Don't Mess With Taxes

Fraudulent tax filing rampant in Florida

2012-05-27T15:06:41-05:00

As the April filing deadline neared, I asked did a crook file your taxes?

For many folks in Florida, the answer apparently is "yes."

A story by Lizette Alvarez in today's New York Times says:

With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.

The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card.

The result? We all end up paying because in some cases the IRS issues two refunds.

The first refund goes to the criminal who filed a fraudulent tax return.

Then, usually many months later, the legitimate taxpayer whose identity was stolen finally gets his or her IRS refund money.

Criminal career changes: The tax ID theft schemes are so profitable that some former drug dealers, spotting easy money, have changed criminal careers.

Florida law enforcement officers, who are dealing with the highest rate of identity theft in the nation, told the newspaper that they regularly encounter corner drug dealers and robbers who have been in and out of prison for years now making lots of money by filing fraudulent returns, enough so that they can afford to buy Bentleys and Lamborghinis.

The IRS is working with Florida, allowing police to get privacy protected information on tax returns as long as the rightful taxpayer agrees.

New federal anti-ID theft tax efforts: Congress also is getting involved.

No, there's not more money in the IRS budget to fight taxpayer fraud.

But this spring, the Senate Finance Subcommittee on Fiscal Responsibility, chaired by Florida Democratic Sen. Bill Nelson, did hear from the IRS, National Taxpayer Advocate, Department of Justice and Florida law enforcement officers on the growing tax fraud ID problem.

Source: Senate staff

The hearing was in connection with S. 1534, introduced by Nelson, that would help victims get their money more quickly in the event their refunds are stolen.

Nelson's bill also would increase protections for victims, help secure some Social Security numbers and expand the Florida pilot program to make it easier for federal and local law enforcement agencies to work together.

On the House side, Democratic Rep. Debbie Wasserman Schultz has introdued Stopping Tax Offenders and Prosecuting Identity Theft Act (H.R. 4362), which is cosponsored by House Judiciary Committee Chairman Lamar Smith (R-Texas).

The similar Identify Theft and Tax Fraud Prevention Act also was sponsored by Rep. Kathy Castor, another Florida Democrat.

Will these measures, if enacted, help? Sure. Every step taken to limit tax ID theft and prosecute those committing this costly crime is good.

Taxpayer tax ID prevention tips: But what can we taxpayers do to protect ourselves from fraudulent 1040s filed in our names?

The easiest move is to file your tax return early in the filing season. That way you can make sure you get your rightful money before a criminal even tries to convince Uncle Sam that he or she is you.

The IRS also has a special Web page with tips on protecting your tax identity, including avoiding email phishing scams designed to get you to reveal tax and personal financial data.

We'll also probably have to reconcile ourselves to somewhat slower tax return processing, at least for a while.

The 2012 filing season was frustrating for many taxpayers who saw their tax refunds delayed as the IRS fine tuned its efforts to detect tax fraud.

Sure, it's no fun to wait for your tax money. You might want to consider adjusting your withholding now so you don't have to wait for a refund next year.

But a delay is much better if it ensures that you and everyone else gets what they're due rather than crooks illegally claiming your tax refund.

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Memorial Day gasoline prices down, but state gas taxes were up a bit in April

2012-05-26T10:00:13-05:00

The arrival of the Memorial Day weekend, the unofficial start of the summer vacation season, means it's time for my annual post on gasoline taxes.

Yes, I am that predictable. But it's a long holiday weekend and none of us wants to do any heavy lifting, right? So let's hit the blogging road.

AAA projects that 34.8 million Americans plan to travel 50 miles or more between Thursday, May 24 and Monday, May 28. That's 1.2 percent more travelers than last year.

And most of them will be on the road.

AAA says about 30.7 million people will drive to their Memorial Day weekend destination, up from 30.3 million people who drove last year.

Part of the reason for the increased highway congestion is lower gasoline prices. The average price of gas is down 14 cents a gallon from this time last year, and a quarter since the end of March.

The tax effect: Gasoline taxes, however, were up a tad earlier this year.

The American Petroleum Institute says that the nationwide average tax on gasoline of in April, the latest month for which data is available, was 49.5 cents per gallon (cpg), up 0.7 cents cpg from the industry trade association's January study.

The federal excise tax on gasoline isn't the reason. It's been stalled for years at 18.4 cents per gallon.

And the average state gasoline excise tax in April was 20.9 cpg, unchanged from January.

But other taxes, such as applicable sales taxes, gross receipts taxes, oil inspection fees, county and local taxes, underground storage tank fees and other miscellaneous environmental fees, did tick up, accounting for the overall April tax increase.

Adding in those assorted levies produced a volume-weighted average state and local tax of 31.1 cents per gallon of gasoline.

The 10 states with the highest combined gasoline taxes in April were:

Click the image for the API summary; complete graphic is on page 2.

The graph's green bar represents the federal excise tax. The states' excise tax amounts are in blue. The red is for other applicable state and local taxes.

Comparing #1 & #10 gas taxes: The top 10 gasoline tax list is book ended by two states with relatively low state excise taxes on the fuel.

Number one New York collects 8 cpg in excise taxes on gas. Number 10 Florida's gasoline excise tax is 4 cpg.

But both collect a lot of other taxes and fuel fees.

Florida's extra 31 cpg comes from the state's sales tax and "other" taxes, such as county and option taxes, the State Comprehensive Enhanced Transportation System tax and various state environmental import taxes.

If you head north from the Sunshine State up I-95, you'll find New York collects an extra 43.2 on each gallon of gasoline.

The Empire State added levies are from its petroleum business tax, a petroleum testing fee and, of course, state and local sales taxes.

I know you really don't care about the breakdown of your per gallon cost when you roll into a gas station on fumes. But if you are traveling further than the 50 miles that the AAA predicts this weekend, you might be able to buy gas in another state.

And that state's fuel and other tax policies might give you a full tank for a few less bucks.

Gas Buddy and Mapquest can help you out on your fuel-saving quest. Happy, safe and economical motoring!

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Doing your taxes or eating healthy? Which is easier?

2012-05-25T14:49:32-05:00

If you think doing your taxes is easier than figuring out how to eat healthy foods, then you are not alone.

The 2012 Food & Health Survey by the International Food Information Council Foundation, 52 percent said it's easier to fill out their own 1040 forms than it is to figure out what they should and shouldn't eat to be healthier.

Click image for a larger view.

The survey findings were not a big surprise to me, a tax geek who's had food issues my whole life.

The fact that healthy dieting is harder than taxes is particularly pertinent as we head into the summer season.

Many of us will spend the few months eating things cooked on the grill. Grilled chicken and fish are good for you, but if you're like me, burgers are best when cooked outside. We red meat fans probably should think about adding some grilled veggies to the mix.

That way we won't feel so guilty about treating ourselves to a decadent dessert to celebrate finishing our taxes.

The food choices vs. taxes debate was one of the topics covered last week at my other tax blog. Actually, it was this week, since this post is going up Friday afternoon.

I also looked at the importance of meeting tax-related deadlines, especially when it comes to appealing your home's appraisal value. Miss that hearing appeal cutoff date and you could end up owing a bigger property tax bill than you should.

The regular roundup from my Bankrate Taxes Blog usually goes up here on the ol' blog on Saturday evenings.

But this being the beginning of the long Memorial Day weekend, I thought I'd mention it now so that we all can take time off to welcome the unofficial start of summer 2012.

If you're traveling, be safe. And have fun!

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How a parent can claim a kidnapped child as a tax dependent

2012-05-25T12:16:23-05:00

Today is one of those days that really makes you think twice, or more, about commemorations and the state of today's world.

May 25 is National Missing Children's Day.

It was established in 1983 by President Ronald Reagan. The date was selected because May 25, 1979, was the day that 6-year-old Etan Patz disappeared.

Thirty-three years later this week, the New York City police department announced an arrest in this highly-publicized child abduction case.

Sadly, Etan's situation is not an aberration. Thousands of kids go missing every day.

Unless you are a parent of a missing son or daughter, there is no way to understand the emotional trauma that these families endure.

Tax issues of kidnapped children: And while taxes are just the tiniest of specks on such distraught parents' radars, the Internal Revenue Service does have a mechanism that addresses kidnapped kids at tax-filing time.

The IRS says parents may claim a kidnapped child as a dependent if two conditions are met.

First, the child must be presumed by law enforcement to have been kidnapped by someone who is not a family member.

Secondly, during the taxable year in which the kidnapping occurred, the child must have lived at the taxpaying parent's same principal place of residence for more than one-half of year before the date of the kidnapping.

When both of those requirements are met, the parent of the kidnapped youngster generally can claim the child as a dependent and get the associated exemption, as well as the child tax credit if that tax break's rules are met.

This tax treatment of a kidnapped child stops at the first tax year beginning after the calendar year in which either it is determined that the child is deceased or the child would have turned 18, whichever occurs first.

This tax circumstance doesn't apply to very many parents, thank goodness.

But for those mothers and fathers struggling to cope with a child who has been abducted, it at least offers a bit of tax relief.

Additional tax, missing child data: More information on the tax treatment of a kidnapped child can be found in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

The National Center for Missing and Exploited Children has a variety of resources for parents.

The Federal Bureau of Investigation maintains an online database of missing and kidnapped persons, including kids, as well as one of suspected parental kidnappings.

The FBI also has missing kid smartphone apps that give parents a way to electronically store pictures and vital information about their children in case they go missing.

And Dr. Betty J. Kuffel, a physician and author, has tips on what parents can do to help keep children safe in today's high-tech world.

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Coming soon: 'Fiscal Cliff,' the biggest economic and tax disaster of all time!

2012-05-24T13:49:24-05:00

Summer is almost here and the Congressional Budget Office (CBO) is getting in the spirit of the season.

The nonpartisan agency of Congress that produces economic analysis and estimates of the cost of legislation just released a tax and spending cut evaluation worthy of the big-budget summer blockbusters coming soon to a movie theater near you.

Although the setting is still more than half a year away, the CBO study has a title that disaster film director Michael Bay would envy: "Falling Off A Fiscal Cliff."

That's how the CBO characterizes what could happen if the Bush tax cuts were allowed to expire on Jan. 1, 2013, and automatic spending cuts, created under the terms of the summer 2011 debt ceiling deal and inability of the Super Committee to come up with an alternative, take effect.

That combination, according to the budget analysts, would probably throw the economy back into a recession.

The CBO report says that the U.S. economy would shrink by 1.3 percent in the first half of next year if higher tax rates -- elimination of the 10 percent income tax bracket and hiking the top rate to 39.6 percent -- and more than $100 billion in automatic cuts to the Pentagon and domestic agencies are allowed to kick in as scheduled.

I almost typed planned instead of scheduled in that previous sentence, but the truth is that no one, on Capitol Hill or elsewhere, really planned on us getting even this close to what also is being called Taxmageddon, which itself is a pretty cool name for a disaster flick.

Reasonable folks, and I concede they are becoming more scarce every election, were sure that Congress and the Obama Administration would have a deal in place by now under which each side would get a little of what it wanted and give up some points to the loyal opposition.

Incredible policy decisions: After all, it doesn't do anyone of any political persuasion any good to commit fiscal homicide and/or suicide, does it?

Does it?

Apparently, some folks think that's OK. In fact, they believe it's what is needed.

They, however, are thinking about elections and not about the people who vote in them.

Of course, if more of us actually did get to the polls and participated in the political process in other constructive ways, we might have saner laws and legislators.

But, hey, I'm not here right now to blame the victims, which are all of us who have to live with the results of Capitol Hill decisions. I'll save that for another blog post.

Today, I just want to alert you to what possibly awaits while there's still time to contact your Representative and Senators.

Let your lawmakers know that you've seen the CBO trailer and you are part of the cinéma vérité focus group that wants changes to the projected disastrous economic ending.

Photo of jumping The Cliffs courtesy DiscoverEleutheraBahamas.com

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Beware unsolicited -- and questionable -- property tax payment plans

2012-05-23T14:12:22-05:00

May is not a fun month for a lot of homeowners. It's when many property appraisers send out notices of what they think homes in their taxing jurisdictions are worth.

Click on the image for a list of Texas appraisal districts. The Lone Star list was from the Texas Comptroller's Office. Check with your state or its tax department for a similar property appraisal directory for your state.

Your home's assessment amount is a key component of your eventual property tax bill that will show up later in the year.

Typically, real estate tax bills are calculated using a jurisdiction's (or jurisdictions' if your property is subject to more than one taxing district) tax rate times your home's appraised value.

If you know the assessor's appraisal of your home is wrong, that is, it's much too high for your neighborhood, then you need to appeal it.

Once the review board gets your correct home valuation data, your appraisal amount will be lowered, meaning your tax bill should be smaller, too.

How to accomplish this reduced appraisal/tax bill is this today's Weekly Tax Tip.

Three homeowners shared how they fought their property tax bills. It's not an easy process, but it's one that's eminently winnable and more and more homeowners nationwide are fighting this good tax reduction battle.

Hiring an appraisal specialist: In most cases, the appeals process is simple enough that homeowners can do it themselves.

Just make sure you don't miss the deadline for filing a protest of your appraisal. And realize that it will take some time to collect the data that you'll need to prove your case.

Because we're all so busy, the annual appraisal notices have spawned a parallel industry of property tax appeal specialists.

We get half a dozen or so mailings each year from folks who promise they can get our assessment amount reduced. I'm sure most of them are legitimate, but before you entrust your case to such an outside firm, check it out to make sure it's reputable and capable.

Outside property tax payment "help" that hurts: And be sure to keep in mind that adage that if something sounds too good to be true, it probably is.

That saying came to mind this year when we got a new property tax bill communication. This one was a letter from our mortgage company warning us that:

"Some organizations in Texas have searched the county tax records for homeowners with outstanding delinquent property taxes. These organizations are contacting the affected borrowers and offering to pay their taxes. The borrowers must, in turn, agree to sign a note charging loan fees and interest (generally at a higher than market rate) on the amount paid."

Wait, it gets worse.

Our mortgage company says that folks who agree to this deal are discovering that the tax-paying organization in most instances will obtain a lien that supersedes the original lender's lien. And that, according to our bank, is a breach of our loan terms.

"Please note that by agreeing to the organization's terms, you are substantially jeopardizing the legal rights to your property. Failure to pay the organization on their terms can result in foreclosure and possibly losing your property. [Your mortgage holder] may not know about the foreclosure of the taxes because these organizations have no statutory obligation to notify the mortgage company."

Yikety!

I'm thankful that the letter's last paragraph applies to us: "If you have paid your own taxes on time in the past and can continue to do so in the future, you do not need to do anything more. This letter is merely for your information."

Other property tax payment options: Now I know that overdue tax bills of any type are scary. And property tax delinquency is at the top of that list.

So I'm not surprised that some cash-strapped folks might turn to a group offering to help them pay their real estate taxes.

But any time you start putting up your home as collateral, even if it's an effort to keep that residence, you could end up in a bigger mess.

And you do have some other property tax payment options.

First, talk with your mortgage lender about your tax situation. The lender might help you get a short-term loan to pay the tax bill. And if you don't have an escrow account arrangement whereby your bank collects tax payment money along with your monthly payment and then pays your property taxes for you each year, consider setting us such a deal.

Also touch base with your taxing entity. Tax officials there might be able to work with you to pay your taxes in installments.

But don't fall prey to sketchy companies that are seeking out people in their most difficult financial times. Ninety-nine percent of the time these firms or groups are in the business for one thing: their profit, not your financial and tax relief.

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IRS going the Postal Service route

2012-05-22T17:02:39-05:00

The Internal Revenue Service is going the way of the U.S. Postal Service.

Wait. Let me clarify that.

I'm not talking "going postal." Rather, the IRS says it will be reducing the number of its facilities, much the way the Post Office looked earlier this year to shutter the doors of some of its operations.

The reason in both cases is, what else, money.

The IRS today announced a sweeping office space and rent reduction initiative that over the next two years will close 43 smaller offices and reduce space in many larger facilities.

The changes are projected to save more than $40 million over two fiscal years, $17.2 million in annual rental costs in fiscal 2012 and $23.5 million in fiscal 2013.

Coupled with last year's space reductions, the IRS says its upcoming literal moves will slash the agency's total office space by more than one million square feet.

"Given today's tight budget environment, we have to be willing to make the tough but responsible calls to save taxpayer dollars," said IRS Commissioner Doug Shulman in a statement announcing the moves. "Cutting and consolidating our real estate is a responsible way we can save money. It's an important addition to our growing portfolio of cost-saving measures."

The plan calls for the IRS to:

Close 43 smaller offices. These are offices that currently have fewer than 25 employees. There was no mention of the displaced workers, but they presumably will be able to move to other offices.
Consolidate multiple offices within the same commuting area.
Explore innovative ways to do more with existing space, such as desk sharing and increased telecommuting.

No walk-in Taxpayer Assistance Centers are on the list. That means, says the IRS, the closures should have minimal taxpayer impact.

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