Job Search Deductions

In the latest issue of its Summertime Tax Tips series, the IRS addresses deductions that may be claimed by job-seekers that could supply some tax relief come April:

1. The deduction is allowed only if you are searching for work within the same field in which you currently work.

2. Money spent on preparing and mailing resumes is deductible.

3. Employment agency fees are also deductible.

4. Money spent traveling in search of employment within the same occupation is deductible as long as the trip is undertaken primarily for the job search.

5. These types of job search deductions are not allowed if there was a substantial break between the end of the last job and the beginning of your search.

6. These types of deductions are not allowed for first time job searches (i.e., only for reemployment purposes).

7. You can claim job search expenses that amounts to more than 2% of your adjusted gross income.

Lawyer Indicted for Tax Evasion

Who: Knoxville attorney, John Threadgill

What: Indicted by Federal Grand Jury for paying personal expenses out of his law practice and deducted them as legitimate business expenses.

How Much: Threadgill was charged with evading $1.4 million in Federal income tax during the period of 1986-2004.

More Info: If convicted, Threadgill faces a fine of up to $100,000 and 5 years imprisonment. Clickhere for full article.

This is a very blatant example of tax fraud. I’m sure that the magnitude of the offense and the fact that the offender is an attorney played a major role in the IRS deciding to pursue him criminally. I suppose the legitimate forms of tax relief just did not seem as attractive to him at the time.

IRS Offers Tax Relief in Response to Discontinued Air Travel Taxes

The Internal Revenue Service (IRS) announced that it would offer tax relief to those consumers taken for a ride by greedy airline companies. By July 22, 2011, Congress failed to extend federal air transportation excise taxes. The discontinued taxes include:

  •  A 7.5 percent tax on the base ticket price;
  • A domestic segment tax of $3.70 per person per segment (a single takeoff and single landing);
  • An international travel facilities tax of $16.30 per person for flights that begin or end in the U.S., or $8.20 per person for a flight that begins or ends in Alaska or Hawaii; and
  • A 6.25 percent tax on the amount paid for transporting property by air.

Air travelers with trips on or after July 23, 2011, who paid the discontinued taxes when purchasing their tickets on or before July 22, 2011, may obtain a refund from the IRS for the discontinued taxes paid, if the air carrier fails to refund the discontinued taxes.

In a greedy move, some air carriers have since increased their air fares in an amount equal to the discontinued excise taxes. Therefore, air travelers pay the same overall price that would have been paid if the excise tax had not been discontinued, with the air carrier profiting in accordance with the discontinued tax. It will be interesting to see if those greedy air carriers maintain their newly increase fares if and when the federal air transportation excise taxes are reinstated by Congress.

Trebek’s Coolness not in Jeopardy

Alex Trebek is the coolest guy ever. He always seems to have an independent knowledge of the questions he asks on his show (even though he may be peeking at an index card with the answer on it). He never, ever, ever lets an answer slip by that is not in the form of a question. And back in the day, when he was at his prime, he had a mustache that could rival that of Tom Selleck.

Now, at the age of 71, Trebek is fighting crime. He recently injured his Achilles tendon while chasing a burglar he caught going through his stuff in a San Francisco hotel room. See the full AP news story here.

Chuck Norris and Dos Equis guy should probably watch their backs.

Almost One Half of Americans will Pay no Income Taxes This Year

The Tax Policy Center estimates that 46% of Americans will pay no federal individual income taxes this year, but it’s not what you think.  Many of these people are paying other taxes, including payroll, excise, and state/local taxes.  Also, don’t blame tax breaks and loopholes because, of the 46%, roughly half do not pay taxes simply because they do not earn enough income.  Most of the people in the other half of that 46% group are not paying taxes because they are taking advantage of special provisions in the tax code that benefit particular behaviors or groups (i.e., families with children and the elderly).  For more information and a nifty pie graph, see recent Forbes article.

TAS Takes Credit for Changes to Innocent Spouse Rule

The National Taxpayer Advocate, Nina Olson, took a bow yesterday as the IRS announced removal of the two-year statute of limitations under the Innocent Spouse program. According to Olson, she and her staff have been advocating for this change for some time now because an “innocent spouse” is often unaware of the shenanigans of his/her spouse until after the two-year period has passed from the IRS’ first collection activity, and it is really not fair to hold them to a limitations period. To read Ms. Olson’s complete statement, click here.

Sales Tax Holidays

Unless you live in Alaska, Delaware, New Hampshire, Montana, or Oregon, you probably pay sales tax on items you purchase in your favorite retail establishment. But you might be able to get a taste of what its like to be an Alaskan within the next few weeks.

17 states are giving back-to-school shoppers a break from paying sales tax on certain school-related purchases beginning July 29th and continuing into mid-August. Click here to see if your state is participating and how your special tax relief holiday works. The individual states determine the dates of their own tax holiday (usually only a two-day weekend), which types of purchases are exempt from sales tax and which are not, and also any special price limits. As of this morning, Massachusetts is likely going to join in since the state has brought in more revenue than anticipated in recent months. bringing the total number of participating states to 18.

These tax holidays are meant to stimulate the economy. There is also the added benefit of encouraging citizens to spend money on education and educational supplies, a behavior that is typically encouraged in this country anyway. Shoppers love these sales tax holidays, but retailers generally see them as extra work. Some who oppose the tax holidays say that they are a political gimmick.

IRS Throws out 2-Year Statute of Limitations for Certain Innocent Spouse Claims

Today the IRS announced that it is removing the two-year limitations period for Innocent Spouse relief sought under the equitable provisions of Revenue Code section 6015(f). This change is effective immediately and also applies to pending cases and apparently even claims that were denied solely on the grounds that the statute of limitations period had expired. The standard requirements of an Innocent Spouse claim are found in section 6015(b)-(c). But if those provisions do not apply and it would be inequitable to deny Innocent Spouse relief given all the facts and circumstances, the petitioner may be granted relief under subsection (f). Prior to today’s announcement, a petitioner seeking relief under subsection (f) had two years to do it just like is required under 6015(b)-(c). This change should expand the availability of Innocent Spouse relief which is granted to taxpayers who can show that they did not know, and did not have reason to know that their spouse had either underpaid the joint taxes or had understated the income reported on the joint return.

IRS Warning to Taxpayers Nationwide

The latest in the Internal Revenue Service’s “Summer Tax Tips” series is a firm warning about some of the most prevalent and dangerous tax scams. The IRS identifies 5 scams that pop up any time of the year:

1. Hiding Money in Offshore Accounts
2. Phishing / Identity Theft
3. Return Preparer Fraud
4. Filing Fraudulent Returns or Forms
5. Frivilous Tax Arguments

Some of these schemes are the product of fraud or deceipt on the part of a third party where the victim is the taxpayer. Numbers 2, 3 and 5 fall into this category. Others are the product of deceiptful activities undertaken by the taxpayer where the victim is the government. Numbers 1 and 4 fall into this category. And some of these probably fall into a third category whereby the hustle involves the taxpayer and the third party working together to deceive the government. Numbers 1, 4, and 5 fall into this category. However you want to categorize them, they are activities that you want to avoid. The IRS has taken great care to provide information to the public on how to recognize these activities, how to avoid them when they are encountered, and also what to do if you find yourself a victim.

Bank Levy: A Serious IRS Collection Tool

The IRS has different collection tools at their disposal to ensure that a tax debt is paid. One such tool is a bank levy. The IRS has the ability to issue a bank levy on an account that bears the name of a person who owes the IRS a tax debt. When the IRS decides to take enforced collection action via a bank levy, a notice of levy is sent to the taxpayer’s bank and it attaches to all accounts in the name of the taxpayer whether a sole or joint account. The bank is then legally obligated to honor the levy. Once received, the levy freezes the funds on deposit in the account. The bank will not allow anyone access to the frozen funds for 21 days from the date of receipt of the levy unless released. This 21 day holding period allows time to resolve any issues about account funds ownership and collectability. After the 21 days have elapsed, the bank will send the money plus interest, if it applies, to the IRS if the levy has not been successfully released. Therefore, if you do not want the IRS to take the money in your bank account, you will need to seek a tax relief attorney before the 21st day since your bank received your bank levy.