From CNET News: "The U.S. Treasury Department wants Congress to force auction sites like eBay, Amazon.com and uBid.com to turn over the identities and Social Security numbers of a large portion of their users to the IRS--so tax collectors know how much each person made through online selling.

The effort is part of a larger plan, which enjoys enthusiastic support from both Democrats and Republicans, to close what's known as the "tax gap." It's a broad term that covers Americans who don't file tax returns or those who underreport their income, and the IRS believes it to total around $345 billion for the 2001 tax year."   More

My comments: This type of income should be reported when there is a material amount of it. There may be some arguments for not reporting it in limited situations. If you sell your old boat on eBay, mostly like you'll have a non-reportable personal loss. If you are buying boats to resell them on eBay, then I'd say you have a business, and you need to be reporting it on your 1040. Material omissions of income from your 1040 tax return is a serious matter. Whether or not Congress acts to require auction sites to report these sales doesn't matter. If someone fails to report to you taxable income that you earned, the law (and this CPA) says you still have to report it.

If a child under 18 is working part-time as a household worker (this means babysitters, gardeners, people who do housecleaning or repair work, or anyone who is employed in or around someone else's home), he or she is also exempt from the Social Security tax."
http://www.kiplinger.com/columns/drt/archive/2007/dt070703.html

It's been my general advice that if your child is in a similar situation, they don't have to pay the Self Employment Tax. The income is reported on line 21 of form 1040. I code it "Child's non SE earned income", so that my tax preparation software knows its relevant attributes and treats it in the correct way. Line 21 is used for almost everything that doesn't fit someplace else on the return. In the case of a child with earned income from babysitting entered on line 21, their standard deduction should be tied to this line 21. As their line 21 increases, their standard deduction generally also increases, up to the 2007 maximum of $5350.

Susan Combs, the Comptroller of Public Accounts, issued a press release last Friday reminding business owners that, absent an extension, mandatory business personal property (BPP) renditions must be filed with Texas’ county appraisal districts by this coming April 15th. The types of BPP that must be rendered for purposes of assessing local ad valorem (property) taxes are taxable inventory, furniture and fixtures, machinery and equipment and other property a business owned or managed as of January 1, 2009.

The Comptroller’s press release also mentioned a development that’s especially important to this year’s BPP property tax rendition process, namely, the effects of the significant number of natural disasters that occurred in Texas during 2008. One example was discussed in the context of sales tax in the previous post on this site captioned “Sales tax breaks in the aftermath of Hurricane Ike”. Because those natural disasters may have reduced the value of BPP at January 1st of this year, “Combs also reminded owners whose property was damaged by a storm, flood or fire last year that they may file a special decreased value report that could lower their final tax bills.” Those decreased value reports are also due by April 15th.

The Comptroller’s versions of the required rendition forms are available at the “Texas Property Tax Renditions Forms” page on the Comptroller’s web site, the Window on State Government. The Comptroller’s version of the special decreased value report (Form 50-127) is available on the “Texas Property Tax Special Appraisal Forms” page on the agency’s web site. In addition, local appraisal districts should have their own forms for these purposes.

Today is the first of the Comptroller of Public Accounts’ free 2009 webinars on the revised franchise tax, or “Margin Tax,” and, as expected, it’s full. Fortunately, the Comptroller’s staff has added another webinar, with a capacity of 1,000 participants, to be held on Friday, April 17th, starting at 10:00 a.m. As recommended in the previous post on this site captioned “The Comptroller has scheduled this year’s revised franchise tax webinars,” readers involved in this year’s franchise tax reporting process should register as soon as possible for the April 17th webinar or for the previously-announced session to be held on Tuesday, April 28th, beginning at 10:00 a.m.

Further information and registration instructions can be found on the “Revised Texas Franchise Tax Webinars March/April 2009” page on the Comptroller’s web site, the Window on State Government. At the moment, that page also contains a link to the webinar material for today’s sold-out session, although the link may change for the later programs.
 

In the March 2009 issue of the Tax Policy News, the Comptroller of Public Accounts’ monthly electronic tax policy newsletter, the Comptroller announced that the agency will review approximately 29,000 revised franchise tax, or “Margin Tax,” reports that were filed in 2008. The March issue, which recently appeared on the Comptroller’s web site, the Window on State Government, also provided some helpful guidance for preparing 2009 franchise tax reports that must be filed or extended by this coming May 15th. Still, most readers will be interested primarily in the upcoming audits – and whether their client’s or company’s reports will chosen for scrutiny by the Comptroller. To avoid any confusion, here’s the full text of the Tax Policy News item captioned “Desk Audit Program:”

The Comptroller’s office plans to review approximately 29,000 franchise tax reports that were filed in 2008. The review will focus on the following three areas:

1. Taxpayers that reported a Standard Industrial Classification (SIC) Code in the service industry and computed margin using the cost of goods sold computation;

2. Taxpayers that reported No Tax Due for 2008, but reported greater than $300,000 in gross receipts everywhere on their 2007 franchise tax report; and

3. Taxpayers that used the 0.5 percent tax rate. We will review SIC code information previously reported by the taxpayer and the taxpayer's Web site (if applicable) to determine if the taxpayer is indeed a wholesaler or retailer that might have qualified for the 0.5 percent tax rate.

Taxable entities whose 2008 reports do not appear to meet the statutory requirements for using the cost of goods sold computation, no tax due provisions and the criteria for the 0.5 percent tax rate will be contacted. This contact may be in the form of a deficiency determination which may be contested by the taxable entity.

Any taxable entities that find they had a reporting error related to one of the above mentioned issues in their 2008 report, and then amend their report to correct the error, will be granted a waiver of penalty.

Please note that this review process will not preclude an audit of the 2008 report year for other issues.

Businesses and their tax advisors should note three points in particular:

Finally, here are summaries of the Comptroller’s additional guidance for preparing 2009 franchise tax reports:

The Comptroller of Public Accounts has just posted an article on the agency’s web site, the Window on State Government, with some suggestions for requesting extensions of time to file 2009 franchise tax reports. The article is captioned “Tips on Requesting an Extension of Time to File Your 2009 Franchise Tax Report” and contains several pointers grouped under the following headings:

Businesses that will need to extend their 2009 reports beyond the deadline of this coming May 15th should review these tips in detail, as should their in-house or outside return preparers.

Is an entire aircraft an item of “aircraft equipment?” For ad valorem (property) tax purposes, the answer is “no,” at least in the area within the jurisdiction of the Third Court of Appeals, as explained in the Court’s recent opinion in ICAN Enterprise, Inc., et al,. v. Williamson County Appraisal District, et al. That answer, in turn, was central to resolving a dispute over the taxability of a hangar lease at a municipal airport. What’s more, in order to reach that answer, the Court had to apply several statutory construction principles to the applicable provisions of the Texas Tax Code.

Image: Wikimedia Commons/Public Domain 

The facts and controlling Tax Code provisions were clear. During the years in issue, ICAN Enterprise leased hangars at the City of Georgetown’s municipal airport for the purpose of storing several aircraft (the lessee’s business was flight instruction and aircraft storage). Subsection (a) of Tax Code Section 25.07 as it then existed provided that a private party’s leasehold interest in property owned by the state or by one of its political subdivisions, such as a city, is subject to property tax. However, subsection (b) of that same code section provided such leasehold interests weren’t taxable if “…the property is part of a public transportation facility owned by an incorporated city or town and . . . is . . . a building used primarily for . . . aircraft equipment storage.”

There was no question that Georgetown’s municipal airport was “part of a public transportation facility.” So, since the lessee, ICAN Enterprise, stored aircraft in the leased hangars at the airport, the issue was whether or not each stored aircraft, as a complete item, qualified as “aircraft equipment” for purposes of Section 25.07(b). If so, then the leasehold interests would have been exempt from property tax. Unfortunately for ICAN Enterprise, the Court of Appeals concluded that, even though Section 25.07 does not define “aircraft equipment,” the Legislature considers such equipment to be different from an entire aircraft. Consequently, the Court held that the hangar leases weren’t exempt from property tax.

ICAN Enterprise may not be the final word on the central question in the case. For one thing, ICAN Enterprise may seek further review in the Texas Supreme Court, and that court might read the term “aircraft equipment” broadly enough so as to include an entire aircraft. For another, ICAN Enterprise is technically controlling authority only within the region covered by the Third Court of Appeals. Other, co-equal, Courts of Appeal may interpret “aircraft equipment” differently for property tax purposes within their areas of the state. In any event, businesses that lease hangars at city-owned airports – and store aircraft in those hangars – should watch for future developments in ICAN Enterprise and any similar cases involving the taxability of such leasehold interests.

Barges are an important mode of transportation on Texas waterways, as can be seen in the photo of the Houston Ship Channel to the right. It’s therefore not surprising that Texas Tax Code Section 151.329 (“Certain Ships and Ship Equipment”) provides exemptions from sales and use taxes for otherwise taxable items used on certain barges (and on other qualifying vessels). In a recent letter ruling, indexed as Document No. 200903297L in the Comptroller of Public Accounts’ STAR database, a member of the Comptroller’s Tax Policy Division explained that the way in which a barge is used will determine how the exemptions will apply to those items.

Image: Wikimedia Commons/Public Domain

These were the facts presented in the letter ruling:

Company X is in the process of self-constructing a new barge of eight or more tons displacement. The barge will be operated by Company X in its business operations to transport material from customers and suppliers located in Texas and in other states to Company X’s facilities in Texas as well as to Company X’s locations in other states. Company X plans to use the barge exclusively for commercial purposes nationwide and potentially in international waters.

By way of background, Tax Code Section 151.329 exempts, among other things, (a) materials, equipment and machinery that become component parts of a barge of eight or more tons displacement used exclusively and directly in a commercial enterprise; and (b) materials and supplies – that is, “ship’s stores” and “sea stores” – purchased for maintenance and operation of a barge operating exclusively in foreign or interstate coastal commerce. Company X’s tax advisor asked the Comptroller’s office for a ruling regarding the taxability of component parts if the barge would occasionally be used for non-commercial purposes, and of ship’s stores and sea stores if the barge was used in intrastate rather than in foreign or interstate coastal commerce.   

The Comptroller’s Tax Policy representative said that the exemption would be lost for both types of items, but there would be a difference in calculating the resulting tax depending on the items involved. For component parts, the non-commercial use of the barge would be considered a “divergent use” requiring the owner to pay tax on those components purchased tax free with an exemption certificate. The barge owner could use the formula in Subsection (a)(5) of Sales Tax Rule 3.297 (“Carriers”) to calculate the tax resulting from the owner’s occasional non-commercial use; that is the sales tax would be based on fair market rental value for the period of time used in that manner. By contrast, that formula could not be used to calculate the tax on ship’s stores and sea stores when the barge was operated in intrastate waters. Instead, the Tax Policy representative relied on Subsection (b)(3)(B) of Rule 3.297 and ruled that the exemption would be lost for the entire quarter in which the nonexempt operation occurred.

So, barge operators and their tax advisors should carefully review this recent letter ruling to understand how the beneficial sales and use tax exemptions in Tax Code Section 151.329 could be lost simply by an occasional lapse in the manner of operation.

Last week, two Congressmen introduced tax debts by submitting OIC application. A mandatory non-refundable fee, combined with a very low chance of acceptance (the IRS rejects more than 75% of all OIC program much less alluring to taxpayers who are searching for ways to settle unpaid OICs received by the IRS fell by 21% from 2006 to 2007 when this down payment requirement took effect.

Should Congress pass OIC would be a much more attractive option to the countless taxpayers who are struggling to settle their testimonials and tax attorneys have filed many successful tax problem and need a tax attorneys, at Brager Tax Law Group, A P.C.

As has been widely reported, many major U.S. corporations have been selling off part or all of their business aircraft fleets. When those aircraft are sold in Texas for registration and use in another state or country, a question arises as to whether the sale is exempt from Texas sales and use tax if there’s a delay between the sale date and the delivery to the buyer. In a letter ruling issued last February and recently added to the Comptroller of Public Accounts’ STAR database as document no. 200902318L, a representative of the Comptroller’s Tax Policy Division said that such sales can be exempt under Subsection (a)(4) of Texas Tax Code Section 151.328 (“Aircraft”) despite the delay. Here were the circumstances and Tax Policy’s response in the ruling: 

The sale and delivery of an aircraft will take place in Texas. Then, for the next few weeks (approximately 4 weeks) the buyer’s pilots will train in **************, while at the same time, the aircraft will go through some inspections required for the FAA to issue an Export Certificate of Airworthiness (ECofA). Within a few days, the buyer should receive the FAA ECofA, and then the buyer will export the aircraft to Mexico where it will be registered and based.

Response: Section 151.328(a)(4) of the Texas Tax Code exempts the sale of an aircraft in Texas to a person for use and registration in another state or nation before any use in Texas. Flight training in the aircraft in Texas and flying the aircraft out of Texas does not constitute a use of the aircraft in Texas. In addition, any time spent in Texas for FAA inspections required for an Export Certificate of Airworthiness, including any necessary repairs or maintenance performed on the aircraft and any necessary test or maintenance flights taken while the aircraft is in Texas will not cause the loss of the above exemption, provided the aircraft is flown out of Texas immediately after the Export Certificate of Airworthiness is issued.

In order to claim the exemption, the purchaser must give the seller a properly completed Texas Aircraft Exemption Certification Out-of-State Registration and Use (Form 01-907) signed by both the seller and the purchaser at the time of the sale. The seller must retain the completed certificate in its records to show why no sales tax was collected on the sale of the aircraft and provide a copy to the purchaser and to the Texas Comptroller of Public Accounts, Business Activity Research Team, P. O. Box 13003, Austin, Texas, 78711-3003.

So, businesses planning to sell their aircraft to buyers for registration and use out-of-state or outside of the country should review this recent letter ruling for guidance if delivery is expected to be delayed following the sale.

A “computer program” is one type of tangible personal property that’s subject to Texas sales and use tax. Under Section 151.0031 of the Texas Tax Code, a “computer program” is “…a series of instructions that are coded for acceptance or use by a computer system and that are designed to permit the computer system to process data and provide results and information.” In its opinion in Verizon North Inc. v. Combs, et al., released last Friday, the Third Court of Appeals (with one Justice concurring only in the judgment) affirmed a lower court’s decision that certain software was a “computer program” and thus taxable when purchased even though it had to be extensively modified after installation in order to perform as the buyer had intended.

In that case, Verizon North had purchased “SAP R/3” computer software licenses (“Software”) for use by one of its subsidiaries and paid approximately $1.6 million in Texas use tax on the purchase price. After the purchase, the subsidiary spent many times the original cost – approximately $100 million – to “…configure, modify, and customize the Software so that it would perform the business functions for which it was purchased.” After losing its administrative refund claim filed with the Comptroller of Public Accounts to recover part of the tax paid on the Software purchase (probably the claim described in Contention No. 3 in the Comptroller’s Decision in Hearing No. 43,240 (2005)), Verizon North brought a de novo refund lawsuit in District Court and contended that the Software wasn’t taxable because it didn’t meet all of the requirements of a taxable “computer program.” Specifically, Verizon North contended that Subsection (b)(1) of the Comptroller’s Rule 3.308 added an additional requirement to the Tax Code definition, namely that software must be “sold as a completed program” in order to be taxable as tangible personal property. According to Verizon North, the Software didn’t satisfy that additional requirement because it wasn’t completely ready for the intended use by Verizon North’s subsidiary at the time of purchase (hence the need for roughly $100 million in post-purchase modifications).

After extensively analyzing the District Court’s fact findings, the Court of Appeals rejected Verizon North’s argument and agreed with the District Court that the Software was indeed capable at the time of purchase, and without modification, “…to process data and provide results and information…” as required under the definition of a “computer program” in both the Tax Code and in Rule 3.308. The Software was therefore “…a completed program as sold, regardless what modifications, extensions, and customizations that the purchaser deems necessary for its intended use of the program.”

Verizon North is an important judicial interpretation of when software is or isn’t a “computer program” and taxable at the time of purchase. That interpretation is especially important to so-called “enterprise software” that often requires extensive – and expensive – post-purchase customization before it can be used as intended. For that reason, Texas businesses should carefully review the Verizon North opinion with their state tax counsel before attempting to claim that the software that they’re planning to buy – or that they’ve purchased in the past – isn’t subject to Texas sales and use tax.

I have been and will be speaking to several CPA firms as well as various California CPA Society groups regarding the Foreign Bank Account Reports (FBARs), TD 90-22.1, and a possible solution through the Internal Revenue Service?s ?FBARs and Voluntary Disclosure?, which is now available on my website. In addition to some of the topics that I have discussed in my tax attorneys face when their clients disclose the existence of tax lawyer can be forced to disclose these client confidences to the IRS.

If your clients have undisclosed tax problems call the

UPDATE: Governor Perry signed House Bill 4765 on June 16th. Here's the press release from the Governor's office.

The 2009 Texas Legislature adjourns today after making only one significant change to the revised franchise tax, the so-called “Margin Tax.” Specifically, House Bill 4765 raises the current $300,000.00 revenue threshold that a business must meet before it becomes liable to pay the franchise tax. Assuming that the Governor signs the enrolled bill as passed by both houses of the Legislature, the threshold amount increases to $1,000.000 for tax reports filed in 2010 and 2011 and then reverts to a permanent minimum of $600,000 starting in 2012. The tax discount under current law for businesses with total revenue less than $1,000,000 won’t apply until the lower revenue threshold takes effect, and then it will apply as follows:

It’s been widely reported that this change will eliminate the franchise tax liability for 40,000 small businesses.

Frank L. Amodeo has serious tax fraud cases in Internal Revenue Service (IRS) history. The penalties for these payroll tax companies, and then knowingly neglected to forward this tax money to the IRS. Consequently, he was charged and convicted with five felonies: willfulpayroll tax); and conspiring to commit wire fraud, to obstruct an agency investigation, and to impede the IRS. Amodeo was forced to surrender more than $1 million cash, three homes, several luxury automobiles, commercial real estate, a Lear Jet, and his corporations in attempt to fulfill his outstanding tax fraud cases on record, people have gone to jail for tax problems, including potential payroll tax problems, contact the

In conversations with the IRS first FBAR FAQ which was issued by the IRS only last month. As readers of this blog know, the IRS Tax Amnesty program for unreported offshore tax problem contact the

In May, the IRS penalties on tax preparers, and others who are tax attorneys, or enrolled agent is considered a violation of OPR first point out that sanctions are determined on a fact specific basis, and the penalty grid is not intended to establish a rigid standard. The guidelines including the actual penalty grid made be found at the OPR contacts the tax lawyer, or enrolled agent who has not filed his tax returns you have a serious tax controversy attorneys at Brager Tax Law Group, A P.C.

Estate planning for those of us in Los Angeles and throughout California where property values have been significantly impacted as a result of the recent economic slump can use this link to a great article from Money magazine on rethinking your estate planning options, given the uncertainty of future tax rates and exemptions.

Discuss your will, living trust and other estate planning needs with a qualified tax attorney. Call Mitchell A. Port at (310) 559-5259.

In an address to the Organization for Economic Co-Operation and Development (OECD) on June 2, 2009, IRS Commissioner Douglas Shulman announced renewed IRS efforts to combat international tax evasion.

Shulman promised to create an inhospitable climate for tax havens that impede legitimate tax enforcement. He hopes to enhance information reporting on foreign bank accounts in countries deemed "tax havens," double FBARs, and allow the IRS more time for investigation by increasing the statute of limitations from three years to six years.

The IRS? effort to eliminate tax evasion is supported by the expansion of President Obama?s 2010 budget. The budget provides funds for increased reporting on cross-border wire transfers, which would allow the IRS to gather information and target individuals who transfer money to and from offshore bank account and have not filed antax attorney at Brager Tax Law Group, A P.C. to understand whether or not you have a

Domestic partners in California whose property was reassessed between January 1, 2000 and January 1, 2006 because of a change in ownership or the death of the owner can apply for an exclusion. Go to the Los Angeles county tax assessor's website and apply for help before June 30, 2009.

The Los Angeles Times ran a target="_blank" rel="nofollow" good article discussing this in more detail.

House Bill 4611, effective next year, provides an important benefit to small and mid-sized Texas banks – often called community banks – under the revised franchise tax, or “Margin Tax.” The bill, passed in the last days of the recently-ended legislative session, allows lending institutions (i.e., banks) to treat the gross proceeds (rather than just the net proceeds) from the sale of certain securities as part of their gross receipts for apportionment purposes. Whether gross or net revenue from securities sales can be counted in determining a bank’s (or any other taxpayer’s) apportionment percentage is significant. That’s because, under Subsection (e)(25) of the Comptroller of Public Accounts’ Rule 3.591 (“Margin: Apportionment”), revenue from the sale of securities is sourced at the location of the payor and, more importantly, “If securities are sold through an exchange, and the buyer cannot be identified, then 7.9% of the revenue is a Texas receipt.”

Stated another way, 92.1% of the revenue from the typical sale of securities over a stock exchange is sourced outside of Texas, so it’s almost always beneficial to be able to include gross revenue rather than just net profit from such a sale in calculating a taxpayer’s apportionment percentage.

Image: Wikimedia Commons/Public Domain 

House Bill 4611 was designed to fix a problem that arose from the Comptroller’s interpretation of Subsection (f) of Tax Code Sect. 171.106 ("Apportionment of Margin to this State"). Specifically, in Subsection (e)(16) of Rule 3.591 and in pronouncements like the 2008 Memorandum indexed as document no. 200809240L in the agency’s STAR database, the way a bank treats securities for federal income tax purposes – and regardless of how it categorizes those securities for accounting purposes – determines whether gross or net proceeds from the sale of those securities could be counted in gross receipts under the apportionment formula. As the Legislature’s Bill Analysis of the language that became the final (enrolled) version of the bill explained,

[T]he comptroller’s office provides that Section 171.106(f) only applies to securities and loans for which a taxable entity is required or elects treatment under Section 475(a)(1), Internal Revenue Code, or accounts for securities and loans under Section 471, Internal Revenue Code.

The comptroller’s policy position on Section 171.106(f) can be complied with most easily by the large multistate banks, due to the large security trading components of these businesses.  These large multistate banks with security broker divisions have already established all the necessary procedures and policies needed to comply with Section 475(a)(1), Internal Revenue Code.

The comptroller’s policy position on Section 171.106(f) will create significant administrative burdens and potential regulatory issues for small to medium-sized banks that exclusively do business in Texas and are commonly recognized as the state’s community banks. These banks do not normally have large security trading components but do sell securities and loans as part of their normal course of business. These banks are faced with implementing costly and extensive administrative procedures and policies to comply with the comptroller’s position or will suffer from significantly higher franchise tax burdens (as a percentage of income) than their large multistate counterparts.

The Legislature’s solution to that problem is Subsection (f-1) as added to Section 171.106 by House Bill 4611. Under the new subsection, for apportionment purposes a bank will be allowed to count as part of its gross receipts the gross proceeds from the sale of securities categorized as “Securities Available for Sale” or “Trading Securities” under Financial Accounting Standard (FAS) No. 115 as in effect on January 1, 2009. In other words, if a bank is holding securities categorized that way under FAS 115, when it sells those securities 92.1% of the gross proceeds will be treated as coming from out-of-state sources, thereby lowering the bank’s Texas apportionment percentage and ultimately its franchise tax. So, community banks, and their tax advisors, should keep this law change in mind when preparing next year’s franchise tax reports.

One final note: Section 2 (providing that the legislation applies only to a report originally due on or after the bill’s effective date) and Section 3 (providing that the legislation takes effect January 1, 2010) of House Bill 4611 taken together appear to rule out refund claims for banks that used the net proceeds from their securities sales in reporting and paying their 2008 and 2009 franchise taxes.

The U.S. Treasury has tax fraud and tax evasion."

The treaty must still be approved by the Swiss Parliament. At this point it is not known what effect this will have on the UBS summons enforcement action in Florida in which the Internal Revenue Service is attempting to obtain the names of over 50,000 UBS customers with tax fraud or offshore bank account, the deadline is June 30th for filing an voluntary disclosure under the tax controversy attorneys at Brager Tax Law Group, A P.C.

To submit an Offer In Compromise (OIC) with the Internal Revenue Service in order to pay pennies on the dollar, a nonrefundable 20% downpayment is required. Combined with a very low acceptance rate by the Internal Revenue Service of OICs, the downpayment has the effect of discouraging people from applying for an Offer.

A Congressional bill was recently introduced the title to which tells it all: ?Repeal of the Partial Payment Requirement on Submissions of Offers in Compromise?. If this is enacted into law, the struggle with your tax debts may be a bit easier.

If you have a tax problem and need a target="_blank" rel="nofollow" tax lawyer, call Mitchell A. Port at (310) 559-5259.

With a play on words, the Wall Street Journal recently published an article entitled "Deciding if Your Kid is Trust-Worthy". Estate planners in California often ask clients the same question since having a living trust may make sense depending on, for instance, whether their children are worthy of getting property when they are young or at an older age.

California Wills, living trusts, durable powers of attorney for property management and the advance health care directive are usually prepared by lawyers. There are many forms available for free online but it is often inadvisable to use them.

Speak with an estate planning attorney about your own situation. Call Mitchell A. Port at 310.559.5259.

The IRS has just issued new FAQs related to the Foreign Bank Account Reports (FBAR). There are 21 new offshore financial account penalty as part of the FBAR prior post. If the taxpayer disagrees with the imposition of the penalties then the taxpayer may go to the IRS Appeals Division.

It is unfortunate that the IRS has chosen to take this draconian stance with respect to the tax litigation attorneys are currently advising clients with tax attorneys at Brager Tax Law Group, A P.C.

When opening a California probate (in Los Angeles Superiour Court, for example) believing that the will is lost, there's a rebuttable presumption that it was destroyed. What this means is that the court will presume that the the person who died destroyed the will.

But, to probate a lost will you may introduce evidence that the will was not destroyed. The sort of evidence that is allowed must satisfy the probate court that the will wasn't destroyed. If the evidence suggests that the will wasn't destroyed, then it will be admitted to probate. For example, you look for a copy of the will and any reason as to why that copy should not be valid.

California Probate Code 6124 says that: ?If the testator's will was last in the testator's possession, the testator was competent until death, and neither the will nor a duplicate original of the will can be found after the testator's death, it is presumed that the testator destroyed the will with intent to revoke it. This presumption is a presumption affecting the burden of producing evidence.?

Let's assume there's no copy, and that the California will is just lost. Most likely what's going to happen is the property will probably pass intestate, meaning it will go equally to whomever the natural objects of the bounty are, the natural heirs or lineal descendants.

For probate help, call Mitchell A. Port at (310) 559-5259.

I have been speaking a lot lately to the Internal Revenue Service?s (IRS) tax amnesty hotline to obtain answers to the many practical questions that have arisen under the IRS Tax Amnesty a.k.a. tax audits under the tax amnesty hotline told me the current belief among IRS employees is that the tax amnesty training in New York, and additional revenue agents will be trained ? probably in California.

According to what I was told, the voluntary disclosures that were made before the IRS issued its voluntary disclosures being filed now will not undergo a civil voluntary disclosure under the tax attorneys at Brager Tax Law Group, A P.C. for a consultation. No one should consider contacting the IRS without first having spoken with a qualified

It may be difficult for some to proceed in court without an attorney familiar with California Probate law when someone dies in Los Angeles or elsewhere in California and leaves property subject to probate.

In California, only a licensed attorney can give legal advice. If you don't understand any information in this blog or if you have trouble filling out any of the forms located here, see an attorney for help.

The Los Angeles Superior Court has a target="_blank" rel="nofollow" self-help website. The web site provides help with Probate matters in general and pays special attention to areas where people represent themselves without an attorney to help them. The self-help site is not supposed to be a do-it-yourself guide and is instead intended to help you help yourself through the court system and probate matters.

The Los Angeles Superiour Court site has information on the following:

Probate Guardianship/Conservatorship Information Sheet

Glossary of Probate Terms

Conservatorship

Guardianship

Creditor's Claims

Transfer Of Small Estates Without Probate

Estate Planning

Probate Forms Packets

Links To Other Probate Self-Help Web Sites

Still need help? Call a qualified probate attorney. In Los Angeles call Mitchell A. Port at (310) 559-5259.

As of June 30, 2009, the IRS has updated the information it makes available concerning subchapter S corporations. Much of what you may need to know about California and federal subchapter S corporations can be found by clicking here.

If you want more information or help forming your California corporation, call Mitchell A. Port at (310) 559-5259.

On July 7, 2009, the Franchise Tax Board (FTB) announced payment of current and past due personal and corporate taxes with California registered warrants (IOUs) is acceptable

By law, FTB cannot deposit the IOU until it is payable, but FTB will credit your account on the date the IOU is received to stop the accrual of interest. If the IOU is not sufficient to pay the outstanding balance, you should send an additional payment for the difference.

Today's Orders from the Texas Supreme Court denied taxpayer petitions for review in two tax cases. The first denial was in a sales tax case, Reynolds Metals Company v. Combs, et al., originally decided by the Third Court of Appeals on February 4th and discussed on this site in a post captioned "The legislative acceptance doctrine won't always defeat a Comptroller policy." The Court later withdrew its original opinion and substituted its April 8th Memorandum Opinion on Rehearing (reachable by the link above).

The second denied petition for review was in an ad valorem (property) tax case, ICAN Enterprise Inc., et al., v. Williamson County Appraisal District, et al., also decided by the Third Court of Appeals. The Court's Opinion (reachable via the link) was issued on April 17th and was discussed in a prior post captioned "The lease of a city-owned hangar is taxable when the hangar is used to store aircraft."

The Texas Supreme Court's denial of review is usually the last stop for state and local tax cases in Texas. Of course, there's always the possibility that the Texas Supreme Court will change its mind on a motion for rehearing, or that the United States Supreme Court will decide to take one or both cases. Those are extremely long shots, however, so businesses and their tax counsel with an interest in either of these cases should assume that they're now final.

Today's Orders from the Texas Supreme Court denied taxpayer petitions for review in two tax cases. The first denial was in a sales tax case, Reynolds Metals Company v. Combs, et al., originally decided by the Third Court of Appeals on February 4th and discussed on this site in a post captioned "The legislative acceptance doctrine won't always defeat a Comptroller policy." The Court later withdrew its original opinion and substituted its April 8th Memorandum Opinion on Rehearing (reachable by the link above).

The second denied petition for review was in an ad valorem (property) tax case, ICAN Enterprise Inc., et al., v. Williamson County Appraisal District, et al., also decided by the Third Court of Appeals. The Court's Opinion (reachable via the link) was issued on April 17th and was discussed in a prior post captioned "The lease of a city-owned hangar is taxable when the hangar is used to store aircraft."

The Texas Supreme Court's denial of review is usually the last stop for state and local tax cases in Texas. Of course, there's always the possibility that the Texas Supreme Court will change its mind on a motion for rehearing, or that the United States Supreme Court will decide to take one or both cases. Those are extremely long shots, however, so businesses and their tax counsel with an interest in either of these cases should assume that they're now final.

The Swiss government has threatened to seize UBS summons lawsuit pending in District Court in Miami, Florida.

Does this mean that U.S. taxpayers who have tax fraud or John Doe summons case there are numerous other ways it can come to the attention of the IRS. For example, most offshore bank account records, which the Germans in turn handed over to the IRS.

U.S. citizens and residents who have Foreign Bank Account Report (FBAR) penalties equal to 50% of the balance in their account.

If you have an tax lawyer to understand your options, and see if the IRS tax litigation attorneys at Brager Tax Law Group, A P.C. please call us.

Starting a new business? Be aware of your federal tax responsibilities. Here are the top six things the IRS wants you to know if you plan on opening a new business this year. Also be sure and look at the IRS website for more information.

1. Decide the type of business entity you are going to establish either in California or some other state (such as Nevada or Delaware). The most common types of business are the sole proprietorship, partnership, corporation and S corporation.

2. The type of business you operate in California determines which tax form you have to file, what taxes you must pay and how you pay them. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.

3. Generally, businesses need an EIN. An Employer Identification Number is used to identify a business entity. You can also apply for an EIN online at IRS.gov.

4. Good records are necessary. Which recordkeeping system is suited to your business is up to you so long as it shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

5. As a business taxpayer, you must figure taxable income on an annual accounting period called a tax year. The calendar year and the fiscal year are the most common tax years used.

6. You must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it and deduct expenses in the tax year you incur them.

Want to incorporate? Create an LLC? Call a business attorney. Call Mitchell A. Port at (310) 559-5259.

The LA Times ran an article on July 14 which in part discussed the risks and benefits of preparing a do-it-yourself Will in California or using cheap online sources for estate planning documents. It also discussed when using an estate planning attorney and paying a higher fee makes sense. Here's the full article.

The hearing on the tax fraud through the use of tax fraud. Generally, under the terms of the existing treaty with Switzerland, the IRS must have evidence of tax evasion before the Swiss will turn over Swiss bank accounts at UBS. According to offshore financial account must report that TD F 90-22.1 Foreign Bank Account Report (FBAR) form.

The key question that remains is whether the announcement suggests that individuals with tax amnesty, or continue to hope that UBS will not be forced to turn over the names.

Given the potential for tax fraud; not to mention an offshore bank account, this question can only be answered after consultation with a knowledgeable tax litigation attorney at the Brager Tax Law Group, please give us a call.

At a time when struggling homeowners need it most, new studies are showing that mortgage firms are struggling to negotiate loan modifications fast enough to keep up with demand. The change comes with new government pressure to negotiate more loans under their Home Affordable Modification Program, or HAMP, where the Federal government encourages these firms to help keep families in their homes. Check out the following story on the issue courtesy of the Wall Street Journal.

Morgan Stanley chief John Mack recently made a new friend, he told shareholders in April -- a Southern woman who had benefited from the big bank's stepped-up efforts to modify loans under a new federal program aimed at keeping borrowers in their homes.

"I'm now invited -- if I ever visit Memphis, Tennessee -- to drive two hours south to have dinner with her and her family," Mr. Mack said.

But by some measures, Morgan Stanley's mortgage-loan servicing firm, Saxon Mortgage Services Inc., has a long road to go. An April Credit Suisse Group analysis of how quickly companies have renegotiated loans ranked Saxon last among 18 mortgage-servicing firms. Saxon has modified just 6% of the loans it oversees that originated between 2005 and 2007. By contrast, Litton Loan Servicing, a Goldman Sachs Group Inc. unit, modified 28% of its loans.

Such firms are at the center of a grand government experiment aimed at halting foreclosures and the collateral damage they cause neighboring homes. New foreclosure notices will total 2.4 million this year, which could trigger price drops in 69.5 million nearby homes, estimates the Center for Responsible Lending, a financial-services research and policy firm. At an average decline of $7,200 a house, that translates to a potential drop of $502 billion in total U.S. property values.

The government plan, rolled out in February and called the Home Affordable Modification Program, or HAMP, will pay mortgage-servicing firms to modify mortgages and find other ways to keep people in their homes. But the program's sheer scale and the speed with which it was rolled out have created a new set of problems for some of the 27 firms charged with carrying it out.

Continue reading?

Attention California business owners: A Restricted LLC (limited liability company) and a Restricted LP (limited partnership) are special entities that will be allowed under Nevada law starting October 1, 2009. Nevada is the first and only state to allow these types of entities.

With a restricted LLC, the new statute imposes restrictions and limitations on the LLC's ability to make distributions. The statute provides, in part, that unless otherwise provided in the articles of organization, a restricted LLC shall not make any distributions to its members with respect to their membership interests until ten years after the date of formation of the LLC (or amendment of the articles of an existing LLC to become a restricted LLC), so long as the LLC has remained a restricted LLC.

Why set up an LLC which by its charter may not make any distributions to members for up to ten years? The reason is Internal Revenue Code Section 2704(b), which provides that when valuing an interest in an entity for gift tax purposes, the liquidation restrictions contained within the LLC operating agreement have to be disregarded by the appraiser if the LLC is owned by family members both before and after the transfer. Code Section 2704(b)(3)(B) provides however that a restriction that is imposed by state law cannot be ignored.

With these new entities, some appraisers provide a range of an additional 10% to 35% for the additional valuation discount. So, for example, if the valuation discount would have been 35% for a regular LLC, after adding the additional valuation discount, the valuation discount would instead be between 45% and 70%.

Remember that the new Nevada Restricted LLC and LP statutes only create a new ceiling on valuation discounts that no other state allows. This doesn't mean that you must lock the underlying assets in for ten years. Maybe five years is more appropriate. Maybe three years.

The Bill can be read online. The Restricted LLC language can be read in Sections 26 and 27 of the Bill. The Restricted LP language can be read in Sections 38, 39 and 49.2 of the Bill.

From ABA Journal.com:

A federal magistrate has found patent lawyer John van Loben Sels in contempt of court and threatened him with a 48-hour jail sentence for a question he asked during voir dire.

Van Loben Sels asked potential jurors in a patent infringement suit whether they had "a problem with a company that puts its headquarters offshore on a Caribbean island in order to avoid paying U.S. taxes," the Recorder reports. He is a partner with Wang, Hartmann, Gibbs & Cauley of Mountain View, Calif.

U.S. Magistrate Judge Charles Everingham IV of Marshall, Texas, had prohibited Van Loben Sels and other lawyers for Beyond Innovation Technology Co., a defendant in a patent suit, from saying anything about the tax motivation for the Cayman Islands home of the plaintiff, O2 Micro.

Everingham said Van Loben Sels would not have to serve the sentence if he behaved for the rest of the case, according to the story. But he granted a mistrial and imposed other sanctions on Beyond Innovation Technology Co., known as BiTEK. It will have to foot the bill for new jury selection, will get half the voir dire time of its opponent and will get two peremptory challenges instead of four, according to the Recorder.

Van Loben Sels had defended his question, saying it was hypothetical and he didn't refer to O2 Micro by name.

Last Friday, the Center on Budget and Policy Priorities released a study examining the House of Representative?s much-discussed proposal for funding health care reform. They call the plan ?a reasonable approach? and assert that the ?impact on small businesses would be modest.? However, as the recession continues, even a small tax increase could delay recovery. Check out a snippet from their study below, but be sure to check out the full explanation of the study (including graphs) at CBPP.org.

Reforming the health care system to provide universal health coverage is an urgent priority. But, facing huge projected budget deficits that have the nation on an unsustainable fiscal path, the White House and Congress must enact a health reform plan that is also fully financed and that reduces the growth rate of health care costs over the long term.

Policymakers have been considering two major proposals to help finance health care reform that represent sound tax policy: (1) limiting the tax exclusion for employer-provided health benefits, and (2) capping the value of itemized deductions at 28 percent or a somewhat higher level. Capping the exclusion has the added benefit of helping slow the growth of health care costs. House Democrats have now advanced a third major proposal that also represents sound tax policy: imposing a graduated surcharge on high-income taxpayers.

The House surcharge proposal is reasonable and well targeted. In recent decades, incomes have grown disproportionately for households at the top of the income scale, while their tax burden has fallen substantially. Moreover, despite charges to the contrary, the proposal would have only a small impact on small businesses. The congressional Joint Tax Committee estimates that it would have no impact at all on 96 percent of small business owners ? broadly defined as any taxpayer with as little as $1 of business income ? and that only half of the 4 percent of small business owners who would be affected derive more than a third of their income from a business. At the same time, the House plan would enhance the ability of small businesses to offer affordable, quality health insurance to their employees.

High-Income Households Have Far Outpaced Others in Recent Decades

The surcharge would affect only the highest-income 1.2 percent of taxpayers, according to the Joint Tax Committee. Very high-income households have benefited handsomely ? both absolutely and compared to the rest of the population ? from both recent trends in pre-tax incomes and recent changes in tax policy. Congressional Budget Office data show that between 1979 and 2006 (the most recent year for which these data are available): [3]

Over the weekend, I came across this informative article from the Associated Press explaining how families would be impacted if the House?s new tax increate were to become law. As you can see from the examples below, some taxpayers could face a huge tax bill next April.

For more information check out this article on RoniDeutch.com.

Question #2: What are the tax legalities of an eBay business?

An eBay business should be treated just like any other home business. In fact, all income you make from eBay should be reported to the IRS, regardless of the amount you make. However, just like having a garage sale, you will only need to report the money you make if it is in fact income. Therefore, if you bought a computer for $1000 and sold it on eBay (or at a garage sale) for $100 then it is not income since you did not make any profit. However, if you make and sell products on eBay for a profit, then you should report the income to the IRS.

Although many people fear that eBay is required to send the IRS data for its users, their spokesperson Chris Donlay says this is not the case. ?The IRS would need to provide us with a subpoena for a specific individual before we would provide any data. I don't believe this is something that would be typically done for a routine audit, though it theoretically could happen.?

However, just because eBay is not reporting the income does not mean it is ok not include it on your tax return. Remember that the IRS now has the ability to monitor bank accounts and if you are making regular deposits then they might get suspicious. To learn more about eBay and tax issues, check out this interesting article I came across this weekend.

Question #3: When did April 15 become tax day?

According to Wikipedia:

The {tax} filing deadline for individuals was March 1 in 1913 and was changed to March 15 in 1918 and again to April 15 in 1955. Today, the filing deadline for U.S. federal income tax returns for individuals remains April 15 or, in the event that the 15th falls on a Saturday, Sunday or holiday, the first succeeding day that is not a Saturday, Sunday or holiday.

Question #4: Is Schaumburg, IL Restaurant Sales Tax the Highest in the Nation at 12%?

Yes, the 12% sales tax levied on foods and beverages in Schaumburg, IL make it the highest sales tax rate in the nation. In addition to the state?s general sales tax the small tourist town also levies a 2% Village of Schaumburg Home Rule Food & Beverage Tax.

Want to contest a California Will? Do you believe the terms of the Will should not be enforced? A Will can be contested and invalidated for a variety of reasons, not all of which are included here.

Undue Influence. Although there are several tests for undue influence, it boils down to a confidential relationship between the testator (will drafter) and the influencer and suspicious circumstances. Suspicious circumstances can be shown by procurement of a will, secrecy, no independent advice by the testator (person who executes the will), an unnatural or unjust gift, susceptibility to influence, haste in the signing of the will, or a change in attitude.

Menace. Menace is essentially blackmail. Menace can be shown by threat of unlawful and violent injury to the person, property or character of any person and will invalidate a will if it was used to coerce a transfer or prevent someone from changing a testamentary document.

The testator may lack capacity. In California, the person must be 18 years of age and of sound mind. The fact situations are often varied, but often the person does not understand the nature of the testamentary act sometimes because of dementia, or lacks the ability to recall the nature of the individual?s property.

Fraud. Fraud may be actual or constructive. Actual fraud generally can be intentional if a person tells a lie, suppresses a fact, or makes a promise without intent to perform. Constructive fraud is a breach of a duty with fraudulent intent to gain advantage to another?s prejudice.

Duress. Although the rule is stated differently in California, duress may invalidate a will if a transfer is obtained after the wrongdoer threatened to perform or did perform a wrongful act that coerced the donor into making a donative transfer that the donor would not otherwise have made.

Mistake. It is hard to show that a mistake will invalidate a will or part of a will, but under certain circumstances it may be possible to prove.

Have other questions, call a target="_blank" rel="nofollow" probate lawyer; call Mitchell A. Port at (310) 559-5259.

When the Internal Revenue Service (IRS) released its foreign bank account holders who made a tax attorney has stated that his clients have been asked 30 standard questions. None of the questions are particularly surprising and are in line with questions our clients have been asked under the IRS? previous voluntary compliance initiative (VCI). Nevertheless no-one who is filing for the tax attorney present, and maybe not even then. The questions appear designed to probe for signs of tax fraud, as well assure the IRS that all tax preparer penalties, or even voluntary disclosure.

According to the Wall Street Journal those questions were:

? Is it your statement that the tax payers are willing to comply with the IRS and make a good faith arrangement to pay all taxes, penalties, fees and interest?
? Where are the funds held regarding the disclosure?
? Do you have any records? If not, whom are you working with at the bank? (Note: If the taxpayer is a UBS client and if they don't have the records, IRS will attempt to assist them in record retrieval).
? When was the account opened?
? How was the account opened?
? Who assisted you with the account opening?
? Who told you about the bank and how to initiate opening of the account?
? Do you have a trust set up relating to the account or the funds?
? How did you deposit money into the account?
? How did you withdraw money from the account?
? Did you have any credit or debit cards associated with the account?
? How did you correspond with the bank? Do you have records relating to the correspondence?
? Who is your current point of contact at the bank?
? Did you ever meet face to face with anyone from the bank? If so, where? When?
? Did you travel outside of the U.S. to conduct business relating to your account and or tax activities?
? Where was your bank statements sent?
? Who has ownership of the account? Is it a joint account?
? What is the source of the funds?
? Do you have tax returns?
? Have you prepared amended tax returns? If so, have you submitted them to the IRS?
? Who prepared your returns?
? When were your returns prepared?
? Did they know about the issues discussed today?
? Did you file FBARs? If not, why not?
? (For those who inherited the account) when did you take control of this account? And, all the related questions a 'yes' answer makes us ask.
? Did you trade US and/or foreign securities with this account? If yes, describe the mechanism for doing that (buy/sell orders, etc.)?
? Did you file returns?
? Do your or have you directly or indirectly controlled any foreign entities? Did you file the required returns for them?
? For UBS clients in particular ? Have you been notified that the US requested information relating to your accounts?
? What countries do you have accounts in?

If you have questions about the questions, feel free to contact the

According to a target="_blank" rel="nofollow" new estimate from Politico.com the Federal bailouts from the past year could end up costing a staggering $23 Trillion. However, the author admits that this number is a ?worst-case scenario.? Neil Barofsky, the special inspector general for the government?s financial bailout programs, also asserts that this total is unlikely and that a number of problems would need to emerge forcing the government to spend more. According to Barofsky, the government has spent about $2 Trillion so far.

Still, the enormity of the IG?s projection underscores the size of the economic disaster that hit the nation over the past year and the unprecedented sums mobilized by the federal government under Presidents George W. Bush and Barack Obama to confront it.

In fact, $23 trillion is more than the total cost of all the wars the United States has ever fought, put together. World War II, for example, cost $4.1 trillion in 2008 dollars, according to the Congressional Research Service.

Even the Moon landings and the New Deal didn?t come close to $23 trillion: the Moon shot in 1969 cost an estimated $237 billion in current dollars, and the entire Depression-era Roosevelt relief program came in at $500 billion, according to Jim Bianco of Bianco Research.

The annual gross domestic product of the United States is just over $14 trillion.

Treasury spokesman Andrew Williams downplayed the total amount could ever reach Barofsky?s number.

?The $23.7 trillion estimate generally includes programs at the hypothetical maximum size envisioned when they were established,? Williams said. ?It was never likely that all these programs would be ?maxed out? at the same time.?

From FT.com:

Sharply falling tax revenues across the US have left states facing fresh budget shortfalls and threatening further painful spending and service cuts following previous multiple rounds of belt-tightening.

In the first quarter of the calendar year, tax collections dropped by 11.7 per cent, the largest fall on record, according to the Rockefeller Institute of Government. Of 50 states, some 45 reported declines.

Early figures for April and May show an overall decline of nearly 20 per cent for total taxes, ?a further dramatic worsening of fiscal conditions nationwide?, says the institute.

Billions of dollars of federal stimulus funds, combined with cuts to state employee jobs, school districts, healthcare and even the US prison system, have so far failed to close the budget gaps.

?The states are constantly trying to recalibrate their budgets to deal with a shrinking revenue base,? said Susan Urahn, managing director of state policy initiative at the Pew Center on the States.

Ron Lieber of the New York Times recently published an article discussing the unpredictable future of Roth IRAs. At one point, Lieber even proposes the possibility of taxes on withdrawals from Roth IRAs. Lieber predicts that ?at the most extreme end, the federal government might try to tax the earnings on a Roth after all, say through the capital gains tax, which is currently at 15 percent for long-term gains but could go up in the next few years.?

You?ll be hearing a lot in the next six months about Roth Individual Retirement Accounts ? but not as much as you should about a long-term threat that hangs over them.

Starting Jan. 1, you?ll be able to take a regular IRA, say, one that you have in a brokerage account after having rolled an old 401(k) into it, and turn it into a Roth. You?ll be able to do this no matter how much money you make, though you?ll have to pay income taxes at your current rate on whatever you move. Currently, you can?t make the conversion at all if your household has more than $100,000 in modified adjusted gross income. (That?s a technical Internal Revenue Service term, which it defines in Publication 590, available on its Web site).

Why would you want to make such a swap? Because you think you or your heirs could end up with more money over the long haul by investing in a Roth instead of a regular IRA.

With a Roth IRA, you pay no taxes on your earnings in most instances when you take money out; distributions from regular IRA?s are taxable the same way that income is, though the basic IRA does offer a tax deduction when you first deposit money into the account. The Roth offers no such deduction when you contribute money to it.

So if you think your tax rate will be higher during retirement than it is now, say if you?re fairly young for instance, making the conversion early in 2010 looks sensible.

California Governor Arnold Schwarzenegger and the California legislature announced yesterday that they had finally put together a budget deal that settles the states whopping $26 billion deficit. Reactions to the budget are mixed, but at least the state is finally taking responsibility for their budget. According to the LA Times, the following changes will be made to the stat budget. However, as the author points out the reductions do not add up to $26 billion, and are pretty general to say the least.

The Wall Street Journal also published a piece with strong opinions on some of the cuts. Check out a clip of their article below, or find the entire full here.

Under the budget plan, state lawmakers would cut $15 billion in spending. The rest of the gap would be filled by taking funds from local governments and through one-time fixes and accounting maneuvers. The deal must still be approved by rank-and-file legislators, who are expected to vote on it Thursday.

"We have accomplished a lot in this budget," Mr. Schwarzenegger told reporters after lawmakers struck the deal Monday evening. "We dealt with the entire $26 billion deficit," he said.

The nation's most populous state faces a $26 billion gap in a $92 billion general-fund budget through June 2010. Mr. Schwarzenegger and legislators have been wrestling over the budget for weeks, forcing the state's chief accountant to issue IOUs to many creditors, including some welfare recipients.

As of Friday, the state had issued 153,711 IOUs, worth a total of $682 million. The office of Controller John Chiang said it would need to evaluate the budget proposal before determining when it could stop issuing the warrants.

Economists said the spending cuts would bruise a California economy already slammed by rising unemployment and foreclosure rates. "It will certainly offset a fraction of the federal-stimulus effect this fall," said Roger Noll, a professor emeritus of economics at Stanford University. "That will mean the depth and duration of the recession [in California] will both be bigger than otherwise would've been the case," he said.

The leaders of the Democratic-controlled state legislature said that of the $15 billion in cuts, $9 billion would come from education, $1.3 billion from state-worker furloughs and $1.2 billion from the prison system.

"For Democrats, I have to tell you that many of cuts we had to make, at another time, we would've thought unthinkable," said Assembly Speaker Karen Bass.

With all the concern over the House?s health care bill, and Obama?s recent omission that he was not familiar with all the provisions in it, Speaker of the House Nancy Pelosi tried her best to defend the proposed tax increases. She asserted that only very wealthy Americans will be paying more taxes, and that the Middle Class would not be affected. Check out the following story on Pelosi?s arguments below courtesy of USA Today.

Ensuring that the middle class doesn't have to pay the $1 trillion-plus price for overhauling the nation's health care system could mean that the wealthiest Americans will pay a higher rate than the House originally proposed, Speaker Nancy Pelosi, D-Calif., told USA Today?s editorial board Tuesday.

"I wanted to remove all doubt that we were not touching the middle class on this," Pelosi said, explaining why she has advocated in recent days for a higher income threshold for taxes proposed in the House version of the health care bill. "When you go there you get less money because there are fewer people so you have to adjust the fee, but you can't adjust it endlessly. It has to be responsible."

President Obama continued to push for quick legislation Tuesday and had harsh words Tuesday for those who want to "block" health care legislation.

"Time and again we've heard excuses to delay" health care reform, Obama said in brief remarks from the White House Rose Garden. But he also stressed the "common ground" that has already been forged on Capitol Hill.

"We have traveled long and hard to reach this point," Obama said adding that "we are closer than ever before to the reform that the American people need, and we're going to get the job done."

It seems like nearly every week I come across a new story about a celebrity or professional athlete who some how forgot to pay their full tax bill. Well it seems like the latest addition to the list is pop music artist Foxy Brown, who has been charged with evading taxes for over 6 years. According to Contact Music Brown owes the IRS over $640,000. Check out a clip of their story below.