Don't Mess With Taxes

Tax guidance for Ponzi scheme victims

Bernard Madoff is heading to jail for the rest of his life.

And the victims of the largest-ever Ponzi scheme got some measure of vengeance from the 150-year prison sentence handed down for the faux financier yesterday.

But what about their money?

There's all sorts of wrangling going on over who owes whom what and how to get it. Before all's said and done, this process likely will join the ranks of the longest legal battles.

One of the targets is the Securities and Exchange Commission (SEC).

As Joe Nocera notes in his his New York Times blog Executive Suite, some victims of Madoff’s Ponzi scheme are suing the SEC. Apparently the legal theory, says Nocera, is that the agency's negligence in failing to catch the now-famous crook means that it should be legally liable for the victims' losses.

I have to agree with Nocera when he says no way. Or, as he puts it so well:

"Government agencies make mistakes, treat people unfairly, and do all sorts of things we all wish they wouldn’t. But by law, the federal government cannot be sued when it carries out an unjust prosecution or, for that matter, when it fails to uncover a giant fraud. Government negligence led pretty directly to the recent financial crisis. Does that mean the feds should be reimbursing us for our stock market losses? Of course not. Because it’s not really the S.E.C. that would be paying out the money — it would be the taxpayers."

While I support government involvement in some extreme economic and fiscal situations -- and please, before you fire off your e-mail castigating me for being a tax-and-spend Socialist, note the words "some" and "extreme" and set your flame thrower accordingly -- I definitely understand, and am feeling it a bit myself, the effects of bailout burnout.

Tax help for scheme victims: Plus, Bernie Madoff victims, as well as other folks who've fallen prey to fraudulent schemes, already might be able to get some help from Uncle Sam. I'm talking, of course, specifically about the IRS.

When the magnitude of the Madoff scheme was coming to light earlier this year, the IRS issued a couple of guidance items to help taxpayers who are victims of losses from Ponzi-type investment scams.

The first, Revenue Ruling 2009-09, clarifies the tax law governing the treatment of losses in such schemes.

The second piece of IRS guidance is Revenue Procedure 2009-20  that provides a safe-harbor method of computing and reporting the losses.

"The revenue ruling is important because determining the amount and timing of losses from these schemes is factually difficult and dependent on the prospect of recovering the lost money (which may not become known for several years)," noted IRS Commissioner Doug Shulman at a Senate Finance Committee hearing back in March. "In addition, it clarifies the reach of older guidance on these losses that is somewhat obsolete."

As for the revenue procedure, Shulman noted that it "simplifies compliance for taxpayers (and administration for the IRS) by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss."

Of course, what Shulman considers simple is usually not what you and I think of as easy. So if you've been the victim of a scheme, check with a tax professional as to whether the IRS proclamations affect you and if so, just how and how much the tax guidance might help you. 

And be happy that there's at least the possibility that via your tax filing you might be able to alleviate a bit of your financial loss, if not your anger about being taken in in the first place.

Read more about it: In addition to Nocera's item, The Atlantic (courtesy of Congress Daily information) looks at Capitol Hill interest in a legislative fix for Madoff victims and Andy Ostroy reminds us of The Lesson to be Learned from Bernie Madoff. 

Madoff in Photoshop jail courtesy Huffington Post

Related posts:

• The Ballad of Bernie Madoff
• Madoffs, marriage and tax filing

Supreme Court reverses Sotomayor case

The Supreme Court has ruled that white firefighters in New Haven, Conn., were unfairly denied promotions because of their race.

The case has received special attention because Supreme Court nominee Sonia Sotomayor was part of an appellate panel that issued the ruling that was today overturned.

Legal experts say the 5-to-4 High Court ruling could alter employment practices across the country and make it harder to prove discrimination.

Sotomayor on taxes: Capitol Hill is obviously paying close attention to all of Sotomayor's prior rulings, not just the high-profile ones.

Those in the tax world, however, don't have a lot to examine.

"Sotomayor has not written extensively in the area of taxation," notes the Congressional Research Service (CRS), "and it is not possible to draw conclusions about her judicial philosophy from the tax cases in which she has been involved."

That difficulty notwithstanding, CRS has released Judge Sonia Sotomayor: Analysis of Selected Opinions, which includes a section on her tax-relevant rulings.

I know all you fellow tax geeks will want to examine the CRS analysis carefully at your own pace, so I won't spoil that thrill by repeating its contents here. Enjoy!

And we'll have to wait and see if any tax-related questions come up during Sotomayor's confirmation hearings later this summer.

Poor little Switzerland

"You mean old U.S. and U.K. bullies, quit picking on us!"

That's essentially what one Swiss banker is saying about efforts by the United States, the United Kingdom and other countries to close down, or at least more tightly control, Swiss and other European countries' uber-private financial operations.

Yves Mirabaud, a managing partner at the Swiss private bank that bears his name, told the Financial Times that such efforts are "more than simply fighting against tax havens. Switzerland is a small country. It is not powerful."

It depends, Mr. Mirabaud, on just how you define power.

The Swiss banker also portrayed the global tax haven issue as an "economic war" and shot back at the tax practices of those who accuse Switzerland and other Alpine nations of tax evasion.

"There is nothing easier than doing tax evasion in the U.S. Look at Delaware companies or trusts in the Channel Islands," said Mirabaud.

Now about those UBS accounts: But Mirabaud did at least acknowledge that UBS had "behaved poorly" and had not "helped the Swiss financial centre."

UBS, Switzerland's largest bank, came under fire for helping wealthy Americans hide nearly $20 billion from the IRS. The financial institution was back in the news last week when the first UBS client named in connection with U.S. tax evasion charges pleaded guilty.

Steven Michael Rubinstein, a Boca Raton accountant, admitted to filing a false 2004 tax return by failing to disclose the existence of a Swiss bank account maintained by UBS.

According to the court documents, Rubinstein was the beneficial owner of the account and he failed to report any income earned on the account.

The Department of Justice announcement of the plea noted that:

From 2001 through 2008, Rubinstein communicated with bankers at UBS via email, telephone and in person about the purchase and sale of securities worth more than 4.5 million Swiss Francs, the conversion of investments from U.S. dollars to British Pounds, the deposit and transfer of funds into and out of the UBS Swiss accounts, and the repatriation of approximately $7 million into the United States to purchase property and build his personal residence in Boca Raton.

Additionally, Rubinstein deposited and sold more than $2 million in South African Krugerrands through his UBS accounts.

Rubinstein was released on $12 million bond. He will be sentenced on Sept. 30.

Legal wrangling continues: Rubinstein's name was one of 285 that UBS turned over to federal prosecutors In February. That move was part of a deferred prosecution agreement the bank reached with U.S. prosecutors. It also forked over $780 million.

Despite the agreement and the first plea resulting from it, culture clashes and concerns over customer bank privacy have led to the inevitable lawsuits.

Last week, reports surfaced that the U.S. might drop its lawsuit to get the names of around 52,000 more UBS clients. The Department of Justice denied any such possibility.

Swiss officials, however, say that UBS and American authorities are trying to reach a settlement.

Who will win this tax haven, tax privacy battle? I suppose it will be which side has the biggest guns in the Mirabaud-described economic war.

Related posts:

• What's wrong with tax evasion?
• Possible international tax back scratching
• So after G-20, what's up with tax havens?
• Delaware, the great U.S. tax haven
• Suing for bank, and tax, secrecy
• Tax secrets are out ... maybe

Time for some tasty financial tidbits

The personal finance blog WiseBread has pulled together a nice little cornucopia (is "little cornucopia" an oxymoronic phrase?) of recent fiscal bloggings.

I am pleased to report that my eight divorce tax tips, prompted by Jon and Kate's beakup, was included.

As a cyber amuse-bouche, let me note that the Best of Personal Finance: Summer's Bounty Edition also has bloggings on car salesmen tricks, tips on talking money with your better half and something called a "side hustle."

And no, the spousal conversation and side hustle items do not automatically mean couples will need to read my divorce tips.

Those are just a few of the offerings. Head over to WiseBread and check out all of the bountiful bloggings.

Tax Carnival coming up: Speaking of collected blog works, mark two upcoming dates on your calendars.

The 55th Carnival of Taxes will be posted on July 6. Yep, I know that's the Monday after the July Fourth weekend, so you might want to get your item (one per blogger and/or blog, please, and on taxes specifically) in before you take time off to celebrate.

You can, however, push the entry deadline if you want. I'll be taking Tax Carnival blog item suggestions until 11 p.m. Saturday, July 4. I'll admit right now, however, that I'm not likely to review the submissions until Sunday afternoon.

So check out the Tax Carnival's guidelines, then head over to our Blog Carnival submission page to send in your tax-related post for inclusion in Tax Carnival #55.

What's your cap-and-trade tax burden?

The House on Friday approved H.R. 2454, the American Clean Energy and Security Act. It's the first ever piece of U.S. legislation designed to curb heat-trapping gases linked to climate change.

As you already know, regardless of which side of the global warming argument you're on, getting a final bill is not going to be easy. House Democrats were unsure early Friday whether, despite the party's majority, they had the votes for passage. They did, barely.

H.R. 2454 was approved 219 to 212, with 44 Democrats voting against it. 

Now the battle moves across Capitol Hill, where the Senate must approve its own version of energy legislation. Then a House-Senate conference committee will have to resolve the two bill's differences in a manner that will get the joint legislation OK'ed by all lawmakers and in a form that Obama will sign into law

Get ready for more, pardon the pun, heated debate. The close House vote was just the beginning. Judging by the reactions to yesterday's House vote, it will be just as close a call in the ostensibly more deliberative body.

What's it gonna cost me?  Speaking as someone who's just a week into summer and is already fed up with the three weeks (so far) of 100-plus temperatures that are frying me, my plants and my air conditioning system, I'm for any possible help.

But like every other American, I have one big question. What does this bill, at least the House version, mean to my bank account?

The legislation focuses on operational changes for many business sectors, including electric power generation, manufacturing, agriculture and construction. These industries will face a cap-and-trade system that limits overall emissions of heat-trapping gases while allowing certain companies to trade pollution permits with each other. 

The system would be phased in over several years, which supporters say should keep costs low. But there will be costs to industry, which will be passed along to you and me.

The Congressional Budget Office says the average American household would pay an additional $175 a year in energy costs by 2020 as a result of the provision. The poorest households would receive rebates that would lower their annual energy costs by $40.

Pre-vote numbers crunched by the American Council for an Energy-Efficient Economy (ACEEE) indicated that the federal energy efficiency provisions in the bill could save each household approximately $1,050 by 2020 and $4,400 by 2030.

Opponents counter that more than 70 percent of Americans will pay higher costs without receiving any tax or other relief under the bill. A family of four with income over $33,000 per year would receive only nominal benefits and no tax credits under the bill to offset its negative effects, according to GOP Ways and Means members who voted against the bill.

Run your own numbers: Of course, these are all just estimates prepared by groups with particular political positions.

For me right now, looking at the thermometer inch toward its predicted high today of 105 degrees, I'd be willing to pay more to have late June temps in the 90s. But we shall see, both what eventually becomes law and what its true costs are.

The Tax Foundation offers some help in our personal energy cost computations. The nonpartisan group has created a Household Cap-and-Trade Burden Calculator to see how much money your household would lose.

The group also has released a cap-and-trade parody video, created by Remy, as well as the working paper "Who Pays for Climate Policy? New Estimates of the Household Burden and Economic Impact of a U.S. Cap-and-Trade System."

The Environmental Protection Agency has put together an analysis of H.R. 2454.

And Earth2Tech provides a good report of what's in the House measure, the vote and opposition arguments. 

House vote screen shot courtesy C-SPAN

Goodbye, Michael & Farrah. Hello, eBay

If you believe the old saying that things come in threes, we should be done, at least for a while, with the passing of pop culture icons.

Within two days, the world's #1 second banana Ed McMahon, TV sex symbol Farrah Fawcett and King of Pop Michael Jackson passed away.

Yesterday, eBay's offerings exploded.

Hey, everyone grieves in his or her own way.

Michael mania: As soon as Jackson's death was confirmed, the online auction company was flooded with items related to to the singer-dancer-songwriter. My last search showed 21,914 items for sale.

Merchandise includes records, DVDs, magnets, photos, pins, buttons, newspapers from the day of his death, figurines and scores of Jackson-related one-off items.

The priciest piece of memorabilia so far is an original signed Fedora, one of Jackson's trademarks, with a starting bid set at $4,995. Or you can buy it immediately for $9,750 plus the $46.05 shipping fee.

No prospective takers yet.

Don't have any Michael items to sell? Just wait. One company is said to be producing mousepads and drink coasters with "R.I.P Michael Joseph Jackson August 29 1958 - June 25 2009" printed on them.

Another vulture seller reportedly is checking out just how much the Internet domain name ripmichaeljacksondead.com will fetch.

Auction already in place: In a morbid coincidence, an auction already was scheduled today to sell off some Michael Jackson items.

According to the Las Vegas Sun, Julien Auction’s annual summer bidding on celebrity memorabilia kicks off this afternoon at Planet Hollywood with lots from both the King of Pop and the father-in-law he never met, the King himself, Elvis.

"While the timing is impeccable," notes the Sun, "the auction was planned well in advance of Jackson's passing…." There are 21 Jackson- and Jackson Five-related auction items, including vintage photos of Michael from the 1970s, early concert posters and Jackson-worn costumes.

If you want to catch a flight to Sin City, the event runs from 2-to-5 p.m. Pacific Time.  There are no reserves.

Don't forget Farrah: More than 3,000 items showcasing Fawcett are up for eBay bid.

I suspect some of my former high school classmates have already called home to see if Mom still has that classic poster tucked in a box with all the other stuff they left at home.

The highest asking price so far on eBay for that piece of paper autographed by the actress is $549.99.

And, yes, there even are a few (217) McMahon items on eBay.

Tax implications of online auctions: Aside from making us focus on mortality, taste and our fixation with celebrity, the online sale of items, celebrity connected or not, also brings up some very real tax issues.

The IRS has long been trying to make sure sellers of items on eBay and other online auction sites properly report any taxable income.

All income from auctions, traditional or online, and consignment sales is generally taxable unless certain exceptions are met, says the IRS. This income is usually considered either "business" or "ordinary" income.

In certain circumstances such income can qualify for capital gain treatment. There are also some exceptions where income can be excluded from taxable income.

Generally, according to an IRS Fact Sheet created to address auction tax issues, you must report a gain from a sale. A reportable gain is the income above the original cost or basis of the item. These gains may be business income or capital gains.

The agency also has created a comprehensive Online Auction Sellers Tax Center to help you decide if the $50 you got for your Jackson Five or Charlie's Angels lunch box is taxable income.

Jon and Kate plus 8 divorce tax tips

I must admit that I've never seen the television show starring Jon and Kate and their brood. I'm not a fan of reality, or quasi-reality as is usually the case, shows.

And being childless, I don't have anything in common, thank goodness, with a family coping with eight kids.

I've also been happily married (and I think the hubby has been, too) for many more years than Jon and Kate. But there's no way anyone can escape the news of the Gosselin's crumbling marriage.

So it seems as good a time as any to offer some tax tips, eight to be exact in keeping with the show's title, to folks who are severing their marital ties.

1. Decide who will get the children's tax exemptions.
This definitely is a tax concern that Jon and Kate and lots of splitting parents must deal with at tax time. An article posted at Divorce 360 notes that this can be a sticking point with many divorcing couples. One approach is to make the exemption contingent on custody payments. If  the person paying child support makes all payments in full and on time throughout the year, allow that parent to take the exemptions.

2. Use the correct filing status.
You might be suddenly single again, but a more tax advantageous filing status is head of household. It offers, in part, a larger standard deduction amount. But only the parent who has physical custody of the child for more than half the tax year, and who provided more than half of the costs of the household's upkeep, is eligible to file this way.

3. Consider filing separately while still legally married.
If the breakup drags on, you could find yourself still married in the eyes of the IRS but leading separate lives for all intents and purposes. In this case, you might want to consider sending in two individual 1040s using the married filing separately status. In this case, each soon-to-be-ex-spouse will report only his or her income, exemptions, credits and deductions.

Be careful though, notes iVillage, if you live in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these jurisdictions you most likely will have to report half of the "community income" and claim one-half of the "community deductions."

4. Know the rules regarding tax breaks for kids.
Jon and Kate are about to discover that kids and taxes get even more complicated with a marital dissolution. DivorceSource.com points out that several tax benefits connected to your child depend upon not only who gets to claim the youngster's dependency exemption, but also upon a parent's residential status of the spouse.

These include, but are not limited to, the child and dependent care credit, the child tax credit, education credits and the Earned Income Tax Credit, or EITC.

The Wandering Tax Pro offers a more detailed look at how divorce affects the claiming of educational tax credits. And the post underscores the importance of discussing with your attorney and tax adviser how child-related tax breaks might be affected and whether some other form of compensation should be made to the spouse who is unable to utilize the tax benefits.

5. Don't automatically take the house.
A couple's residence is most often their most expensive jointly-owned asset. When they divorce, the ex-wife usually wants to keep the house so the kids, who typically live with her, can continue to live in the place where they've grown up and stay close to their friends and school. But that might not be the best tax-saving move.

Divorcing couples can sell the home before the final decree is issued and divide the potential $500,000 tax-excluded profit. If the spouse that ends up as sole owner of the property decides to sell it later, his or her allowable tax-free net profit will be just $250,000.

6. Time your breakup.
In a situation as emotional as ending a marriage, tax timing is probably not going to be a major consideration. But it could hurt or help you. Remember that your filing status is determined by your marital status on the last day of the year.

If you're still legally married on Dec. 31, you have the option of filing a joint return. Even couples who don't want to be together might find it worth some valuable tax benefits to tough it out a bit longer to use this filing status.

Similarly, if you're single on Dec. 31, even if you were legally married the other 364 days, you no longer can file a joint return. Familiarize yourself how your status change might affect your taxes and plan accordingly.

7. Understand the tax treatment of support payments.
Alimony generally counts as taxable income to the person receiving it and can be deducted by the person paying it.

Child support, however, is not taxable, either to the spouse receiving it or the children for whom it is supposed to be spent. And child support payments can't be deducted by the paying parent.

The different tax treatment of these common divorce-related payments could have a major impact on your tax life and should be taken into account in structuring your divorce agreement.

8. Write off some divorce costs.
You generally cannot deduct legal fees and court costs incurred in connection with your divorce. DivorceNet.com notes, however, that you may be able to deduct fees paid to appraisers, actuaries, and accountants for services in determining your correct tax or in helping to get alimony.

You can read about more tax and general financial financial considerations in Dealing with Divorce Dollars and Cents, as well as in IRS Publication 504, Divorced or Separated Individuals.

Related posts:

• When love goes bad: Divorce and taxes
• For better or ... apparently just better
  

Image excerpted from magnet available at AllPosters.com

Bicycling tax break injustice?

My neighbors here in the Lone Star State's capital love their bicycles. That's no surprise in the city that is home to seven-time Tour de France champ Lance Armstrong.

How committed are Austinites to this transportation alternative?

Temperatures here have been near or over 100 degrees for weeks, yet bicycle riders, many wishfully attired in yellow biking jerseys, still have been hitting the roads and hills -- yes, inclines in sweltering weather! -- in droves.

So there was generally joy when it was announced that the guy who stole Lance's $10,000 ride while he was competing in a California race would be going to jail for the offense.

Is the three-year sentence, expected to be officially handed down next week, too long? Sports Pros(e) has some good thoughts on the legal considerations involved in the case.

Biking tax breaks: As for me, being a tax geek, all this talk of Lance's bike brought to my mind a two-wheel tax break and the injustices contained in it.

First the good news. Since Jan. 1, bicycling commuters have been a part of the tax code that allows for employer reimbursement of certain workplace transportation costs.

The Bicycle Commuter Act, a separate bill that languished in Congress for years, finally was enacted last October and took effect this year.

The original goal was to give cyclists the same employer-provided tax-free fringe benefit status as workers who receive qualified transportation benefits, or QTFs, for using public transit or driving (parking, actually) their cars to and from work.

But things didn't quite work out that way. Folks who take buses, trains, commuter vans or drive their own autos still get a better reimbursement deal from their bosses. But at least bikes this year finally make it into the mix.

Under Section 132(f) of the Internal Revenue Code, bicyclists can use special tax-favored workplace accounts to help defray some of their special commuting costs. This includes such things as the purchase of a bicycle, bike lock, helmet, bike parking fees, shower facilities and general bike maintenance.

Depending upon how your company offers the commuter fringe benefits, you might need to provide receipts to be reimbursed, sign up for regular monthly payments or deal with a voucher system offered by your employer.

Unfair limits? While the new tax-favored transportation benefit was generally welcomed by bicyclists, it does have some limitations.

It's available any month that an employee meets two conditions:

1. The employee regularly uses a bicycle for a substantial portion of travel between his or her residence and workplace and -- and here's the kicker --

2. The employee does not receive any other qualified transportation benefit in the same month.

So if you take the bus and load your bike on the front of that public transportation option, and then use your bike to get from a bus stop to your job, you only get the mass transit QTF reimbursement. The reason you'll opt for the bus payback is that it's more than the allowable bike money.

The law offers $20 a month untaxed reimbursement for bicycle commuter expenses.

The mass transit commuting benefit, however, since March 1 (thanks to changes in American Recovery and Reinvestment Act of 2009, better known as the Obama stimulus plan) has paid up to $230 a month, the same amount available to workers who drive to the office and pay to park.

These commuter account limits will be in effect through 2010 with an inflation adjustment.

Previously, parking payments were larger ($230 a month vs. $120 a month), which mass transit advocates saw as favoring drivers. The change evens the playing field for all commuters.

All, that is, except bicycle commuters.

Comparing costs: In 2009, that's a maximum $240 in tax-free fringe benefits for commuting by bicycle. Compare that to up to $2,540 for mass transit and van pool commuters ($120 for January and February commuting costs plus $230 for each of the next 10 months) and $2,760 in tax-free transportation fringe benefits for workers who this year drive to work and pay to park.

What's wrong with this picture? The photo to the left (taken by the hubby) is an amusing tribute by a local nursery to Lance's historic seventh Tour win.

But the tax-break image isn't that pleasant.

In fact, folks who commute in the most exhaust spewing method get the biggest tax rewards.

So this hot Texas weather isn't the only thing that's discouraging commuters from taking the most environmentally friendly route to work. The tax code also is a deterrent to truly energy-efficient transportation.

Expansion efforts: The sponsor of the Bicycle Commuter Act is trying again.

In February, Rep. Earl Blumenauer (D-Ore.) introduced H.R. 863. This bill would amend the tax code to allow employees use of both the transit and bike benefit in the same month.

So far, the bike bill is still parked in the Ways and Means Committee. But if it does eventually roll out for further consideration, Blumenauer hopes this time he gets to vote for it.

Last October, although his bicycle commuter language was part of the financial services bailout bill, the Congressman voted against the measure because so many of his constituents opposed it.

Bicycle commuter photo courtesty MoBikeFed/flickr

Ice jam tax relief

I just had to blog about this, seeing as how here in Central Texas we're into our third straight week of near-or-hotter-than-100-degree temperatures. And summer just officially started on Sunday!

So any mention of ice, which we are going through by the bucket loads in our tea, is welcome.

Not so, however, for residents of Alaska.

In colder climes (I vaguely remember those), warming weather can create ice jams or, as they also are called, ice dams. These also begin with warming weather, when ice in rivers starts melting and breaking into pieces that float downstream, as shown in the photo below from the National Oceanic and Atmospheric Administration (NOAA). Simultaneously, water from melting snow flows into rivers, causing floods behind the ice blockage.

But those on the other side of the natural dam aren't out of danger. When the ice dams break up naturally as the ice continues to melt, the water that had been held back then rushes further downstream, causing flash floods in those areas.

Such was the case for many Alaskans this spring.

Now, says the IRS, those folks who suffered through flooding and other ice jam damage may qualify for tax relief.

Following flooding and ice jams on April 28, the president declared Alaska Gateway, Kuspuk, Yukon Flats and Yukon-Koyukuk regional educational attendance areas a federal disaster area. As a result, the IRS is postponing until June 29 certain taxpayer deadlines for those who live or own a business in the disaster area.

Similar tax relief is available to other victims of major disasters. The IRS keeps a running list of all tax relief due to major natural disasters.

Getting ready: The IRS also has issued its own guidance encouraging taxpayers to take tax-record precautions during the 2009 hurricane season.

Several of the IRS recommendations are identical to my suggestions in Hurricane season financial preparations -- make digital copies of important documents, create photographic records -- but the agency also addresses an issue that could affect a business struck by a disaster.

If you're an employer who uses a payroll service, the IRS says to ask that service if it has a fiduciary bond in place. The bond could protect you, the employer, in the event of default by the payroll service provider.

Just one more reason why I'm glad I'm a one-person operation!

Also remember that once you dig out of any disaster, you might be able to get some tax help from the IRS, either by filling a casualty loss deduction claim on next year's tax return or, in certain disaster situations, by filing an amended return to get the tax help sooner.

The IRS also notes that it has specialists available who are trained to handle disaster-related issues. You can reach them with a toll-free phone call to (866) 562-5227.

And the agency will provide you with copies or transcripts of your tax returns at no cost if you're located in a federal disaster area. If you haven't taken the storm prep precautions, you'll need that earlier tax paperwork to get storm-related tax help.

Court watches as state tax collectors dip into Capital One's wallet

Watch out businesses, out-of-state state tax collectors just got a boost from the country's high court.

The U.S. Supreme Court today decided against hearing an appeal from out-of-state companies that Massachusetts officials say owe it taxes.

As I mentioned about a month ago in Money-hungry states, cities tax trolling, Bay State tax collectors set their sites on credit-card giant Capital One Financial.

Massachusetts officials said that since the Virginia-base company made beaucoups money from cardholders who live in their state, Cap One should fork over more than $2 million in taxes to the Massachusetts treasury.

The Department of Revenue was emboldened by a Massachusetts Supreme Court ruling that the state could tax out-of-state corporations if the businesses have a "substantial nexus" in the state.

Also involved in the case is Geoffrey, Inc., a subsidiary of Toys R Us. The Associated Press notes that Capital One offers credit cards that are used by Massachusetts residents and hires state-based collection agencies to go after delinquent accounts there. Geoffrey, Inc., licenses the use of Toys R Us trademarks for its stores in Massachusetts.

The two companies asked the U.S. Supreme Court to hear their argument that the Commerce Clause of the Constitution prohibits state officials from taxing out-of-state companies that do not have a physical presence in that state.

The Justices said no, not specifically to their complaint, but to hearing it in the first place.

So Massachusetts tax collectors should be knocking on Cap One and Geoffrey, Inc doors right about now.

As I noted in my earlier post, this isn't the first instance of states looking for tax dollars from cross-border sources. But you can be sure that many more revenue-starved states will now follow Massachusetts' lead.