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Enforcing Tax Laws Works. Go Figure.

This article was written by in Taxes. 27 comments.

Earlier this Fall, the IRS was offering an amnesty program for offshore tax cheats to come forward and admit their wrongdoing, thereby getting a more lenient punishment.

Nearly 15,000 Americans who knew they were cheating came forward and admitted their bad behavior. From Reuters:

While IRS officials were still analyzing the amount of offshore assets declared in the amnesty program, Shulman said, “we are talking about billions of dollars coming into the U.S. Treasury” from the new disclosures.

This is not the end of the story. Combining these (perhaps) brave souls to the 4,450 accounts which are forcibly being turned over from the Swiss bank UBS, there are just under 20,000 leads that the IRS is now following. For example, they may find that some of the largest account holders were advised by the same unscrupulous high-powered tax adviser. And now we know his or her name, and we can investigate, and find even more cheaters.

This is happening on a State level, as well. According to the Wall Street Journal:

This year, 12 states had amnesties, up from the annual average of two or three. Another 10 or 15 are likely to follow suit in 2010.

If you live in a State with a State Income Tax, and you suspect you might be guilty of tax evasion, I’d recommend you set up a news alert for “[state name] tax amnesty” so that you can have plenty of time to weigh your options.

The Editorial Part

On a personal note, this will probably end up being my favorite story of the year. It takes the cynical view that if you’re wealthy enough, you can buy the power needed to keep more than you’re supposed to, and makes a big ol’ dent in that belief.

We have a big budget deficit, and I believe that’s because the previous administration’s ideas didn’t work out the way they were supposed to. Many people fear that their taxes will be raised as a result, though the only plans I’ve seen to raise taxes will affect maybe 5% of Americans. Amazingly, some people think that their taxes have already been raised (these people are either getting their news from some untrustworthy sources, or their paychecks are coming with a free mirage).

Happily, sometimes you don’t have to raise taxes; you just have to be serious about collecting them.

Nearly 15,000 Americans admit offshore tax cheating, Kim Dixon, Reuters, 17 Nov. 2009
More States Jump on Tax-Amnesty Bandwagon, Arden Dale, Wall Street Journal, 19 Nov. 2009

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Are You One of the 4400 (Tax Evaders)?

This article was written by in Taxes. 19 comments.

Every so often I come across a news story that’s more enjoyable to read when I add a vindictive “ha ha ha ha ha” after each sentence. For example:

Rich Americans who have evaded taxes by hiding foreign holdings have about a week to turn themselves in to an Internal Revenue Service amnesty program or gamble they will not be caught.

Ha ha ha ha ha!

In fact, most of this news article is enhanced with a little maniacal laughter. That is, unless you’ve been in the habit of hiding money you owe the IRS in a Swiss bank account maintained by UBS AG. And since hiding money from the IRS is equivalent to stealing from your fellow citizens (in the form of, for example, making sure the bridges you all use never get the maintenance they need, and schools are using outdated books, etc.), I’m thrilled to see this moving forward.

IOUIt would’ve been better if we’d managed to get the names of all of the American cheaters hiding the needed pothole-fixing money in Switzerland (the original stated goal was to get the names of 52,000 account owners), but I won’t let that get me down. I never thought I’d see even this much go-get-em attitude from the IRS. (I should point out that this isn’t a Democratic or Republican plan – it started under Bush and Obama is simply continuing it.)

The fun part now is that nobody is saying yet who is on the list of about 4,400 account holders that will be turned over to the IRS, so the IRS started an “amnesty” program for volunteers who are willing to come forward now, instead of risking a worse punishment later.

The IRS said that, in one week of July, about 400 individuals turned themselves in under the amnesty program. That was four times higher than the number of tax evaders who stepped forward in all of 2008, according to the agency.

The risk of not joining in the amnesty program now is paying much more than you owe and possibly criminal prosecution. The deadline is September 23, 2009. Here’s the amnesty program Q&A page on the IRS web site, in case you think you might need it.

By the way:

At the same time, IRS officials have said other foreign banks are being queried for possibly helping the wealthy evade taxes, although they have declined to be specific.

Ha ha ha ha ha!

Tax evaders rush to beat amnesty deadline, Kim Dixon, Reuters, Sep. 24, 2009

Image credit: zolierdos

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10 Tips for Buying a Residential Rental Property, Part 2: Find the Right Neighborhood

This article was written by in Real Estate and Home. 14 comments.

As I mentioned in my last entry on this topic, rental property ownership can reward or punish you for decisions made during the buying process, so it’s crucial to make the right ones. It’s about much more than just getting the right price. Here’s my next tip in the series.

2. Find the right neighborhood.

Rental properties don’t always make good neighbors, but there are a few tricks to making it work. Overall, it’s important to find a community where your rental property will have a good chance of being accepted, and the ritziest corner of town may not be it. Even a terrific landlord with a pristine property can run into neighbors who just don’t want rentals in their community and will vocalize their feelings to local officials, resulting in increased scrutiny and eventually, tighter regulations. On the other hand, it’s hard to find and keep good tenants in bad areas, where crime rates may be higher. If you are looking to buy in an area where you feel this may be an issue, I advise driving around the area after 11 p.m. on several occasions during the week and weekend to get a feel for what the area’s really like after dark.

I’ve had the best luck with solid working-class neighborhoods, generally middle to lower income areas where tradesmen and even some businesses might reside, intermingled with the houses. One can often tell these neighborhoods by the work vans and trucks parked in the driveways. Not only do the residents understand the value of hard work, they appreciate the effort I invest in rehabilitating and improving my properties. Your presence in the neighborhood should help to make it a better place.

Proximity to one’s neighbors is an important factor, too – too close and there’s an increased risk of your tenants disturbing them or vice versa. Noise, garbage, and visitors all become more of an issue when in close quarters. I prefer detached homes, since my tenant has more control of his/her environment that way. It’s a shame to lose good tenants because of the constantly-fighting couple in the row home next door. With attached homes especially, you run the risk of inheriting your neighbors’ maintenance issues. If the house adjoining yours has a leaky roof, you may find rainwater traveling down the common wall and damaging the drywall in your unit, as I learned the hard way two years ago. If you don’t own the attached property, it’s much harder to address the problem.

Regardless of what neighborhood you choose, you never want your property to be the worst-looking one on the street, or complaints and possibly citations may follow. If you choose a property which visibly needs maintenance, you should budget to correct these issues within the first year, and ideally prior to renting it at all. This helps to show the township or city officials that you’re one of the good landlords, committed to keeping your property up, and can make a huge difference in your experiences over the life of the property.

It just might even lead to future property purchase incentives. I know, confidentially, of one real estate investor who is able to purchase certain homes for a mere dollar apiece on the condition that he will completely rehabilitate the properties. Especially in lower-income areas, city officials may offer incentives like a reduced sale price or even temporary tax amnesty to investors whom they feel can help with community gentrification and housing projects. Each property you own serves as a reference to your work, abilities, and commitment.

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