I first discovered this blog when twenty-something recent college grad Jim, the blog’s author, submitted a posting on historical tax rates to the TAX CARNIVAL I was guest hosting.
Jim describes BLUEPRINT FOR FINANCIAL PROSPERITY as “a personal finance blog where I plan to discuss matters of shopping, insurance, investing, retirement, loans, credit cards, mortgages, bargain hunting and other issues related to personal finance. What you will find at Blueprint is a personal finance novice struggling to understand some pretty complex and confusing topics. I’m by no means an expert on anything and I don’t claim to be - you will learn as I learn, struggle as I struggle, and hopefully, together, we can avoid some of the common mistakes we would otherwise fall prey to.”
In a January 24th posting Jim weighs in on the subject of Refund Anticipation Loans, stating, quite correctly, that “Refund Anticipation Loans Are Rip-Offs”.
Jim’s bottom line is “You should avoid these paystub or refund anticipation loans like the plague because that’s what they are.”
I believe that there is absolutely no reason, short of the threat of having your knee caps broken by a loan shark, why anyone should take out a paystub or refund anticipation loan. If you need the money that bad it is cheaper to take a cash advance from your credit card (as long as you pay it back when the refund arrives).
* Oi vey! A story from Friday’s Accountants World daily headline email advises PA taxpayers not to use the 2006 Form 1099-G you received from the Pennsylvania Department of Revenue this week. The forms mistakenly report the 2004 state income tax refund received in 2005 instead of the 2005 state income tax refund received in 2006!
The computer tape from the wrong year was used to prepare and mail 900,000 forms. The Department of Revenue promises, “"We're working overtime to mail corrected forms. They will be marked 'corrected' in red letters."
Taxpayers who itemized in 2005 and claimed a deduction for PA state and local income taxes paid must include in taxable income (on Form 1040 Line 10) any state tax refunds received in 2006 to the extent they received a “tax benefit” from the refund. See my “Getting Ready to Prepare Your Return” posting.
This follows a FU earlier this year by the Wisconsin Department of Revenue, which sent out 170,000 annual tax return packages with the individuals' Social Security numbers printed on the labels.
The errant labels were blamed on a computer error. As Key Bell of DON’T MESS WITH TAXES pointed out in her blog on the subject, “One benefit of our total dependence on technology: Now machines instead of lower-level, lower-paid employees -- committers of the proverbial ‘clerical error’ -- bear the brunt of office blunders.”
* Friday’s CCH daily Tax News email brought to my attention some not so surprising news from the IRS.
According to an IRS press release, some early filing taxpayers have requested "large and apparently improper amounts for the special telephone tax refund”.
The IRS checked a sample of returns filed through mid-January and found that some individual taxpayers requested telephone tax refunds that appear to be excessive:
· In some cases, taxpayers appear to be requesting a refund of the entire amount of their phone bills, rather than just the three-percent tax on long-distance and bundled service that they are entitled to.
· Some individuals are making requests for thousands of dollars, indicating that they had phone bills topping $100,000 – an amount exceeding their income.
· Some tax preparers are helping their clients file apparently improper requests.
The IRS is investigating potential abuses in this area and will take prompt action against taxpayers who claim improper refund amounts and the return preparers who help them.
See my posting on “An Update on the Telephone Excise Tax Refund". BTW, Kay Bell over at DON’T MESS WITH TAXES discusses some of her readers’ experiences trying to calculate the actual telephone excise taxes paid in “No Good Tax Break Goes Unpunished.”
* The IRS Oversight Board has released its 2006 Annual Report.
The report states that the IRS made steady progress last year towards “transforming itself into a modern institution that provides efficient and effective tax administration services to America’s taxpayers.” However, “the IRS must still meet a number of challenges before it can achieve the vision of a 21st Century tax administration agency described in the IRS Restructuring and Reform Act of 1998.”
The Oversight Board is a nine-member independent body charged to oversee the IRS in its administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws. The IRS Oversight Board was created by the IRS Restructuring and Reform Act of 1998.
* William Perez at Taxes.About.Com answers a reader’s question on “Reporting Income from a Home-Based Business”. The answer includes some good resources on business expenses of freelance professionals.
* The NJ Division of Taxation has announced that New Jersey will follow the IRS and extend the due date for NJ state income tax returns and payments to April 17, 2007.
Under N.J.S.A. 54A: 54A:8-1, the Director of the NJ Division of Taxation may extend either the filing or payment due date, or both, for any return under the New Jersey Gross Income Tax Act to coincide with a similar extended filing or payment due date established for federal personal income tax returns and may adopt the same terms or conditions specified by federal law or regulation for any such filing extension or payment due date.
Therefore, the due date for filing and payment of the 2006 New Jersey Gross Income Tax returns corresponds with the Federal Income Tax of April 17, 2007. Any New Jersey income tax form, instruction or publication that currently shows an “April 16, 2007” due date should now be read as “April 17, 2007”.
* The Tax Foundation reports that, based on information from the Congressional Budget Office’s Budget and Economic Outlook, “Spending Increases Cause Deficits” [Duh!].
According to Friday’s Foundation blog posting, “Tax cuts on wages such as those enacted in 2001 have certainly reduced tax revenue from the level it would hypothetically have reached absent tax cuts. But despite those rate cuts, revenue has grown considerably since 2001. Spending, meanwhile, has risen almost twice as fast since 2001.”