Don't Mess With Taxes

Tax payment plans for all, including the formerly rich and famous

2009-11-14T12:50:34-06:00

It's no secret that celebrities get into tax trouble as often, if not more so, that we regular folks.

And it's definitely true that when famous folk run afoul of the IRS or state revenue offices, the unpaid tax amounts are pretty impressive.

So it make sense that the famous and, after their tax troubles, formerly rich also take advantage of a remedy available to everyone: installment payment plans.

That's the case for a couple of celebrities in recent days.

Tax lien trouble, dahling: The Hungarian bombshell of the 1950s and 1960s, Zsa Zsa Gabor, is dealing with a tax lien of of more than $118,000.

The IRS reportedly took action because she didn't pay all her taxes in 2001 and 2002.

Her advisers contend that a third-part with some financial troubles of his own is to blame: Bernie Madoff.

Gabor's lawyer say the actress lost about $7 million in Madoff's Ponzi scheme and the tax bill is a byproduct.

While things are being sorted out, Zsa Zsa and her husband are "pulling together their resources and working out a payment plan with the IRS."

Political pundit turns to payment plan: Ed Rollins, the noted campaign consultant and political pundit, reportedly has mostly worked through the fallout of $1.33 million in tax liens, in large part thanks to a payment plan.

According to the Detroit News, the IRS filed an $87,623 lien against Rollins in September, a $47,518 lien in July, a $13,567 lien in May and a $977,458 lien in March. The states of New York and Oklahoma have also filed tax warrants against him.

Rollins was national campaign director on the 1984 Reagan-Bush campaign. In 2007, he was national campaign chairman for Mike Huckabee's presidential attempt.

Rollins told the Detroit paper that he has worked out a payment schedule with the IRS and has paid a "substantial portion" of the outstanding tax bills.

He also said he has paid off his New York tax debts, but is contesting the Oklahoma tax warrants on residency grounds.

Good luck, Ed. States are getting pretty tenacious about getting what they believe is their share even if you don't even live within their borders.

Payment plans for all: If you find yourself owing the IRS (or a state tax office) more than you can pay, don't wait for the collectors to file liens.

Be proactive and set a payment plan before things get totally out of hand.

In many cases, the IRS is fine with these plans, also called installment agreements, payment agreements or payment options.

Sure, the IRS wants taxpayers to pay the tax they owe as soon and as completely as possible. But if you don't have the full amount in one lump sum, Uncle Sam figures it's better to get it from you incrementally than to have to spend resources tracking you down and going to court.

The agency has more information online about setting up a tax payment plan.

And while such plans can be a big help if you're having cash flow issues, remember that setting up an installment agreement with the IRS does have some added costs.

You'll be charged a one-time user fee of $105 to apply. If your plan is accepted, that amount goes toward your payments.

A payment plan won't stop interest charges from accruing on your unpaid tax.

You also might face a late payment penalty unless you can show reasonable cause for not getting your money into the IRS by April 15. In this case, penalty charges will also apply.

In these tough economic time,s the IRS says it is offering some taxpayers a little leeway. So give the agency a call and explain your situation. Even better, call a reputable tax adviser who can help you work with the IRS to set up a payment plan that works for you and Uncle Sam.

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Gabor photo courtesy Dr. Macro

Overcoming tax terrors

2009-11-13T00:36:36-06:00

Another Friday the 13th is upon us, the third one this year.

Are you superstitious? That's OK, most of us are.

But for real terror, April 15 is probably the day that frightens most Americans.

Yep, that annual income tax filing deadline can be pretty horrifying. But there are some ways to ease your fear of filing in particular and taxes in general.

Check out 7 tax terrors and how to overcome them. Full disclosure: It's a story I wrote for Bankrate.com. That said, I think it's pretty darn good.

The terrors I identified are:

   1. Afraid I can't do my taxes myself
   2. Afraid I'll overlook a tax break
   3. Afraid I'll make a costly mistake
   4. Afraid my tax adviser is inept or a crook
   5. Afraid I'll get audited
   6. Afraid to e-file because of identity theft
   7. Afraid to file because I can't pay

After you read about these frightening tax situations, come on back to the ol' blog and let me know if they scare you, too.

If you have some fears I missed, I'd love to hear about those and how you overcame them ... if you did!

Foreign tax fears: A dread that's not new, but which has gotten a lot of attention this year, is the fear that the IRS is going to catch you if you try to evade taxes by putting your money in a foreign bank account.

This week, the Swiss private bank Julius Baer Group said that tax fears following an international clampdown on tax evasion had slowed the pace of money flowing in from wealthy clients.

Tax officials in the United States, Germany, France and Italy this year initiated legal actions against financial institutions in Switzerland and other so-called tax haven countries in an effort to get them to be more forthcoming about nonresidents suspected of stashing cash in secretive accounts.

More money fears: In addition to being afraid of taxes (or maybe just the tax collector!), many folks also suffer from broader money phobias.

Divine.ca offers some advice on conquering financial fears.

Frugal Living Advice discusses how to face your financial fears.

And Cheerful Living tackles the same topic in how to overcome financial fears.

So quit cowering! We're all here for you as you fight your financial fears and tax terrors!

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13th Street & 13th Avenue intersection
photo courtesy The Skeptic's Dictionary

Is the IRS hanging onto your refund?

2009-11-12T11:59:49-06:00

It does if your name is on one of the 107,831 refund checks that bounced back to the agency as undeliverable mail.

While the number of checks is tiny compared to the millions who file returns and get refunds, the amount that's in a holding pattern is huge.

The checks collecting dust instead of interest in their proper owners' bank accounts total $123.5 million.

The average undeliverable refund check amount this year, says the IRS, is $1,148. That's $158 more than the average returned refund the agency got back last year.Of course, that's an average amount.

If you're one of the folks still waiting on your refund to show up in your snail mail box, your check could be smaller. Or it could be larger. And some folks are due more than one check.

A perennial problem: The IRS goes through this song and dance every fall. Thousands of folks don't get their refund checks, leaving millions sitting in Treasury.

How does this happen? How could you not know you're missing your refund? Or be expecting it and not raising holy hell about why it hasn't arrived?

I know life is hectic, but people you need to pay attention to your taxes, especially when you're owed money by the IRS!

Typically, folks file a return or an amended return and then move before the check arrives. Remember, with snail mail, refunds can take up to eight weeks to show up in your curbside box.

In other cases, the address on the return was just plain illegible (is "plain illegible" an oxymoron? Nah, just a Texas turn of phrase!) so the IRS folks had to make a best guess when entering it into the system.

If that guess was wrong, your poor penmanship meant your check went to the wrong place. And then it came back to the IRS.

Direct deposit could help: Both these common instances underscore why getting your refund directly deposited is usually a good idea.

As long as you enter in the correct back account information, your federal refund money will just show up there, usually in a matter of days instead of weeks, rather than being lost, returned as undeliverable or stolen from your mail box.

Getting your cash back: But you didn't do that. And now your check is among the 107,831 that were returned to Uncle Sam.

What can you do to get your rightful cash as soon as possible, especially since holiday shopping season is already here?

Click on over to the IRS' Where's My Refund? page.

Using that online tracker, you enter your Social Security number, filing status and the amount of refund shown on your 2008 return. The system then will tell you the status of your refund. And you can update your address while you're there.

If you prefer the telephone, call 1-800-829-1954. You'll need the same info as required by the onlilne version of Where's My Refund.

Basic tax housekeeping: What if you aren't owed a refund but have moved?

There's no way (yet) to update your IRS data online or telephonically. Just make sure you enter your new address legibly when you file your 2009 return next year.

Or, if you want to make sure the IRS knows where you are -- and who doesn't? -- you can send the agency Form 8822, Change of Address.

You'll need to do that the old-fashioned, snail mail way. The addresses of where to send Form 8822, based on where you live and what sections you complete, are included in the form's instructions.

Finally, don't forget your state tax department. They need to know where you are, too.

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Bequest benefits warblers of all sorts

2009-11-11T15:59:00-06:00

As a long-time birder and a bit of an opera buff, I got a kick out of the story that a U.K. woman who shared my interests had left most of her sizable fortune to New York's Metropolitan Opera and a British nature charity.

Even better, there's a tax connection.

The bequests to the Met and the Wildfowl and Wetlands Trust came from the $16.3 million estate of Mona Webster, whom the New York Times reports was at one time during her 96 years a clerk in the British tax office.

But wait. There's still more about taxes. A lot more, in fact, for the Met.

While the U.S. opera company is thrilled to get the $7.5 million gift from Mrs. Webster, it's not without strings.

Gail Chesler, the opera's director of planned and special gifts, told the Times that the Met would have to pay taxes on the gift in Britain. "That's 40 percent," she said.

Consult an estate tax expert: If you'd like to set up an estate plan that includes gifts to entities or individuals in other countries, you'll need to talk with an estate planner and/or attorney.

Even if you plan to leave all your worldly goods to folks here in the United States, you'll need that expert guidance, too.

Estate issues, particularly the associated tax considerations, are complex. And Congress isn't helping make things any simpler.

As I've blogged about before, the estate tax is scheduled to disappear on Jan. 1. That's not going to happen.

But exactly what will happen is still unclear, at least unofficially.

Word is, and what I believe will happen, is that the current estate tax law -- no tax on estates worth less than $3.5 million; a tax of 45 percent on assets greater than that -- will continue as is for a year.

That will give lawmakers time in 2010 to arrive at a permanent solution before tougher estate tax laws kick in on Jan. 1, 2011.

Time on their hands: Of course, Congress may get to the estate tax issue before 2009 ends. They'll likely be around until late in the year.

Yes, wonks, get ready to hunker down. House Majority Leader Steny Hoyer (D-Md.) has revised that legislative body's calendar to include possible roll call votes almost to Christmas Eve.

The long session is expected if health care reform actually starts moving. And while Congress is waiting to cast the final vote on that controversial measure, they'll be able to fill the hours with other legislation.

Oh, joy! Who knows what damage they can do with that much time on their hands?!

In tune: One of my favorite composers is France's Olivier Messiaen.

He was so fascinated by the warbling of birds that he composed a series of miniature pieces based on the transcriptions of bird songs.

But I don't think he ever produced a bird-inspired opera. Too bad. Mrs. Webster and I would have enjoyed it.

The May 2007 issue of Birder South has more on Messiaen and our musical connection with birds.

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Military tax tips

2009-11-11T00:15:10-06:00