Last Thursday, cellphone carrier Verizon Wireless announced a new $2 fee for one-time payments made online or over the phone. On Friday, the Federal Communications Commission immediately announced they were “concerned about Verizon’s actions” and planned to look into the matter. At the same time, over 158,000 visitors signed an online petition demanding that Verizon drop the fee. In fact, the website hosting the petition expressed shock that “while you are instituting this new fee, Verizon paid zero federal income tax from 2008-2010, and actually got almost a billion dollars in rebates from taxpayers.” Verizon immediately beat a hasty retreat and dropped the proposed fee.

Verizon is hardly the only corporate giant to float new fees, only to see them immediately fall back to earth. Back in September, Bank of America announced plans to charge a $5 monthly fee for customers making debit card purchases — then, after howls of customer protest, backed off just five weeks later. Other banks, which had tested similar debit card fees, killed their fees too in the wake of the protests.

There’s a pattern developing here. In today’s struggling economy, companies can’t impose the broad-based price hikes they really want. So they settle for nickel-and-diming us with junk fees. Unfortunately for them, consumers are pushing back — and at least with Verizon and the banks, the customers are winning.

There’s a similar pattern at work in today’s Washington. Candidates can talk ’till they’re blue in the face about bold sweeping change, like Rick Perry’s 20% flat tax and Herman Cain’s attention-grabbing “9-9-9″ plan. (If you close your eyes right now, I bet you can still hear Cain saying “9-9-9″ in your head.) But in today’s hyper-partisan Congress, the actual legislators in charge of implementing all those bright ideas can’t find the consensus to name a Post Office, let alone remake the tax code in any meaningful way. So they settle for nickel-and-diming the system — extending the payroll tax holiday for a miserly 60 days instead of a full year, and paying for it by levying fees on mortgages sold to Fannie Mae and Freddie Mac rather than by raising taxes on million-dollar earners.

Even when legislators extend new breaks, they tend to be for small amounts, like the $800 “Making Work Pay” credit or $1,500 for home energy improvements. New tax breaks also tend to be short-lived: the 2009 deduction for sales tax on new cars lasted 10½ months, and the much-ballyhooed “Cash for Clunkers” program lasted just 56 days.

The problem, of course, is that Washington’s version of nickel-and-diming us adds up fast. A couple of bucks for online bill payments here and $5 for monthly debit-card usage there? Maybe it cuts into your Starbucks budget. But closing tax breaks hurts. As former Senate Minority Leader Everett Dirksen famously said, “A billion here, a billion there, pretty soon you’re talking real money.” And IRS “customers” can’t threaten to take their “business” somewhere else like customers at the bank.

2012 is an election year, of course, which means we can expect even less in the way of substantive action — at least for the next 10 months. But that may all change after November 6, as the Bush tax cuts expire after December 31. If the upcoming election leaves Washington as divided as it is now, we can expect a repeat of last summer’s debt-ceiling battle. Our job is to keep on top of all the news to safeguard your nickels and dimes, regardless of what happens in November. And that means planning. Remember, being proactive, now, is the key to keeping your tax bill as low as possible in 2012 and beyond. So, if one of your New Year’s resolutions is to get out in front of the tax nickel-and-dimers, give us a call!

Donna Bordeaux is participating in the TaxCoach(TM) SuperTable this week in New Orleans from May 5th – 7th.  The event is a gathering of the top tax professionals across the nation to develop new strategies and systems for providing a proactive plain-English plan for beating the IRS- legally..

Traditional tax planning crunches numbers to illustrate what-if scenarios based on future assumptions.  It gives clients dry numbers, in more detail than they need or want.  But clients don’t want numbers.  Clients want savings. That’s is where the strategies and systems developed at the SuperTable come in.

I just read an interesting article in the NY Times, about Leona Helmsley’s $8 billion bequest to be used to the care and welfare of dogs. This is great. Or is it?

First off, this is not technically an $8 billion donation from Leona Helmsley. It is technically a $4.4 billion donation from Leona Helmsley and a $3.6 billion donation from us – the other taxpayers. At some point, the $3.6 billion difference is going to have to be made up – and it isn’t going to be from the deceased.

Another major downside to this is that all of the funds are not required to go toward the “dogs” care and welfare. Current law requires that the Private Foundation disburse at least 5% of its assets annually. The kicker is that within this 5% includes administrative cost – including payments to Trustee’s. Who are these Trustees? Well, to my understanding, any one who is appointed. So, basically the Private Foundation can pay a salary to the individuals that Leona Helmsley (or others) selects.

In the Leona Helmsley case, I must point out that the Foundation must distribute a minimum of $400 million in year one. I find it unlikely that all of this will be paid in salary. My point is that on a smaller scale, individuals can use this strategy to avoid paying death taxes. Lets scale it down. Assume someone leaves $8 million to a Private Foundation. Disbursement requirements are only $400,000 in the first year. A large portion of this can be eaten up with administrative cost if salaries for the Trustees are included. This would leave very little funds for the actual charities that are purportedly supported by the deceased and by us – the other taxpayers required to pay into the system.

Of course, I believe that our taxes are way too high and that we pay for an astronomical amount of bureaucracy and government waste. I do not fault any individual, including Leona Helmsley, for finding a way to legally avoid paying the taxes due. Actually, that is my job, to legally reduce peoples tax bills. My issues lie with our elected officials and why these loopholes exist in the first place.

Personally, I believe the estate tax should be abolished. However, if we are going to have it – we should try to keep a fair playing field.

My suggestions to fix this issue:
1) Charitable Donations deductions to Private Foundations should be limited – both at death and while someone is still living. This is not to say that someone can not donate. They just should not get a full deduction for it. Give it to the actual charity where the good is being done, not another level of administrative overhead.

2) Why should one individual get a break because they are helping a charity that educates people on the historical contributions of the tractor, while another loses 45% of their money because they wanted to make sure their grandchildren and their great grandchildren had a quality education and lifestyle? I think there should be more stringent requirements as to what charities qualify for this deduction. There are far too many charities out there that qualify and only a portion of them actually help causes that can better the world.

3) Private Foundations should have a requirement to spend at least 5% of their assets on actual charity work annually – not including administrative overhead. This was introduced into Congress a few years ago but was axed after the Private Foundations (and their Trustees) whined that it would threaten their perpetual existence. Why should they have a right to exist forever? If they run out of money they just run out of money. Perhaps the Trustees can work to lower some of the administrative cost. If the work they are doing is actually beneficial, perhaps they can boost their chances at perpetual existence by receiving donations. Isn’t this how other charities survive?

Also, as a final note, I want to point out that Leona Helmsley did nothing wrong here – to my knowledge. It was actually great tax planning. As I said before, instructing my clients how to legally save taxes is part of my job. My problem is not with taxpayers who legally take advantage of the laws as they are written, but with the individuals in the Congress and the Senate who jack up taxes on the middle class and then leave loopholes open where select individuals can get around paying the tax. As much as I love dogs, I would rather the money have gone to help poor and disadvantaged children thatn dogs, but that was not my call. If Leona Helmsley liked dogs better than children, that is her business.