Here are two interesting items from the post -
(1) Rachel spent $8,000 on a CPA/attorney to represent her in the audit. The IRS originally wanted $16,000 in tax, interest and penalties (which is ridiculous when her income for the year was just under $19,000) and the CPA/attorney knocked it down to $1,600, which Mary pointed out in an earlier post on the subject was not the correct amount that would be due.
“According to the press coverage, Rachel Porcaro made $10 per hour cutting hair at SuperCuts. At that rate, it would take her 800 hours of cutting hair to pay off the legal bills run up during her audit.”
(2) Mary tells us, “The Seattle Times reported that H&R Block prepared Ms. Porcaro's original tax returns. The H&R Block website states that it will provide a substantial amount of free assistance and support to any of its customers who are audited. They will also pay for any penalties and interest that resulted from errors made by their preparers.”
So where were the minions of Henry and Richard when Rachel was audited? Did they pay any of the penalties and interest included in the $1,600 final assessment? Why did she shell out $8,000 to a CPA/attorney when H+R is supposed to “stand behind” clients in the event of an audit?
The IRS was not the only party that screwed Rachel.
* While Kay Bell, the yellow rose of taxes, is off to Wash DC to attend meetings of the Taxpayer Advocacy Panel she is running a series on “The 12 Tax Tips of Christmas” over at DON’T MESS WITH TAXES. She begins with “#1 Sell Assets”.
She will also be running a series on “Year-End Money Moves”.
Knowing Kay’s work, both series are well worth following.
* Trish McIntire describes the “evolution” of the tax preparation business over the past 20 years in her post “Paying the Piper” at OUR TAXING TIMES.
* Russ Fox echoes my sentiments in “Cutting Spending” at TAXABLE TALK.
“When you or I run into cash flow problems, what do we do? We’re forced to cut spending, of course. It’s not as if we have a choice: We can’t print money, and robbing banks is usually not a good idea.
Congress, though, can spend money even if they don’t have any: It’s called deficit spending. But when the voting public starts complaining even Congress knows they have to do something. Of course, we have Democrats in control of Congress so the idea of cutting programs is anathema to them.
What Congress should do is cut programs, cut regulations, and cut the bureaucracy.”
And speaking of Russ, thanks for mentioning my post on the ROTH IRA Conversion Trap in “Links from the Blogosphere”.
* Russ gets the BUZZ Trifecta – three links in a single BUZZ – with his identification of bad blog advice in “Bad Advice: Holding the Check ’til 2010”. The post discusses the concept of “constructive receipt”.
A payment is received when it is in your hands, not when it is deposited in the bank.
* Here’s a thought – “Fight the Deficit Monster with Tax Reform”. Over at BUSINESSWEEK.COM “Simplifying the U.S. code could lower overall income tax rates and raise more revenue, says Bloomberg BusinessWeek columnist Chris Farrell”.
“Leaders of both parties should embrace major tax reform with an emphasis on simplification. In essence, eliminate all or most tax credits and tax deductions, income phase-ins and phase-outs, exclusions and exemptions. A dramatic broadening of the tax base can allow for both lowering overall income tax rates and raising more revenue. It would make it far easier to match federal tax revenue with federal spending obligations.”
* A tweet told me that the IRS has a new “virtual” Small Business Tax Workshop to help business owners. I haven’t had time to check it out in detail, but you may find it helpful if you are starting, or thinking about starting, a small business.
* Did you know “Feds Owe Uncle Sam $3B in Unpaid Taxes”? This story is nothing new – report similar statements each year.
“At a time when the White House is projecting the largest deficit in the nation's history, Uncle Sam is trying to recover billions of dollars in unpaid taxes from its own employees.
Federal workers owe more than $3 billion in income taxes they failed to pay in 2008. According to Internal Revenue Service documents, 276,300 federal employees and retirees owe $3,042,200,000.
The IRS tracks the voluntary compliance rate of federal employees and retirees each year, and each year feds come up short. The one bright spot in this year's report is that after several years of a steady increase, the amount owed by feds is down from the previous year.”
I hope the IRS is going after delinquent federal employees with the same “zeal” that it applies to pursuing single working mothers in Seattle!
* Several sources, including the print publication BOTTOM LINE PERSONAL, have indicated that the capital gain distributions issued by mutual funds, usually in the last quarter of the year, will be minimal this year. BLP reports that, “As of October 31, only about 250 stock funds have declared capital gain distributions, compared with more than 1,600 at the same time last year. And the average distribution was cut in half.”
* And in a related item - Joe Kristan gives us a good reminder in “Don't Buy Somebody Else's Mutual Fund Tax Liability” at the ROTH AND COMPANY TAX UPDATE BLOG.