Claiming a rebate when your income is too low to be required to file a return

Q: My mother has a small pension from Canada in addition to her Social Security. Should she add this in with her Social Security amount on the 1040 for the stimulus rebate? The person at the IRS that I spoke to did not seem to be able to answer that for me.

A: When Congress extended rebates to nontaxpayers, the issue became a lot more complex for everyone, including the IRS. Your mother and others whose income is too low to pay taxes have the option of partially filling out the 1040A or 1040--that means writing "stimulus rebate" at the top of the form, completing the top section with her personal info, filling in the amount of her Social Security benefits, with the taxable amount as zero, filling in the bank account information under "refund" if she wants her rebate direct deposited, signing and dating the form. OR she call fill out the form completely, which would mean including her Canadian income, interest income, etc. She would not add her Canadian pension to her Social Security, but would report it on a separate line.'

Having said all that, I highly recommend that people who are not accustomed to filling out tax forms, get someone to help them. Go here, enter your zip code and find a free tax help site near you.

Good news for Florida teachers saving for retirement

Florida teachers have some of the worst retirement savings options out there with fees so high that many of them would be better off putting their money in taxable accounts with low cost providers. Their choices are about to get a whole lot better, at least in counties where school boards adopt a model plan put forth last week by the Independent Benefits Council. Read more about it in my column today.

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.