Response: There are a lot of proposals to reduce the deficit. There has been a bill introduced in Congress, but the chances of being passed are slim. See the information in Snopes.
http://www.snopes.com/politics/taxes/debtfree.asp
Larry Kopsa CPA
Thursday, November 18, 2010
IS THERE GOING TO BE A 1% TRANSATION TAX?
Question: I heard that the government is going to impose a 1% transaction tax. Is this true?
http://www.snopes.com/politics/taxes/debtfree.asp
Larry Kopsa CPA
http://www.snopes.com/politics/taxes/debtfree.asp
Larry Kopsa CPA
NO 2011 WITHHOLDING RATES UNTIL DECEMBER
IRS has stated during its Nov. 10 payroll industry conference call that it is unlikely that any 2011 withholding tables will be issued this month. The percentage method withholding tables are usually issued in November to give payroll professionals sufficient time to get the tables into their computer systems before the new rates go into effect in January.
However, this year the tables will not be issued until Congress decides whether to adjust the tax rates.
However, this year the tables will not be issued until Congress decides whether to adjust the tax rates.
Tuesday, November 16, 2010
WILL REDUCING TAX RATES ACTUALLY INCREASE GOVERNMENT REVENUE
If you have been following my blog, you know that I am a fan of decreasing taxes. By working with clients, I know that as tax rates go up they lose the incentive to invest. Here is an example of what I have witnessed during my career.
A few weeks ago I was talking to a client. He told me that he was working really hard (70 to 80 hours per week) all summer to create a new line for his business. If this goes the way he wants, in the next year he would have to build or rent a new warehouse and hire another 6 people. As we worked through the numbers, it looked like there was potential for another $40,000 in annual revenue.
Later in our conversation we started talking about the uncertainty of tax rates. He said "You know if tax rates went to 70% (Federal, State and Social Security), I would not have sacrificed my time or the financial sacrifices that I went through this summer." See what I am talking about?
Here is a very good article from the National Review that better summarizes my thoughts along with historical examples.
http://www.nationalreview.com/articles/250954/brass-oldies-thomas-sowell
A few weeks ago I was talking to a client. He told me that he was working really hard (70 to 80 hours per week) all summer to create a new line for his business. If this goes the way he wants, in the next year he would have to build or rent a new warehouse and hire another 6 people. As we worked through the numbers, it looked like there was potential for another $40,000 in annual revenue.
Later in our conversation we started talking about the uncertainty of tax rates. He said "You know if tax rates went to 70% (Federal, State and Social Security), I would not have sacrificed my time or the financial sacrifices that I went through this summer." See what I am talking about?
Here is a very good article from the National Review that better summarizes my thoughts along with historical examples.
http://www.nationalreview.com/articles/250954/brass-oldies-thomas-sowell
NO ESTATE TAX IN 2010 - BUT YOU STILL MIGHT NEED TO FILE WITH THE IRS
Even though there was no estate tax in 2010, many estates still have to file an estate tax return. Those estates with non cash assets exceeding $1.3 million must file Form 8939 with the IRS. The reason for this is that the IRS wants to know how the executor allocated the basis to heirs. In addition the heirs will need to know the basis of the inherited assets so that when the inherited property is sold they can calculate their gain or loss. In addition, if the property is business property, the heirs can take depreciation if there is a basis step up.
On property that is not given a basis step up, the basis of the decedent is the basis for the heir.
In 2010 executors can increase the basis of estate assets by $1.3 million plus an extra $3 million for assets that go to a surviving spouse. The filing of the Form 8939 is due by April 18, 2011, although the Service may extend the deadline because the agency has not yet issued any public guidance on the allocation rules.
On property that is not given a basis step up, the basis of the decedent is the basis for the heir.
In 2010 executors can increase the basis of estate assets by $1.3 million plus an extra $3 million for assets that go to a surviving spouse. The filing of the Form 8939 is due by April 18, 2011, although the Service may extend the deadline because the agency has not yet issued any public guidance on the allocation rules.
Friday, November 5, 2010
HERE ARE MY THOUGHTS ON THE TAX RAMIFICATIONS OF THE ELECTION
It's finally official. The Republicans have taken over the House of Representatives and clawed away much of the Democrats' edge in the Senate. As I gaze into my crystal ball, here are my latest thoughts on what we can expect from the new Congress. But don’t take this to the bank… remember I was the guy that said the Congress would never allow the estate tax to lapse in 2010. Boy was I wrong. Here are my thoughts:
• Most tax accountants have been skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts (even just for those earning under $250,000) in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all. http://www.cnbc.com/id/40007621
• Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.
• If Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. We have been doing several pre tax appointments and so far, if they do not do the patch, we only had one client that was not paying the additional Alternative Minimum Tax. It could get ugly.
• The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.
• Republican leaders insist they plan to repeal the Legislation that Washington refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically; the requirement that all business file 1099s for all purchases over $600.
Some clients are breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. Don’t bury your heads in the sand. Recognize this economic inevitability and realize that continued gridlock means uncertainty — and even mere uncertainty not only makes it hard to tax plan but impacts the economy.
• Most tax accountants have been skeptical that Congress would get their act together and extend the 2001 and 2003 Bush tax cuts (even just for those earning under $250,000) in the lame duck session of Congress convening on November 13. But White House Press Secretary Robert Gibbs announced just today that the administration is open to extending the cuts for all. http://www.cnbc.com/id/40007621
• Word on the street suggests we may see a one-year extension for everyone, then fight it all out again with the new Congress in 2011. However, the Republicans may wait until the new Congress convenes in January to address the issue. In that case, clients can expect to see less take-home pay as the IRS adjusts withholding tables to reflect the new, higher rates.
• If Congress reaches the consensus necessary to resolve the Bush tax cuts question, they'll also manage to "patch" the AMT to avoid soaking millions of unsuspecting Americans. We have been doing several pre tax appointments and so far, if they do not do the patch, we only had one client that was not paying the additional Alternative Minimum Tax. It could get ugly.
• The new Republican House makes it unlikely that we'll see the estate tax roar back with a vengeance like it's scheduled to on January 1. But Congress isn't going to come up with a compromise imposing it retroactively for 2010, either. At this point, the smart money is betting on a compromise with a unified credit in the neighborhood of $3.5-5.0 million and rate of 45%.
• Republican leaders insist they plan to repeal the Legislation that Washington refers to as Healthcare Reform. But even L. Ron Hubbard can't imagine an alternate universe that gives them the votes they need to overcome a Senate Democratic filibuster or presidential veto. However, prospects are good that they can cherry-pick some of their least-favorite provisions — specifically; the requirement that all business file 1099s for all purchases over $600.
Some clients are breathing sighs of relief that the Republican victory will keep taxes low. But that view ignores the reality that deficits are still going up — and taxes will ultimately have to follow. This week's elections may have postponed that day of reckoning, but they haven't eliminated it. Don’t bury your heads in the sand. Recognize this economic inevitability and realize that continued gridlock means uncertainty — and even mere uncertainty not only makes it hard to tax plan but impacts the economy.
Wednesday, November 3, 2010
JUST BECAUSE YOU ARE DEAD DOESN'T MEAN THAT THE GOVERNMENT WON'T SEND YOU A CHECK
Last Sunday was Halloween and for some reason we had an exorbitant number of kids dressed up as zombies. It felt like the night of the living dead, which for some reason made me think about taxes and the federal government. You see the federal government does not apparently believe in death. For some reason they keep sending money to dead people. Maybe that's why we had so many zombies at our door begging for candy. Here is proof that the government does not believe that people die.
Remember those $250 stimulus checks? An investigation found that $18 million of those checks were sent to 71,688 deceased individuals. While some percentage of those checks were mailed out because SSA had not been informed that the taxpayers had died, an alarming number of the beneficiaries were actually accurately reported as deceased. In fact, in 2008, SSA paid deceased beneficiaries a whopping $40.3 million in benefits even after being notified of those deaths.
The beleaguered Department of Housing and Urban Development paid out more than $15.2 million in to households in 2008 to program households containing at least one deceased tenant. This included $7 million sent to single-member households whose only “family” was a deceased individual.
Scary, huh? The report goes on to cite examples of poor oversight and waste in other programs, including Medicare and Medicaid.
You can find the report on Senator Coburns oversight link below.
http://coburn.senate.gov/public/?p=OversightAction
Remember those $250 stimulus checks? An investigation found that $18 million of those checks were sent to 71,688 deceased individuals. While some percentage of those checks were mailed out because SSA had not been informed that the taxpayers had died, an alarming number of the beneficiaries were actually accurately reported as deceased. In fact, in 2008, SSA paid deceased beneficiaries a whopping $40.3 million in benefits even after being notified of those deaths.
The beleaguered Department of Housing and Urban Development paid out more than $15.2 million in to households in 2008 to program households containing at least one deceased tenant. This included $7 million sent to single-member households whose only “family” was a deceased individual.
Scary, huh? The report goes on to cite examples of poor oversight and waste in other programs, including Medicare and Medicaid.
You can find the report on Senator Coburns oversight link below.
http://coburn.senate.gov/public/?p=OversightAction
THE IRS STILL WON'T ANSWER QUESTIONS ABOUT THE NEW 1099 RULES
The IRS remains unclear about 1099 reporting implementation. The Internal Revenue Service is still avoiding questions about how it will implement the controversial 1099 reporting rule, a provision of the health care reform law that requires a business to file a 1099 when a vendor is paid more than $600. IRS Commissioner Douglas Shulman has declined to provide information on the rule after requests for clarity, says Rep. Sam Graves, R-Mo. See the article and comments from The Hill.
http://r.smartbrief.com/resp/zpzgvscgyzecybBoajaoyAalxeEw?format=standard
http://r.smartbrief.com/resp/zpzgvscgyzecybBoajaoyAalxeEw?format=standard
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