Tax Carnival # 80 – Tax Horror Stories Edition

January 31, 2011
/ Invest & Retire
/ By Jacob A Irwin

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Welcome everyone to the Carnival of Taxes! That’s right, the blog article festival where we party like it’s 1040…Form 1040 that is!

The purpose of the Carnival of Taxes is to serve as a continuing compendium of tax-related postings, ranging from tax news to commentary on taxes (and the politics and politicos who create them) to filing tips and tax-saving strategies.

I hope you enjoy the money stories and the tax horror stories spread throughout, and stop by to say “hi” again on my non-carnival days as well.

Editor’s Top 3 Picks

1. 39 year veteran tax professional, Robert D. Flach, presents What to Give Your Tax Preparer posted at THE WANDERING TAX PRO. In this very well-written, detailed piece, Robert explains what is necessary to give and not to give your tax professional when preparing your taxes. Read and learn!

2. MoneyNing presents Tax Time: Do I Have to Report that Income? posted at Money Ning. So, you’ve started a little home business, but the money is only dribbling in. When do you have to start putting that income on your tax forms for the IRS? Find out here!

3. Jeff Rose, CFP presents Flexible Spending Accounts (FSA) Changes for 2011 posted at Jeff Rose. In this post, Jeff takes us through the ins-and-outs of the changes for FSA accounts for this new year. I’ve read a lot of these “FSA Changes” posts this past month, but this one has some new details that I hadn’t read yet! Enjoy!

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Tax Horror Story # 1

“Boy do I have a horror story for you! My father passed away 10/90. His estate for tax purposes was assessed at 7.7 million dollars when it was re-evaluated. After six months it had not changed much so approximately 3.8 million was owed in death and estate taxes. Most of my father’s estate was in real estate and shortly after the six month period after his death, real estate took a dive. And every piece of property we sold to pay taxes sold at about 40% of what it was appraised at time of death.

Well it has been ten years since my father’s passing and we have still not seen any money. If and I do mean if we are lucky, then maybe at the end of this year after we pay the last $350,000 to federal and pay the state, my mother, sister and I may have all of $200,000 to split between us. Great.”

–Michael Stern

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Listed below are the rest of the great tax article submission for this edition (listed in order of 1st to last submitted):

Daniel presents Federal and State Estimated Quarterly Tax Payments are Due! posted at Sweating The Big Stuff.

Mike Piper presents Income Tax 101: Tax Brackets and Withholding posted at Oblivious Investor.

FreeFromBroke presents TurboTax Online Tax Software 2010 Review posted at Free From Broke.

Trent Green presents How Social Security and Medicare Payroll (or FICA) Taxes Work posted at Money for Regular People.

Miranda presents Tax Planning 2011: Things to Think About This Year posted at Personal Dividends.

Pinyo presents 2010 Tax Tables, IRS Federal Income Tax Rates And Tax Brackets posted at Moolanomy Personal Finance.

Andy presents 2010 Income Tax Brackets posted at moneywalks.

Money Thinker presents Watching for Common Tax Errors posted at Money Thinking.

Jim Yih presents Tax Smart Investing posted at Retire Happy Blog.

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Tax Horror Story # 2

Ghosts of Receipts Past

Julie faced her worst nightmare one evening when she came home to fire trucks in front of her burning home. To make matters worse the tax deadline was just around the corner and she could not recover enough of her financial document to prepare her return. Julie contacted the IRS to explain the situation, and told IRS personal how she had lost her entire archive of financial documents and receipts. Although she was able to file for an automatic extension, Julie was shocked to find an IRS audit letter in the mail less than two weeks later. Without any proof to back up the information in her previous returns, she was forced to pay over $18,000 in unpaid taxes and penalties.

—Rdtc.com

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Jason presents Common Tax Deductions Reminder for Filing Your Personal Income Taxes posted at One Money Design.

Control your Cash presents Read this and watch your taxes fall posted at Control Your Cash: Making Money Make Sense.

RC presents IRS to Start Accepting Itemized and Delayed Filer’s Tax Returns on February 14th posted at Think Your Way to Wealth.

Craig Ford presents The Best TurboTax Discounts | Save 35% Off posted at Money Help For Christians.

CreditCardGuru presents Can You Pay Taxes With Credit Card? posted at Credit Card Forum Blog.

FMF presents The Return on Your Social Security Taxes posted at Free Money Finance.

Kay presents Tax refund debit card pilot program raises Congressional questions posted at Don’t Mess With Taxes.

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Tax Horror Story # 3

I was fined by the IRS for missing a payment for my home based business while I was ill. I appealed with the help of my accountant and tax attorney. After a long winded process, I received a notice, by registered mail, to say my appeal had been rejected. The same day, there was a knock at my door and a man in an expensive looking suit flashed some ID and said he was from the IRS to collect a payment. He was inside before I had chance to object. He showed me a copy of the notice I had received and said he would like a check. Fortunately I had kept the money aside in a money market account so I could pay. Once he had the check he was much more pleasant. I asked if this was normal practice and he said that he almost always collects payments in this manner due to the “transient” nature of business owners in Southern California.

—About.com Reader

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Michael presents Social Security Contribution Limits ? 2011 posted at The Dough Roller.

Madison DuPaix presents 6 Free E-File Options posted at My Dollar Plan.

PT presents Ideas for Your Social Security Tax Break posted at PT Money.

Ann Douglas presents Tax Advantages of First Time Home Buyers Explained posted at DoorFly.com.

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Tax Horror Story # 4

A Cayman Islands Vacation Gone Bad

When most people hear the words “Cayman Islands” they probably think of a relaxing Caribbean vacation. However, many might also think about illegal tax shelters, as the islands are somewhat infamous for hosting the private bank accounts of many American tax evaders. A few years ago, Joe ran into a few problems of his own in the Cayman Islands. He and his business partners used to vacation in, and bank in the islands on a regular basis, until Joe’s vengeful ex wife got wind of the situation. She tipped off the IRS and Joe found out about it one afternoon when 25 federal agents stormed his home and business, ceasing all kinds of financial information. Joe was considered a flight risk and imprisoned under $5 million bail. It took dozens of court cases, and thousands of dollars in legal fees to prove his innocence, and resulted in a major lifestyle change for Joe.

—Rdtc.com
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Well – that concludes this week’s edition! Thanks for reading and a special thanks to all the contributors. We’ll be back in a few weeks with the 81st edition of the Carnival of Taxes!

Be sure to submit your tax-related articles (and tax-only items please; check the guidelines for details) via the Blog Carnival page.

Also, if you are interested in hosting an upcoming edition of the Carnival of Taxes, you can read the hosting requirements and submit your request at the following link.

***Photo courtesy of http://media.photobucket.com/image/taxes/mmatters/taxes.jpg

About the Author Jacob A Irwin

Hi folks! My name is Jacob. I am the owner and operator of My Personal Finance Journey. I started this blog in January of 2010 and have enjoyed the journey ever since. Since finishing up graduate school in Virginia in 2014, I have been working in biopharmaceutical development in Colorado. You can read more about me and this site here. Please contact me if you have any questions!

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