The Philadelphia Inquirer is reporting that Jonathan P. Wiktorchik, a Bucks County chiropractor, has been charged with lying to the IRS and arson yesterday in a March 2008 fire. The fire destroyed his office and neighboring businesses.

At the time of the fire, Wiktorchik implicated a gang. He said that he was attacked by Spanish-speaking gang members shouting “Viva trece!” which means, “Long live thirteen!”

Wiktorchik had previously pleaded guilty to insurance fraud and lost his chiropractic license. In that instance, Wiktorchik was charged in 2007 with submitting about $90,000 of insurance claims for phantom visits billed under the name of several of his patients. Those claims represented about 1,800 procedures that were never done. Wiktorchik was eventually sentenced to serve 6 to 23 months in prison, 3 years probation and ordered to pay $50,000 in restitution and all court costs.

Wiktorchik also is charged with lying to the IRS. At the time of the fire, he was under investigation from the IRS for the tax year 2005. Wiktorchik claimed that his 2005 business tax records were destroyed in the fire but those records were actually in his home, and not at his office. There is no word on the amount of income in question or whether the audit will be extended to subsequent years.

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I’ve been getting a lot of questions from disabled taxpayers about whether any special tax breaks exist for them in 2009. The answer is yes – and no.

As I stated in a prior post, there was some economic relief for disabled Americans in 2009 in the form of the Economic Recovery Payment (ERP) – but it was not through the IRS. It was in the form of additional checks mailed out by the Social Security Administration, Railroad Retirement Board and the Veterans Administration. If you were eligible for a check, it will not affect your 2009 tax return unless you are also working and claiming the Making Work Pay Credit. You cannot apply for a missed ERP check through the IRS – contact the agency directly.

That said, taxpayers with disabilities may qualify for other tax breaks in 2009; unlike ERP, you can take advantage of these benefits by filing a tax return. They include:

Increased Standard Deduction. If you are totally or partly blind on December 31, 2008, and you do not itemize deductions, you are entitled to a higher standard deduction of an additional $1,100. If you are partly blind, you must get a certified statement from an eye doctor or registered optometrist that you cannot see better than 20/200 in the better eye with glasses or contact lenses or your field of vision is not more than 20 degrees. If your vision will not get better, that statement should be included.

Credit for the Elderly or Disabled. If you are over age 65 or under 65 on permanent and total disability, you may be eligible for an additional credit. You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. A physician must certify that the condition has lasted or can be expected to last continuously for a year or more, or that the condition can be expected to result in death. Income limits apply. To take the credit, you’ll need to complete f1040sr.pdfSchedule R (downloads as a pdf). If you want the IRS to figure the credit for you, attach Schedule R and check the appropriate box.

Medical Expenses. If you itemize your deductions, you may be able to deduct medical expenses. The expenses must be at least 7.5% of your AGI in order to qualify – and then you can only deduct expenses over that amount.

Dependent Care Credit. If you pay someone to take care for your dependent or spouse, you may be entitled to claim this credit. There is no applicable age limit if your dependent or spouse is unable to take care of themselves. To figure the credit, complete federal form 2441 (downloads as a pdf).

Taxpayers should also keep in mind that certain disability-related payments such as Veterans Administration disability benefits and Supplemental Security Income are not taxable for federal income tax purposes.

If all of this is a bit overwhelming – or if you think you might qualify for other credits, such as the EITC (earned income tax credit) – there is free help available.Similar Posts:

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Taxpayer asks:

I heard that I can get more money back from my taxes this year because I am disabled. Is this true? I am on fixed income and it would help me.

Taxgirl says:

I think what you’re referring to is the one time payment for retirees and disabled persons as part of Obama’s stimulus package for 2009, called the American Recovery and Reinvestment Act of 2009. It’s also referred to as the Economic Recovery Payment (ERP).

If you were eligible, you should have received a check for $250 sometime in 2009 directly from the Social Security Administration, Veterans Administration or the Railroad Retirement Board. Payments would have been made to:

• Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration;
• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs; or
• Railroad Retirement beneficiaries.

The check would not have been issued by the IRS.

If you can’t remember whether you received a check, you’ll need to contact the respective agency:

Social Security Administration: Toll free number is 800-722-1213.
Veterans Administration: Toll free number is 800-827-1000.
Railroad Retirement Board

This is not an IRS issue. It only affects your taxes with respect to the Making Work Pay Credit. In the event that you are also eligible for both, the Making Work Pay Credit would have to be reduced by the amount of your Economy Recovery Payment. If you report that you did not receive a check and you did, your tax return will be bounced. I’ve already heard of a few that have been returned for this mistake, so be careful.

Otherwise, there are no new credits or payments available from IRS for the disabled for 2009. I do have a post coming up about existing credits – so keep reading!

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirlSimilar Posts:

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If there’s one thing that both parties in Congress can agree on, it’s that any hope for economic recovery is going to hinge on getting unemployment under control. At the end of 2009, one out of every ten Americans able to work wasn’t working.

Fortunately, there’s some good news. Last month, the national unemployment rate dropped to 9.7%, the lowest since August. In addition, the manufacturing sector added jobs for the first time in three years.

It’s certainly encouraging but likely not enough to signify a recovery. That’s why Democrats and Republicans are working together to get a jobs bill passed this week. The bill will provide a tax break for companies who hire unemployed workers; the measure would exempt companies from paying the employer’s share of Social Security payroll taxes for new workers so long as those new employees had previously been unemployed at least 60 days. That’s equivalent to a 6.2% reduction in overhead costs for a small business. If it passes, it would be a substitute for Obama’s proposed $5,000 tax credit for small businesses who commit to new hires. The Senate plan is cheaper and considered less likely to be abused than Obama’s version.

While it looks likely that the Senate will pass some version of the bill, it’s not so certain in the House. Reportedly, a number of Representatives doubt the efficacy of a bill which creates jobs if there are no consumers willing to buy goods and services. I have one question for them: what do you suggest instead? It’s awfully easy to sit back and try nothing. After all, our good friends in Congress are employed – to the tune of $174,000 per year. Speaker of the House Nancy Pelosi (D-CA) takes home $223,500. Majority Leader Steny H. Hoyer (D-MD) and Minority Leader John Boehner (R-OH) each take home $193,400. Oh, and did I mention the benefits?

So, it’s of course it’s easy for members of the House to sit back with a “it’s not going to work” attitude without even giving it a go. They have no clue.

I’m not in Congress but I do own a business. And here’s the thing: our economy is very interdependent. I don’t buy the idea that giving the top more money will help everyone down the line any more than I buy the idea that the failure to buy goods or services at the bottom creates a standstill to the top. It’s not a straight line and it’s not a simple equation. It’s complicated. Financial incentives matter. If I could expand my business capacity with limited overhead, I would. And I think most small businesses would.

Why makes the House think they know better? And what do they have to lose by saying yes? It won’t cost them anything upfront and it would only apply if businesses actually made a new hire (which would, in turn, reduce unemployment payments). So, no hire, no cost. And it’s not a refundable credit, so nobody’s getting anything that they didn’t pay in. It’s a tax cut but for taxes associated with costs and not directly tied to profits. So it’s not a blanket tax cut – it’s a tax cut specific to businesses who create jobs. That feels like a good thing.

Last year, Idaho paid out more than $500 million in federal unemployment benefits. Georgia paid out $1.6 billion. We’re already bleeding money to pay for those who are unemployed. Why not try something new and try to kick start the economy by something other than simply throwing money at it with our eyes closed? Your thoughts?Similar Posts:

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Over the weekend, I had the opportunity to chat with Marjorie Kornhauser, a professor at the Sandra Day O’Connor School of Law at Arizona State University about her Tax Literacy Project. It’s an ambitious project, for sure. Her plan is to make tax law more accessible (!) to the general public through a series of interactive sites, games and more. I share her enthusiasm for the notion that everyone should understand what they’re paying and the mechanisms behind our tax law and policy.

The Tax Literacy Project focuses on federal income tax but much of the content will also apply to other federal, state, and local taxes. Although the idea is to appeal to the the general public, the Project will specifically focus on young adults, those potential taxpayers between the ages of 16 and 30, who are about to enter (or have just entered) the workforce.

The Project’s web page is scheduled to launch early this year. I’ve already chatted with Professor Kornhauser about establishing a presence on twitter and she’s in the process of setting something on Facebook. They’re also setting up an advisory board to drive the Project forward and it’s my understanding that there are some pretty high profile folks signed on already.

I’ll keep you informed as more information becomes available, including the launch. In the interim, if you’re interested in helping out, the Project is seeking some funding. Every little bit counts, so if you have a few dollars to spare, I know that it would be appreciated. To make a contribution to the Tax Literacy Fund, you can make a secured donation directly to the university at https://secure.asufoundation.org/giving/online-gift.asp?fid=418 (no appeal code necessary) or make a check payable to the ASU Foundation and mail to :

Be sure and write Tax Literacy Fund (30004788) in the memo line of your check so that it’s directed to the Project.

I’ll be sure and let you know when the web site launches: keep an eye out.Similar Posts:

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Taxpayer asks:

Just before Christmas, I bought a 2007 VW Jetta. It was a great deal since it had very low miles on it. When I bought it, the dealer said that I could deduct the sales tax from my taxes but I read on your site that the car has to be new, not just new to you. Was this just a slimy, used car salesman trick?

Taxgirl says:

The post you’re referring to is this one and was specifically about whether the purchase of a new car qualified for the new sales tax deduction – the one that got all of the press that increased your standard deduction. The deduction is available to taxpayers who bought new vehicles from February 17, 2009, through December 31, 2009. In those states that don’t have a sales tax (Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon), taxpayers can take a deduction for other taxes or fees paid. The deduction is limited to state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle and phase outs for taxpayers whose modified AGI begin at $125,000 for individual filers and $250,000 for married taxpayers filing jointly.

What your dealer is likely referring to is the option at Schedule A to deduct your state and local sales taxes or your state and local income taxes. This was part of the American Jobs Creation Act of 2004 and has been extended for a few years at a time since – it still applies for 2009. So, for 2009, you can elect to deduct state and local general sales taxes instead of state and local income taxes as a deduction on Schedule A. You cannot deduct both.

If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and use that amount to figure your deduction. If you didn’t save your receipts, you can use the optional general sales tax tables in the instructions for Schedule A or use the IRS’ Sales Tax Deduction Calculator! I played around with it this morning – it’s pretty cool.

If you go the actual expenses route, you can deduct the actual sales taxes that you paid if the tax rate was the same as the general sales tax rate for your locality. On the plus side, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. But, and this may apply to you, if you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle.

So, if you itemize your taxes, you might still be able to claim sales taxes paid as a deduction on your Schedule A – which would make your dealer right. Run the numbers and see how they come out. Depending on the income tax rate in your state, this could make sense for you.

Oh, and one more caveat: the sales tax deduction is available to individual taxpayers for items of personal use. Do not include sales taxes paid on items used in your trade or business.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirlSimilar Posts:

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If you base it on the amount of screaming and jumping in my house alone, the most exciting moment in tonight’s Super Bowl coverage was Carrie Underwood singing the national anthem. But then, to my knowledge, neither Peyton Manning nor Drew Brees has appeared in an evening dress at the same event as Taylor Swift so they can hardly compete with that. If you have young daughters in your house, you totally understand.

That said, the Super Bowl this year is a pretty exciting match up. It’s estimated that more than 150 million people will watch all or part of the game in some fashion, either on TV or online. That’s a lot of people eating guacamole, drinking beer, complaining about how the commercials aren’t as good this year as last and betting on the big game. Experts predict that nearly half of all American adults will make some sort of wager on the big game.

We can’t all be winners, trust me. You’re talking to a girl who had Matt Leinart in her lineup for Fantasy Football at one point. And I’m an Eagles fan. I know about losing.

But if you lose in gambling, you can’t deduct it as a loss on your taxes unless – and this is a big unless – you can offset your losses with any winnings during the year. It doesn’t matter how much you lose: if you lose $100 or $10,000, your losses are limited to the amount of your winnings. If you don’t have any winnings, you’re out of luck (pardon the pun).

Assuming that you have winnings to offset those losses, you’ll report them on your Schedule A. Yep, that means that you can only deduct gambling losses if you itemize. It’s considered a miscellaneous deduction, though, thankfully not subject to the 2% limit.

If you win, you’ll need to pay taxes on your winnings even if it wasn’t a legal bet. Legal or not, gambling winnings are fully taxable and must be reported on your tax return. And it’s not just the Super Bowl… All of those Fantasy Football competitions for cash, office pools for March Madness and good natured World Series wagers – they all count, as do winnings from horse races, poker tournaments and casinos. You’ll report it on your line 21 on your tax return as “other income.” If you win from a legit gambling site or a casino, they’ll issue you a form W-2G and may even withhold taxes from your winnings; if you win big and are not subject to withholding, you may want to make some estimated payments during the year so that you’re not hit with an underpayment penalty at tax time.

Win or lose, it really is how you play the game. So be smart and keep a journal of your wins and losses. It will not only be great documentation for the IRS, it’ll be a great conversation piece some day. Unless you’re an Eagles fan, in which case it will be just a sad, sad statement on your over reliance on Andy Reid’s game management.

As for the Saints and the Colts? The official line on the Super Bowl is the Colts by four. Interestingly, that’s exactly what it was at the half.Similar Posts:

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Vanity Fair has released its list of the top 40 Hollywood earners in 2009. CNN has the entire list but here’s a peek at the top 10:

1. Michael Bay, producer-director ($125 million)
2. Steven Spielberg, producer-director ($85 million)
3. Roland Emmerich, producer-director ($70 million)
4. James Cameron, producer-director ($50 million)
5. Todd Phillips, director ($44 million) – no relation, sadly
6. Daniel Radcliffe, actor ($41 million)
7. Ben Stiller, actor ($40 million)
8. Tom Hanks, actor ($36 million)
9. J. J. Abrams, producer-director ($36 million)
10. Jerry Bruckheimer, producer ($35.5 million)

(And no, it didn’t go unnoticed that none of the top ten are women. Just sayin’.)

Looking at the list, I thought it would be fun to figure some of the estimated tax bills. Of course, I don’t know what kind of expenses they have or how they arrange their affairs – whether they have losses, huge mortgages, business expenses, etc. I just took the basics (married or not, income, kids) and tried them out on a tax calculator. TurboTax has a fun one – it actually handles income estimates in the hundreds of millions of dollars – so I used that one for most of my calculations. Here are the results:

Michael Bay is, so far as I can tell from his bios, single. He grossed $125 million last year at the age of 44. Using the standard deduction, his taxable income would be $124,991,867, resulting in a tax of $43,724,837. After paying about 35% in taxes, he’d walk away with about $81,275,163.

Steven Spielberg is a different story. He’s married to Kate Capshaw and has seven children: Theo Spielberg, who was adopted by Kate Capshaw before their marriage and later adopted by Spielberg (21), Sasha Spielberg (19), Sawyer Spielberg (17), their adopted daughter Mikaela George Spielberg (13), Destry Allen Spielberg (13), Jessica Capshaw, (33) and Max Spielberg (24). Spielberg was age 63 in 2009 and his wife was 56. I assume that all of the children under the age of 24 were treated as dependents. That means that Spielberg’s taxable income would be $84,971,569. His tax bill would be $29,710,411, or 35% – same as Michael Bay. The result? He pockets about $55,289,589.

James Cameron is similarly situated. He was 55 in 2009 – and married (for the 5th time). He has four children, the oldest is 16. His taxable income would be $49,981,301. His tax bite would be $17,463,417 leaving him with $32,536,583.

You’ll notice that all three producers paid a marginal rate of 35% whether they made $125 million or less than half of that. The same rate applies at $1 million. And half a million. The 35% rate kicks in at $372,950, making even the cast of many reality shows in the same tax bracket as Bay, Spielberg and Cameron.

Nothing earth shattering here, just some fun facts for the weekend.Similar Posts:

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Taxpayer asks:

I started a new business working from home in November 2009 and so far dont have income just losses. I also have my child in daycare and wanted to file his daycare tuition but with no income to report turbo tax isnt letting me use this. How do I go about using the daycare on my taxes? Thanks!

Taxgirl says:

Okay, don’t hate me for the answer on this one. You can’t claim your daycare expenses for 2009. You’re stuck.

This is the result of one of those really annoying rules that I’ve complained about before. The child care credit is dependent upon your qualify income. Qualifying income must be from wages or salaries or net earnings from self-employment. So that means if you report a loss on your business, you can’t claim anything. And if you only make a little bit of money, you can only claim a percentage based on that income. But if you’re a regular W-2 employer, your net doesn’t matter – you get to claim the credit based on your actual wages, not taking into consideration any deductible expenses.

While I get the technical reasons behind the rule (that you should offset expenses with income), I hate the policy behind it. It’s wrong-headed. But it is what it is.

Don’t shoot the messenger.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirlSimilar Posts:

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Taxpayer asks:

This last year I had a son born who only survived 1 day. Do I need to get a Social Security number for him? Do I claim him as a dependant?

Taxgirl says:

Gosh, I honest can’t imagine how difficult this is for you and your family. My sympathies and thoughts are with you and your family.

I do have a bit of good news for you. You can claim your son on your tax return and you do not have to get a Social Security number for him. You just need to attach a copy of his birth certificate, death certificate, or hospital records to your tax return. Then, write “DIED” in column (2) of line 6c of your Form 1040.

Again, my sympathies. I sincerely wish you some joy in 2010.

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – Now on Facebook at http://www.facebook.com/taxgirlSimilar Posts:

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