Archive for the ‘New York’ Category

There Are Better Methods of Paying Off the IRS than Bungling a Burglary

Sunday, September 1st, 2013

Let’s assume you owe the IRS $10,000 in back taxes. What would you do? Perhaps obtain a payment plan? Maybe you can negotiate an Offer in Compromise? Or maybe you have so little funds on hand than you can go into Currently Uncollectible Status. Or maybe you will elect to attempt to steal welding equipment, and then become the prototypical demolition derby driver. And yes, someone actually did this.

Joel Grasman (and his wife) apparently owed the IRS $10,000. Instead of doing one of the obvious things to resolve the tax debt, he first stole welding equipment from the MTA (New York’s transit system), then on his way out drove his truck into power lines. That caused thousands of Long Island power customers to be powerless.

This New York Post article notes that Mr. Grasman has confessed. He faces a multitude of charges; frankly, his tax debt is the least of his current problems.

Nite Moves Asks Supreme Court to Rule on Constitutionality of Taxing Pole Dances in New York

Sunday, August 11th, 2013

When I think of “Night Moves” I think of a Bob Seger song. That’s not what this post is about. It seems that the upstate New York adult entertainment facility named Nite Moves isn’t happy with a New York state sales tax on pole dancers. The essential question: Is a tax on just certain kind of music or entertainment legal?

New York’s highest court, the Court of Appeals, held in a 4-3 decision that a sales tax on pole dancing is just fine. The owner of Nite Moves, Stephen Dick, has filed a writ of certiorari with the US Supreme Court asking the Court to overturn the tax. The question of whether pole dancing is a form of art or something that doesn’t promote culture (and so can be taxed) might be argued next Spring in Washington.

Speaking of Night Moves:

The Flow of AGI from One State to Another

Saturday, July 20th, 2013

From watchdog.org comes an interesting interactive map showing how money has flowed from state to state. Back when I moved to Nevada from California, I noted this issue. Here’s yet more verification that this is real.

The five biggest losers were:
1. New York ($68.10 billion in annual Adjusted Gross Income (AGI))
2. California ($45.27 billion in annual AGI)
3. Illinois ($29.27 billion in annual AGI)
4. New Jersey ($20.62 billion in annual AGI)
5. Ohio ($18.39 billion in annual AGI)

The five biggest winners were:
1. Florida ($95.61 billion in annual AGI)
2. Arizona ($28.30 billion in annual AGI)
3. North Carolina ($25.12 billion in annual AGI)
4. Texas ($24.94 billion in annual AGI)
5. Nevada ($18.17 billion in annual AGI)

Sure, some of this is retirees moving from the snow belt to the sun belt. But California is anything but part of the snow belt; it’s clear that successful individuals are fleeing high tax states for low tax states. We here in Nevada are appreciative of the $9.59 billion in annual AGI that has moved from the Bronze Golden State to the Silver State.

Interestingly, the interactive map allows you to look county-by-county. The areas that one would think would show AGI growth are losing AGI. The area around Silicon Valley has lost AGI; so have Los Angeles and Orange County. Sure, some of this is retirees moving to the desert (Riverside County, which includes Palm Springs, showed an increase in AGI). However, there is no chance that this is just caused by retirees.

Taxes matter, and individuals absolutely do relocate because of taxes.

What Happens When Cigarette Taxes go Through the Roof?

Sunday, December 16th, 2012

While Alan Greenspan noted, “Whatever you tax, you get less of,” the New York legislature seems to not understand. In one of the least shocking reports I’ve seen, the New York Association of Convenience Stores (NYACS) noted that the state is losing $1.7 billion of tax revenue each year and 6,700 jobs because of cigarette tax evasion. Why would this be?

New Yorkers who can buy cigarettes elsewhere. The study found that many are buying cigarettes from surrounding states, military bases, Indian reservations, and duty free shops. Add in smuggling from low-tax states (there’s undoubtedly a black market) and you have tax avoidance.

Meanwhile, Cook County, Illinois (Chicago) is conducting cigarette raids to enforce the $2 county cigarette tax. A picture is coming into my mind, that of prohibition, where organized crime prospered when alcohol was banned. I’m sure the similarities are just superficial…or maybe they’re not.

Of course, the NYACS would like New York to begin raids like those in Chicago; after all, convenience stores that are obeying the law stand to sell more cigarettes than most other locations. Still, the unintended consequences of increased taxes are obvious to most of us.

Ref Fouls Out

Wednesday, December 12th, 2012

Last year I reported on the rather brazen scheme of some referees at New York’s Chelsea Piers. Instead of reporting their $40 income per game, they decided to commit identity theft and use false names for reporting their income. This isn’t the identity theft that normally makes the news–fraudsters using someone else’s identity to obtain a tax refund. Rather, this was a scheme to avoid paying taxes on income the referees clearly earned. And this wasn’t a one-time thing: The scheme ran for twelve years.

It was judgment day yesterday in Manhattan
. Peter Iulo was one of the individuals who committed the fouls, er, crimes. Besides his involvement with the referee scandal, he also elected to not file his own tax returns. That didn’t sit well with Judge Barbara Jones: He was sentenced to two years at ClubFed and must make restitution of $80,000. All told, the four individuals involved in the scheme must make restitution totaling $200,000. As always, it’s far, far easier to just pay the tax you owe…but that thought rarely occurs to the Bozo mind.

New York Extends Tax Deadlines Because of Sandy; Expect the IRS, New Jersey, Pennsylvania and Others to Follow

Monday, October 29th, 2012

The New York State Department of Taxation and Finance announced that they have extended all tax deadlines falling from October 26 to November 14 to November 14th because of Hurricane Sandy. I expect similar actions to be taken by the IRS, New Jersey, Pennsylvania and other impacted areas.

The New York extension directly effects MCTMT tax returns on extension that would be due on October 31st; those are now due on November 14th. Also, third quarter MCTMT estimated payments for 2012 are now due on November 14th. This will likely also impact payroll tax filings.

Tax Foundation Releases State & Local Tax Burdens

Wednesday, October 24th, 2012

The Tax Foundation released its annual State-Local Tax Burden Ranking. In what won’t be shocking to most readers, New York came in first…and that’s not a good thing. Here are the ten worst states:

1. New York 12.8%
2. New Jersey 12.4%
3. Connecticut 12.3%
4. California 11.2%
5. Wisconsin 11.1%
6. Rhode Island 10.9%
7. Minnesota 10.8%
8. Massachusetts 10.4%
9. Maine 10.3%
10. Pennsylvania 10.2%

The ten best states (those with the lowest tax burdens):

41. South Carolina 8.4%
42. Nevada 8.2%
43. Alabama 8.2%
44. New Hampshire 8.1%
45. Texas 7.9%
46. Wyoming 7.8%
47. Louisiana 7.8%
48. Tennessee 7.7%
49. South Dakota 7.6%
50. Alaska 7.0%

One observation that the Tax Foundation made is that most states have similar burdens. Note that the burden being measured is on taxes residents pay and not taxes on tourists (such as hotel excise taxes). Numerous states fall between 8.7% and 9.7%.

One interesting observation I have is that almost all of the low-tax states are “Red” states (they tend to vote Republican) while almost all of the high-tax states are “Blue” states (they tend to vote Democratic). I suspect that this is not a coincidence.

Bad States for Gamblers

Monday, October 22nd, 2012

It’s been a while since I’ve listed out the bad states for gamblers. Here’s an updated list. Make sure you read the notes because while all of these states have tax systems that are problematic for gamblers, some impact amateurs while others impact professionals. Note that I do not cover the laws that impact gambling here (such as Washington State’s law that makes online gambling a Class C felony).

Connecticut [1]
Hawaii [2]
Illinois [1]
Indiana [1]
Massachusetts [1]
Michigan [1]
Minnesota [3]
Mississippi [4]
New York [5]
Ohio [6]
Washington [7]
West Virginia [1]
Wisconsin [1]

NOTES:

1. CT, IL, IN, MA, MI, WV, and WI do not allow gambling losses as an itemized deduction. These states’ income taxes are written so that taxpayers pay based (generally) on their federal Adjusted Gross Income (AGI). AGI includes gambling winnings but does not include gambling losses. Thus, a taxpayer who has (say) $100,000 of gambling winnings and $100,000 of gambling losses will owe state income tax on the phantom gambling winnings. (Michigan does exempt the first $300 of gambling winnings from state income tax.)

2. Hawaii has an excise tax (the General Excise and Use Tax) that’s thought of as a sales tax. It is, but it is also a tax on various professions. A professional gambler is subject to this 4% tax (an amateur gambler is not).

3. Minnesota’s state Alternative Minimum Tax (AMT) negatively impacts amateur gamblers. Because of the design of the Minnesota AMT, amateur gamblers with significant losses effectively cannot deduct those losses.

4. Mississippi only allows Mississippi gambling losses as an itemized deduction.

5. New York has a limitation on itemized deductions. If your AGI is over $500,000, you lose 50% of your itemized deductions (including gambling losses). You begin to lose itemized deductions at an AGI of $100,000.

6. Ohio currently does not allow gambling losses as an itemized deduction. However, effective January 1, 2013, gambling losses will be allowed as a deduction on state income tax returns. Unfortunately, those gambling losses will not be deductible on city or school district income tax returns, so Ohio will remain a bad state for amateur gamblers.

7. Washington state has no state income tax. However, the state does have a Business & Occupations Tax (B&O Tax). The B&O Tax has not been applied toward professional gamblers, but my reading of the law says that it could be at any time.

Why I’m Happy to be in Nevada and Not in California

Tuesday, October 9th, 2012

The Tax Foundation released its 2013 State Business Tax Climate Index today. Last year, I was a California resident; in the 2012 Index, California ranked 48th out of 50 states. I now reside in Nevada, which ranks 3rd out of the 50 states. In this case, 3rd is third best. Here are the top ten:

1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Washington
7. New Hampshire
8. Montana
9. Texas
10. Utah

And the bottom ten:
41. Maryland
42. Iowa
43. Wisconsin
44. North Carolina
45. Minnesota
46. Rhode Island
47. Vermont
48. California
49. New Jersey
50. New York

This just a listing based on taxes. If we added in regulations, California might even fall to 49. (Based on what I know of New York, it would be difficult for the Bronze Golden State to hit bottom.) States showing the best improvement were Michigan (which went from 18 to 12) and Maine (from 37 to 30). Michigan is especially notable because its corporate ranking went from 49th to 7th!

Taxes and regulations matter. On Monday, the Tax Foundation released a map showing annual income lost and gained due to interstate migration in 2009:

Annual Income Gained or Lost due to Interstate Migration

Shock of shocks, New York and New Jersey are in the top ten of loss of income back in 2009. Michigan was worst off (remember, Michigan’s tax system was horrible); Montana was best followed by South Carolina. Low tax states generally did quite well, with Florida #3, Wyoming #4, and Arizona #5.

Returning to the state business tax climate, taxes matter. Kudos to the Tax Foundation for their vital work. As the Tax Foundation stated in their report,

Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits…

States do not enact tax changes (increases or cuts) in a vacuum. Every tax law will in some way change a state’s competitive position relative
to its immediate neighbors, its geographic region, and even globally…Entrepreneurial states can take advantage of the tax increases of their neighbors to lure businesses out of high-tax states

MTA (MCTMT) Tax Ruled Unconstitutional; Appeal Certain

Sunday, August 26th, 2012

I prepare a number of New York tax returns for self-employed individuals. One of the more annoying tax returns is the Metropolitan Commuter Transportation Mobility Tax in the New York City metropolitan area. It’s not a large tax by any means, but it is additional paperwork that must be filed by my New York clients. However, that may be a thing of the past. The MCTMT represents about 15% of the revenue of the Metropolitan Transportation Authority (MTA).

This week a New York state court judge ruled that tax unconstitutional. “The bill [authorizing the tax] is unconstitutional because it appropriates public monies for a local purpose…And that it is unconstitutional for imposing liability onto political subdivisions for the debt of a public corporation.” The court also found that the MTA must be self-sustaining.

There have been four previous lawsuits alleging that the MCTMT was unconstitutional. All of those failed. It will likely be many months before the ultimate fate of this lawsuit is known.

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