Don't Mess With Taxes

Mortgage fraud on the increase

This just in from the Department of the Obvious: Mortgage fraud is on the rise and the subprime lending crisis is a contributing factor.

Sorry to be a bit snarky, but I think we all know this by now. The FBI, however, wants to make sure, just in case.

In a report released today, the agency said that by the end of last year, its investigators were handling just over 1,200 mortgage fraud investigations, a 47 percent increase from 2006 and a whopping 176 percent increase from 2003. And yes, the FBI press release used the word "whopping."

Other report highlights:

• 46,717 Suspicious Activity Reports (SARs) were filed in connection with mortgage fraud in 2007. The 2006 number was 35,617; in 2003, the FBI got just 6,936 mortgage fraud SARs.

• The financial cost of mortgage fraud is difficult to quantify, but likely astronomical. The FBI said only 7 percent of last year's SARs documented an exact dollar amount in terms of losses, but the total loss from that small percentage was $813 million.

• The variety of mortgage schemes include builder-bailouts, seller assistance, short sales, foreclosure rescue, and identity theft exploiting home equity lines of credit.

• The nation's top 10 mortgage fraud hot spots in 2007 were Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota (in red below; the blue states are also "significantly affected" by mortgage fraud).

Getting back to that subprime bombshell, the FBI said these high-interest, high-risk loans, designed for people with poor or limited credit histories, remain a key factor in influencing mortgage fraud directly and indirectly.

The subprime share of outstanding loans has more than doubled since 2003, according to the report, putting a greater share of loans at higher risk of failure.

During 2007, nationally there were more than 2.2 million foreclosure filings reported on approximately 1.29 million properties; that's a 75 percent increase from 2006.

You can read the full report here, as well as check out the FBI's special mortgage fraud Web page.

We now return you to your regularly scheduled blogging program.

Record-breaking city sales tax hikes

A couple of weeks ago when I was whining about discussing how expensive groceries were getting, I mentioned that at least here in Texas we don't have to pay state or local sales taxes on food items, or at least what the state and localities deem as a food product.

That money-saving circumstance looks even better now, as a recent study found that 485 U.S. cities last year increased their sales tax rates.

Vertex, a tax technology company,  said that of those municipalities, 178 were newly imposed city tax rates and 307 were straight increases in existing city tax rates. This is the largest annual expansion in the number of cities who either increased their existing rate or initiated a sales tax in the past four years, according to the company's annual sales tax rate study.

North Courtland, Ala., had the largest increase nationwide, rising from a 1 percent sales tax rate to 4 percent. Seldovia, Alaska, was next, going from 2 percent to 4.5 percent, followed by Fredonia, Ariz., and Watts, Okla., with increases from 2 percent to 4 percent.

Several large U.S. cities also raised their sales tax rates between 0.1 percent and 0.2 percent in 2007. They include Boulder, Colo.; Phoenix, Ariz.; St. Louis, Mo.; and areas of Denver, Colo. and Seattle, Wash.

States with the most number of city rate increases included Colorado, Missouri, Texas and Washington.

Other findings: The report revealed that 2007 sales tax rates remained higher than any previous year among those cities increasing an existing rate, illustrating an overall steady growth in the combined state, county and city average rate since Vertex began tracking the data in 1981.

The average U.S. sales tax rate among all taxing cities, however, decreased slightly in 2007 to 8.573 percent, as compared to 8.579 percent in 2006. The reason for the incremental reduction is the number of cities initiating lower rates on first-time taxes.

Click here to peruse the latest full Vertex 2007 Sales Tax Rate Report, which provides a summary of sales tax rate changes at the state, county, city, and district levels nationwide.

Too little, too late: Apparently the finances of Vallejo, Calif., were too far gone for any increase in sales taxes to help. I previously blogged about this city's fiscal troubles back in February in Towns in Trouble.

Now it's official. The San Francisco suburb has filed for bankruptcy protection.

Economic pessimists see this as only the first shoe falling off a fiscal centipede that lived, and now will die, by our overall slowing economy and the national housing situation.

"The fiscal strains afflicting Vallejo are reverberating across the U.S., as a housing slump and slowing economy curb revenue for states and local governments. U.S. state sales-tax collections fell in the first quarter for the first time in six years," writes blogger Straight Stocks.

You can read more on Vallejo's money woes at the Associated Press, Bloomberg, the Times-Herald, the California Progress Report, the Bond Buyer and the San Jose Mercury-News.

Tax relief for disaster victims

Earlier today I reminded folks of how they can lend a hand to disaster victims. Here's part two of the process: Getting help directly from the IRS after a catastrophe.

Unfortunately, I've had to discuss this topic way too many times here on the ol' blog (most recently here), but I do so again in the hopes that it might help some folks looking for any and every way to cope with what they've gone through.

When an area is designated a major disaster area by the president, which is the norm after Mother Nature gets nasty, special tax rules apply.

The key one is that you can choose when to claim your disaster losses on your return and that might get you more money, and sooner, from the IRS.

Generally, casualty losses are deductible in the year they occurred. But if the loss is in a presidentially declared disaster area, you can choose to deduct that loss on your tax return for the previous year. The timing is optional in these cases, and you need to run the numbers to see which tax year will get you the most tax money.

For example, Jim sustained major damage in this weekend's tornadoes. When he filed his 2007 return earlier this year, he claimed the standard deduction. However, he can now claim more than that if he itemizes and counts his storm damage as a casualty deduction. By doing so via filing an amended 2007 return (the tax year just prior to the year the damage actually happened), Jim will get a bigger refund as soon as the IRS processes his 2007 Form 1040X.

If, however, Jim finds that it would be advantageous, tax and financially, to wait and claim the losses on his 2008 return next year, he can do that.

I doubt many storm victims are surfing the 'Net for tax advice right now. But if you have friends or family in an affected area, please let them know they have this option.

Tracking tragedies: The IRS keeps a running list of major disasters at this Web page. The presidential disaster areas and other applicable tax information, such as extended filing deadlines, are listed by state. The most recent twisters aren't there yet, but I'm sure they will be soon.

Each specific state page also has a link with addresses and phone numbers of local IRS offices where you can go for personal assistance. More tax information on how to deal with casualties, disasters and thefts is available in Tax Topic 515 and IRS Publication 547.

And Publication 2194, Disaster Losses Kit for Individuals, is chock full of information, from getting copies of old tax returns to a list of documents you'll need to seek federal help to a worksheet to help you value the items you lost.

Finally, FEMA also maintains its own major disaster list here.

Help needed for natural disaster victims

Man, I did not want to have to write about the need for charitable donations, but Mother Nature is just not being very maternal.

So far this year, the U.S. has been hit by a near-record number of killer tornadoes that has left almost 100 people dead and their families devastated not only by the property damage, but by the much more costly personal loss of loved ones.

Weather experts say that the 98 tornado-related deaths make 2008 the deadliest year thus far for twisters since 1998 and the seventh deadliest since modern record keeping began in 1950.

We're just now in the prime twister month, and if the outbreaks continue, 2008 could record the most tornadoes since 1950. "We are on a pace that continues a record number" of twisters, said Greg Forbes, severe weather expert at The Weather Channel.

Donations can help: There is nothing we can do to ease the pain of those who've lost family and friend in a natural catastrophe. But we can try to help meet their other post-disaster needs.

If you can spare it, call or go to a relief organization's Web page and make a tax-deductible donation.

Both the American Red Cross and Salvation Army are taking contributions and, in many cases, you get a say in where your financial assistance will be used.

If you want to expand your generosity beyond U.S. borders, both nonprofits also are accepting donations to help survivors of Cyclone Nargis, which hit Myanmar (Burma) a week ago, and the 7.8 magnitude earthquake that rocked southwestern China overnight.

The advertising value of taxes

What are taxes good for? The answers vary depending upon who you ask.

But for retailers here in Austin, they're good for ad campaigns.

In addition to television ads by local furniture stores promoting "tax-free" sales of couches and chairs and whatever knickknacks you want or need for your home, a jeweler sent out a multi-page mailing last week with this message:

Texas does have a state sales tax holiday; I'll be writing more on it and the dozen or so others coming up later this summer. But I guess sales are a bit slow everywhere, so some businesses, based on their ads, are willing to cover the sales tax on all purchases themselves just to get more people into the stores right now.

And that  "gas credit" pitch is inspired. Based on local pump prices, that'll get you around seven gallons, more than enough to cover the drive to and from the store.

Have you hugged your mom today?

"Like mothers, taxes are often misunderstood,
but seldom forgotten."

-- Lord Bramwell, English judge

Al Sharpton's tax troubles

The Rev. Al Sharpton usually isn't one to shy away from attention, but no one likes it when the added interest comes from tax collectors.

The Associated Press reports that it has obtained government records indicating that Sharpton and his business entities owe nearly $1.5 million in overdue taxes and penalties.

Sharpton's personal debts include $365,558 in New York City income tax and $931,397 in federal income tax, according to an IRS lien filed last spring. Sharpton's for-profit company, Rev. Al Communications, owes New York state another $175,962 in delinquent taxes.

According to the wire service, the U.S. Attorney also is investigating Sharpton's National Action Network. Lawyers for the nonprofit group have been negotiating with the feds over the size of the debt, as well as trying to pay off tens of thousands of dollars owed for failing to properly maintain workers compensation and unemployment insurance.

This is not the first time Sharpton has tangled with the tax man.

In 1990, he was acquitted of tax fraud and charges that he stole from one of his charities. He followed that up with what was essentially another victory in a tax case by pleading guilty to a misdemeanor charge of failing to file a state return.

Really, just where the heck is my rebate!?!

A lot of taxpayers are starting to feel like these turkey vultures.

Yep, patience is starting to wear thin as folks wait for their rebate money.

Emotions range from frustrated but slightly apologetic Jesi:

I really don't want to bit** about this money because this time last year, I didn't  know or expect to be getting it and am grateful that I am now. But it's like dangling candy in front of a two-year-old. I was supposed to get mine today and nothing. I know that I do not owe anything and made all the qualifying items …

To the somewhat more agitated Kollette:

I'm on the "before May 5" schedule for direct deposits and have been looking for something ever since. How do we find out? Who do we talk to? If you give me something and tell me when you're going to give it to me, why should I have to find out when it's coming?

To the downright angry Pierre:

This is damned bull crap. A lot of the people I know who have last 2 digits in the 30s-70s range say they haven't received it. Its bull****. You do everything by the book and they still find a way to screw you over. Those dates might as well be lies to shut people up and give them false hope of a quick direct deposit. I did my taxes early and I waited patiently to the 9th of May and what? NOTHING! It must be a scam being played on us by this government. False hope, that's all we get here.

As Jesi also noted, the waiting is a problem many taxpayers are having. And they're starting to demand at least some answers as to why they haven't seen a cent of the economic stimulus payment yet.

Timetable travails: It certainly was exciting when, back on March 18 the IRS announced the timetable for rebate delivery. But the problem with putting out specific dates is that even if you qualify them by noting that other factors might mean your money won't show up exactly when you expect it, folks don't care about that.

What they care about is you -- IRS, Congress, Dubya -- said you were giving them money. You laid out some dates. You made us mark our calendars. Now deliver, in every sense of the word!

The expectation factor then got ramped up when Dubya and his Treasury Department minions decided he original rebated delivery schedule needed to be accelerated.

The interesting thing in all this is that even after the prez's announcement that the rebate money would be going out sooner, the IRS never adjusted its original delivery schedule posted on its Web site.

And the agency is in basic CYA mode in its latest rebate FAQs. There, one of the most common questions is, "I filed my return on time, but I haven’t received my stimulus payment, even though the payment date listed for my Social Security number has passed. Why?"

The official IRS answer, or to anxious taxpayers, non-answer to this increasingly asked question is:

In general, the payment schedule only applies if your return was received and the IRS finished processing it before April 15. If you filed your return on time, but close to the April 15 deadline, the IRS may not have finished processing it before April 15.

Processing times for tax returns and stimulus payments vary. If you are getting a regular income-tax refund, the IRS will send you that refund first. Normally, your stimulus payment will follow one to two weeks later.

If you are not expecting a regular tax refund, your stimulus payment generally should arrive a minimum of six weeks after you file.

Also, if you chose direct deposit and requested a Refund Anticipation Loan (RAL) or had your refund deposited into more than one account, you will receive a paper check based on the distribution schedule for paper checks.

So what the IRS essentially is saying is that although we put out a schedule, we have lots of other things that could keep us from meeting it.

Hmmm. Perhaps Pierre's analysis is correct.

So what to do? Right now, my best advice is to check the IRS' Where's My Rebate? online tracker (blogged about here).

I know; it seems counterintuitive to trust the IRS with regard to anything associated with the rebates. But the rebate tracking program is based on the similar Where's My Refund? system, and that seems to work well.

So the rebate one should (and I say that with my fingers crossed, making it hard to type!) help you discover just what the hold up is with your stimulus money.

I do know that some checks and direct deposits have been sent out. Here's hoping yours is next in line.

Mother's Day gift ideas

It's been a crazy week and Mother's Day almost sneaked up on me. But a little while ago I called a florist in my mother's town and was assured they could deliver a nice flower arrangement later today or tomorrow.

A gift for my Mom is easy. First of all there's the card; that's a must, preferably a mushy one.

She also loves flowers, and my tardiness this year made that choice a no-brainer. Costume jewelry also is a welcome present, as are various accessories like scarves and fashion belts.

You could spend a lot for those gifts, or you could find some nice but less budget busting versions of everything but the fresh flowers at a local department or discount store.

Spending on Mom: This year, with recession on everyone's mind, it looks like thriftier options will win.

One recent survey, reported in Progressive Grocer (which, by the way, notes that fresh flowers are available at most supermarkets), found that consumers are planning to scale back a bit on the number of gifts they buy Mom this year.

According to the National Retail Federation's 2008 Mother's Day Consumer Intentions and Actions Survey, conducted by BIGresearch, consumers will spend an average of $138.63 this year, compared to $139.14 last year. Total consumer spending is expected to reach $15.8 billion.

While the majority of consumers will invest in one major gift (such as jewelry) for Mom, they are likely to spend at least some money on the aforementioned flowers ($2 billion expected in this category), gift cards or gift certificates ($1.6 billion), housewares and gardening tools ($696 million), and, of course, greeting cards ($672 million).

Most shoppers (35 percent) told pollsters that they will shop at specialty stores, with the rest of those surveyed heading to department (28.8 percent) and discount (25.7 percent) stores. Other outlets for Mom's gifts include specialty clothing stores and online and catalog merchants.

Other gift ideas: If you're still looking for ideas, check out Our Fourpence Worth's frugal but thoughtful Mother’s Day gift suggestions.

Mrs. Nespy's World has a wide-ranging five-part collection of gift ideas (part 1, part 2, part 3, part 4 and part 5).

And all you who procrastinated longer than I did will want to check out Slashfood's yummy gift list, ParentDish's last-minute gift guide and Mother's Day gifts for the procrastinator, part 1 and part 2, from Wordcandy Bookshelf.

Happy shopping and to all moms, grandmothers, aunts, nieces, godmothers and nurturing women everywhere, a well-deserved and very Happy Mother's Day!

Mom heart logo courtesy of LogoGolfwear.com.

No tax transparency from Cindy McCain

If John McCain wins in November, don't expect to ever see his wife's tax returns.

"You know, my husband and I have been married 28 years and we have filed separate tax returns for 28 years. This is a privacy issue. My husband is the candidate," Cindy McCain said in an NBC Today show interview aired Thursday (video here; transcript here).

As blogged about here, the Arizona senator released his married filing separately tax return last month. His wife's return was not made public.

She's heiress to a Phoenix-based beer distributing company with a reported fortune in the $100 million range. Thanks to a prenuptial agreement, much of the family's assets are solely in Mrs. McCain's name.

Political scolding: As expected, much is being made by political opponents about Mrs. McCain's decision to keep her tax data to herself.

Democratic National Committee Chairman Howard Dean said Cindy McCain's refusal to release her tax returns gives the appearance of a double standard on the part of her husband.

"What is John McCain trying to hide?" asked Dean in a statement. "Throughout this campaign, he has acted like his own calls for openness and accountability apply to everyone but himself. Now he thinks he can bring that same double standard to the White House."

In response, Republican National Committee spokesman Danny Diaz said, "Howard Dean continues to lower the bar in this election."

Who really cares? Aside from satisfying our society's current celebrity/tabloid thirst for tell-all personal details, what purpose does release of tax returns really serve?

The whole process is voluntary and the details revealed range from bare bones (see Dick and Lynne Cheney) to TMI (35 pages from the Obamas; they're obviously new to this!).

I don't really care what any candidate or sitting lawmaker at any governmental level makes as long as he or she reports it all to the IRS and/or applicable state tax collectors.

If the feds or their state/local cousins are investigating a candidate for suspected tax evasion (see Al Franken), that's when I want to know all the dirty allegedly law-breaking details.

Otherwise, the only return I'm going to worry about is my own.