Personal exemption up, minimum tax rate down, child credit in effect

Gillian Shaw
Sun

Killian Ruby and Catherine Harrison are $300 ahead this tax year thanks to a new credit for their baby Sam.

Right off the bat, Sam makes the family eligible for a $2,000 non-refundable child tax credit, a new measure introduced for the 2007 tax year that will see their taxes drop by $300.

When he’s big enough to kick a ball, if he takes up playing soccer or another activity Ottawa deems will help him keep fit, his parents could claim up to $500 a year until he reaches the age of 16 under the new children’s fitness tax credit. That could reduce the taxes they pay by another $75.

Then there is the universal child care benefit, which could be clawed back depending on their income levels, child care expenses that can be deducted, registered education savings plans (RESPs) in which the government adds 20 per cent on the first $2,500 contributed every year and which allow education savings to grow tax free.

“For parents who can afford it, and admittedly that is not everybody, you get free money from the government, and the money increases tax free,” KPMG tax partner Mike Fahrmann said. “That’s a decent one for Catherine and Killian; if you are going to save for education, you might as well do it in a tax-effective manner, and it is like a 20-per-cent automatic return on the first $2,500.”

Early this week, more than 10 million of the roughly 25 million Canadians who are expected to send in tax returns had yet to file, leaving tax preparers and the Canada Revenue Agency bracing for a last-minute rush to beat the deadline which hits at midnight on April 30.

Even though that’s a lot of laggards, there have been more early filers this year, perhaps encouraged by some new tax credits, as well as measures that are boosting refunds and leaving more money in Canadian pockets.

The average refund going out so far this year is $1,393, up from $1,219 around the same time last year.

“We have roughly half a million more tax returns in this year than we did at the same time last year,” said CRA spokesman Bradley Alvarez, who said an increased number of people filing online plus tax software that helps people plug in figures and see their potential refund may be helping.

“You don’t have to worry about mailing it,” he said. “And there is an added incentive if you are playing around with it and say, ‘Hey, I’m getting a refund,’ it makes it that much easier to just file your return.”

Among other changes this year are:

– A $2,000 tax credit for dependant children under the age of 18.

– Pension income-splitting that allows taxpayers to transfer up to 50 per cent of their income that is eligible for pension income credit to a spouse or common-law partner. There is also a $2,000 non-refundable pension income credit, which is not new this year but you can shelter the first $2,000 in qualifying pension income. It doesn’t include Canada Pension Plan, Old Age Security or Guaranteed Income Supplement payments.

– The minimum tax rate has been reduced to 15 per cent from 15.5 per cent for income up to $37,178. While the measure wasn’t introduced until last fall, it was made retroactive to January 1, 2007. That’s worth about $240 in tax savings, and depending on what adjustments your employer made in tax withholdings, you may be eligible for a larger-than-expected tax refund if you overpaid for the year.

– The personal exemption has been increased to $9,600 from $8,929 — that’s the amount you can earn before tax kicks in.

When it comes to tax filing, some people just procrastinate; others who owe money are loath to write a cheque until the last possible moment.

“The biggest piece of advice is make sure you file by April 30,” Fahrmann said. “Suppose you owe $1,000 in taxes and you decide not to file on time. You have just cost yourself a five-per-cent penalty. The better strategy is to file whatever you can, so at least you’ll avoid the penalty.”

The last possible moment before incurring a five-per-cent penalty on any money owing — in addition to a one-per-cent-per-month interest charge — can come several ways: If you file online, you have until the midnight deadline; if you mail in a return, it must be postmarked before the midnight deadline; if you don’t trust technology or the post office, you can hand deliver your return.

“Our kiosk will be open at Surrey and drop boxes at 1166 West Pender in Vancouver,” Alvarez said. “There will be people on site — there is a drop box and we empty it on an on-going basis.”

Even if you haven’t managed to scrounge together all those slips of paper you need to file, or you have no idea where you’ll find the money to pay your tax bill, it’s best to meet the deadline. That missing tuition slip, the soccer team receipts, the RRSP receipt that’s fallen out the back of the drawer can all go in later.

If you owe money, the bill only climbs faster if you ignore the deadline.

© The Vancouver Sun 2008

 

Malcolm Parry
Sun

STORES IN STORE: Meinhardt Fine Food Inc. president Linda Meinhardt says she has no plans to close her 11-year-old 6,000-square-foot gourmet grocery store on South Granville, nor its adjacent 1,000-square-foot deli-eatery, Picnic. Instead, July will see the family-owned and recently incorporated Meinhardt & Associates Inc., doing business as Meinhardt, open a 15,000-square-foot store-and-offices complex at Arbutus Street and 16th Ave., with 31-year-old Michael Meinhardt as general manager.

Two years later, mother, son and a silent partner plan to open a like-sized Meinhardt store in Calgary‘s Mount Royal district, where they’ve acquired an entire city block. They’ve since sold one site to West Vancouver entrepreneur Glenn Bailey, who’ll renovate an existing building to house an outlet of his Liberty home-furnishings chain. A new four-floor complex will house the Meinhardt grocery and wine stores, and leased-out business offices.

Back in Vancouver, where the Meinhardts have a 25-year lease on premises beside the Ridge theatre, contractor Craig Strand poured the new store’s white-concrete floor this week.

Arbutus rent is “half what it is on Granville Street,” Linda said. Asked what the latter might be, she replied: “Way too much.” By 2012, though, an option on her existing lease would switch to market rent, which is presently in the $80-per-square-foot range.

All that new space spells big changes for the Meinhardts. And not just the moderne branding the Taxi firm (Telus, Mini) developed to supplant the Granville store’s homespun feel.

Commuter-customers will have the choice of 36 prepared meals to take home — and 140 stalls to park in. “The deli and kitchen is the engine room of our business,” Michael said. Nodding, Linda added: “The entire profit is on that side.”

Cook-at-homes will be served by a first-time in-store butcher with doubled display cases, and even a Reinhardt stainless-steel cookware line produced by Finland‘s Iittala outfit.

Also new will be Meinhardt sauces, dips, condiments, jams, breads, cakes, pies, chocolates, sweets and the like — even a lifestyles-and-recipes-themed $60 Meinhardt coffee-table book and store-ground coffee — roasted by JJ Bean chain owner John Neate — to go with it. Meanwhile, bottled still waters will be dumped in favour of a single brand from Pemberton branded — you guessed it — Meinhardt.

By opening day, Michael Meinhardt should have a self-produced documentary movie ready for screening to staff and customers. It’ll be no debut, though. He’s produced and directed music videos, and premiered his 19-minute Nostalgia Boy at the Ridge in 2006. That picture featured a teen who dreamed of the past yet convinced his father’s pregnant girlfriend to face the future by not aborting her child.

Linda Meinhardt herself sounds nostalgic for southern France, where she once owned Chateau Drouille. Now she’s seeking a farmhouse and 11-hectare property for three-months-a-year occupation.

– EAT, DRINK AND BE READY: Two years have passed since B.C. Wine Institute executive director Peggy Athans said that the 1990-founded organization would shift its focus from wine to “marketing, government advocacy and communications.” Claiming then that B.C. “has the potential to be another Napa or Tuscany,” she urged the B.C. government to get behind a BCWI proposal to develop wine and culinary tourism.

That was a natural for an outfit that claims its 63 member wineries and 14 associated grape growers produce 95.5 percent of B.C. wines.

Now Athans has swung the promotional spotlight from vineyard-winery regions to downtown Vancouver. She says the BCWI expects to have a $3-million, 7,000-square-foot wine and culinary centre operating in time for the 2010 Winter Olympics. Fund-raising for the “sustainable and profitable” facility has begun, says Athans. “The challenge now is to find a space. We would love to work with a developer on this.”

Based on a feasibility study conducted by the Grant Thornton accounting firm, Canada‘s one-of-a-kind centre should include a demonstration kitchen featuring B.C. ingredients, presentation facilities, wine-retailing space and a full-time 55-seat wine bar with patio. The unique licencing entailed would include the single VQA (Vintners Quality Alliance) Wine Store licence remaining from 21 issued.

While applauding a similar facility under construction in Walla Walla, Wash., Athans says: “We want one where people in the centre of population can taste the wines and food.” She envisages an open-plan centre similar to San Diego‘s, but almost twice the size.

– CANNES DID: Omni Life executive producer Heather Hawthorn-Doyle was back at her desk five metres from city railway tracks Monday. She’d spent a good chunk of the previous week in the air, looking to get the $4-million-worth of television series she oversees on the air.

On the air or distributed via cable in any global market the Cannes TV Festival’s 15,000 attendees might represent, that is. On-line, too, although producers like Hawthorn-Doyle are still trying to work out funding models for shows that might cost $100,000 an episode to make but would realize only 15 percent of that from on-line showing.

Hawthorn-Doyle returned from her first-time trip to Cannes with few firm deals on the four shows — She’s Crafty, Smart Cookies, Pure Design and Word Travels — presently under production by two-year-old Omni Life, which is a division of 1981-founded Omni Film Productions Ltd. But Du Cote De Chez Vous TV (France‘s HGTV equivalent) signed for 23 episodes of She’s Crafty, and sale of another show’s 13 episodes is as close as Cannes is to Cap d’Antibes, she said. She also met many prospects for future arm-wrestling, including Canwest Broadcasting’s senior vice-president of lifestyle programming Karen Gelbart, and W network VP Joanna Webb.

“At the [festival’s] opening party, 5,000 people were there, and I knew maybe a dozen,” Hawthorn-Doyle said. “There were 1,000 at the final party, and I knew a couple of hundred.”

With international competitors pitching 3,000 new or limited-airing shows, months of work at a producer’s home base can depend on minutes of conviction at Cannes.

Then again, Hawthorn-Doyle was “thrilled” to be back in Vancouver for final wrangling with National Geographic International on 13 episodes of the Word Travels series, featuring Julia Demon and longtime Vancouver Sun travel writer Robin Erick. She’s also reviewing applicants for a new show — contact [email protected] — that will track unmarried couples’ experiences with family-planning, housework, income, sex and the like as their relationships develop.

Her own relationship with husband Gearin — named for the priest who baptized Canada‘s first immigrant Doyles — began when they were assistant managers at McDonald’s franchises. But her entrée to television entailed a genuine McTerror. That was when B.C. Institute of Technology instructors granted her leave to work on the late Jack Webster’s show if he pledged to grade her performance. Sensibly, Doyle wore a Macdonald kilt to the interview.

“What kind of mark d’ye want, lassie?” Webster asked.

She never looked back.

© The Vancouver Sun 2008

Sun

Google “crossed cheques” and “Canada” and you won’t find much.

Crossing is a procedure that is routine in much of the world, but little known here even though it is allowed by the federal legislation that sets the rules for cashing cheques.

Crossing cheques is a technique you should learn, since that same law, the Bills of Exchange Act, set the stage for a nasty surprise that Vancouver Sun columnist Don Cayo and others have encountered recently after stopping payment on cheques to individuals who subsequently cashed them anyway at Money Mart.

The surprise was that despite stopping the cheques through their own financial institutions, Cayo and the others were still liable for payment. When Money Mart discovered that the cheques were no good, it went after the issuers of the cheques, rather than the person who cashed them.

Money Mart was able to go after the victims rather than the villains of the pieces because the Bills of Exchange Act says that if a third party accepts a cheque it does not know has been stopped, it has the right to treat it as if it were still valid and collect from the issuer. It’s unlikely this ridiculous state of affairs will be remedied anytime soon. Canada‘s cheque-cashing rules are set in part according to international convention.

In the meantime, however, you can protect yourself by “crossing” any cheque you issue so that it can only be cashed by a bank, credit union or trust company.

If Money Mart or any other third party accepts such a cheque and subsequently finds out it has been stopped, it has to eat the loss or, as the outlets should, pursue the person who gave it to them, not the original issuer.

You “cross” a cheque by drawing two straight lines between diagonal corners. You can also write “not negotiable” between the lines.

Banks and credit unions could help their customers by issuing cheques that are preprinted with such crosses on them. Such cheques are available in Europe and Asia where they are more commonly used.

It’s sad that we now have to take such action here, but in the absence of effective consumer legislation, individuals have to protect themselves from aggressive cheque-cashing services.

© The Vancouver Sun 2008

Sun

Canada‘s banking system rests on a foundation of confidence. Customers must trust that their money is not at risk, that it will be there when they need it.

In the past, that meant massive safes and armed guards. In the e-banking world, the risks have evolved. So too have the security measures. The underlying principle remains: Customers must be confident that banks will not leave their hard-earned funds at risk to robbers, whether they carry a gun or sneak through fibre-optic networks to do their dirty work.

Canadians have warmly embraced electronic banking. It’s easy and convenient and we have been persuaded by our financial institutions that while there are risks, they are generally limited as long as customers do their part to safeguard personal information.

But how safe is our money? Researchers at Carleton University in Ottawa accuse banks of misleading customers by, on the one hand, assuring them that their funds are safe, while on the other binding them to “agreements” that may leave them at risk in case of a loss.

Such agreements — which are really conditions set unilaterally by banks and other financial institutions — list conditions that give them the right to hold customers responsible in case someone fraudulently accesses their money.

The researchers found that a relatively large percentage of computer-savvy users were routinely violating the fine print and concluded that most average Canadians would find themselves ineligible for reimbursement guarantees. In other words, if a hacker steals from your account, it’s your loss, not the bank’s.

Financial institutions argue that customers should be responsible for understanding the terms of the agreement to which they become party to by using electronic services.

But these agreements are often so complicated that they can be understood only with the help of a lawyer. One of the big chartered bank’s Electronic Access Agreement, for example, runs to more than 8,000 words and has almost three pages of definitions alone.

If you actually read the agreement, you will find that not only are the terms difficult to meet, they can be changed at any time unilaterally by the bank. You may learn of such changes only if you regularly read its website.

Among the ways you can void the Online Banking Guarantee is by creating a password that is deemed to be too weak — if it includes your name, for example, or that of a family member, their birthdates, your telephone number or even sequential numbers like 1234.

It can also be voided if you fail to maintain up-to-date virus software or if you access your accounts through any device that you “reasonably ought to know” has been infected with software to steal your personal information.

Most financial institutions have versions of these rules. Frankly, we don’t have time to wade through them all. Neither do most customers.

What customers do have is a right to expect their money is safe without having to jump through a bunch of hoops that can be moved without their knowledge.

It’s worth noting that while the potential risk to consumers appears to be great, we have not heard of any who have actually lost money as a result of failing to meet all of the conditions set by the bank.

But we cannot for long maintain confidence in our financial institutions if an activity that has become as central as electronic banking is deemed too complicated and risky for ordinary people to engage in safely.

Banks either have to make it easier for their customers to use their services safely or shoulder more of the risk — without hiding behind all the fine print.

© The Vancouver Sun 2008

 

Shell Busey
Province

Q. We moved into a home with granite countertops that we really like but we are not sure if the previous owners have ever sealed them properly. What maintenance is required for granite and is there something that we can use to restore the shine.

Cliff, Surrey

A. While granite is one of the most durable stones available, you should re-seal your granite countertops every two years to avoid any staining and to preserve the natural look. For maintenance and cleaning, always use a product specifically designed for natural stone, not over-the-counter cleaning products. I would suggest you contact the folks at Apex Granite and Tile since they will be able to suggest a suitable product and maintenance program. They also have a restoration service that would help to bring the stone back into its original appearance. In the Greater Vancouver area they can be reached by calling 604-882-9284.

Q. One of most dreaded spring cleaning chores is cleaning my window screens. How do you recommend cleaning them?

— Dorris, Vancouver

A. When cleaning screens take care not overstress the fabric. To begin, mix equal parts vinegar and water in a spray bottle. If the screens are quite dirty you can add mild dish soap to the vinegar cleaner. Fill another bottle with clear water. Remove the screen from the window and wipe both sides with a microfibre cloth, or you can gently vacuum. Lay the screen flat on an old towel; spray with your vinegar cleaner and clean using a soft brush or sponge. After you have cleaned both sides, rinse with the clear water and blot dry with a clean towel. Throughout the year you can keep your screens clean using a lint brush.

For more tips, sign up to receive Shell Busey’s online HouseSmart newsletter at www.TheHouseSmart.com.

© The Vancouver Province 2008

 

Hints to living in someone else’s place — while they live in yours

Ron Chalmers
Province

Home exchanges over the Internet have vastly expanded vacation options, says Douglas Gray, author of the newly published Recreational Property in Canada (John Wiley & Sons, $26.99).

“I have done 14 home exchanges throughout the world,” says Gray, who owns homes in Vancouver and Whistler. “I have never been burned.”

The Internet lifts your visibility, making a short-term swap of your city home or lake cottage entirely possible, Gray says. “The Internet has changed the world of marketing and renting recreational property.”

In a simple exchange, you spend one or several weeks in someone else’s place — while they spend the same time in yours. If you own two properties, your options expand.

With two homes, you can do a non-simultaneous swap. You could go to Australia when it’s summer there — and your counterpart could come to Canada when it’s summer here.

A third option is simply to find a suitable home where you want to go and rent it for cash. This can provide more space and comfort than a typical hotel experience.

If you list your property, Gray warns, “It’s a highly competitive market.” To boost your chances, he has three tips: Provide as much information as possible; hire a professional photographer; and include a link to your own website where you show more information and more professional photos.

The Complete Guide to Buying and Owning Recreational Property in Canada also includes chapters on investment, legal, tax, insurance and estate-planning aspects of recreational properties, plus the pros and cons of shared or fractional ownership.

— Edmonton Journal

SITE SEEING

Selected home-exchange websites:

– www.digsville.com

– www.greatrentals.com

– www.holiday-rentals.com

– www.homeexchange.com

– www.homelink.ca

– www.intervac.com

– www.vacationrentals.com

– www.vacationvillas.net

© The Vancouver Province 2008

 

David Cadman warns of the health risk

Christina Montgomery
Province

A $5-million plan to upgrade the Granville Street Bridge for heavy trucks and tour buses will create unacceptable congestion and health hazards in neighbourhoods that have not even been warned about the plan, a Vancouver councillor says.

A motion to approve the design of the upgrade heads to council Tuesday.

David Cadman, the lone COPE councillor and an environmental activist, says bracing the bridge will effectively open all of Granville south to Marine Drive, and all of the downtown streets that run parallel to Granville, to heavy trucks.

A staff report to council recommends that $330,000 be spent on a sole-source contract for design of the upgrade — without taking time to tender the work — so that the 16-month job can be done in time for the 2010 Olympics.

Games planners have yet to announce which streets will be closed or restricted during the Olympics. Cambie and Burrard are now the only other crossings usable by trucks and non-transit buses.

The report says that beyond its use in providing “flexible” Games planning, the Granville bridge will provide an alternate False Creek crossing that the B.C. Trucking Association wants.

Cadman objects on both fronts.

“You don’t make this kind of capital investment for a two-week event,” he says, suggesting tour buses be given exemptions during the Games.

“It’s simply unacceptable with that kind of residential density in the downtown core that we would route trucks there without consulting Vancouver Coastal Health — or those neighbourhoods,” Cadman said.

“We know people living along the Knight [Street] truck route are exposed to high levels of diesel particulate

that has been recognized as causing cancer.

“Now we are being presented with a plan to turn residential streets along Granville into diesel-truck routes without any analysis of the impact on air quality, noise congestion or the disruption caused by routing big transport trucks and highway buses onto the Granville bridge.”

The staff report says the idea of strengthening the bridge arose after Canada Line work disrupted Cambie Street. There was an increased demand for an alternate truck crossing, and the B.C. Trucking Association asked to allow its tour-bus members to use the Granville bridge.

Vehicles heavier than 10 tonnes are currently barred. Coast Mountain buses have been given a city exemption.

Louise Yako, vice-president of the association, confirmed that it wanted to find another route for buses coming in from the airport.

With Cambie closed, they were routed until recently down Quebec Street, which offered less than ideal scenery for arriving tourists, Yako said. And a recent decision to allow them to turn down Broadway and across Burrard also presented difficulties.

Dane Dolman, the city engineer who wrote the staff report, told The Province the work is aimed at limiting traffic disruptions to short periods on specific stretches of the bridge and feeder lanes. Much of the work will be done from beneath the structure, he said.

© The Vancouver Province 2008

Malcolm Parry
Sun

MODEL CHANGE-OVER: BMW auto dealer Brian Jessel is getting fashion hungry, as witnessed by a self-named glossy publication featuring several photos of himself spiffed up in the Harry Rosen manner. His Boundary Road showroom also hosts a Hugo Boss fashion show named Cabriolet, which recently benefited the BC Women’s Hospital’s gynecological program and the Prostate Centre at Vancouver General Hospital.

Those recipients resonated with Allwest Insurance president Devina Zalesky, whose firm was an event sponsor. She’d just learned that surgery and treatment had knocked out a breast cancer diagnosed some months ago. Although someone had nabbed the delayed Zalesky’s reserved seat, news like that would leave anybody floating on air.

© The Vancouver Sun 2008

 

Kevin McCoy
USA Today

David Hodge got a shock when he filed his federal tax returns last year. An identity thief had beaten him to it.

“I was stunned,” says Hodge, a 33-year-old Mount Vernon, N.Y., home-improvement contractor, recalling the moment his accountant told him the IRS had rejected his return because someone had already filed using his name and Social Security number. “How could somebody do that?

Hodge contacted the IRS. He says the tax agency told him to produce copies of his Social Security card and birth certificate within 30 days, “or else I would probably have more problems with that number.”

Unable to comply by the deadline, Hodge says, he left “message after message after message” with the IRS seeking an extension, “But nobody called me back, ever.” He didn’t know whether the problem had been resolved until this spring, when his accountant, Catherine Censullo, filed his 2007 tax return electronically without problems.

“I’m getting a refund, too, which is great after everything that happened,” he says.

Even as the Tuesday federal tax deadline looms, Hodge’s experience is becoming more common. Federal Trade Commission complaints involving tax returns linked to identity theft rose to 20,782 in 2007, up 158% since 2003. Similar complaints to the IRS Taxpayer Advocate jumped to 3,327 in federal fiscal year 2007, up 644% in three years.

Nina Olson, head of the IRS Taxpayer Advocate office, reported to Congress early this year that identity theft has emerged as one of the top problems facing taxpayers. Olson said in an interview she believes the statistics only hint at the size of the problem.

“If you want quantification, we don’t know,” Olson says. “The IRS has no idea how many cases of identity theft exist.”

Senate Finance Committee Chairman Max Baucus, D-Mont., criticized the tax agency’s efforts to combat the problem during a Thursday hearing. Saying, “Victims of identity theft deserve better,” he directed the IRS to produce a comprehensive action plan within 90 days. IRS Commissioner Douglas Shulman, conceding the agency’s response to the problem “is not where it needs to be,” promised to comply.

“It’s time to end the nightmare for honest American taxpayers who fall victim to identity theft,” said Baucus.

That nightmare is spreading, according to USA TODAY interviews with more than a dozen accountants and other tax experts nationwide.

Often, the goal is to collect an undeserved tax refund. File with one stolen identity, claim multiple dependents and apply for the federal Earned Income Tax Credit, and an identity thief can snag a tax refund worth thousands of dollars, or more. Diana Aliffi, a Riverhead, N.Y., accountant, allegedly stole former clients’ personal information in a scam that could have netted her up to $19 million in tax refunds, according to an indictment unsealed Wednesday in Suffolk County Court.

“People create a phony business, phony children, phony working hours and other details to get a very nice refund,” says Eduardo Leiseca, an enrolled agent in Miami who says a client who ran an import-export business fell victim to just such a scheme.

Alternately, taking another’s identity can help thieves hide a criminal conviction, illegal-immigration status or other problem that could block them from getting a job. Their employers file W-2 wage-reporting forms with the IRS, which attributes the income to the true owner of the Social Security number. Victims don’t discover the problem until the IRS contacts them with questions about under-reported income.

Either way, the thieves’ victims confront weeks or months of bureaucratic wrangling to verify their identity at best, or suffer longer-term financial damage at worst.

A New York State Police trooper whose identity was stolen last year waited from February until September to get his anticipated tax refund as the IRS sorted out the problem, says Dianne Corsbie, the enrolled agent who prepared and filed his tax return.

“He was counting on that refund to pay his real estate tax bill. He didn’t have the money to pay on time … and he had to pay penalties and interest, so of course it was a hardship,” says Corsbie, a tax preparer at Boncor & Associates in White Plains, N.Y.

Victims forced to wait for refunds

A worker at the Hiram Walker distillery in Fort Smith, Ark., got his federal tax refund as expected last year. But six months later, he received an IRS letter questioning whether he had under-reported his income, says Charles Homolka, the enrolled agent in Muldrow, Okla., who prepared his tax return.

“Someone using his name and Social Security number worked at an aircraft factory in California. The IRS thought my client was hiding the income,” Homolka says. “It made me laugh, because the commute would have been murder.”

But it was no laughing matter for the distillery employee, because the problem took at least three months to resolve with the IRS, Homolka says.

Some cases take far longer. From 2002 through 2005, multiple identity thieves used the name and Social Security number of a Mexican-American factory worker to get jobs in Kansas, Texas and New Jersey, says Bob Smith, the enrolled agent in Albert Lea, Minn., who prepared the worker’s tax returns. Olson says Taxpayer Advocate staffers have helped many victims whose identities were similarly appropriated.

“One year, he supposedly had over $240,000 in income” from all the different jobs, Smith says. “He said, ‘I’ll pay the tax if I can have all that income.’ “

Each time, the IRS held up the worker’s tax refund while investigating whether he had under-reported his income, Smith says. Each time, it took about six months to prove his client hadn’t worked elsewhere and to get the refund released, he says.

Like Hodge, many identity-theft victims and their accountants complain about IRS delays and miscommunications in resolving their claims. Olson acknowledged in her congressional report that while IRS response has improved, the agency “too often exacerbates the difficulties” faced by victims. She said the IRS:

•Used procedures that ignored common-sense evidence about the rightful owner of a disputed Social Security number.

•Gave alleged victims temporary identification numbers to file tax returns and then denied tax benefits because they did not use Social Security numbers to file.

•Provided inadequate authentication processes for the electronic filing system used by many taxpayers and tax preparers.

•Provided instructions that varied from office to office, leaving victims “bounced around from one place to another.”

“They were behind the curve,” Olson says. “They didn’t see this as a global issue, but rather as a specific problem that they had.”

Similarly, a federal audit released Wednesday said the IRS contacted identity-theft victims multiple times for the same issues, even though their cases had been previously marked as closed. The audit, conducted by the Treasury Inspector General for Tax Administration, also criticized the IRS failing to pursue criminal investigations of identity thieves unless the cases “directly relate to a substantive tax or conspiracy violation.” Only 100 IRS referrals for criminal prosecution in the last two years included identity-theft charges, the audit found.

“We are concerned that if the IRS takes no additional action to stop further use of another person’s identity, then there is no deterrent to keep the problem from spreading,” the audit concluded.

What the IRS is doing to help

The IRS agreed with the auditors’ call for development of new and tougher strategies to deal with the problem. In an interview last week, Linda Stiff, the IRS deputy commissioner for services and enforcement, said cracking down on identity theft and assisting its victims is now “a top priority here.”

The IRS recently established a Privacy, Information Protection and Data Security office to centralize the tax agency’s handling of identity-theft issues and help provide assistance and consistent treatment to taxpayers whose personal information has been stolen.

Stiff says the agency by the fall will also form a team of specialists skilled both in navigating the IRS and in the measures victims should take “to get their lives back in balance.”

“We’ve taken steps to ensure that our workforce … understands that when they’re dealing with a victim, it’s imperative that they provide the assistance that that victim needs, on the first call, and not 10 calls later,” says Stiff.

The IRS recently created an electronic marker to flag compromised Social Security numbers in a system that would alert employees agencywide. The move is aimed at sparing identity-theft victims from having to prove their claim year after year.

But Olson, complaining, “There’s no central guidance within the IRS as to how to use the marker,” says the agency should do more.

She recommended creating an IRS form for taxpayers to file if they’ve been victimized by identity theft.

She also urged the agency to notify all filers using a compromised Social Security number that their identity might have been stolen.

“Maybe the thief would stop” after receiving such a notice, she said, adding that true victims would be alerted to the need to contact the IRS and other authorities.

Stiff says some of Olson’s recommendations have been implemented, and others are being assessed as the IRS works to improve its victim assistance.

Once a taxpayer has proved she or he has been victimized, says Stiff, “We want you to know that we’ve cleared the matter up, and we want to take steps so that in the future our records won’t force you into having to prove that a second or third or fourth time.”

Although Hodge says the IRS never officially notified him about the outcome of his claim, he hopes the new steps being taken by the agency mean his ordeal is over.

“I feel ecstatic now,” he says, “because I feel like I finally got my identity back.”

Few signs of rebound from U.S. housing mess, says IMF

Province

WASHINGTON — The global economic outlook is increasingly grim, with the United States mired in a recession from a housing meltdown whose effects are still spreading, the IMF said yesterday.

Global expansion is set to slow to 3.7 per cent in 2008 amid an unfolding crisis that began in the United States, the International Monetary Fund said in its semiannual World Economic Outlook report.

The growth estimate is a half-point lower than the January WEO update, it noted.

The U.S. economy, the world’s biggest, is likely in a “mild recession” and will stagnate through much of 2009 as housing prices slide further and credit conditions remain difficult.

For the world economy, there is a 25- per-cent chance of dropping below three-per-cent growth in 2008 and 2009, which, according to the IMF, would be the equivalent of a global recession.

“Moreover, growth is projected to remain broadly unchanged in 2009,” with growth in the advanced economies likely to fall “well below potential,” the 185-nation institution said.

The U.S. is poised to grow a paltry 0.5 per cent in 2008, the IMF said, despite a multibillion-dollar government stimulus package.

U.S. growth for 2009 will improve to 0.6 per cent, a “modest” recovery expected as financial institutions clean up their balance sheets.

But Treasury Under Secretary for International Affairs David McCormick called the IMF much too downbeat in its outlook.

The IMF also said growth in western Europe is projected to slow “well below” potential due to financial strains, trade spillovers and housing downturns in some countries. It paints much the same picture for Japan, the world’s second-largest economy.

China and India, the new engines of global growth, will also feel the slowdown, the IMF said.

© The Vancouver Province 2008