Which party is better for the markets?

Thanks to Ben Cunningham for passing along the following:

IRS ‘exam’ is something no taxpayer cares to take

Imagine Uncle Sam’s Mitts Off Your Paycheck – A good report on the status of the Fair Tax Act, which would replace the income tax with a national sales tax.

Tax collection, IRS served up with a wicked smile

I received the following email in regard to this article explaining how lenders often require borrowers to sign IRS Form 4506, allowing the lender to obtain personal tax info directly from IRS.

Kerry…Were you aware of form 4506?? I was not even aware this existed…scary as hell. This means the govt has essentially become a partner in coercion to give up privacy rights. Ben

http://www.miami.com/mld/miamiherald/living/home/8170552.htm

“Case in point: Kathie Street, a mortgage broker in Bellingham, Wash., recently was ordered by a national lender to instruct her loan customers to sign — but not date — an IRS Form 4506 as a condition of funding their loan. If the clients refused, the loan would be canceled.

IRS Form 4506 grants lenders access to multiple years of private tax returns for up to 60 days after the borrowers sign and date the form. Widely used in the mortgage industry to combat fraud, the form directs the IRS to provide either full returns or transcripts showing key details of the taxpayers’ filings.

The form carries explicit instructions that taxpayers must date and sign it. . By signing, but not dating, Form 4506, mortgage applicants essentially allow unknown persons to date the form and receive up to four years of IRS tax filings, no questions asked. There are no controls over their subsequent use of the income and tax information.”

My response:

Ben:

I am well aware of the use of that form by lenders for the past 15 or so years and I have a lot of experience with this matter. It’s the lenders’ method of verifying that the tax returns provided as part of a loan package are the same ones that were sent in to IRS. It was a reaction to a very real problem, where people were making up dummy tax returns in order to qualify for loans, and later they defaulted on those loans. That kind of thing does still happen nowadays and is even easier for people to do with do-it-yourself software, such as TurboTax. Over the 28 plus years I have been a tax pro, I have had several requests to prepare dummy tax returns for lenders, and I still receive occasional such requests; however not as many as previously, since I chewed out several loan brokers for sending their clients to me for this illegal action.

It is similar to lender verification of tax returns with the preparers. I often receive copies of tax returns that I had prepared from lenders asking me to verify that it was the same as what I had prepared. The only time I can recall it not being correct was about a dozen years ago when a lender sent me a copy of a tax return I had allegedly prepared for a married couple. It had my name as preparer; but when I compared it to my copy of the return I had prepared for that couple, it was very different. Their loan broker had dummied up a tax return, using my name and completely different numbers. To say the least, I was outraged at this and filed complaints with every regulatory board imaginable to nail that loan broker. I also terminated all connection with those clients. To the best of my knowledge, nothing was ever done to that loan broker and the lender didn’t call in the loan, which was their right after discovering such false information from the borrowers, my former clients.

While it may seem to be a violation of personal privacy to have borrowers sign Form 4506, I really can’t get too worked up about it. With all of the personal financial info we are forced to provide to lenders, as well as the open access they have to our credit histories, the 4506 isn’t that dangerous.

I hope this real world perspective on this matter gives you a better understanding of this issue.

Kerry Kerstetter

A Follow-Up on Health Savings Accounts

Last year, when our rulers in DC were crafting the tax cuts, they played fast and loose with the effective dates for the various provisions of that bill. In their classic smoke and mirrors style, they set up most of the tax cuts to be temporary, with varying expiration dates.

At the time, they claimed that they would later go in and make them permanent. However, they still haven’t done so, and the first part of that bill turns into a pumpkin next year, 2005.

Regardless of who wins the November election for the White House, if our rulers in Congress don’t do something to either extend these tax cuts – or better still, just make them permanent — everyone’s taxes will go up next year. We all should be pestering our CongressCritters to act ASAP on this matter. Doing nothing is tantamount to raising all of our taxes.

Thanks to Andrew Roth of MoveRight.org for posting this PDF version of the impending tax increases. I thought it was so important, that I converted that to HTML and posted it on my website so that we can refer to it often. I’ve also added a link to it in my BlogRoll on the right side of this page.

From a recent Fark PhotoShop contest with the theme of Truth In Advertising:

Big-bill bearer: Just a mistake – The idiot woman who tried to use a million dollar bill to buy things from Wal-Mart claims it was a mistake, but that she thought the bill was real. Definitely a John Kerry voter.

Pals tell all about counterfeiting – These idiots even burned up some of their fake twenties while cooking them in a microwave oven.

Dialing For Dollars – I’m always interested in creative ways people try to make money. Of course, some of those ways aren’t exactly kosher. These guys scammed the phone company out of half a million smackers by auto-dialing two million 800 numbers and receiving a commission of 24 cents for each call.

Or, as I like to say, “free advice is worth every penny you pay for it.”

It never ceases to amaze me how useful the QuickFinder books are. As I’ve said on several occasions, I have been buying them for each of the past 20 plus years and refer to them a number of times each day.

They add new features every year, but I generally don’t have time to check out every page when the new editions arrive. I was looking through the 1040 book for something today and came across this excellent two-page summary of idiotic arguments used by tax protestor morons, and the reasons why they are wrong. I pulled out my QuickFinder book from last year, and confirmed that these pages are new for the 2004 book.

Counterfeit Stamp Use on the Rise – With the cost of postage always going up, and higher denomination stamps being issued (we buy lots of $3.85 stamps for Priority Mail), this shouldn’t be a surprise. Postage stamps are just like cash, and I can remember back when people did use them as a means of sending payments through the mail. I’ve long wondered why IRS didn’t include postage stamps as a “cash equivalent” on Form 8300, where cash transactions of over $10,000 are to be reported.