IRS Seeks to Return $266 Million in Undeliverable Refunds And Economic Stimulus Payments to Taxpayers

I IRS Newswire

June 24, 2008  2008

Issue Number:    IR-2008-082

Inside This Issue

---

IRS Increases Mileage Rates through Dec. 31, 2008 

WASHINGTON —

The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/08	Rates 7/1 through 12/31/08
Business	50.5	58.5
Medical/Moving	19	27
Charitable	14	14

IRS Sets March 29 as “Super Saturday” to Help Retirees, Veterans and Low-Income Workers Receive Economic Stimulus Payments
 

IR-2008-50, March 24, 2008

WASHINGTON —

The Internal Revenue Service and scores of its partners nationwide will open hundreds of locations on Super Saturday, March 29, in an effort to reach those Americans who are eligible for the economic stimulus payment but who normally are not required to file an income tax return.

Approximately 320 IRS offices will be open on Super Saturday to prepare the simple Form 1040A for people who are filing a return solely to receive their stimulus payment. IRS partners such as AARP, United Way of America and dozens of others also are making special efforts on Super Saturday to reach out to those who normally are not required to file a tax return.

“We don’t want any Americans to miss out on their economic stimulus payment. For millions of Americans, filing a tax return is not routine. Their income is either too low or not taxable. But this year, filing a 2007 tax return is the only way to receive an economic stimulus payment. Super Saturday is one way the IRS and its partners are working to ensure everyone eligible receives a stimulus payment,” said IRS Commissioner Doug Shulman.

Super Saturday, part of an extensive outreach effort by the IRS, is a one-day event for which Americans can plan in advance. It also highlights the need for all taxpayers to file as soon as possible to avoid the April 15 rush.

Millions of Americans who do not pay federal income taxes may be eligible for a $300 payment ($600 for married couples) if they have at least $3,000 in qualifying income. Qualifying income is defined as any combination of earned income such as wages, nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement. Many households also will be eligible for an additional $300 for each qualifying child younger than 17.

The IRS this week is mailing 20.5 million Social Security and Veterans Affairs recipients a Package 1040A-3 that contains all the information they need to file a return immediately. Railroad Retirement recipients, low-income individuals and military personnel with nontaxable combat pay also can use the package if they need to file solely to receive the payment.

The 320 IRS offices are located in all 50 states and the District of Columbia. Operating hours will be 9 a.m. to 3 p.m., although some may be open longer. IRS employees will help prepare the Form 1040A returns for low-income workers, retirees, disabled veterans and others. IRS field assistance personnel also will visit nursing homes and similar locations to prepare returns.

A list of IRS offices and partner sites providing assistance on Super Saturday is available at www.irs.gov or by calling the IRS Hotline, 1-800-906-9887, for free assistance locations. If taxpayers have economic stimulus questions on March 29, they can call 1-866-234-2942. These phone services are available on March 29 between 9 a.m. and 3 p.m. local time. (Alaska and Hawaii service is based on Pacific Time Zone.)

IRS partners are actively involved in reaching out to these people to help them receive their payments. Many are using innovative techniques to ensure eligible recipients who normally are not required to file a tax return receive the payment they are due. Here is just a brief sampling of partner activities and the complete list is still evolving:
Sweetwater, Fla.: Miami-Dade County Mayor Carlos Alvarez will conduct a press conference at City of Sweetwater's Jorge Mas Canosa Youth Center free tax preparation site staffed by Florida International University students.
• Baltimore, Md.: Baltimore Commission on Disability will help prepare returns for people with disabilities and others;
Houston, Texas: Ripley Neighborhood Center will prepare returns for Social Security recipients and veterans;
Manning, S.C.: Antioch Baptist Church will host a tax preparation day for Form 1040A filers;
Boston, Mass.:  Mayor Thomas Menino will open 10 locations throughout the city to prepare Form 1040A returns;
Aurora, Col.: IRS partners printed Economic Stimulus Payment information in Vietnamese and will be available at two locations to assist the Vietnamese community;
Fresno, Calif.: Hispanic Internal Revenue Employees (HIRE) chapter members have volunteered to prepare returns at the Fresno Veteran’s Hospital and the Aging Adult Center.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus additional payments of $300 for each for qualifying child. Most Americans don’t need to do anything more than file their tax returns as they normally do. The maximum payments will begin to phase out at $75,000 in adjusted gross income ($150,000 for married couples).

The IRS encourages everyone who is required to file a tax return to do so prior to the April 15 deadline to enable the agency to process the return and to calculate stimulus payment eligibility and amounts. Taxpayers who already have filed a tax return can calculate their potential payment amounts by visiting www.irs.gov.

The IRS reminds taxpayers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges taxpayers to file electronically. For people who normally are not required to file a tax return, the IRS and the Free File Alliance have a special program set up to allow for free electronic filing. For those with computer access, IRS Free File –Economic Stimulus Payment is available at IRS.gov.

Also, people should be wary of unsolicited e-mail or telephone calls from anyone claiming to be from the IRS. Don't click on any links. Instead, forward the email to phishing@irs.gov, and then delete it. Use the same email address to report unsolicited telephone calls. The only official IRS Web site is located at www.irs.gov.

Related Items:
Super Saturday Locations for March 29
Economic Stimulus Payment Information Center

IRS Newswire February 15, 2008

More Information on Stimulus Payments Posted to IRS.gov;  New Details for Recipients of Social Security, Veterans Benefits

WASHINGTON — The Internal Revenue Service released additional information today about the upcoming economic stimulus payments in a specially designed section for taxpayers on IRS.gov.

The new information includes an extensive set of Frequently Asked Questions about the stimulus payments, with a special emphasis on recipients of Social Security and certain veterans’ benefits. Millions of people in this group who normally don’t file a tax return will need to do so this year in order to receive a stimulus payment.

For recipients of Social Security and certain veterans’ benefits and low-income workers who don’t normally need to file, the IRS also released a special version of a Form 1040A that highlights the simple, specific sections of the return that can be filled out by people in these categories to qualify for a stimulus payment.

“Most taxpayers just need to file a 2007 tax return in order to automatically receive the stimulus payment,” said Acting IRS Commissioner Linda Stiff. “But we are especially concerned about recipients of Social Security and veterans’ benefits who may need to take special steps this year to file a tax return in order to obtain a stimulus payment. IRS.gov will help taxpayers get what they need.”

The Frequently Asked Questions section – accessible through the front page of IRS.gov -- includes an extensive set of information for all taxpayers with questions about the stimulus payments, commonly referred to as rebates. The questions and answers include important information for low-income workers and certain recipients of Social Security, Railroad Retirement benefits and veterans’ benefits.

The special IRS.gov section also features extensive examples of how much taxpayers can expect to receive in stimulus payments. The page includes more than two-dozen payment scenarios affecting different types of taxpayers.

IRS.gov will be updated frequently to provide taxpayers with all they need to understand the stimulus payments.

The IRS will begin sending taxpayers their economic stimulus payments in early May after the current tax season concludes. In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for married couples who file a joint return). Payments to more than 130 million households will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future on IRS.gov.

The IRS reminds taxpayers when they file their 2007 tax return to use direct deposit, which is the fastest way to get both regular refunds and stimulus payments. However, taxpayers who use Refund Anticipation Loans (RALs) or enter into any other loan or financial agreement with their tax professional cannot receive their stimulus payments by direct deposit and instead will get a paper check.

The only way to receive a stimulus payment in 2008 is to file a 2007 tax return. The vast majority of taxpayers must take no extra steps to receive their stimulus payment beyond the routine filing of their tax return. No other action, extra form or call is necessary.

Special Guidelines for Recipients of Certain Social Security, Veterans and Railroad Benefits

Certain people who normally are not required to file but who are eligible for the stimulus payment will have to file a 2007 tax return. This includes low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. For taxpayers filing joint tax returns, only a total of $3,000 of qualifying income from both spouses is required to be eligible for a payment.

The special version of the Form 1040A unveiled today on IRS.gov shows taxpayers in these groups the specific sections of the form they need to fill out to qualify for the stimulus payment. The mock-up is designed to be used as a guide for filling out an actual Form 1040A.

“People who don’t normally need to file have a roadmap on how to fill out the Form 1040A quickly and easily,” Stiff said. “We encourage recipients of Social Security and veterans’ benefits who don’t normally need to file a tax return to use this mock-up of the form as a guide to help them get their stimulus payment.”

The Form 1040A illustration on IRS.gov shows the limited number of lines that will need to be filled out for recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits. A key line is reporting their 2007 benefits on Line 14a of Form 1040A. The IRS reminds taxpayers they can also use Line 20a on Form 1040 to report these same benefits.

In addition, taxpayers in these groups should write the words “Stimulus Payment” at the top of the 1040A or 1040.

For now, taxpayers in this group filing a tax return can only file a paper copy of the Form 1040 or Form 1040A. The IRS is working to update its systems to accept electronic versions of these limited-information returns for taxpayers who otherwise have no need to file a tax return. The IRS is also working with the software community to handle these returns electronically at a future date.

The IRS also reminded taxpayers with Social Security, Railroad Retirement or veterans’ benefits who have already filed but did not report their qualifying benefits on either Line 14a of Form 1040A or Line 20a of Form 1040 that they may need to file an amended return in some situations to receive a larger stimulus payment.

Taxpayers who already have filed but did not report these benefits can file an amended return by using Form 1040X, which can only be filed with a paper form.

The IRS reminded taxpayers who don’t have any other requirement to file a tax return that submitting a tax return to qualify for the economic stimulus payments does not create any additional tax or trigger a tax bill. In addition, the stimulus payments will not have any effect on eligibility for federal benefits.

The IRS is working with the Social Security Administration and Department of Veterans Affairs and other organizations to ensure that recipients are aware of the need to file a tax return to receive their stimulus payment in 2008. 

Issue Number:    IR-2008-018

Inside This Issue

---

IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate 

WASHINGTON — The Internal Revenue Service today advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.

“If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff.

The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments.

The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.

Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. This Web site will be the best information source for all updates and taxpayer questions.

In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return).

The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.

Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment.

Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue.

“Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.”

Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit.

Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.

Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children.

Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.

To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service.

The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information. Scam e-mails and information about scam calls should be forwarded to phishing@irs.gov.

Related Items:

• FS-2008-15, Facts about the 2008 Stimulus Payments
• FS-2008-16, Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans’ Benefits
• Tax forms and instructions

Issue Number:    IR-2008-014

IRS Newswire February 6, 2008

Inside This Issue

---

IRS Offers New Online Help Tools for 2008 Tax Filers

Listen In: Audio Interview on New IRS.gov Tools

WASHINGTON — Things have gotten easier for taxpayers who need help preparing their federal returns this year. The IRS has enhanced both Publication 17 and Where’s My Refund?, two key electronic tools available on this Web site, IRS.gov, the official Web site of the IRS. These improvements will help any taxpayer with Internet access find answers to tax questions quickly, prepare returns accurately and file on time.

Publication 17, Your Federal Income Tax –– The online version of Publication 17 now contains electronic links allowing users to more quickly navigate this widely used publication. Both the downloadable PDF and the html version of the 2007 Publication 17 contain more than 800 hyperlinks. The links allow users to jump immediately to other parts of the publication, reducing the time it takes to access information. In accordance with the Americans with Disabilities Act, the html version of Publication 17 on IRS.gov is accessible to visually impaired taxpayers.

Where’s My Refund? — The online refund-tracking tool Where’s My Refund? is now available in Spanish as well as English. Taxpayers can access the Spanish version through either the Where’s My Refund? page on IRS.gov or the Spanish-language portal. The goal of this new feature is to make tax information available to taxpayers who don’t speak English or those who know English as a second language. Taxpayers without Internet access can get the same information about their refunds by calling the IRS Refund Hotline at 1-800-829-1954.

Official IRS Web Site Is IRS.gov

Taxpayers looking for the IRS online should type www.irs.gov into their Web browsers. Taxpayers should also beware of Web sites that may resemble IRS.gov but end in .com, .net, .org, .biz or any other domain name extension. For the genuine IRS Web site, it’s IRS.gov.

e-News for Small Businesses January 23, 2008

Depreciation and Section 179 Expense

Increased section 179 limits. The maximum section 179 deduction you can elect for qualified section 179 property placed in service in 2007 has increased to $125,000 ($160,000 for qualified enterprise zone and qualified renewal community property). This limit is reduced by the amount by which the cost of qualified property placed in service during the tax year exceeds $500,000.

For qualified section 179 Gulf Opportunity (GO) Zone property, the maximum section 179 deduction is higher than the deduction for most other section 179 property.

Depreciation limits on electric vehicles. The higher maximum depreciation deduction for a passenger automobile that is an electric vehicle does not apply to electric vehicles placed in service after December 31, 2006.

Limited reduction in Liberty Zone tax benefits. The special depreciation allowance for qualified New York Liberty Zone property does not apply to property placed in service after December 31, 2006 (except for qualified nonresidential real property and qualified residential rental property).

Top of Page

---

Domestic Production Activities Deduction

For tax years beginning after December 31, 2006, the domestic production activities deduction percentage increases from 3% to 6%. For more information on this deduction, see Form 8903, Domestic Production Activities Deduction, and its instructions.

Top of Page

---

Self-Employment Tax

The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2007 has increased to $97,500. All net earnings of at least $400 are subject to the Medicare part of the tax.

Top of Page

---

Social Security and Medicare Taxes

The maximum amount of wages subject to the social security tax for 2007 is $97,500. There is no limit on the amount of wages subject to the Medicare tax.

Top of Page

---

Standard Mileage Rate

For 2007, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck is increased to 48.5 cents a mile for business miles driven.

Top of Page

---

Qualified Transportation Fringe Benefit

For taxable years beginning in 2007, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $110. The monthly limitation regarding the fringe benefit exclusion amount for qualified parking is $215.

Top of Page

---

Work Opportunity Credit

After December 31, 2006, the welfare-to-work credit was combined with the work opportunity credit. Use Form 5884, Work Opportunity Credit, to claim a credit for an employee who begins work for the employer after December 31, 2006.

Members of targeted groups. For employees who begin work after December 31, 2006, the following changes pertaining to targeted group members apply.

• Ex-felons are no longer required to be a member of a low-income family.
• Food stamp recipients must be at least age 18 when hired, but not age 40 or older.

Form 8850.  The Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, that you are required to file with the work opportunity tax credit (WOTC) coordinator for your state workforce agency (SWA) is now due no later than the 28th day after the job applicant begins work for you. See Instructions for Form 8850 for more information.

IRS Newswire December 20,                                                              December 20, 2007
be
December 20, 2007

Issue Number:   IR-2007-203 Inside This Issue IRS NEWS WIRE

Misclassified Workers to

File New Social Security Tax Form 

WASHINGTON — The Internal Revenue Service has developed a new form for employees who have been misclassified as independent contractors by an employer. Form 8919, Uncollected Social Security and Medicare Tax on Wages, will now be used to figure and report the employee’s share of uncollected social security and Medicare taxes due on their compensation. 

Generally, a worker who receives a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit, using Schedule SE. However, sometimes the worker is incorrectly treated as an independent contractor when they are actually an employee. When this happens, Form 8919  will be used beginning for tax year 2007 by workers who performed services for an employer but the employer did not withhold the worker’s share of social security and Medicare taxes.

In addition, the worker must meet one of several criteria indicating they were an employee while performing the services.  The criteria include:

• The worker has filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating they are an employee of the firm.
• The worker has been designated as a section 530 employee by their employer or by the IRS prior to January 1, 1997.
• The worker has received other correspondence from the IRS that states they are an employee.
• The worker was previously treated as an employee by the firm and they are performing services in a similar capacity and under similar direction and control.
• The worker’s co-workers are performing similar services under similar direction and control and are treated as employees.
• The worker’s co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
• The worker has filed Form SS-8 with the IRS and has not yet received a reply.

By using Form 8919, the worker’s social security and Medicare taxes will be credited to their social security record. To facilitate this process, the IRS will electronically share Form 8919 data with the Social Security Administration.

In the past, misclassified workers often used Form 4137 to report their share of social security and Medicare taxes. Misclassified workers should no longer use this form. Instead, Form 4137 should now only be used by tipped employees to report social security and Medicare taxes on allocated tips and tips not reported to their employers.

----------------------------------------------------------------------------------

Past Featured Articles:

Changes to the Allowable Living Expense Standards

Over the past dozen years, the lure of regulating the Internet has proven irresistible to legislators. For example, in the 109th Congress, almost 1,100 introduced bills referenced the word “Internet.” Although this legislative activity doesn’t always come to fruition, hundreds of Internet laws have been passed by Congress and the states. This body of work is now large enough that we can identify some winners and losers. So in the spirit of good fun, I offer an opinionated list of my personal votes for the best and worst Internet statutes in the United States.

Best Internet Laws

With my libertarian leanings, it should not be surprising that my list of good Internet laws is both brief and skewed toward laws that minimize the scope of Internet regulation.

#2: Internet Tax Freedom Act

Many people mistakenly think that this law eliminated sales tax for purchases over the Internet. It didn’t (if you don’t pay sales tax, you owe use taxes on those purchases). Instead, the law placed a temporary moratorium on states enacting Internet access taxes or e-commerce–specific taxes. By freezing new taxes, the law forestalled a tax frenzy during the dot-com boom. The current moratorium expires in November, but Congress is proposing to extend the law permanently (see the Permanent Internet Tax Freedom Act of 2007: S. 156 & H.R. 743). To which I say amen!

#1: 47 USC 230

This law was enacted in 1996 (as part of the Communications Decency Act, discussed below) during the heyday of the cyberspace exceptionalism movement—about the same time as Barlow’s Declaration of Independence and Johnson/Post’s Internet self-governance article. Indeed, this law is one of the most conspicuous examples of how a legislative body has set different rules for physical space and cyberspace. In this case, the law provides websites and other intermediaries a near-absolute immunization from liability for their users’ content—even if offline publishers would be liable for publishing the exact same user content in dead trees.

It’s hard to overstate the importance of this law to the Internet’s evolution. Without this law, all Internet content probably would be subject to a notice-and-takedown regime like we have for copyright law (see discussion about the DMCA Online Safe Harbors below). If websites had to remove user content upon notice to avoid liability, they would act conservatively, quickly pulling down complained-about content without much fuss. So, any company unhappy with negative consumer comments could simply contact the web host, claim that the comments were defamatory (making the web host potentially liable for the content), and expect the web host to scramble to take down the user’s comment.

But in this takedown melee, only negative remarks would be targeted (there would be no legal grounds—or reason—to target positive comments). Thus, notice-and-takedown rules would result in “lopsided” databases in which only positive opinions/commentary would remain, but many negative comments could be quickly excised. This would ruin the capability of the consumer opinion sites (for example, eBay’s feedback forum and Amazon product reviews) to hold people and companies accountable for their choices. Indeed, by undermining the credibility of Internet content generally, a notice-and-takedown scheme could diminish the Internet’s vitality as a mainstream information resource.

47 USC 230 eliminates the notice-and-takedown option for people and companies trying to escape accountability. As a result, 47 USC 230 is a big part of the reason why the Internet has been such a massive success.

Effective but Questionable Internet Laws

Two laws are noteworthy for substantially accomplishing their intended goals, even though I can’t classify them as “good” because of their deficient policy rationales.

#2: No Electronic Theft Act (NET Act)

In 1997, Congress changed the basic paradigm for criminal copyright infringement. Previously, the law required that defendants had to infringe for the money. The NET Act expanded the scope of criminal law to cover both commercial and non-commercial infringers.

Specifically, the NET Act targeted warez traders, a group of hobbyist infringers who aggregate and disseminate copyrighted works as trophies—by finding and publicly presenting a hard-to-get copyrighted work, the warez trader demonstrates his/her prowess as a trader and earns recognition from the community. Warez traders generally subscribe to the “information wants to be free” philosophy, so they never exchange copyrighted works for the money, but their trading can have adverse consequences for copyright owners.

There are many reasons why the NET Act is lousy policy, most importantly because criminal sanctions do not deter warez traders. Yet, it has given the Department of Justice (DOJ) an effective tool to nail warez traders, and a couple of hundred warez traders have been busted using the law. Removing warez traders from the Net, one by one, is a crude but ultimately effective method for curtailing warez trading.

#1: Anti-Cybersquatting Consumer Protection Act (ACPA)

The 1990s saw a frenzy of domain name registrations, often involving the registration of domain names containing well-known trademarks by someone other than the trademark owner (a process called cybersquatting). Courts struggled to apply trademark law to this behavior, so trademark owners appealed to Congress for help. Congress initially hoped that the Internet Corporation for Assigned Names and Numbers (ICANN) would promulgate its own anti-cybersquatting administrative regulations (which ultimately became the Uniform Domain-Name Dispute-Resolution Policy [UDRP]). But ICANN took too long, and an impatient Congress enacted the ACPA.

The ACPA targeted cybersquatting, and in that respect the law has worked well. The classic 1990s cybersquatting “land-grab” registrations of [trademarkowner].[tld] have effectively dried up, and the few cases in which a true cybersquatter has defended an ACPA claim in court generally have resulted in resounding victories for the trademark owner.

A silver lining of the ACPA: It contains an immunization of domain name registrars and registries that completely eliminated them as the targets of trademark owners. Prior to ACPA, domain name registrars (especially Network Solutions, the monopoly .com registrar for most of that time) had been sued repeatedly. Now, plaintiffs don’t even think about it.

However, the ACPA isn’t all good news. From a defense perspective, the ACPA has emerged as a tool to attack gripers and other critics. From a trademark owner’s perspective, the ACPA hasn’t curbed domain name parking, domain tasting and other AdSense-fueled sites using trademarks or typographical versions of them. So no one is really happy with the law. Nevertheless, as a point solution to the cybersquatting problem, I think ACPA is fairly characterized as a solid success.

Worst Internet Laws

I want a little credit for finding four laws that I could say something good about. It wasn’t easy. In contrast, the list of bad laws is much longer, so I limited myself to 10.

What makes a law “bad?” Unfortunately, there are many routes to ignominy, and mere legislative cluelessness isn’t sufficient. Some common themes: poor/ambiguous drafting, unintended consequences, justification bait-and-switch (publicly declaring that the law was intended to accomplish a goal it was never designed to do), and attempts to legislatively manufacture markets or change consumer behavior.

The dishonor roll:

#10: E-Sign

E-Sign generally says that online contracts are not denied enforcement simply because they are in electronic form rather than on paper. Superficially, this sounds positive because it stops courts from underenforcing electronic contracts or overreacting to new communication technologies. The problem? This law was unnecessary. Although there was a little concern that some states would enact a non-standard version of the law, by the time that Congress passed E-Sign, there was a lot of momentum toward adopting the Uniform Electronic Transactions Act (UETA), and a lot of states had already implemented UETA. Worse, E-Sign has a partial preemption clause that makes it difficult/impossible to figure out which state laws survived it. So E-Sign is a prime example of how Congress cannot resist the lure of Internet regulation—even if it adds no value (or even subtracts value) in the process.

#9: DMCA Online Safe Harbors

Another law that looks good on the surface, this law purports to provide safe harbors to protect online intermediaries from copyright infringement caused by other people. However, this law has at least two major flaws. First, it sets up a notice-and-takedown procedure that has led to significant abuse, such as content owners effectively “spamming” online service providers with poorly researched junk notices that impose significant investigatory costs on the provider-recipients.

Second, and perhaps more importantly, the law governs only late 1990s technologies; it doesn’t contemplate P2P file sharing and other decentralized forms of communications. This technological dependency makes the safe harbor increasingly irrelevant as technology evolves. As a stark example, consider that the online safe harbors didn’t get mentioned—not once!—in the most important online secondary infringement case to date: the Grokster Supreme Court opinion.

#8: Unlawful Internet Gambling Enforcement Act of 2006 (see the end of this file)

As I have said elsewhere, this law is “a flagship example of how special interest lobbying combined with legislative mumbling can produce an unreadable mess.” First, the law is written in unintelligible Congress-ese. Second, the law is pockmarked with special interest exceptions, clearly showing who has the best lobbyists. Third, and most importantly, Congress did not specify (in this law or elsewhere) what constitutes illegal Internet gambling, yet the law requires third-party money sources to block the flow of money to illegal gambling operations. Thus, just like Kafka might write it, Congress deputizes private actors to block illegal activity without deciding for itself what constitutes illegal activity. As a result, banks and other money sources probably will curtail lots of legitimate activity to be on the safe side.

#7: Digital Millennium Copyright Act (DMCA) Anti-Circumvention

There are lots of reasons not to like the DMCA anti-circumvention law. Most obviously, the law targets “bad” technology rather than bad behavior—a regulatory model that usually fails when technological innovation bypasses such restrictions; or worse, the restrictions inhibit the development of socially beneficial technology.

However, the anti-circumvention laws make this list principally because of their unintended consequences. The law was designed to bolster content protection technology: the purported justification was that content owners wouldn’t feel comfortable putting content online without content protection measures, and this law restricts the capability to bypass those measures.

As it turns out, the hottest area of anti-circumvention litigation has nothing to do with such content protection schemes, but instead involves companies using the DMCA as an anti-competition law. Two flagship examples—Chamberlain, involving the sale of compatible after-market universal garage door openers (a case the EFF calls “mind-bogglingly absurd”) and Lexmark, involving refilled printer cartridges—ultimately reached pro-competitive outcomes, but only after significant litigation and some disconcerting early rulings. Even with these rulings, companies now routinely consider anti-circumvention claims as part of a general anti-competitor campaign (for a very recent example, see here). As a result, the law has increased the cost of doing business and given plaintiffs another tool to try to restrict legitimate competition, while doing almost nothing to advance its principal goal of increasing protection for content owners.

#6: Electronic Communications Privacy Act

This law was written in 1986 (amending earlier versions), back when the Internet was an obscure academic network. Although the law wasn’t written with the Internet in mind, it has the heroic responsibility of governing a huge swath of private Internet communications, including email, private chat, VOIP, and others. Even if the law were well-drafted, applying a pre-Internet law to these communications would create plenty of ambiguity and friction. Unfortunately, this is not a well-drafted law; in my opinion, this law is one of the most poorly drafted statutes ever. The result is a tangled convoluted hairball that no one (even privacy experts) can understand or apply.

#5: Utah Digital Signatures Act

In 1995, there was some concern that the lack of Internet authentication would inhibit the development of e-commerce. As a result, VeriSign (and others) advocated that everyone on the Internet—both users and websites—should have digital certificates to validate their identity (the equivalent of an Internet driver’s license) so that websites and users each could figure out who they were dealing with. However, VeriSign and others expressed concern that a digital certificate issuer would face significant liability if the authenticated information was wrong. Thus, the argument went, if only digital certificate vendors could get some liability protection, digital certificate vendors would provide the necessary authentication that would allow e-commerce to explode.

In response to these concerns, Utah enacted the Digital Signatures Act to regulate the process of granting accurate certificates and limit the liability of digital certificate vendors. Utah hoped the law would encourage digital certificate vendors to relocate to Utah to take advantage of its friendly legal climate, making Utah a leader in e-commerce.

As it turns out, digital certificates weren’t needed to catalyze e-commerce, nor did the market materialize for digital certificates in the form contemplated by the statute (as a PKI-based system). As a result, this law was a complete failure, and no companies ever complied with the statute’s formalities. Indeed, the law proved to be so irrelevant that Utah has taken the highly unusual step of repealing the law. At least it owned up to its mistake (this time).

#4: Anti-Kid Spam Laws in Utah and Michigan

Nothing fires up the legislative machine like trying to protect kids from Internet dangers. In this case, Utah and Michigan created “do-not-email” registries, similar to the national Do-Not-Call registries, for the registration of kids’ email addresses. Porn spammers are supposed to check these databases and eliminate any registered kids’ addresses from their porn spam distributions.

While do-not-contact registries are generally popular, I’m in the minority of people of who think they are suboptimal policy (I explain my thinking, by deconstructing the federal Do-Not-Call registry here). In these cases, the do-not-email registries claim to be protecting kids, but they actually don’t try to authenticate registrants’ ages—making them a generic do-not-email registry, something even the FTC doesn’t favor. Most importantly, assuming that the database actually contains kids’ email addresses, it becomes a juicy target for criminal hackers, pedophiles, and other bad actors. Based on this concern, many privacy advocates, including the FTC, have advocated against kid-specific do-not-email registries.

#3: Dot Kids Implementation and Efficiency Act of 2002

As we saw with the Utah Digital Signatures Act, legislators can’t stimulate market demand simply by legislating the market into existence. In my opinion, no legislative act better illustrates this principle than the Dot Kids Implementation and Efficiency Act of 2002. In the name of providing a safe online haven for kids, Congress co-opted the .kids.us domain and decreed that only kid-safe content could reside there. In theory, parents would feel safe letting their kids loose there, and content publishers would have a good place to reach kids. Ultimately, Internet filters could simply enable .kids.us websites and shut off the rest of the Internet to kids.

The problem? Not many content publishers saw the value of creating kid-safe websites and housing them under the restrictive rules of the law. As a result, .kids.us is a virtual wasteland, housing fewer than 20 websites—almost all of which have less-than-compelling content. (You mean to tell me you’ve never been there? Check it out yourself.) Not exactly the most enticing destination for Junior. So .kids.us is a ghost-town-like reminder that legislators should stay out of the business of trying to manufacture markets.

#2: Utah/Alaska Anti-Adware Laws

Have you noticed a trend here? Utah makes my dud-law list three times—a hat trick of legislative incompetence. This is such a remarkable feat that we might consider banning Utah from enacting further Internet regulations until Utah can show that it will use its powers wisely.

This law makes my list because of the deceptive rationales used to justify it. Touted as an “anti-spyware,” “consumer-protection” law, it was neither. The law targeted only adware, not spyware, and it gave enforcement rights to trademark owners, not consumers. As a result, the law gave trademark owners the power to take software out of consumers’ hands—even if the consumers actually wanted the technology. Further, by allowing trademark owners to attack competitors for engaging in comparative advertising, the law tried to inhibit beneficial competition rather than promoting it. Thus, despite its billing, this law was a profoundly regressive anti-consumer law.

Given its deceptive nature and adverse policy effects (which I explain in lengthy detail here), it should not be surprising that the law was quickly enjoined. (Disclosure note: I worked on an amicus brief challenging the law.) Chastened, the act’s sponsor subsequently amended the law to make it effectively irrelevant.

However, before Utah amended its law, Alaska implemented its own bastardization of Utah’s initial law. Among the Alaska law’s defects, it expects adware vendors to pop up a notice to potential downloaders, asking them for their geography. With this information, in theory, the vendor can avoid downloading the regulated software to Alaska residents. In other words, in an effort to fight unwanted pop-ups, the Alaska law mandates that software vendors deliver lots of unwanted pop-ups to consumers—even when both the vendors and consumers are located outside of Alaska. Classic legislator logic!

NOTE

While this article was in press, Utah revisited this area yet again. This time, Utah enacted a law that controls all keyword-triggered advertising, raising serious questions about its effect on Google and other search engines. As I explain here, regulating the use of keywords to trigger advertising is profoundly anti-consumer and is very bad policy.]

#1: Communications Decency Act (CDA)

Based on the discussion above, clearly there was plenty of competition for the worst Internet law of all time. However, I found picking a “winner” surprisingly easy. In fact, in my book, it isn’t particularly close.

The Communications Decency Act, passed in 1996, was Congress’ first comprehensive attempt to regulate Internet content. Not surprisingly, Congress made a lot of rookie mistakes. The CDA tried to keep kids away from Internet porn, a reaction to a sensational 1995 article (the “Rimm Report”) published in the Georgetown Law Journal that proclaimed that the Internet was awash in porn. But later examinations thoroughly discredited the Rimm Report—meaning that Congress’ efforts/overreactions were based on bad social science.

Worse, Congress mistakenly assumed that non-porn content could be easily segregated from porn. In defense of this assumption, the government’s expert witness proposed a content-tagging system that would enable browsers to wall off porn. But this exposed a deep flaw in the law: the tagging system didn’t exist, browsers weren’t written to honor the tag, and it turns out that requiring publisher self-tagging for all Internet content is burdensome and cost-prohibitive.

Because web and email content publishers had no easy way to comply with the law, the law threatened to restrict virtually every Internet speaker. Further, Congress imposed punitive and draconian sanctions (including stiff jail time) for breaking the law. Congress really, really wanted to wipe porn off the Internet, but it chose a particularly mean-spirited way of doing so.

Not surprisingly, the law fared poorly in the courts. Within a week, it was enjoined. The next year, the U.S. Supreme Court unanimously struck down the law (although two judges would have found a way to preserve some of the law). For its lack of policy support, its sloppy blunderbuss approach to regulating speech, and its flat-out meanness, I hereby crown the CDA the worst Internet law (to date…).

California in bid to impose 7.25% sales tax on cannabis

Taxpayers may be confused by the proliferation of Internet sites that contain some form of the Internal Revenue Service name or IRS acronym with a .com, .net, .org or other designation in the address instead of .gov. Since many of these sites also bear a striking resemblance to the real IRS site, taxpayers may be misled into thinking that the site they have accessed is indeed the official IRS government site. These sites are not the official IRS Web site and have no connection to the official IRS site or to the IRS.

The IRS also reminds consumers to be alert to an on-going Internet scam in which consumers receive an e-mail informing them of a federal tax refund. The e-mail, which claims to be from the IRS, directs the consumer to a link — often a Web site resembling the IRS Web site — that requests personal and financial information, such as Social Security number and credit card information.    

This scheme is an attempt to trick the e-mail recipients into disclosing their personal and financial data. The practice is called “phishing” for information.

3/06/2007          Issue Number:   IR-2007-0500 

Inside This Issue

• New payment terms and submission rules;
• A new matrix to assist in determining the number of Forms 656, $150 application fee(s), and TIPRA payments to submit to the IRS depending on the number of individuals submitting the offer, and the types of liabilities being compromised;
• A checklist, redesigned as a result of TIPRA, to help taxpayers determine if they are eligible to file an OIC before they invest time in form preparation;
• Revised Section V defining the contractual terms of the offer;
• OIC Application Fee and Payment Worksheet to determine eligibility for claiming exception to the payment of the $150 application fee and the mandatory offer payments imposed by the TIPRA legislation;
• Form 656, PPV Periodic Payment Voucher, a removable form designed to be used to remit the required TIPRA payments to the IRS while the offer is under investigation; and
• Form 656-A, renamed Income Certification for Offer in Compromise Application Fee and Payment.

• Form 656, Offer in Compromise
• Fact Sheet 2005-16 , Revisions to Form 656, Offer in Compromise
• Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

Issue Number:   IR-2007-049
Inside This Issue

Home Computer E-File Usage Grows in 2007

WASHINGTON The Internal Revenue Service announced today that taxpayers are continuing to file their tax returns electronically from home computers at a record pace, up almost 7 percent from the same period last year.

People using home computers are helping e-file grow this year," said IRS Commissioner Mark W. Everson. Taxpayers can rely on e-file as a safe, accurate way to quickly finish their taxes and get a refund. For those who haven’t filed, they should make sure to request the telephone excise refund tax if they are eligible.

Overall, e-file has increased by nearly 4 percent since last year.  In addition to a 7 percent increase in self-prepared electronically filed returns, e-filed returns from tax professionals climbed by more than 2 percent.

So far this tax filing season, 78 percent of all returns have been e-filed, compared to 76 percent for the same period last year. As of last Friday, 30 percent of e-filed returns were filed by people using their home computers, up from 29 percent of e-filed returns for the same period last year.

Also, more people than ever before are opting to have their refunds directly deposited into their financial accounts. So far this year, the IRS has directly deposited almost 32 million refunds, or 82 percent of all refunds issued this tax filing season, up from 80 percent of the total for the same period last year.

People are also visiting the IRS Web site IRS.gov in record numbers. The IRS has recorded almost 68 million unique visits to IRS.gov this year, up from 62 million for the same period last year, an increase of 9.0 percent.

In addition, this years filings show about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the Telephone Excise Tax Refund section on IRS.gov.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

Of those requesting the telephone tax refund, 99 percent are choosing the standard amount, and the rest are basing their request on the actual amount of tax paid. The standard amount ranges from $30 to $60 and is based on the number of exemptions a taxpayer is eligible to claim on their return. Alternatively, taxpayers can request a refund, based on the tax shown on their phone bills and other records.

• File electronically. Electronic-filing software flags often overlooked tax breaks and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return.
• E-file for free. If your income is $52,000 or less, use the Free File link on this Web site to connect to a private-sector company offering free e-file services.
• Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account.
• Consider using the standard-refund amount for the telephone-tax refund. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you dont need to present proof to the IRS. The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return.
• If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested.
• Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who dont need to file a regular income-tax return. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return.
• Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program.
• Use the Telephone Excise Tax Refund section on the front page of this Web site. Here, you can download forms, find answers to frequently-asked questions and link to participating Free File partners.

H. John Johnsen

February 26, 2007

http://www.homedesignsense.com

The American Dream is, and always will be, to come up with an idea, start a business and become rich from your own efforts. Based upon this motivation, thousands of businesses fail each year, due primarily to not being familiar with the basics involved in running a business.

This report will enlighten you, and give you a number of suggestions you can use to better guarantee your chances for success. This report is written with the warning that any and every business venture contains certain inherent risks, and any number of alternatives. We do not espouse that any one way is the right way or that our suggestions are the only way. On the contrary, we advise that before investing any money in a business venture, you seek counseling and help from a qualified accountant and/or attorney.

Just about the first thing you should consider before deciding to start or purchase a business is the legal form you'll be operating under. There are basically four choices: sole proprietorship, partnership, limited partnership, and/or corporation.

Each has a number of advantages and disadvantages. We'll try to enumerate some of them for you.

As much as anything else, for many people starting a business is a form of ego-gratification, and they form a corporation for some sort of prestige gain - just to say, "I own a corporation."

With just a little bit of observation, you'll find that one of the major causes of business failures is due to the founder wasting start-up capital on frills, such as an impressive store-front office, expensive furnishings, and corporate legal costs.

One of the basic traits you must develop it you're going to be successful in business, is a tight hold on your expenditures. In fact, a good rule of thumb is that anything that does not make money for you, or protect your investment, should not be purchased at this time. Very definitely, this applies to the expense of setting up your own corporation.

Unless you have a partnership and start your business as such, the only real advantage to forming a corporation would appear to be that a corporate structure will semi-protect the property you personally own.

As an example, you own a home and car. You form a corporation to protect these possessions from business losses. Yet, if you can be found guilty of misusing corporate funds, your business creditors can pierce the corporate shield and come after your possessions.

Basically, if you invest everything you have in your business, as most newcomers do, you don't usually need a corporation because you have nothing to protect. Your household possessions, personal belongings, generally your car, and even a portion of the equity in your home is protected by the homestead provision of the Federal Bankruptcy Act, and cannot be taken away from you.

As a sole proprietor or partner of a business you'll be paying taxes on your overall earnings, much the same as if you were holding down a salaried or hourly paid job. Whether you do or don't take out money as a salary will have no bearing on the earnings of your business and tax return.

The often advertised advantage of incorporating, that you can manipulate your salary in order to save on tax dollars, is real because of corporation laws. However, the IRS frowns on this practice. When your business is successful and making a lot of money, definitely check with your accountant on the advantages of incorporating.

As a corporation, you'll be subject to a number of other drawbacks as well: generally higher state taxes, stricter laws concerning the operation of your business, more elaborate accounting procedures, and legal papers that are required just about every time you make a major move or sign almost any contract. Thus, your legal and accounting fees will be much higher as a corporation than will those required for a sole proprietorship type of business.

As a sole proprietor or partnership, you'll find many areas require the registration of your business name. The cost however, is minimal, ranging from $5 to $100. About the best way to find out what laws apply in your area, is to call your bank and ask if they need a fictitious name registration card or certificate in order for you to open a business account.

Selecting a name for your business is quite important to you and particularly relative to advertising. Your business name should describe the product or services you offer. Fancy names such as, Linda's Clipping Service will lose potential "walk-in and passing" customers to the beauty shop across the street that calls itself, Patti's Beauty Salon or Jane's Hair Styling Shop.

The advantage of using your full name in the title of your business, such as Johnny Jones' Meat Lockers, has the advantage of making credit somewhat easier to come by - provided you pay your bills on time - but it also includes the disadvantage of confining your services to a local or at most, a regional area.

Should you buy, lease, or rent a space for your business? Think twice before you make any decision along these lines. Most businesses tend to grow quickly or they never get off the ground.

There are a few exceptions, but only a very few, that tend to grow at a modified rate.

So, buying a piece of property and setting up your business on or within that property obligates you to ownership regardless of what happens to your business.

Leases are almost always very strong contracts written by attorneys to the advantage of the property-owner. When you sign an agreement to pay someone for the use of their space over any length of time, you're "nailed in" to paying for that space regardless of what happens to your business.

In the beginning, it's wise to either get the shortest-term lease possible, or arrange to rent with an option to lease at a later date. This does not apply to a retail business, unless your particular business happens to be an untried one.

Definitely, you should open a business bank account. In selecting a bank for your business, scout around and look for one that can, and will help you. Determine what your banking needs will be, and then via telephone, interview the managers of the banks in your area, the important convenient bank to your business location.

A point to remember: the closer you can make the relationship between you and the bank manager, the better your chances are going to be for approval on loans and/or special favors you may need at a later date.

Try to become acquainted with as many of the bank employees as possible. The better you know them, the more courtesies they'll be extending especially to you in the course of your association.

Just as a doctor is a specialist in his field, and you go to him for medical problems, your banker is a specialist in his field and you should go to him for your money problems. In business, you'll have to learn that everyone is an expert in his own line of work, and in your associations with other business people, refrain from acting like a "sharpie" and/or pretending that you know exactly how everything works in someone else's specialty.

You'll find that very often, different banks specialize in different types of businesses. As an example, you're sure to find banks that specialize in real estate transactions, export-import businesses, and even manufacturing operations only.

What I'm saying here is that if you're planning to sell a fairly expensive item, your customers will probably need and/or want financing. It will behoove you to select a bank familiar with your type of product that will afford your customers, through you, contract financing.

Some of the questions you should ask of your banker include the following:

Is it necessary to maintain a certain balance in your account before the bank will approve a loan for you? What qualifications must you have in order to obtain a line of credit with the bank? Does the bank limit the number of loans, or types of loans it will approve for small businesses?

What is the bank's policy regarding the size of a check you might deposit that requires holding for collection? And what about checks less than that amount - will they be immediately credited to your account?

In almost all types of businesses, it will be to your benefit to set up with your bank, a method of handling VISA, Master Charge, and regional credit cards. The important thing here is to ultimately set up your account in the bank that will service all of these credit transactions for you - one stop for all your banking needs. In most instances, you'll find that having the capability to fill orders/make sales via credit card transactions, will increase your volume of sales appreciatively.

Once you've made the decision as to which bank is going to handle your account, you'll need your Social Security Number or your Federal Employer's Identification Number, your driver's license, the fictitious name certificate, and if you're requesting a VISA or Master Charge franchise, you'll also need a financial statement.

For corporations, you'll also need a corporate resolution approving of the opening of your business account. There are different policies exercised in just about every state regarding installation/hook-up charges by the telephone and utility companies. Some require a deposit, and some don't.

You'll find that a great number of city business license departments are there solely for the purpose of collecting another tax. Depending on the type of business you're asking a license for, the building and zoning people may inspect your premises for soundness of structure and safety. Generally, you won't encounter any difficulties - you simply pay your fee to operate your business in that city, and the clerk types your name onto a city license certificate.

Relative to sales tax permits and licenses, each state's rules and regulations very widely. The best thing to do is call your state offices and ask for information concerning registry and collection procedures. Many states require an advance deposit or bond, and you'll find that some wholesalers or manufacturers will not sell to you at wholesale prices until you can show them your sales tax permit or number.

Should your business entail selling your products or services across state lines, in another state, you're not required to collect taxes except in those where you have offices or stores.

You may find also that your particular business requires the collection of Federal Excise Taxes. For information along these lines, check in with your local office of the Internal Revenue Service.

Some states also require certain businesses to hold state licenses, such as those required in many states for TV Repairmen.

These are known as "occupational permits" and are most often required of barbers, hair stylists, real estate people and a number of other consumer oriented businesses. If you have any doubts, check with your state offices for a list of those occupations that require licensing.

Any business doing business in any type of interstate commerce is subject to federal regulations, usually through the Federal Trade Commission. This means that any business that shops, sells or advertises in more than one state is subject to such regulation, and this includes even the smallest of mail order operations.

Normally, very few business people ever have and contact with the federal regulatory agencies. The only exceptions being when there is a question of your operating your business unethically or illegally.

Any business that sells or distributes food in any manner almost always requires a county health department permit. If your business falls into this category, simply call the county health department and invite them out to your place of business for an inspection. The fees generally range from about $25, depending on the size of your business when they first inspect it for permit approval.

There are also a number of businesses that require inspection by a fire marshall, and fire department approval. Generally, these are those that handle flammable materials or attract large numbers of people, such as a theater. Overall, the local fire department has to be allowed to inspect your premises whenever they desire to do so.

You may also run into a requirement for an air and/or water pollution control permit. These specifically apply to any business that burns anything, discharges anything into the sewers or waterways, or use any gas-producing product, such as a paint sprayer.

Without a doubt, you'll need to check on local regulations relating to advertising display signs. Each city or township makes its own rules and then enforces those rules according to its own thinking -check before you contract to have a sign made for your business.

The design and placement of your sign is very important to your business - specifically to retail establishments - but let me remind you that your business sign is usually the first thing a potential customer sees and as such, it should catch his eye and leave an impression that lasts. It would be a good idea to ride around your town and take a look at the signs that catch your eye, and try to determine the impression of the business that sign leaves on you. This is a basic learning formula for determining the design, size and placement of your business sign.

Some of the other things to consider before opening for business - If you intend to employ one or more employees, you'll be required to deduct Federal Income Taxes, and Social Security payments from their checks. This will involve your filing for a

Federal Tax Number and necessitates contact with your local IRS Office.

Most states have "unemployment taxes" which will have to be deducted from the paychecks of any employees you hire. And there are a number of states that have income taxes - disability insurance - and any number of other taxes. Again, the best thing to do is check with your local office of the IRS. And above all else, don't forget to ask for the rules of the minimum wage law, and comply.

When your business grows to the point of needing additional help, don't be afraid to look for and hire the help you need. When you're ready to hire someone, simply run an ad in your local paper and/or register your needs with the local office of your state's employment service. Businesses either grow or die, and those that grow eventually need more people in order to continue growing.

When that time comes, hire the additional people you need, and your business will continue growing. If you don't, for whatever reason, you'll find yourself married to your business and your business growth stymied.

Regardless of how small your business is when you begin, never walk in with the thought in mind that it's something to keep you busy. Anyone with an attitude of that kind is a fool. You begin and make a business successful in order to realize financial freedom. Establish your business. Put it on its feet, and then hire other people to do the work for you. And those businesses that require an operations manager, or someone to run a phase of the business you're too busy to handle, hire the person needed or the business will surely suffer.

To protect the investment of your business, you need business insurance. If you've never had any experience with business insurance, simply look under the heading of "business insurance" in your phone directory. Ask for bids from several different companies or agents...Primarily, you should have a policy that gives you general liability, fire, workmen's compensation, business interruption, and vehicle coverage. You may also want coverage against possible losses related to burglary, robbery, Life & Accident, Key Man, and Fidelity Bonds.

As the sole proprietor of a business, you won't be paid as an employee, so there will be no income tax deducted from whatever you withdraw from the company's earnings. What you'll have to do is a gain check with the IRS Office for a Tax Guide For Small Businesses Handbook, and probably end up filing an estimated tax return on a quarterly basis.

The minute you open your doors for business, you'll have to spend some time engaged in the work of bookkeeping. Exactly how, and using what forms, you keep books, should be on the recommendations of a good tax counselor...The same holds true for your overall business and/or payroll accounting system. Look for an experienced CPA that knows the accounting problems to your particular kind of business, and solicit his dvise/counseling.

If your business is going to involve the possible purchase or lease of operating equipment, again seek the help of your tax counselor for the most advantageous method of obtaining the needed equipment.

Basically, arranging for your suppliers to give you materials on credit will depend upon your honesty and personal financial statement. The best way is usually a personal visit to the person with the power to approve or disapprove of credit at the company where you want to set up a credit account. Show him your financial statement, and explain your prospects for success. Then assure him that you've always honored all of your obligations, and that if ever there's a question or problem, you'd like for him to call you at home. And of course, give him your home phone number.

We won't go into the exigencies of advertising your products, services or business here, but there is something along these lines you should always keep in mind. The best kind of advertising your business can receive is that you don't really pay for - publicity.

When something unusual happens to you, your business, or your employees - that's news, so be sure to tell the news media in your area about it.

In closing, let me say that the most important ingredient of your eventual success will be the soundness of the planning you did before you started your business. Any number of bad things can really throw your business into a tailspin, but it you've done your homework well - really set up a detailed business plan before starting - your losses or setbacks will be minimal. Success takes planning, and within this report, you've got a basic checklist...The rest is up to you...Good luck, and may your life overflow with success in all that you undertake from this moment forward.

www.johnthewriter.com

E-filing clicks for payers, IRS

Tuesday, February 20, 2007

 This year, for instance, filers relying on paper forms easily could miss taking certain tax breaks because forms mailed by the Internal Revenue Service weren't updated in time to reflect eleventh-hour changes to the tax laws. Some of those changes included deductions for higher education tuition and fees, classroom supplies and state and local sales taxes, which taxpayers can choose instead of deductions for state and local income taxes. There are reasons for sitting down with a pencil and calculator, of course. Some people don't have easy access to a computer or simply don't want to spend money to buy or access software needed to file a return online.

 But because it's far cheaper for Uncle Sam to process electronic returns than paper ones, the government tries to entice more people e-file with its Free File program, a four-year-old partnership with about 20 tax-preparation software companies that allows low- and moderate-income taxpayers to file electronically for free.

 According to the IRS, roughly 70 percent of taxpayers qualify for Free File. A list of companies in the program is available at www.irs.gov by clicking "Free File," then "Start Now," then "Browse All Companies."

 Be forewarned that Free File only applies to federal tax returns. Companies may charge for filing state returns. Be sure to read all terms before filing out any state forms online.

 Many Californians qualify for free online filing through the state's CalFile service. For more information, go to www.ftb.ca.gov/online/calfile.

 Taxpayers who don't qualify for free file can expect to pay up to $80 for desktop software or from about $10 to $40 to access the programs directly online. Desktop versions allow users to fill out multiple returns.

 Among the most popular packages, a basic, inexpensive program called TaxAct is a good choice for filing simple returns, said Jeremy Kaplan, executive editor of PC Magazine.

 For more complicated, itemized returns, Intuit's TurboTax and H&R Block's TaxCut are better choices, Kaplan said. Both come in various versions depending on the complexity of the filing and whether the taxpayer is using the online or desktop software. Both brands use an interview process to guide the user.

 "They walk you through all of the pros and cons of the option menus and provide you with advice on the best ways to fill out a certain form," Kaplan said.

TurboTax generally gets high marks for ease of use and for the help it gives investors trying to figure the cost basis for securities.

 TaxCut also offers one-on-one consultations with its tax advisers. The TaxCut Premium+E-file version, for example, includes one session with a tax professional via phone or e-mail.

The company also advertises free support on all electronically filed returns in the event of an audit, including help collecting the right papers and representation during an audit from an enrolled agent.

 "Fewer errors means you'll be less likely to be flagged," he said.

 The error rate is roughly 1 percent for electronic filings versus 20 percent for paper returns. That includes all types of errors, including math mistakes and missing Social Security numbers or signatures.

 E-filers who opt for direct deposit can expect a refund in two weeks or less, while paper filers typically wait between three and six weeks, depending on the volume of returns at that time. The wait can be up to eight weeks or more for people who file after April 1, when 30 percent of all returns typically flood in.

Featured Article: IR-2007-023: Free Tax Help Available at Sites Nationwide

WASHINGTON — More than 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations performing vital tax preparation services for low-income and elderly taxpayers.

The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help to people who earn less than $39,000. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.

“These volunteers help low-income taxpayers meet their filing obligations and claim the Earned Income Tax Credit,” said IRS Commissioner Mark W. Everson. “This is community volunteerism at its best.”

Today, many of these partners and local officials will be hosting news conferences or issuing news releases nationwide to highlight the Earned Income Tax Credit and their free tax preparation programs. The EITC is already the government's largest cash assistance program targeted to low-income Americans. However, not all eligible taxpayers may be aware or claim the credit.

Taxpayers need to bring to the following items to the VITA/TCE sites for tax return preparation:

0. Photo identification

0. Valid Social Security cards for the taxpayer, spouse and dependents

0. Birth dates for primary, secondary and dependents on the tax return

0. Current year’s tax package, if received

0. Wage and earning statement(s) Form W-2, W-2G, 1099-R from all employers

0. Interest and dividend statements from banks (Forms 1099)

0. A copy of last year’s federal and state returns, if available

0. Bank routing numbers and account numbers for direct deposit

0. Other relevant information about income and expenses

0. Total paid for day care

0. Day care provider’s Identifying number

To file taxes electronically on a Married Filing Jointly tax return, both spouses must be present to sign the required forms.

Trained community volunteers can help eligible taxpayers with all special credits, such as the Child Tax Credit or Credit for the Elderly. They also can help people claim the $30 to $60 telephone tax refund being offered this year. Individuals with no tax filing requirement should use Form 1040EZ-T to request the one-time only telephone tax refund. Also, many sites have language specialists to assist people with limited English skills.

In addition to free tax return preparation assistance, most sites use free electronic filing (e-filing). Individuals taking advantage of the e-file program will receive their refunds in half the time compared to returns filed on paper — even faster if taxpayers have their refund deposited directly into their bank accounts.

As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at nearly 8,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's Internet site.

The military also partners with the IRS to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. Volunteers are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the EITC guidelines.

If taxpayers owe, they can make a payment April 17 by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account, paying by credit (Discover Card®, American Express®, MasterCard® or VISA® Card), or by check or money order(made out to the United States Treasury) using Form 1040-V, Payment Voucher.

 ______________________________________________________________________

By Joyce M. Rosenberg

ASSOCIATED PRESS

11:26 a.m. February 14, 2007

. Don't try it at home:

Small business owners should get tax help

Tax-filing Extension Expires Oct. 15; Don’t Overlook Tax Breaks, Choose e-file or Free File, IRS Urges

WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax breaks and then file their returns electronically using IRS e-file or the Free File system.

IRS Has $110 Million in Refund Checks Looking for a Home  

IRS Newswire November 14, 2007

Issue Number: IR-2007-189

Inside This Issue

WASHINGTON — The Internal Revenue Service is looking for 115,478 taxpayers who are due refund checks worth about $110 million after the checks were returned as undeliverable.

The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting.

“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”

The “Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Most Refunds

The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.

In fact, undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.

A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS.

Telephone Tax Refund

The list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The sharp increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.

Updating Your Address

Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service.

Taxpayers can update their addresses with the IRS on the “Where’s My Refund?” feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses.

A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form from IRS.gov or request it by calling 1-800-TAX-FORM (1-800-829-3676).

Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.

Direct Deposit Can Stop Lost Refunds

Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form.

Links:

• Want to hear more? Listen to an IRS interview on Undelivered Refunds(Editors: Download the .mp3 file to podcast from your Web site)
•  Where's My Refund?
• IRS Change of Address, Form 8822

Many of the more than 10.2 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. A record 58 percent of the 135.3 million returns received so far this year have been filed electronically.

In addition, the IRS urges all taxpayers with incomes at or below $52,000 to file their returns for free using the Free File link on IRS.gov. Seven in 10 taxpayers qualify to use the software and electronic-filing services made available through the Free File Alliance, a public-private partnership between the IRS and a consortium of tax-preparation software manufacturers. Telephone customers can also use Free File to request this year’s one-time telephone excise tax refund.

Taxpayers who have purchased their own software or use a paid tax preparer are also urged to file their returns electronically. Almost 78.8 million individual taxpayers have already used IRS e-file, a 9 percent increase over last year at this time.

Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers.

Paper filers, as well as electronic filers, who cannot pay what they owe, may be able to set up a payment agreement with the IRS. Check out the Online Payment Agreement section on IRS.gov for more information.

Anyone expecting a refund can get it sooner by choosing direct deposit. Nearly three in five refunds have been direct-deposited this year, a new record. This year for the first time, taxpayers can choose to have their refunds deposited into as many as three accounts.

Loans under siege:

Lending practices draw fire

Consumer groups and lawmakers are pushing for closer scrutiny as problems spread through the subprime mortgage market

By Jim Wasserman - Bee Staff Writer

Home loan lenders, the financial services superstars that helped fuel the nation's housing boom with adjustable-rate financing, no down payments and loans that didn't require a verified income, are stumbling through a hostile new world.

As more of their loans go into default, Wall Street is punishing their stock prices. Federal and state lawmakers are threatening tougher rules to rein in their loosened lending standards. Mortgage companies across the nation and close to home -- including Folsom-based Central Pacific Mortgage, which shut down suddenly two weeks ago -- are imploding under the weight of risky loans and rising defaults.

One of the biggest of them all, Irvine-based New Century Financial Corp., which specialized in risky, or subprime, loans to borrowers with bad credit history, is in tatters. Its stock is down nearly 97 percent from its one-year high last May.

On the street ever more people who received easy money from mortgage firms are themselves reeling. They're missing payments, being served with notices of default and losing their piece of the American dream.

"It's shocking to see the foreclosures in the paper," said Sen. Mike Machado, D-Linden.

Machado is chairman of the state Senate's Banking, Finance and Insurance Committee and represents a Central Valley straining under the weight of its home loans. According to LoanPerformance.com, five Valley locations -- Sacramento, Merced, Modesto, Stockton-Lodi and Yuba City -- are among the nation's top 10 metropolitan areas with the highest incidence of subprime loan delinquencies.

Machado said he's seeing "good, functioning communities" suffering because of foreclosures. Last month, 455 people lost their houses to foreclosure in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties compared with 59 in February 2006.

Following a recent committee hearing rife with horror stories -- about lenders inflating borrowers' incomes, not explaining what they were getting into and committing outright fraud -- Machado introduced a bill to crack down on the industry.

It's a profound and sudden shift in fortunes for a home loan sector that many now believe flew too high during the boom. As the recent housing euphoria has morphed into an era of rising foreclosures and overdue mortgage payments, Machado and others are asking how much responsibility lenders bear for a sudden and worrisome new economic landscape.

It's a question with serious reverberations for the future. Borrowers may find it tougher to qualify or refinance, and mortgage firms say that could adversely affect the real estate market. Developers and even sellers of existing homes worry that a reduced number of buyers could significantly curb sales and values. That has real consequences for an economy that has thrived as the housing market boomed.

There is plenty of blame to go around.

As home prices soared in recent years, the mortgage industry produced a dazzling array of innovative and riskier ways for borrowers to surmount the affordability problem, especially in California. And a new generation of borrowers seemed ever willing to suspend common sense and overlook the fine print -- adjusting interest rates, prepayment penalties, the consequences of minimum payments -- to buy the house of their dreams, no matter how far beyond their means.

"People know if they agree to these things they'll get the house tomorrow, and that's their only concern," said Raphael Bostic, a former Federal Reserve Board staffer who specializes in real estate and credit at the University of Southern California.

Now many of those borrowers are getting walloped, and the lending industry is receiving a large share of blame for stoking the fires beyond all reason. On both sides of the lender-borrower divide, people who should have known better didn't say "no."

What now?

Experts say in coming months there will be more legislative moves to rein in the most aggressive lending practices. That will likely spur orchestrated resistance by sectors of the mortgage industry.