Foreclosure, IRS and Celebrities

One of my favorite rappers Doug E Fresh best known for his '80s hit "The Show" and "Loddi Doddi" has been hit with three foreclosure actions by banks looking to collect more than $3.5 million in unpaid mortgages on a trio of his Harlem homes. Doug E Fresh is also being chased by American Express for nearly $60,000 in credit-card debt, and the IRS just slapped him with a $367,000 tax lien on top of more than $40,000 owed to the state tax collector, records show.

Singer Tionne “T-Boz” Watkins of TLC is facing foreclosure on her home. T-Boz's five-bedroom, nearly 10,000-square-foot home in the gated Sugarloaf Country Club community will be put up for auction in January. According to T-Boz, the home involved in foreclosure proceedings may have to do with her ex-husband Mack 10." This isn't the first time the singer has been confronted with financial difficulties, back in 1995 as a member of the group TLC, the group filed for bankruptcy.

Other celebrities also facing foreclosure on one or more of their properties is American Idol winner Fantasia Barrino. Fantasia's $1.3 million, 6,200 square foot home has been scheduled for auction in January. She defaulted on a mortgage she took out in 2007.

Tonight Show sidekick Ed McMahon was close to losing his $6.25 million home after falling behind more than $644,000 behind on $4.8 million in mortgage loan payments. Thankfully for him, he had a friend in Donald Trump who bailed him out of his troubles allowing him to keep his home. I know the other celebrities wish they were so lucky.

Merry Christmas

I hope everyone have a safe and joyous holiday.

Tax Amnesty

State after state is facing a disastrous drop-off in tax revenue because of the stock market collapse, the housing foreclosure crisis, and the recession. As a result, many lawmakers are being forced to think outside the box in order to develop creative solutions to close current and future projected budget deficits. One solution that seems to be gaining momentum is tax amnesty. Under a tax amnesty program, individuals and businesses would be allowed to pay their past-due tax bills with little or no penalties or interest.


Three years ago, Indiana raised about $245 million dollars over three months by allowing individuals and businesses to clear their overdue tax obligations without penalties of any sort. Other states inspired by Indiana's success, are either experimenting with or discussing their own amnesty programs,


Nevada for example raised 41 million dollars in just under four months this year while giving up 14 million dollars. The result of Nevada's tax amenesty is that they earned approximately $3 for every $1 given up in penalties or interest. Oklahoma, generated about twice as much as it expected from its offer of amnesty, raising $82 million through its 90-day Clean Slate program for businesses and individuals. New York has a program under way, and Connecticut and Massachusetts are drawing up theirs. California debated one before rejecting it in favor of stiffer penalties. Delaware's incoming governor campaigned on the idea. A similar program is being considered for Louisiana when its lawmakers return in April.

New York, which has a $1.5 billion deficit, began a limited amnesty last January that covers income, corporate and sales taxes. The state has collected $11 million so far and hopes to take in $30 million.

Connecticut Gov. Jodi Rell has warned that the state faces nearly $6 billion in deficits over the next two fiscal years. The state is hoping to generate $40 million by instituting a 56-day tax amnesty program next spring. It will let taxpayers pay their late state taxes without penalty, and with a 25 percent reduction in interest.

Many states are reluctant to offer amnesty, arguing that its rewards cheaters, discourages honest taxpayers and poaches revenue the states will collect in the future — especially as they improve the databases they use to catch delinquents. They worry, too, that people will hold back on their taxes and simply wait for the next amnesty. I guess this is what the lawmakers in California were thinking since they rejected a tax amnesty program as a way to generate tax revenues while the state is on course to run out of money in 60 days.

Updated Publication 17 for 2008

The IRS has published an updated version of its comprehensive tax guide for individuals for use in preparing 2008 tax returns: The updated on-line version of Publication 17, Your Federal Income Tax, contains more than 900 interactive links.

Publication 17 has been updated with important changes for 2008, including information on the new recovery rebate credit, new first-time-homebuyer credit, and an additional standard deduction for real estate taxes. It has been published annually by the IRS for more than 65 years and has been available on the IRS Web site since 1996.

As in prior years, the publication provides information on how to file an individual tax return, what to include as income, how to calculate capital gains and losses, how IRAs and other expenses can affect how much income to report, whether to take the standard deduction or itemize, and how to figure taxes and credits.

IRS To Help Distessed Homeowners

T
he IRS has announced that it will be providing relief to financially distressed homeowners to avoid having a federal tax lien impair their ability to either sell or refinance their homes.

If a taxpayer has a federal tax lien against his property, and the taxpayer is looking to refinance or restructure his loan, the taxpayer or the taxpayer's representative may request that the IRS make the tax lien secondary to that of the lending institution restructuring or refinancing the loan. For homes being sold for less than the mortgage lien, the taxpayer or its representative may request that the tax lien be discharged. The discharge does not relieve the taxpayer of his responsibility to pay the taxes owed. It merely removes the lien from the property so that it can be sold.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner. “We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”

To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.

Charitable Donations Rules

As the end of the year approaches and our minds are focused on the holiday season, we can help others in this time of economic distress and lower our tax bill by making donations to charity prior to the end of the year.

Some of the the items you can donate are furniture, furnishings, electronics, appliances, linens, clothing and of course cash. In order for your clothings or household items to be deductable, they must be in good used condition or better. Torn or stained clothing does not qualify. Clothing or household items which you claim a deduction of over $500 does not have to be in good used condition or better if you include a qualified appraisal of the item with the return.

Donations of money include those made in cash, check, electronic funds transfer, credit card, and payroll deduction. So if your employer lets you make a charitable donations through automatic payroll withdrawls, you should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

To deduct any charitable donation of money, regardless of amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2008. This is true even if the credit card bill isn’t paid until next year. Also, checks count for 2008 as long as they are mailed this year. You must also obtain ackowledgement from the charity for donations of property or cash of $250 more. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value.

Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under “ Search for Charities.” In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.

Rules for Charitable Donations

As the end of the year approaches and our minds are focused on the holiday season, we can help others in this time of economic distress and lower our tax bill by making donations to charity prior to the end of the year. Some of the the items you can donate are furniture, furnishings, electronics, appliances, linens, clothing and of course cash.

In order for your clothings or household items to be deductable, they must be in good used condition or better. Torn or stained clothing does not qualify. Clothing or household items which you claim a deduction of over $500 does not have to be in good used condition or better if you include a qualified appraisal of the item with the return.

To deduct any charitable donation of money, regardless of amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash, check, electronic funds transfer, credit card, and payroll deduction. So if your employer lets you make a charitable donations through automatic payroll withdrawls, you should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

Contributions are deductible in the year made. Thus, donations charged to a credit card before the end of the year count for 2008. This is true even if the credit card bill isn’t paid until next year. Also, checks count for 2008 as long as they are mailed this year. You must also obtain ackowledgement from the charity for donations of property or cash of $250 more. For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value.

Check that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under “ Search for Charities.” In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even though they often are not listed in Publication 78.
For individuals, only taxpayers who itemize their deductions on Form 1040 Schedule A can claim deductions for charitable contributions. This deduction is not available to people who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceeds the standard deduction. Use the 2008 Form 1040 Schedule A, available now on IRS.gov, to determine whether itemizing is better than claiming the standard deduction.
For all donations of property, including clothing and household items, get from the charity, if possible, a receipt that includes the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value.Additional rules apply for a contribution of $250 or more.
The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value of the vehicle is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.