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Short Sales Lead to Unexpected Tax Hardships -

Google IRS Federal Income Tax - Tue, 2014-06-03 10:24

Short Sales Lead to Unexpected Tax Hardships
As reported in the Wall Street Journal, the IRS replied that the forgiven debt is nonrecourse debt under the state's law and that a seller would not face federal income tax obligations. (California's Franchise Tax Board also indicated that forgiven ...

Categories: Tax news

Map of State Gasoline Tax Rates in 2014

Tax Foundation - Tue, 2014-06-03 07:15

This week’s tax map takes a look at state gasoline tax rates, using data from a recent report by the American Petroleum Institute. California is in 1st place with the highest rate of 52.89 cents per gallon, and is followed closely by New York (49.86 cents/gallon), Connecticut (49.3 cents/gallon), and Hawaii (48.05 cents/gallon). On the other end of the spectrum, Alaska has the lowest rate at 12.4 cents per gallon, but New Jersey (14.5 cents/gallon) and South Carolina (16.75 cents/gallon) aren’t far behind. These rates do not include the additional 18.4 cent federal excise tax.

Gas taxes are generally used to fund transportation infrastructure maintenance and new projects. While gas taxes are not a perfect user fee like tolls, they are generally more favorable than other taxes because they at least loosely connect the users of roads with the costs of enjoying them. However, some of our recent analysis shows that many states do not rely on gas taxes and tolls as much as they could, and instead fund substantial amounts of transportation from other sources like income and sales taxes.

(Click on the map to enlarge it. Reposting policy)

Follow Scott and Rich on Twitter.

Categories: Tax news

IRS Warns US Expats Of Filing Deadlines -

Google IRS Federal Income Tax - Tue, 2014-06-03 04:39

IRS Warns US Expats Of Filing Deadlines
United States citizens and resident aliens living overseas who qualified for an automatic two-month extension after the regular April 15 tax filing date must file their 2013 federal income tax returns by June 16. The IRS explained that, if an ...
June 16 Filing Deadline for Taxpayers Living Abroad; Free June 4 Webinar Can ...KCSG
Don't miss these important US tax deadlinesRoyal Gazette

all 6 news articles »
Categories: Tax news

IRS Warns US Expats Of Filing Deadlines -

Google IRS Federal Income Tax - Tue, 2014-06-03 04:34

IRS Warns US Expats Of Filing Deadlines
The IRS explained that, if an individual is a US citizen or resident alien, the rules for filing income, estate, and gift tax returns, and paying estimated tax, are generally the same as if the taxpayer resided in the US. Federal law requires US ...
June 16 Filing Deadline for Taxpayers Living Abroad; Free June 4 Webinar Can ...KCSG
Don't miss these important US tax deadlinesRoyal Gazette

all 6 news articles »
Categories: Tax news

IRS rules captive reinsurance arrangement involving retiree medical benefits ... - Lexology (registration)

Google IRS Federal Income Tax - Tue, 2014-06-03 04:32

IRS rules captive reinsurance arrangement involving retiree medical benefits ...
Lexology (registration)
On May 18, 2014, the Internal Revenue Service (IRS) ruled that an employer's wholly owned captive insurance subsidiary could reinsure the employer's retiree medical benefit risks and still qualify as insurance for federal tax purposes, even though the ...

Categories: Tax news

Valuing Artwork for Federal Taxation Purposes: Income, Estate & Gift Tax Issues - Mondaq News Alerts (registration)

Google IRS Federal Income Tax - Tue, 2014-06-03 02:07

Valuing Artwork for Federal Taxation Purposes: Income, Estate & Gift Tax Issues
Mondaq News Alerts (registration)
The Panel also reviews and evaluates the acceptability of property appraisals submitted by taxpayers in support of the fair market value claimed on works of art involved in federal income, estate, or gift taxes. In March 2014, the IRS renewed the Panel ...

Categories: Tax news

IRS: 4.7 million made at least $200000 - KSPR

Google IRS Federal Income Tax - Mon, 2014-06-02 15:29

IRS: 4.7 million made at least $200000
That represents 3.2% of all federal income tax returns. The vast majority ended up owing U.S. income tax. Roughly 1.8 million paid between 15% and 20% of their income in taxes. Nearly 1.5 million paid between 20% and 25%. And about 900,000 paid more ...

and more »
Categories: Tax news

Blaming a Tax "Loophole" Doesn't Make a Tax on Obesity More Palatable

Tax Foundation - Mon, 2014-06-02 13:45

In early May Senators Tom Harkin (D-IA) and Richard Blumenthal (D-CT) introduced a bill called the, "Stop Subsidizing Childhood Obesity Act of 2014." The bill targets business by eliminating the income tax deduction for advertising and marketing expenses for companies that market unhealthy foods to children. The bill uses the tax increase on these businesses to help fund the Department of Agriculture's Fresh Fruit and Vegetable Program.

Administering the tax first requires creating a legal definition of unhealthy food. The difficulty of this task and associated tax complexity has already been demonstrated by taxes on candy and soda at the state level. In this case the federal government will contract with the Institute of Medicine to develop a strategy to properly identify “food of poor nutritional quality” and “brands that are primarily associated with food of poor nutritional quality.”

Regardless of the bill's administrative costs or its policy merits, the bill singles out individual industries and mischaracterizes the current tax code by mislabeling true business costs. To disguise the tax increase the bill characterizes the current adjustment for marketing and advertising as a "nonsensical tax loophole," not an ordinary and necessary business expense. 

Fully accounting for the costs associated with earning revenue in order to define business income is good tax policy, not a so called "loophole." Business taxes are levied on profits, meaning revenue minus the costs of earning that revenue. Typically, advertising and marketing are included in these costs, and sound tax policy requires they should be.

If policymakers believe that select businesses should bear the costs of childhood obesity then they should consider proposals on that basis. However, declaring that there is a current tax loophole that rewards businesses that advertise to innocent children obscures the actual debate. A loophole implies that there are extra dollars escaping the tax base, but advertising deductions are well within the federal tax base's current definition and should be.

Therefore, instead of simply closing a loophole and making the tax code “fairer”, as this tax change has been presented, this policy is would increase costs to business, make the tax code less neutral, and add unneeded complexity

Since the implementation of Obamacare government has an increasing stake in rising healthcare costs. Therefore, policies designed to reduce obesity have become increasingly popular and contentious. If these policies become the norm, it is important that that they are designed according sound tax principles. For example, if senators intend to boost funding for the Fresh Fruit and Vegetable program, then they should do so in a neutral fashion, not by punishing businesses or the tax code. 

Categories: Tax news

The Common Misconception about the Lower Rate on Capital Gains and Dividends

Tax Foundation - Mon, 2014-06-02 13:00

“In a strong rejection of the current tax code, 90 percent of respondents believe income from investments should be taxed at least as much as wages.”

That was a finding from a recent survey from Wallet Hub.

Fortunately for that 90 percent of respondents, their wish is a reality.

Warren Buffett and His Secretary

Wallet Hub explains the tax code’s treatment of investment income in this way: “Current policy taxes income from investments at a lower rate than income from wages; which results in someone like Warren Buffett paying a lower effective tax rate than his secretary.”

On the face of it, it makes sense. With federal tax policy, that should be your first hint that something is amiss.

Income from capital gains and dividends is subject to a top federal rate of 23.8 percent. This is less than the top marginal income tax rate of 39.6 percent for ordinary income. Let’s say both Warren Buffett and his secretary earn $100 (and for simplicities sake, let’s assume that Warren Buffett’s secretary is well paid and pays the top marginal tax rate on every additional dollar), but Mr. Buffett’s $100 is from dividends and his secretary’s income is from salary.

The billionaire Mr. Buffett would pay $23.80 in taxes and takes home $76.20, while his secretary, who is probably not a billionaire, pays $39.60 in taxes and only gets to take home $60.40.

How is that fair? It’s almost twice the amount in taxes.

There is More than Meets the Eye

What is not easily seen is that the $100 that Mr. Buffett earns in dividends has already been taxed at the corporate level. In fact, Mr. Buffett’s $100 didn’t start at $100, it started as $153.85.

To receive his $100 dividend payment, Mr. Buffett must own shares in a corporation, which we will call Company A. Company A earned $153.85 in profits on Mr. Buffett’s behalf. This $153.85 is then subject to the federal corporate tax of 35 percent, or $53.85.

The corporation pays the $53.85 to the federal government on behalf of Mr. Buffett and then passes the remaining $100 to him in the form of a dividend. This is the $100 we discussed earlier, on which, Mr. Buffett pays $23.80 in dividend taxes.

Mr. Buffett’s Actual Tax Rate

Now that we know this, what would Warren Buffett actually pay in taxes and what would his tax rate be?

In the situation described above, Mr. Buffett pays $77.65 ($53.85 in corporate taxes and $23.80 in dividend taxes) on $153.85 in income.

This is a tax rate of 50.47 percent. Or, as 90 percent of respondents had hoped, 10 percentage points higher than the top marginal tax rate on wages.

Categories: Tax news

77,000 foreign banks to share tax info with IRS

Yahoo Tax - Mon, 2014-06-02 12:52
WASHINGTON (AP) — It will soon get a lot harder to use overseas accounts to hide income and assets from the Internal Revenue Service.
Categories: Tax news

Bailout Act Includes Tax Breaks for the Little Guy - Tax Matters - Wed, 2008-10-08 12:27
The unpopular Fed bailout act does offer some nice tax breaks.
Categories: Tax news

A Smart Tax Move for Short-Term Investors - Tax Matters - Wed, 2008-10-01 11:30
Reduce the tax hit on short-term bets by investing in broad-based equity index options.
Categories: Tax news

Refundable AMT Credit Could Mean Cash Back for You - Tax Matters - Wed, 2008-09-24 09:49
If you exercised incentive stock options and got socked by the AMT, here's some relief.
Categories: Tax news

Borrowing From Your IRA - Tax Matters - Thu, 2008-09-18 08:16
It can be a source for an interest-free short-term loan -- or a bad idea if you do it wrong.
Categories: Tax news

Why Our @*$! Tax Code Is So Confusing - Tax Matters - Wed, 2008-09-10 08:30
I'm a CPA and our stupid tax code even drives me nuts. Politicians, are you listening?
Categories: Tax news

Which Cars Qualify for Alternative Fuel Credit? - Tax Matters - Thu, 2008-09-04 06:34
Here's a list of which vehicles still qualify for the juicy tax credit of up to $3,000.
Categories: Tax news

IRAs Are Better Than Ever as Retirement Tool - Tax Matters - Wed, 2008-08-27 07:03
More folks are eligible -- and the contribution limits are higher. So get on this.
Categories: Tax news

Late Payments of Estimated Taxes Can Be Smart Move - Tax Matters - Wed, 2008-08-20 10:27
If you pay estimated taxes, delaying your payments is remarkably painless.
Categories: Tax news

A Sneaky New Twist on the Wash-Sale Rules - Tax Matters - Thu, 2008-08-07 07:16
The IRS says IRA and other transactions can now trigger the dreaded wash-sale rule.
Categories: Tax news

3 Brand-New Tax Changes You Need to Know About - Tax Matters - Tue, 2008-08-05 11:00
New legislation has changes that will affect many homeowners.
Categories: Tax news
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