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Court Rules Turbo Tax Not Responsible for Errors

man sitting at computer screenIs Turbo Tax responsible for any errors they make on your taxes? According to a recent United States Tax Court ruling, it is the consumer who is responsible for any errors or inaccurate financial information submitted to the IRS. The ruling was reached on May 11, 2017 by Judge Holmes.

Barry Bulakites, an insurance consultant, was the petitioner in the recently closed Turbo Tax case. Mr. Bulakites believed that he had evidence to prove that he was tricked into claiming more deductions than what he would normally be allowed to claim through usage of the Turbo Tax software to file his 2011 and 2012 returns.

The taxation issue was partly due to alimony that was paid to Mr. Bulakite’s ex-wife following a divorce settlement. In the divorce decree, a sum of $2,000 was supposed to be paid in monthly installments. Mr. Bulakites offered to pay a larger sum of $5000 to “do the right thing” during the 2008 financial crisis to help his wife since both parties were unable to sell their interests in a home that they shared together.

The additional money that was paid to Mr. Bulakite’s ex-wife was written off as an alimony deduction on the 2011 and 2012 tax returns. Since the extra $3000 per month was not allowed to be written off under current IRS tax laws as an interest deduction, $79,000 could not be claimed or proven as interest or principal.

Other expenses that were originally claimed in the aforementioned tax years by Mr. Bulakite include interest from a note that was secured through owned real estate. The deducted amount of $185,673 was mistakenly inputted into the Turbo Tax software as a carry forward of net operating loss for the previous tax year.

Because no documentation was provided by Mr. Bulakite that showed a detailed schedule of operating loss deductions, the total amount was not allowed to be deducted, meaning no entitlement of reduced taxes. Mistakes made during the input of financial information into the Turbo Tax software by Mr. Bulakite were not found to be reasonable or in good faith by the United States Tax Court.

In his final decision, Judge Holmes cited a previous ruling known as “Bunney v. Commissioner, 114 T.C. 259, 267 (2000)” that states that taxation software is only as good as the information that someone inputs into it for the preparation and filing of state and federal tax forms for electronic or hard copy delivery.

The decision will now be entered under Rule 155 which is the Computation by Parties for Entry of Decision in all US Tax Court matters. Consumers can protect themselves by inspecting 1040, 1099 or other taxation forms for numerical errors prior to using Turbo Tax.

Turbo Tax does offer a 100% Accurate Calculation Guarantee for consumers. This guarantee is subject to a number of regulations, and it provides only a 60-day error window starting with the date a penalty assessment notice is received. Consumers are still required to respond to requests by the … Read More

What To Know About Taxation Of Gambling Winnings

image of a blackjack tableOne of the biggest gambling events of the year is the Kentucky Derby. This is usually a chance for horse-racing fans to make some quick cash at the tracks. After all, the horses, riders and trainers are known, so the adds favor certain horses. However, there are also some underdogs that may pull off a surprise win. This can be a great opportunity to win big. The number of bets as well as the amount of money that will be staked during the Kentucky Derby will be quite considerable as people from around the world will also be watching the event and placing their bets. While the focus is on the races, many people have not thought about paying taxes on their winnings. In fact, some people do not even know that gambling winnings are taxable.

How Gambling Winnings are Taxed

Taxpayers are required to pay taxes on all the income they get, whether it’s from employment, dividends or gambling winnings. The federal government has singled out gambling winnings and imposed a special tax on all gambling winnings whether it’s at the tracks or casino. Some states have also imposed a special tax on gambling winnings. In addition to paying these taxes, you must also report them when filing your tax returns. There are also special forms, known as W2-G forms, that must be filled when your winnings exceed a certain amount.

The gambling tax rate imposed by the federal government is 25% of the total winnings. However, your winnings must reach or exceed the threshold set.

Below are the thresholds for different types of gambling winnings:

– $5,000 in tournament winnings at the poker table
– $1,500 in keno winnings
– $1,200 at a bingo game or slot machine
– $600 at the horse tracks (but this must be 300 times your bet)

If your winnings have reached or exceeded these thresholds, you will be required to fill IRS Form W2-G and pay a tax rate of 25% for the total gambling income. In most cases, the casino will withhold 25% of your winnings on behalf of the government before paying you.

It is important to note that taxpayers are not always required to fill the IRS Form W2-G when their gambling winnings exceed the thresholds highlighted above. For instance, you do not have fill this form if your winnings are from table games, such as roulette, craps, baccarat or blackjack, regardless of the amount. However, you still have to report these winnings when filing your tax returns and pay the gambling tax.

Paying Tax on Smaller Winnings

If your gambling winnings have not reached the thresholds noted above, does it mean your winnings are tax-exempt? No, it doesn’t. What it means is that you will not pay the 25% gambling tax. Instead, you will have to add it to your employment income and treat it like any other taxable income. The income must be declared on Form 1040. The good news is that you can avoid paying tax … Read More

How Trump’s Tax Reform Impacts High Tax States

pile of one dollar billsWith the recent announcements by the Trump administration that tax reform is on the way, one of the proposals with the newer and simplified tax plan is the elimination of various deductions in order to close some loopholes and even things out for the masses. One of these proposed eliminations is within the state and local taxes.

So who will this impact the most?  Residents of high-tax states, like California where the state income tax rate is a whopping 13.3 percent. Of course the crafty tax filers who know how to deduct their state and local income taxes will take advantage of such a high tax rate, but if this deduction is eliminated then they’ll have to look elsewhere for their tax havens. Will Republicans in California have to explain themselves to their constituents? It depends on how skilled they are at shifting the conversation toward how California is in need of an overhaul regarding the way they tax their citizens, otherwise they’ll be pinned to the new tax reform by the media.

So along with President Trump’s tax proposal and Paul Ryan’s tax-reform blueprint, both plans would compensate what the itemized deductions would’ve cost. Because only 30 percent of federal tax filers actually itemize their deductions, they would feel the impact of this change the most.

The Tax Foundation says the deduction primarily benefits high-income taxpayers and that more than 88 percent of these tax savings seem to go to those over the $100,000 income level. Additionally this deduction favors states with high tax rates. Most states with high tax rates have high property values.   One report shows that in 2014 nearly one third of the deductions total value nationwide came from California and New York.

Devin Nunes, a member of the tax-writing Ways and Means Committee says that he supports getting rid of it. He also proposes doubling the standard deduction and also adding some additional tax breaks for children.

Tom McClintock declined to comment, but in an interview with KGO radio he mentioned that eliminating the deduction might result in double taxation. By this he means that when residents are taxed by both the federal government, and the state government, and then the local government on the same income, then it’s more like triple taxation.  He believes that part of the proposal will need to be modified over time.

Republicans who reside in wealthier districts pose the biggest targets. This list includes Ken Calvert, Dana Rohrabacher, Darrell Issa, Duncan Hunter and Steve Knight.

Republicans who represent inland areas would also come under pressure because even though their constituents as a whole deduct less tax coastal residents, they still rank higher than many other states and deduct more than many other national citizens.

Just looking at 2014, when the average California local and state tax deductions ranged from $1,330 in Imperial County to a marked different in Marin County, where it was $16,956. Compare this to Missouri, where the deduction ranged between $392 to $4,593.

A $100 increase

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Warriors To Bring Millions in Tax Revenue to San Francisco

The Chase Center AccommodationsAerial view of the Chase Center and San Francisco Bay

The Golden State Warriors will soon be shooting hoops at their new $1 billion arena, located in the Mission Bay neighborhood of San Francisco. The Chase Center will officially open for the 2019-2020 season. In fact, San Francisco Mayor Edwin M. Lee will attend the ribbon-cutting ceremony for the new sports complex, along with Coach Steve Kerr, Kevin Durant, and a number of Golden State’s stars.

While most fans are celebrating the new arena, the road to changing venues faced a myriad of legal challenges and concerns. This mainly revolved around traffic concerns in the area, which is still a topic of debate as the project moves forward. The Warriors have wanted a new arena for some time now — and the ownership group finally agreed. Led by Peter Guber and Joe Jacob, the owners opted to privately finance the area — which will replace the Oracle Arena in Oakland. Oracle arena is currently the NBA’s oldest venue in existence.

The new 18,000-seat arena will feature cutting edge and innovative technologies. With state-of-the-art amenities, the venue will also be designed to reflect the diversity and growth of the Bay Area. With 11 acres of restaurants, public plazas and offices — the arena is sure to be a center of attraction and nightlife for many locals and visitors

Tax Revenue and Economic Benefits

According to Mayor Lee, the Chase Center is slated to provide great economic benefits for San Francisco. This includes thousands of new jobs and literally millions in new tax revenues for The City. Similarly, the venue will fill the current void in San Francisco’s arts and events facility scene. More importantly — the arena will ensure that the beloved Warriors remain the Greater Bay Area. In order to secure the projected millions in new tax revenues, the team and ownership are financing the arena without any public funding.

Funding for the arena got a huge boost when JPMorgan Chase secured the naming rights a year ago. This deal is for a solid 20 years and at an estimated price of $300 million. According to industry monitors, this is the richest arena naming rights deal ever in the United States.

According to Warriors President Rick Welts, the team –and ownership — always had a vision of privately financing a state-of-the-art sports facility in San Francisco. However, they also wanted the venue to be a multi-purpose arena; one that could easily facilitate entertainment events as well. With the creation of the new Chase Center, their dreams –and that of the fans — are soon to become realities. The venue will not only be the home of the Warriors — but will also showcase concerts, family shows, conventions, charity events and so much more. The Golden State Warriors were purchased by Guber and Lacob — for $450 million — back in 2010. This is still considered one of the greatest investments in NBA and sports history. The ownership team now looks to expand their base with the

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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
Read More