State settles with AT&T Mobility (Cingular) in cell phone fraud case

You may be eligible for a refund if your AT&T/Cingular cell phone was billed for ring tones, horoscopes or other services you thought were free. Florida Attorney Gen. Bill McCollum announced a settlement this morning that includes refunds for customers, a $2.5-million payment to his office and an additional $500,000 to pay for consumer education on safe internet use. The state said it expects the refunds to be between $10-million and $45-million, based on the information it received from AT&T.

"Consumers should never be billed for services they thought were free of charge," McCollum said. "Today's agreement establishes a precedent for wireless companies accepting responsibility for the charges placed on consumers' bills."

AT&T wasn't behind the fraud, but made the fraud possible by including the third-party charges on customers' bills. McCollum said the fraud often targeted teenagers who didn't realize by downloading a ringtone or other content, their phones would be charged a monthly subscription fee. As part of the settlement, AT&T agreed to set strict advertising disclosure standards for third-party providers.

AT&T will send a notice of the settlement to current account holders and to former customers for whom it still has an email address. A toll-free telephone number and Web site will be set up with information on how to make a claim.

No more suite deal for the Bucs games

If you were hoping to sit in the Trans Continental suite at Raymond James Stadium to watch the Tampa Bay Bucs, you've officially missed your chance. Here's Soneet Kapila's request to give up the luxury suite and club seats that Trans Continental had at RJ.

For those who always wondered what was involved in luxury suite agreement, here's the document Lou Pearlman and the Bucs' representatives signed in 2005. It's a 10-year agreement for suite US140, which is on the 45-yard line on the east side. It seats 12 in upholstered chair seats and four in bar stools. Sixteen tickets to each preseason and regular season game included. Price: $150,000 security deposit and $150,000 annual rent, subject to increases. In addition, Trans Continental had licenses on eight club seats (Document One, Document Two). The deposit was $1,750 for each seat, which may also have been the amount of the annual fee, but the documents are too blurry for me to decipher.

Kapila says he tried to sell Pearlman's interest in the licensing agreements, but didn't get any takers. He wants the court to approve rejecting the contracts. He says the Bucs agreed to cancel the agreements, waive any rights to damages and pay Kapila $3,000. It doesn't appear they'll be returning the security deposits.

Also: WESH story on possible plea agreement.

[Times photo]

    

Can I avoid paying taxes on the sale of stock?

Q: My adviser recommended selling some of the stocks in my portfolio. Here's my question:  If I sell stocks and reinvest all the money from the sale into my IRA, will I have to pay federal taxes?

A: If your stock portfolio is part of your IRA, selling stocks will not have any tax consequences. You only owe tax on an IRA when you withdraw money. If your your stock portfolio is in a separate taxable account, you definitely will owe capital gains taxes on your sale. If you have earned income, you can make an IRA contribution, which may be tax deductible. It makes no difference whether the money comes from sale of stock or some other source.

Entertainment consultant submits her first bill

Entertainment consultant Barbara Bolan's invoice offers some insight into bankruptcy trustee Soneet Kapila's efforts to track down Lou Pearlman's assets. You can see that she has been reviewing issues relating to royalties and researching Pearlman's major artists. 

Update:

Also, here's the latest attempt by Soneet Kapila to get access to documents held by former Lou Pearlman lawyers Robert Leventhal, GrayRobinson and Leventhal & Slaughter. It's a continuation of the arguments about attorney-client privilege.

Should I gradually convert my IRA to a Roth?

Q: Should I consider systematically converting my IRA to my Roth? I read somewhere that this was prudent as long as you stayed in a low income bracket. What’s a low income bracket?

A: Gradual conversion is a good idea since money in a Roth grows tax-free. Money left in a regular IRA at your death will be taxable to your heirs, while Roth IRA money will be tax free. The lowest tax bracket is 10 percent, which applies to taxable income AFTER deductions and exemptions of up to $7,825 if single and $15,650 if married filing jointly.

You are eligible to convert from a traditional IRA to a Roth if your modified adjusted gross income is $100,000 or less (not including the amount of the conversion.)

What could come from Lou's cooperation?

"The primary reason to enter a plea agreement with the government is that you hope to get a sentence reduction based on your substantial cooperation," said Tampa criminal defense lawyer Lori Palmieri, who is not involved in the Pearlman case. --from my St. Petersburg Times story today.

When/if Lou Pearlman and federal prosecutors reach a plea agreement, it probably will call for Lou to cooperate with prosecutors. Certainly if Lou said : "Here's where you can find the key to the vault where I have several hundred million dollars stashed away," that would be worthy of a reduction in sentence. However, that seems extremely unlikely to happen, especially considering that he pled poverty when he obtained a public defender. My best guess is that he would be pointing fingers at others who received some of the investor/bank loan money. I'd be very nervous if I were in their shoes.

It takes "substantial" assistance to the prosecutors to get a sentence reduction, another Tampa criminal defense lawyer, Ed Suarez, explained to me. Prosecutors decide whether the assistance has been substantial enough to warrant a sentence reduction.

Suarez also said an order to pay restitution is always part of the sentence in cases like this. It's a debt that cannot be discharged in bankruptcy, which means "if he gets out of prison and ever makes any money," the victims could pursue their claims against him. 

Plea agreement in the works for Lou Pearlman

One-time boy band producer Lou Pearlman is telling friends that he has been working on a plea agreement that would bypass a trial but could result in a sentence of up to 25 years in prison.

"He's between a rock and a hard place," said Dave Hedrick, the owner of an Orlando-area audio video business who has been one of Pearlman's most frequent visitors. "I don't know what he's going to do. If the judge says ‘I’ll give you 10,’ he has something left of his life. A 25-year-sentence, that’s almost a life sentence for him.”

Pearlman was indicted on bank fraud charges last year based on this complaint, made public after his arrest in Bali, Indonesia last June. He is scheduled to go to trial in April. However, prosecutors have said they planned to file additional charges against him, which most likely would delay the trial. Last year the state of Florida accused Pearlman of running a massive investment fraud, but so far no criminal charges related to the scheme have been filed.

Hedrick declined to provide additional details of the plea agreement Pearlman is considering. He said he still believes Pearlman is "innocent until proven guilty," but "I'm a true believer if you're innocent you don't take a deal. If the evidence isn't there, you shouldn't be convicted."

Pearlman owes banks and investors more than $500-million, but attempts to recover assets to pay them have so far garnered only about $2.4-million.

Hedrick spent thousands buying Pearlman's possessions at two auctions conducted by the bankruptcy trustee. He currently has many of those auction items for sale on eBay, including Pearlman's "World Connection Award" presented by Mikhail Gorbachev.

"It would not be appropriate for us to make any comment on discussions we may or may not be having with Mr. Pearlman," said Steve Cole, spokesman for the U.S. attorney's office in the middle district of Florida.

Can an injured spouse get a rebate?

Q: My husband and I file a joint return and include a Form 8379 (injured spouse allocation) so he may receive his portion of the refund. I am on disability and do not work but owe back student loans. Can an 8379 be filed to request his portion of the stimulus rebate? I have gotten a lot of different answers.

A:  The IRS says there is no need to file a separate Form 8379 to cover the stimulus payment if you already sent one in with your tax return. (If you had not already sent one in, you would need to do that.) Your portion of the rebate will be withheld to cover your student loan debt. Your spouse will get his portion.

Do my parents have to claim my sister to get medical insurance?

Q: Do my parents have to claim my sister as a dependent? She was a full-time student and covered under my parents insurance for half the year. She paid all her own tuition and has a good paying job. My parents say they have to claim her because of the medical insurance, but she wants to file her own return.

A: It is possible that your parents' medical insurance policy limits dependent coverage to dependents claimed on their income tax return. If your sister was claimed only the first half of the year and is not currently on your parents' policy, then this should not be an issue. However, if she is currently insured, it is an issue. If your sister doesn't want to be claimed on your parents' tax return, she may have to find her own medical insurance. This is something that would need to be verified by a representative of the insurance company or someone in the human resources department of the company where the insured parent works.

The IRS rules say that only the person who provided more than half the support is entitled to the exemption. It sounds to me as though that's your sister, not your parents. Since she has a good paying job, your parents claiming her exemption probably will cost her at least $740 ($340 in taxes plus her rebate of at least $300.) If your parents claim her, they get the $340, and no one gets her rebate.

Is the Tampa Bay area still a good place to retire?

Hurricanes, sky-high property insurance rates, clogged roads.....I could go on. It seems as though there's plenty to complain about regarding life in the Tampa Bay area. But then I take a walk along Tampa Bay and I feel incredibly lucky to live here.

Do you think the Tampa Bay area is still a good place to retire? Why or why not?

I would particularly like to get a few responses (with first and last names and city) that I could put in the newspaper. Email me or post your comment here.

Do I have to report all my income to get my rebate?

Q: My income is too low to file a tax return, but I need to file to get the rebate. Can I just list my Social Security income, which qualifies me for the rebate, or do I have to list the other $9,300 in income that I have?

A: You should list it all. Fill out all the parts of the tax return that apply to your situation to avoid any confusion.

The IRS recommends filling out a paper 1040 or 1040A, writing "stimulus rebate" across the top and mailing it in. If you fill in your bank account numbers in the "refund" section, your rebate should be deposited to your account. Otherwise, it will be mailed to you. 

Can I use capital losses to offset IRA withdrawals?

Q: I have a traditional IRA that I would like to convert to a Roth IRA.  I am thinking of doing half the value this year and half next year. I think it would be advantageous to me as I expect taxes will probably rise within the next few years. I realize that taxes will have to paid on the monies converted to the Roth IRA.  I have a good bit of capital gains carryover losses. Can I use these to offset the income from the IRA conversion?

A: Unfortunately not. IRA withdrawals are ordinary income and each year you are limited to using $3,000 of your capital loss against ordinary income.

I agree with you that tax rates will be higher in the future. For the most benefit, you should pay your taxes on the IRA withdrawals from some source other than the withdrawals themselves.

Will my son in medical school qualify for a rebate?

Q: My adult son is a full-time student in medical school with absolutely zero in income, living strictly on school loans. He was not planning to even file a tax return since he has no income to report.  Is he entitled to the government's rebate of $600?  If so, he'll gladly file a return.

A: No. Since he did not have at least $3,000 in earned income (or other qualifying income, such as Social Security) in 2007, he is not entitled a rebate this year. However, if he has at least $3,000 in income in 2008, he can file a return next year to get the rebate.

Are IRA withdrawals taxable if used to pay for college?

Q: I am due to withdraw money from my IRA (non-Roth) next year and had planned to use it solely for my granddaughter's college expenses; will it be taxable to either of us?

A: Yes. You will have to pay income tax on your IRA withdrawals. If you give her more than $12,000 a year, you will need to file a gift tax return, but will not actually have  to pay gift taxes until you've given away $1-million. Tuition costs paid directly to the college do not count as part of the $12,000 annual limit.

Your granddaughter will not owe any taxes on your gifts. Because she is not your dependent, you will not get the benefit of any of the education tax breaks. However, she or her parents may be eligible, depending on their situation.

Ask and you shall receive....

Maybe. But don't ask and it's highly likely that you won't get what you're looking for. My column today is about asking companies for a better deal. It was inspired by my personal experience with Internet providers Bright House and Verizon. I was paying too much for my DSL service simply because I didn't call Verizon and ask for the better deal they would have given me if only I'd asked.

What's been your experience asking for a better deal? 

Chamberlain's emails will be scrutinized

Soneet Kapila, the Lou Pearlman bankrutpcy trustee, and Rene Chamberlain, Pearlman's former attorney, have agreed to a plan for Kapila's lawyers to review her emails. Wonder what they'll find?

Now on eBay: Photo of Britney Spears and Harry Wayne Casey of KC and the Sunshine Band.

New retirement planning resource available

The Department of Labor is offering a new retirement planning resource for people who are 10 to 15 years from retirement. You can use the interactive worksheets to project retirement income and expenses. The worksheets are a companion piece to the publication "Taking the Mystery Out of Retirement," which is also available in print form. Happy number crunching!

What do I do with this 1099-MISC?

Q: When the owner of a company where I worked sold the business, he gave me a check for $5,000 for my loyal service to the company. I am still employed with the new owners. I received a 1099-MISC notice for this $5,000 for my 2007 taxes. I can't find any info on such a document. In box No. 7 it lists this as "nonemployee compensation." Do I add that $5,000 to my wages on my 1040A? If I have to do that, I will be paying taxes on almost all my Social Security check. I am 74 and retiring this summer.

Revised answer

A: Nonemployee compensation reported on a 1099-MISC is definitely taxable. Depending on the circumstances, it may be considered income from self employment, which means you not only have to pay income tax, but both halves of the Social Security tax (15.3%) on this amount. It is not clear to me based on your description whether this would be considered self employment income. If it is, you would need to file a Form 1040 and a Schedule C-EZ, which also would allow you to deduct any expenses related to the income.

Update on the New York lawsuit

The Jim Lowy-affiliated plaintiffs are now being represented by Naples lawyer Robert Pearl. He filed this notice in the New York court this week, voluntarily dismissing their action against various parties, many of them Trans Continental entities that are protected because they are in bankruptcy or that have no assets. The suit is still pending against the State of Florida, Gov. Charlie Crist and others. The judge has not yet ruled on the state's motion to dismiss the case. Ed Fagan continues to represent some of the other plaintiffs in the case.

Tax Rebate Questions, Part V

The latest on the rebate: If you have no tax liability and are filing just to report your Social Security or Railroad Retirement benefits, the IRS suggests writing "stimulus payment" at the top of your form and mailing in a paper return. Here are instructions on where to enter your Social Security benefits on a Form 1040A.

Looking for free tax help? Here are a couple of additional toll-free numbers to call to find a location near you: 1-800-906-9887 for a VITA site (low and moderate-income taxpayers) and 888-227-7669 (primarily for the elderly, but will help others with low and moderate incomes).

Q: People are saying the rebate will be coming out of our Social Security payments. Is this true?

A. Heavens no. In fact, it doesn't even make any sense. I don't know who these "people" are, but I wouldn't be listening to them.

Q: You said you can use your 2007 or 2008 return to claim the rebate. I thought you had to use 2007. I'm concerned because my income will be too high to get the rebate based on my 2007 return. What's the story?

A: The rebates sent out this year are based on 2007 tax returns, so you won't get one. But when you (and the rest of the taxpayers) file your 2008 return, if it shows you are entitled to a higher rebate, you will get the difference. So you have the potential to receive a rebate next year, assuming you qualify. Those whose rebate would be less based on their 2008 return do not have to be concerned. They will not have to give back any money. Here is my column on this topic.

Does my charitable contribution qualify for a tax break?

Q: I contributed $8,000 to charity last year but will not report it on my income tax because the standard deduction of $10,700 is more. I also withdrew $34,000 from my IRA last year. Can I subtract the $8,000 charitable contributions from the taxable income of my IRA as a Qualified Charitable Distribution?  I wrote the checks to charities from the same checking account where the IRA money is direct deposited.

A: Sadly, no. For your contribution to be a an official "qualified charitable distribution," it would have to have been paid directly by the IRA trustee to the charity. You also would have to have been at least 70 1/2 last year. I'm guessing that you are younger since you mention the amount for a standard deduction for a couple younger than 65. This tax break expired at the end of 2007, although Congress could always decide to extend it.

Where do I mail my return?

Q: We are ready to file a 1040 form, but do not have an address to send it to. Could you supply same?

A: If you live in Florida, mail your tax return to Department of Treasury, Internal Revenue Service, Atlanta, GA 39901-0002. If you live elsewhere, check the 1040 filing instructions. Addresses are on the next to last page. If you are only filing to get a rebate, the IRS suggests writing "stimulus payment" at the top of your return.

More items going up on eBay

Here's the latest list of items Lou Pearlman bankruptcy trustee Soneet Kapila wants to sell on eBay. There's more memorabilia from Natural, US5, O-Town, LFO, Aaron Carter, plus Trans Continental logo items such as wine glasses and door mats. And, for those who don't have one already, autographed pictures of Lou himself. The judge has to approve selling them on eBay. Here's the earlier eBay list. Most of those items have not yet been auctioned.

Can I split my IRA contribution between regular and Roth IRAs?

Q: For 2007, can I contribute $3,000 to a Traditional IRA and $2,000 to a Roth IRA? I am over 50 years old.

A: Yes. As long as you meet the income requirements for Roth IRA contributions, there's no problem splitting your contributions between regular and Roth IRAs. The contribution limits are $4,000 for those under 50 and $5,000 for those 50 and older.

The income limits for a full 2007 Roth contribution are $99,000  (single) and $156,000 (joint) and for a partial contribution $114,000 (single) and $166,000 (joint).

Can a boyfriend claim a girlfriend as a dependent?

Q: Can a boyfriend claim his girlfriend as a dependent in the state of Indiana? The Indiana Department of Revenue's attorney couldn’t even answer that question for me. She told me to call my lawmakers on the local laws involving this. I got an email from a senator's office that said no, but a friend got a letter from the same senator's office from a different person that said yes.

A. Your best bet is to ask someone in Indiana who prepares federal income tax returns. I'm sure you are not the first person to have had this question. If unmarried cohabitation is legal under state law, then he can claim her as long as she has less than $3,400 in income and he provides more than half her support. Unfortunately I do not know the answer; I don't even try to answer questions about laws in other states.

In Florida, he could not claim her as a dependent. Here is the relevant Florida law for those who are interested:

Abstract: 798.02 Lewd and lascivious behavior. --If any man and woman, not being married to each other, lewdly and lasciviously associate and cohabit together, or if any man or woman, married or unmarried, engages in open and gross lewdness and lascivious behavior, they shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 1637, 1868; RS 2596; GS 3519; RGS 5407; CGL 7550; s

Can I file as head of household?

Q: My unmarried 22-year-old son lives with me . He is not a student and is not disabled. He only had income of $300 last year and about $300 in interest from cashing in old saving bonds . He is a citizen and I contributed to more than half of his support. Can I claim him as a dependent and use the head of household filing status? I have been divorced for 19 years . 

A. Yes you can. He fits within the definition of a "qualifying relative," which will allow you to claim head of household status. However, you will not be able to receive the $300 rebate based on his dependent status since he is older than 16.

Can we deduct taxes we paid when we bought our home?

Q: When we bought our home last year, we paid about $1,700 for recording fees for the deed and and mortgage, mortgage intangible tax and mortgage doc stamps. Can we deduct any of these on our federal income tax?

A: No. Those are considered transfer taxes, which are not deductible. If you or the seller paid points on the loan and they were clearly earmarked on your closing statement, those are deductible. So are your mortgage insurance premiums if you have an insured mortgage (but NOT property insurance premiums). And, of course, your mortgage interest and real estate taxes are deductible.

Can my mom claim my sister as a dependent?

Q: My mom made about $15,000 last year and my full time college sister works part time and made about $12,000.  She lives at home with my mom. Can my mom claim her as a dependent?  My mom pays all the bills and her house is paid off.  My dad is on Social Security income.

A: Based on the information you have provided, it would be a big mistake for your mom to claim your sister. If your parents' income is $15,000 from wages plus your dad's Social Security, they will not owe any taxes. In addition, they would not be eligible for a rebate based on your sister since she is older than 16. The bottom line: claiming your sister would be of no benefit to them, but it would be very costly for your sister. If your parents claim her as a dependent, she will get stuck paying $340 in extra income taxes and miss out on her tax rebate (about $325 if your numbers and my calculations are correct) for a total of $665 lost.

The IRS says whoever provides the majority of the support (parent or child) should get the dependency exemption. Unless your sister is stashing most of her $12,000 income in the bank, I doubt that your parents actually provide more than half her support. The money your sister spends on clothes, gas, books, college expenses, entertainment, food out, etc. all count as part of her support for herself. So does any student loan she has.

What's the standard deduction?

Q: For the year 2006 there was a standard deduction of $12,300, line 40.  What is it for 2007, and what is included in the dollar amount?

A: The standard deduction varies with your age and filing status. The basic deduction is $5,350 (single) and $10,700 married filing jointly. Apparently you and your spouse are both over 65 but are not blind and you file a joint return. That would make your standard deduction $12,800 for 2007. Here's a chart that breaks down who gets what.

Nothing is "included" in the standard deduction. It is an option available to people who do not itemize their deductions.

Settlement will bring $750,000 for Pearlman bankruptcy estate

Lou Pearlman bankruptcy trustee Soneet Kapila has agreed to sell Pearlman's 24% interest in a company called MUB Holdings LLC (formerly Trans Continental Communication) for $1-million. The buyer is a company called Kolel Beth Yechiel Mechil of Tartikov Inc., which made an intial $250,000 payment that is presently the subject of a dispute with Deutsche Bank. The agreement calls for Kolel to relinquish all rights to the $250,000 and to hand over the remaining $750,000.

The sticking point in the deal had been a $350,000 payment that Kolel made to the notorious German Invest and Finanzberatung GmbH (aka German Savings) last May at Pearlman's instruction. Kolel wanted the payment applied to the purchase price while Kapila said nothing doing. Under the agreement, Kolel will have the rights to the $350,000 if it is successful reclaiming the money from German Savings. The attraction of the deal is that MUB owns a 60% interest in TCM Mobile LLC (formerly Trans Con Mobile), a research and development company in the cell phone business. Kapila says the company, which is located in Israel, doesn't have any revenue and requires additional capital investments.

The deal is subject to the approval of the bankruptcy judge.

Filing for free?

Q: You say "File for free" if your AG income is less than $54000. Then you say "Go to www.irs.gov for a list of companies and their requirements"  Does this mean one cannot file directly with the IRS??  Please clarify this. If we have to go thru these companies how is it "FREE"?

A: You can file a paper return for free directly with the IRS. You can do a tax return online (letting the software do the calculations for you) and file electronically for free by using IRS FreeFile. Free File is an IRS program in cooperation with online filing companies. Some companies have more restrictive requirements than others to get the free filing service.

I have used IRS FreeFile to do my children's tax returns ever since the service became available. In addition to being free, it's very easy to use.

Tax Rebate Questions Part IV

Q: We have our taxes prepared by an Illinois tax accountant who has been preparing our taxes for 35 years. Because we travel to Illinois only in July, we routinely defer our tax preparation until late in July.  From what I have read, in order to qualify for a rebate, we have to first file a 2007 tax return.  Since we defer our tax return until July, are we still eligible for a rebate?

A: Yes, you will be eligible, but your refund will be delayed by your late filing. You might consider mailing your information to your accountant.

Q: I am an 82-year-old senior who has not had to file taxes because of low income. I understand that I need to file to get the rebate. Which form do I use: 1040 or 1040A. And can I print it out on my computer?

A: Since your tax situation is simple, you can use either form. You can print them from the IRS Web site (www.irs.gov). You only have to use Form 1040 if you have certain deductions, credits and other tax situations. The instructions for Form 1040A tell who is not allowed to use it.

Q. I have not seen my situation discussed in any of the many articles listing the qualifications for receiving a rebate - I have over $13,000 in taxable income for 2007 but it is derived mainly from a private pension check, interest fom CD's and dividends.  I do not "earn" a salary.  Do I qualify just by being a taxpayer?  Thank you in advance for your response. 

A: Yes, you can qualify just by being a taxpayer.You can get as much as $600 (single) or $1,200 (joint), depending on your tax liability for 2007.

Q: I am disabled and have not filed taxes before. I make over $3,000 with Social Security disability. Someone told me this year I should file some form and I would get money back. Could you tell me the name of the form and where I would get one. My ex husband keeps declaring the kids live with him, which they don't. I filed a fraud form with the IRS a year ago. Can I get the earned income credit from the kids that live with me all year? My husband is also on disability.

A: You can file either Form 1040A or  Form 1040, which you can get from the IRS Web site. It sounds as though you and your husband would qualify for a $600 rebate if you file jointly. In addition, you could get $300 for each child under 17. However, you would not get the Earned Income Credit since you do not have earned income. When parents divorce, the custodial parent generally is assumed to be the one who gets to claim the kids unless the parents have agreed between them to let the other parent have the tax benefit. As a practical matter, the exemption will go to the parent who files first using the child's Social Security number. If your husband has already filed, your claim for the children will be disallowed and you'll have to contact the IRS to fight it out.

It's tax time and we want to help take the pain out of filing

The Times has put a special report on income taxes on the Web that will serve as a collection point for stories and tips about income taxes. Be sure to note these stories from today's paper:

*10 tips on filing your return

*What to look for on this year's tax return.

*Tax planning opportunities with the rebate

Email me with your tax questions and I will answer as many as possible here on the blog.

[Times photo]

Guys who support their girlfriends' kids get a break

The IRS recently clarified its rules on dependency exemptions for couples who live together without the benefit of marriage. As I explain in my column Sunday, the old rule was that a guy who supported his girlfriends' kids from prior relationships could not claim them as dependents because they could be claimed by "any other taxpayer," meaning their mom. That was the case even when the mom had no income of her own. The clarification: the mom doesn't count as "any other taxpayer" if she isn't required to file a tax return or files one only to get a refund of taxes paid. If this situation applies to you, read the rules carefully. You may even be able to file an amended return for 2005 and 2006 if the live-in arrangement was in place back then. The bad news: you still cannot claim your significant other as a dependent if you live in Florida or any other state where unmarried cohabitation is still illegal.

Note: Although you can claim the dependent exemption under these circumstances, this does not entitle you to the child credit, the Earned Income Credit or head of household status. Nor does it qualify you for a $300 rebate for the child.

Rebate Questions and Answers, Part III

Q: Is the stimulus payment basically just an advance of any refund that we would typically receive in 2008?  For example, if we typically receive a tax refund of $1,200 and we receive a stimulus payment of $1,200 this summer, does that mean that our refund in 2008 could be zero--i.e. would it just be subtracted from any potential refund?

A: No. Your refund would not be affected. Basically the 2008 return will include an accounting for the rebate to see if you are entitled to a different amount of rebate based on your 2008 return than you were on the 2007 return. If you are entitled to a larger rebate based on the 2008 return, you will then get the extra amount. If you are entitled to the same or a smaller rebate, there will be no impact. (You won't have to give back a rebate based on your 2008 return.)

Q: I am the mother of a 2-year-old. His dad claimed him on his taxes. We are not married. His dad got about a little less than $5,000 back and I only got $100 back because I just recently went back to work. Should we still file and what form should it be if so?

A: His dad will get the rebate. Since his dad already filed a return, nothing else needs to be done.

Q: Your story mentions the IRS sending out two notices. Will this be after I have filed or before?

A: After.

Q: Which year's income is the rebate based on?  Is it for tax year 2007 which we have not yet filed or is it for tax year 2006?

A: 2007. That's why you have to file a 2007 return to get it. As mentioned above, you may qualify for a larger rebate when you do your 2008 return.

Q: My wife of 50 years died during 2007. I will be able to file a joint return for 2007. I am retired, and have a income of $50,000. Since my wife is no longer with me, will I be entitled to the $600 or $1,200? (I would not want to cash a check for $1,200 if I am only entitled to $600.)

A: As long as you are entitled to file a joint return, you are entitled to the full joint return rebate based on your income or tax liability.

Here are more Frequently Asked Questions directly from the IRS.

Latest financials; Pearlman items on eBay

The latest financial report shows bankruptcy trustee Soneet Kapila has recovered a little more than $2.4-million to date. Here's the January financial report  for the main bankruptcy case.

Want to bid on some of Pearlman's stuff? These eBay auctions end Friday (2/15). When new items go up I hope to post the links.

Men's Gucci Watch (sold for $93.99)

Silver pocket watch (sold for $41)

US5 autographed item (sold for $5)

Here's a list of items to be auctioned on eBay. (See p. 15) The plan is to put several of them up for sale each week.

Online rebate calculator now available

Kiplinger.com has put up a tax rebate calculator that you may find helpful. If you hope to qualify for more than the minimum rebate, you will need the information from your completed tax return to get an accurate result from the calculator.

Rebate questions and answers, Part II

Q: Is a person 55 years old who is collecting Social Security Disability benefits eligible for the $300 rebate?

A: Yes, if the person receives at least $3,000 in disability benefits. Age doesn't matter, but the person cannot be claimed as a dependent on someone else's return. Social Security retirement, disability and survivor benefits all count toward the $3,000 total. SSI payments do not count.

Q: We are both over 65 and both receive Social Security. My wife is still working and her salary income by itself makes her eligible for the $600 rebate. Will our 2 SS incomes plus her salary make us eligible for the $1200, will we get $900 or some other sum?

A: First of all, if you are married and file a joint return, your rebates are not calculated individually. They are paid to you jointly as a couple. If your wife has at least $3,000 in earned income, then you are eligible for the combined $600 minimum rebate. Whether you are eligible for a higher rebate depends not on her income but on your joint tax liability. If you don't claim the child credit or the Earned Income Credit, use the tax liability found on line 63 of Form 1040, line 37 of Form 1040A or line 10 of Form 1040EZ. Your rebate will be this amount up to $1,200. If it is less than $600, you'll still get the $600 minimum.

Q: My mother is on Medicaid. Would she be eligible for the $300 rebate if she files?

A: Yes, if she has at least $3,000 in Social Security benefits. The fact that she is on Medicaid does not disqualify her. In addition, note that the rebate will not count as income that would prevent eligibility in any federally-funded relief program.

Q: When will I get my rebate?

A: The Treasury expects to start sending out checks in May and none will be sent after Dec. 31. If you delay filing your 2007 tax return, your rebate will be delayed.

Q: I always file tax but I have not been able to pay what I owe on the year 2006 yet. My question is Can that rebate check be used to pay my tax for 2006 and 2007?
Answer: Technically not because your tax payment is due before you will get your rebate. If you don't pay on time, you will be subject to interest and penalties. However, your rebate can be seized for unpaid taxes, so effectively it could be used to satisfy your tax obligation after the fact.

Q. I tried calling the IRS toll-free number (800-829-1040) to find where I can go for free tax help so I can get my rebate, but I just get recorded messages and can't get an answer. How can I get this information?

A. To get a live person on the line, you have to press the numbers related to questions about preparing an individual tax return. That's a "1" at the first prompt and a "5" at the second. Tell the person you want information about a free tax help site for the low income and elderly. Or just click here and enter your zip code.

Lots of questions about rebates (and answers too!)

My story in today's Times about the rebates is generating lots of questions. I'll answer some of them here. If you have other questions, feel free to post them as comments. Here are links to a helpful CCH publication and the IRS Web page on rebates if you want to delve more deeply.

Q. I don't understand if we do or do not have to file a return in order to qualify. Our income is $22,224 Social Security and $8,701 other. Do we have to file a return?

A. If you want the $600 rebate for a couple, you must file. If you don't want the $600, no law requires you to file.

Q. If we owe the government money, will they deduct what we owe from the rebate or will we be able to get the entire amount?

A. The IRS will deduct payments you owe the IRS as well as other debts the IRS collects such as defaulted student loans and child support payments.

Q. I am confused. What income qualifies for a rebate? Stock dividends, interest (bond, CD , bank), Social Security, IRA withdrawals, pensions. How can retirees qualify? Please explain.

A. There are two basic ways to qualify. One way is as a taxpayer. If you are qualifying that way, all your income is reported and you qualify based on your tax liability. The other way of qualifying is for people who do not pay taxes. In that case the only kinds of income that count are wages, Social Security benefits, VA disability benefits and railroad retirement benefits. If you have at least $3,000 from those sources, you qualify. But you must file a tax return to get the money.

Q.  In this morning's article about the tax rebate, you used the phrase "up to $600."  What's it take to get the full $600? Or is it just the income of at least $3,000 that gets the full amount?.

A. To get the full $600 for a single person ($1,200 for a couple), you must have a tax liability of at least $600 (single) or $1,200 (married.)  If you qualify based only on the $3,000 in Social Security, earned income etc., you will get the minimum rebate of $300 (single), $600 (married.) If your tax liability is between $300 and $600 (single), then your tax liability will be the amount of the rebate. BTW, tax liability is defined in a somewhat peculiar way. Tax liability is the number before subtracting the child tax credit or the Earned Income Credit.

Q. I have already filed a tax return but, did not include my Social Security benefit (because it wasn't taxable). I only included income I receive from a "state retirement account". It is in excess of $3,000 and I pay taxes on it. The only "retirement" income you mention as an eligible source of income is "Railroad Retirement benefits." Do I need to file an amended return on form 1040X?

A. Whether it is worthwhile to file an amended return depends on what the tax liability number was on your original return. If it was at least $300 and you are single or $600 and you are married filing jointly, then there is no reason to file an amended return because you won't get any more money. However, if your liability was below those amounts, you should file a 1040X that includes your Social Security income.

If you want a rebate, you MUST file a tax return

News flash: Everyone who wants a share of the rebates that are part of the economic stimulus plan MUST file a tax return this year. You are eligible if you have at least $3,000 in income from work, Social Security benefits and/or VA disability benefits (and are not claimed as a dependent on someone else's return). Many people whose primary income is from Social Security are not required to file a tax return ordinarily. However, if they want the rebate, they must file a 2007 return. The minimum rebate, which will apply for low-income people, is $300 (single) or $600 (joint) plus $300 per qualifying child 16 or younger. The maximum rebate is $600 (single) or $1,200 (joint) plus $300 per qualifying child 16 or younger.

You can file for FREE at www.irs.gov (click on FreeFile) or find a free tax help site near you.

Kapila sues HSBC Bank over fraudulent transfers

Soneet Kapila has filed this complaint against HSBC Bank USA over what he says was the fraudulent transfer of more than $5-million in loan proceeds borrowed by Trans Continental Television Productions to Lou Pearlman's personal HSBC account, where it paid off an overdraft of the same amount. The loan was supposed to be for production of "Breaking the Band."

The complaint contains a number of interesting allegations, including that HSBC allowed Lou Pearlman to overdraw his personal account by $5.3-million and that HSBC made the loan to TC TV Productions in January 2007, AFTER the state had already sued, claiming the Trans Continental savings program involved the sale of illegal securities. Kapila says this was a preferential transfer in that the money from TC TV Productions was used to pay off HSBC's own advance after Pearlman and the TC companies were insolvent. The theory is that once TC TV got the money, it should have been used for the benefit of all its creditors instead of being transferred to Pearlman's personal account.

HSBC Bank declined to comment.

Update: Here is my story from Thursday's paper.

Here is Kapila's latest trustee's letter to creditors.

Dow 18,500? That's what Morningstar analyst says

Need cheering up? How's this: Morningstar analyst Jeffrey Ptak predicts the Dow Jones Industrial Average will be at 18,500 within three years. "The Dow hasn't looked this cheap to us since Septemer 2002," he says. The valuation is based on a bottoms-up analysis of individual stocks rather than as top-down economic view.

New plan offers hope to homeowners in mortgage trouble

Project Lifeline, which the government announced today, offers the possibility of help to another group of homeowners behind on their mortgages. Here’s how it will work:
Q. Which lenders/mortgage servicers are participating?
A. Bank of America, Citigroup, Countrywide, J.P. Morgan Chase, Washington Mutual and Wells Fargo.
Q: Which properties qualify?
A: Owner-occupied homes; the type of mortgage doesn’t matter. Officially the homeowner must be at least 90 days behind on mortgage payments, although some mortgage lenders will talk to borrowers who are only 30 days behind. The property cannot have a foreclosure sale date set within the next 30 days. The homeowner cannot be in bankruptcy.
Q. What kind of help will people get?
A. The lenders say they will send letters to borrowers, some going out as soon as this week. The message: Call to discuss options for modifying your loan to make it more affordable, generally by reducing the interest rate. In some cases, foreclosure can be postponed for 30 days to allow time to negotiate.
Q. Who can I call right now?
A. Call your lender or mortgage servicer directly or call the toll-free HOPE Hotline (888) 995-HOPE set up by the Homeownership Preservation Foundation.

-- Helen Huntley, Times Personal Finance Editor

Where can you get excess deposit insurance?

Question: In one of your articles you mentioned banks buying extra insurance for depositors so they would have more than $100,000 from the FDIC .What was the name of that insurance? Is there a list of what banks have this?

Answer: The insurance is called CDARS, which stands for Certificate of Deposit Account Registry Service. It is offered by Promontory Interfinancial Network. You can find a list of banks offering it here.  Here was the original story.

Will we get the rebate for my daughter or will she get it?

Question: My daughter has been working this past year, attending school part time and living at home. She will be filing a return with income greater than $3,400 and will be paying taxes. Since she is of college age, I understand there would be no $300 rebate for her if I claim her. Taxwise, it is better for me to claim her as a dependent rather than her filing as a single taxpayer this year? If I claim her as a dependent, but she still files an individual return as someone who can be claimed on anther’s return, would she receive the $600 rebate, or would she have to file as a single taxpayer herself to receive it?

Answer: You are not entitled to claim your daughter as your dependent unless she meets ALL these tests as a qualifying child: she was under 24 at year-end, she was a full-time-student at least 12 months of the year and you provided more than half her support. If she does meet the tests, you DO get to claim her as a dependent. (Check with her college to determine how many hours she had to be taking to be considered a full-time student.) However, you do not get to claim her for the rebate or the child credit unless she was under 17.

However, it sounds as though your daughter will not meet the above tests. In that case, she will file as a single person, claim an exemption for herself and collect a rebate of at least $300. Essentially she will get all her income taxes back up to a maximum of $600, just like any other single filer.

According to this very helpful report from CCH, if your daughter is eligible to be claimed by you as a dependent, even if you do not actually claim her, she is not allowed to claim a rebate for herself. However, I don't see this becoming an issue unless her return is audited. No one who is claimed as a dependent on another return will get a rebate. 

Municipal bonds may be worth a look

The problems in the credit markets have wreaked havoc for municipal bond insurers and issuers but may be creating some opportunities for investors. As I wrote in my column today, it's become crucial to go back to the old way of looking at munis. That means evaluating the credit of the underlying issuer rather than relying solely on the "enhanced" AAA credit of a municipal bond insurer. The issues in the market have called into question whether bond insurers really are AAA.

High-quality municipal bonds (general obligation bonds and revenue bonds backed by water and sewer fees) are very unlikely to default. However, they do carry other risks. If you sell before maturity, you can lose money. They rise and fall in value based on fluctuations in interest rates and changes in the credit outlook for the issuer. They also can be called early for redemption (check the terms of each bond issue), which creates a risk of loss if you pay more than the face value of the bond. In addition, bonds are bought at one price and sold at another price, so if you have to sell, you get the lower price. Bonds are sold through brokers. You can get information about interest rates at BondsOnline.   

Has your credit card company jacked up your rate for no apparent reason?

Some card issuers are raising rates for some customers even though the customers have never had any late payments. This Business Week story says Bank of America appears to be doing its own internal review of customer credit, raising rates on factors such as higher balances even though the customer's credit rating and payment history are unchanged. If you write the bank a letter and don't put any new charges on the card, you have the option of paying off the balance at the old rate. If you fail to do that, both your old and new balances will accumulate interest at the new rate, which may be as high as 28%

Based on the problems we've seen in the credit markets, banks should have tougher lending standards. However, it seems very unfair to entice customers into building big balances with easy terms, then suddenly change the rules. They certainly will push up their default rates as a result, but I guess they think the extra interest they're going to get will be worth it.

We're saving energy with CFLs

My husband I recently received our smallest electric bill ever, a mere 512 kilowatt hours for the month of January. While I'm sure the mild weather was the biggest factor, I'm also giving credit to compact fluorescent light bulbs, or CFLs as they are known. A couple months ago we replaced about 80 percent of the bulbs in our home with CFLs. The only negative I've noticed is that lights are not instantly at full brightness. If you are interested in replacing yours, here are a few suggestions based on my experience:

You get the most bang for your buck by replacing those lights that you keep on the longest. That means you should install CFLs right now in your kitchen and family room or wherever you have lights on the most. Then use the bulbs you removed in other areas of the house. We went ahead and replaced lots of bulbs throughout our house, but it's probably more economical to replace the less frequently used bulbs more slowly as the old bulbs burn out. Keep in mind that CFLs can't be used with dimmer switches. Replacing bulbs in closets is pretty much a waste. My understanding is that turning the bulbs on and off shortens their lifespan, so if you're only burning them for one minute at a time, they won't last as many hours. We also left in place a row of flood lamps in our living room that we rarely turn on. We saved all the receipts and the guarantees that came with the bulbs so (theoretically), we can get some money back if they don't live up to their life manufacturers' guarantees.

In the interests of full disclosure, I should tell you that we have a gas water heater and stove top, which help keep our electric bill low. (Our gas bill runs $35-40 a month.) Although we keep our house (a three-story townhouse) closed, we do several things to minimize our air conditioning bill.  We have a zoned air conditioning system. When we're using an area, we set the thermostat to 79 (77 at night in the bedrooms), and when we're not using an area, we set it at 83. We rarely turn on the heat because we have big south facing windows and the house warms up very quickly during the day (which means we use AC more often in the winter).

Do you have any energy-saving tips to share?

Regulators look at how brokers do business with older investors

How should brokerage firms relate to older investors? Securities regulators said today they plan to compile ideas and best practices from the industry, then publicize them and encourage other brokerages to use them. They are looking at marketing and advertising to seniors; account opening; product and account review; ongoing review of the relationship and appropriateness of products; surveillance and training.

They say they don't intend to impose new regulatory requirements, so it remains to be seen how effective the effort will be. But it's good that they're paying attention to the issue. Other parts of the initiative include enforcement actions and the "free lunch" report highlighting abuses involving investment seminars.

Auction date set for March 8

The auction of Lou Pearlman's Windermere mansion will be March 8. Previews start this Saturday if you are interested in getting a peek inside. Here are the details,including a virtual tour of 36 photos.

Story about buyers' first preview.

• Exclusive Home in Prestigious Windermere, Florida
• Located on the Butler Lake Chain - Spectacular Views
• 2.77± Acre Estate Property with Possible Division
• 6 Bedrooms/11 Bathrooms - Total of 16,000± S.F.
• Private Gated Community of Chaine du Lac
• Preview/Inspection Dates: 12488 Park Avenue Windermere, FL 34786
  Saturday, February 9th, 2008
  09:00 - 11:00 AM
  
  Saturday, February 23rd, 2008
  09:00 - 11:00 AM
  
  Saturday, March 8th, 2008
  09:00 - 11:00 AM
• AUCTION SAT., MARCH 8 @ 1 PM, EST 
  
  Auction Location:
  Renaissance Orlando Hotel Airport
  5445 Forbes Place, Orlando, Fl 32812

Judge approves agreement regarding seized property

Judge Arthur Briskman today approved several items in the Lou Pearlman bankruptcy case, including the  agreement with the U.S. attorney's office for Soneet Kapila to take custody of property seized by the Feds, abandonment of any interest in the Belle Harbor condo, and the hiring of an auctioneer to sell the Windermere mansion.

Rene Chamberlain ordered to turn over email and letter

Former Trans Continental lawyer Rene Chamberlain apparently continues to resist bankruptcy trustee Soneet Kapila's efforts to obtain documents she possessed. In this latest order, Judge Arthur Briskman ordered her to turn over a letter and an email to the court for review. Once turned over, the judge would decide whether Kapila could have them or whther they were in fact protcted by any attorney-client or work product privileges. Here is the judge's Dec. 13 order outlining his views on attorney-client privilege.

No word on what was in any of the documents Chamberlain actually did turn over.

How do I report my IRA contribution to charity?

Question: I had IRA money sent to three different charities last year and have letters from them acknowledging same. How do I report this on my income tax form? The 1099 reports only the total amount withdrawn from my IRA, which also includes funds that I withdrew for myself.

Answer: If you look at Form 1040, you’ll notice that the IRS asks for two numbers on the line for IRA distributions. The first one is the total amount of the distribution. The second one is “taxable amount,” which is the amount that you kept for yourself. Write the letters QCD (for qualified charitable distribution) next to the taxable amount on your form.

Trustee wants to abandon any interest in Pearlman's Clearwater condo

Bankruptcy trustee Soneet Kapila is ready to throw in the towel on Lou Pearlman's vacant condo unit 609 at Belle Harbor, 501 Mandalay Ave. in Clearwater. He filed this motion today asking the bankruptcy judge to allow him to abandon any interest in the property. He says there would be no equity left after paying off the SunTrust mortgage, which is more than $1.2-million, and the assessments from the homeowners association.

[Times photo]