget.

Is it worth it?

Today’s Fix the Tax Code Friday question is:

Would you be willing to pony up $8,798 in extra taxes to balance the budget? If not, what about would you be willing, if any, to put up?

(Psst, in case you’re wondering, the Tax Foundation study found that 6% of taxpayers would be willing to pay the whole thing.)Similar Posts:

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When Ed Liddy took the reins of troubled insurance giant AIG, he probably thought it would be tough. I’m guessing he had no idea how tough. Today, Liddy will face the House Financial Services subcommittee on capital markets in DC, and chances are, he’s in for a flogging.

It’s now been made clear that AIG will have to return $165 million that it paid out in executive bonuses to the Treasury Department in 2009. According to Geithner: “We will impose on AIG a contractual commitment to pay the treasury from the operations of the company the amount of the retention awards just paid. In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.” That’s right, double.

Public anger over the bonuses has not subsided. The bonuses, which total more than $165 million were said to be contractual “retention” bonuses. It has since been revealed that at least 11 of the 73 employees (15%) that took the money no longer work for AIG – so much for retention, huh? Additionally, the sector which received the bonuses, the financial products sector, has been charged with the primary blame for the AIG meltdown. In other words, these folks help run the company into the ground and got a nice big check for doing so.

All of this while AIG is operating on $170 billion in bailout money – $150 billion of which was promised before the provisions of TARP even took effect (thanks, ex-Secretary Paulson). AIG is scheduled to receive another $30 billion this year. That’s about the same amount of money the Big Three automakers asked for in the fall – you know, when we made them jump through some (potentially deserving) hoops to prove that they would be responsible with our money.

Of course, the bonus situations really should come as no surprise. This is the same company that, just days after receiving its first bailout payments in 2008, sent executives on a $440,000 retreat to a posh California resort. Those same executives – the ones who are perhaps indirectly responsible for massive layoffs that followed – spent the equivalent of two full years’ salary for someone making minimum wage in just a few days on spa treatments alone. Yep, spa treatments.

Congress sat back and let it happen. And now, they’re apparently waking up.

Just a day after Sen. Max Baucus (D-MT) suggested an excise tax on the bonuses, a key GOP Senator has stepped in to support the idea. Sen. Chuck Grassley (R-IA), who is the top ranking Republican on the Senate Finance Committee, will lead the vote on a measure which makes all retention bonuses subject to a 35% excise tax for excessive compensation to be paid by the company and by the individual. Nonretention bonuses of more than $50,000 would be subject to the same tax. If passed, the provisions would be retroactive to January 1, 2009, which means those AIG bonuses would be taxable under the new scheme.

AIG has since pledged to reduce 2009 bonuses by about 30%. They claim they need to keep their bonus structure – but do they? All of this talk of “talent” jumping ship if the company does away with the bonus structure is crazy. Where is the talent to begin with? If “talent” like that is what’s holding AIG together, then maybe it’s time for AIG to redefine the meaning of talent.

Here’s the thing: millions of Americans go to work every day and (gasp) do their job without being promised a little something extra. I know that’s hard for folks on Wall Street to understand, but it’s true. Even law firms are learning that paying out bonuses for simply showing up and doing your job is a bad idea: BigLaw, in the midst of thousands of legal layoffs, is scaling back – and in some cases eliminating – bonuses. You’re not owed a bonus, you earn a bonus. The definition of bonus is “a gift to reward performance.” Just think about that.

Grassley has. On yesterday, remarking on the bonuses, he said, “there’s just so much that the taxpayers of this country are going to stand for.” And he’s right.Similar Posts:

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The US Tax Court has received reports about an e-mail allegedly sent by a member of the Tax Court’s practitioner bar. This is NOT a legitimate email. If you do not have a case pending before the US Tax Court, the Court will not contact you via email.

The Tax Court has advised that if you receive an e-mail with a subject line that includes the text, “Notice of Deficiency #” followed by a series of numbers or “US Tax Petition”, along with a malformed docket number following the format #000-000, and a sender address of noreply@ustaxcourt.org, complaints@ustaxcourt.org, or notice@ustaxcourt.org, delete the e-mail and do not click any link in the email.Similar Posts:

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Even though many politicians – including President Bush – are still reticent to use the “R” word (recession), economic pundits, including those in the Bush administration are using it. Ed Lazear, President Bush’s chief economic adviser, has been quoted as saying that “parts of the country” are in a recession.

With the threat (or reality, depending on where you land) of a recession looming, there is now a rush to consider a second stimulus package. Federal Reserve Chairman Ben Bernanke has told Congressional leaders that “consideration of a fiscal package by the Congress at this juncture seems appropriate.” He did not, however, use the “R” word, instead referring economy as in a “protracted slowdown.” His suggestions for a stimulus package include direct lending from the federal government to states (a measure that Governor Schwarzenegger of California also supports), consumers and businesses; he has also backed the idea of additional tax credits.

As Bernanke made his announcement, it seems that even President Bush is warming to the idea of a second stimulus package. Just two months after the President objected to the idea of a second stimulus package, the White House has signaled that President Bush would now be “open” to the idea of an additional package. The administration has not agreed to any specific plan and has not indicated which details he would approve.

The Democrats have floated several plans but have not reached a conclusion as to the best overall package. One version included a small rebate check but was not expected to pass and has, in recent weeks largely been ignored. The most recent plan proposed by House Speaker Pelosi focused on extending jobless benefits and increasing infrastructure spending but does not include rebate checks.

The Republicans have been much more apprehensive about a second stimulus plan. Most in the GOP are not on board with the Democratic proposals. Instead, the GOP wants to focus on additional tax breaks including a temporary elimination of capital gains tax on stocks. They have also suggested offering capital gains exclusions for taxpayers with multiple residences in an effort to reduce foreclosures by those who own more than one home.

With such disparate proposals on board, it’s highly unlikely that a resolution will be reached before the end of the year. Democrats have indicated that they are hopeful that if Obama wins the White House, they may have leverage to pass legislation within two weeks of the election – Congress is off session until after the elections. However, the reality is that no matter who wins, Bush will remain in the White House through mid-January. His approval would be needed for any stimulus package as the threat of veto would remain so a compromise will be necessary.

So, there are lots of reports being circulated about what could happen. But to be clear, despite rumors to the contrary, no second stimulus package has been approved and no additional stimulus checks are being mailed as a result. Keep checking back for details as they become available.Similar Posts:

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