Tax Docket

From Forbes, Did Tax Ploy Help Saints Win Super Bowl?

In a just-filed U.S. Tax Court lawsuit, the partnership owning the Saints acknowledges that it didn’t treat an $8.5 million annual payment from the state of Louisiana as income and therefore didn’t pay taxes on the sum. Rather, the team said the money was an addition to “working capital” and a nontaxable transaction.

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According to the lawsuit, the $8.5 million was one of a series of “inducement payments” starting in 2001 for 10 years to keep the National Football League team in New Orleans. The lawsuit says, the money was to be used, among other things, to “acquire additional and higher-priced player contacts” to make the team “more competitive in the NFL.”

On Wednesday, the Senate approved legislation which allows home buyers (first-time home buyers and home buyers purchasing home for primary residence) that signed contracts by April 30 to close by September 30 in order to still be eligible for the tax credit. The tax credit is $8,000 for first time home buyers and $6,500 for home buyers purchasing a home as their new primary residence. Congress has sent the bill to President Obama.

Reuters, Senate Agrees to Extend Home Tax Credit

New York Times, Home Buyers’ Tax Credit Extended

ABC News,Congress Approves Home Tax Credit Extension

As part of a Special Edition Tax Tip, the IRS provides 9 Tips on the 10 Percent Tax on Tanning Services for businesses offering tanning services :

Businesses providing ultraviolet tanning services must collect the 10 percent excise tax at the time the customer pays for the tanning services.

If the customer fails to pay the excise tax, the tanning service provider is liable for the tax.

The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises.

The tax does not apply to spray-on tanning services.

If a payment covers charges for tanning services along with other goods and services, the other goods and services may be excluded from the tax if they are separately stated and the charges do not exceed the fair market value for those other goods and services.

If the customer purchases bundled services and the charges are not separately stated, the tax applies to the portion of the payment that can be reasonably attributed to the indoor tanning services.

The tax does not have to be paid on membership fees for certain qualified physical fitness facilities that offer indoor tanning services as an incidental service to members without a separately identifiable fee.

Tanning service providers must report and pay the excise tax on a quarterly basis.

To pay the tax, businesses must file IRS Form 720, Quarterly Federal Excise Tax Return using an Employer Identification Number assigned by the IRS. Businesses that don’t already have one can apply for an EIN online at IRS.gov.

Other resources:

Excise on Indoor Tanning Services FAQs

Affordable Care Act Tax Provisions

And for good measure a video from the IRS explaining the tax. Enjoy!

Method Man plead guilty to tax evasion charges Monday. The Hip Hip artist  was arrested on August 9 for failure to pay state and personal income taxes. According to reports, he wrote a $40,000 restitution check on the spot after owning approximately $106,000 in taxes.

The Associated Press, Method Man Pleads Guilty to NYC- Tax Evasion Charge

ABC News, Method Man Pleads Guilty to Tax Evasion

Fox News, Method Man Pleads Guilty to Tax Evasion Charge

New York Daily News, Wu-Tang rapper Method Man Pleads Guilty to Attempted Tax Evasion, Pays $106K in Restitution

In IR 2010-78, the IRS issued guidance to individuals and businesses effected by the oil spill in the Gulf of Mexico. In addition to a number of new efforts to assist taxpayers, the service announced that on July 17th there will be a special Gulf Coast Assistance Day:

The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.

Here are links to additional IRS Gulf Oil Spill Resources:

Gulf Oil Spill Information Center

Gulf Oil Spill: Questions and Answers

The Wall Street Journal is reporting that shrinking the amount of charitable contributions New Yorkers earning more than $10 million can deduct from there state taxes is gaining support from Gov. David Paterson and lawmakers:

Under the plan, the amount those high earners could be allowed to deduct may drop to as little as 25% of their giving. The current limit is 50%.

Depending on where the limit is set, lawmakers estimated the state could generate $60 million to $100 million from an estimated 3,500 taxpayers, including Mayor Michael Bloomberg, who donated $254 million in 2009.

“We haven’t seen the details, but it sounds like it would really hurt the charities and nonprofits that people rely on now more than ever,” said Stu Loeser, a spokesman for Mr. Bloomberg.

The tax would be the third significant hike targeted at wealthy residents that Albany has passed during the Paterson administration.

On today’s NPR’s All Things Considered radio program, it was reported that there have been thousands of fraudulent first-time homebuyer tax credit claims as revealed in a report by the U.S. Treasury Inspector general. The program also notes that prisoners have been able to take advantage of the credit:

The tax credit applies only to a primary residence — a person has to actually live in the house. So if someone is in prison, it would be pretty tough to qualify for the credit. But that didn’t stop an estimated 1,300 inmates from fraudulently collecting the tax credit from behind bars.

“Unfortunately, they have a lot of time on their hands, and so this is how they’ve elected to use that time,” says J. Russell George, the Treasury inspector general for tax administration. George says it is possible for a prisoner to buy a house, and if the prisoner has a spouse on the outside, that property could even qualify for the credit.

The North Carolina House of Representatives approved a bill giving among other things a tax incentive to movie stars and directors. The legislation passed 80 to 28, allows the salaries of star actors and directors to count toward the amount they can write off their state taxes. Currently, the cap on each individual is $1 Million. The movie production tax incentive is part of a large tax break legislation that is on its way to the Senate. According to reports, the legislation could cost as much as $300 Million in uncollected taxes over the next five years.

Charlotte Observer, Bill to lure NC biz with tax breaks gets House OK

According to the New York Times, Gov. David A. Paterson has reached a tentative deal with leglislative leaders that would raise New York’s cigarette tax by $1.60 per pack making it the highest cigarette tax in the nation:

The proposal, which officials said Mr. Paterson would include in an emergency budget bill due for a vote on Monday, would also raise wholesale taxes on other tobacco products like chewing tobacco, bringing the tax on those products closer in line with those of cigarettes.

In New York City, which levies steep taxes of its own on tobacco products, a pack of cigarettes would come with a tax of $5.85, making it the nation’s first city to break $5, antismoking advocates said. That would bring the overall cost of a pack of premium cigarettes above $10 in many stores in the city.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past.

Here is a map from Tax Foundation, which shows the state excise tax rates on cigarettes per 20-pack of cigarettes as of January 1, 2009. Click the map to enlarge.

From CNN Money’s Estate Tax in Limbo:

Several key senators have been trying to cut a deal for months. Negotiations have stalled on more than one occasion.

“We’re almost half a year away from a tax policy that a super majority of senators say they don’t support. Yet, we’re stuck,” Sen. Charles Grassley, R-Iowa, said earlier this week. “This time-sensitive issue has taken a back seat to everything else.”

Anne Mathias, director of research at Concept Capital’s Washington Research Group, thinks it’s a fair bet to assume the new exemption level will fall somewhere between $3.5 million to $5 million.

But she also said if Republicans sweep the mid-term elections, and win at least 60 seats in the Senate, they may push to extend the repeal of the tax.

When Hartnett was asked what he thinks will happen with the estate tax next year, he gave the only answer he and his colleagues can give for many estate tax questions these days: “I don’t know.”

Basically, the Senate is doing the limbo dance!