HOOKERS TIGERS AND 1099's

With a title like that how can you not read this entry.

I’ve tried to avoid blogging the Tiger Woods scandal because, except for the divorce issues it has little to do with taxes. But now this scandal is expanding into the tax area. Hookers and tax form 1099. How can I not blog this information for you.

Michelle Braun, who allegedly made at least $8.5 million for her job as a madam, was eventually busted by the feds for charges related to a prostitution ring. You might recall she operated a high end call girl service which catered to Hollywood actors and royalty (think Charlie Sheen).

Interestingly, she always paid her taxes – smart woman!

Braun has told TMZ that two of the women who have claimed to have relationships with Tiger Woods, Jamie Jungers and Holly Joy Sampson, were active in her escort service. Braun paid the women for their services out of Global Travel Network, her escort front. And she issued them forms 1099.

Tiger or no Tiger, the best part of this story is the whole “upstanding tax citizen” issue. Braun was apparently properly issuing forms 1099 for “non-employee compensation.” Remember, according to the Tax Code, even compensation received for illegal activities is subject to tax. Clearly, this woman had some pretty savvy tax pros at her side.

You can view the alleged tax forms here.

QUOTE OF THE WEEK

Be who you say you are...
and say what you feel...
because those that matter,don't mind...
and those that mind, don't matter!

WHAT IS HAPPENING WITH ESTATE TAXES?

Would it be a good idea to die in 2010 to avoid estate taxes? This is a question that we cannot yet answer.

Congress is leaving behind a big tax mess. Many key issues remain unresolved for now. Although the House approved extensions for a group of expiring tax breaks, the Senate got bogged down in debate over health care overhaul, preventing it from tackling other must-do bills before year-end. The gridlock could lead to a train wreck on taxes in 2010. Not only will unfinished business have to be taken care of, but Congress will be staring at another major deadline because the Bush tax cuts will expire at the end of the year if nothing is done.

This session’s biggest failure is inaction on the estate tax. We are currently in limbo.

With no change in current law, the estate tax will disappear in 2010, then reappear in 2011 with a top rate of 60% and a low $1-million exemption. The generation-skipping tax will also end for a year, and the gift tax lives on but the top rate falls to 35%. A big problem as the law now stands is that some heirs of people who die in 2010 will owe capital gains tax when they sell inherited assets. Current law, which steps up the basis for inherited assets to the date-of-death value, is replaced by a convoluted system that starts with the decedent’s income tax basis. Executors are allowed to increase the basis of inherited assets by up to $1.3 million. So if they do not change the law it is a good estate planning tool to die this year.

Everyone in the estate tax business felt that some type of resolution would have been reached by now. This is a nightmare.

IRS WAIVES PENALTY IF UNDERPAYMENT DUE TO REDUCED WITHHOLDING

The withholding tables were adjusted in the spring of 2009 to give taxpayers the immediate advantage of the Making Work Pay Credit (MWPC). However, the adjustments to the tables may have caused millions of taxpayers to be underwithheld, according to a recent report by the Treasury Inspector General For Tax Administration (TIGTA). Now, in the wake of this highly critical report, IRS has decided to waive the penalty for an underpayment caused by the adjustments to the tables. It has been fixed but you should see the form that you must fill out to avoid that portion of the penalty. How to get the waiver.

To request the waiver, a taxpayer must check box A or box B in Part II of Form 2210. Box A is used to request a waiver of the entire penalty. In such a case, a taxpayer need only complete page 1 of Form 2210 and attach it to his return. The taxpayer is not required to figure the amount of penalty to be waived. Box B is used to request a waiver of part of the penalty. In such a case, the taxpayer must figure the penalty and the waiver amount on Form 2210.

HOMEBUYER CREDIT HANDOUT

We've been fielding some questions at our office regarding the expanded homebuyer's credit. We thought it would be useful to create a handout for our clients about the credit to reflect the law changes that occurred on Nov. 6 2009.

Check out our Homebuyer Credit Handout on our website at www.kopsaotte.com under General Tax Information; or link directly to the handout at: Homebuyer's Credit from IRS.

ONLY THE TSA WOULD WORK ON THEIR WEB SITE WHEN PEOPLE USE IT THE MOST

And we want the government to run health care. Come on, what are they thinking?

I was amazed last week that during one of the busiest times of the year for travel the TSA's web site that lists the historical wait times of airport security lines in airports was “under construction” and not available for travelers. Many people use this web site during the busy holiday season to see how long the wait times are at major airports to clear security checkpoints.

This site (when it is up and working) shows all the security checkpoint wait times throughout the day. This helps people plan on how early they need to arrive at the airport to make their flight. When they do finally get the site back in working order I suggest you try it: http://www.tsa.gov/travelers/waittime.shtm.

QUOTE OF THE WEEK

"The things you fear are undefeatable

not by their nature but by your approach."

Jewel, singer-songwriter