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Taxpayers Get Second Chance at Stimulus

by Tom Herman
Wednesday, November 12, 2008

Remember those economic-stimulus checks the government was handing out this year? Many taxpayers didn’t qualify for the full amount — or for any payment at all — because their 2007 income exceeded a certain threshold.

But many people who lost their jobs this year, or whose incomes fell for some other reason, will get a second chance next year, thanks to a little-noticed tax-law twist.

More from WSJ.com:

• Banks Boost Customer Fees to Record Highs
• A Little-Known Tax Break for Bruised 529s
• Bailout Bill Provided Tech Workers With Tax Relief Read the rest of this entry »

  Technorati Tags: economic stimulus, tax credits, tax refunds

Zombie Debt

Imagine, nine years ago someone stole your wallet right out of your coat pocket. You never even saw the guy. He used your credit cards to buy $1,300 worth of shoes. Of course you reported the theft as soon as you found out, and the credit card company declared you not responsible for the debt. Lesson learned, end of story. Right?

Today, you have a nice sturdy paycheck and a sound credit rating. In fact, you’ve got your eye on a gorgeous loft-condo. Suddenly the phone rings…

That old theft has come back to haunt you. The collection agency says that, with interest, the debt on that $1,300 now comes to more than $10,000. The agency has no record of your fraud report and considers you responsible for the debt. The agent informs you that if you don’t pay up — and soon — you could risk legal action. And the debt could jeopardize your loan application for that condo.

Surprise: You’ve just come face to face with Zombie Debt.

The Debt Lives!
Unfortunately, the zombie metaphor is incredibly apt.  On the credit market, debts are sold and resold from agency to agency, so something you may have settled — even more than once — can spring back to life, with no record of past payments.  Collectors grab for whatever they can get.  And the debts are hard to kill.
Zombie debt has become profitable in part because of two trends that took off in the 1990s: the proliferation of consumer credit and identity theft.
Zombie debt gets its name because the debts in question are supposed to be dead and buried since: Read the rest of this entry »

Technorati Tags: bad credit, bad debt, collection, old debt

1. Watch out for shipping costs when buying via the Internet. Use the Internet to comparison shop, and then pick up the item locally.
2. If you see something in a catalog that you want to buy, wait a week before ordering to see if you still really want it.
3. When traveling, look online for ideas and/or coupons before you go. Once on site, ask the locals for low-cost favorite spots, a la Rachael Ray.
4. Try a vacation at home. See and do the things you’ve always meant to do and save on hotel costs. The holidays are a perfect time to enjoy local festivities.
5. Send free e-cards and save on postage.
6. Give your time or services instead of “things” for gifts.

Read the rest of this entry »

Technorati Tags: credit card debt, tax deferral

The Tax Gap has the IRS on the fast track. The IRS will be auditing more and tougher.These are some examples of what’s coming in order for the Service to find and close the 300 billion-tax gap. These recommendations have come from lawmakers and the GAO who are convinced that the rate of noncompliance comes from individuals and firms and the gap is rising, so they say.

• Be diligent and make sure your Schedule C is audit proof. Do not you low-ball your income and increased your write-offs, a common practice that is an audit point and sometimes, in some scenarios it is more prudent to under report your expenses.
• Farmers especially those that are part-time and/or hobby farmers frequently using these losses to reduce their other income are being scheduled in the audit process.
• Itemized deductions on Schedule “A” where medical costs and charitable donations and job related expenses are under the microscope this year also.
• Employment tax dodgers will be hit harder as the service looks for the places in small business where popular schemes used all too often, have been used to avoid payroll taxes. The service believes that workers are misclassified as 1099 sub contractors. Sound familiar? It should this is not new but audits are up. And also on the hit list is an over abundance of employer reimbursements to employees.
• What about Per Diem rates. Make sure you are not taking more than the IRS allows on its schedule.
• Damages for nonphysical injuries are taxable to recipients. An Appeals Court has officially reversed last year’s ruling that it is unconstitutional to tax awards for mental distress and injury to a professional reputation. The full award is now taxable and not very good news for taxpayers who have filed claims for refunds bases on the Courts previous ruling (Murphy, D.C. Circuit). IRS will now deny those claims.
• Homebuilders will get special audit attention now, as revenue agents look for inappropriate income deferrals.
• Also the random audits will return and begin this fall. Remember those? Starting with 2006.
• Real Estate professionals and their loss deductions are going to be another subject for audit.

Read the rest of this entry »

Technorati Tags: charitable donations, random audits, tax gap