Tag Archives: Taxes

Get those reports in!

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As the treasurer of more than one tax exempt organization, I’m spending a good portion of the New Year Day sorting paperwork, filing paperwork, and creating paperwork. All of this paperwork will be required when the “real” paperwork needs to be filed later with the IRS and California’s FTB. But I digress … already.

One thing I noticed while going through one organization’s operation expenses was how much postage and other fees consumed. This organization has $24 annual dues – Which means that they spent eight members’ dues on postage, three members’ dues on taxes and so on. In fact, their operations’ expenses consumed the dues of more than a quarter of their members.

Try visualizing all their members standing in a room – Now put 25% in a corner and take their membership dues. It won’t go toward events nor activities. It’s just the overhead to run the organization. Seems like a lot … but I’m looking at the numbers right here. There’s not a lot of waste.

Another thing that I observed was me accelerating state and membership fees into 2010. In fact I tried to pay as many bills in 2010 as possible – Just to make 2011 look better.

Suddenly it hit me – This is no different than the controller at my last job forever harassing me to get my expense reports in on time so her next month would look good! Think it would make her feel any better if I called her up and explained that I now feel her pain?

Nah, I didn’t think so either …  ;-)

“Enjoy” paying taxes?

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April 15 was busy this year. Not only did I have my own taxes to file, but a couple tax-exempt organizations I work for had their own share of paperwork. Fortunately, they are all small enough that a Form 990EZ was acceptable, not the onerous Form 990.

Except that one organization had advertising income, aka UBTI, or Unrelated Business Taxable Income. Yeah, that’s right. Even tax-exempt organizations have to pay taxes on “unrelated” income. And advertising in our member magazine is not “related” to the primary cause of the organization.

It gets better – If your unrelated income grows too much, then you have to make quarterly estimated tax payments. Yup, this organization gets to make estimated payments in 2010. California is no problem – California accepts normal checks.

But the feds require special deposit slips to accompany the deposit. And you can’t just mail the payment in. Only certain banks and financial institutions can accept these estimated payments.

(Ed.: This makes NO sense at all to me – If I can mail my annual tax obligation to the IRS, why can’t I mail quarterly payments?)

Meanwhile, the IRS has established EFTPS (Electronic Federal Tax Payment System) to simplify the payment process. Not wanting to jump through the deposit slip/bank process hoops again, I applied.

Yesterday, the application was approved and my credentials arrived. One sentence on the document caught my eye. Read the very last one asking me to enjoy paying taxes …

Who wrote that?

Taxes and Pablo Escobar

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taxespabloescobarIf you live in cash-strapped California and file your taxes on-line expecting a refund, you’ll receive a short email from the California Franchise Tax Board (FTB) that states that … well … you may have to wait. As a courtesy, the FTB also provides a link to a page that tells you how long your wait will be.

But more intriguing was a link a little further down the page that exposed California’s 250 largest tax scofflaws. The #1 ranking went to Winson T Lee, who owes just under $10M – When you consider California’s top marginal tax rate is 10.3%, that means Mr. Lee earned $96M, give or take a couple million. I guess if you’re going to go delinquent on your tax bill, go in style!

Further down the list were performers Sinbad and Dionne Warwick – They made the top 10 – And somewhere close to the bottom was Burt Reynolds, but those were the only names that really stuck out … except for another guy around #200 – Pablo Escobar of Huntington Beach!

You were probably wondering when I was going to get to ol’ Pablo?

Last I heard, Pablo Escobar, the Colombian drug lord, died in 1993. While some details of his death are in dispute, it’s generally agreed he’s dead. Does the State of California not know that?

I’m guessing one of two alternatives – Either a) some part of the drug lord’s ill-gotten assets are in California financial institutions and this is California’s way of getting to them, or b) some one’s parents named some poor innocent kid Pablo Escobar not knowing about his namesake’s reputation. Talk about a double whammy, sharing a name with a drug lord (that probably puts you under the microscope every time you fly or apply for a passport) *and* being delinquent to the FTB.

So why am I even bothering? Can you figure out any better way to tie taxes and drug lords together?

Political Humor. Or Absurdity?

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arnoldHere’s a thought about my previous post and taxes – The 1% sales tax increase looming before all California tax payers is a result of the 2009 state budget package – A package authored almost exclusively by Democrats, and almost universally opposed by Republicans. If you follow the political pundits, that seems pretty normal.

But now consider the sales tax refund, an effective tax decrease. It is part of the Federal Stimulus package that was authored almost exclusively by the Democrats, and almost universally opposed by Republicans. Huh? The parties switched positions?

Yes, I know much more goes into the State Budget and the Federal Stimulus, but isn’t there just a bit of humor in both parties switching positions and just opposing each other on political grounds. You’re right, that isn’t humor, that’s sad… and absurd.

And just for the record, California, at 7.25%, already has the highest state sales tax in the nation. 8.25% seems way to high!

Tax Confusion

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federalstimuluspackageEarlier today an email arrived from my local motorcycle dealer advising now was the right time to buy a new motorcycle. After the Federal Stimulus Package was enacted that provides for an income tax deduction of state’s sales taxes on motor vehicle purchases, but before California’s 1% sales tax increase goes into effect.

I had to think about that for a minute. Yes, the state’s sales tax rises from 7.25% to 8.25% on April 1, meaning that (hypothetical) new $20,000 motorcycle will cost $200 more in sales tax, or $1,650 total!

But the stimulus package will allow me to deduct the $1,450 (pre-Mar 31) or $1,650 (post-Apr 1) sales tax. Figure I’m in the 28% tax bracket – Then that translates to a $406 or $462 tax reduction next year!

What does all this mean?

  • Purchase bike today: $20,000 + $1,450 - $406 = $21,044
  • Purchase bike Apr 1: $20,000 + $1,650 – $462 = $21,188

OK, the dealer is correct that a purchase today will save some money ($144 to be specific), but that’s only a 0.68% savings *and* I won’t get the money back until I file my 2009 taxes a year from now.

So I’m probably not going to buy a new bike today …