Tax Liens Bring Flint Water Crisis To A Head

faucet leaking waterRoughly 8,000 Flint, Michigan families are now facing potential tax liens for refusing to pay their water bill due to the city’s ongoing water crisis. All residents who are at least six months behind in their payments received notices that failure to pay could result in foreclosure and the loss of their home. Residents have until May 19 to pay up before the outstanding balance is transferred to the resident’s property tax bill. After that date, residents have until February 28, 2018 to pay their entire tax bill (including water charges) before the balance is transferred to the county treasurer for collection.

Flint residents remain unable to drink their tap water, causing many to refuse to pay for it on principle. One such individual is Melissa Mays, a self-described water activist who received one of the notices. She now plans to pay the outstanding balance of nearly $900 to avoid foreclosure, but maintains that the situation is unfair.

For its part, the city claims to be in dire need of the revenue. Al Mooney of Flint’s Treasury Department said in a statement that “we… (need) revenue coming in to pay those bills.” The city has previously turned off the water for some residents in an effort to encourage them to pay, increasing monthly water revenues to $3 million this month after collecting just $2.1 million last month. Total outstanding water charges amount to nearly $6 million, money the city would like to collect in full soon.

Michigan state law allows for a lien to be placed automatically wherever water is delivered, just like when you take out a loan to purchase an automobile. Therefore, the city did not need to write a new law or create new tax liens before sending the notices. Tax liens for delinquent water payments are usually placed annually, but the process was skipped last year due to the water credits residents received as a result of the ongoing water crisis. Water credits have since been discontinued by Governor Snyder. Congressman Dan Kildee believes that the state should not threaten homeowners with foreclosure for failure to pay for tainted water, arguing that “…Flint families deserve support from the state until there is confidence in the water system again.”

In summation, Flint residents who continue to refuse to pay their water bill now face a lengthy legal process potentially ending in foreclosure. Both sides have valid arguments, making it challenging to predict what the eventual result will be.

Jersey Shore Star in Tax Trouble

Mike "The Situation" Sorrentino is facing serious legal issues together with his brother Marc Sorrentino. The duo have been indicted by the Department of Justice on various charges, including tax evasion and structuring and falsifying records. These fresh charges add...

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Trump to Increase Gas Tax?

Image of a gas pumpIt was recently announced that President Trump may attempt to finance his ambitious $1 trillion infrastructure plan through raising gasoline and diesel fuel taxes. According to the President, the current fuel taxes, which have remained unchanged since 1993, are inadequate to finance the construction and maintenance of road and transit networks across America. Because of this, the American highway and transit system is in dire need of an upgrade. In fact, a recent report by the American Society of Civil Engineers that gave the country’s roads and transit system grades D and D- respectively. Additionally, a government report published in January says that the highway fund requires $90 billion to complete pending road repairs.

The federal Highway Trust Fund currently receives 18.4 cents and 24.4 cents per gallon of gasoline and diesel fuel respectively from the federal fuel tax. However, with neither tax adjusted for inflation, the revenue raised has eroded by almost 40% since 2013. Since 2008, lawmakers have approved an additional $143 billion to keep the fun solvent. This is according to a 2016 report by the Congressional Budget Office. At the local government level, 21 states have increased fuel taxes since 2013 to date, the American Road & Transportation Builders Association reports. Just last month, for instance, several states including California, Indiana, Montana and Tennessee voted to increase the tax.

The proposed tax increase is likely to gain support among some American taxpayers. For instance, the US trucking industry, which contributes almost 50% of the fuel taxes, would support the increase provided the additional funds are used to improve the country’s transit system. Chris Spear, the president of the American Trucking Associations, believes that a higher fuel tax would be less expensive for the trucking industry than a poor road network. However, the Trump administration is treading carefully on this issue because, on the one hand, higher fuel taxes could mean higher costs for commuters, effectively hitting low-income workers who spend a large portion of their income on gasoline particularly hard. On the other hand, it could also create more jobs, especially construction jobs, thereby stimulating economic growth. In fact, Trump’s press secretary, Sean Spicer, said Trump was only considering a proposal by the trucking industry rather than endorsing a gas tax hike.

The American road and transit system is in need of an overhaul. Unfortunately, the federal Highway Trust Fund does not currently have enough money to finance the all the necessary upgrades and repairs. To solve this problem, the Trump administration may consider raising fuel taxes, which have remained unchanged since 2013.

Jersey Shore Star in Tax Trouble

Mike "The Situation" Sorrentino is facing serious legal issues together with his brother Marc Sorrentino. The duo have been indicted by the Department of Justice on various charges, including tax evasion and structuring and falsifying records. These fresh charges add...

read more
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How Could President Trump’s New Tax Plan Affect Corporate Tax Rates?

Graphic with text reading "How will Trump's new tax plan affect corporate tax rates?"President Trump recently announced that he plans to make radical changes to our tax code, and he made it clear that these chances would include dramatic alterations to the U.S. corporate income tax rate.

Not only does President Trump’s tax plan aim to make it more attractive for international businesses to bring overseas profits into the United States, he also wants to slash the corporate tax rate as much as possible. Trump wants to implement these changes as quickly as he can because of all the publicity surrounding his first 100 days in office and the fact that other platforms on which he ran during the campaign (building a wall, repealing Obamacare, etc.) have struggled to gain traction in Congress.

Trump’s tax plan proposes cutting the corporate income tax rate to 15% from 35%, and he wants multinational corporations to be taxed at a rate of 10% instead of 35% to provide those companies with an additional incentive to bring their money into the United States. Trump also wants to pass a sharp cut in the top-tier tax rate for pass-through businesses. These companies (i.e. sole proprietorships, small business partnerships, etc.) would see their taxation rate fall from 39.6% to 15% if President Trump’s plan is approved.

Republicans had earlier submitted a tax plan proposal that included a border adjustment tax on imports, but President Trump did not include this addendum in his proposal. Trump’s proposal appears to fall short of what many Republican lawmakers were hoping for, but his advisers have said that it is only meant to serve as a guide for lawmakers in the House and the Senate.

The House Republican plan only called for a 20% corporate tax rate as opposed to Trump’s 15% suggestion. Their plan also made imports somewhat prohibitive while strongly encouraging exports.

Trump’s tax plan also calls for capping the individual tax rate at 33%, and he would like to see estate and alternative minimum tax rates cut in order to benefit the middle class. What’s yet to be seen is if the President will include provisions for funding infrastructure or child tax credits, and many analysts believe that such provisions could help him win enough Democratic votes to pass his plan.

One question that has formed in the minds of many lawmakers and taxpayers is, “How can President Trump lower taxes without adding billions of dollars to the national debt?” Treasury Secretary Steve Mnuchin believes that the tax cuts will eventually pay for themselves by generating more economic growth and jobs. Mnuchin told reporters this week after leaving the Capitol that there is “no question” that both the administration and Republicans agree on the fundamental principles of U.S. tax reform. Mnuchin also said that Trump would prefer to see his tax reform plan passed before winter.

One criticism that has been levied against President Trump regarding his tax plan is that it would benefit him personally. Frank Clemente is the executive director of Americans for Tax Fairness, a Democratic activist group,

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Who Will Benefit From Trump’s New Tax Cuts?

Cartoon of Donald Trump as Uncle SamU.S. President Donald Trump revealed his plans to make drastic changes to the U.S. tax code, including the addition of tax cuts that would significantly reduce the tax liabilities of the wealthy. The proposal, released on Wednesday, would provide both individuals and businesses with substantial tax cuts. It does not, however, elaborate how such tax cuts would be financed.

Some of the provisions established by Trump’s proposed tax cuts include cutting the corporate tax rate to 15% and reducing the number of personal income tax brackets. There are currently seven individual brackets and Trump wants to lower that number to three (10%, 25% and 35%), and he also wants to lower the minimum tax bracket to ease the burden on middle class families. Individual tax income brackets currently max out at 39.6% for the highest earners.

President Trump also wants to get rid of estate taxes and the alternative minimum tax, which primarily affects wealthy Americans as it limits their deductions and other benefits. These tax cuts could benefit Trump personally, according to Democrats, although there is no surefire way to know this unless the president releases his tax returns. Trump’s plan would also see increased aid for child care, and he would like to eliminate the 3.8% investment income tax that was included in Obamacare, officially known as the Affordable Care Act.

Additionally, Trump would like to double the standard tax deduction for Americans, thus eliminating taxes on approximately $24,000 of a couple’s annual earnings. This proposal has drawn the ire of real estate agents and home builders, who believe it could destabilize the housing market.Tax breaks for things like mortgage interest, charitable contributions and retirement account savings, however, would remain in place.

Trump’s team, including Treasury Secretary Steve Mnuchin, are confident that the proposed tax cuts will pay for themselves by attracting more businesses to the United States and bringing jobs back to America. “This will pay for itself with growth and…reduction of different deductions and closing loopholes. The economic plan under Trump will grow the economy and will create massive amounts of revenues,” Mnuchin said.

Republicans have praised Trump’s proposed tax cuts as the most important tax reform since Reagan’s efforts in 1986 even though the latest proposal doesn’t meet all of the standards for which Republicans had originally hoped. Many Democrats, however, are convinced that these tax cuts will only benefit the wealthy, Trump himself included.

“Trump’s latest proposal is another gift to corporations and billionaires like himself,” according to Democratic party chair Tom Perez.

Senator Chuck Schumer (D-NY) agreed. “That’s not tax reform. That’s just a tax giveaway to the very, very wealthy that will explode the deficit,” Schumer said.

Democrats have long called for President Trump to release his annual tax returns to the public, and Democratic lawmakers have said that they will not aid Congress in passing any tax plan nor will they approve tax cuts until Trump’s returns have been released. Trump, for his part, has declined to release the records,

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San Francisco Considers Forming Publicly-Owned Bank

San Francisco skyline at nightIt was revealed this week that the city of San Francisco is considering forming what would be just the second publicly-owned bank in the United States, with the first being the Bank of North Dakota. The topic is gaining traction due to various factors, including the legalization of marijuana in California, the issue of undocumented immigrants who are unable to open bank accounts, and the constant politicization of which banks the city uses.

Before such a bank could open, however, a number of issues would need to be addressed. Factors such as operating costs, tax liability, start-up capital, insurance, revenue streams would all have to be evaluated by a task force before the bank could open its doors. The time to start addressing such issues is now, according to many of San Francisco’s leaders.

“People in San Francisco are at a point where they are no longer willing to accept the status quo…they are open to exploring other alternatives,” said San Francisco City Supervisor Malia Cohen.

This is not the first time the city has weighed the option of opening a publicly-funded financial institution. In 2011, San Francisco’s budget analyst released a report in which the potential benefits of such a bank were listed. Among the benefits including the ability to create a new revenue stream without raising taxes, decreased borrowing costs, and more support for local businesses. Additionally, a bank funded by the citizens of San Francisco could alleviate the problem of how the city’s money is spent.

San Francisco is considered an extremely progressive city whose leaders often clash with state and national leaders when it comes to funding various projects. Over the last few years, for example, city supervisors have voiced their displeasure with banks that support firearm manufacturers, fossil fuels, and the Dakota Access Pipeline.

Even if the city was able to open its own bank, supporting the city’s cannabis industry could still prove to be problematic. Marijuana is still illegal as per federal law, and even if San Francisco was able to do business with dispensaries the federal government could theoretically seize those funds at any time and levy sanctions against the bank for “aiding and abetting violation of federal drug laws and also engaging in money laundering,” according to regulatory reform expert Joseph Lynyak III.

Fiona Ma is a member of the California Board of Equalization, and she believes a publicly-owned bank could do business with marijuana dispensaries in certain circumstances. However, she acknowledges that there would be a degree of risk as long as marijuana remains illegal under federal law. “The question always is, can the federal government come and take the money, asked Ma rhetorically. In addition to San Francisco, the Finance and Management Committee of Oakland’s City Council is also looking into opening a bank that could be used by cannabis-related businesses to store the large amounts of cash they are currently forced to hold privately.

Residents of San Francisco have some time to consider the pros and cons

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San Francisco anti-Trump Tax March

image of a microphone in front of a protesting crowdThousands of protesters in San Francisco, the Bay Area and across the nation participated in an anti-Trump Tax March this past Saturday. The demonstrations were part of a larger effort to persuade the recently inaugurated 45th President of the United States to release his annual tax returns.

Crowds began forming early on Saturday afternoon at the Civic Center Plaza in San Francisco, and at 3pm PST the march down Market Street to the Embarcadero began. There was a large rally in front of City Hall that lasted for approximately one hour, at the end of which protesters began chanting anti-Trump slogans such as, “Hey hey, ho ho, Donald Trump has got to go!”

Other attendees held signs that read, “Drop your tax returns instead of bombs” and “Lesbians love taxes, Donald. Show us yours!” Even San Francisco Rep. Nancy Pelosi (D-CA) made an appearance at the rally and started a chant of her own: “Donald Trump, who do you owe? We must know!”

Before rhetorically asking Trump, “Why are you so chicken?” to cheers from the largely partisan crowd, Pelosi pointed out that each week Democrats introduce new legislation aimed at forcing President Trump to release his annual tax returns. Pelosi claimed that 100% of Democrats vote to approve the legislation each time, but as of yet there have been insufficient Republican votes for the measure to pass.

Jane Kim, San Francisco’s city supervisor, also spoke at the rally in front of City Hall. Kim said that the demand for Trump to release his federal tax returns is about more than President Trump himself. She said U.S. citizens want the rich to be held accountable because of the ever-increasing income and wealth gaps. “I’m not afraid to call Trump an enemy of this state,” Kim said to the audience. “We, the American people, want to know: Was our president honest?” she added.

Any tax attorney in San Francisco can tell you that U.S. Presidents are not legally required to publicly release their annual tax returns, although each President since the early 1970s has done so voluntarily. Trump said prior to his being elected that he would release his returns after a federal audit was completed, but he has also said that voters aren’t interested in the details of his state or federal tax returns. Tuesday, April 18 is the filing deadline to file tax returns for this year (it’s normally April 15 but that date fell on a Saturday this year) and the anti-Trump Tax March attendees are insisting that Trump release his returns by the close of business on Tuesday.

Many protesters decided to attend the rally in San Francisco, not just to support the movement calling for the President to release his annual tax returns, but to call into question his business ties and potential conflicts of interest that may arise during his presidency. Menlo Park resident Diane Walter made the trip to San Francisco for the rally. Walter readily admits she is not a fan

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2017 Tax Refund Delays

image of cash and tax documentsLife as a tax lawyer during refund season can become a little hectic, and this is especially true this year. Indeed, updates to the IRS tax code instigated a warning from the Internal Revenue Service that certain taxpayers may experience delays in receiving their 2017 tax refunds.

So where is the delay coming from? In 2015, Congress passed the “Protecting Americans from Tax Hikes (PATH) Act of 2015“, and the section of the law that focuses on refunds goes into effect this year. Consequently, the IRS must wait until February 15, 2017 to issue refunds to taxpayers who claimed either the earned-income tax credit (EITC) or the additional child tax credit (ACTC).

The ACTC and EITC are both refundable tax credits, meaning that if the amount of the claimed credit is larger than the amount of taxes you owe, you receive a refund. Even if you don’t have any tax obligation when you file, you can still get a tax refund by claiming these refundable credits.

In order to claim either the EITC or ACTC, you must have earned wages in the year your tax return is for. For tax purposes, these wages are usually reported on a form W-2 or form 1099-MISC, which employers are required to provide to taxpayers by January 31.

Employers used to be able to wait until the end of February if filing on paper, or the end of March if filing electronically, to submit these forms to the government. However, if taxpayers filed their returns early they would have done so before the IRS had even received those same forms from employers. The gap in time for reporting wage information has left open an opportunity for fraud, effectively giving scammers or identity thieves the chance to file phony tax returns before the IRS could catch on.

As part of the PATH Act, employers are now required to submit forms W-2 and 1099-MISC to the Social Security Administration on the same date that taxpayers receive their forms. By delaying the refund issue date to February 15, the IRS will be able to confirm accuracy of both the employer and taxpayer information. Additionally, the rise in identity theft has motivated the IRS and state tax authorities to establish extra fraud safeguards, which can result in additional review time. Despite potential delays, the new law’s requirements should overall mean more safe and accurate refund checks.

It’s important to note that for affected taxpayers, the IRS has to hold the entire refund, not just the portion associated with those credits, until at least February 15. Regardless, the IRS anticipates issuing most refunds in less than 21 days, which nearly any tax lawyer would agree is an expedient time frame.

If you would like more information on the status of your refund, check out the “Where’s My Refund?” tool available on IRS.gov. Taxpayers can check the status of their refunds within 24 hours after the IRS has received an electronically filed tax return or four

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San Francisco Supervisor Proposes Robot Tax

two robots face to faceOne mention of robot-centered job automation is enough to send shivers up the spine of most workers who depend on these jobs for their livelihood. Many see the changes happening right before their eyes—automated supermarket checkouts, self-driving cars and touchscreen restaurant ordering is eliminating many jobs. While this is bad for workers, it’s great for manufacturers and large scale businesses who save substantially on the cost of labor. One San Francisco politician has proposed the notion that these companies should have to pay for the privilege of their vast cost savings. She wants to tax robots.

What at once seemed extreme is now becoming more attractive to workers, especially those hard hit by the new robot economy. A proposed Universal Basic Income, or UBI, would serve as a base salary that would allow everyone to enjoy a living wage. Now many want to tax the robots—a move that would stop companies from dumping their entire workforce and replacing them with artificial intelligence.

San Francisco Supervisor Jane Kim thinks that a tax on robots would allay a lot of the fears of the knowledge industry workers in Silicon Valley who fear that a robotic takeover would mean financial ruin for them. Bill Gates agrees, theorizing that a tax on robots would serve to slow down the inevitable robot labor force takeover, while providing much needed revenue for those in human centered careers like child care and nursing.

This sentiment is a bit surprising coming from someone like Gates, since Microsoft is one of the major manufacturers of artificial intelligence systems. Gates is not alone in his thinking. Kim says that her idea to impose a tax on robots stemmed from a fear that job automation would create a chasm between the have and the have-nots.

Those who had been previously dependent on unskilled labor and lower wage pink collar jobs would find themselves impoverished and without a way to earn a living. Kim is developing an advisory committee to brainstorm about ways to make the best use of the proposed automation tax. Her committee will include the most influential leaders in academia, healthcare, unions and the tech community. She hopes to raise awareness of how the expansion of robots in the workplace would have a ripple effect across industries, from trucking to finance, hospitality and healthcare.

While the plan would not stop the inevitable switch to robot labor, a system that taxes robots would help to slow the job displacement and allow employees to make smooth transitions.

One of the major objections raised to the idea is that it can be hard to define what constitutes “harmful” automation. While a robot may cost one worker part of a job, it could also free that worker up to engage in more productive activity, bringing with it financial value.

While Kim does not think that her automation tax idea would be a panacea, she does believe it is a step in the right direction for San Francisco, and the entire country. She

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The Top Five Red Flags That Can Trigger An IRS Audit

With tax season coming to a close, many filers are dreading the arrival of April 15 and the terrifying prospect of an being audited. Many taxpayers will hit “send” on their returns, then agonize over whether they have filled out their deductions correctly or accounted for each penny earned. Understanding what red flags commonly trigger an IRS audit is the best way to avoid this possibility.

1. Failing to Report Taxable Income

When you earn more than a certain amount of income each year, you are required to report it to the IRS, regardless of how it is earned. This amount varies from year to year, but in past years, the limit has been $600. You are required to report your wages earned from work, any income from small business and even income from illegal activities. Failing to report this income—especially if you have reported it in past years—can trigger an audit.

2. Claiming Unusual or Large Deductions

While many people make small donations to charity in the form of personal checks, making too large of a donation can trigger an audit. Many taxpayers use donations of cars and clothes to get a larger deduction than they’re entitled to. The IRS will examine your return more closely if the amount of your charitable donations are out of proportion to your income. If you earn $30,000 a year and claim a deduction for a $10,000 donation, it doesn’t take a tax lawyer in San Francisco to tell you that the IRS might come knocking.

3. Claiming Too Many Meals and Other Incidentals

It is not unusual for employees to have expenses that their employers do not reimburse, but having too many of these deductions can raise red flags on your tax return. If you are claiming deductions for meals, trips and entertainment, be ready to explain how these relate to your work. Make sure to save all of your receipts in case you are faced with an interview with the IRS.

4. The Home Office Deduction

A huge chunk of the millions of entrepreneurs and self-employed professionals in the U.S. work from home. For many of these people, however, claiming the home office deduction can be enough to have your tax return flagged by the IRS. Remember that the only amount you can claim as a home office deduction is the portion of your office that is used for your home business. If you use your home office for personal reasons, you may not be able to deduct that portion from your taxes.

5. The Alimony Deduction

One of the most surprising things that the IRS is cracking down on is alimony deductions. The payer of alimony is allowed to take a certain deduction, but only if certain conditions are met. Without a divorce agreement that outlines the terms of alimony, the IRS will deny you the deduction and any credits that come along with it. Both the payer and the recipient have to report alimony payments on their taxes and

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Doctor Slapped With Huge Fine After Granting Business Loan

Title graphicOne prominent physician in Texas is in hot water after lending cash to a struggling business to cover its payroll. Dr Robert McClendon was slapped with a $4.3 million penalty from the IRS after the move, and is facing felony charges for non-payment of payroll taxes.

While the case may seem clear cut and dry, it is not. Dr. McClendon owned the failing business and one of his employees started embezzling funds from the company. McClendon was the owner of Family Practice, a company that provided medical services.

He hired a CFO, Richard Stephen, and within a few years, the company was more than $10 million in arrears to the IRS. It was later discovered that Stephen was not making the necessary payments to the employees and using the funds for his own purposes. When Dr. McClendon discovered the fraud, he jumped to its rescue and loaned the company $100,000 in order to pay the salaries of his workers. Stephen eventually plead guilty to felony fraud charges in the case. However, his admission of guilt did not stop Dr. McClendon from being implicated in the tax fraud.

Family Practice eventually went out of business and used the bulk of their profits to pay off the debt. It was then that he made the hefty $100,000 loan to cover his employees’ payroll, but neglected to pay the taxes on the loan. The IRS assessed a “responsible person” penalty on Dr. McClendon and declared that his failure to pay was willful. Dr. McClendon offered that while he was a responsible person, his failure was unintentional.

Despite his claims, the IRS did not buy his story. They slapped him with a huge fine of more than $4 million. Dr. McClendon is currently in the process of appealing the ruling.

This is not the first time the IRS has cracked down on business owners for failure to pay taxes. The IRS is extremely strict when it comes to a willful failure to pay, and will often take aggressive collection measures including seizing assets, wage garnishments or bank levies. In some cases, the IRS may often shut the business down to stop the bleeding.

Dr. McClendon found out the hard way that no good deed goes unpunished. n/a

Jersey Shore Star in Tax Trouble

Mike "The Situation" Sorrentino is facing serious legal issues together with his brother Marc Sorrentino. The duo have been indicted by the Department of Justice on various charges, including tax evasion and structuring and falsifying records. These fresh charges add...

Cristiano Ronaldo Accused of Tax Evasion in Spain

There is a very thin line between tax avoidance and tax evasion. Tax avoidance serves to reduce the tax bill of a taxpayer by using existing laws to their advantage. Tax evasion, on the other hand, is refusal to pay taxes or using fraudulent means to lower your tax...

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