Swenson, Debbie for State Representative District 66

Firefighters called to wedding ring emergency at Queen Elizabeth Hospital, Woolwich

2011-06-02T01:41:00.000-07:00

A MARRIED woman wanted firefighters help this morning (June 2) when her ring finger swelled up.

The woman went to the Queen Elizabeth Hospital, Woolwich, with her husband as her finger was swollen and they could not get her rings off.

After attempts by staff at the accident and emergency department failed to remove the wedding and engagement rings they called 999.

Firefighters arrived at around 4am and used specialist cutting equipment to get the rings off the woman’s finger.

The crew from Woolwich fire station was at the scene for around 15 minutes.

Carbon tax might be offset by tax cuts

2011-05-31T03:15:00.000-07:00

Australians earning less than $80,000 a year could be given two rounds of tax cuts as compensation for any price rises under the Gillard government's proposed carbon tax. But wealthier people "will pay a price" as the country moves to a low-carbon economy under a 10-year plan unveiled by Labor climate alter adviser Ross Garnaut.

Both sides of politics were fast to use the economist's final update to his landmark 2008 climate alter review to push their own barrow. Labor noted, properly, that the report was scornful of Tony Abbott's direct action policy because it would cost more than placing a price on carbon but not raise any revenue to compensate households with.

But the opposition leader held on another claim in the report. Prof Garnaut made clear on Tuesday that "Australian households will in due course bear the full cost of a carbon price". "So how can (the prime minister) continue to preserve that her tax only makes big polluters pay," Mr Abbott asked parliament.

"Who pays? Big polluters or households? The truth is households." A carbon price of $26 a tonne would raise about $11.5 billion in 2012/13. After the tax transitions to an release trading scheme in 2015 it could rake in much more - up to $16 billion by 2022/23.

Prof Garnaut wants 55 per cent of the revenue raised in the first three years to go to low and middle-income earners in the form of tax cuts and senior welfare payments. That could rise to 65 per cent by 2021/22. The rest of the revenue would be used to help business, drive innovation and stock up carbon in land systems.

Wealthier Australians would pick up the tab. That's because in the long run business will pass carbon costs from side to side to the users of their products. "High-income earners who don't get a tax cut or something else will experience a reduction in real incomes," Prof Garnaut told reporters.

"That's just the economics of it... people on high incomes will pay a cost." Most of the household assistance under Prof Garnaut's 10-year plan would be in the form of tax cuts, with the tax-free threshold raised to $25,000. That would result in 1.2 million Australians paying no tax.

Other rates would be rejigged to ensure people earning more than $80,000 a year wouldn't benefit. Prof Garnaut argued that as transitional aid to business declines there would be further opportunity for "a second round of tax cuts". Such a move wouldn't be bad politics, the adviser said. Ms Gillard seems to agree. She told parliament on Tuesday "tax cuts are a serious option".

The impact of a carbon price on petrol prices would be lessened by a one-off cut to the fuel excise. But business would get less under Prof Garnaut's plan than was on offer under Kevin Rudd's carbon pollution reduction scheme. Emissions-intensive, trade-exposed industries would get 30 per cent of the revenue pie for the first three years but that would decline by 1.5 percentage points annually after that.

Electricity generators would receive just three per cent until 2015 and then nothing. When it comes to pollution reduction targets, Prof Garnaut wants them determined by an independent committee. In 2014, it would review Australia's current pledge to cut emission by five per cent in 2020 relative to 2000 levels. The committee could advise much deeper reductions depending on international developments.

The world's developed countries have, on average, already vowed to cut emissions by between 10 and 16 per cent by 2020.

A Texas Attorney Is Disbarred from Practicing Before the IRS for Willful Failure to File Tax Returns

2011-05-06T01:48:00.001-07:00

The Internal Revenue Service’s Office of Professional Responsibility (OPR) has prevailed in a Texas attorney’s appeal of an order for disbarment to practice before the IRS for willfully failing to file his federal tax returns, according to the Decision on Appeal.

The Treasury Secretary’s Delegate to hear appeals (Appellate Authority) has confirmed the basis for, and result of, the summary judgment granted by Administrative Law Judge (ALJ) Susan L. Biro in the case of Director, Office of Professional Responsibility vs. Donald J. Petrillo, according to the Decision on Appeal.

OPR alleged that Texas attorney Petrillo willfully failed to timely file his federal individual income tax returns for 2001 through 2006 and willfully failed to file his 2007 tax return. The untimely filings were from two to four years late. OPR further alleged that Petrillo willfully failed to pay the outstanding tax balances due on the late filed returns.

Petrillo did not deny the allegations but argued that his failures to file and pay were not the result of willful conduct but were due to personal circumstances beyond his control. Using the standard for “willfulness” set forth in previously published Circular 230 cases (“a voluntary, intentional violation of a known legal duty”), the ALJ found that the various explanations given by Petrillo for his failures to file did not negate his willfulness.

However, the ALJ explicitly declined to adopt OPR’s position that willful evasion of payment for purposes of Cir 230, sec 10.51(a)(6) should be analogous to Trust Fund Recovery penalty assessments. Finding that the failures to file were significant enough by themselves, the ALJ ordered disbarment without addressing the failures to pay.

In his appeal, Petrillo argued that (1) the ALJ applied a willful negligence standard rather than a willfulness standard; (2) the ALJ applied the wrong standard for willfulness; (3) material facts were in issue making summary judgment inappropriate; and (4) he was denied due process because the standards were changed from willfulness to willful negligence after the Complaint was filed.

The Appellate Authority determined that the ALJ had correctly and consistently applied the existing standard for willfulness to Petrillo’s conduct; that the ALJ had correctly determined from the deposition testimony and briefs that there were no material factual issues remaining to be heard; and that the ALJ’s findings of fact were well supported by the record and not clearly erroneous. Finding, during the periods in issue, that Petrillo was not mentally or physically incapacitated; was gainfully employed; prepared tax returns for others; engaged in legal work for clients; and conducted his own personal business, the Appellate Authority concurred in the ALJ’s decision to disbar, noting that Petrillo had been previously suspended by OPR from 1993 through 1997.

“This is yet another in a line of Final Agency Decisions in the past two years which reiterate that practitioners cannot expect to be excused for not filing or late filing their own tax returns when the record reflects their active engagement in other tax and business matters on behalf of paying clients, or active involvement with their own personal activities which belie any debilitation,” said OPR Director, Karen L. Hawkins.

April 18 Filing Deadline Approaching; IRS Offers Tips to Taxpayers

2011-04-05T23:23:00.000-07:00

The Internal Revenue Service today reminded taxpayers that they have two weeks remaining until the April 18 filing deadline and that they can use IRS Free File to do their taxes or file an extension.
As of March 25, the IRS has received more than 82 million individual income tax returns, which is 58 percent of the 141 million returns expected this year. The IRS has received about the same number of returns so far this year as it did at this time last year, while processing of returns is up 3 percent from the same time last year.
Numerous economic recovery tax credits are also still available. The IRS reminded taxpayers that for some credits, such as the Making Work Pay Credit, individuals must claim the $400 ($800 for married couples) in order to receive it. (Use Schedule M to calculate your Making Work Pay credit.)
Usually, 20 to 25 percent of all taxpayers file in the final two weeks of the tax season. And, usually, about 7 percent of taxpayers seek a six-month extension to file.
Taxpayers have an extra weekend to file this year because of a District of Columbia holiday. The deadline for 2011 is Monday April 18, instead of April 15.
The IRS offered these filing tips as the final countdown begins:
Start now to gather information and prepare your return to avoid hasty and possibly costly errors;

Many tax credits from the American Recovery and Reinvestment Act (ARRA) are available. There’s an expanded American Opportunity Credit of up to $2,500 for tuition, books and fees; a larger energy credit of up to $1,500 and an expanded Earned Income Tax Credit for larger families of up to $5,666. The $8,000 first-time homebuyer credit is still available for people who entered into a binding contract by April 30, 2010, and went to settlement by September 30, 2010;
Consider using IRS Free File, which is brand-name software or online fillable forms, to prepare and e-file your returns – at no charge. Software is available to the 70 percent of taxpayers – those who earn $58,000 or less. And, fillable forms have no income limitations. Get started at IRS Free File;
File electronically to get a faster refund, have secure, encrypted transmission and a more accurate tax return. You can e-file through your tax preparer, through commercial software or through IRS Free File;
If you cannot meet the April 18 deadline, file an extension, Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. All taxpayers can use Free File to submit a Form 4868 for an automatic six-month extension. And, Free File will be available through the October 17 extension deadline for late filers.
The six-month extension is to file a return only; it is not an extension to pay taxes due. If you are unable to pay your taxes, file a tax return anyway to lessen the penalties and pay all that you can. Then work with the IRS to set up a payment plan or you can go to IRS.gov and use the Online Payment Agreement Application.

In addition to Free File, the IRS offers other free tax help services through volunteers at 12,000 sites nationwide. The Volunteer Income Tax Assistance (VITA) sites serve taxpayers whose 2010 incomes were $49,000 or less. Tax Counseling for the Elderly sites serve taxpayers who are 60 and older.
Note to editors, PSA directors and Web managers: Multi-media products are available. Public Service Announcements to support IRS Free File and the Earned Income Tax Credit are available in video and audio formats. Both IRS Free File and EITC have Spread the Word campaigns that offer tax-day countdown widgets, electronic banners and posters.

2011 FILING SEASON STATISTICS
Cumulative through the weeks ending 03/26/10 and 03/25/11
Individual Income Tax Returns	2010		2011		% Change
Total Receipts	82,533,000		82,276,000		-0.3%
Total Processed	77,812,000		80,318,000		3.2%

E-filing Receipts:
TOTAL	66,542,000		71,067,000		6.8%
Tax Professionals	42,354,000		44,712,000		5.6%
Self-prepared	24,188,000		26,355,000		9.0%

Web Usage:
Visits to IRS.gov	141,109,467		151,305,611		7.2

Total Refunds:
Number	68,587,000		69,955,000		2.0%
Amount	$204.260	Billion	$206.477	Billion	1.1%
Average refund	$2,978		$2,952		-0.9%

Direct Deposit Refunds:
Number	54,738,000		57,251,000		4.6%
Amount	$175.038	Billion	$179.827	Billion	2.7%
Average refund	$3,198		$3,141		-1.8%

Tax On Funk Food

2011-03-22T22:25:00.001-07:00

In an effort to alter bad eating habits of its citizens, the Hungarian government plans to bring in “tax on hamburgers.”

“Ministry of studying the likely effects of introducing taxes called” hamburger tax ‘, “said economics minister Gjergi Matolči on the site of the Assembly.

“Psychoanalysis of dietary habits in recent years and their effects on health shows that eating too much fatty and salty food reasons more problems,” noted the minister.

“To stop this process, various ministries are studying taxes that could be introduce, their economic effects, but it is still unclear which products will be to relate, and how to used the profits from these taxes,” he added.

If being a “hamburger tax”, a fast food restaurant chains will be able to protest to him as a discriminatory measure, since the Hungarian cuisine is not easy.

IRS Announces VCAP Relief from Debt Extinguishment for Certain Issuers of Tax-Exempt Bonds

2011-03-01T22:59:00.000-08:00

Internal Revenue Service (“IRS”) Announcement 2011-19 provides relief from debt extinguishment for certain issuers purchasing and holding their own tax-exempt securities under the Tax Exempt Bonds Voluntary Closing Agreement Program (“TEB VCAP”).

Notice 2008-41, modified by Notice 2008-88, and extended by Notice 2010-7 to December 31, 2010, provided temporary rules allowing state and local governmental issuers to purchase and hold their own tax-exempt obligations for temporary holding periods. This rule prevented extinguishment of the purchased obligations under § 103 and §§ 141-150 of the Internal Revenue Code (“Code”). These temporary rules provided relief from liquidity constraints in the tax-exempt bond market during the financial crisis.

For various reasons, some issuers that purchased their bonds under the temporary rules were unable to resell their bonds by December 31, 2010. Other issuers are experiencing an ongoing need to purchase and hold their own tax-exempt obligations due to certain financial challenges.

Closing agreements executed under this program provide that the extinguished bonds are treated as remaining outstanding for purposes of § 103 and §§ 141-150 beginning from the later of January 1, 2011, the expiration of the temporary rules, or the date the issuer purchases its obligations.

The closing agreement will require the issuer to:

(1) submit a resolution of its intent to resell or currently refund the extinguished tax-exempt bonds no later than 180 days after the closing agreement is signed;

(2) submit representations or an unqualified bond counsel’s opinion the bonds are outstanding legal, valid and binding obligations of the issuer under State law and, if treated as outstanding under the closing agreement, will qualify as tax-exempt obligations of the issuer under § 103 of the Code;

(3) pay a fee based on the formula described in the Announcement. The TEB VCAP requests are due no later than December 31, 2012 under the operating procedures described in section 7.2.3 of the Internal Revenue Manual.

Simplifying federal tax code will decrease fraud

2011-02-20T21:02:00.000-08:00

USA TODAY's article "Inmates stole $39 million from the IRS in 2009" serves to highlight that the wealthy are not the only ones trying to get extra money back, avoid taxes or pay less than their compulsion under the current federal tax system. Income tax evasion and fraud cut across all income tax brackets.

A complex system of exemptions, deductions and credits creates a state of mind that others aren't paying their fair share, so why should I? It creates a false insight of tax evasion and fraud as victimless crimes. But the victims are the countless taxpayers who pay and file their taxes in a timely, precise manner. They are supporting financially all the tax cheats.

It is time to make simpler the tax code and stop using it to advance political agendas or to accomplish social engineering.

Every year, I pay my Pennsylvania income tax, and I am reminded how simple and fair it is. Take your income and increase it by the current tax rate, a flat 3.07%, and arrive at your tax obligation. Simple. There are very few adjustments, credits or exemptions. The system is fair. Low-income Pennsylvanians have their tax compulsions forgiven. For Pennsylvania retirees, Social Security and pension income do not count as taxable income.

By using the Pennsylvania income tax system, much of the fraud and abuse that occur with the current federal income tax system could be eliminated

Obama to recommend break for states on jobless aid

2011-02-08T23:26:00.000-08:00

President Obama is expected to recommend easing the burden on states that on loan to provide jobless benefits during the economic downturn by allow them to postpone debt payments to the federal unemployment trust fund for two years.

The proposal in his upcoming 2012 budget is likely to be embraced by states frantic for help as they struggle to shore up budget shortfalls. But it is being disapproved of by congressional Republicans as a job-killer that will eventually inflict higher taxes on employers who pay the cost of most jobless aid.

Obama is likely to discuss the suggestion with Republicans on Wednesday, when House Speaker John A. Boehner (R-Ohio) and other House GOP leaders join him for lunch.

White House Press Secretary Robert Gibbs said the president thinks the steps future in his budget outline would reduce the burden on states providing jobless aid, and would give state officials time to "reduce what they offer and how they pay for it." Obama's budget is expected to be revealed Monday.

The proposal is not the only gauge to help states run the fiscal fallout from persistent unemployment, said one person familiar with the discussion.

Yet Republican leaders in the House and Senate have made it clear they have little interest in providing federal help to cash-strapped states, as Democrats did last year when they forbidden Congress. At the time, Obama approved a states' aid bill to keep teachers on the job and give medical care for lower-income residents.

"There will be no post security of the states," Rep. Eric Cantor (R-Va.), the House majority leader, said recently.

Thirty states owe almost $42 billion to the federal unemployment insurance trust fund, and the president's proposal would congeal for two years their interest payments to the federal government. Obama's plan would also halt the tax adds to that kick in automatically to pay it off.

Congressional Republicans say the Obama proposal would obstruct job growth by allowing states to eventually increase the tax on employers who pay for unemployment benefits.

IRS Announces 2011 Air Transportation Tax Rates

2010-12-30T22:44:00.000-08:00

The Internal Revenue Service today announced the 2011 inflation adjustments to the excise taxes on air transportation.

Excise taxes apply to the domestic segments of taxable air transportation and to the use of international air facilities. The Airport and Airway Extension Act of 2010, Part IV, signed into law on Dec. 22, 2010, extends these excise taxes to air transportation that begins or is paid for no later than March 31, 2011.

These excise taxes are adjusted annually for inflation:
•    For 2011, the excise tax on the domestic segment of taxable air transportation is $3.70, unchanged from 2010.
•    The excise tax for 2011 for international flights that begin or end in the United States is $16.30, up from $16.10 in 2010.
•    The tax on use of international air facilities also applies at a reduced rate to departures of interstate flights that begin or end in Alaska or Hawaii. For 2011, the international air facilities tax on these flights is $8.20, up from $8.10 in 2010.

The new rates take effect Jan. 1, 2011.

Tax cut deal: What to expect in your paycheck

2010-12-19T20:22:00.000-08:00

Come January, you'll start to see some changes in your paycheck, as the new Social Security tax break that President Obama signed into law Friday takes result. The measure, part of a sweeping package of tax cuts, will decrease the amount of money workers pay into Social Security in 2011, which will mean more take-home pay for many workers, although not for all.

Workers normally pay 6.2% on their first $106,800 of wages into Social Security. As a result of the tax cut deal passed by the House on Thursday night, they will only pay in 4.2% in 2011. So, for every thousand dollars in wages per paycheck up to the cap, one would only have $42 withheld (4.2% x $1,000), rather than $62 (6.2% x $1,000).

But given how late in the year it is, it may take employers a pair of pay periods to get everything working as it should. Employers typically need a few weeks to program and test their new payroll systems. The IRS just issued guidance on Friday morning, a few weeks later than normal because Congress waited until the very last minute to render its decision on tax policy for 2011.

"It could be the third paycheck of the year before you see a 'normal' check," said Scott Mezistrano, senior manager of government relations of the American Payroll Association.

Here's what that might mean:

Say you make $1,000 a paycheck. Your first paycheck in 2011 may have $62 withheld -- or $20 too much -- because your employers' payroll tax system has not been fully re-programmed, Mezistrano said. To compensate you for that, only $22 may be withheld in your second paycheck (4.2% x $1,000 - $20).

And, with any luck, by your third paycheck in 2011, everything will be set to the right dial. The IRS on Friday asked employers "to adjust their payroll systems as soon as possible but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible, but not later than March 31, 2011."

How much more they will net relative to this year depends on whether they qualified for the expiring Making Work Pay credit. That credit provided up to $400 to any working individual making less than $75,000 (or up to $800 for working couples making less than $150,000).

For instance, individuals who make $50,000 will see a bump of $1,000 in take-home pay, which is $600 more than the Making Work Pay credit they got this year. For a couple at that income level, it will mean $200 more than they received under Making Work Pay.

For people making less than $20,000 (or couples making less than $40,000), they may actual see a drop of about $210 on average in their take-home pay relative to this year, because the payroll tax break will be worth less to them than the Making Work Pay credit was.

The IRS noted that the Social Security tax break for 2011 will have no effect on your future Social Security benefits, which are based on your career earnings.

Deal on Bush-era tax cuts

2010-12-08T22:51:00.000-08:00

In an eleventh-hour compromise, United States President Barack Obama struck a deal with his well-established Republican opposition to extend Bush-era tax cuts for another two years.

The cuts, introduced in 2001 by the former President, George W. Bush, were set to end on December 31 since Congress was forbidden from making them permanent under rules at the time. The situation saw both the White House and the opposition digging in their heels as the deadline approached.

President Barack Obama had initially hoped to protect the tax cuts for middle-class Americans while allowing the benefit to lapse for the richest two per cent a distinction that Republicans sought to block.

Under the bargain struck this week, Mr. Obama will have his way at smallest amount on one item on the White House agenda the extension of unemployment benefits and a payroll tax cut that will improve the lot of ordinary Americans.

In remarks following the negotiations, Mr. Obama said he “completely disagreed” with the Republican view that the tax cuts, including for the wealthiest, should be made permanent. “A permanent extension of these tax cuts would cost us $700 billion at a time when we need to start centering on bringing down our deficit,” he said.

He, however, said he would not accept the “chilling prospect” faced by middle-class Americans of a tax rise on January 1, 2011, and unemployment insurance payouts drying up. “Make no mistake; allowing taxes to go up on all Americans would have raised taxes by $3,000 for a typical American family. And that could cost our economy well over a million jobs,” he said.

While the deal marks the breaking of a stalemate that could have spelt economic doom for millions of American households still reeling from the effects of the downturn, some experts noted that Mr. Obama has endangered the support of his liberal base.
Economist Paul Krugman recently argued against precisely such a deal, saying: “Mr. Obama should draw a line in the sand, right here, right now. If Republicans hold out, and taxes go up, he should tell the nation the truth, and denounce the blackmail attempt for what it is.”

Under the bipartisan deal, American families will retain not only the Bush-era tax cuts, but also those introduced under Mr. Obama.

Mr. Obama said that in exchange for a temporary extension of tax cuts for the wealthiest, middle-class tax credits such as the Earned Income Tax Credit and the Child Tax Credit would persist, as would the American Opportunity Tax benefitting nearly eight million students.

The agreement will also see unemployment insurance extended for a further 13 months, a direct benefit to nearly three million Americans.

State finances billions in the red

2010-12-02T23:31:00.000-08:00

The State's finances were 13.3 billion euro in the red even though the Government took in more tax than predictable. The latest Exchequer figures showed revenue officials took in 470 million euro more in levies than predictable.

The Department of Finance said a higher-than-predicted corporation tax intake joint with smaller surpluses in excise and VAT offset falls in income tax. Despite the better than expected returns, taxes are still 1.3 billion euro below the first 11 months of last year.

Michael Noonan, Fine Gael finance spokesman, said the figures exposed a deep split in Irish society, revealing the hardship now facing huge numbers of Irish families. "On one side, the multinational sector and large companies are enjoying a reasonable resurgence," Mr Noonan said.

Striking a more conciliatory tone, Joan Burton, Labour's Finance spokeswoman, said that after three years of haemorrhaging tax revenues there was now evidence Exchequer figures were stabilising.

"Due to the continuing depressed state of the economy, tax gate are 646 million euro, or 4.1%, down on 2010 for the year to date," Ms Burton said.

"This serves to underscore the challenge facing any government in meeting the onerous repayments negotiated by the Fianna Fail government in their bailout agreement with the EU-IMF troika. "

Gold inches down, US data calms economic concerns

2010-11-24T22:52:00.000-08:00

Gold edged down in thin trade on Thursday after encouraging U.S. jobless claims data calmed some worries about economic growth, but concerns over tensions on the Korean peninsula could present some support.

Bullion barely reacted to news that Vietnam's central bank has granted additional quotas for domestic companies to import gold between now and the year end, but dealers noted buying on plunges from consumers in Asia.

Spot gold eased $4.42 to $1,369.29 an ounce by 0240 GMT - well below a lifetime high around $1,424 struck in early November. It had hit an intraday low around $1,367 an ounce. U.S. gold futures fell $4.5 to $1,368.5 an ounce. U.S. markets are shut on Thursday for the Thanksgiving holiday.

"I would say emotions are still bullish. The conflict between North and South Korea is not going be solved within a short period of time," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"It will take a bit of time. There may be more buying at below $1,370." North Korea warned of additional military attacks if South Korea makes "reckless military provocations again," its official media said on Thursday.

The United States says it considers North Korea's actions were an isolated act tied to leadership changes in Pyongyang, and many experts say the North carried out the shelling to burnish the image of the inexperienced and little-known younger Kim.

U.S. crude futures firmed on Thursday, extending a rally from the day before on optimism about the U.S. economic recovery, but the Thanksgiving holiday in the United States and concerns over tensions on the Korean peninsula may limit further gains.

BC government call off 15 per cent income tax reduction

2010-11-17T23:07:00.000-08:00

The proverbial carrot that Premier Gordon Campbell hangs in front of millions of British Columbians has been suddenly yanked away.
Two weeks after Gordon Campbell announced he was stepping down as Premier, the provincial government has decided to hang the 15 per cent reduction in personal income tax rates for the first $72,000 of personal income that was promised in Campbell's televised address last month.

Campbell says this is not the time when he or cabinet should be tying the hands of the future leader. "They will still have the chance where they can bring in the tax cut retroactively January 1, if they decide to do that."

But Finance Minister Colin Hansen says they can't say when or if the tax cut would be re-instated. "The choice as to whether or not to proceed with that should be made by the new premier in conjunction with the cabinet at that time."

NDP Leader Carole James says she was against the tax reduction to start with, but this is a whole new Pandora's Box, "To pull back on that tax cut now, it shows that the government is completely focused on damage control, on their own problems, and sadly it's British Columbians who are hurting because of that."

Brian Bonney with the Canadian Federation for Independent Business says taking away this tax benefit is a big fault. "You give people hope correct before Christmas that they're going to have some extra money to pay off a few bills in the new year, and in one foul pounce that seems to be taken away from us."

He says this is yet another box when politics has trumped good public policy and created unnecessary uncertainty for businesses.

The tax reduction would have taken effect January 1 of next year, provided it received legislative endorsement. It would have become the second largest personal income tax relief gauge in BC's history.

The government will still roll out a throne speech and budget in early February, but won't proclaim any programs until a new party leader is chosen later that month. There will also be what the Executive Council calls a "status quo" budget, with no new proposals beyond what is statutorily required.

Kan. gov.-elect against revoking sales tax hike

2010-11-12T22:13:00.000-08:00

Gov.-elect Sam Brownback said Thursday that he opposes a quick revoke of this year's Kansas sales tax increase, an idea circulating among Republican legislators. The incoming GOP governor did leave room for him to back the idea in upcoming years. Brownback already has said he wants to amend the state's tax system to promote economic growth. But Brownback said the Legislature shouldn't revoke the sales tax increase next year because of the budget problems. He takes office and the Legislature assembles its annual session Jan. 10.

"We're short of capital for the state, and I don't think it's something that we should be doing at this time," Brownback told reporters after a Veterans Day ceremony in Topeka. "Our economic situation is not even." Rep. Owen Donohoe, a Republican from the Kansas City-area suburb of Shawnee, suggested in a recent letter to colleagues that GOP House members make the revoke a top priority. He acknowledged in an interview that he hadn't spoken with Brownback about it.

In his letter, Donohoe called on colleagues to commit to a conventional agenda, noting Republicans' big election gains. The GOP picked up 16 House seats, giving those 92 to Democrats' 33. "With the sweeping consent of the Kansas voters, we have a rare opportunity to effect substantial legislation that reflects fiscal and family values in the next session," he wrote.

House Speaker Mike O'Neal, a Hutchinson Republican who, like Donohoe, opposed the tax increase, said it's fair to debate revoking it. However, he also said legislators may want take a longer-term look at tax policy and consider plummeting individual and corporate income taxes to spur growth. Brownback said last week that he'd liked to cut individual income taxes.

"I think that all comes into the discuss that we certainly will have," O'Neal said. The sales tax rose from 5.3 percent to 6.3 percent in July. Outgoing Gov. Mark Parkinson, a Democrat, had pushed for the increase, saying it was necessary to keep away from crippling cuts in education funding and social services. The tax increase is expected to provide $314 million for state programs during the current fiscal year and more than $370 million during the fiscal year that begins in July 2011.
For the first three years, a small portion of the revenues will help support a 10-year, $8.2 billion transportation program that legislators approved this year, also at Parkinson's urging. The sales tax is due to drop to 5.7 percent in July 2013, with all funds raised by the last 0.4 percent going to transportation. O'Neal acknowledged that revoking the increase next year could "hamstring" the program.

"There's a lot of moving parts here," he said. Parkinson and other supporters of the sales tax increase dispute that it stabilized the state's finances. But the state also used federal stimulus funds to bolster aid to public schools and spending on social programs.

Kansas officials expect no additional incentive funds, leaving a $492 million gap in the next fiscal year's budget. "We've got to balance our budget," Brownback said, adding that his goal is to chapter out accounting moves the state has used in previous years to help paper over some problems.

But the governor-elect also refused to portray the sales tax increase as good. "When you raise taxes, you send a signal to the rest of the country (that) you're a high tax state," he said. "We've been a high tax state in this district, so the way to grow is not that way."

To Tax More Rich ‎

2010-10-28T03:44:00.000-07:00

Washington State, where politics is as liberal as it gets, has an initiative on its Nov. 2 election ballot to charge a personal income tax on the “rich,” according to an Oct 26 special report by the Tax Foundation. Presently it’s one of seven states with no individual income tax. Washington State voters, along with other Americans will be worriedly awaiting Congress’s decision in the lame duck session next month whether to let the Bush tax cuts expire on Dec. 31. President Obama and his fellow lefties in Congress have bellowed endlessly that the Bush tax drops favor the “rich.”

Washington State’s Initiative 1098 would initiate an income tax on high earners at a rate of 5 percent on income over $200,000 ($400,000 for couples) and 9 percent on income over $500,000 ($1 million for couples). “Officials guess that the new tax would raise approximately $2.2 billion per year. Of that amount $600 million would be used to decrease property taxes by about 4 percent and provide additional credits against the state gross receipts tax.” New spending on health care and education would assert the left over $1.6 billion.

If proposition 1098 passes, “a constitutional challenge is likely,” writes Joseph Henchman. Director of state projects for the Tax Foundation. Since the income tax was ruled unconstitutional in the state, voters there have discarded previous attempts to accept an income tax. “Washington’s planned new income tax “would be out of the norm in two respects, said Henchman. “It will relate to all adjusted gross income with no exemptions or deductions, and it will apply only to high-income earners.” Further, “just as numerous other states are overturning so-called millionaires’ taxes or allowing them to expire, Washington would be accepting one.”

Washington’s constitution has a uniformity section. Its purpose has been described as “strict constitutional supplies requiring equal and uniform taxation.” The initiative’s extremely slim base (exempting over 98 percent of taxpayers) would probably violate that provision,” Henchman wrote. In essence, a mass of voters would decide whether to impose a tax on 1.2 percent of the population.

Sales tax receipts up for most in county

2010-10-07T21:53:00.000-07:00

Most all of the entities that collect a local sales tax in the county saw tax receipts up over year-ago statistics, according to the latest information from State Comptroller Susan Combs. The City of Corsicana saw sales tax receipts increase 3.98 percent from year ago statistics. The city’s split of sales taxes for the month was $416,471.65, up from $400,512.00 from one year ago. For the year-to-date, sales tax receipts are down 1.01 percent, with receipts totaling $4,122,672.68 for 2010, compared to a year-to-date total of $4,165,154.97 for 2009.

Statewide, sales tax receipts were up 6.8 percent from year ago figures. Gains in almost all sectors, including oil and gas, construction, manufacturing, wholesale trade, retail trade and restaurants were noted, Combs said in a release announcing the latest statistics. The collections actually symbolize sales taxes collected in September from sales made in August 2010.

Even with the 1.01 percent arrears from year ago statistics, city leaders are happy with that figure — they had budgeted a loss of 1.58 percent for the year. Should next month’s figures come in at or near 2009 levels, the city will end the economic year very close to what it had projected, around $4.9 million.
Going forward in the budget just adopted, city leaders have estimated a drop of about $100,000 from this year’s projection, although it could be spring before a correct projection on receipts could be made.

It’s very important that we end the year where we thought we were going to. It is a good sign. It is really very satisfied to see (August) not in a ‘negative’ category. That has not been the trend this year.

Only four tax entities in Navarro County Mildred, Navarro, Oak Valley and Richland saw decreases for the month from year ago figures. Combining all taxing entities in the county, receipts were up 4.58 percent from the same month a year ago, and down 1.05 percent for the year, with $442,578 collected for the month, and $4,386,088.71 year-to-date.

Fight over Bush-era tax slash moves to campaign trail

2010-09-29T23:56:00.000-07:00

Congress prepared to leave town without voting to expand the Bush-era tax cuts Wednesday, choosing to shift the fight over one of the year's biggest partisan battles from the halls of Congress to the political campaign trail.Both Democrats and Republicans see latent political gains in carrying the tax fight to their home states, banking on their ability to induce voters that the other side is to blame for the impasse. Congress is expected to put the issue to a vote in the post-election lame-duck session.

The decision introduces a fiery matter into an election in which control of the House, and possibly the Senate are in the balance. What happens to the $3.7 trillion tax package will feel the pocketbook of almost every voter. It also has major implications for the federal budget and U.S. economy in the residue of President Barack Obama's first term. Most Democrats support extending the tax cuts to all but top earners -- individuals making $200,000 or more and families earning $250,000, for whom they favor letting the Bush cuts lapse. Unless Congress acts, all the tax cuts will slip at year's end. Republicans and some conservative Democrats favor extending the cuts for all, arguing that tax cuts for wealthier Americans would help businesses expand and create jobs.

Voters who are focused on pocketbook issues this campaign season will be offered two distinct views on the tax cut debate. As the tax cuts loomed large over the final days of congressional debate, both the House and Senate conducted a flurry of votes, even though both Democrats and Republicans were anxious to leave Washington for the campaign season. Congress was on track to reach an agreement to keep the government running by approving a stop-gap spending bill called a continuing resolution that would hew to 2010 spending levels. The resolution was needed because Congress had failed to pass any of its annual appropriations bills.

Both the House and Senate also conducted a series of votes this week on core issues designed to underscore Democratic priorities, even though the bills had little chance at final passage before the midterm elections. The House on Wednesday passed legislation to fund a new health program for responders and community members injured in the Sept. 11, 2001, terrorist attacks in New York, and re-open the federal victims' compensation fund. The bill has not passed the Senate.

As a last effort to address the nation's stubborn unemployment rate and promote jobs, the Senate voted also on an outsourcing bill that offered a payroll tax holiday to firms bringing overseas jobs back to the United States and imposed tax penalties on those that ship jobs overseas.The outsourcing bill failed largely along party lines, with some Democratic dissent, in what Sen. Mitch McConnell of Kentucky, the Republican leader, called "about as pure a political exercise as you can get."As the tax cut debate hangs over the political season, both sides offered a glimpse of the arguments as they prepared to make the case to voters.

"It's irresponsible for them to leave town," said Rep. John Boehner of Ohio, the Republican leader, as Democrats made it clear they would not be bringing the issue to the floor. "This is no way to run the people's House."Many economists say that as the economy continues to struggle it would be unwise to raise taxes on the middle class. They give credence to the proposal from Obama and Democrats to extend tax cuts for those making less than $200,000 and families making less than $250,000, despite the $3 trillion cost.But economists are split over extending $700 billion in tax breaks for the wealthy, as the GOP want to do.

Mark Zandi, chief economist at Moody's Analytics, has argued for phasing out the tax break for the wealthy but not until after 2011.Studies from the Tax Policy Center show just 1.7 percent of all American taxpayers earn more than the $200,000 cut off.

Tax credits hype as key to homelessness

2010-09-22T01:41:00.000-07:00

Tax cuts -- and not more funding for government-led programs -- could be the key to helping end homelessness in Canada if Ottawa offers tax credits to entice private enterprise into building more low-income housing, according to a policy paper released by the University of Calgary.

The report, issued by the university's School of Public Policy on Tuesday, says U.S.-style tax credits could help stem the tide of condo conversions and make it more financially feasible for developers to construct new multi-family rental units.
Affordable housing has become particularly critical in cities like Calgary, where roughly a third of all multi-family rental housing units in this city have vanished since 1992, and resident research associate for the University of Toronto's Cities Centre, who also co-authored the report.

"Homelessness is a problem that will be solved only with the connection of the private sector. We deem we must pay attention to tax incentives and regulatory measures to harness the energy and efficiency of the private sector.
The tax incentives being planned are based on the U.S. low income housing tax credit, which has been operating since 1986.

It would modify existing Canadian tax laws to offer breaks to developers who include affordable housing units in new construction. Building owners making major repairs on apartments with an eye to converting them into condominiums could also be eligible for the tax credits, if they make a long-term pledge to maintain the units as rentals.

While the tax credits would divert $50 million in tax revenues from federal coffers in its first year, $100 million in the second year and $150 million in its third year, it would fund between 3,500 and 5,000 rental units nationwide.
Alberta's share of this boost to rental spaces would be between 300 and 500 units.
The tax cuts are a small government investment that could yield dramatic results because they offer a financial incentive for private business to get involved in helping address a social concern, said Ron Kneebone, director of economic and social policy research for U of C's school of public policy.

And ultimately it will be the taxpayer who is going to win the race.

Business pushes to extend tax cuts

2010-09-14T02:26:00.000-07:00

The business community and anti-tax groups are sloping up their campaign to win an extension of the Bush tax breaks for the wealthy and hand President Barack Obama and his economic team a defeat just in time for Election Day.

This battle, however, is about other than just winning one policy fight. It’s also about clutching an eleventh-hour opportunity and maximizing gains that have largely eluded corporate interests since Obama took office.

With Democrats on the ropes on the campaign trail and cringing from the idea of another tough vote, conservatives now find themselves with a better than fair shot at getting all of President George W. Bush’s tax cuts extended — at least for a couple of years, a prediction that would have been deemed laughable two years ago.

Then, if the Democrats fall in November, the business community can try to make those tax cuts permanent and still pocket a handful of other tax breaks that Obama put on the table in topical weeks — a move one corporate insider dismissed mockingly as “flailing in the face of November.”
Business leaders disagree that a tax hike timed to hit the wealthiest Americans in January would stall job growth by hobbling small businesses and shrinking money available for investments that could help spur new economic activity.

Advocates of revoking the tax breaks dispute that argument, saying only a tiny percentage of small businesses would be affected and that an influx of federal cash is needed to help pay for the extension of Bush’s middle-class tax cuts and support more-effective jobs programs.

To push back on that message, the U.S. Chamber of Commerce on Wednesday will steer into town executives from more than 40 small-to-medium-sized businesses for a tax policy briefing that will close with a lobbying blitz on Capitol Hill.

The Business Roundtable, meanwhile, has 87 chief director officers from major corporations coming to Washington the same day, and their dance cards are full, too. Among those scheduled to assemble down with the CEOs are White House chief of staff Rahm Emanuel, Sen. Ben Nelson (D-Neb.), Sen. Susan Collins (R-Maine) and Rep. Dave Camp (R-Mich.).

“Our situation is that this is not the time to raise any taxes. The economy is very frail,” said Johanna Schneider, the Roundtable’s executive director for external affairs.

The Chamber’s grass-roots division has also helped engender more than 75,000 letters from constituents to lawmakers about the need to extend the credits; a similar letter was generated by its Tax Relief Coalition, which represents just about every trade group in town.

“We will go to the House Democrats who sent a letter to the president in January calling for an extension of the tax cuts and others — a increasing number of them on the battle trail — to try to see if they will join with us,” said Bruce Josten, the Chamber’s executive vice president for government affairs.

Americans for Tax Reform, a conservative group also calling for extension of the tax breaks, is running radio ads in House districts, placing belief pieces in local newspapers and writing letters to Capitol Hill lawmakers updating them of what ATR is doing in their home districts.

“We’re centering on the districts because lobbying is a waste of time when there is an election coming. Democrats and Obama may vote to prolong the tax rate reductions for two years because they fear losing the next election. They can’t be swayed it is bad policy,” said Grover Norquist, ATR’s president. “The only way to change their minds is to make them afraid of the voters. And if they don’t change their minds, the voters can change them.”

DTC provides some relief to tax payers

2010-09-05T22:23:00.000-07:00

The much-awaited Direct Tax Code (DTC) Bill, which aims to replace the existing Income-Tax Act, 1961, has finally been presented in the Parliament and once approved by both Houses, it will be enacted as a law, effective from April 1 2012. While a lot had been anticipated from the DTC in terms of widening of tax slabs and reduction in tax rates, the proposal in its current form does not have a great deal for the aam aadmi. For one, though the tax slabs for individual tax payers have been widened, the resultant savings in the hands of the individual tax payers is just a pittance.

TAX SLABS: The DTC proposes to increase the limit of income exempt from tax to `2 lakh from the current `1.6 lakh for individual and to `2 lakh from `1.9 lakh for working women. This will result into a minimum saving of `4,000 per annum for individuals and `1,000 per annum for women.

On the positive note, the new proposal aims to abolish the distinction between the individual and a women tax payer, bringing both of them at par — at least as far as payment of taxes is concerned. But given the rising cost of living with each day, an additional disposable income of about `4,000 and `1,000, respectively, does not sound much appealing.

From today, consumers buying new vehicles will be cuffed with a carbon emission tax.

2010-09-01T00:14:00.000-07:00

In February this year the National Treasury announced that the tax which is aimed at encouraging people to drive more environmentally friendly cars.

Primarily the tax will apply only to passenger cars, but it will eventually be extended to commercial vehicles.

Automobile Association NAAMSA says South Africans will have to get used to the idea of having 'green taxes' to help protect the environment.

Nico Vermeulen says the tax is calculated based on how much carbon dioxide a car emits per kilometer.

He explains how motorists will be affected by the new CO2 tax: "The average vehicle will probably incur an additional cost to the consumer of about 2.5%, that is assuming the manufacturer and importer costs are passed on to the consumer.

"But in the case of a number of cars, the increase in the cost to the consumer - as a result of the tax - could be between five and six percent."

But Vermeulen says the tax on all double-cabs will only be implemented next year March, as the industry is still testing the fuel consumption in these vehicles.

INCOME TAX LIMIT TO BE HIKED TO RS. 2 LAKH

2010-08-28T04:07:00.000-07:00

Tax ceiling for women, senior citizens to be raised to Rs. 2.5 lakh
New Delhi, Aug. 28 (JP) - The 50-year-old Income Tax Act with its many layers of incomprehensible laws and clauses will be revamped with the new streamlined Direct Taxes Code (DTC) that will come into force in the next Finance year.

The new tax code is expected to widen the tax base, put an end to unnecessary exemptions, moderate tax rates and finally add to the government’s revenues.

The DTC Bill, which has been approved by the Union Cabinet, will be placed before the Parliament on Monday.

The new tax slabs proposed in the DTC will raise the exemption limit to Rs. 2 lakh per annum against the current Rs. 1.6 lakh. For women and senior citizens, the exemption limit would be Rs. 2.5 lakh per annum.

Under the present IT Act, women have to pay a tax on an income of Rs. 1.9 lakh per annum or more while senior citizens have to pay a tax on income of Rs. 2.4 lakh.

A person earning Rs.10 lakh per annum would save Rs. 21,540 additionally each year when compared to the existing tax regime.

Similarly, women too stand to gain on the same income of Rs. 10 lakh per annum, as they will be saving around Rs. 23,450 while senior citizens (over 65 years) will save an extra Rs. 18,300 more.

Will companies hit MAT?
The DTC Bill, which will be vetted by the Parliament on Monday also seeks to impose Minimum Alternate Tax (MAT) at 20 per cent of the book profit, compared to 18 per cent at present. The corporate tax rate has come down from 40 per cent in 2000 to 33.22 per cent currently while MAT has inched upwards from 8.5 per cent to 19.93 per cent .

Meanwhile, Finance Ministry officials exuded confidence that the Bill will come into force by the deadline of April 1, 2011.

How to battle against the "Blogger's tax"

2010-08-27T06:02:00.000-07:00

GO, BLOGGERS, GO.

An uproar on a so-called "blogger's tax" went a little viral earlier this week, when some bloggers got letters from the city asking for $300 to cover a business-privilege license.

The item became the subject of many other blogs, including libertarians and those on the far right who are using this as a way to promote the evils of big government.

We'd like to use the uproar, too, as a way to promote the idea of long-overdue reforms to the city's tax code, especially as it relates to business.

The fee in question is not a tax on bloggers; it's a fee for the privilege of doing business in the city, and it applies to all businesses no matter how much money they make. The problem is, if you make $100 from your blog, you're considered a business, and must have a license.

After that, it gets even worse.

The city will also impose a tax on any money your blog makes. That's because the city not only taxes profits, but also gross receipts. So it doesn't matter what you spend to make your blog viable. Whatever nickels and dimes you generate from advertising or other arrangements will also be taxed.

More than one proposal that could address this is rattling around. A 2009 mayoral task force recommended the city carry on its course to eliminate the gross-receipts portion of the business- privilege tax. But that won't happen for 15 years.

Meanwhile, Council members Maria Quinones- Sanchez and Bill Greene have their own proposal, which would actually increase the tax on business receipts but establish criteria that would exempt the first $100,000 of those receipts.

Both proposals deserve scrutiny. And we hope the latest howls from the blogging community will get people to focus attention on tax reform, especially since it's the first to fall off the table when serious fiscal problems hit. The city should have a regular mechanism for reviewing the tax code.

As the bloggers' outcry demonstrates, "business" is no longer limited to bricks and mortar enterprises; in fact, the idea of business is no longer always about making a sustainable living. Blogging in particular often combines commerce with free expression. Should such enterprises have their own tax category? Should we consider all revenue to be equal, whether it comes from a hard-goods manufacturer, service provider, or information technician? We encourage bloggers to keep this alive and get Council and Mayor Nutter to review these issues regularly.

Sliced Bagels, Taxes on Top

2010-08-26T00:10:00.000-07:00

What's the tax on a bagel? It depends how you slice it—or in the case of New York, if you slice it.

In New York, the sale of whole bagels isn't subject to sales tax. But the tax does apply to "sliced or prepared bagels (with cream cheese or other toppings)," according to the state Department of Taxation and Finance. And if the bagel is eaten in the store, even if it's never been touched by a knife, it's also taxed.

Tax cut rollback proven to help

2010-08-25T02:00:00.000-07:00

Yes, if you make more than $250,000, according to the Democratic proposal your taxes will go back to where they were before the Bush tax cut. If not, they will not change.

The writer said, "We all know what happened when Clinton won the election." Yes, he restored the tax rates close to what they were before Reagan lowered them, and the Republicans screeched that it would cause a recession. What we got was seven years of the best economy, and lowest unemployment, in my 60 years.

We then got Republican control of everything, a huge tax cut for the wealthy, and a war in Iraq, all of which added $3.3 trillion to the debit. Did anyone complain about the debit? Put a Democrat in the White House, and it's a problem. Now that these cuts will expire, which could help the debit problem, no you can't do that, it might cause recession. Same thing they said in 1993. Did it happen? No. Check the history.

All of this doesn't really shock me. The wealthy and powerful control the Republican Party. The same party that gave us deregulation of the banks. Isn't that what got us in this clutter? They did it once before with the Savings & Loans -- remember that mess? Now these same people want back in charge. They say it's all Obama's fault, but the economy going into the ditch is why they are out of power. Why would someone be so gullible to believe the same lies over and over? Let's roll back the tax cut for the wealthiest 2 percent and see what happens.

Treasury Secretary Timothy Geithner argued on Bush tax cuts

2010-08-09T04:18:00.000-07:00

Extending tax cuts for the wealthiest Americans would imperil the fragile economic recovery, Treasury Secretary Timothy Geithner said, as the Obama administration pushes to let the Bush-era policies expire at the end of the year. The tax cuts should be extended for almost everyone. The exception is for married couples making more than $250,000 or a single person making $125,000 or more.

Geithner was justifying the administration's proposal to extend the George W. Bush tax cuts except for those making more than $200,000 a year. The Bush tax cuts for the middle class need to be extended, according to Geithner, to maintain incomes. However, long-term economic prospects require a signal that the federal government will get serious about its debt, so the rich need to pay more. Taking more from the rich won't be economically damaging, according to Geithner, because they are less likely to spend the difference.

The tax on dividends, for example, is currently 15%, but it could increase to as high as 39.6% if the 2001 and 2003 tax cuts expire. On top of this, a new 3.8% tax on investment incomes for high-income earners begins in 2013 to help pay for ObamaCare. The administration's arguments for higher taxes on capital center on fairness and the need for deficit reduction. Mr. Geithner argued that the wealthy tend to save more of their tax breaks than do other groups, so in letting their taxes rise; there would be minimal impact on economic activity.

If President Obama is interested in promoting growth now and in the future, he should commit to retaining the low tax rates Congress passed in 2003. A Treasury estimate shows the 10-year cost of extending the middle-class tax breaks is about $3 trillion. Extension of the breaks for higher earners adds $679.6 billion to the tab.

Sales Tax Holiday Blooms Shopping Season

2010-07-24T01:14:00.000-07:00

Local shopping centers are gearing up for coming annual “Back to School” sales tax holiday a weekend as big as during the holiday shopping season.

The Missouri state sales tax of 4.225 percent will be dropped on clothes, computers and school supplies starting at midnight Aug. 6 and lasting through Aug. 8. Many municipalities also are dropping their local sales taxes for the weekend, letting customers buy qualified items tax-free.

For seven days in August, Maryland shoppers can purchase certain clothing items costing less than $100 without paying the state's 6 percent sales tax.

The Mississippi sales tax holiday weekend is July 30 and 31st. It's back to school shopping made easier in Mississippi, but retailers hope it's not just school shoppers cashing in. Clothing and shoes will be exempt from the state's sales tax; retailers say it's a time for customers to buy.

A 2007 law established Aug. 8-16 of this year as a "sales-tax holiday" because legislators thought that by now the state would have a budget surplus and could afford the revenue loss. But tough economic times have lasted longer than anyone expected, to the point where what the state is really doing now is giving up money it doesn't have.

The tax holiday is expected to cost the state treasury about $9 million in lost revenues. That's enough to provide 1,000 families with emergency housing assistance, or state college scholarships for 4,500 students. And it comes as the state is about to grapple with how to fill an expected $1.5 billion revenue hole resulting from lower revenues brought on by the recession.

Job Creation Tax Credit Causes and Effect

2010-07-14T05:14:00.000-07:00

Whether the job creation tax credit signed in law last March is having any effect, Treasury Department officials reported. Though it took some time for a clear picture to develop, we're pleased to learn that the tax incentives the state grants companies to create jobs.

The Treasury study compared responses from the Labor Department's Current Population Survey the basis for the government's labor force data and the unemployment rate for three consecutive months to May. This tax program, part of the Hire Act of 2010, is intended to encourage businesses to add workers who have been out of a job for at least 60 days by making it cheaper to employ them.

Usually, the federal government collects Social Security payroll taxes on salaries, amounting to 12.4 percent of every employee’s wages (up to $106,800; any wages over that amount are not subject to Social Security taxes). Half of this payroll tax, or 6.2 percent, comes from the employee, and the other half, or another 6.2 percent, is collected from the employer. For the average wage of the 4.5 million workers cited by Treasury, employers could see up to $3,500 in tax savings for each, however that smaller firms may not be as aware of the credit as larger firms with larger human resources departments.

Under the Hire Act, businesses that hire the long-term unemployed do not have to pay this 6.2 percent tax on each worker for the remainder of 2010. Additionally, if these new employees stay on for a year, the employer gets another tax credit of $1,000. The challenge, of course, is making sure that the tax credit actually induces hiring, rather than just being claimed for people who would have gotten jobs anyway.

The Treasury Department is now trying to assess how well the program is working, and is finding it a challenging task. The Obama administration is trying to extend the act, which expires at the end of the year, in the hopes that it will still be around by the time word actually spreads.

Long Beach Tax on Medical Marijuana

2010-07-07T04:23:00.000-07:00

Long Beach is joining the cities of Berkeley and Sacramento in considering a tax on medical marijuana collectives to help close their budget gaps. Proposed ballot measure would levy a 5% tax on medical pot collectives and another tax of 10% if recreational pot is legalized. But it would require a special election costing up to $450,000.

When Long Beach voters join other Californians in November to decide whether to legalize recreational marijuana, they may also get the chance to decide if it should be taxed. The City Council took a step toward putting a marijuana tax measure on the ballot that would levy a 15 percent tax bumped up from a proposed 10 percent on the recreational drug and a 5 percent tax on medical marijuana. City officials don't know how revenue the tax would raise, but they're looking for every penny to help eliminate an estimated $18.5 million budget deficit in the next fiscal year.

The Los Angeles suburb with a population of almost 500,000 scheduled a public hearing on the drug levy for Aug. 3. If the council later approves the wording, a ballot initiative establishing a 5 percent tax on the city’s 35 dispensaries could go to voters in November, according to Lori Ann Farrell, Long Beach’s director of financial management.

Long Beach joins California cities including the state capital, Sacramento, weighing marijuana taxes to bridge falling revenue from the worst recession since the 1930s. The nation’s largest state by population saw an explosion in the number of marijuana dispensaries after voters approved a 1996 referendum legalizing pot for medicinal use.

Discussion of the tax comes as the state prepares to vote on Proposition 19, a referendum on the November ballot. If approved, the measure would make it legal for anyone age 21 or older to possess one ounce or less of marijuana, and allow local governments to regulate and tax sales. The medical marijuana tax is modeled after one by the City of Oakland, which expects to collect $1 million a year in revenue from its four authorized dispensaries.

Home Buyers Rushing to Meet Sales Tax

2010-06-27T22:02:00.000-07:00

Some home buyers who rushed to sign sales contracts to meet an April deadline for an up to $8,000 tax credit, may not get their money after all. Deadline to claim a federal tax credit as banks and title companies deal with a crush of closings.

Home buyers hoping to get the tax credit have until June 30 to close their deals. But the U.S. Senate failed to pass a bill that contained an amendment that would have extended that deadline to Sept. 30. The real-estate industry stepped up calls for an extension of the closing deadline in recent weeks amid concerns that some buyers might miss the deadline after a last-minute home-buying rush led to bottlenecks at banks, appraisal firms and title insurers. The Post-Standard last week said they have clients who won’t close before the deadline.

The American Recovery and Reinvestment Act of 2009 offered first-time home buyers an $8,000 credit for purchases made before Dec. 1, 2009. Then Congress passed a second law, the Worker, Home-ownership and Business Assistance Act of 2009, which extended the deadline to April 30 and added a $6,500 credit for repeat home buyers. Buyers had to close their deal by June 30. But a Senate bill that included the extension failed to secure enough votes last week and has been shelved.

The National Association of Realtor said that as many as 180,000 contracts that were signed by April 30 might miss the June 30 closing deadline. But it is unclear how many of those sales won't happen as a result of missing the tax credit.

New York’s Sales Tax on clothes to Close Budget

2010-06-23T22:12:00.000-07:00

New York's leaders are studying the sales tax on clothing and other taxes and fees to balance a budget they are still drawing up, after failing to meet an April 1 deadline according to the Associated Press.

Two state officials said one of the so-called "revenue raisers" under discussion would increase the state's 4 percent sales tax on clothing. One of the officials said the proposal includes three or four tax-free clothes shopping periods each year, including before school begins in the fall and at the December holidays. Purchases of footwear and clothing under $110 are currently exempt. The officials spoke on the condition of anonymity because of the sensitivity of the talks.

Democratic Gov. David Paterson told reporters two specific taxing ideas increases in the rate on online reservations and rental cars weren't under discussion, but when asked if a clothing sales tax proposal was being discussed he said he wouldn't comment on ideas "piece by piece."

Legislative leaders will soon brief rank-and-file lawmakers on details of the talks. Lawmakers would be forced then to accept Paterson's budget provisions as part of an emergency spending bill or shut down government. The budget so far includes raising the cigarette tax to the highest in the nation. In addition, Paterson's proposal to cap all local property taxes among the nations highest appears unlikely at this point.

Cigarette Tax Hike in New York is good for Public Health

2010-06-21T21:31:00.000-07:00

Cigarette taxes in New York would jump by $1.60 a pack under a tentative deal reached between Gov. David A. Paterson and legislative leaders, which would give New York the nation’s highest state cigarette taxes.

The average price in New York City, which imposes its own cigarette taxes, will be even higher, nearly $11 a pack. Those who prefer other tobacco products will also be forced to pay significantly more. The tax on smokeless tobacco will more than double, to $2 an ounce from 96 cents an ounce, starting on Aug. 1. And the wholesale tax on cigars, dips and other kinds of tobacco will rise to 75 percent from 46 percent.

The legislation will also include a plan to begin collecting taxes on cigarettes sold off the reservation by Indian tribes in New York, an issue that has provoked confrontations between State Police officers and protesting tribe members in years past.

The proposal would generate $440 million in revenue this year, helping close a state budget gap estimated at over $9 billion. But it is unclear whether there are enough votes to approve the plan in the State Senate, where Republicans have threatened to vote against any emergency budget bill that includes tax increases and some Democrats oppose efforts to collect taxes on cigarettes sold by the tribes.

“I think it’s wonderful,” said Peter Slocum, an official with the American Cancer Society. “Increased cigarette taxes have been one of the major successful public health interventions in the last decade in driving smoking rates to record lows in New York City and a lot of other parts of the country, too.”

Oil and Gas Industry Debated on Tax Break

2010-06-15T22:48:00.000-07:00

The oil and gas industry measure by Senator Bernie Sanders, a Vermont independent, failed to muster even a simple 51-vote majority, although 60 votes were needed to pass it.

It was offered as an amendment to a bill that would extend unemployment insurance for hundreds of thousands of jobless workers whose benefits ran out last month and also renew a set of popular business tax breaks. The bill faces a key procedural vote on Wednesday, but it appears doubtful that Democratic leaders will be able to muster the 60 votes needed to advance the bill to a final vote.

Only 35 senators backed the Sanders' amendment as a number of Democrats joined the Republican opposition to defeat it. Sanders argued that big oil companies making billions in profits do not deserve the tax breaks at a time when the nation is facing record budget deficits and rising debt.

"With a record-breaking $13 trillion national debt and an unsustainable federal deficit, the last thing we should be doing is giving tax breaks to oil and gas companies that have been making enormous profits," Sanders said.

Opponents argued that removing the breaks for oil and gas drilling would hurt small producers as well as big oil companies. Meanwhile, the Senate passed a measure offered by Democratic Senator Al Franken that would establish a homeowner’s advocate office to help people having problems getting mortgages adjusted in the Home Affordable Modification Program.

The tax extenders bill would add about $80 billion to the deficit over 10 years, according to the Congressional Budget Office. The bill's $126 billion in spending would be offset in part by the increase in taxes on investment fund managers. The so-called carried interest proposal would have fund managers pay the ordinary income tax rate of 35 percent on a majority of earnings from managing investors' money. They now pay a 15 percent capital gains tax rate on those earnings.

The Senate bill would tax 65 percent of fund managers' income at the higher rate. A tougher version passed by the House of Representatives would tax 75 percent at ordinary income rates.

Bottle Tax Proposed by Baltimore City Council

2010-06-14T22:02:00.001-07:00

It's mind-blowing that City Council is talking about taxing the energy used by Baltimore's dwindling base of manufacturers as an alternative to the "bottle tax" of 4 cents a drink. Baltimore had 13,000 factory jobs in April the least ever recorded since the Labor Department began keeping track. That's down from 27,000 in 2000 and 43,000 in 1990.

The Baltimore City Council has endorsed more than $43 million in new or higher taxes on items including income and telephone lines, largely adopting a wrenching budget-balancing plan laid out by Mayor Stephanie Rawlings-Blake.

The tax of 4 cents per container, exempting milk and fruit juice bottles, was proposed by Mayor Stephanie Rawlings-Blake in April as a way to help raise $50 million in new tax revenue to help eliminate a looming deficit and avoid city layoffs and cuts to fire and police operations. It is estimated to bring in $11.4 million in new revenues annually.

A deposit on bottles would make a lot more sense, though it wouldn't achieve the purpose of the tax, which is to raise revenues for the city. Instead, a deposit would raise revenues for citizens and nonprofits while augmenting the efforts already being made to recycle glass and plastic.

Extended Holiday tax Massachusetts

2010-06-13T23:02:00.000-07:00

Massachusetts lawmakers appear to be preparing for an extended holiday from the sales tax holiday.

With marginal improvements seen in state revenue and questions over whether a badly-needed influx of federal Medicaid funds will come through, the Legislature isn’t in any rush to approve a sales tax holiday bill this year.

This is around the time of the year when store managers in Massachusetts start wondering if they’re going to need to get ready for a sales tax holiday weekend in August. There are usually some necessary preparations, if even just to make sure the store is properly staffed for the throngs of shoppers that will (hopefully) show up.

The Legislature and Gov. Deval L. Patrick should consider calls to hold a tax holiday in August but only if revenues stabilize and the state can justify forfeiting as much as $15 million in taxes. But the Retailers Association of Massachusetts thinks conditions are more favorable this time around for the popular holiday. The trade group revived its annual June ritual of asking its membership to call lawmakers and urge them to approve a tax holiday. The group wants the Legislature to set aside Saturday, Aug. 14, and Sunday, Aug. 15, for the sales-tax-free event.

Last August, retail sales fall an average of 30 percent below August 2008 for Retailers’ Association of Massachusetts members, following five years of growth for the month, said the group’s president, Jon Hurst.

Baltimore City Council proposed new energy tax

2010-06-10T22:33:00.000-07:00

A City Council committee approved more than $15 million in new taxes and announced a deal with hospitals and universities that will net the city another $20 million over the next six years.

But the taxation and finance committee delayed action on a proposal to apply the city's energy tax to industrial businesses, over what its chairwoman, Councilwoman Helen Holton, described as "a technical issue."

During a session devoted to finding new revenue to narrow the city's $121 million budget gap before the end of the fiscal year on June 30, Holton announced that city officials had reached an agreement with hospitals and universities on a payment in lieu of taxes, or PILOT, that would take the place of a proposed $350 annual fee for beds.

Under the terms of the deal, which was signed by the presidents of the Maryland Hospital Association and the Maryland Independent College and University Association, the nonprofits would pay the city $5.4 million for the first two years and smaller payments in the next four.

According to a copy obtained by The Baltimore Sun, the deal would protect hospitals and universities from increases to telecommunications and energy tax rates over the six-year period, although they would experience rate increases this year. The committee voted to increase hotel room taxes, parking rates, an excise tax on billboards and the energy tax for residents, nonprofits and nonindustrial businesses.

The same cannot be said of the major new tax proposal City Council President Bernard C. "Jack" Young has put on the table this week to replace most of the revenue from the beverage tax. Ms. Rawlings-Blake proposed increasing energy tax rates for residential, commercial and nonprofit users. Mr. Young is proposing adding industrial users to the mix on the grounds that it's only fair that they, too, shoulder some of the burden.

But because of the vastly greater amount of energy used by industry, such an increase would not be equitable. Consider this: Increasing the rate for all commercial and residential customers by 15 percent and increasing the rates for nonprofits by more than 50 percent would raise about $8.2 million; adding industrial users would, by itself, raise $9.1 million a year. That's a big burden spread among a small number of firms.

New Jersey Film and Television Tax Credit Program

2010-06-09T22:24:00.000-07:00

Film producers, production workers, union organizers and even a TV actress put a touch of drama into a state Senate Budget Committee hearing in Secaucus, denouncing Governor Christie’s plan to suspend a film and television tax credit program in New Jersey.

Representatives from "Mercy" and "Law and Order: Special Victims Unit" urged Republican Gov. Chris Christie to reconsider ending the 20 percent tax credit the state has offered since 2006 to lure movie and TV production companies to the state. Both TV series are filmed largely in New Jersey.

The program provides $10 million a year in tax credits for television and film productions. Companies that spend 60 percent of their production budget in New Jersey are eligible for a tax credit of up to 20 percent of that expenditure.

Supporters say the economic activity generated by film and television companies attracted by the program brings in far more in taxes than is spent on the credits. But Christie’s office released a statement saying the state’s budget shortfall was so dire that “cuts had to be made and priorities considered in closing a $10.9 billion budget gap.”

The interest in New Jersey has a lot to do with the money the film and television industry spend to market and promote New Jersey based shows.

Oil Refining Industry Federal Tax

2010-06-08T22:21:00.000-07:00

A key oil-refining industry organization is opposing a provision in a Senate bill that would quintuple a federal tax specifically used by agencies to clean up oil spills because it would increase fuel costs for consumers. Senate Democrats brought up a measure that would couple a fivefold increase in the tax oil companies pay into a spill fund with help for the jobless, doctors, and cash-starved states.

The National Petrochemical and Refiners Association sent a letter to Senators Harry Reid (D., Nev.) and Mitch McConnell (R., Ky.) opposing a provision that would increase the Oil Spill Liability Trust Fund tax from 8 cents a gallon of crude oil to 41 cents a gallon. The bill passed by the U.S. House of Representatives on May 28 had increased the tax to 34 cents a gallon, which NPRA didn't oppose.

NPRA didn't oppose the tax 34-cent tax increase passed by the U.S. House of Representatives on May 28 to ensure that the fund was adequately financed to respond to future oil spills, said Charles Drevna, president of the refining-industry organization. This provision was passed as part of a broader jobs bill that extended unemployment benefits and various tax incentives.

Even with those levies on investment fund managers, oil companies, and some international businesses, among others the measure would add about $80 billion to the deficit over the next decade.

Debate on Medical Device Manufacturers Tax

2010-06-07T21:45:00.000-07:00

Medical device manufacturers are bristling over a key provision in the nation’s new health care law which they say forces them to shoulder an unfair cost of expanded insurance coverage.

The companies say a 2.3 percent excise tax on medical devices like heart defibrillators and surgical tools for hospitals, health centers and ambulance services will cost them an estimated $20 billion in new taxes over the next decade. And they say that will force them to lay off workers and curb the research and development of new medical tools.

The tax, which doesn’t kick in until 2013, has also pitted the state’s two senators against each other. “Many small to midsize medical device companies will owe more to the federal government in taxes than they make in profits," said Mark Leahy of the Medical Device Manufacturers Association. It could have been worse: the initial proposed tax was $40 billion.

Sen. John Kerry, a Democrat, who helped arrange meetings between medical device companies and Democrats leaders in Congress to convince them to cut in half the original proposed tax hike, maintained there would be a benefit for the companies. He explained about the expanded marketplace for 32 million people who are going to buy the products.

The tax, which doesn't kick in until 2013, has touched a nerve in Massachusetts, the state that provided the blueprint for the health care law. Massachusetts is also a hub for medical device companies, with more than 200 firms calling the state home. It has also pitted its senators against one another.

California has the highest number of medical device workers with more than 72,400 followed by Massachusetts with nearly 22,000, Florida with nearly 20,000 and Minnesota with more than 18,000, according to industry estimates. Other states with significant medical device hubs include: New Jersey, Pennsylvania, New York, Texas and Ohio.

When the negotiations started it was going to be $40 billion and our industry negotiated it down to $20 billion.

G20 Implementation of Global Bank Tax

2010-06-06T22:00:00.000-07:00

Canada may have scored a win at the G20 with the decision to let countries decide for themselves about whether to implement a bank tax, but there’s plenty more to fight over, opposition critics say. The G20 finance ministers agreed in Korea over the weekend not to designate a global bank tax, the funds from which would have been used for future bank bailouts.

They are pushing for stricter regulations, something the Canadian government and opposition parties’ support, but won't have a proposal ready until the November summit. Liberal finance critic John McCallum says the devil will be in the details, predicting debates over how much capital banks will require holding. The higher the capital ratios forced on the banks, the more secure the system is, but the fewer banks will be able to lend money in the short run.

So there will be a big debate about how high those capital requirements should be and also on how long they should allow the banks to implement them. Canada opposes the bank tax and deployed cabinet ministers around the world to lobby against it. Prime Minister Stephen Harper also discussed it in his meetings last week with British Prime Minister David Cameron and French Prime Minister Francois Fillon, who both support the tax.

The Tories argued having a safety net would let the banks make risky investments, knowing there was money available to bail them out. NDP finance critic Thomas Mulcair says he wants to see the government discussing a financial transaction tax with the G20, an idea supported by international development groups who want the world's richest countries to impose a 0.05% tax on financial transactions to fund humanitarian aid.

“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions,” the G20 said in a communiqué issued after the talks.

Attempts to introduce the global bank levy to fund future bailouts were ditched after opposition from Japan, Canada and Brazil, whose banks needed no public aid during the crisis. But the group said the financial sector should make a “substantial” contribution toward the cost of any rescue.

Los Angeles County Homeowners Tax Reductions

2010-06-03T22:35:00.000-07:00

About 405,000 homeowners in Los Angeles County can expect to see lower property taxes later this year, the county assessor said Wednesday.

Those most likely to receive property tax reductions purchased their homes or condominiums after July 1, 2003, Assessor Robert Quon said, just as the housing market bubble began to inflate.

In some cases, however, tax reductions were made for some homes purchased earlier than 2003, including in Compton, East Los Angeles, Van Nuys, Paramount and Pomona. In hard-hit Lancaster and Palmdale, those who purchased homes as early as the 1980s may see tax cuts.

The average reduction for single-family homes is about $1,800; for condo owners, it is $1,500. About 290,000 houses and 115,000 condos qualified for the reduction. In Lancaster and Palmdale, which have seen a severe drop in property values, those who purchased homes as far back as the 1980s may see tax reductions.

The reduction in property taxes may be significant. For single-family homes, the average reduction in property taxes is about $1,800; the average savings for condo owners is $1,500. The reductions will be seen on property tax bills later this year.

New Hampshire Senate are Voted for LLC Tax

2010-06-02T22:23:00.000-07:00

The New Hampshire Senate swallowed hard, but voted for a reasonable compensation bill that keeps the so-called "LLC tax" in place, at least for now. Only Sen. Jack Barnes, R-Raymond, voted against the bill in protest, but the rest of the Senate agreed to it, leaving the fate of the LLC tax repeal to budget deliberations in special session.

Repeal of the LLC tax did not make it into HB 1607 which deals with reasonable compensation that the House and Senate are voted. The whole debate over extending the interest and dividends tax to limited liability company distributions (more commonly known as the "LLC tax") focused attention on the reasonable compensation issue, but House members say the two are unrelated.

The New Hampshire House and Senate have passed legislation setting the amount state business owners are allowed to deduct for themselves as earnings, before they are taxed on profits. The bill sets $50,000 as a so-called "safe harbor" as reasonable compensation business owners can pay themselves without justifying it to state revenue officials.

The Department of Revenue Administration has been increasingly questioning such deductions, and the $50,000 threshold will lessen the fear among business owners, though most business groups think the figure is too low especially the $50,000 limit is per entity, as opposed to each individual in a business ownership. The compromise passed the Senate, 23-1. The House approved it with no debate and a loud "no," but the chair ruled that the motion passed.

Here are some other measures approved by lawmakers that will become law, unless prohibited by Gov. John Lynch:

Under SB 408, trade groups and chambers of commerce would be able to form alliances to purchase health insurance for members. As a last-minute addition to the bill, the Insurance Department was told not to prevent leasing companies from using a group rate that would include many of its clients to buy insurance.
Under SB 480, those who wish to appeal environmental board decisions would be able to only go to court over interpretation of the law, and not on matters of fact.
Under HB 491, all things being equal, the state would give local vendors preference in bidding (with Department of Transportation contractors exempted), and those contractors that violated law in the last two years would be barred from bidding.
Under HB 1168, a person would no longer be denied unemployed benefits for gross misconduct involving dishonesty but instead for a theft of more than $500, and only if that theft was connected to his or her work.
Under HB 1239, developers would receive a timely permit from the state Department of Environmental Services, or their permits will be approved automatically (stricter conditions than contained in an earlier version that gave developers their money back.) Under HB 1380, developers also wouldn't have to pay for duplicate review from local planning board.
Under HB 1267, municipalities would be able to force hawkers and peddlers to submit to criminal background checks in order to obtain a license.
Under HB 1461, municipalities would be able to regulate sellers' display of martial arts weapons, with an eye of protecting marketing to children.
Under SB 411, those with permits for large groundwater withdrawals would have to comply with local regulations.
Under SB 420, insurers offering prescription drug benefits would be required to allow participants to use non-mail order pharmacies.
Under SB 181, the Department of Safety, not the Liquor Commission, would be in charge of liquor licensing, enforcement and education. Licensing and education would start in July, but the enforcement switch wouldn’t take place until July 2011.

Biodiesel Tax on Memorial Day Recess

2010-05-28T22:40:00.001-07:00

In a voting frenzy prior to the Memorial Day recess, the U.S. House of Representatives has extended the $1 a gallon biodiesel tax credit that expired Dec. 31, despite indications even late that the vote would be delayed until June.

The extension, which was part of a package that includes, continued unemployment benefits and other tax breaks, would keep the biodiesel credit in place until the end of this year. The legislation still needs to be approved by the Senate, but that vote is not expected until after the recess.

On behalf of the state’s biodiesel plants, nearly half of which are idled or shuttered, the Iowa Biodiesel Board today applauded the U.S. House of Representatives for passing a bill that included extension of the federal biodiesel tax incentive.

The biodiesel industry desperately waited for Congress to act on H.R. 4213, The American Jobs and Closing Tax Loopholes Act of 2010, to reinstate the much needed $1 per gallon tax credit before the Memorial Day recess, but time for this to happen has run out essentially. The tax credit will be retroactive as written and the RFS2 volume requirements will go into effect on July 1 regardless of the tax credit’s status.

Oklahoma’s Tax Cut on Wireless Technology

2010-05-26T22:31:00.001-07:00

Based on the theory that wireless companies operating in Oklahoma would invest more in bringing new technology, such as cell phone towers, to the state, the Oklahoma House approved a tax cut on wireless technology. However, opponents of the bill called it a tax cut, saying passage would hurt public schools and counties, which receive money from ad valorem taxes.

The property tax rate on new wireless technology infrastructure in the state would be nearly cut in half under a bill narrowly approved by the Oklahoma House. Supporters said Senate Bill 1589 would encourage wireless companies to build new towers and install electronic equipment in Oklahoma to improve the quality and range of cell phones. Opponents of the bill called it a tax cut, saying passage would hurt public schools and counties, which receive money from ad valorem taxes. The House passed SB 1589 by a vote of 53-43. It needed 51 votes to pass.

But telecommunications companies are among a handful of industries including gas and electric utilities, telephone companies and railroads that are centrally assessed on ad valorem taxes, which mostly fund local schools. Most companies are assessed locally in each of the state's 77 counties. Reducing the ad valorem assessment rate will result in less money for schools, Kiesel and others argued.

Tax Analysis of California and Maryland

2010-05-25T22:22:00.000-07:00

Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. Close behind were Hawaii and Nevada. The national average among the roughly one quarter of Americans who deducted mortgage interest from their taxes was $12,221.

But taxpayers in California benefited the most from taking advantage of the deduction. Californians who deducted mortgage interest saved an average of $18,876, several thousand dollars more than the typical Maryland homeowner who deducted mortgage interest on the 2008 federal income tax return. Folks who live in Maryland had the highest percent of tax returns claiming a mortgage interest deduction in 2008, according to fresh research from the Tax Foundation. Californians who deducted saved the most on their tax bill, an average deduction of nearly $20,000.

Overall, Maryland and California are the biggest winners. Maryland had the highest percentage of tax returns claiming the deduction, 37.9 percent, and average dollar amounts claimed were also high. It had the second-highest average deduction among all tax returns, $5,372, and counting only the tax returns that claim the mortgage interest deduction, the average Maryland tax return claimed $14,162 in mortgage interest. That is the fifth highest nationwide.

California had a lower percentage of tax returns claiming the deduction, but when Californians deduct mortgage interest, the amounts are high. Of California's 16.4 million tax returns, about three in ten deducted mortgage interest, 29.2 percent, 19th highest nationwide. But California ranked highest in average deduction among deducting returns, $18,876, and also highest among all returns, $5,520. Hawaii also ranked high, with its famously expensive homes, as did Nevada which has been growing so quickly that more of its home owners are in the early years of their mortgages when interest payments are high.

This analysis are a reminder of why the mortgage interest rate deduction, despite being assaulted by everyone from economists who say it distorts incentives in favor of home ownership to urban zealots who say it encourages sprawl, remains an untouchable tax break and a third rail of American politics.

America’s New Tax Changes

2010-05-24T21:57:00.000-07:00

If you are an American homeowner, you know you're in trouble when the Communist Chinese are making more sense on taxes than your own state officials. In China, stocks have been bouncing up and down on rumors that the government will soon introduce a U.S.-style property tax. Whatever the wisdom of such a tax, Chinese officials at least appreciate that the effect would be to dampen their property market, which they fear is turning into a bubble.

Here in America, by contrast, most states and towns are dealing with depressed home prices and large budget gaps. Yet few are rethinking their property taxes. Two exceptions are Indiana and New Jersey, and if the candidates for governor are to be believed New York.

In Indiana, Republican Gov. Mitch Daniels has succeeded in lowering property taxes on homes to 1% of assessed value. In New Jersey, another Republican, Gov. Chris Christie, has introduced a reform package that would cap property tax increases to 2.5% each year. And in New York, Democrat Andrew Cuomo has just announced his candidacy for governor with a call for a 2% cap on property tax increases lower than the caps proposed by two of the state's leading candidates for the GOP nomination.

California has taxed corporations using a formula based on employment, property and sales in the state. When the new formula takes effect in 2011, it would allow a corporation to calculate its tax based on actual sales in the state, a move favored by California technology companies. The tax breaks are expected to cost the state $2 billion next year.

The New Jersey state has a projected $767 million shortfall over the next 13 months, raising the potential for even deeper budget cuts, according to new figures to be released. It’s not immediately clear why the income tax projections were off by so much whether the increased millionaire’s tax of 2009 did not bring in the desired amount of money, whether wealthy residents created a strategy to avoid paying the increase in that year, or whether it was just a worse year than expected for the average New Jersey resident.

Tax Proposed on Soda and Other Sweet Drinks

2010-05-23T22:04:00.000-07:00

Makers and sellers of soda and other sweet drinks have intensified a fight against proposed taxes on their products, as a growing number of cities and states are weighing the measures to help fill depleted coffers.

A soft-drink bottler offered what it called a $10 million good will gesture donation for health and recreation programs in Philadelphia, as city officials there considered a proposal for an excise tax to help plug a budget hole and fight obesity. Politicians say the taxes will help curb rates of obesity and diabetes and can pay for health programs. But retailers and the beverage industry say the taxes are unpopular, unfair and simply won't work.

Industry officials are also considering trying to organize a referendum in Washington State to repeal a three-year excise tax on carbonated beverages of two cents on every 12 ounces. The moves come as officials in at least 20 cities and states have proposed new taxes or the removal of tax exemptions on non-alcoholic beverages so far this year. The beverage industry has spent millions of dollars since 2009 on lobbying and advertising against proposed taxes, including a federal tax initially proposed as part of the health-care reform bill.

So far, few such taxes have actually been imposed. The final federal health overhaul didn't include a soft-drink tax. And while several state and city legislators initially expressed enthusiasm for new soda taxes, only Washington State has approved a new excise tax on soda thus far, while Colorado removed a sales-tax exemption. Several other states have existing small taxes on soft drinks, but those stirring controversy are the proposals for new, larger taxes. Industry officials argue that taxes would penalize consumers at a time when people are already struggling and lead to lost jobs for bottlers and distributors.

Federal Income Tax Increases in Coming Years

2010-05-22T00:39:00.001-07:00

The federal income tax increases over the next three years have led to lots of grumbling. But for all the back and forth about the percentages, something has been overlooked: what do these increases mean in real numbers? In other words, how much will wealthy people have left after they pay the higher taxes in the coming years?

What may surprise some people is that the various percentage point increases do not necessarily correspond with the reactions surrounding them. The 3.8 percent Health Care Act surcharge attracted much populist anger, but in many cases, it will result in a lower tax increase than the 0.9 percentage point rise in the Medicare tax. This is because of how and on what part of your income the taxes are applied.

By Summit’s calculations, that $250,000 tax increase would apply next year to a couple filing jointly with $5 million in annual income. The calculations also looked at people earning $500,000, $1 million and $3 million a year.

While the tax increase next year is substantial, another increase comes in 2013, when provisions to pay for the health care bill take effect. Following are some general estimates for people at the four different income levels. (By the way, these tax increases aim only at single people making more than $200,000 a year and couples with incomes above $250,000.) All the assumptions below were based on a married couple filing jointly and without considering the alternative minimum tax, a parallel tax system aimed at a certain slice of high earners that excludes many deductions.

According to Summit’s calculations, the couple earning $500,000 a year, with an assumed $75,000 in net investment income and an equal amount in itemized deductions, is looking at a tax increase of $20,327 in 2011, from 2010. That would bring their federal tax bill to $162,885.
A couple earning $1 million a year with $150,000 in investment income and the same amount in deductions would pay $48,427 more for a federal total of $363,235. Under the same assumption of investment income and deductions being equal, a couple earning $3 million a year could expect an increase of $145,627 in federal taxes, to $1,174,435, and one earning $5 million, an increase of $243,027 for a total of $1,975,835.

The Medicare increase would tax the first $250,000 for a couple at the existing 1.45 percent rate and anything above that at 2.35 percent. For the couple earning $500,000, this translates to an increase of $2,250, for a total Medicare tax of $9,500. In the $1 million situation, the tax would jump by $6,750, to $21, 250. For $3 million in income, it goes up $24,750, to $68,250. It rises $42,750, to $115,250, for the $5 million couple.

If the very wealthy couple had higher investment income, the tax could rise. But it is calculated by a formula that always compares the net investment income against the modified adjusted gross income and taxes the lower one.

Debate on Online Gambling in US

2010-05-20T22:39:00.000-07:00

According to “independent.co.uk” United States are discussing the possibility to lift the restrictions of internet gambling. It is the first time since the Unlawful Internet Gambling Enforcement Act of 2006 passed that there is serious debate regarding this issue. The above mentioned law passed in an effort of the US government to minimize money laundry from the Web as they were not able to track down the true receivers of the wagers placed by online poker, online bingo or casino players. Back then, many opinions expressed in favor of the online banning act, including that the money from the US residents was used to fund terrorist attacks within US soil.

Almost four years passed since the law enforcement and now distinct members of the political world started a debate on Senate’s Ways and Means Committee as an effort to reverse the 2006 ban. Congressmen Barney Frank and Jim McDermott are leading the campaign which is based on three main points.

For permitting online gambling, the federal government and the states can receive over $42 billion by taxation within a 10 years period. The companies will have to pay 2% tax to the federal government and 6% to the state that issued the gambling license. Additionally, taxes will be applied to the players’ winnings who; as Jim McDermott stated: “We are sending a multi-billion dollar industry offshore and underground. As a result, we are making tax criminals of Americans who can’t declare their online winnings to the IRS”.

The committee meeting will be considering H.R. 4976, a bill that would tax online gambling in the United States, if a companion bill that legalizes online gambling were to pass. The bill is sponsored by Congressman Jim McDermott (D-Wash.), and would create a revenue stream for the U.S. government that currently does not exist. Revenue would go to the federal government, states and tribal governments. Some of the funds generated would also be earmarked to help foster-care systems.

The Committee will discuss the current tax laws and reporting requirements applicable to wagering in the United States. The Committee will consider tax and other proposals in the Committee’s jurisdiction related to legislation pending in the Congress to license and regulate Internet gambling activities.

any online gaming companies that were shut out of the US market eye the opportunity of a come back. London based Party Gaming and 888.com, two of the biggest companies in the world in the area of online gambling have already mobilized towards that opportunity. Party Gaming is in negotiations with brick and mortar casino operators in the US about possible joint ventures, should the laws be relaxed at a federal level or by individual states, and 888.com, too, is “staying close” to the American casino chain.

Senate’s Vote to Delay the Suspension of Tax Credit

2010-05-19T22:58:00.000-07:00

Frustrated by their lack of involvement in budget negotiations, Senate Democrats of Oklahoma City voted to delay the suspension of two tax credit programs that would have saved the state about $23 million.

In a straight party-line vote, minority Democrats opposed putting the tax credit programs on hold. Although the bill passed 26-22, the emergency clause on the measure did not get the two-thirds vote needed for passage delaying the effective date of the bill for three months.

The move could reduce the amount of money the state saves from a moratorium on the two programs as leaders try to plug an estimated $1.2 billion hole in the state budget. Democrats have vowed to oppose any spending plan that does not include funding for senior nutrition and rural programs, a new hospital provider fee and an assessment on insurance claims.

Senates are not feel comfortable to vote because they are all don’t no what the overall budget agreement?

The tax credits involve certain investments in rural business ventures and investments by qualified small business capital companies. During debate on the bill, some rural Democrats questioned why Republican leaders planned to target tax credits that could help locate businesses in economically depressed sections of the state.

Senate President Pro Tem Glenn Coffee, R-Oklahoma City, said the Democrats' move to delay the suspension of the tax credits could ultimately reduce the amount of revenue available to close the budget gap.

Houston Area Home Sales Tax Credit

2010-05-18T22:55:00.001-07:00

The federal tax credit fueled Houston-area home sales in April, marking the second consecutive month of increased activity. Realtors sold 5,321 single-family homes in the area last month, according to a monthly report from the Houston Association of Realtors. That's up 26.7 percent from the same period last year.

Realtors point to the federal home buying tax credit, which expired April 30, as well as the start of the spring buying season. Now that the support of the credit is gone, however, coming months could see flatter or lower sales numbers.

The spring buying season, will likely help support the market as families try to move before the start of a new school year. Though homebuyers hoping to take advantage of the credit had until April 30 to have contracts in place, they don't have to close until June 30.That means some sales through the early summer will still have benefited from the tax credit.

Still, the number of pending sales during the first week of May has already taken a dip, indicating the tax credit's positive effects may already be dwindling. Pending sales dropped 16.7 percent to 975 from the same week last year, according to preliminary data collected in the association's latest weekly market report.

In April, activity was up in every price segment except for the lowest end of the market, where homes were priced below $80,000 remained flat. The number of homes that sold for $500,000 or more was up 53.4 percent in April, according to the association, which tracks homes sold through the Multiple Listing Service in Harris, Fort Bend and Montgomery counties, as well as parts of Brazoria, Galveston, Waller and Wharton counties.

Boosted by high-end activity, the median sales price for single-family houses in April also increased for the 12th consecutive month on a year-over-year basis, climbing 2.4 percent to $153,500 from the same month last year. Houses were also selling faster than this time last year. Homes stayed on the market an average 73 days, down from 88 days a year ago.

Small Businesses Health-Care Tax Credit for Dental and Vision

2010-05-17T22:23:00.000-07:00

Small businesses will be able to claim a new federal health-care tax credit for dental and vision benefits in addition to health insurance premiums, a Treasury Department official announced. The Treasury released technical guidance explaining what kinds of expenses are eligible and how small firms should calculate their credit amount. The credit will offset employer health-care premiums paid on and after Jan. 1, 2010, under health-care legislation signed in March by President Barack Obama.

Firms may claim state health tax credits and other subsidies without having their federal health-care tax credit reduced, said Treasury Assistant Secretary for Tax Policy Michael Mundaca in a conference call with reporters. Some small-business advocates criticized the tax credit Monday as too limited in scope. Bill Rys, tax counsel for the National Federation of Independent Business, said more than two-thirds of small firms will be excluded because they are too large or don't currently offer health insurance.

Eligibility for the credit is limited to firms with fewer than 25 full-time workers, or the equivalent, and average wages of less than $50,000. To qualify, firms must pay at least 50% of worker health-insurance premiums. The credit is worth up to 35% of the employer's premium costs for the smallest firms. That percentage is reduced for firms with between 10 and 25 employees, and to the extent that average wages exceed $25,000.

The Internal Revenue Service earlier this year notified four million small businesses that they may be eligible to claim the credit this year. Mundaca said the Treasury doesn't have estimates yet on how many will actually claim it. Small firms will claim the credit next year when they file their 2010 tax returns. But they already may be able to benefit in the second half of this year by having quarterly estimated tax payments reduced to reflect the credit.

Small Business Health Tax Credit Companies with 10 employees or less may get a tax credit of up to 35 percent of the employer premium costs (25 percent for tax exempt small employers), but only if they pay their workers $25,000 or less and provided the employer contribution is at least 50 percent of the premium costs. Credit is reduced on a sliding scale per employee for companies with 11-25 employees, and is reduced as the average wage increases from $25,000 to $50,000. Companies with more than 25 employees, or that pay their employees on average over $50,000, are not eligible. This tax credit is only available for a maximum of five years, and only two years once the Health Insurance Exchanges are up and running in 2014.

Business Tax Comes Shortly in Texas

2010-05-16T23:09:00.000-07:00

The Texas business tax comes again, and no one's suggesting it will yield anywhere near the approximately $6 billion it was initially forecast to produce annually.

It yielded $4.5 billion when first collected in 2008, based on the previous year's business activity. Last year, collections dipped to $4.3 billion. State Comptroller Susan Combs predicts the same amount will be collected this year.

Texas Comptroller Susan Combs sent tax-allocation checks totaling $6.3 million to the county’s sales-taxing cities Friday, almost $70,000 less than the amount they received at the same time last year. The total was almost 1.1 percent less than last year’s May figure and underperformed the Texas average allocation for the month.

Altogether, state cities received $385.2 million, 5 percent more than they did a year ago, to end a 14-month run of declining figures. The allocations came from sales taxes collected by monthly tax filers during March and by quarterly filers during January, February and March. Throughout the county, only Texas City, Friendswood and Hitchcock received more this year than in May 2009, with the latter’s figure a mere 0.6 percent higher than 12 months previously.
Experts cite several reasons the tax has failed to live up to expectations, including the fact that it is unique to Texas and, thus, difficult to forecast. The lagging economy also has factored in the lower-than-anticipated tax collection.

White House Announced Tax Increase for Oil Companies

2010-05-13T22:30:00.000-07:00

President Obama is giving his support to legislation that would raise taxes on oil companies and increase the liability they face in the event of an oil spill. The White House asked Congress Wednesday to raise limits on BP's liability for the Gulf oil spill, approve new spending on everything from food stamps to seafood inspections and increase taxes on oil companies for an emergency cleanup fund.

The legislation would increase the 8-cent per barrel tax on oil companies to 9 cents immediately. "While we are asking for additional funds, in some cases, the federal government will not relent in pursuing full compensation for the expenses it has occurred and damage caused by the spill," White House energy adviser Carol Browner said in a conference.

Administration officials said they couldn't forecast total costs from the cleanup of the massive spill and a multitude of economic damages to the Gulf region, but the changes they're seeking in the legislative package unveiled Wednesday suggest a multibillion dollar response.

The administration wants to increase from $1 billion to $1.5 billion the amount that could be spent from an emergency cleanup fund paid with industry fees, and raise a $75 million liability limit BP would bear for costs not directly connected to cleaning up the spill, such as lost wages and tourism.

California Teachers Association’s Tax Breaks

2010-05-12T22:29:00.000-07:00

The California Teachers Association announced on May-12 that an initiative to repeal nearly $2 billion in corporate tax breaks has garnered enough signatures to go to the November state ballot.

It was "Day of the Teacher" in California, but many of them had little to celebrate because of budget cuts and potential layoffs. In Oakland, teachers packed a school board meeting early Wednesday evening to make their concerns clear. There were rallies in other parts of the Bay Area to show support for teachers. In addition, the teachers union made two major announcements.

The Repeal Corporate Tax Loopholes Act would make the state stop giving tax breaks to large corporations, which the California Teachers Association says would help the state's budget crisis at a time when funding for schools has been slashed by billions of dollars in the past two years.

The teachers' union has invested $2 million to collect more than 800,000 signatures to qualify a measure for the November ballot to repeal a trio of corporate tax breaks approved in the last two years during state budget negotiations.

The union estimates the business tax breaks will cost the state's general fund roughly $2 billion per year. Democrats are expected to try to postpone the start date of the tax breaks, which have yet to go into effect, during the summer budget talks.

Pfizer pharmaceutical company plans for Tax break

2010-05-11T22:01:00.001-07:00

Pfizer, the world’s largest pharmaceutical company, plans to lay-off or relocate up to 1,400 New York City employees, seven years after receiving millions of dollars in tax breaks to create jobs in the city.

The company, which has already scrapped about 2,000 positions, also put its office tower at 685 Third Avenue up for sale. Pfizer officials said the company’s world headquarters would remain in the office tower at 235 East 42nd Street, near Grand Central Terminal. The company, which has been based in New York City since its founding in 1849, has about 4,400 employees here.

But the company’s decision is a remarkable turnabout in Pfizer’s once robust expansion plans for New York and an embarrassment for Mayor Michael R. Bloomberg and state officials who had provided the drug-maker with the tax breaks in 2003.

Government officials often give the breaks, or what critics call corporate welfare, to companies that forgo plans to leave the city, or that invest in new equipment and jobs. But some economists argue that those scarce resources could be better spent on transportation, education and other things that create a better environment for all employers. Major companies don’t make location decisions based on tax breaks.

The Bloomberg administration has been far stingier than Mayor Rudolph W. Giuliani’s was in granting tax breaks to corporations threatening to leave New York. It has also worked to strengthen the penalties for companies that violate job-retention agreements.

Under the terms of its deal with Pfizer, the city will seek to recover double the $12 million in tax breaks that the company ultimately used if Pfizer eliminates more than 450 jobs. Pfizer bought another major pharmaceutical firm, Wyeth, last year in a $68 billion deal. Pfizer reported better than expected earnings in the first quarter of the year.

Parents can get a Tax Break for their Children's Health Insurance

2010-05-10T21:44:00.000-07:00

Parents can get a tax break for adding children under 26 to their employer provided health insurance as part of the U.S. overhaul.

Under U.S. government regulations issued today, workers who pay to add children to their insurance can deduct the cost from their taxes if the money used to pay the premium isn’t already set aside as pretax cash.

While the rules letting children stay on their parents’ coverage don’t go into effect until Sept. 23, 65 insurers have agreed not to drop young adults graduating from college this spring. WellPoint Inc., the largest insurer by enrollment, Cigna Corp., UnitedHealth Group Inc. and Humana Inc. are among those that are part of the agreement.

“For years, getting a diploma also meant losing your health insurance,” said Kathleen Sebelius, the U.S. secretary of health and human services, in a statement. “Over the last few weeks, we’ve reached out to insurance companies and asked them to make this change immediately. And to their credit, we’ve gotten a terrific response.”

The regulations issued today require companies to set aside a 30-day enrollment period for parents to sign up eligible children. While a company can choose to allow sign-ups before Sept. 23, it must offer a 30-day enrollment period that starts by the beginning of its plan’s New Year. The rules say the tax break is retroactive to March 30.

The U.S. administration estimates there are 6.6 million uninsured adults ages 19 to 25 in the U.S., 2.4 million of who will potentially benefit under the new regulations. The administration estimated that between 190,000 and 1.6 million young adults will actually sign up for the coverage by 2011.

Health insurance premiums will increase because of the cost of adding young adults to their parents’ plans. The administration estimates that group insurance premiums will increase 0.7 percent between 2011 and 2012 because of the change.

Shutting Down Tax Credit to Lure Businesses and Create Jobs

2010-05-09T21:26:00.001-07:00

Some state governments seeking to plug yawning budget holes are shutting down tax credit and incentive programs that are supposed to lure businesses and create jobs.

The main driver behind the cutbacks and those in the works is the budget crunch, but such programs have also come under fire from critics who say special tax policies have little bearing on businesses hiring or investment decisions.

In New York, Gov. David Paterson, a Democrat, has proposed deferring dozens of business tax credits for three years, while Missouri Gov. Jay Nixon, a Democrat, wants to reduce the amount of tax credits developers get for restoring historic buildings. A new Oregon law scales back credits given to certain renewable-energy projects. Iowa Gov. Chet Culver, a Democrat, signed a new law that halts tax credits to filmmakers and reduces other economic development lures.

Tax credits are an easy target for governors and legislators looking to close ongoing budget gaps caused by falling sales, income and other taxes. Eliminating or reducing such credits can boost a state's coffers without creating new taxes or raising them on broad swaths of the population.
But hurdles remain to passing these rules as critics, such as business organizations and economic-development officials, say that removing targeted tax credits will crimp hiring and investment at a time when the economy needs both.

States collected $686 billion in tax revenue in 2009, down 11.4% from the year earlier. Their costs, meantime, are skyrocketing: Investment losses have forced many states to make added contributions to pension funds, while the recession and recovery has increased demand for social services such as food stamps and health care.

To plug their budget gaps, states have cut employees, benefits and in many cases raised taxes. Amid that backdrop, a more-skeptical eye toward tax breaks was inevitable. Indeed, some states are going the other direction. Minnesota's governor recently signed a bill with various tax credits, including a break for so-called angel investors who put money in young companies. Meantime, the move to curtail tax credits and other economic-development programs has opened a window for critics who say such programs are largely ineffective.

B.C.'s Softwood Lumber has no Export Taxes

2010-05-07T22:58:00.000-07:00

Due to strong lumber prices, effective June 1, B.C.'s softwood lumber producers will no longer pay any tax on their shipments to the U.S., Forests and Range Minister Pat Bell announced.

Under the 2006 Softwood Lumber Agreement, companies exporting softwood lumber to the United States are required to pay an export tax on their shipments. The formula for determining the tax is based on the average price over a four-week period 21 days before the start of the month. The higher the average lumber price is, the lower the export tax.

In this case, since the four-week average lumber price, as given by the Random Lengths Framing Composite Price Index, is now $US361 per thousand board feet, the export tax rate that will be in effect June 1, will be zero. If lumber prices decrease again, the export tax will be re-applied.

The tax will be reinstated if prices fall again. The U.S. is B.C.'s largest market for softwood lumber, followed by China and Japan. The rise in lumber prices means British Columbia's lumber producers will not have to pay export taxes under the Canada/U.S.

Australian Mining Industry's Profits Based Resources Tax

2010-05-06T22:25:00.001-07:00

Representatives from the Western Australian mining industry have weighed into the debate on the federal government’s proposed resource super profits tax, claiming it will have a significant impact on all Australians, not just mining companies. Fortescue Metals Group Ltd founder and chief executive Andrew Forrest said the federal government had misled the Australian people, and the new tax was just a nationalization of 40 per cent of the mining industry, and it should be scrapped.

The Government, in response to the tax review, wants to slug mining companies with a 40 per cent tax. Mr Swan (Treasury Minister of Australia) said “the Federal Government was replacing an inefficient royalty regime which penalized mines, miners and shareholders, the regime we are talking about putting in place is a profits-based tax and of course when companies are much more profitable the return to the Australian people is higher. But when profits are lower this is a tax which encourages many of those mines that have been punished and penalised by an archaic and unfair royalty’s regime.”

Mining industry bosses, including Fortescue Metals Group chief Andrew Forrest have banded together to oppose the tax, saying it will not only harm mining but will harm Australian families. Mr Forrest said today all Australian mining projects which required substantial capital, including Fortescue, would be under review. Queensland based mining magnate Clive Palmer has also been openly critical of the tax.

The council was quick to label the resources tax a revenue grab rather than taxation reform. Never forget to the council itself that made a submission to the independent tax inquiry suggesting the resources tax be replaced with a profits-based tax.

In small businesses, retail and non-residential building continue to struggle, stating that some resources are picking up faster while the other sections are at a slow pace.

California Water Resources Bond Expands

2010-05-05T22:29:00.000-07:00

A $2 billion bond sale by California's Department of Water Resources saw strong demand from individual investors looking for additional yield in a market starved for new deals.

Almost half the issue $966 million had been sold to retail investors. Backed by rates revenue and with solid credit ratings, the bonds are seen as safer than the state's general-obligation bonds. Extraordinarily strong investor demand for highly-rated California Department of Water Resources bonds enabled the agency Wednesday to expand the offering by $970 million to $2.97 billion.

Lead book running underwriter for the huge deal Morgan Stanley & Co said the bonds had been verbally awarded at yields that ranged out to 3.80% for debt maturing in 2022. Benchmark 10-year bonds offered a 3.61% return. That's more than a 10-year Treasury bond that traded Wednesday morning at about 3.54%.

"To a California investor, the tax equivalent yield, taking into account both federal and state taxes, is pretty attractive for an intermediate bond," said Dan Solender, Director of Municipal Bond Management at Jersey City-based Lord Abbett.

The hike in amount was the day's second after a report by State Treasurer Bill Lockyer's office that individual investors Monday and Tuesday had signed on for $1.27 billion, or 63.5%, of the original $2 billion. When offered to institutional investors, demand just as intense, and the offering was lifted to $2.74 billion and then to $2.97 billion. Yields were left mostly the same as earlier, ranging from 0.92% in 2012 to 3.80% in 2022. A 2012 maturity, at 0.92%, offered three basis points less than earlier in the day. A 2011 maturity wasn't reoffered publicly.

The power revenue bond issue now becomes the largest tax-exempt bond sold this year, replacing a previously top-ranked $2.5 billion issue by the state of California itself. The Golden State is far and away the largest seller of bonds among states. The bonds will refinance debt sold in 2001 and 2002 during California's energy crisis, when the water department borrowed to finance the purchase of electricity for hard-pressed publicly listed utilities.

Tax Relief Allocations in Pennsylvania

2010-05-04T21:29:00.000-07:00

Homeowners in the Pennsylvania suburbs due property-tax relief provided by slot-machine revenue will get anywhere from $72 to $632 next school year, down slightly for most from last year, according to figures released by the state.

In Philadelphia, that aid comes in the form of a cut in the wage tax. Those who pay it will get about the same amount of relief as they did last year. The tax relief, which comes from the state's share of gaming revenue under the 2006 Act One, is not given directly to households or individuals. In the suburbs it is entered as a credit on tax bills; in the city, it is used to lower the wage-tax percentage.

Suburban property owners must register to get the benefit by Dec. 31 of the previous year; sign-up information is available at local school districts. The amount of tax relief each homeowner gets depends on a variety of factors, including the wealth of the school district, how highly taxed it is, and how many homeowners have applied for the credit.

The total amount of property-tax relief will be up slightly for next school year, but in many school districts, the rebate to each homeowner will be down somewhat. That's because more people have applied for the tax credit, spreading it thinner. Shifts in relative school district wealth and tax burden between 2009-10 and 2010-11 also changed the amounts doled out in each district.

Residents of the 63 suburban districts will get about $142.3 million in property-tax relief, up from about $139 million last year. But the per-household payment fell by a few dollars in close to two-thirds of districts. About 606,000 households applied for the tax credit, up about 3,000 from last year.

The average property-tax credit in the Pennsylvania suburbs is $251, up from $247 last year. The estimated tax-credit reductions in those area districts whose per-household allocation dropped were relatively small - less than $10 in most cases while in a few cases, increases in the tax credits were larger. For example, homeowners will get an estimated $95 more in tax relief next school year in Jenkintown, and those in Octorara will get $62 more. The amount of wage-tax relief going to Philadelphia employees and commuters who work in the city is about $86.3 million this year, only a few thousand dollars more than last year.

An additional $21.5 million in Act One gaming revenue will reimburse Philadelphia area school districts whose residents do not pay local earned income taxes because they work in Philadelphia and are charged the Philadelphia wage tax. This year, the city wage tax is 3.93 percent for residents and 3.50 percent for nonresidents.

Statewide, Act One, enacted as a companion to the legislation legalizing slot machines, is providing $616.5 million in tax relief next school year, up from $613.2 million last year. Under Act One, gaming money was also used to expand the senior citizen Property Tax and Rent Rebate program, so the total amount of tax relief from gaming revenues will total about $772.5 million, up slightly from last year. This is the third year of tax relief allocations from Act One.

End of Federal Homebuyer Tax Credit

2010-04-28T21:59:00.000-07:00

An $8,000 federal homebuyer tax credit ends Friday, after months of helping fuel sales among first-time customers. But despite concerns that the buyer frenzy will diminish as the credit goes away, Realtors and observers say the market will continue strengthening and prices will rise. That increase is partly why the end of the federal tax credit is unlikely to delay home purchases among Americans who feel now is the time to buy, according to Prudential Real Estate and Relocation Services Inc.

According to the survey, low interest rates and the expectation that rates and housing prices will rise were more important than the tax credit in prompting a purchase. Of those surveyed, 61 percent cited low mortgage interest rates as "very important" to their decisions higher than the tax credit or cheap prices. In contrast, 65 percent believe that the end of the tax credits will have little or no effect on their pursuit of a home.

That's not to say the tax credits didn't play a role in reviving a market crushed under the weight of defaulted subprime loans. More than 90 percent of consumers, according to the prudential survey, believe the credits have helped first time homebuyers and the U.S. housing market in general. Many local Realtors said the credits helped move a lot of buyers off the fence to pursue a first home.

The California Association of Realtors has repeatedly pointed to the credits as fuel for the market. And industry lobbyists have pushed leaders on Capitol Hill to extend the credit once again. It was unclear if that would happen, but lawmakers instead seemed to be emphasizing ways to create jobs as a way to drive the home market.

Georgia Chamber Tax Overhaul Plan

2010-04-27T22:16:00.000-07:00

The tax overhaul plan is a response to the near universal assessment that the state's tax system is, in the description of the Atlanta Business Chronicle, "out of date, too full of exemptions and discouraging to potential corporate prospects."

It's an overhaul the need for which has been brought into sharp focus by the devastating drop in state revenues during the current economic crisis a mathematical fact that suggests, among other things, a revenue stream based too heavily on sources that are too volatile and too recession vulnerable.

A special committee of economists, the chairman of the Georgia Chamber of Commerce, the state chair of the National Federation of Independent Business and four other members appointed by the lieutenant governor and House speaker would recommend changes to the legislature. A legislative committee would then write a tax revision bill to be submitted to the General Assembly for an up or down vote.

That's the good news: The process seems designed to take pork politics out of the equation as much as possible, and to address chronic flaws in the ways state government in Georgia is paid for. Democrats have objected that they have too little representation on the committee the same complaint that would be, and frequently was, heard from Republicans during the decades of Democratic rule in Atlanta. The more compelling case for diverse representation has less to do with party affiliation than with the demographic and economic realities of Georgia's people.

While business interests, which account for hundreds of millions in taxes, absolutely must have prominent seats at the table, there is reason to ask whether there will be enough chairs left for other important stakeholders in tax policy meaning, of course, every citizen of Georgia, high and humble.

We suggest that the governor, lieutenant governor, the speaker and others responsible for the makeup of this council keep in mind the microeconomics, as well as macroeconomic, consequences of the decisions they make. As too many Georgians already know, bad tax policy crunches more than just numbers.

Replace Corporate and Personal Income Taxes with VAT

2010-04-26T22:14:00.000-07:00

President Obama and his advisers are hinting that they may ask Congress to supplement the existing corporate and personal income taxes with a national Value-Added Tax (VAT) a tax on consumption. The reaction has been quick, venomous and misleading.

Missing in that criticism is any recognition that VAT-based tax discrimination in the global trading system is a major cause of our large and expanding trade deficits and is costing the United States millions of jobs as U.S. based corporations shift their production to countries with a VAT.

Eliminate the existing U.S. personal and corporate income tax system altogether and replace it with a VAT a great tax swap of historic proportions. One argument against such a swap is that it would require the repeal of the 16th Amendment, which is wrongheaded since the 16th Amendment gives Congress the power to levy an income tax, but does not mandate that it do so.
Several VAT critics are also arguing that while the VAT is efficient, fair, and effective, it would, however, raise too much money, too easily and thus encourage the purchase of more public services. They seem to like the existing chaos and inefficiency. And indeed, there is already much about the U.S. Tax Code to hate, not the least of which is its complexity and sheer size a 24-megabyte computer download that fills 7,500 letter-size pages at 60 lines per page.

The administrative compliance costs to the U.S. economy, moreover, are enormous, with the General Accountability Office (GAO) estimating that it consumes approximately one percent of the gross domestic product annually ($145 billion in 2009). The Cato Institute, a Washington-based think tank, estimates that the U.S. "tax army" of accountants, lawyers, and computer experts includes more than 1.2 million tax preparers and processors.

The present system also has vast non-compliance. The IRS estimates that the difference between what taxpayers paid and what they should have paid in 2001 was $345 billion, which was 17 percent of federal revenue that year. Put another way, cheaters evade paying about one of every six dollars of taxes due the federal government.

For many VAT critics, their goal is not to define the method by which the U.S. government raises taxes or to improve its efficiency but to slash revenues as a means of cutting government, or "starve the beast."

Amazon Tax Ignited a Tax War with Huge Online Retailer

2010-04-25T22:19:00.000-07:00

Every consumer knows that shopping online can be a handy way to avoid paying sales tax on books, CDs and electronics. But not nearly as many know that they're still supposed to pay tax on these purchases. That's something Colorado, North Carolina and other states, desperate for revenue, want to change.

But by taking steps to collect what many have simply begun calling the “Amazon tax,” the states have ignited a tax war with the huge online retailer that is the primary target of their efforts. Colorado passed a law requiring Amazon.com and other Internet retailers to mail notices to customers reminding them of their tax liabilities. Amazon responded by shutting down its affiliate program in Colorado, effectively closing thousands of small businesses that were marketing Amazon's products over the Web.

Amazon sued North Carolina after the state's department of revenue asked the company to turn over the names and addresses of its North Carolina customer’s information the state would need if it were to try to collect unpaid taxes. With as many as 15 more cash-strapped states weighing whether to pass Amazon taxes of their own, there's a lot of interest in seeing how that case, as well as a related case in New York State, turn out.

The disputes in Colorado and North Carolina are only the latest twists in the fight over Internet sales taxes. Opponents of taxing the sales of Amazon and other Web-based retailers say such measures are a misguided attempt at recouping additional revenue without having to raise taxes. Further, a Tax Foundation report released last month questioned how much money it would actually bring in. Still, the states say it's not just money they're after but fairness: Main Street retailers have to collect sales taxes, and leaving the Internet as a tax-free shopping zone puts them at a disadvantage.

Repeated New Home Buyer Tax Credit

2010-04-23T22:34:00.000-07:00

The first-time homebuyer and repeat buyer tax credits expire on April 30. As of this moment, there doesn’t seem to be a movement to extend these credits again in California.

Common myths related to the tax credits are,

If deals haven’t completely closed by April 30 as long as you sign a binding sales contract by April 30, you have until June 30 to complete the transaction and qualify for either the $8,000 first-time homebuyer or $6,500 repeat buyer tax credits.

Receiving new home buyer tax credit check is even if you buy a home in 2010, you can claim the first-time homebuyer or repeat buyer credit on your 2009 return. If you haven’t yet filed your 2009 return, great. If you did, you’ll need to file an amended return. Otherwise, you can wait until you file your 2010 taxes.

In most cases, the government doesn’t issue you a check. Instead, every dollar of the tax credit reduces your income taxes by a dollar. So if your total tax liability was $10,000, the $8,000 tax credit would bring your total tax liability down to $2,000.

So when does someone receive a check? If your total tax liability was $5,000, the IRS would send a qualifying first-time homebuyer a check for $3,000 the difference between the $8,000 tax credit and the buyer’s $5,000 tax liability.

Eligible for the tax credits is for the home you buy has to be your principal residence. And it has to have cost no more than $800,000. There are also exclusions based on your modified adjusted gross income. For example: If your modified adjusted gross income is $145,000 or more, or $245,000 and up if married and filing jointly, and you bought your home after Nov. 6, 2009, you can’t claim either the first-time homebuyer or the repeat buyer tax credit.

Spend Time to Review Your Tax Return

2010-04-22T21:57:00.000-07:00

Most of us would like an answer to this question: Am I on the royal highway toward realizing my long-term financial goals building up savings for the children’s education and for retirement.

Your tax return can provide clues for answering that question. So, before filing away a copy of your 2009 return, spend some time reviewing it. Even if you want professional advice, review the return first. For the tax return the topics to consider and the questions to ask are,

INVESTMENTS
If you have more than $1,500 of either, at the attached Schedule B, it will show net capital gains or losses, with the details of your trades on Schedule D.

If Schedule D showed only gains, take it as a warning sign. “Harvesting losses is an important part of good planning.” Often investors do not want to sell losers, feeling a stock will surely bounce back. But a capital loss could offset a capital gain, making the gain tax-free, and the money that was recognized in selling losers could be reinvested, perhaps more productively. Net losses of up to $3,000 can offset ordinary income with any excess carried forward to future years.

Many tax professionals expect tax rates to rise, and if they do, harvesting losses can become even more valuable. President Obama has proposed raising the rate on long-term gains those held more than a year to 20 percent for most taxpayers, and under present law the top rate for ordinary income next year is to rise to the 2001 top of 39.6 percent.

A nonprofit that encourages teaching personal finance to students, warned against two extremes. Short-term gains are taxed as ordinary income, not at lower capital gains rates, so frequent trading can result in a high tax bill. But if Schedule B shows dividends but there is no Schedule D, you may not be re-balancing your portfolio to keep the right mix of stocks and bonds to meet your long-term goals within your personal risk tolerance.

RETIREMENT SAVINGS
“You always want to put away as much as you can on a tax-deferred basis.” If you are an employee, look at your Form W-2 to see if you have made the maximum contribution to a 401(k), 403(b) or other employer-sponsored plan. The income from wages and salaries reported after the retirement contribution.

Self-employed people can set up several different types of tax-deferred retirement plans, including the Simplified Employee Pension, known as SEP, and Simple and qualified plans, such as solo 401(k) plans. And they can take a deduction for their contributions. People whose retirement accounts have eroded in recent years may want to generate some self-employment income and contribute as much as possible to one of these plans to rebuild retirement savings.

People whose employers do not sponsor retirement plans or whose income is below certain limits can put $5,000, or $6,000 if age 50 or older, into a deductible I.R.A. To encourage lower-paid workers to save for retirement, Congress has authorized a tax credit, which offsets taxes dollar for dollar, of up to $1,000 for single filers or $2,000 for married filers.

DEDUCTIONS
Schedule A, which lists itemized deductions, gives rise to several planning issues. For people who are not liable for the alternative minimum tax, state income taxes are deductible. Some people are liable for taxes in two states because they maintain two homes. With state taxes generally rising, people thinking of buying a second home or of eventually retiring to a different state may want to check the state and local tax rates first.

If you take a deduction for mortgage interest expense, consider the rate on your mortgage, he said. With today’s low interest rates, it may make sense to refinance, though the rules are tricky and careful study is needed.

Many people write checks to favorite charities and claim a tax deduction. But the tax savings can be far larger if they give appreciated securities, which are deductible at market value with no capital gains tax due. Affluent people may “discover the enjoyment of lifetime charitable giving,” as distinct from bequests. If so, they may want to set up charitable trusts, donor-advised funds or private foundations for tax-efficient giving.

SELF-EMPLOYMENT
If you are filing Schedule C as a sole practitioner, ask your adviser if you would be better off with a limited liability company. Other tax-saving moves for self-employed people, include hiring family members to do legitimate work. That will shift income to them and may make them eligible for retirement and health plans.

No Gas Tax Hike Announced by Senators

2010-04-21T21:58:00.000-07:00

In US Senators John Kerry (D-MA), Lindsey Graham (R-SC) and Joe Lieberman (I-CT) have been discussing the idea of establishing a “linked fee” on oil and gas companies. This potential fee would be related to the carbon market price for other industrial sectors rather than putting oil companies directly into an economy-wide cap-and-trade program.

Kerry, Graham, and Lieberman struggle with how their climate and energy bill will affect oil companies under a carbon control plan, though all reject the prospect of a gas tax hike. There is no gas tax; however, the notion of putting a fee on oil and gas companies, a measure which could in turn raise prices at the pump, in the current political and economic climate is cause for alarm in some quarters.

The senators have floated the concept of a “linked fee” on oil and gas companies, which would tie to the carbon market price for other industries instead of grouping oil companies directly into a cap-and-trade program. ConocoPhillips, BP and ExxonMobil Corp. have expressed support for the idea.

The Congressional Budget Office (CBO) has come out with numbers on the cap-and-trade legislation passed by the House in June. The CBO said the legislation would raise the cost of electricity and other goods produced through the use of fossil fuels, costing the average household $160 a year in 2020 and $930 a year by 2050.

Michigan state approved tax breaks for 10 projects

2010-04-20T22:06:00.000-07:00

The Michigan state approved tax breaks for 10 projects, including a business support company's proposal to create more than 1,900 jobs in Southfield and a health care company's plans to hire about 1,000 in Flint.

The Michigan Economic Development Growth Authority (MEGA) board approved $4.6 million in tax breaks over five years for a New Jersey firm putting up its facility in downtown Detroit. GalaxE Solutions promised to investing $4.2 million and to provide 500 jobs in return.

The Michigan Economic Growth Authority board approved a $9.1 million tax break over four years for Farmington Hills-based Minacs Group USA to invest $11 million in expanding at a new facility in Southfield. The project would include call centers and other services.

The board also approved a $61.5-million tax credit over 18 years for Flint Township-based Diplomat Specialty Pharmacy. The company plans to spend $12 million to move its headquarters to nearby Flint and expand in part of the Great Lakes Technology Centre, a former manufacturing and office complex.

Among other projects, PSCU Financial Services was granted a $3.5 million tax break over five years to encourage the financial service provider to invest up to $12 million to expand in Auburn Hills, creating more than 830 jobs.

The board also backed manufacturers, including a $5.6 million credit over seven years for auto parts maker Magna International Inc. to spend $49.2 million and create about 500 jobs, and a $1.8 million break over seven years for auto parts maker Tenneco to invest up to $15.6 million to create about 185 jobs.

Small businesses benefited from Healthcare Tax in Iowa

2010-04-19T21:35:00.000-07:00

Small businesses in Iowa could benefit from a new health care tax credit.

The IRS is mailing out information to more than 57,000 Iowa employers about possibly expanding health care coverage. Last week, the agency began mailing postcards to employers and tax-exempt organizations.

The credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. In order for businesses to apply for the credit the information needs to be available.

Right now the emphasis is on making sure people have the information; there will be plenty of time for businesses to be able to make a decision because it applies to tax year 2010. Iowa isn’t the only state that will be receiving postcards. Information is being mailed out nationwide.

"The postcard the IRS is sending out to alert a small business of this new healthcare tax credit is being sent to approximately 4 million small businesses and tax exempt organizations across the country."

The provision is one of the first from the health care reform law signed last month.

Cinnabon Tax day with Free Food

2010-04-17T02:08:00.000-07:00

As a reward for dealing with the tension of Tax Day on April 15, tax payers could visit various quick-service locations around the country and receive a few stress-relieving food items.

Cinnabon customers who visited between 6 p.m. and 8 p.m. for the company's "Tax Day Bites!" campaign sampled two free bite-sized portions of Cinnabon's new line of cupcakes.

"We think it's just a fun way to have a great experience for the guests to come in and get a little bit of a break on a day that bites," says Cinnabon president Gary Bales. "We all have to write checks, but in the same sense, it's a great opportunity for us to use the event this year to launch the new product."

Customers could choose from four flavors: Cinnicake Classic, Chocolate Passion, Vanilla Bliss, and 24-Carrot Cake. The promotion benefited both consumers and the company.

Like Cinnabon, bd's Mongolian Grill felt the need to give customers some stress relief on Tax Day.

Tax Cuts are Beginning to Strategize

2010-04-14T21:55:00.000-07:00

Democrats for years have vowed to let the Bush administration’s tax cuts for the wealthiest taxpayers expire as scheduled after this year, but election-year politics and the economy’s fragility could complicate matters in Congress.

One thing seems certain, both parties agree: The 2001 income tax cuts will be extended for everyone else that is, for the roughly 98 percent of households in which couples have less than $250,000 in annual income or individuals earn less than $200,000.

Even so, the White House and Democrats in Congress have given some thought to limiting an extension of the popular middle-class tax cuts to a year or two in the hope that they can overhaul the tax code in the meantime. That also would have the effect, at least on paper, of making projected big deficits look smaller over the long run than if the tax cuts for the vast middle class were continued indefinitely an important political consideration when the nation’s debt is building to what many economists consider dangerous levels.

For all of the talk from President Obama and his party of ending the Bush tax cuts, letting that happen could be harder for some Democratic lawmakers from Republican-leaning districts or states. Republicans already are reviving what has sometimes proven an effective, if disputed, argument in the past: that rich taxpayers include many small businesses whose owners pay income taxes as individuals.

The news this week that an influential group of economists is split over whether the recession actually is over also provides ammunition to Republicans who say that letting the tax rates for wealthy Americans revert to their pre-2001 levels would amount to a big tax increase that could endanger the recovery.

In the 2008 campaign, Mr. Obama called for repealing the tax cuts for the rich in 2010, a year before they would otherwise expire. But once in office, he quietly set aside that promise because of the recession, proposing to let them lapse in 2011 as the original law provided. Now, administration officials say, the economy is recovering enough that by next year higher taxes for the wealthiest households will not be an economic risk.

The revenue stakes are huge, so huge that some economists and analysts have called for letting all the tax cuts expire after this year. Ending the tax cuts for the rich would bring additional revenues to the government of more than $678 billion through 2020, the administration has projected, while keeping in place the tax cuts for everyone else would mean forgoing more than $2 trillion in revenues during that time.

This month’s income tax filing deadline has drawn politicians attention to the issue, which probably would have gotten much more of it before now but for the preoccupation in Congress and the White House with health insurance. Both parties acknowledge they are only now beginning to strategize.

Cigarette Tax Increase Reduce Teen Smoking

2010-04-12T22:06:00.000-07:00

South Carolina Senate could give final approval to a plan to raise our state's cigarette tax from the lowest in the nation, at a cancer-inducing 7 cents per pack, to the ninth lowest, at 57 cents. If senators don't change the way the revenue is spent, the entire effort will be a colossal waste of time.

Gov. Mark Sanford has promised to veto a cigarette tax increase that is not offset by equal tax cuts elsewhere, and it takes 31 votes in the Senate to override a gubernatorial veto - two more than supporters ever were able to muster for the bill.

It has been clearly documented that raising the tax on cigarettes prices kids out of the market. And if they can't afford to start when they're still adolescents, chances are excellent that by the time they can afford to, they'll have sense enough not to. Raise the cost of cigarettes 10 percent, and you reduce teen smoking by 7 percent; overall smoking drops by 4 percent. So if we raised our cigarette tax by 50 cents, more than 23,000 kids alive today who would have become smokers would not. More than 400 kids saved every year.

The life-saving effect is so dramatic and so certain that our state would be better off with a higher cigarette tax even if we burned the money.

Though the bill the House passed last year used the money to provide tax credits to small businesses that provide health insurance to their employees, representatives might be willing to go along with a Medicaid-only bill this year: The budget they passed last month included a smaller cigarette tax increase that directs nearly all the money to Medicaid.

Time for Filing a Tax before Deadline

2010-04-11T22:27:00.000-07:00

April 15th is quickly approaching. Do you have your taxes done? Nearly half of all tax returns are filed after April 1st. If you are one of the last-minute filers, here are five tips to maximize refunds, avoid errors and get a little something extra backing.

Review tax changes. There were plenty, especially for homeowners. If you made energy-efficient upgrades to your home, check to see if you qualify for a tax credit of up to $1,500. Non-itemizing homeowners are allowed to deduct an extra $1,000 in property taxes, and anyone who bought a car after February 16th of 2009 can deduct sales tax paid up to a certain extent.

Individuals who bought a home for the first time can take advantage of a tax credit for as much as $8,000. Homeowners who made energy-efficiency improvements can get a tax credit worth as much as $1,500. And individuals who collected unemployment benefits last year can exclude the first $2,400 of the benefits from their 2009 federal taxes.

Be sure to e-file. If you're owed a refund, filing electronically can get you your check up to a week sooner. Many taxpayers can also e-file for free. The Internal Revenue Service Web site, www.irs.gov, is a trove of tax help, tax forms and tax information for do-it-yourselfers. The site's Free File tax preparation software actually is free to those with an adjusted gross income of $57,000 or less.

The federal government doesn't tax the first $2,400 in unemployment benefits, but the state of Illinois does. Take advantage of the earned income tax credit and more new tax credits and deductions.

Californians Tax Relief

2010-04-08T22:04:00.000-07:00

Thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.

Gov. Arnold Schwarzenegger said he would sign the measure, which would also provide about $60 million in tax credits to green-energy companies, when it reached his desk. Californians can already claim the tax breaks on federal returns. Lawmakers passed the measure in time for people to take advantage of it by the April 15 deadline for filing tax returns.

"The mortgage-debt tax relief provision in this bill will provide financial shelter for tens of thousands of Californians who have lost their hopes and dreams in the housing market crash, and it's about time we gave these folks a helping hand."

The short-sale provision would mean about $34 million less in tax revenue for the state over three years, according to the Franchise Tax Board. The "green" credits are a response to the federal American Recovery and Reinvestment Act, which provides grants to firms for power plants that produce renewable energy. The federal government does not tax the grant money. Under the bill approved Thursday, California would provide similar relief.

Estimate Your Tax with Proper Planning

2010-04-08T00:39:00.000-07:00

Estimated taxes, something most working Americans don't have to deal with or may not even is aware of, can be a hidden cost when converting traditional IRAs to Roth IRAs. With proper planning, however, this potential trap can be easily avoided.

Estimated taxes are payments we must make four times a year to the Internet Revenue Service if the amount withheld for taxes at work or elsewhere does not meet certain minimums. If we fail to make the required estimated payments due April 15, June 15, Sept. 15 and the following Jan. 15 for each tax year we will owe a penalty for underpayments. The penalty, a variable interest rate set by the IRS, stood at 4 percent for the first quarter of 2010.

This is not a problem for the majority of American workers, who tend to have too much money withheld from their paychecks and get large refunds. But the income from a large Roth IRA conversion is likely to create a tax liability that may trigger the need to increase withholding and/or to pay estimated taxes.

Starting in 2011, income from a conversion must be reported for the year the conversion is made. But for conversions made this year, taxpayers can report either the entire conversion income for 2010, or half of it for 2011 and the other half for 2012. This latter income split is the default option, or what will happen if the taxpayer does not choose otherwise.

The decision of when to report the income is not made until the taxpayer files the 2010 tax return in 2011. Therefore, taxpayers choosing to report the Roth IRA conversion income for 2010 may discover after the fact that they owe a penalty for not having enough withholding and/or not paying enough estimated taxes in 2010.

But a penalty can be avoided by using any of three "safe harbor" methods. The easiest to implement it's foolproof and you don't have to make any estimates is to have your withholding and any estimated tax payments add up to 100 percent of your total tax liability for the previous year, or 110 percent if your adjusted gross income was higher than $150,000 ($75,000 for married taxpayers filing separately).

April 15 Deadline for Filing Tax Returns

2010-04-06T21:31:00.000-07:00

As the April 15 deadline for filing tax returns approaches, authorities are reminding people to steer clear of scams that could land them in jail.

Just because someone else prepares your tax return and, for example, lists fake deductions or hides income doesn't mean you are off the hook, said Internal Revenue Service. If the return has your name on it, you are ultimately responsible for what it contains.

One of the most common scams involves tax preparers who promise return checks to their customers that are too good to be true. The problem in these cases is that preparers may make false deductions or use other illegal practices to push up the amount the customer will get back from the government. The preparers make their money by charging exorbitant fees or skimming money from the refund.

"Taxpayers should be wary of anyone peddling scams that seem too good to be true."

People should also be aware of phishing scams. In these cases crooks use e-mail, Tweets or realistic-looking but fake Web sites. Scammers will try to mislead people by telling them they are entitled to a tax refund and that they must reveal personal information to claim it. Crooks then use that information to set up bank accounts, get credit cards or take out loans.
Some of the other scams that surface around tax time are:

Zero wages: In this scam a person files a Form 4852 in order to reduce his taxable income to zero. Filing this kind of return could mean a fine of up to $5,000.
Filing misleading forms: This fraud involves claiming a tax credit or asking for a refund on taxes someone hasn't paid. The Form 1099 Original Issue Discount is sometimes used in this scheme.
Retirement plans: People should be wary of advisers who encourage them to put assets into individual retirement accounts at an amount less than fair market value. This is a way to get around yearly contribution limits and is illegal.

Beer Tax Hike to Balance the Budget

2010-04-05T21:57:00.000-07:00

Some Democratic state lawmakers want to raise taxes on beer to help solve the state's budget woes. The tax on beer would hit the so-called “Joe Six-Pack” consumer, but shelter products from small, in-state breweries that sell a higher-priced brew to a more well-heeled clientele.

That's the highlight of a new tax proposal from the Senate, which has been negotiating a state tax package with the House and Governor. The newest Senate idea would increase state taxes by 50 cents per gallon on mass-market beers. Microbrews would be exempt.

Their plan would hike existing state taxes by 50 cents per gallon on mass-market beers. With existing taxes, that would mean people will pay 43 cents in taxes per six packs, Senate Democrats said.

It also would extend the sales tax to candy, gum and bottled water, and raise the state sales tax by one-tenth of a penny. That would raise about $200 million - the final disputed piece of a roughly $800 million tax package that Democratic leaders want to help patch the state budget. Lawmakers are in a special session to bridge a $2.8 billion budget deficit through June 2011.

Reducing Tax Burden for Homebuyers

2010-04-04T23:10:00.000-07:00

As if the allure of spring weren't inspiration enough to make hopeful shoppers start searching in earnest, this year potential home buyers has the prospect of a nice tax credit to help with the purchase. You'll need to get to work fast, though, and acquire the house by the end of April if you want take advantage of what is often called the homebuyer tax credit.

The Worker, Homeownership and Business Assistance Act of 2009 are the formal name for the law that is often abbreviated on for sale signs simply as "$8,000 available." That amount is a reference to the maximum federal income tax credit available to first- time home buyers under the law.

The Louisiana Society of Certified Public Accountants helped taxpayers with their personal and corporate tax questions last month during its annual telephone Tax Hotline. During the three-hour public service event most of the questions posed to the 17 volunteer CPAs were related to claiming the New Homebuyer Credit. While the new act brought extra benefits to help the nation's economy recover, it also raised more questions about who qualifies and how to claim it.

There are some nuances that should be noted, and when it comes to income taxes, the details can never be examined too closely. If you're thinking of claiming the tax credit and are accustomed to preparing your own return, this could be the year to consult a tax professional. The definition of "first-time home buyer" under the act means someone who hasn't owned a primary residence in the past three years. For them, the law gives a tax credit of $8,000 for single taxpayers with modified adjusted gross income of $125,000, and married couples with income up to $225,000.

Single taxpayers with income between $125,000 and $145,000 are eligible for a reduced tax credit. The credit phases out for married couples with annual income of $225,000 to $245,000. Anyone with income over those limits doesn't qualify for the home buyer tax credit. To qualify for the tax credit, buyers must enter into a binding contract to buy a principal residence by April 10, and go to closing by June 30, 2010.

Finally, the act also tightened up on documentation needed to claim the tax credit. Taxpayers who want to claim the credit will have to prove they actually bought a house, not difficult considering all the paperwork involved in a home purchase. Taxpayers will also have to file a paper return and include Form 5405 and a copy of the settlement statement used to complete the purchase, the CPA Society said.

For those homeowners who want to claim the tax credit for buying another home, the best way to prove their longtime ownership will be to submit either property tax records, homeowners insurance records or the Form 1098, the Mortgage Interest Statement from their lender for the property they owned during the five-year period claimed.

As with most things tax-related, be prepared to document, document, document. If the IRS suspects fraud, the act gives the agency authority to automatically assess taxes and start collection proceedings. Members of the military have an additional year to buy a home and take advantage of the tax credit. They have until April 30, 2011, to enter a binding contract to buy, and until June 30, 2011, to close the deal.

Of course, the old benefits of owning your home remain. You'll also get to deduct the home mortgage interest on your federal income tax return and reduce your tax burden.

911 System For Phone Tax

2010-04-03T02:56:00.000-07:00

Washington residents are likely to pay an extra 25 cents a month next year for every phone line they have, whether it’s a land line, a cell phone or an Internet-connected system.

The House of Representatives passed an increase in phone taxes Friday to pay for enhanced 911 equipment for state and local agencies, following action taken Thursday by the Senate.

Enhanced 911 allows a dispatcher to see the caller’s number and location when a call comes in. The state already allows local systems to charge a 50 cent fee for every land line and cell phone to help pay for the enhanced system, and the state charges 20 cents. The proposal raises local fees to 70 cents and the state fee to 25 cents.

House Republicans denounced the bill as another tax, even if it was for a good cause.

Tax Credits for Education Benefits Parents

2010-03-31T21:18:00.000-07:00

Everyone hates taxes but one good thing about the U.S. tax code is the astounding number of tax credits and deductions that are geared towards taxpayers with children. These credits and deductions run the gamut from simply having children to college education credits and deductions.

Most of these credits and deductions phase out or get reduced over certain income levels, but these income levels are high enough to permit most Americans to claim these credits and deductions on their tax returns.

Credits vs. Deductions
The first thing to understand is the difference between a tax deduction and a tax credit. A deduction reduces a taxpayer's taxable income by the amount of the deduction, while the tax credit is a dollar for dollar credit against taxes owed. This generally makes a tax credit more valuable than a deduction.
In 2009, a taxpayer married filing jointly who has three children is eligible for the earned income tax credit as long as adjusted gross income and earned income is below $48,279.

Education Benefits
The next group of credits and deductions are designed to promote education and soften the cost of that education for the taxpayer. There are a number of different programs under which taxpayers may be eligible. The contributions are not tax deductible, but earnings grow tax free, and withdrawals are not taxable if used for qualified education expenses. This is also one of the few tax breaks from the IRS that can be used for College or qualified secondary and elementary education expenses.

Education Deductions
The Higher Education Tuition Deduction is a deduction up to $4,000 for qualifying education expenses at the college level. This reduces your income subject to tax when you file your return.

Education Credits
The American Opportunity Credit is a credit up to $2,500 for qualified college educational expenses paid for each student eligible. Expenses include tuition, fees, books and other supplies. This credit is an expansion of the Hope credit for 2009 and 2010 which bumped the $1,800 limit up to $2,500 and increased the period it can be claimed from the first two years of college to the first four years.

The Lifetime Learning Credit is a credit up to $2,000 for qualified college educational expenses paid for each student eligible. Like the Hope Credit, the maximum tax credit is doubled to $4,000 for students attending eligible schools in a Midwestern disaster area.

No Double Dipping
One thing to note about the deduction and education credits above is that taxpayers can only claim one of them per student. For example, you can only claim either the expanded Hope credit or Lifetime Learning credit in the same year for the same student. Taxpayers should calculate the benefit for each credit they are eligible for and then claim the one that reduces taxes the most.

Get Proper Advice
These credits and deductions can be complex so please consult a tax advisor prior to claiming them. An excellent resource is the IRS web site, which has the entire set of rules in Publication 970, including eligibility and income levels at which the credits and deductions begin to phase out.

The U.S. tax code has evolved over the last generation to include many tax deductions and credits that provide benefits to taxpayers with children. These deductions and credits can significantly reduce the tax burden and should be claimed by those eligible.

Local Companies Job Creation Tax Credits

2010-03-30T21:55:00.000-07:00

Five local companies are receiving job creation tax credits in Columbus (the capital and largest city in the U.S. state of Ohio) with a total value of $3.27 million in exchange for retaining 1,780 jobs and creating 547 more, the state Department of Development announced Tuesday, March 30.

The projects include:
ConAgra Foods Packaged Foods, LLC will receive a 15-year, 70 percent tax credit valued at $1.99 million in exchange for a $59 million project in Troy expected to create 191 jobs and retain 371 more. The company, which soon will add Slim Jim beef jerky production to its pizza production business at a Troy plant, would be required to maintain operations in Troy for at least 18 years.

Pierre Foods Inc. will receive a six-year, 50 percent tax credit valued at $279,020 in exchange for a $21.5 million project in West Chester Twp., Butler County, that’s expected to create 40 jobs and retain 849 more. The company, whose brands produce a line of fully cooked beef, pork, chicken, turkey, peanut butter and bakery products, would have to maintain operations at the site for at least nine years.

RealPage Inc. will receive a six-year, 50 percent tax credit valued at $635,571 in exchange for a $14 million project in Deerfield Twp., Warren County, that’s expected to create 87 jobs. The company, which specializes in rental housing software, would have to maintain operations at the site for at least nine years.

Sugar Creek Packing Co. will receive a six-year, 45 percent tax credit valued at $136,436 in exchange for a $3.25 million project in Dayton expected to create 79 jobs and retain 406 more. The company, one of the nation’s largest independent bacon processors, would have to maintain operations at the site for at least nine years. Sugar Creek Packing Co. also will receive a six-year, 45 percent tax credit valued at $84,245 in exchange for an $84,245 project in West Chester Twp., Butler County, expected to create 50 jobs and retain 75 more. The company would have to maintain operations at the site for at least nine years.

The Hartz Mountain Corp. will receive a five-year, 45 percent tax credit valued at $138,525 in exchange for a $2.6 million project in Harlan Twp., Warren County, expected to create 100 jobs and retain 79 more. The company, which was founded in 1926 and has branched out from just selling supplies for birds, cats and dogs, would have to maintain operations at the project site for at least eight years.

Tax Provisions for Tax-Payers

2010-03-29T21:46:00.000-07:00

With April 15 quickly approaching, a lot of people are digging out their W-2 or 1099 forms to begin filing taxes.

As with any federal tax preparation, filers will want to make sure they understand the significant changes within the IRS tax codes. As a CPA, here are the top 10 tax provisions that I believe could impact income tax preparation for 2009:

The first-time home buyer’s credit: Taxpayers should not forget that the well-publicized credit of $8,000 is available for those who purchased their first home in 2009. The IRS recently extended this credit so home buyers who sign a contract by April 30 and complete the sale by June 30 also can claim this credit.
Purchasing a new car: In Texas and other states without a state income tax, the IRS has allowed a deduction for the sales tax paid on the purchase of a new car for several years now.
Making work pay credit: Couples who earned less than $190,000 ($95,000 if single) in 2009 are eligible for a tax credit of 6 percent of their earned income, up to a limit of $800 ($400 if single). This is a major change, since virtually all returns filed will contain this credit in some form. Taxpayers can claim this credit on Schedule M of the tax return. This is a new form designed specifically for this credit.
Mileage rates: Business travelers can claim 55 cents per mile for business travel in 2009. The IRS will also allow 24 cents per mile for medical mileage, and 14 cents per mile for charitable mileage.
Unemployed benefits: For 2009, the first $2,400 of unemployment benefits received can be excluded from income. Previously, all unemployment benefits were taxable.
Losing a home during the housing crisis: Taxpayers who lost their homes during the housing crisis will not have to pay taxes on the amount the mortgage company wrote off on their debt. For example, if a taxpayer went into foreclosure on a home with a mortgage of $200,000 and the mortgage company sold the home for $185,000, the taxpayer will not have to claim the $15,000 difference as income.
Filing late fees: The penalties for filing late returns have increased. Now, if a return is more than 60 days late, the minimum penalty is $135 or 100 percent of the unpaid tax. In other words, late filers could end up owing double their original balance in a very short time.
Casualty losses: The minimum threshold for an event to qualify as a casualty must now be 10 percent of your income plus $500. Previously, it was the same percentage amount plus $100. This will make the casualty loss more difficult to claim.
Paying your taxes with credit cards: For those who pay off their tax liability with a credit card and incur a “convenience charge” to do so, that charge will now be deductible on their next itemized return.
Estimated tax thresholds lowered: Small businesses only need to pay in 90 percent of the previous

Top Tax Scams Reported by IRS

2010-03-28T21:41:00.000-07:00

Income tax-related scams are a growing crime. Americans of all ages and incomes continue to fall for or perpetrate some of the oldest scams around. Here are the top scams as compiled by the Internal Revenue Service

Tax preparer fraud
The courts are filled with actions taken against tax preparers who allegedly have taken a portion of their clients' refunds, charged inflated fees or promised refunds too good to be true. Choose your tax preparer carefully.

Hiding income offshore
Americans continue to try to hide some of their income in offshore banks, brokerage accounts or other fraudulent foreign accounts. For many, this may be the time to come clean: The IRS says taxpayers who voluntarily disclose such fraudulent schemes may fare better in a criminal prosecution than those who don't come forward on their own.

Filing false or misleading forms
Some taxpayers file false or misleading returns to claim refunds they are not entitled to. Those who are caught face penalties, possibly even criminal prosecution. One common scheme involves people who receive Social Security benefits and report incorrect withholding and income amounts to avoid paying any taxes.

Abuse of charitable organizations and deductions
Numerous schemes involve tax-exempt organizations. One common scheme involves overvaluing noncash donations for income tax purposes. Another involves donors who maintain a level of control over a donated item that served as a tax deduction.

Frivolous arguments
Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. One of the most common schemes involves filing a phony return or reporting no income for a particular tax year. Another involves the fuel tax credit. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But others who aren't entitled to the credit have claimed it anyway to reduce their tax liability.

Abusive retirement plans
Some taxpayers use various schemes to avoid the limits on contributions to retirement accounts, such as IRAs, or to avoid penalties on early distributions. Taxpayers also should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or who suggest strategies for avoiding annual contribution limits to retirement plans.

Disguised Corporate Ownership
Some taxpayers try to disguise the ownership of a business or financial entity to avoid paying some or all of their tax liability.

Misuse of Trusts
For years, some financial advisers have urged taxpayers to transfer assets into trusts as a way to shield income from taxes. While many trusts are legitimate parts of tax and estate planning, others are not. Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Phishing
Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. IRS impersonation schemes flourish during the filing season and can take the form of e-mails, tweets or phony Web sites. Many times, the e-mails and other correspondence appear to be authentically from the IRS. Scammers also may use phones and faxes to reach victims. Some scam artists tell consumers they are entitled to a refund and that they must reveal personal financial information to get it.

If you get an e-mail that appears to be from the IRS but seeks personal information, do not open it or attachments or click on any links in the e-mail. Forward the e-mail to phishing@irs.gov.

Heavily Built Tax Break Spared in Health Care Bill

2010-03-26T21:44:00.000-07:00

The health care bill that passed this week offers subsidies to people with low income so they can afford health insurance. To help pay for those subsidies, people with large incomes will have higher tax bills.

It sounds like a rout for Robin Hood, but President Obama and Congress ultimately spared one big tax break the health savings account that Republicans love and senior members of George W. Bush’s administration had championed. In fact, the legislation makes it likely that many more people will take advantage of the accounts by the middle of the decade, keeping even more money out of the hands of the government.

Consumers were able to sign up for H.S.A.’s beginning in 2004, though similar accounts had existed before that. When you deposit money into an account at a bank, you pay no federal income taxes on the money you deposit, it grows tax-free in the account and there’s no levy on earnings once you tap into the account for qualified expenses. It’s a rare triple play in the world of tax breaks.

But it comes with some big restrictions. You have to use the money for health care costs to qualify for the tax break. And you can put in only $3,050 in 2010 if you’re just covering yourself or $6,150 if you’re also covering your family. (If you’re 55 or older, you can make an extra $1,000 contribution. Anyone of any income level can put in money, and an employer can contribute, too.)

Why were H.S.A.’s created in the first place? The big idea was that if people had to pay more out of pocket each year, they’d have an incentive to shop around and be less wasteful with their health care spending. The cumulative effect of millions of people doing that would supposedly lower costs. Tax savings from the accounts, meanwhile, would lure the uninsured into high-deductible plans, which often have lower premiums. And if the new enrollees were young and healthy, their premiums could subsidize coverage for the old and the sick.

We don’t know yet whether all of this can help cure what ails health care. But it is definitely a spectacular tax dodge for those who can afford to max out their contributions and not touch them for decades. Plenty of doctors and tax lawyers have their own H.S.A.’s. And they would know, wouldn’t they?

But for anyone who will soon be paying higher taxes because of the health care bill, taking some of it back through an H.S.A. contribution is pretty easy money if you qualify. And for everyone else who ends up in an eligible health insurance plan, it would be wise to at least cycle some money through an account.

Homebuyer Tax Credit Bill in California

2010-03-25T21:40:00.000-07:00

Gov. Arnold Schwarzenegger signed a bill aimed at selling California's vacant homes and encouraging new construction by extending a $10,000 state tax credit for first-time homebuyers.

The governor signed a bill the state Legislature passed on a bipartisan vote earlier this week. It provides a state tax credit to first-time homebuyers who buy new or existing homes from May 1 until the end of 2010. Homebuyers can claim 5 percent of the purchase price against their California taxes, or up to $10,000.

"I have been up and down the state pushing this important housing bill that will get people off the fence and into homes while creating jobs and stimulating our economy," Schwarzenegger said in a statement.

Earlier this year, Schwarzenegger called on lawmakers to extend the homebuyers tax credit as part of his job-creation initiative. At 12.5 percent, California has the fifth highest unemployment rate in the nation.

The state passed a similar tax break last year that capped the total credit available at $100 million on new homes bought through February.

The new bill makes another $100 million available for buyers of new homes and $100 million for those who buy existing homes. According to the Franchise Tax Board, the state allocated that credit to 10,569 applicants after receiving more than 12,000 applications.

The governor said the expanded tax credit will help cities and counties get more properties back on the tax roll and put more people to work.

Also Schwarzenegger vetoed a tax bill that would have provided relief to those who had mortgage debt forgiven in 2009. The governor said in his veto message that he could not support the bill because lawmakers inserted a tax penalty opposed by businesses.

6 Ways to Handle Tax for the Struggling Taxpayers

2010-03-24T21:54:00.000-07:00

Filling out and filing those tax returns is not fun, but it's not as painful as coming to the end of the form and realizing you owe more than you have left in your checking account.

That's likely to happen to more people than usual this year. Many reduced the amount of taxes withheld from their take-home pay in 2009 so they could collect their Making Work Pay credit in every paycheck. Some over adjusted and had too little withheld. Others lost jobs, and collected taxable unemployment benefits that they weren't paying taxes on.

With many taxpayers still struggling with less work and less pay than they are used to, there will be lots of unhappiness and worry when those numbers emerge at the bottom of the form. The Internal Revenue Service says it's going to be more lenient than ever in working out deals to help folks who can't pay.

There are good ways and bad ways to handle the big-bill-no-cash situation. Here's what you need to know now.

Don't hide. The penalties for not filing a tax return are severe, amounting to 5 percent of the amount owed per month, up to 25 percent the total owed. And simply ignoring the situation is sure to increase your stress levels.
Don't be in a hurry to put the balance on your credit card. You'll have to pay 2 percent to 4 percent off the top, just to do the transaction. Then you'll pay interest at your credit card's high annual rate, until you've paid off the balance. If you have a credit card that is offering a decent low-interest cash-advance offer, you can write a check against that card and deposit it into your checking account and then use that cash to pay your tax bill. But good low-interest (and low-fee) credit card cash advance offers are hard to find these days.
Do look for other sources of cash. That can be anything from borrowing from a relative to hosting a yard sale, to taking money out of a low-yielding savings account. Don't take money out of a tax-deferred retirement or college savings account to pay a tax bill. Consider writing a check on your home-equity line of credit.
Ask the IRS for a short-term loan. If you think you'll have the money within 4 months, you can simply stretch out your payments to the tax agency. You'll need to file an online payment agreement at the IRS website . You will have to pay a penalty of 0.5 percent per month (that's one-tenth of the penalty for not filing) plus interest at an annual rate of 4 percent a year. That is not a bad deal.
Ask for even more time. That same interest and penalty rate also be stretched out over a longer period of time, if you agree to make regular payments. You can have the IRS deduct money from your paycheck or bank account on a regular basis, or simply agree to make regular payments on your own. If you owe less than $25,000 and can pay it off in under three years, the IRS is likely to approve your installment plan without much fuss. You can use the same online payment form to set up an installment plan.
If you have big problems, look for big solutions. If you are teetering on the edge of bankruptcy, with no hope of ever paying your bill, you may be able to get the IRS to agree to accept a smaller amount. This is called an Offer in Compromise, and it is not the easy pennies-on-the-dollar deal hawked in often fraudulent television ads. The agency approves only one in four of the requests it got last year. However, the IRS says it's going to grant more leeway to its agents to accept these offers this year. It will, for the first time, allow agents to make forward-looking judgments about whether taxpayers will have the income in the future to pay bills based on their income in the past.

For many taxpayers who used to be flying high but now are skating on the edge, which could be a big help.

Top 10 Tax Procrastinating Cities

2010-03-23T21:17:00.000-07:00

Big D apparently hates to do its taxes.

Dallas has once again made TurboTax's annual list of top 10 tax procrastinating cities. For the second year in a row, it has come in at No. 9.

TurboTax based the list on its customers last year, so perhaps it's more accurate to say that users of its service in Dallas are procrastinators.

Two other Texas cities are also full of tax procrastinators. Austin came in at No. 4, and Houston can be proud (or not) of its No. 1 ranking.

With three cities, the Lone Star State ties California for being with biggest procrastinating state on the list.

But Dallas residents have plenty of company in kicking the tax-return can down the road. The IRS estimates that as many as 20 percent of all Americas put off sending in their tax returns until the last two weeks, according to TurboTax.

TurboTax’s rankings are based on the largest number of people that file between April 14 – 17. Here are your biggest putter-offers for 2009 (with previous year ranking in parents):

Houston – (#2)
Chicago – (#4)
New York – (#3)
Austin, Texas – (#11)
San Francisco – (#1)
Seattle – (#7)
San Diego – (#5)
Los Angeles – (#8)
Dallas – (#9)
Las Vegas – (#10)

Green technology in California's Tax

2010-03-22T21:38:00.000-07:00

Moving swiftly to save hundreds of millions in state funding for public transit projects, the Legislature struck a deal Monday with Gov. Arnold Schwarzenegger and approved millions in tax breaks for two groups whose fortunes are tied closely to the state's economic recovery homebuyers and green-technology manufacturers.

By delivering the tax breaks which were blessed in uncommonly strong bipartisan votes lawmakers ensured the governor would reverse him and sign $1.1 billion in budget fixes sent to his desk last month. Those fixes involved a complex shuffling of fuel taxes meant to reduce the state's $20 billion deficit while pouring more cash into public transportation.

The deal reached Monday provides $200 million in new tax credits for homebuyers, to be split evenly among those buying a home for the first time and anyone buying a newly constructed home. Anyone qualified who makes a purchase between this May and August 2011 will receive a credit for 5 percent of the home's purchase price, up to $10,000 over three years.

Additionally, companies that make "green" technology products like solar arrays and electric cars will be freed from having to pay any sales tax when purchasing their manufacturing equipment over the next 10 years. The proposal is meant to drive hundreds of millions of dollars in new manufacturing to California, including Silicon Valley.

"Green technology is California's present and its future"

Both exemptions will take effect as soon as the governor signs them, which he is expected do after stumping for them up and down the state recently. "The package of bills as written will provide significant benefit to the state's general fund and will help put Californians back to work."

The green-tech tax credit won't affect this year's budget, according to the Department of Finance, since it's meant to attract investment that hasn't yet materialized.

A third bill sent to the governor included technical changes to the gas-tax swap, ensuring that commuter rail lines and transit agencies didn't see a spike in diesel prices. The governor's fuel-tax plan would have eliminated state transit funding by shifting the state's sales tax on gasoline to a special excise tax, in the process giving consumers a 5 cent tax cut on each gallon of gas. The governor was upset that Democrats tweaked that plan to eliminate that reduction in favor of increasing transit money.

Payroll Tax Incentive for Employers

2010-03-21T21:55:00.000-07:00

Two new tax benefits have become available to employers who hire workers who were unemployed or working part time.

These new benefits are a part of the Hiring Incentives to Restore Employment Act that was signed into law Thursday.

To qualify for the benefits, employers must hire unemployed workers between February 3rd of 2010 and January 1st of 2011. This could give them a 6.2% payroll tax incentive. The reduced tax will have no effect on the employee's future Social Security benefits and employers would still need to withhold the employee's 6.2% share of Social Security taxes and income taxes. Medicare taxes would still apply to wages.

Additionally, for each unemployed worker retained for at least a year, business may claim an additional general business credit of up to $1000 per worker when filing their 2011 income tax returns.

"These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead," said IRS Commissioner Doug Shulman.

Latest Kansas Budget Plan in Schools

2010-03-18T23:22:00.000-07:00

The House Appropriations Committee passed a $5.1 billion budget proposal at Topeka, KS USA, that includes no tax increases and would cause public schools to lose $172 million.

The amount that the state spends on kindergarten through 12th grade would stay the same next year as this year, but the schools would get less because they won’t receive $172 million in federal stimulus funds.

Gov. Mark Parkinson had asked the Legislature to make up for the loss of federal funds, and spend $33 million more to increase per-pupil funding. However, the House committee recommended that the state not kick in any more money.

The committee measure also seeks to save about $21 million through a 5 percent cut for most state workers, which could cause state offices to close at 3 p.m. on Fridays.

Other proposed cuts include:

A hiring freeze on some agencies.
No increase in state contributions to the state pension fund.
A 1 percent budget reductions for most state agencies. Education would not be cut further. The Department of Corrections and some social services caseloads also would not be cut.

While the House committee was talking about cutting the budget, a Senate committee was debating raising taxes a proposal that went nowhere. The Senate taxation committee failed to approve anything in a bundle of tax increase bills. The original plan was to increase taxes on cigarettes, alcohol, sugary drinks and raise the overall sales tax by a penny.

Time up For Home Buyer Tax Credit

2010-03-17T21:49:00.000-07:00

Time is almost up on the federal home-buyer tax credit, the government’s gift of up to $8,000, crafted to jump-start a stalled housing market. Just about six weeks remain for buyers to get those contracts inked.

For those just now getting into the market who wants the cash, you’re going to have to move quickly, that pushed hard for this credit and its two extensions in February and December 2009. “You’ve got to be prepared to make quick decisions.”

In honor of the countdown, here are six things to keep in mind

This round is actually an extension, but it doesn’t just cover first-time buyers. Move-up buyers are also eligible, though they only qualify for up to $6,500.
Only the contract has to be signed on or before April 30. The home purchase must be completed by June 30. Real-estate experts advise signing the contract as soon as possible and leaving plenty of time for closing, given lenders remain extra careful these days. Don’t try to squeeze in a July 1 deal. It won’t work.
The definition of a first-time buyer isn’t as limiting as the words indicate. In this case, the “buyer” hasn’t owned a principal residence in three years. For married taxpayers, both parties can’t have owned.
It might seem genius to “buy” a home from your parents, but skip any such notion. You can’t purchase a home from most family members: Parents, children, grandparents and grandchildren are excluded.
Consider that prices might fall after the credit expires: Buyer traffic will undoubtedly decline once this enticement goes away. As sellers adjust to this slower new reality-they’ll be more than likely to shave prices.
Of course, there’s talk of another extension, given housing’s recovery remains choppy. Some think the time has come to end the program pushed to extend the tax credit last fall but last month it’s time to let it expire. It’s worn out its benefit, if you extend it again, it isn’t going to do much, and what you’re doing is providing a tax break to folks who bought anyway.

Health Insurance After-tax Basis Medical Expense Deduction

2010-03-16T21:24:00.000-07:00

The prescription from accountants says that with incomes down and insurance premiums up more Americans are qualifying to take medical and dental deductions on Schedule A of their individual tax returns.

The most common mistake people make is assuming they need a big health-care expense to qualify since their eligible medical and dental expenses must be greater than 7.5% of their adjusted gross income.

While that may have been true in the past, over the last three years Canning, who also has a tax practice, has seen an increasing number of clients meet that 7.5% threshold thanks to skyrocketing insurance premiums, deductibles, co-pays and coinsurance.

If you have employer-sponsored health insurance, find out whether you pay your premiums on a pretax or after-tax basis. Only premiums paid on an after-tax basis may qualify for the medical-expense deduction.

Add up out-of-pocket costs
To take the deduction, first, you must itemize rather than using the standard deduction. Second, you can only deduct the amount that is above the 7.5% threshold. And if you are unlucky enough to be subject to the alternative minimum tax, that limit rises to 10% of adjusted gross income.

With a spouse out of work and higher out-of-pocket costs for two elective surgeries, a longtime client is taking the medical deduction for the first time. If you were out of work and received the federal government's 65% subsidy for your Cobra coverage, you also can still deduct the remaining 35% that you paid. "The tax deduction eases the blow.”

While you don't need to add the premium assistance to your gross income, you may have to pay back part of that subsidy if your adjusted gross income was between $125,000 to $145,000 for individuals, and $250,000 to $290,000 if filing jointly. And if your AGI was more than $145,000 or $290,000, respectively you must repay the Cobra subsidy in full as part of your income tax.

Surprising medical deductions
This year, the IRS didn't add anything to its long list of what qualifies as deductible medical and dental expenses, but many eligible costs may surprise taxpayers because they're not covered fully or at all by insurers.

Preparing taxes Ideas

2010-03-15T21:37:00.000-07:00

Preparing taxes is nobody's idea of a good time, but for most taxpayers, there's a payoff: a sizable refund check. This year, though, residents of several states will have to wait up to five months to receive their state tax refunds because of budget shortfalls.

The federal government hasn't run out of money at least not yet. Still, at a time when many people need their refund checks to pay the bills, some taxpayers' federal tax refunds have been delayed.

Taxpayers who file their federal tax return electronically and arrange for direct deposit typically receive their refunds in about two weeks, the IRS says. But here are some reasons your federal tax refund could arrive later than expected:

You failed to claim the Making Work Pay credit.
Of the 60 million individual tax returns filed by early March, more than 2 million contained an error related to this credit, the IRS says.

Last year's economic stimulus package provided most taxpayers with a tax credit of $400, or $800 for married couples. The IRS adjusted its withholding tables so the credit was spread out through the year.

But when you file your tax return, you need to claim the credit on Schedule M, says Michelle Eldridge, a spokeswoman for the IRS (tax software programs will do this automatically). This is particularly important for taxpayers such as workers who are self-employed who didn't receive the credit through withholding, or only received a partial credit.

You received a Making Work Pay credit and an Economic Recovery Payment.
As part of the stimulus package, Social Security beneficiaries received a one-time Economic Recovery Payment of $250. Since the maximum a taxpayer can receive from both programs is $400, those seniors will have to reduce their Making Work Pay credit by the amount of their Economic Recovery Payment. Failure to do this could hold up your refund.

If you're not sure whether you received the $250 payment, you'll have to check your bank records. The IRS didn't send out a notice about the payment, and neither did the Social Security Administration. The Treasury Department delivered the checks last year in the same manner Social Security beneficiaries received their regular benefits. If you received your Social Security benefits through direct deposit last year, your check went directly into your bank account.

You claimed the home buyer's credit.
Taxpayers who were first-time home buyers in 2009 are eligible for a tax credit of up to $8,000, while repeat buyers are eligible for a credit of up to $6,500. That's a nice benefit, but you may have to postpone buying those window treatments.

Taxpayers who claim this credit are required to attach a copy of their settlement statement to their tax return. That means they must file their return by mail instead of electronically. Congress added this requirement last year in response to reports of widespread fraud in connection with the credit.

VITA Tax Refund Help

2010-03-14T21:49:00.000-07:00

The volunteers who help low income people fill out their tax returns at Springfield Partners for Community Action are busy early this year, seeing a rush of taxpayer’s weeks before the April 15 deadline.

"With this economy, people need the money now," Martin D. O'Connor, tax advocate and head of the Volunteer Income Tax Assistance or VITA program said. "They have bills to pay now and they can't afford to wait. They need their money now."

Springfield Partners' VITA program expects to help 3,500 to 4,000 low income Springfield residents fill out tax returns this year. The VITA program is open to taxpayers who earned $49,000 or less in 2009.

The Internal Revenue Service also estimates that more taxpayers will qualify for the earned income tax credit this tax season after suffering unemployment and cutbacks in pay and hours during 2009.

The federal government also changed the tax credit this year allowing for an enhanced credit for people with three or more children. The benefit used to stop growing after the second child.

The amount of the refund varies according to a person's income and number of dependent children. For example, a single person with no dependent children would have to earn no more than $13,440 a year to qualify. But a parent of three or more children can qualify with an income of $43,279 or $48,279 for two parents married and filing jointly, according to the IRS.

The maximum tax credit ranges from just $457 for someone with no dependent children to $5,657 for someone with three or more qualifying children. Last year, 24 million people received $50 million in benefits. The average refund was $2,000.

California State Tax Free Bonds

2010-03-11T20:50:00.000-08:00

Despite all the talk about California going bankrupt (which it can't, legally) or being like Greece, investors scooped up the state's tax-free general obligation bonds this week. Demand was strong enough that Treasurer Bill Lockyer increased the size of the sale by $500 million to $2.5 billion today.

Individual investors bought about 55 percent of the bonds, primarily the shorter-term maturities, during a two-day retail order period that ended Wednesday. Institutional investors bought the rest of the bond issue today.

Strong demand allowed the state to pay slightly less than originally planned. Final yields ranged from 1.17 percent for the March 2012 maturity to 5.65 percent for bonds maturing in March 2040. The state had expected to pay 5.7 percent on the 2040 maturity.

"I think (investors) recognize what the treasurer and state officials have been saying forever, that California is still a sound investment. Despite all those negative headlines and our ratings (California has a lower credit rating than any other state), our likelihood of default is virtually zero."

California was lucky that the overall supply of tax-free bonds both newly issued debt and previously issued bonds trading in the secondary market has been unusually small lately. Meanwhile, demand for tax-free bonds has been strong because many investors expect tax rates will be going up. Strong demand and limited supply means investors were willing to pay a slightly higher price and accept a slightly lower yield than some market experts had expected.

Supply has been limited because many states, instead of issuing tax-free bonds, have been issuing Build America Bonds, which pay taxable interest. These bonds, nicknamed BABs, were created by last year's federal stimulus act. States and other government issuers sell them to finance infrastructure projects. Because they are taxable, they pay higher interest rates than tax-free bonds, but the federal government reimburses states for 35 percent of the interest.

Kansas Tax Increase in Alcohol

2010-03-10T20:37:00.000-08:00

Kansas lawmakers trying to close a $467 million budget deficit weighed two tax increases, one on alcohol, and another on tobacco. One fared better than the other.

The proposed alcohol tax hike was tabled indefinitely by the House Tax Committee. But the idea is likely to resurface as lawmakers look for alternatives to further budget cuts. The added alcohol tax revenue would have been split between mental health programs and services for people with development disabilities.

But several members of the House Tax committee opposed the bill, HB 2593, for different reasons. Some worried it could hurt businesses that sell alcohol. Others questioned if the tax revenue would actually be spent on its intended purpose.

The bill would have doubled a wholesale tax on beer, wine and alcohol that’s been unchanged since 1977. The current tax is 18 cents per gallon of beer, 30 cents per gallon of wine and $2.50 per gallon of alcohol. The tax, amounting to a few pennies per drink, is passed on to the consumer. The increase would have raised $21.8 million a year.

Community mental health agencies have lost $20 million in state funding due to recent budget cuts. More than 4,000 Kansans with disabilities are now awaiting services.

Meanwhile, the Senate Tax Committee reviewed legislation to increase the tax on tobacco. A committee vote is likely next week. The tax would go up by 55 cents per pack of cigarettes to $1.34, the national average. The increase would raise $69 million.

Anti-tobacco groups argue that the measure, SB 516, would reduce smoking rates, especially among teenagers. They note the state already pays hundreds of millions to defray the cost of smoking related illnesses. School lobbyists and social service advocates contend the tax could help prevent further budget cuts.

But tobacco and convenience store owners maintain that increasing the tax would backfire. They argue that smokers near the state line would travel to Missouri, home of one of the nation’s lowest tobacco tax rates at 17 cents per pack.

Mexico's Value Added Tax for Hollywood Film Production

2010-03-09T20:26:00.000-08:00

Mexico has launched a $20-million tax-incentive program in an ambitious move to lure film production from Hollywood and other locales.

Mexican President Felipe Calderon said he hopes the program will make Mexico "the capital of Latin American cinema."

He made the announcement at Baja Studios in the state of Baja California, where James Cameron's "Titanic" and Peter Weir's "Master and Commander: Far Side of the World" were shot in the studio's colossal tanks.

Managed by state-run film financing agency Imcine and Mexican trade and investment body ProMexico, the program offers tax rebates of 7.5% on film productions that exceed the amount of 70 million pesos ($5.5 million). By Mexican standards, where the average budget runs about $2 million, that is considered a high-budget production. The fund will double next year to $40 million.

To qualify, foreign producers must contract local production services. Producers also can write off an additional 10% owed for IVA, Mexico's value-added tax.

"The message is that there is a 17.5% rebate for foreign productions," said Manuel Sandoval, ProMexico's head of strategy and innovation.