Archive for the ‘Tax Collection’ Category

Has the American Dream Turned Into a Tax Nightmare?

Saturday, July 17th, 2010

cat relax taxing Our country was founded on certain inalienable rights and millions of people flocked to the United States of America because we enabled opportunity. We were a land where, if you worked hard, you could prosper and avoid excessive taxation by the King. Our history books may not be as long as other, older countries, but our history books are filled with the names of people who have come to America with nothing and built personal fortunes from hard work, perseverance and ingenuity.

And let’s not forget the millions more, like my forebears, who never got rich, but have been able to provide a decent living for their families through honest work.

My hat goes off to those who have dreamed the American Dream and have achieved it. Unfortunately, for many of those who have worked hard to become financially successful or provide more for their families, the American Dream has turned into a tax nightmare: A bad dream where you work hard while others take your hard-earned money. We’ve turned into a nation that redistributes wealth, with the IRS taxing the higher income earners a disproportionately high amount while writing a check to those who have not worked and sacrificed for their income.

Now, let me say this: I believe America should be a land of equal opportunity, but not a land of equality. I believe people should be treated fairly regardless of their skin color, national origin, religion, etc. I think that’s something that makes America great. But we aren’t helping by heavily taxing what one person has honestly earned and giving to others. By this we are teaching them that wage theft, in the name of being “fair”, is permissable.

A society that offers its citizens an equal opportunity to work hard and advance themselves is all that can be expected of “fairness”. A society that forcibly takes earned income away from one person to give to another person is actually discouraging hard work. Entrepreneurs work unhuman hours to create the future, while undertaking significant risks. Entrepreneurs and successful businesspeople should not have to pay more to the Internal Revenue Service if their risks pay off, just as they would not receive an award if their startup venture failed.

We want to encourage every American to stand on their own two feet and to push forward, not enable them to continue lying down and not contribute to society.

We have become a nation of takers and givers, as Sherman Frederick points out in his article Tax Man Comes For Half of Us. We have become a nation of that says “wealthy” people (however the takers want to define it at any given moment) should be forced to give their income away to others.

Those receiving the handouts from massive taxes should rise up in revulsion and say they don’t want what they didn’t produce, and that they don’t want to treated like a charity case.

Have we reached the point where receiving free handouts is no longer shameful, and considered a “right”?

If we create a nation of people who expect a “hand out”, then we’ve fallen so far from our founding ideals that we may not recover.

Who’s to blame? Sherman Frederick points to Obama and Democrats in general (and a few Republicans). I think it’s easy to blame Obama, and he certainly deserves to shoulder a large share of the blame, but I believe it extends far beyond the current President. From eroding values to disengaged parenting, there are a lot of reasons that we’ve become a country of people seeking instant, selfish gratification without lifting a finger.

Let’s initiate change: Work harder. Seek the pride and satisfaction of a job well done. Sacrifice to get a better education. Save money and spend it less frivoulously.

Contact your government representatives at all levels and demand fairer taxation and aggressive government representation. Commit to working to change things in your own circumstances through hard work, a determined will, and guidance from your core beliefs.

And remember – pay your taxes, but take every legal tax-minimizing break you can to avoid redistributing more of your wealth than is necessary.

Through social change there may be a day when our tax debts decrease instead of the current increasing trend.

If the IRS Can’t Get Your Taxes, They’ll Take Your Stuff

Saturday, July 10th, 2010


The IRS wants taxpayers to pay their outstanding taxes. If those taxes aren’t paid, the IRS has a growing arsenal of actions it can take, from garnishing wages to seizing assets.

That’s right, the IRS can and will seize your assets in lieu of your tax payments. Now, don’t think of them as a giant pawnshop where you can get your favorite chair or your mother’s wedding ring back once you’ve paid. The IRS will put your stuff up for auction! Airplanes, boats, vehicles, homes, property, the list goes on and on. (Check out the IRS Auction Site… if you don’t see something you like today, new items are listed regularly, all “donated” by tax payers who are unable to pay their taxes).

Now, more than ever, people with tax problems need to take an active approach to fighting the IRS to clear up their tax issues and their good name. Leaving your tax problem and hoping it will go away could mean that you’ll get a knock at your door and they’ll be asking for the clothes on your back (figuratively speaking)! Wishing that the IRS won’t come after you isn’t much of a game plan, and it isn’t going to work. If you have tax problems, they’re looking for you so they can look through your stuff like a kid with a catalog at Christmas.

[image source: bsabarnowl]

What’s scarier: A Shark or a Tax Collector?

Friday, June 25th, 2010


After watching the famous movie Jaws, you might not go near a beach for a while after viewing it. And although you and I might find a great white shark to be a scary villain in Steven Spielberg’s movie, Actor Robert Shaw was scared of another (and far more menacing) foe: The IRS tax collector!

Robert Shaw lived from 1927 to 1978 and starred in such hit films as The Sting, From Russia With Love, The Taking of Pelham One-Two-Three, and (of course), our favorite fish movie, Jaws.

Shaw played Quint, a gruff sea captain who takes Chief Martin Brody (played by Roy Scheider) and Matt Hooper (played by Richard Dreyfuss) out to the ocean to catch and kill the shark (not the government sharks that want to garnish your wages and tax your earnings).
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The IRS Gets Lazy, Wants You To Self Audit

Sunday, May 30th, 2010

Everyone hates an audit and one of the only things that makes us feel better about being audited is knowing that the auditor has to look through tons of boring, number-filled receipts to try and squeeze more money out of us.

But now the IRS has just gotten lazier. Much, much lazier.

Thanks to new rules that are currently being explored and discussed, businesses that file taxes will need to list the areas where the IRS might disagree, and those businesses will also need to write in the amount that the IRS will need to be paid if it turns out that the IRS is correct in their assessment.

In short, if these new rules go through, the IRS will basically be asking businesses to do the work for them by requiring them to do a preliminary “self-audit” that will raise red flags for the IRS. That’s like walking up to a thug and saying: “If you hit me here and here, you’ll easily be able to take the $10 I have in my wallet.”

BusinessWeek.com brought this to our attention and they quote one tax lawyer who correctly calls this what it is: a revenue-grab for the IRS. They want to increase their auditor’s efficiencies (who currently spend 25% of their time looking through documentation) and they want to find new opportunities to make money. Instead of using auditors to do the heavy lifting, they are requiring businesses to announce what they could owe if the IRS pressed the issue.

This is terrible news for taxpayers. While it is still currently in discussion and will initially only affect businesses, I can foresee this becoming a widely used tool by the IRS to have taxpayers announce to the IRS: “This is the upper ceiling of what you can audit me for, and here are several ways that you can audit me.”

If this rule goes through, it will be a sad day for American business… And some day it will be a sad day for individual taxpayers, too.

(Image source: John-Morgan)

Pennsylvania Tax Amnesty Program Uses Computer Voice Scare Tactics

Sunday, May 16th, 2010

Pennsylvania has a common problem. Hundreds of millions in unpaid taxes. And it needs that revenue.

The state took the offensive with a $3 million ad campaign. The television ad begins with a satellite view of earth. A serene computerized woman’s voice is heard. It sounds like a female version of the computer voice from the film and novel “2001″ which has a computer which wants to control humans.

There is a target in the ad. It’s centered on a homing beacon. The computer zooms in on the United States.

The voice says, “We have contacted the tax delinquents and we do know who they are. We have addresses.”

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The IRS was giving away money. Did you get yours?

Tuesday, May 4th, 2010

When you don’t pay your taxes, the IRS is on you like ants to a picnic. I know that because everyday I work with people whose tax problems are exacerbated by strong arm IRS tax collection techniques.

But what about people who overpay their taxes? It might seem hard to believe but the IRS had $1.3 billion sitting owed to 1.4 million people who did not file a tax return for tax year 2006. (You can read more about it at this IRS press release). This outstanding amount owed back to taxpayers happens because someone might pre-pay their tax based on quarterly estimates but then they fail to file a tax return at tax filing time.

The problem is, if you didn’t file your income tax within three years you generally forfeit your right to receive that refund. That means the money will not be leaving the U.S. Treasury, and Congress will be able spend it for its many “important” projects.

It doesn’t seem fair does it. The IRS gets a much longer time period to collect any money you owe them, but you get a much shorter time period to collect money from the the IRS that they owe you.

I guess Congress, who makes up these screwy rules thinks it’s fair, but that because it benefits them.
They fix the rules in their favor.

President John Kennedy Visits the IRS in 1961

Tuesday, April 27th, 2010

President John F Kennedy was the first president to ever visit the offices of the Internal Revenue Service.

The quotes I have heard or read from President Kennedy, including this one, remind me of how much some politicians have changed their political philosophy over the last 50 years.

President Kennedy spoke at the IRS on the topics of tax burdens and efficiency:

“So many taxpayers have become so preoccupied with so many tax-saving devices that business decisions are interfered with, and the efficient functioning of the price system is distorted.

“Moreover, special provisions have developed into an increasing source of preferential treatment to various groups. Whenever one taxpayer is permitted to pay less, someone else must be asked to pay more. The uniform distribution of the tax burden is thereby disturbed and higher rates are made necessary by the narrowing of the tax base. Of course, some departures from uniformity are needed to promote desirable social or economic objectives of overriding importance which can be achieved most effectively through the tax mechanism. But many of the preferences which have developed do not meet such a test and need to be reevaluated in our tax reform program.”

Fascinating. Let’s read his great quote once again:
“Moreover, special provisions have developed into an increasing source of preferential treatment to various groups. Whenever one taxpayer is permitted to pay less, someone else must be asked to pay more. The uniform distribution of the tax burden is thereby disturbed and higher rates are made necessary by the narrowing of the tax base.”

Our politicians of today should heed his straight forward, common sense views on this point.

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Tax Freedom Day: A Day to Celebrate… or a Day to Mourn?

Monday, April 19th, 2010

Imagine that instead of paying your taxes at the end of the year, you paid them all at the beginning: Every dollar you earned went to municipal, state, and federal governments until your taxes were paid off for the year. Then, everything you earned after that was yours to keep. It’s theoretical, of course, but it’s a good measure of the tax burden of a country’s citizens. And you can watch to see how this “Tax Freedom Day” moves in order to determine how your tax burden increases every year.

In 2010, the US Tax Freedom Day is April 9. That means, if every dollar you earned between January 1st and April 8th were paid to the government, every dollar you earned after, until the end of the year, was yours to keep. By comparison, in 1900, the US Tax Freedom Day was January 22. And in 2000, exactly 100 years later, it was May 1st. So although we like seeing that our tax burden has decreased (as indicated by the shift from May 1st to April 9th), it’s still a lot of money to pay.

So April 9th is a day of celebration. But it’s also a day of mourning. We should be concerned about the amount of taxes we pay and about where those tax dollars are being spent. And, we shouldn’t celebrate too much that our Tax Freedom Day has moved closer to the beginning of the year because some of the lighter tax burden is simply the result of short term tax breaks enacted by the current administration to help with economic recovery. And more alarmingly, according to the Tax Foundation, if Americans had to pay for what the government was actually spending this year, Tax Freedom Day would really fall on May 17.

This chart shows the Tax Freedom Day through history and note how the adjustment dramatically increases the Tax Freedom Day!
tax freedom

By comparison, though, Norway and Sweden’s Tax Freedom Day is July 29th. So although I don’t like paying all the taxes we do, I’m proud to be an American.

For more information on Tax Freedom Day for United States taxpayers click here.

The True Cost of Tax Credits

Friday, April 16th, 2010

Everyone loves tax credits. There’s no better feeling than finishing your income tax return on (or preferably before) April 15 and seeing that you own nothing… or even that the IRS owes you. Long before the money arrives in your mailbox, you’ve probably spent it on something.

Tax credits seem great! But they come at a cost and it is threatening the fabric of our economic system.

As governments support specific groups or reward specific behaviors, they look to income tax credits as a way to manage that support and people make the mistake of thinking that their “great” income tax credits are a bonus.

But the real result is much more startling: A dwindling group of people are paying for a larger and larger group of people. Since the dawn of the new millennium, one in four taxpayers are considered “non-payers” because they owe no taxes (or receive money back). The number of non-payers grew by 36% while the number of tax filers grew by just 13%. So the gap is narrowing and the IRS is evolving into a turnstile of money, taking it in and then pumping it back out again.

This is increasing dramatically and it’s not just for impoverished families any longer! In fact, some families earning as much as $50,000 are able to combine deductions and credits to get out of paying taxes.

In this chart, notice how the percentage of returns with no liability is increasing!
no tax liability

Here’s the reason why this upsets me: tax credits mean the the government, instead of you and I, is deciding to give away our hard-earned money, and deciding whom to give it to.

Democracy being what it is, politicians will buy votes by giving away money that’s not their’s to give away. That will enevitable result, just as it already has, in more and more people getting “tax credits”. This means that a smaller group of high income earners are paying an increasingly disproportionate amount of taxes to support everyone.

If the IRS says you owe money, it’s not just because they want you to pay… it’s because they need to pay off others who are getting an increasing amount of tax credits.

The problem isn’t going away any time soon: Tax credits sound great and win elections. But politicians are just borrowing against the future.

Read more at the Tax Foundation about how Americans are getting out of paying taxes and avoiding societal obligations.

An Interesting Tax Problem Resulting From the Recession

Sunday, March 28th, 2010

Last year’s so-called “Great Recession” wreaked havoc on a number of economic fronts and its effects are still being felt today during tax time.

Here’s the situation, as reported by the WCF Courier and summarized here for your convenience: Last year, people had jobs and income but not all of them had sufficient taxes taken out of their paychecks. This year, some of those people don’t have jobs. The problem? They earned taxable income but now have no income to pay their back taxes.

That’s a difficult situation to be in. On the one hand, I understand the desire that these taxpayers had initially to avoid the constant pay-reducing reminder of income tax by delaying their tax payments. On the other hand, it is a bit like gambling in the sense that they are accepting the risk that they will have an income to pay the tax debt at a later time.

What’s the solution? Unless we reduce or eliminate the excessive taxation of American taxpayers, I don’t see an easy solution. And I’m not about to say “well, they should have…” because should-haves don’t solve the problem right now.

Their best option is to file their income tax and pay what they can, even if they can’t pay it all. As the article correctly points out, the penalty for not filing is greater than the penalty for filing and not paying. So it always “pays” to file your tax return, even if you can’t pay.

The next thing they should do immediately after filing? Contact a licensed tax attorney. It is my belief that tax attorneys are the one group of tax professionals best trained to assist you. I believe they’re more aggressive in representing you than a CPA or accountant would be. Tax attorneys aren’t afraid to look at different options which might help you.

Tax attorneys aggressively go to bat for taxpayers who are staring at the open hand of the “tax man” and wondering how they will fill it. We use 100% legal tax resolution strategies, tried and perfected over the years, to help people in difficult tax situations.

No tax case is hopeless, and of course the options will vary from case to case.

Don’t hestitate to give us a call if you want to discuss your tax case.

(Read the full WCF Courier article here)

Fouts Law Office · 772 Maddox Drive, Suite 114 · East Ellijay, GA 30540 · Tel: (800) 509-2770 · Fax: (706) 636-5293
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