The sales tax in Maine is 5%. The tax is a bit broad in that items like clothing and newspapers are taxed (they’re not in my home state of Pennsylvania) but still, 5%? I’m used to paying 7%.

Likewise, the tax on bars, restaurants and hotels (and other lodging like our cabin) is an amazingly low 7%. Yep, 7%. In most areas, liquor taxes and hotel taxes quickly hit 10% and climb close to 15%.

I’m not privy to real estate and income tax rates just now - but I am checking them out. I’ve got to find out what’s driving these Mainers crazy…

If you’re a reader and you’re from Maine, please chime in!

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I’m with the family in the wilds of Maine this week. I have no internet connection inside the cabin (hence, the vacation part) but never fear, there’s still plenty of taxgirl on tap. Check back to see what’s percolating inside of my head… we’ll see what inspires me out in the woods!

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My best laid plans have gone awry - this has been one of the busiest summers that I can remember (that’s supposed to be a good thing, right?).

I haven’t had a second to go to the movies. And since no one has inquired about Pixar’s “Cars”, the only movie that I have seen on DVD this summer (over and over and over), I’m far behind for this year’s taxgirl goes to the movies contest.

With that, I’m announcing that the contest has been extended through mid-October. Details forthcoming. You still have time to get your suggestions in - go to this post to leave your recommendations!

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Joe Francis has spent his life duping young girls into flashing their breasts in front of a camera. Now, he’s claiming that he’s the one that’s been duped.

As previously reported, Francis is facing a trial in September on federal charges, including tax evasion. The fed allege that Francis claimed over $20 million in phony business expenses on his corporate tax returns for 2002 and 2003. He is also accused of shifting assets overseas in an effort to avoid taxation. Francis faces up to 10 years in prison and $500,000 in fines if found guilty.

Jail would, of course, not be new to Francis who recently served 11 months in jail on charges arising from complaints that he filmed naked underage girls. He subsequently pleaded no contest to two misdemeanor charges while in prison for possession of Aprozolam, Lorazapam, sleeping pills and cash.

Francis plans to argue that he is the victim of an accountant with an agenda. He claims that his accountant set him up by preparing returns without his knowledge and then turning him into the IRS under the whistleblower program.

Technorati Tags:
Girls Gone Wild, tax evasion, Joe Francis, whistleblower, Donald Trump

It sounds like a crazy defense - but I could be wrong. I missed the boat on the Wesley Snipes trial since I was sure that Snipes would be found guilty on more charges; Snipes was acquitted of the most serious charges. Apparently, Francis has been reading up on his tax trials, since he retained the same firm, Bernhoft Law, to represent him as Snipes used.

Francis has fired back at the accountant, Michael Barrett, by filing a lawsuit against him for unspecified damages. Francis claims that Barrett hoped to gain at least $10 million for his part in turning Francis into the IRS.

And there’s more… This week, Francis announced that he was filing a lawsuit in Florida to rescind his no contest settlement in Florida. He is also suing in Florida for alleged civil rights abuses during his stint in Florida jail; he is seeking $300 million in compensation.

Francis, of course, has been the target of many lawsuits himself. He has been sued by several girls, claiming that they were tricked into appearing on his “Girls Gone Wild” movies - including Ashley Dupre, the call girl involved in former New York Governor Spitzer’s escort scandal (Dupre later dropped her suit). Casino giant Steve Wynn has filed suit against Francis to collect on a $2 million gambling debt; Francis alleges that he was tricked into gambling after Wynn provided prostitutes.

(So much trickery!)

Francis alleges that the feds and others are simply targeting him in an effort to shut down his business. He told reporters:

I’m not selling Bibles, you know. At the end of the day, I’m selling naked girls. People want to buy naked girls.

Nice.

But he has at least a handful of B list (C list?) celebs rallying to his side… the Kardashian family, who will still be photographed with family is best known for daughter Kim’s large, um, assets, and a sex tape. Yeah, that’s the kind of solid “backing” Francis needs. And Francis’ profile will get a boost this fall when he reportedly appears in Donald Trump’s “The Apprentice.” The Donald said about Francis:

He’s a smart guy. He’s a brilliant marketer. A lot of people don’t like what he markets, but that’s a different subject.

Filming underaged girls? Taking drugs in jail? Not checking out his multi-million dollar tax returns?

I dunno. He doesn’t sound terribly smart to me.

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Okay, maybe not all of them. I was a first time home buyer once, too.

** Oh sorry, I just drifted off to a dreamland involving no screaming kids or barking dogs. **

But the latest rounds of criticisms of the Housing and Economic Recovery Act of 2008 have gotten to me.

I’ll just say upfront that I’m not a fan of the Act. I personally don’t think that it’s good policy for a lot of reasons. Primarily, I am not keen on bailing out an industry that dug its own grave.

However, it is what it is and it’s not all bad. Two of the provisions are particularly note worthy from a tax perspective.

One, for the 2008 tax year, taxpayers who do not itemize but pay property taxes will receive up to a $500 additional standard deduction, or $1,000 for married couples (if your property taxes are lower, you can only claim the amount paid - and if your property taxes are actually lower, please, please tell me where you live!). This is a nice nod, I think, to seniors and high income taxpayers who largely missed out on the last economic stimulus package. It’s not terribly common for homeowners to take the standard deduction - the mortgage interest deduction is what tends to make it worthwhile for many taxpayers to itemize. But those that may take the standard deduction and own a home tend (though not always) to be seniors or higher income folks who have already paid off their home mortgage.

The other provision - the tax credit for first-time home buyers - is the one that’s getting the most press, and the one that’s driving me nuts. It’s not so much bothersome because of the credit, again, it is what it is, but moreso for the loud whining from potential home buyers. I keep hearing, “Why don’t you give us more?”

I’m sorry, what?

Here’s the skinny on the tax credit… It’s a tax credit for first-time home buyers. First-time buyers are defined as those who have not owned a principal residence (vacation homes and rentals don’t count against you) during the three-year period prior to the purchase of a new home. If you’re married, your spouse’s home buying history will affect your own for purposes of this credit.

To qualify for the credit, you must close on the purchase of a new primary residence (not a vacation home or rental) between April 9, 2008 and July 1, 2009. If you’re building a new house, you must plan to occupy the house between those dates.

DC residents who take the DC home buying credit on their personal returns can’t claim both credits. And nonresident aliens may not claim the credit (for information about nonresident spouses, see my prior article on the subject).

If you qualify, you can take a tax credit of up to $7,500 on your 2008 tax return. To take the maximum credit, you must fall within the modified adjusted gross income (MAGI) restrictions: up to $75,000 for single taxpayers and $150,000 for married couples. After those income restrictions, phase outs apply.

Here’s how it works: a tax credit reduces your federal tax liability dollar for dollar, as opposed to a deduction which merely reduces your taxable income. If your deductions exceed your income, in most cases, as an individual, you’re out of luck. But if your credits exceed your taxable liability, you are entitled to a refund.

What this means, practically speaking, is that this credit offsets your tax liability in a fairly significant manner, entitling you to a big fat check from the government. It is, in other words, free money.

Only it’s not really free: the tax credit must be “repaid” over a 15-year period.

Home buyers who take advantage of the credit will be required to repay the credit to the government over a period of 15 years or when the house is sold if there is sufficient capital gain from the sale. Payments must begin two years after the credit is claimed, so taxpayers who take the credit in 2008 must begin repayment with the 2010 tax return and taxpayers who take the credit in 2009 would begin repayment on the 2011 tax return.

The repayment is a straight line repayment over 15 years with no interest. So if the maximum credit is claimed in 2008, a taxpayer would begin repaying the credit in 2010 at the amount of $500 per year ($7500/15 years = $500 per year). If you sell the home within those 15 years, the payback is accelerated from the profit on the home. If there is not enough gain on the sale to pay back the credit, the remaining credit is forgiven.

In other words, this is a carefully designed interest-free, no risk (to the borrower) loan.

The idea is the credit will act as a stimulus for the housing economy (yep, there’s that word again). This extra cash incentive should incite potential home buyers to buy sooner rather than later.

With today’s lending rates, the incentive works out to a pretty good deal. At 7% interest, a taxpayer would have paid $4,200 in interest payments to a “regular” lender over the term of the repayment. But this is cash in hand, with no interest to pay. Not a bad deal, huh?

Only this is where the whining starts.

Why, the crybabies ask, do we have to give it back at all?

Because, well, to do otherwise wouldn’t quite be fair to everyone else, would it? And it could likely skew the real estate market - if sellers understand that you’re getting cash back, they would adjust their prices upwards accordingly. And more significantly, it would be incredibly costly at a time when the government doesn’t have the cash to hand out $7,500 checks.

And that’s the part that I don’t get. This is a hand out. It is an interest free cash advance from the government - the forgiven interest can total thousands of dollars to you without penalty. It is something that you would have been otherwise not entitled to. It is a gift.

Stop your whining.

(and now, I get off of my soapbox - temporarily, of course!)

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I don’t like stifling discussion and it’s rare, unless you’re a spammer, that I’ll delete you. But even I have my limits. Please stop and think about what you’re writing before you publish it - if it’s offensive or hurtful to another reader, reveals too much personal information (I’m not going to redact it for you - read my “ask the taxgirl” notes) or has so many swear words that my sailor brothers are blushing, I can’t post it. End of story.

If you need more tongue lashings, check out my official comment policy.

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Last year, I posted about Wal-Mart’s aggressive stance on paying property taxes; not surprisingly, Wal-Mart isn’t a fan of paying property tax and has challenged a disproportionately high percentage of assessments for its stores (more than 2,100 property tax challenges nationwide). I titled the piece “Does Wal-Mart Want Your Kid To Read?”

Flash forward to this weekend. I was desperately searching for canning jars (a little known fact about taxgirl: I enjoy gardening). I called around and found a store that purported to have Mason jars, so we piled into the car and headed out. Along the way, at Route 202 and Swedesford Road near Berwyn, we saw a sign advertising a new Wal-Mart. There is no Wal-Mart near our home, and quite frankly, I’ve never had need for one. But if anyone has canning jars, it would be Wal-Mart, and the location was convenient. So, we decided to give it a try.

We pulled into the parking lot only to discover that the Wal-Mart had not yet opened. As we were leaving, I happened to notice something peculiar painted on the pavement. In giant white letters, at one of the intersections in the lot, the word “YEILD” (sic) was carefully painted. And then again. At every yield in the lot, the word “YEILD” (sic) is painted in letters at least 12 inches tall.

Apparently, the folks that painted the drive never heard of the “i before e” rule.

Hmm. Perhaps Wal-Mart should reconsider its stance on funding local schools…

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I received a lot of feedback via email and twitter on the story that I posted about the IRS stance on taxing employee cell phone use. Yesterday, I was advised that NPR ran a story about this very issue on Thursday. While I didn’t hear the story on the radio, I did read the NPR piece on their web site - you can check it out here. I also listened to the piece on Media Player - you can listen to the piece here (it’s about 3 minutes long).

There’s also a link on the same page to a really interesting bit on memorable cell phone history… There are clips from the movies “Wall Street” and “The Devil Wears Prada”, as well as the TV show, “Sex and the City” and “Star Trek.” And of course, it wouldn’t be a commentary about cell phones without a picture of Paris Hilton and her ubiquitous fashion accessory (as above)…

(Hat Tip: Wayne, thanks dad!)

Technorati Tags:
business, IRS, tax, cell phones

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Prince Alois has confirmed that Liechtenstein is taking steps to correct what has been regarded by much of the world as intentional loopholes in country’s banking system. The announcement did not come as much of a surprise. Despite earlier vows to do nothing in light of the scandal, Prime Minister Otmar Hasler (pictured left) had indicated that reforms had already begun.

No immediate details were provided but most tax professionals (including myself) suspect that the reform will include a provision for the country to provide tax information about foreign account holders. In order to protect the bank’s clients, there will likely be some concession from foreign governments to agree to lesser penalties in exchange for the information.

The changes which have been discussed over the past eight years, have been accelerated by world reaction to the tax evasion scandal which came to light earlier this year. Banking and financial services account for almost 1/3 of Liechtenstein’s gross domestic product.

Many banks and financial services companies have used the country’s banking secrecy laws to woo foreign clients seeking privacy. The spectre of change is controversial to those companies and Hasler realizes this. So, he has been progressing slowly, hoping to work both with the financial services companies and the heads of foreign countries like Darling and Merkel.

Prince Aloise was vague about the changes, saying:

In the future, we should offer all states comprehensive co-operation if they are willing to find sensible solutions with us for the client relationships we have built up, and if they are interested in fair and constructive co-operation for the future.

It will be interesting to see what happens moving forward. Clearly, Liechtenstein is facing pressure to be more transparent but some countries, like Switzerland, have traditionally not bowed much to the pressure. Politics or progress? We’ll see.

Technorati Tags:
tax, tax evasion, Liechtenstein, banking

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My inbox is chock full of people asking me to verify rumors - some of them quite specific and I have to say, just a little bit humorous - that a new stimulus package has been approved. In fact, I’ve been getting these questions for a couple of months now. But the requests for information have recently increased.

Let me just say this: I don’t have any more information than you do. But if you base the answer on information from Congress and the White House instead of chain emails and word of mouth, the result is that there is no news. The status, so far as I know, is exactly as reported before.

Remember, the first round of stimulus checks has not yet been completed. Despite calls from the media and politicians, the White House (and most Congressional officials, it seems) believes that we should wait and see what happens before introducing additional stimulus legislation. In fact, as recently as August 1, White House spokesperson Perrino said: I think the president is not inclined to move forward on a second stimulus package right now.

Part of the energy surrounding this second wind of rumors has to do with Obama’s proposed “emergency economic plan” (you can download the plan here as a pdf which proposed an additional check by “fast tracking” a tax credit. Some people believe that the plan has already become law; it has not. It is a proposal from Obama to continue to boost a sagging economy. Let’s just say that Obama wins in November and takes office in January - the bill still must pass Congress before it takes effect. So, despite what you’ve heard or read that reference this “emergency” plan as taking effect before the holidays, it is simply not true.

Likewise, there are no “replacement” checks for college students or those who made too much money to qualify this year. That is, I am sorry to say, wishful thinking. Additionally, seniors and returning vets will also not be receiving bonus checks.

I know that many of you want to believe the rumors and many of you feel that they come from reliable sources (if your accountant really did tell you that another check was coming, shame on him or her!) but so far, nothing has changed from before. It could happen - though I still don’t think it will. I think that any economic stimulus package that is introduced at this point will focus on infrastructure and not rebates. But, of course, I could be wrong.

Technorati Tags:
tax, stimulus check, economy, rebate check

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