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Man Loses Home After Failing To Pay $8.41 In Property Taxes

$8.41. That was how much 83-year-old Uri Rafaeli, a retired engineer, in Michigan underpaid his property taxes by in 2014. That was all it took for him to lose his house.

Rafaeli bought a 1,500-square-foot Southfield home in 2011. He paid $60,000 for the property, and the deed was recorded by the Oakland County Register of Deeds on January 6, 2012. He put additional money into the home, too, as he intended to use the rental income from the property to fund his retirement.

Rafaeli believed that he was paying his property taxes on time and in full, but in 2012, he received notice that he had underpaid his 2011 tax bill by $496. He paid up in 2013 but made a mistake figuring the interest (interest also accrued while his check was in the mail): He was short by $8.41.

In response, Oakland County seized his property and put it up for sale. The home netted just $24,500 at auction; according to Zillow, the property is now estimated to be worth nearly $130,000.

The County kept the overage from the auction: $24,215 in profits, or 8,496% of the actual tax, penalties, and interest due (the debt had grown to $285 with penalties, interest, and fees).

It was all legal.

Under Act 123 of 1999, Michigan allows its county treasurers a great deal of authority to handle unpaid taxes, including rushing the tax foreclosure process. Under the Act, the property is considered delinquent if taxes aren’t paid in the previous year. If the outstanding taxes, fees and penalties remain unpaid after two years, the County can foreclose on the property; that’s much more quickly than before, when the average timeframe to move a foreclosure was five to seven years. Shortly after foreclosure, the former owner loses the right to buy back the property, and the County becomes the owner. At sale, the funds belong to the County. There’s no requirement to refund any of the proceeds to the owner even if the overage far exceeds the amount owed.

Rafaeli—and his lawyers—think that’s wrong. They took the matter to the U.S. District Court for the Eastern District of Michigan. The court found that Rafaeli—and a similarly situated plaintiff—suffered “a manifest injustice that should find redress under the law” but dismissed the claim for lack of jurisdiction.

Rafaeli tried again. He didn’t argue that he didn’t owe tax, penalties, interest and fees. But he did object to the County taking the excess. The County argued that Rafaeli had no rights to the equity because the General Property Tax Act does not expressly protect it. And that’s the reason that Rafaeli keeps losing: The courts have sympathy for his plight but have found that the law does not prevent the County from keeping it.

He’s not alone. Tens of thousands of properties in Detroit have been subject to the same kind of treatment. Many of those who owe taxes understand that they have a debt, but they don’t necessarily understand how to navigate the process or what the failure to pay on time can mean. As with Rafaeli, even something as simple as miscalculating the interest due, can have serious consequences.

Today, Rafaeli is represented by the Pacific Legal Foundation (PLF). PLF was founded in 1973 by members of then-governor Ronald Reagan’s staff as the first public interest law firm dedicated to the principles of individual rights and limited government. PLF is taking the case to the Michigan Supreme Court, arguing that keeping the funds is an unjust taking. If he wins, Rafaeli—and other landowners in similar situations—may be entitled to compensation.

According to PLF, the entire process, as it is happening now, is nothing more than government-sanctioned theft. “Predatory government foreclosure particularly threatens the elderly, sick, and people in economic distress,” PLF argued on its website. “It could happen to your grandparents. It could happen to you.”

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Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future, I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I earned an LL.M Taxation. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. At one such audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax. Just like that, Taxgirl® was born.

Source: Man Loses Home After Failing To Pay $8.41 In Property Taxes

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A short video explaining your property taxes and the role of the Assessor’s Office.

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TurboTax Glitch Led To $216 Million Tax Bill For Thrift Store Worker

Nobody likes getting a tax bill in the mail. It’s especially concerning when your tax bill is a bit higher than you anticipated. But what happens when it’s hundreds of millions of dollars more than you were expecting? Just ask Donna Smith from Aurora, Colorado. Smith, a part-time worker at a local thrift store, got quite the surprise when she opened a tax bill from the Colorado Department of Revenue to find that the state claimed she owed $216,399,508 in taxes.

Smith, who makes about $10 an hour, couldn’t understand the tax bill. To put the amount in perspective, it’s nearly a quarter of the City of Aurora’s entire budget for the year (report downloads as a PDF).

Smith’s returns are self-prepared, of sorts. Her mother, Diana Valencia, prepared Smith’s tax return for 2018 and couldn’t understand what happened. She told 9News that she went back to check the return, saying, “I mean, I thought, ‘Wow, was that an error on my part?’”

Today In: Money

It was an error – but not on Valencia’s part. Valencia used TurboTax to prepare the return. According to the Colorado Department of Revenue (DOR), the TurboTax software made an error tied to Smith’s federal taxable income.

A spokesperson from TurboTax confirmed the error, saying, “For a small number of TurboTax online customers that filed their taxes between June 13-16, there was an issue that caused select fields on their tax return to be incorrectly transmitted during e-file. The issue was quickly fixed and we have been working directly with affected Colorado taxpayers and the Colorado State DOR to help resolve.” If you were affected by the billing error and aren’t currently working to resolve the matter, you should contact the Department of Revenue at (303) 866-4622 to reach a citizen’s advocate.

The Colorado DOR pegged the number of affected taxpayers at 44. That doesn’t mean, however, that a few dozen taxpayers received multi-million dollar tax bills. According to Daniel Carr, Taxation Communications Manager at the Colorado DOR, that number represents taxpayers who encountered the same glitch using TurboTax software during a three-day window in June of this year. “What the taxpayer entered into TurboTax was correct,” Carr said, explaining that “an error in the TurboTax transfer reported incorrect amounts to the State of Colorado.”

The bills went out, explains the DOR, because “[o]n our end it was simply data in data out and we could only process what we were given by TurboTax. We cannot determine the accurate amounts based on the information provided.”

Once the errors were discovered, however, the DOR worked with affected taxpayers. “We have reached out to all of the taxpayers affected and are helping them resolve this issue,” says Carr.

That doesn’t mean that the taxpayers don’t have work to do. According to Carr, “Taxpayers, in this case, who kept a copy of what they submitted are able to send us that copy and we will correct the error. Otherwise, they would have to amend their return.”

(For more information on how to file an amended federal income tax return, click here.)

Mistakes happen all of the time – just maybe not quite this big. No matter the size of the return, taxpayers can protect themselves, Carr advises, by always keeping a copy of filed returns. And if the bill seems out of place? “Contact the Department of Revenue immediately to have it resolved.”

Don’t ignore the problem. That’s good advice for all taxpayers, no matter whether the bill is federal, state or local. In most cases – even when the bill is hundreds of millions of dollars – errors are totally fixable. But don’t wait and hope that it goes away: it’s important to reach out to the respective tax authorities to clear up any problems as soon as possible.

(For more on how to fix a mistake on your return, click here.)

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Years ago, I found myself sitting in law school in Moot Court wearing an oversized itchy blue suit. It was a horrible experience. In a desperate attempt to avoid anything like that in the future, I enrolled in a tax course. I loved it. I signed up for another. Before I knew it, in addition to my JD, I earned an LL.M Taxation. While at law school, I interned at the estates attorney division of the IRS. At IRS, I participated in the review and audit of federal estate tax returns. At one such audit, opposing counsel read my report, looked at his file and said, “Gentlemen, she’s exactly right.” I nearly fainted. It was a short jump from there to practicing, teaching, writing and breathing tax. Just like that, Taxgirl® was born.

Source: TurboTax Glitch Led To $216 Million Tax Bill For Thrift Store Worker

I just finished reviewing TurboTax 2018-2019, and I’m excited about how easy it is to use. 💵But, if you don’t qualify for free file (and it’s limited), they are one of the most expensive options for filing your taxes this year. Check out the full article with all the links here: https://thecollegeinvestor.com/20778/… Here’s what we’re going to talk about in this video: ▶︎ Look at the pricing of TurboTax Online 2018 – 2019 ▶︎ See how easy it is to file your taxes and why I like it so much ▶︎ The limitations of TurboTax Free Edition ▶︎ What upsells to avoid and what upsells you should consider Be sure to subscribe: http://www.youtube.com/subscription_c… ★☆★Resources Mentioned in this video:★☆★ 💵TurboTax 2018 – 2019: http://go.thecollegeinvestor.com/Turb… 💵TurboTax Amazon Deal: https://amzn.to/2EctYxn 💵H&R Block Online: http://go.thecollegeinvestor.com/HRBlock ★☆★ Want More From The College Investor? ★☆★ 💻 Check out my blog here: https://thecollegeinvestor.com/ Connect with me on Instagram: https://www.instagram.com/thecollegei…

How IRS Taxes Fire Victims

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Do wildfire victims worry about their taxes? You bet. How fire victims are taxed depends on what they collect, what they claim on their taxes, if they are rebuilding their property, their insurance and more. Another big variable is whether they sue PG&E. It can build out a complex tax picture, especially now that there is a new tax on litigation settlements, as many legal fees can no longer be deducted.

The IRS (and California’s notoriously tough Franchise Tax Board) require annual tax filings, so several years may be peppered with fire items. Say you lose a $1M home, but collect $1M from your insurance company or PG&E. There’s no tax, right? Not so fast. You need to know about the tax basis of the property, usually purchase price, plus improvements. Your property might be worth $1M when it was destroyed, but if the original purchase price plus improvements was only $100K, there is a $900K gain.

Does that mean a fire victim must pay tax on $900K? Not necessarily. If you qualify and replace your home, you can apply your old $100K tax basis to a replacement. That means you should not need to pay tax on that $900K gain until you eventually sell the replacement home. The replacement must generally be purchased within two years after the close of the first year in which any part of the casualty gain is realized. For Federal Declared Disasters, you get four years. However, if your insurance company has paid you enough to create even $1 of gain on your destroyed property, the clock for acquiring replacement property may already have started.

Another big issue is claiming a casualty loss. Up until 2018, many taxpayers could claim casualty losses on their tax returns. For 2018 through 2025, casualty losses are allowed only if your loss was the result of a Federal Declared Disaster. Most major California wildfires are a Federal Declared Disaster, but determining whether claiming a loss is a good move can be complex.

How to handle expenses for temporary housing and similar expenses can also be tricky. If your primary residence is damaged or destroyed, insurance proceeds intended to compensate you for living expenses like housing and food may be partially tax-free. However, if the insurance proceeds pay you for living expenses you would have normally incurred if your home had not been damaged, say your mortgage payment or your typical food expenses, that portion may be taxable income to you. If the insurance proceeds exceed the actual amount you spend on temporary housing, food, and other living expenses, that surplus can be taxable.

For victims who eventually get a legal settlement, how will it be taxed? Health problems from smoke inhalation or from the exacerbation of pre-existing medical problems can be enough for tax-free damages. Section 104 of the tax code excludes damages for personal physical injuries or physical sickness. But the damages must be physical, not merely emotional, and that can be a chicken or egg issue.

Most money in fire cases is fully taxable, and if you do not reinvest in time, you may have a big capital gain. However, up to $500K from a primary residence may be tax free for a married couple filing jointly. It isn’t only the IRS that collects tax. States do too, notably California, where all income is taxed at up to 13.3%, even capital gain.

Many fire victim plaintiffs use contingent fee lawyers. Up until 2018, it was clear that legal fees were virtually always tax deductible. Now, however, many legal fees are no longer deductible. Thus, some plaintiffs may have to pay taxes on their gross recoveries, even though 40% or more is paid to their lawyer, who also must pay tax on the same fees. The tax treatment of the legal fees has become a major tax problem associated with many types of litigation. Fortunately, if the money can be treated as capital gain, the legal fees can often be treated as additional basis or as a selling expense. In effect, it can mean paying tax only on the net recovery.

Understandably, most fire victims hope not to face any tax hit at all. That is possible in some cases, but it can involve scrupulous attention to timing and details. When it comes to taxes or fire, be careful out there.

This is not legal advice. For tax alerts or tax advice, email me at Wood@WoodLLP.com.

Check out my website.

I handle tax matters across the U.S. and abroad (www.WoodLLP.com), addressing tax problems, tax disputes, writing tax opinions, tax advice on legal settlements

 

Source: How IRS Taxes Fire Victims

Do You Know Where Your Money Is? IRS Has More Than $1.4 Billion In Unclaimed Tax Refunds

The Internal Revenue Service (IRS) might have your money. The tax agency has announced that more than $1.4 billion in outstanding refunds remain unclaimed from 2015. Yes, billion. That represents more than one million taxpayers who might have qualified for a refund but who did not file a federal income tax return for 2015. If you are due a refund, you must file a federal income tax return to get your money. You typically have a three-year window following the return due date to claim your tax refund. To claim your refund for the 2015 tax year, your return must be postmarked on or before Tax Day, April 15, 2019 (except for taxpayers in Maine and Massachusetts, who have until April 17, 2019).

Source: Do You Know Where Your Money Is? IRS Has More Than $1.4 Billion In Unclaimed Tax Refunds.

Patagonia’s Billionaire Founder To Give Away The Millions His Company Saved From Trump’s Tax Cuts To Save The Planet – Angel Au-Yeung

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Yvon Chouinard, billionaire founder of outdoor apparel firm Patagonia, has traditionally shied away from politics. But things have changed for the rock-climbing, fly-fishing outdoorsman since Donald Trump moved into the Oval Office. On Wednesday, Patagonia announced it has an additional $10 million in profits on its books for 2018 as a result of Trump’s “irresponsible tax cut” last year, which lowered the corporate tax rate from 35% to 21%. Instead of investing the additional dollars back into its business, Patagonia said it would give $10 million to grassroot groups fighting climate change, including organizations that work in regenerative organic agriculture to help reverse global warming.

 

 

 

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