There is no place in the U.S. more expensive to smoke than New York City, where the taxes alone will set you back $5.85 per pack. Yet, addicts who visit Island Smokes, a "roll-your-own" cigarette shop in Chinatown, can walk out with an entire 10-pack carton for under $40, thanks to a yawning tax loophole that officials in several states are now trying to close.

The store is one of a growing number around the country that have come under fire over their use of high-speed cigarette rolling machines that function as miniature factories, and can package loose tobacco and rolling papers into neatly formed cigarettes, sometimes in just a few minutes.

The secret to Island's low prices is simple: Even though patrons leave carrying cartons that look very much like the Marlboros or Newports, the store charges taxes at the rate set for loose tobacco, which is just a fraction of what is charged for a commercially made pack.

Customers select a blend of tobacco leaves, intended to mirror the flavor of their regular brand. Then they feed the tobacco and some paper tubes into the machines, and return to the counter with the finished product to ring up the purchase.

The savings come at every level. Many stores sell customers loose pipe tobacco, which is taxed by the federal government at $2.80 per pound, compared with $25 per pound for tobacco made for cigarettes. The shops don't pay into the cigarette manufacturer trust fund, intended to reimburse government health programs for the cost of treating smoking-related illness. And the packs produced by "roll-your-own" shops are generally also being sold without local tax stamps, which in New York include a $1.50 city tax and a $4.35 state tax.

New York City's legal department filed a lawsuit against Island Smokes on Nov. 14, arguing that the company's Manhattan store and another on Staten Island are engaging in blatant tax evasion.

A judge on Tuesday spared Michael Jackson's former general manager prison time after she tearfully admitted failing to file her taxes and blamed the failure on being overwhelmed with the late singer's affairs.

U.S. Magistrate Judge Alan Kay sentenced Raymone Bain to five years' probation and to pay $202,422 in back taxes to the IRS and District of Columbia for the 2006-2008 tax years.

Prosecutors said Bain was earning $30,000 a month as president and general manger of the Michael Jackson Co. during that time. They asked Kay to lock her up for a year and a half to show that tax scofflaws will be punished.

"It's important that the law-abiding taxpayers of the United States are not dupes for following the law," prosecutor Karen Kelly told the judge, also noting that Bain has yet to file returns for 2009 or 2010.

Bain pleaded guilty to two counts of failing to file returns — one for the IRS and one for the District of Columbia, where she ran a public relations firm from the basement of her home. She specialized in handling media relations for high profile clients, including tennis star Serena Williams, longtime Washington mayor and councilman Marion Barry and rhythm and blues vocal group Boyz II Men.

Her attorney said the criminal charges have damaged her business because clients don't want someone with her problems speaking on their behalf.

A lawyer has pleaded guilty to not paying taxes on nearly $11 million in income while working at a major Wall Street law firm.

John O'Brien entered the plea Thursday in federal court in Manhattan.

The government had accused the 48-year-old O'Brien of failing to pay $2.5 million taxes on $10.8 million in income from 2001 to 2008. They say during that time, he splurged on a weekend home, international travel and a rare book business.

Prosecutors say O'Brien has agreed to pay $2.8 million in back taxes and interest. At his Nov. 16 sentencing, he faces a maximum of four years in prison, though the term will probably be shorter under sentencing guidelines.

Rapper and actor Ja Rule faces sentencing in federal court in New Jersey for failing to file income tax returns.

The platinum-selling rapper, whose real name is Jeffrey Atkins, faces up to three years in prison at his sentencing in Newark.

Atkins admitted in March that he failed to pay taxes on more than $3 million in income that he earned between 2004 and 2006 while he lived in Saddle River.

Ja Rule was sentenced in New York City last month to up to two years in prison after he pleaded guilty to attempted criminal weapon possession. The case stemmed from a gun found in his luxury sports car in July 2007.

The Internal Revenue Service is increasing the tax deduction motorists can take for using private vehicles for business, a rare midyear move sparked by high gas prices.

Starting July 1, motorists who use their personal vehicles for business will be able to deduct 55 ½ cents a mile from their taxable income, the agency announced Thursday. That's an increase of 4 ½ cents from the first six months of the year.

The rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. Workers who receive the reimbursement don't have to report it as income, as long as the payments don't exceed the IRS benchmark.

High gas prices have hit consumers, slowed the economic recovery and put increased political pressure on President Barack Obama. On Thursday, the Obama administration said it will release 30 million barrels of oil from the country's emergency reserve as part of an international response to lost oil supplies caused by turmoil in the Middle East and Libya.

Thousands of companies that cashed in on President Barack Obama's economic stimulus package owed the government millions in unpaid taxes, congressional investigators have found.

The Government Accountability Office, in a report being released Tuesday, said at least 3,700 government contractors and nonprofit organizations that received more than $24 billion from the stimulus effort owed $757 million in back taxes as of Sept. 30, 2009, the end of the budget year.

The report said the tax delinquents accounted for nearly 6 percent of the 63,000 contractors and grantees examined and cautioned that the real number might be higher because the known tax debt does not measure such factors as income underreporting.

Among the examples was an engineering firm that received a $100,000 stimulus act contract but owed $6 million in taxes. The IRS called it "an extreme case of noncompliance." A social services nonprofit that received more than $1 million in stimulus funds owed taxes of $2 million.

The GAO referred those two cases and 13 others to the IRS for further investigation.

On Tuesday, a Senate Homeland Security and Governmental Affairs subcommittee will hold a hearing on the report.

Federal law does not prohibit tax delinquents from getting government contracts or grants, though there are provisions that enable the government to withhold payments in some cases. While the federal government requires contractors to present documentation that their taxes are paid, some recipients escaped federal review because the money was disbursed at state or local levels.

Sen. Carl Levin, D-Mich., chairman of the investigations subcommittee holding the hearing, said it's been known for years that a few federal contractors and grantees don't pay their taxes.

House Speaker John Boehner is insisting tax increases are "off the table" in negotiations with the Obama administration and congressional Democrats on extending the federal debt limit.

The Ohio Republican tells NBC's "Today" show "everything else is on the table." Boehner  appeared a day after telling the Economic Club of New York he wants trillions of dollars in spending cuts as part of legislation allowing the government to continue borrowing beyond the current $14.3 trillion cap.

Boehner says he doesn't think Congress can take money from "some who would invest in our economy" and hand it over to the government. He said, "You can't raise taxes."

Boehner said mandatory spending programs like Medicare and Social Security must be addressed because now "they're unaffordable for our kids and our grandkids."