Taxable Talk

It's only my third day back from vacation. Some of the individuals mentioned below will be counting the days at ClubFed very soon.

Let's start in Stillwater, Minnesota. Randy Haugen owned an automobile repair business, and it was apparently quite successful. One of his methods of improving his bottom line was allegedly not remitting sales tax to Minnesota and not filing income tax returns. Those methods really do help the bottom line...until you're caught. The Minnesota Department of Revenue said that Mr. Haugen, "knew this day was going to come and he dreaded it." As a helpful hint, if you find yourself in that situation get an attorney and make a payment plan rather than postponing the inevitable discovery of the tax evasion.

Staying in the Twin Cities, a former co-owner of a roofing business is accused of conspiracy, mail fraud, tax evasion, and filing false tax returns. Amit Sela of Minnetonka, Minnesota, allegedly embezzled over $600,000 from Sela Roofing, and then allegedly filed false tax returns to cover up the theft. On the other hand, Mr. Sela's attorney, Eric Brever, told the Minneapolis Star-Tribune, "We believe a jury will find Mr. Sela innocent of all the charges...[A]ll of the taxes were paid prior to the IRS criminal investigation." That's a big difference of opinion and we won't know the answer until the case comes to trial.

Finally, from Grand Rapids, Michigan, we learn that two former executives of U.S. Signal, a telecommunications firm serving the Great Lakes region, are pleading guilty to tax and mail fraud charges. The two, Barry Raternik, the former president of U.S. Signal, and Tim Hall, who used to be the company's director of operations, teamed with a supplier, Douglas Lautenbach (who also pleaded guilty) to overcharge the company for fiber optics. The three pocketed the difference and used the ill-gotten gains to fund lavish homes, sports cars, RVs, and other expensive items. They also allegedly sold other equipment on the secondary market. Instead of enjoying the luxury items they'll likely get to spend a few years enjoying the not so luxurious insides of various ClubFed facilities.

In the end, most of these "perfect crimes" end up with the same result—the participants enjoying ClubFed and making restitution to the government. Crime just rarely pays.

While I was away on vacation Congress passed a Housing Bill. There are a number of tax impacts of the legislation:

A first-time homebuyer's credit of up to $7,500. This credit can be taken if you are a first-time homebuyer who purchases a home between April 1, 2008 and July 31, 2009 who meets the income qualifications (phase out of the credit begins with at an AGI of $75,000 if single or $150,000 if married-filing-jointly (MFJ)). This credit must be paid back over 15 years beginning two years following the purchase. Additionally, the credit can be taken in 2008 if a qualified home is purchased in 2009.

There is a one-time property tax deduction for taxpayers who don't itemize for 2008. It's $500 if single or $1,000 if MFJ.

New credit card reporting requirements are one of the offsets of the cost of this legislation. The new requirements, effective January 1, 2011, require credit card processors to report the total dollar amount of transactions to the IRS and the merchant if the total is at least $20,000.

There are a number of other tax impacts of this legislation. CCH has published an excellent summary that's available here.

Hat tip: Tax Guru-Ker$tetter Letter

As expected California is no closer to a budget today than when I left on my vacation two weeks ago. The Democrats in the Legislature remain convinced that the only solution is new taxes while the Republicans are convinced that the only solution is to cut programs and spending. Meanwhile, Meanwhile, Governor Schwarzenegger proposed a temporary $0.01 hike in the sales tax coupled with spending restraints.

I doubt we'll see a California budget until September at the earliest.