Monday, December 25, 2006

Year-End Tax Tips

With one week till the end of the year, I would like to offer a few last minute tips in order to save on your 2006 Individual Income Tax Return.

1) Pay as much as possible as a charitable donation -- If you are Mormon this means paying your tithing in full before Dec. 31st. If you are not Mormon and living in Utah, take advantage of the situation by donating as much as ten percent to a charity of your choice. The culture in Utah offers an opportunity to donate a higher percentage of your income without increased audit risk as opposed to other parts of our nation.

2.) Pay future deductible expenses before Dec. 31st -- prep state income taxes, January's mortgage, and tithing. By doing so you can deduct expenses now that would be incurred in 2007. There is an AMT trap regarding early payments of state income taxes, and paying January's mortgage early. Consult a competent tax consultant.

3) Business owners should make inventory/equipment purchases before Jan. 1 -- Making such purchases before January 1 offers a wider variety of alternatives to lower taxable ordinary income, including the use of the accelerated depreciation deduction.

4) By a Hybrid/Qualifying energy efficient vehicle -- hybrid still offer great Federal breaks to business owners and individuals. There is no longer a tax credit for the purchase of a Toyota Prius (credits were limited to the first several thousand vehicles sold).

No strategy is right for all taxpayers consult a competent professional on whether any of these tax strategies are right for you. Competent tax advise can keep the tax tail from waging the economic dog in your finances.

Tax Reform/Relief -- Revisited

At the Senate Site they revisited the ever perplexing question of what should the Legislature do in order to provide meaningful tax relief to all Utahn's. I would like repost my comments from the Senate Site post:

""If we a) want a tax cut package that directly benefits lower as well as higher income brackets, yet b) find it unwise to completely delete the tax on food... what other options should we be considering?"

While I am appreciative of the tax cuts that the legislature has passed, I believe there has been many viable options that have been balked at.

-- The Governor has a flat tax. Tax relief for the upper class is signed and delivered. (If anyone needs my analysis of the flat tax as a break for the rich, I invite a visit to my blog archives for an exhaustive review)

-- The rate drop to 6.98% from 7% is nice, but could have been more friendly with brackets that are actually in a real income range (11,000 is where the top bracket phases in). True tax relief for the lower and middle class could benefit from some smaller implementations of a few Federal tax breaks (family friendly Child Tax credits, Saver's credits for lower-middle class families who save for retirement, and a smaller version of an Earned Income Credit for low income wage earners)

Once more I appreciate the steps taken to cut taxes in this state, however a broader effort could have been made to offer real tax relief to the middle and lower income taxpayers. The wealthy definitely pay there fair share and deserve some relief, but not at the cost of those who are less able to pay taxes.

Lastly, our State Tax Commission does a masterful job at collecting tax, but I believe they should have some reigns put on their tax collecting power. The Federal government requires the IRS to collect tax debts within 10 years, and requires the IRS to accept all reasonable offers to settle outstanding tax debts. The State of Utah has put no such reigns on the power of Utah State Tax Commission. As a tax practitioner I have seen many gross abuses of this power against taxpayers (in one case even breaking federal law that disallows liens to be placed against active duty soldiers). There needs to be operational reigns placed on the Utah State Tax Commission. "

Of all of the above suggestions listed, I would like to strongly recommend stronger operational reigns being placed on the Utah State Tax commission. The Tax Commission operates without a collections statute of limitations, and therefore has little incentive to truly consider offers to settle outstanding tax debts. One solid break the legislature could give to Utah taxpayers is a taxing authority that operates a little more fairly.

Monday, December 04, 2006

"Preying On The Troops" Payday Loans Prey on Soldiers and the Poor

Ed Partridge had this gem on Part of the Plan. It comes from a DesNews article about payday-loan companies. This is an issue that really gets my blood boiling. These organizations prey on poor, and or desperate people who are taken advantage of in transactions that charge usurious fees and interest. These groups operate legally, but they leave the realms ethical business practices in the dust.

In the tax realm, the scam business plan is to offer loans on large EITC/ACTC refunds that are generally largest for families whose income is in only in the range of 15,000 dollars. These poor families who often stupidly ignorantly sign for these loans end up sucking 10 to 25% of their tax credit funds away because they can't wait less than 2 weeks that a normal refund would take from the IRS. It is of course a large portion of the victim's fault that they lacked needed patience, but for the remainder of those who are sucked into these scams it is completely unethical of these organizations to take advantage of Federal funds that are intended as a supplement to incomes of poor families, or single parents.

Better still, it appears from the DesNews article, an effort to regulate this industry in Utah maybe thwarted by Legislators who lacked the moral integrity to refuse campaign donations from such charlatans. I would be very interested in finding who has accepted bribes campaign donations from these unethical organizations.

Sunday, December 03, 2006

The Redistricting Committee Agrees on a Map with "Stunning" Bipartisan Support

Hat tip Ric Cantrell at the Senate Site:

I got this email on Wednesday regarding the map that would be recommended to bring in a fourth seat for Utah.

"The Redistricting Committee agreed on a map this morning with surprising (some would say stunning) bipartisan support. It doesn't answer the constitutional questions, but I thought you'd be interested in the update."

This map seems reminiscent on the map that SLCSpin was so displeased with earlier in the year (I would link Ethan's posts, but alas I'm too lazy this Sunday morning). I actually have no objections to boundaries that have been drawn up. I don't see a problem with having one specific district setup in which Democrats can enjoy better chances in this red state, although the new district 2 could foreseeably be too liberal for Matheson.

I still feel that pursuing our fourth seat via a D.C. congressional seat compromise, is selling our states best interest short. The only thing that could change my mind on this is if the soon to be Democrat controlled Congress will push the D.C. seat regardless of whether or not Utah supports the compromise (if we can beat it than we might as well join it philosophy) otherwise I think it would be wiser to back off until after the next census results around 2012.